MERRILL LYNCH
ASSET INCOME
FUND, INC.
FUND LOGO
Annual Report
December 31, 1995
Officers and Directors
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, 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
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.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Asset Income
Fund, Inc.
Box 9011
Princeton, NJ
MERRILL LYNCH ASSET INCOME FUND, INC.
Worldwide
Investments as of
December 31, 1995
(unaudited)
Percent Breakdown of
Stocks & Fixed-Income Percent of
Securities by Country Net Assets++
<PAGE>
United States* 88.9%
Japan 2.3
Canada 2.0
United Kingdom 1.9
Netherlands 0.5
Switzerland 0.4
Germany 0.4
Hong Kong 0.3
Argentina 0.2
Spain 0.1
Indonesia 0.1
Italy 0.1
Philippines 0.1
[FN]
*Includes investments in short-term securities.
++Percent of net assets may not total 100%.
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Telecommunications 1.3%
Pharmaceuticals 0.9
Electrical Equipment 0.8
Electronics 0.6
Oil Service 0.6
Petroleum 0.5
Insurance 0.5
Banking 0.4
Trading 0.4
Home Appliances 0.4
Country Percent
Ten Largest Holdings of of Net
(Equity Investments) Origin Assets
Merck & Co., Inc. United States 0.4%
United Technologies
Corp. United States 0.3
Schlumberger Ltd. Netherlands 0.3
The Stanley Works
Co. United States 0.3
Sumitomo Corp. Japan 0.3
Eastman Kodak Co. United States 0.3
Bell Atlantic
Corporation United States 0.3
Abbott Laboratories United States 0.3
Dresser Industries,
Inc. United States 0.3
Hong Kong Telecom-
munications Ltd.
(ADR) Hong Kong 0.3
<PAGE>
Important Tax
Information
(unaudited)
Of the ordinary income distributions paid monthly by Merrill Lynch
Asset Income Fund, Inc. during the fiscal year ended December 31,
1995, 2.58% qualifies for the dividends received deduction for
corporations. Additionally, the Fund distributed long-term capital
gains of $0.036140 per share to shareholders of record on December
20, 1995.
Please retain this information for your records.
DEAR SHAREHOLDER
Fiscal Year in Review
As of December 31, 1995, the Fund's asset allocation was: US bonds,
65% of net assets; foreign bonds, 3%; foreign stocks, 5%; US stocks,
5%; and cash, 22%.
Maintaining the Fund's US bond commitment in Treasury obligations
with an average maturity of over six years contributed positively to
the performance of the Fund during 1995, given the decline in
interest rates and advance in bond prices which persisted throughout
the year. As for the foreign bonds, our commitment in Germany
favorably impacted performance as a result of the Deutschemark's
appreciation relative to the US dollar. The return on other bonds in
the United Kingdom and Canada did not significantly exceed the
returns on US fixed-income securities during 1995. In the equity
sector, the underweighting of US stocks retarded overall
performance, given the superior return of the US equity market
during the year.
<PAGE>
Portfolio Matters
At December 31, 1995, we retained an average duration of over six
years in the Fund's US bond commitment. The US bond market rally
which began in late 1994 has extended into 1996, in our opinion, as
US inflation is expected to remain subdued during 1996. The rate of
economic growth is likely to be held down by the reluctance of
consumers to increase spending and by a lack of dramatic export
growth. A relatively slow rate of economic growth will not
contribute to inflationary pressures. In such an environment, the
inflation premium for US bonds is likely to continue to shrink.
In the foreign bond sector, we liquidated our German commitment.
Therefore, the Fund only has foreign bond investments in the United
Kingdom and Canada. The sale of German bonds reflected our concern
that strength in the US dollar relative to the Deutschemark could
offset any yield pick-up over dollar-denominated bonds. Within
Europe, United Kingdom bonds appeared to offer sufficient total
return potential to justify keeping them, even with the lack of
potential for currency gains. In Canada, a significant yield
advantage over the United States was deemed likely to be augmented
by modest appreciation of the Canadian dollar over the US currency.
During the three-month period ended December 31, 1995, we assumed a
more cautious posture toward foreign equity markets. Evidence of
slowing economic growth in Europe and the emerging economies,
particularly those in Asia, resulted in a less-optimistic assessment
of the reward/risk relationship in these markets. Japanese equities
remained our largest commitment in the foreign stock sector. The
Japanese stock market should continue to benefit from an
aggressively accommodative stance by the Bank of Japan and
indications that the Japanese government is dealing with the
problems of the financial system in a meaningful way. At the same
time, the Japanese economy is showing signs of beginning a recovery,
a result of its reflationary monetary policy and a weaker yen. We
believe that the yen could continue to weaken relative to the US
dollar. Therefore, over 60% of the market value of our yen-
denominated holdings is now hedged back into US dollars.
