MERRILL LYNCH
ASSET INCOME
FUND, INC.
FUND LOGO
Quarterly Report
September 30, 1995
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
<PAGE>
Merrill Lynch
Asset Income
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH ASSET INCOME FUND, INC.
Worldwide
Investments as of
September 30, 1995
Percent Breakdown of
Stocks & Fixed-Income Percent of
Securities by Country Net Assets++
United States* 79.0%
Japan 4.3
Germany 4.2
United Kingdom 2.8
Canada 2.3
France 0.6
Hong Kong 0.5
Switzerland 0.4
Netherlands 0.4
Mexico 0.3
Australia 0.3
Argentina 0.2
Sweden 0.2
Philippines 0.2
Spain 0.2
Indonesia 0.2
Italy 0.2
Norway 0.1
Thailand 0.1
Singapore 0.1
[FN]
*Includes investments in short-term securities.
++Percent of net assets may not equal 100%.
<PAGE>
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Telecommunications 1.9%
Capital Goods 1.4
Electrical Equipment 0.8
Chemicals 0.8
Pharmaceuticals 0.8
Petroleum 0.8
Building & Construction 0.8
Machinery 0.7
Multi-Industry 0.7
Oil Service 0.7
Country Percent
Ten Largest Holdings of of Net
(Equity Investments) Origin Assets
Merck & Co., Inc United States 0.5%
United Technologies
Corp. United States 0.4
Schlumberger Ltd.,
Inc. Netherlands 0.4
Abbott Laboratories United States 0.3
Sumitomo Corp Japan 0.3
Ford Motor Co United States 0.3
Bell Atlantic
Corporation United States 0.3
Dresser Industries,
Inc. United States 0.3
Eastman Kodak Co United States 0.3
GTE Corp United States 0.3
<PAGE>
DEAR SHAREHOLDER
After losing momentum through the second calendar quarter of 1995,
it now appears that the US economy has resumed a moderate growth
trend. Gross domestic product growth for the three months ended June
30 was revised to show that the economy expanded at a 1.1% pace,
rather than the 0.5% rate that was originally reported. The
employment report for August exceeded consensus expectations,
although most of the new jobs created were in the service sector,
reflecting the ongoing sluggishness in manufacturing. However,
durable goods orders rebounded somewhat in August, supported by
stronger automobile sales. Reflecting the trend of renewed economic
growth and continued containment of inflationary pressures, the
Federal Reserve Board signaled no shift in monetary policy following
its September meeting. One of the major developments during the
September quarter was the strengthening of the US dollar relative to
the yen and the Deutschemark. Improving interest rate differentials
favoring the US currency, combined with coordinated central bank
intervention and more positive investor sentiment, have helped to
bolster the dollar in foreign exchange markets. Other factors that
appear to be improving the US dollar's outlook in the near term are
a pick-up in capital flows to the United States and the prospect of
increased capital outflows from Japan. However, it remains to be
seen if the US dollar's strengthening trend can continue without
significant improvements in the US budget and trade deficits.
In the weeks ahead, investor interest will continue to focus on US
economic activity. Clear signs of a moderate, noninflationary
expansion could further benefit the US stock and bond markets. In
addition, should the current Federal budget deficit reduction
efforts now underway in Washington prove successful, the
implications would likely be positive for the US financial markets.
Portfolio Matters
As of September 30, 1995, the Fund's asset allocation was: US bonds,
69% of net assets; foreign bonds, 8%; foreign stocks, 10%; US
stocks, 6%; and cash and cash equivalents, 7%. The combined value of
foreign bonds and stocks is 18% of total assets, compared to a
maximum allowable 25% of total assets.
After reducing the US bond commitment earlier in 1995, we
recommitted funds to bonds during the September quarter. We also
extended the average portfolio maturity and duration of our bond
commitment. As of September 30, 1995, the Fund's average portfolio
maturity approached nine years, and the duration exceeded six years.
<PAGE>
Our more aggressive posture toward US bonds reflected an
increasingly optimistic outlook toward the fixed-income market.
While we continue to look for a gradual acceleration of economic
activity, the rate of inflation remained surprisingly subdued, a
trend which is expected to continue. The US bond market should also
benefit from increasing foreign purchases in response to a stronger
US dollar, particularly relative to the yen. Foreign bond
representation was unchanged, with positions maintained in Germany,
the United Kingdom and Canada.