In Europe, we retained selected positions in the United Kingdom,
Germany, the Netherlands, Italy, Switzerland, and Spain. Our Latin
American representation is limited to Argentina, because we believe
that investors there are beginning to be rewarded for the country's
decision not to devalue its currency. In Asia, outside of Japan, the
Fund's representation is limited to telecommunications companies,
including P.T. Indonesian Satellite Corp. and Philippine Long
Distance Telephone Co.
We restructured the Fund's US equity sector in view of evidence of a
slower rate of economic growth than seemed the case previously.
However, we maintained commitments in the consumer staples area,
most notably through selected healthcare and photography companies,
as well as credit-sensitive equities in areas such as insurance,
telecommunications and banking. Commitments in the energy sector
were also retained.
<PAGE>
We also established positions in several technology companies,
including Corning, Inc., General Motors Corp., and Texas Instruments
Inc. These commitments appeared to lack the valuation excesses of
many companies in technology-related areas. Other capital spending
commitments were maintained in the aerospace and pollution control
industries. We also retained positions in several equities which
would benefit if the Federal Reserve Board responded to a sluggish
US economy by continuing to lower short-term interest rates. These
commitments included Sears, Roebuck & Co., Ford Motor Co., Whirlpool
Corporation, and Aluminum Company of America.
In the process of restructuring the portfolio, our cash position was
increased. We intend to recommit the cash primarily to US and
foreign equities in upcoming months as opportunities arise. In the
US market, any near-term pullback in share prices would present
opportunities for the establishment of additional US equity
commitments at attractive valuations.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Joel Heymsfeld)
Joel Heymsfeld
Vice President and
Co-Portfolio Manager
(Thomas R. Robinson)
Thomas R. Robinson
Vice President and
Co-Portfolio Manager
February 14, 1996
<PAGE>
Effective November 1, 1995, Thomas R. Robinson is responsible for
the day-to-day co-management of Merrill Lynch Asset Income Fund,
Inc. Mr. Robinson had been employed by Merrill Lynch & Co. since
1981 before joining Merrill Lynch Asset Management, L.P. in November
1995. Since 1989 he was Manager--International Equity Strategy with
the Global Securities Research & Economics Group.
PERFORMANCE DATA
About Fund
Performance
Investors are 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 approximately 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.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
<PAGE>
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.
PERFORMANCE DATA (continued)
Total Return
Based on a
$10,000
Investment
A line graph depicting the growth of an investment in the Fund's
Class A and Class B Shares compared to growth of an investment in
the ML B0A0 Index and the Composite Index. Beginning and ending
values are:
9/02/94** 12/95
ML Asset Income Fund, Inc,.++--
Class A Shares* $ 9,600 $11,114
ML Asset Income Fund, Inc,.++--
Class B Shares* $10,000 $11,163
ML B0A0 Index++++ $10,000 $11,786
Composite Index++++++ $10,000 $12,090
A line graph depicting the growth of an investment in the Fund's
Class C and Class D Shares compared to growth of an investment in
the ML B0A0 Index and the Composite Index. Beginning and ending
values are:
10/21/94** 12/95
<PAGE>
ML Asset Income Fund, Inc,.++--
Class C Shares* $10,000 $11,524
ML Asset Income Fund, Inc,.++--
Class D Shares* $ 9,600 $11,135
ML B0A0 Index++++ $10,000 $11,991
Composite Index++++++ $10,000 $12,277
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses including advisory fees.
**Commencement of Operations.
++ML Asset Income Fund, Inc. invests in a portfolio of US and foreign
debt, equity and money market securities.
++++This unmanaged Index is comprised of investment-grade bonds.
++++++The Composite Index consists of: 5%--3-month US Treasury
Bills; 75%--ML Bond Index; B0A0--Corporate & Government Master;
and 20%--Standard & Poor's 500.
Past performance is predictive of future performance.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/95 +17.38% +12.68%
Inception (9/02/94)
through 12/31/95 +11.65 + 8.27
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
<PAGE>
Class B Shares*
Year Ended 12/31/95 +16.51% +12.51%
Inception (9/02/94)
through 12/31/95 +10.82 + 8.63
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/95 +16.33% +15.33%
Inception (10/21/94)
through 12/31/95 +12.61 +12.61
[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*
Year Ended 12/31/95 +16.97% +12.29%
Inception (10/21/94)
through 12/31/95 +13.22 + 9.42
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
12/31/95 9/30/95 12/31/94 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.62 $10.44 $9.68 +10.08%(1) +2.07%(1)
Class B Shares* 10.62 10.44 9.68 +10.08(1) +2.07(1)
Class C Shares* 10.62 10.44 9.69 + 9.97(1) +2.07(1)
Class D Shares* 10.62 10.44 9.69 + 9.97(1) +2.07(1)
Class A Shares-Total Return* +17.38(2) +4.16(3)
Class B Shares-Total Return* +16.51(4) +3.95(5)
Class C Shares-Total Return* +16.33(6) +3.94(7)
Class D Shares-Total Return* +16.97(8) +4.09(9)
Class A Shares-Standardized 30-day Yield 5.16%
Class B Shares-Standardized 30-day Yield 4.56%
Class C Shares-Standardized 30-day Yield 4.47%
Class D Shares-Standardized 30-day Yield 4.82%
<FN>
*Investment results shown do not reflect sales charges; results
would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.036 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.662 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.226 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.586 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.205 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.580 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.203 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.637 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.219 per share ordinary
income dividends and $0.036 per share capital gains distributions.
</TABLE>
<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%
1995 9.68 10.62 $0.036 0.662 +17.38
------ ------
Total $0.036 Total $0.846
<PAGE> Cumulative total return as of 12/31/95: +15.77%**
<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>
PERFORMANCE DATA (concluded)
<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%
1995 9.68 10.62 $0.036 0.586 +16.51
------ ------
Total $0.036 Total $0.745
Cumulative total return as of 12/31/95: +14.63%***
</TABLE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $9.88 $ 9.69 -- $0.097 - 0.94%
1995 9.69 10.62 $0.036 0.580 +16.33
------ ------
Total $0.036 Total $0.677
Cumulative total return as of 12/31/95: +15.24%***
</TABLE>
<PAGE>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $9.88 $ 9.69 -- $0.108 - 0.83%
1995 9.69 10.62 $0.036 0.637 +16.97
------ ------
Total $0.036 Total $0.745
Cumulative total return as of 12/31/95: +15.99%**
<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.
***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>
<TABLE>
SCHEDULE OF INVESTMENTS (in USdollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Banking 690 Banco Frances del Rio de la
Plata S.A. (ADR)* $ 18,594 $ 18,544 0.1%
Petroleum 800 Yacimientos Petroliferos Fiscales S.A.
(Class D) (Sponsored) (ADR)* 18,614 17,300 0.1
Total Common Stocks in Argentina 37,208 35,844 0.2
Canada Multi-Industry 1,900 Canadian Pacific, Ltd. 33,447 34,438 0.2
Telecommunications 500 Northern Telecommunications Ltd. 17,405 21,500 0.2
Total Common Stocks in Canada 50,852 55,938 0.4
<PAGE>
Germany Electrical Equipment 50 Siemens AG 22,176 27,419 0.2
Machinery & Equipment 70 Mannesmann AG 19,573 22,333 0.2
Total Common Stocks in Germany 41,749 49,752 0.4
Hong Kong Telecommunications 2,000 Hong Kong Telecommunications Ltd. (ADR)* 35,697 35,500 0.3
Total Common Stocks in Hong Kong 35,697 35,500 0.3
Indonesia Telecommunications 520 P.T. Indonesian Satellite Corp. (ADR)* 20,272 18,980 0.1
Total Common Stocks in Indonesia 20,272 18,980 0.1
Italy Telecommunications 6,000 Societa Finanziara Telefonica S.p.A.