The weaker yen should also benefit the Japanese equity market by
acting as a catalyst for a recovery in corporate earnings. We expect
the Japanese economy to also benefit from the increasingly
accommodative monetary policy followed by the Bank of Japan and from
substantial fiscal stimulus efforts. Given our favorable outlook
toward Japanese equities, we increased our commitment by
establishing a position in Sanwa Bank, Ltd. We continue to hedge a
portion of the Fund's yen exposure back into US dollars in the event
that the US currency strengthens further. However, following the
weakness of the yen in recent months, only 40% of the market value
of our yen-denominated holdings is now hedged back into US dollars.
As for the Fund's other equity holdings, our commitment in US
equities has not changed significantly, with the sale of Archer-
Daniels-Midland Co. and Kelly Services, Inc. balanced by the
purchase of Whirlpool Corporation. Our cautious near-term outlook is
balanced by optimistic longer-term expectation caused by a benign
economic background. We continue to overweight the emerging markets
of Asia and Latin America, as we look for continuing recovery in
these markets. We adhere to a selective posture toward European
equity markets, since we believe that stock selection will be more
important than country weightings in coming months.
In Conclusion
We thank you for your investment in Merrill Lynch Asset Income Fund,
Inc., and we look forward to reviewing our outlook and strategy with
you in our upcoming annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Joel Heymsfeld)
Joel Heymsfeld
Vice President and
Portfolio Manager
October 12, 1995
PERFORMANCE DATA
About Fund
Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after 10 years.
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
<PAGE>
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
Performance data for Class A and Class B Shares are presented in the
"Average Total Return" and "Performance Summary" tables below and on
page 5. Data for Class C and Class D Shares are also presented in
the "Aggregate Total Return" table below. Data for all of the Fund's
shares are presented in the "Recent Performance Results" table on
page 5.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class A and Class B
Shares for the 12-month and 3-month periods ended September 30, 1995
and for Class C and Class D Shares for the since inception and 3-
month periods through September 30, 1995. All data in this table
assume imposition of the actual total expenses incurred by each
class of shares during the relevant period.
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/95 +11.66% +7.19%
Inception (9/02/94)
through 9/30/95 +10.32 +6.21
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/95 +10.83% +6.83%
Inception (9/02/94)
through 9/30/95 + 9.50 +6.73
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Aggregate
Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 9/30/95 +10.87% +9.87%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 9/30/95 +11.44% +6.98%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
9/30/95 6/30/95 9/30/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.44 $10.35 $9.91 + 5.35% +0.87%
Class B Shares* 10.44 10.35 9.91 + 5.35 +0.87
Class C Shares* 10.44 10.35 9.88 + 5.67 +0.87
Class D Shares* 10.44 10.35 9.88 + 5.67 +0.87
Class A Shares-Total Return* +11.66(1) +2.29(2)
Class B Shares-Total Return* +10.83(3) +2.10(4)
Class C Shares-Total Return* +10.87(5) +2.09(6)
Class D Shares-Total Return* +11.44(7) +2.23(8)
Class A Shares-Standardized 30-day Yield 6.48%
Class B Shares-Standardized 30-day Yield 5.99%
Class C Shares-Standardized 30-day Yield 5.95%
Class D Shares-Standardized 30-day Yield 6.23%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
++Investment results shown for Class C and Class D Shares are since
inception (10/21/94).
(1)Percent change includes reinvestment of $0.586 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.145 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.511 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.126 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.474 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.124 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.525 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.139 per share ordinary
income dividends.