(STET) 18,206 16,997 0.1
Total Common Stocks in Italy 18,206 16,997 0.1
Japan Banking 1,000 Mitsubishi Trust & Banking Corp. 18,121 16,660 0.1
1,000 Sanwa Bank, Ltd. 19,883 20,341 0.1
----------- ----------- ------
38,004 37,001 0.2
Building & 2,000 Maeda Corp. 22,346 19,566 0.2
Construction 2,000 Okumura Corp. 17,151 18,210 0.1
----------- ----------- ------
39,497 37,776 0.3
Capital Goods 4,000 Hitachi Cable Ltd. 31,837 28,322 0.2
3,000 Mitsubishi Heavy Industries, Inc. 23,282 23,915 0.2
----------- ----------- ------
55,119 52,237 0.4
Electrical 3,000 Mitsubishi Electric Co. 20,723 21,590 0.2
Equipment
Electronics 1,000 Canon, Inc. 17,439 18,113 0.1
1,000 Matsushita Electric Industrial Co., Ltd. 16,802 16,273 0.1
----------- ----------- ------
34,241 34,386 0.2
Financial Services 1,000 Nomura Securities Co., Ltd. 20,384 21,794 0.2
Insurance 2,000 Tokio Marine & Fire Insurance Co., Ltd. 23,827 26,153 0.2
Printing & Publishing 1,000 Dai Nippon Printing Co., Ltd. 18,630 16,951 0.1
<PAGE>
Textiles 3,000 Toray Industries Ltd. 22,048 19,760 0.1
Trading 2,000 Kamigumi Co., Ltd. 23,315 19,198 0.1
4,000 Sumitomo Corp. 39,891 40,682 0.3
----------- ----------- ------
63,206 59,880 0.4
Total Common Stocks in Japan 335,679 327,528 2.3
Netherlands Oil Service 600 Schlumberger Ltd. 33,233 41,550 0.3
Petroleum 200 Royal Dutch Petroleum Co. (ADR)* 26,802 28,225 0.2
Total Common Stocks in the Netherlands 60,035 69,775 0.5
Philippines Telecommunications 300 Philippine Long Distance
Telephone Co. (ADR)* 20,990 16,238 0.1
Total Common Stocks in the Philippines 20,990 16,238 0.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in USdollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Spain Petroleum 600 Repsol S.A. (ADR)* $ 19,311 $ 19,725 0.1%
Total Common Stocks in Spain 19,311 19,725 0.1
Switzerland Electrical Equipment 25 BBC Brown Boveri & Cie (Bearer) 22,679 29,113 0.2
Pharmaceuticals 500 Sandoz AG (ADR)* 21,705 22,812 0.2
Total Common Stocks in Switzerland 44,384 51,925 0.4
United Chemicals 400 Imperial Chemical Industries PLC (ADR)* 20,682 18,700 0.1
Kingdom
Electrical Equipment 5,000 General Electric Co. PLC 22,639 27,552 0.2
Total Common Stocks in
the United Kingdom 43,321 46,252 0.3
<PAGE>
United Aerospace 500 United Technologies Corp. 31,448 47,437 0.3
States
Airlines 200 Boeing Co. 14,651 15,675 0.1
Aluminum 300 Aluminum Company of America 17,262 15,862 0.1
Automobile 1,200 Ford Motor Co. 32,137 34,800 0.3
Banking 400 Bank of New York Co., Inc. 18,903 19,500 0.1
Chemicals 500 Eastman Chemical Co. 26,197 31,312 0.2
Electronics 600 Corning, Inc. 16,570 19,200 0.2
300 General Motors Corp. (Class E) 15,424 15,600 0.1
300 Texas Instruments Inc. 18,021 15,525 0.1
----------- ----------- ------
50,015 50,325 0.4
Environmental Control 1,900 Wheelabrator Technologies Inc. 31,172 31,825 0.2
Systems
Hardware Products 800 The Stanley Works Co. 31,572 41,200 0.3
Home Appliances 1,000 Singer Co. 26,787 27,875 0.2
600 Whirlpool Corporation 34,735 31,950 0.2
----------- ----------- ------
61,522 59,825 0.4
Insurance 200 Aetna Life & Casualty Co. 14,884 13,850 0.1
400 Allstate Corp. 16,373 16,450 0.1
400 National Re Corp. 12,955 15,200 0.1
----------- ----------- ------
44,212 45,500 0.3
Oil Service 1,500 Dresser Industries, Inc. 30,407 36,562 0.3
Oil &Gas Producers 300 Enron Corp. 11,340 11,437 0.1
Petroleum 300 Pennzoil Co. 11,806 12,675 0.1
Pharmaceuticals 900 Abbott Laboratories 29,082 37,575 0.3
900 Merck & Co., Inc. 30,882 59,175 0.4
----------- ----------- ------
59,964 96,750 0.7
Photography 600 Eastman Kodak Co. 28,913 40,200 0.3
Retail 500 Sears, Roebuck & Co. 19,932 19,500 0.1
<PAGE>
Scientific Equipment 1,000 Fisher Scientific International, Inc. 30,407 33,375 0.2
Telecommunications 400 AT&T Corp. 21,682 25,900 0.2
600 Bell Atlantic Corporation 30,590 40,125 0.3
----------- ----------- ------
52,272 66,025 0.5
Total Common Stocks in the United States 604,132 709,785 5.0
Total Investments in Common Stocks 1,331,836 1,454,239 10.2
Face
Amount Fixed-Income Securities
Canada C$ 300,000 National Bank of Canada, 7.25% due
6/01/2003 201,403 223,890 1.6
Total Fixed-Income Securities in Canada 201,403 223,890 1.6
United Pound 150,000 UK Treasury Gilt, 7.25% due 3/30/1998 231,490 237,123 1.6
Kingdom Sterling
Total Fixed-Income Securities in the
United Kingdom 231,490 237,123 1.6
United States US Treasury Notes:
US$ 1,000,000 6.375% due 8/15/2002 1,020,781 1,048,590 7.3
3,250,000 7.25% due 8/15/2004 3,153,750 3,614,097 25.3
500,000 7.50% due 2/15/2005 503,750 566,720 4.0
1,500,000 6.50% due 5/15/2005 1,541,953 1,595,865 11.2
1,300,000 6.50% due 8/15/2005 1,312,905 1,384,903 9.7
1,000,000 5.875% due 11/15/2005 1,011,094 1,022,500 7.1
Total Fixed-Income Securities
in the United States 8,544,233 9,232,675 64.6
Total Investments in
Fixed-Income Securities 8,977,126 9,693,688 67.8
Short-Term Securities
<PAGE>
United Commercial US$ 575,000 General Electric Capital Corp.,
States Paper** 5.90% due 1/02/1996 575,000 575,000 4.0
US Government & 700,000 Federal Farm Credit Bank, 5.53%
Agency due 1/16/1996 698,495 698,495 4.9
Obligations** 1,500,000 Federal National Mortgage
Association, 5.40% due 2/01/1996 1,493,250 1,493,250 10.4
----------- ----------- ------
2,191,745 2,191,745 15.3
Total Investments in
Short-Term Securities 2,766,745 2,766,745 19.3
Total Investments $13,075,707 13,914,672 97.3
===========
Unrealized Appreciation on Forward Foreign Exchange Contracts*** 38,974 0.3
Other Assets Less Liabilities 343,634 2.4
----------- ------
Net Assets $14,297,280 100.0%
=========== ======
<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 sold as of December 31, 1995
were as follows:
Unrealized
Expiration Appreciation
Foreign Currency Sold Date (Note 1c)
YEN 19,167,200 January 1996 $38,974
Total Unrealized Appreciation on
Forward Foreign Exchange Contracts
(US$ Commitment--$225,013) $38,974
=======
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of December 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$13,075,707) (Note 1a) $13,914,672
Unrealized appreciaton on forward foreign exchange contracts (Note 1c) 38,974
Cash 1,032
Foreign cash (Note 1d) 39,437
Receivables:
Interest $ 190,876
Capital shares sold 59,698
Dividends 2,865 253,439
-----------
Deferred organization expenses (Note 1g). 81,380
Prepaid registration fees and other assets (Note 1g) 105,754
-----------
Total assets 14,434,688
-----------
Liabilities: Payables:
Dividends to shareholders (Note 1h) 24,508
Securities purchased 11,340
Distributor (Note 2) 6,471
Capital shares redeemed 5,459 47,778
-----------
Accrued expenses and other liabilities 89,630]
-----------
Total liabilities 137,408
-----------
Net Assets: Net assets $14,297,280
===========
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized $ 36,474
Class B Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 86,972
Class C Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 3,936
Class D Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 7,259
Paid-in capital in excess of par 13,406,868
Accumulated distributions in excess of realized capital gains on
investments and foreign currency transactions--net (121,449)
Unrealized appreciation on investments and foreign currency
transactions--net 877,220
-----------
Net assets $14,297,280
===========
<PAGE>
Net Asset Value: Class A--Based on net assets of $3,872,535 and 364,737
shares outstanding $ 10.62
===========
Class B--Based on net assets of $9,235,989 and 869,721
shares outstanding $ 10.62
===========
Class C--Based on net assets of $417,960 and 39,362
shares outstanding $ 10.62
===========
Class D--Based on net assets of $770,796 and 72,593
shares outstanding. $ 10.62
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended December 31, 1995
<S> <S> <C> <C>
Investment Interest and discount earned $ 586,665
Income Dividends (net of $2,163 foreign withholding tax) 36,840
(Notes 1e & 1f): -----------
Total income 623,505
-----------
Expenses: Registration fees (Note 1g) $ 119,127
Printing and shareholder reports 114,519
Investment advisory fees (Note 2) 80,601
Professional fees 78,968
Accounting services (Note 2) 74,125
Account maintenance and distribution fees--Class B (Note 2) 63,003
Directors' fees and expenses 25,349
Amortization of organization expenses (Note 1g) 22,382
Custodian fees 12,751
Transfer agent fees--Class B (Note 2) 10,780
Pricing fees 6,018
Account maintenance and distribution fees--Class C (Note 2) 2,567
Transfer agent fees--Class A (Note 2) 1,578
Account maintenance fees--Class D (Note 2) 1,442
Transfer agent fees--Class D (Note 2) 639
Transfer agent fees--Class C (Note 2) 428
Other 9,954
-----------
Total expenses before reimbursements 624,231
Reimbursement of expenses (Note 2) (557,220)
-----------
Total expenses after reimbursement 67,011
-----------
Investment income--net 556,494
-----------
<PAGE>
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 33,995
(Loss) on Foreign currency transactions--net (17,336) 16,659
Investment & -----------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 1,047,270
(Notes 1c, 1d, Foreign currency transactions--net 40,014 1,087,284
1f & 3): ----------- -----------
Net realized and unrealized gain on investments and
foreign currency transactions 1,103,943
-----------