</TABLE>
<PAGE>
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<C> <C> <C> <C> <C> <C>
9/02/94--12/31/94 $10.00 $ 9.68 -- $0.184 - 1.37%
1/01/95--9/30/95 9.68 10.44 -- 0.436 +12.69
------
Total $0.620
Cumulative total return as of 9/30/95: +11.15%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<C> <C> <C> <C> <C> <C>
9/02/94--12/31/94 $10.00 $ 9.68 -- $0.159 - 1.62%
1/01/95--9/30/95 9.68 10.44 -- 0.381 +12.08
------
Total $0.540
Cumulative total return as of 9/30/95: +10.27%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Common Stocks Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Banking 600 Banco Frances del Rio de la
Plata S.A. (ADR)* $ 18,594 $ 12,975 0.1%
Petroleum 800 Yacimientos Petroliferos Fiscales
S.A. (Class D) (Sponsored) (ADR)* 18,614 14,400 0.1
Total Common Stocks in Argentina 37,208 27,375 0.2
Australia Multi-Industry 6,000 CSR Ltd. 20,467 19,937 0.2
6,000 Pacific Dunlop Ltd. 18,156 14,953 0.1
Total Common Stocks in Australia 38,623 34,890 0.3
Canada Multi-Industry 1,900 Canadian Pacific Ltd. 33,447 30,400 0.3
Telecommunications 500 Northern Telecommunications Ltd. 17,405 17,812 0.1
Total Common Stocks in Canada 50,852 48,212 0.4
France Building & 200 Compagnie de Saint Gobain 25,427 24,373 0.2
Construction
Capital Goods 1,500 Alcatel Alsthom (ADR)* 32,271 25,500 0.2
Petroleum 300 TOTAL S.A. (Class B) 17,819 18,158 0.2
Total Common Stocks in France 75,517 68,031 0.6
Germany Electronics 50 Siemens AG 22,176 25,245 0.2
Machinery & 70 Mannesmann AG 19,573 22,981 0.2
Equipment
Total Common Stocks in Germany 41,749 48,226 0.4
<PAGE>
Hong Kong Chemicals 50,000 Shanghai Petrochemical Co., Ltd. 16,523 14,551 0.1
Multi-Industry 2,000 Swire Pacific Ltd. 'A' 16,946 15,845 0.1
Real Estate 2,000 Sun Hung Kai Properties, Ltd. 15,357 16,233 0.2
Utilities--Electric 3,000 China Light & Power Co., Ltd. 15,713 15,522 0.1
Total Common Stocks in Hong Kong 64,539 62,151 0.5
Indonesia Telecommunications 520 P.T. Indonesian Satellite (ADR)* 20,272 18,265 0.2
Total Common Stocks in Indonesia 20,272 18,265 0.2
Italy Telecommunications 6,000 Societa Finanziara Telefonica
S.p.A.(STET) 18,206 18,216 0.2
Total Common Stocks in Italy 18,206 18,216 0.2
Japan Banking 1,000 Mitsubishi Trust & Banking Corp. 18,121 15,657 0.1
1,000 Sanwa Bank, Ltd. 19,883 18,788 0.2
----------- ----------- ------
38,004 34,445 0.3
Building & 2,000 Asahi Glass Co., Ltd. 24,617 21,616 0.2
Construction 2,000 Maeda Corp. 22,346 21,212 0.2
2,000 Okumura Corp. 17,151 18,586 0.2
----------- ----------- ------
64,114 61,414 0.6
Capital Goods 4,000 Hitachi Cable Ltd. 31,837 28,768 0.3
3,000 Mitsubishi Heavy Industries, Inc. 23,282 23,030 0.2
----------- ----------- ------
55,119 51,798 0.5
Chemicals 2,000 Sekisui Chemical Co., Ltd. 24,801 25,455 0.2
Construction 2,000 Kandenko Co., Ltd. 28,722 27,071 0.2
& Housing
Electrical Equipment 1,000 Makita Corp. 15,192 15,859 0.1
3,000 Mitsubishi Electric Co. 20,723 23,485 0.2
----------- ----------- ------
35,915 39,344 0.3
<PAGE>
Electronics 1,000 Canon, Inc. 17,439 17,879 0.2
1,000 Matsushita Electric Industrial
Co., Ltd. 16,802 15,354 0.1
1,000 Sharp Corp. 17,969 14,040 0.1
----------- ----------- ------
52,210 47,273 0.4
Insurance 4,000 Nippon Fire & Marine Insurance
Co., Ltd. 28,215 22,909 0.2
2,000 Tokio Marine & Fire Insurance
Co., Ltd. 23,827 21,616 0.2
----------- ----------- ------
52,042 44,525 0.4
Machinery 3,000 Komatsu Ltd. 24,019 24,121 0.2
3,000 Makino Milling Machine Co. 25,342 23,333 0.2
----------- ----------- ------
49,361 47,454 0.4
Petroleum 4,000 Nippon Oil Co., Ltd. 27,799 21,576 0.2
Printing & Publishing 1,000 Dai Nippon Printing Co., Ltd. 18,630 15,859 0.1
Textiles 3,000 Toray Industries Ltd. 22,048 18,242 0.2
Trading 2,000 Kamigumi Co., Ltd. 23,315 18,768 0.2
4,000 Sumitomo Corp. 39,891 38,263 0.3
----------- ----------- ------
63,206 57,031 0.5
Total Common Stocks in Japan 531,971 491,487 4.3
Mexico Cement 4,000 Cementos Mexicano, S.A. de C.V.