Net Increase in Net Assets Resulting from Operations $ 1,660,437
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the
For the Period
Year Sept. 2,
Ended 1994++ to
Dec. 31, Dec. 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 556,494 $ 109,214
Realized gain on investments and foreign currency
transactions--net 16,659 122
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 1,087,284 (210,064)
----------- -----------
Net increase (decrease) in net assets resulting from operations 1,660,437 (100,728)
----------- -----------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (83,814) (18,023)
Shareholders Class B (424,788) (89,843)
(Note 1h): Class C (16,003) (796)
Class D (31,889) (552)
Realized gain on investments--net:
Class A (4,541) --
Class B (10,847) --
Class C (494) --
Class D (899) --
In excess of realized gain on investments--net:
Class A (32,862) --
Class B (78,505) --
Class C (3,574) --
Class D (6,508) --
----------- -----------
Net decrease in net assets resulting from
dividends and distributions to shareholders (694,724) (109,214)
----------- -----------
Capital Share Net increase in net assets derived from capital share
Transactions transactions 5,170,953 8,270,556
(Note 4): ----------- -----------
Net Assets: Total increase in net assets 6,136,666 8,060,614
Beginning of period 8,160,614 100,000
----------- -----------
End of period $14,297,280 $ 8,160,614
=========== ===========
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A Class B
For the For the
For the Period For the Period
The following per share data and ratios have been derived Year Sept. 2, Year Sept. 2,
from information provided in the financial statements. Ended 1994++ to Ended 1994++ to
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.68 $ 10.00 $ 9.68 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .60 .18 .51 .16
Realized and unrealized gain (loss)
on investments and foreign currency
<PAGE> transactions--net 1.04 (.32) 1.04 (.32)
------- ------- ------- -------
Total from investment operations 1.64 (.14) 1.55 (.16)
------- ------- ------- -------
Less dividends:
Investment income--net (.60) (.18) (.51) (.16)
Realized gain on investments--net (.01) -- (.01) --
In excess of realized gain on investments--net (.09) -- (.09) --
------- ------- ------- -------
Total dividends and distributions (.70) (.18) (.61) (.16)
------- ------- ------- -------
Net asset value, end of period $10.62 $ 9.68 $10.62 $ 9.68
======= ======= ======= =======
Total Investment Based on net asset value per share 17.38% (1.37%)+++ 16.51% (1.62%)+++
Return:** ======= ======= ======= =======
Ratios to Expenses, net of reimbursement and
Average Net excluding account maintenance and
Assets: distribution fees .00% .00%* .00% .00%*
======= ======= ======= =======
Expenses, net of reimbursement .00% .00%* .75% .75%*
======= ======= ======= =======
Expenses 5.12% 5.20%* 5.94% 6.04%*
======= ======= ======= =======
Investment income--net 5.78% 5.64%* 5.06% 4.86%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 3,872 $ 1,147 $ 9,236 $ 6,797
Data: ======= ======= ======= =======
Portfolio turnover 46.75% .83% 46.75% .83%
======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class C Class D
For the For the
For the Period For the Period
The following per share data and ratios have been derived Year Oct. 21, Year Oct. 21,
from information provided in the financial statements. Ended 1994++ to Ended 1994++ to
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.69 $ 9.88 $ 9.69 $ 9.88
Operating ------- ------- ------- -------
Performance: Investment income--net .52 .10 .57 .11
Realized and unrealized gain (loss) on
investments and foreign currency transactions--net 1.03 (.19) 1.03 (.19)
------- ------- ------- -------
Total from investment operations 1.55 (.09) 1.60 (.08)
------- ------- ------- -------
Less dividends:
Investment income--net (.52) (.10) (.57) (.11)
Realized gain on investments--net (.01) -- (.01) --
In excess of realized gain on investments--net (.09) -- (.09) --
------- ------- ------- -------
Total dividends and distributions (.62) (.10) (.67) (.11)
------- ------- ------- -------
Net asset value, end of period $ 10.62 $ 9.69 $ 10.62 $ 9.69
======= ======= ======= =======
Total Investment Based on net asset value per share 16.33% (.94%)+++ 16.97% (.83%)+++
Return:** ======= ======= ======= =======
Ratios to Expenses, net of reimbursement and excluding
Average Net account maintenance and distribution fees .00% .00%* .00% .00%*
Assets: ======= ======= ======= =======
Expenses, net of reimbursement .80% .80%* .25% .25%*
======= ======= ======= =======
Expenses 6.02% 5.75%* 5.44% 5.14%*
======= ======= ======= =======
Investment income--net 4.99% 5.19%* 5.53% 5.70%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 418 $ 154 $ 771 $ 63
Data: ======= ======= ======= =======
Portfolio turnover 46.75% .83% 46.75% .83%
======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Asset Income Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a non-diversified, open-
end management investment company. The Fund offers four classes of
shares under the Merrill Lynch Select Pricing SM System. Shares of
Class A and Class D are sold with a front-end sales charge. Shares
of Class B and Class C may be subject to a contingent deferred sales
charge. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and
Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as
the primary market. Securities which are traded both in the over-the-
counter market and on a stock exchange are valued according to the
broadest and most representative market. Options written are valued
at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. Short-
term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets
for which market quotations are not available are valued at fair
value as determined in good faith by or under the direction of the
Fund's Board of Directors.
<PAGE>
(b) Repurchase agreements--The Fund invests in US Government
securities pursuant to repurchase agreements with a member bank of
the Federal Reserve System or a primary dealer in US Government
securities. Under such agreements, the bank or primary dealer agrees
to repurchase the security at a mutually agreed upon time and price.
The Fund takes possession of the underlying securities, marks to
market such securities and, if necessary, receives additions to such
securities daily to ensure that the contract is fully
collateralized.
(c) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt and currency
markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
* Forward foreign exchange contracts--The Fund is authorized to
enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. Such contracts
are not entered on the Fund's records. However, the effect on
operations is recorded from the date the Fund enters into such
contracts. Premium or discount is amortized over the life of the
contracts.
NOTES TO FINANCIAL STATEMENTS (continued)
* Foreign currency options and futures--The Fund may also purchase
or sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
<PAGE>
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing
investments.
(d) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(e) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends, and capital
gains at various rates.
(f) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates except that if the ex-dividend date has passed,
certain dividends from foreign securities are recorded as soon as
the Fund is informed of the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
<PAGE>
(g) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(h) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post-October losses.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee of 0.75%, on an annual basis,
of the average daily value of the Fund's net assets. Certain of the
states in which the shares of the Fund are qualified for sale impose
limitations on the expenses of the Fund. The most restrictive annual
expense limitation requires that MLAM reimburse the Fund to the
extent the Fund's expenses (excluding interest, taxes, distribution
fees, brokerage fees and commissions, and extraordinary items)
exceed 2.5% of the Fund's first $30 million of average daily net
assets, 2.0% of the next $70 million of average daily net assets,
and 1.5% of the average daily net assets in excess thereof. MLAM's
obligation to reimburse the Fund is limited to the amount of the
management fee. No fee payment will be made to MLAM during any
fiscal year which will cause such expenses to exceed the most
restrictive expense limitation at the time of such payment. For the
year ended December 31, 1995, MLAM earned fees of $80,601, all of
which were waived. MLAM also reimbursed the Fund for additional
expenses of $476,619.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
<PAGE>
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.50%
Class C 0.25% 0.55%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended December 31, 1995, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $ 14 $ 112
Class D $246 $3,035
For the year ended December 31, 1995, MLPF&S received contingent
deferred sales charges of $13,537 and $36 relating to transactions
in Class B and Class C Shares, respectively.