(Class B) (Cemex) 25,167 15,987 0.1
Telecommunications 2,000 Empresas ICA Sociedad Controladora,
S.A. de C.V. (ADR)* 40,309 23,000 0.2
Total Common Stocks in Mexico 65,476 38,987 0.3
Netherlands Oil Service 600 Schlumberger Ltd., Inc. 33,233 39,150 0.4
Total Common Stocks in the Netherlands 33,233 39,150 0.4
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Common Stocks Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Norway Shipbuilding 400 Kvaerner A.S. (Class B) $ 16,976 $ 16,269 0.1%
Total Common Stocks in Norway 16,976 16,269 0.1
Philippines Telecommunications 300 Philippine Long Distance Telephone
Co. (ADR)* 20,990 19,912 0.2
Total Common Stocks in the Philippines 20,990 19,912 0.2
Singapore Shipping 11,000 Neptune Orient Lines Ltd. 17,077 11,766 0.1
Total Common Stocks in Singapore 17,077 11,766 0.1
Spain Petroleum 600 Repsol S.A. (ADR)* 19,311 19,050 0.2
Total Common Stocks in Spain 19,311 19,050 0.2
Sweden Capital Goods 1,000 SKF AB 'B' Free 17,877 22,071 0.2
Total Common Stocks in Sweden 17,877 22,071 0.2
Switzerland Electrical Equipment 25 BBC Brown Boveri & Cie (Bearer) 22,679 28,958 0.3
Machinery 25 Sulzer Gebrueder AG 18,002 14,490 0.1
Total Common Stocks in Switzerland 40,681 43,448 0.4
Thailand Real Estate 6,000 MDX Company Ltd. (Foreign) 19,504 13,158 0.1
Total Common Stocks in Thailand 19,504 13,158 0.1
United Beverages 700 Grand Metropolitan PLC (ADR)* 19,242 19,600 0.2
Kingdom
Chemicals 400 Imperial Chemical Industries PLC
(ADR)* 20,682 20,300 0.2
<PAGE>
Electrical Equipment 5,000 General Electric Co. PLC 22,639 25,110 0.2
Utilities--Gas 400 British Gas PLC (ADR)* 18,428 16,700 0.1
Total Common Stocks in the
United Kingdom 80,991 81,710 0.7
United Aerospace 500 United Technologies Corp. 31,447 44,187 0.4
States
Automobile 1,200 Ford Motor Co. 32,137 37,350 0.3
Capital Goods 800 General Signal Corp. 28,443 23,400 0.2
1,000 Stewart & Stevenson Services, Inc. 35,398 32,250 0.3
----------- ----------- ------
63,841 55,650 0.5
Chemicals 500 Eastman Chemical Co. 26,197 32,000 0.3
Environmental 1,900 Wheelabrator Technologies Inc. 31,172 28,262 0.3
Control Systems
Furniture/Home 600 Whirlpool Corporation 34,735 34,650 0.3
Appliances
Hardware Products 800 The Stanley Works Co. 31,572 34,700 0.3
Machinery 600 Ingersoll-Rand Company 18,942 22,500 0.2
Office--Related 600 Pitney Bowes, Inc. 20,090 25,200 0.2
Oil Service 1,500 Dresser Industries, Inc. 30,407 35,812 0.3
Petroleum 1,000 Phillips Petroleum Company 34,364 32,500 0.3
Pharmaceuticals 900 Abbott Laboratories 29,082 38,362 0.3
900 Merck & Co., Inc. 30,882 50,400 0.5
----------- ----------- ------
59,964 88,762 0.8
Photography 600 Eastman Kodak Co. 28,913 35,550 0.3
Scientific Equipment 1,000 Fisher Scientific International, Inc. 30,407 32,375 0.3
Telecommunications 400 AT&T Corp. 21,682 26,300 0.2
600 Bell Atlantic Corporation 30,590 36,825 0.3
900 Comsat Corp. 18,901 20,250 0.2
900 GTE Corp. 29,377 35,325 0.3
----------- ----------- ------
100,550 118,700 1.0
<PAGE>
Total Common Stocks in the
United States 574,738 658,198 5.8
Total Investments in Common Stocks 1,785,791 1,780,572 15.6
<CAPTION>
Face
Amount Fixed-Income Securities
<S> <S> <C> <S> <C> <C> <C>
Canada C$ 300,000 National Bank of Canada, 7.25% due
6/01/2003 201,403 217,428 1.9
Total Fixed-Income Securities in
Canada 201,403 217,428 1.9
Germany Bundes Obligations:
DM 300,000 6.375% due 5/20/1998 197,809 218,002 1.9
300,000 7.375% due 1/03/2005 217,005 219,530 1.9
Total Fixed-Income Securities
in Germany 414,814 437,532 3.8
United Pound Sterling 150,000 UK Treasury Gilt, 7.25% due 3/30/1998 231,490 237,371 2.1
Kingdom
Total Fixed-Income Securities
in the United Kingdom 231,490 237,371 2.1
United States US Treasury Notes:
US$ 1,000,000 6.375% due 8/15/2002 1,020,781 1,014,840 8.9
3,250,000 7.25% due 8/15/2004 3,153,750 3,474,965 30.5
500,000 7.50% due 2/15/2005 503,750 544,610 4.8
1,500,000 6.50% due 5/15/2005 1,541,953 1,534,455 13.5
1,300,000 6.50% due 8/15/2005 1,312,905 1,331,889 11.7
Total Fixed-Income Securities
in the United States 7,533,139 7,900,759 69.4
Total Investments in Fixed-Income
Securities 8,380,846 8,793,090 77.2
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Face Percent of
COUNTRY Amount Short-Term Securities Cost Value Net Assets
<S> <S> <S> <C> <S> <C> <C> <C>
United Commercial US$ 228,000 General Electric Capital Corp.,
States Paper** 6.45% due 10/02/1995 $ 228,000 $ 228,000 2.0%
US Government 200,000 Federal Home Loan Mortgage Corp.,
& Agency 5.65% due 10/11/1995 199,718 199,718 1.8
Obligations**
Total Investments in Short-Term
Securities 427,718 427,718 3.8
Total Investments $10,594,355 11,001,380 96.6
===========
Unrealized Appreciation on Forward Foreign Exchange Contracts*** 28,170 0.3
Other Assets Less Liabilities 355,545 3.1
----------- ------
Net Assets $11,385,095 100.0%
=========== ======
Net Asset Value: Class A--Based on net assets of $1,264,684 and
121,144 shares outstanding $ 10.44
===========
Class B--Based on net assets of $9,052,277 and
867,108 shares outstanding $ 10.44
===========
Class C--Based on net assets of $384,050 and
36,793 shares outstanding $ 10.44
===========
Class D--Based on net assets of $684,084 and
65,537 shares outstanding $ 10.44
===========
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper and certain US Government & Agency Obligations
are traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
***Forward foreign exchange contracts as of September 30, 1995 were
as follows:
Foreign Currency Expiration Unrealized
Sold Date Appreciation
YEN 19,167,200 January 1996 $28,170
Total Unrealized Appreciation on Forward Foreign
Exchange Contracts (US$ Commitment--$225,013) $28,170
=======
</TABLE>
<PAGE>
COMMON STOCK PORTFOLIO CHANGES
For the Quarter Ended September 30, 1995
Additions
Sanwa Bank, Ltd.
Whirlpool Corporation
Deletions
Archer-Daniels-Midland Co.
Hanson PLC (Sponsored)(ADR)
Jurong Shipyard Ltd.
Kelly Services, Inc. (Class A)
US Industries, Inc.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Harry Woolf, Director
Terry K. Glenn, Executive Vice President
Richard L. Reller, Senior Vice President
Donald C. Burke, Vice President
Joel Heymsfeld, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Chase Manhattan Bank, N.A.
4 MetroTech Center, 18th Floor
Brooklyn, New York 11245
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