In addition, MLPF&S received $611 in commissions on the execution of
portfolio security transactions for the Fund for the year ended
December 31, 1995.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
During the year ended December 31, 1995, the Fund paid Merrill Lynch
Security Pricing Service, an affiliate of MLPF&S, $199 for security
price quotations to compute the net asset value of the Fund.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended December 31, 1995 were $7,795,074 and $4,360,216,
respectively.
Net realized and unrealized gains (losses) as of December 31, 1995
were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 33,981 $ 838,965
Short-term investments 14 --
Forward foreign exchange contracts (23,572) 38,974
Foreign currency transactions 6,236 (719)
-------- ----------
Total $ 16,659 $ 877,220
======== ==========
As of December 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $838,965, of which $874,278 related
to appreciated securities and $35,313 related to depreciated
securities. At December 31, 1995, the aggregate cost of investments
for Federal income tax purposes was $13,075,707.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $5,170,953 for the year ended December 31, 1995 and $8,270,556
for the period September 2, 1994 to December 31, 1994.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Ended Dollar
December 31, 1995 Shares Amount
Shares sold 472,669 $4,997,372
Shares issued to shareholders in
reinvestment of dividends and
distributions 7,443 79,751
-------- ----------
Total issued 480,112 5,077,123
Shares redeemed (233,839) (2,476,825)
-------- ----------
Net increase 246,273 $2,600,298
======== ==========
<PAGE>
Class A Shares for the Period
September 2, 1994++ Dollar
to December 31, 1994 Shares Amount
Shares sold 124,621 $1,237,577
Shares issued to shareholders in
reinvestment of dividends 923 9,012
-------- ----------
Total issued 125,544 1,246,589
Shares redeemed (12,080) (119,643)
-------- ----------
Net increase 113,464 $1,126,946
======== ==========
[FN]
++Commencement of Operations. Prior to September 2, 1994, the Fund
issued 5,000 shares to MLAM for $50,000.
NOTES TO FINANCIAL STATEMENTS (concluded)
Class B Shares for the Year Ended Dollar
December 31, 1995 Shares Amount
Shares sold 395,975 $4,018,024
Shares issued to shareholders in
reinvestment of dividends and
distributions 29,811 307,641
-------- ----------
Total issued 425,786 4,325,665
Shares redeemed (257,918) (2,648,106)
-------- ----------
Net increase 167,868 $1,677,559
======== ==========
Class B Shares for the Period
September 2, 1994++ Dollar
to December 31, 1994 Shares Amount
Shares sold 771,236 $7,656,187
Shares issued to shareholders in
reinvestment of dividends 5,204 50,756
-------- ----------
Total issued 776,440 7,706,943
Shares redeemed (79,587) (781,691)
-------- ----------
Net increase 696,853 $6,925,252
======== ==========
<PAGE>
[FN]
++Commencement of Operations. Prior to September 2, 1994, the Fund
issued 5,000 shares to MLAM for $50,000.
Class C Shares for the Year Ended Dollar
December 31, 1995 Shares Amount
Shares sold 44,492 $ 445,570
Shares issued to shareholders in
reinvestment of dividends and
distributions 1,385 13,383
-------- ----------
Total issued 45,877 458,953
Shares redeemed (22,425) (224,003)
-------- ----------
Net increase 23,452 $ 234,950
======== ==========
Class C Shares for the Period
October 21, 1994++ to Dollar
December 31, 1994 Shares Amount
Shares sold 15,858 $ 154,725
Shares issued to shareholders in
reinvestment of dividends 52 504
-------- ----------
Net increase 15,910 $ 155,229
======== ==========
[FN]
++Commencement of Operations.
Class D Shares for the Year Ended Dollar
December 31, 1995 Shares Amount
Shares sold 73,881 $ 726,037
Shares issued to shareholders in
reinvestment of dividends and
distributions 2,407 35,301
-------- ----------
Total issued 76,288 761,338
Shares redeemed (10,134) (103,192)
-------- ----------
Net increase 66,154 $ 658,146
======== ==========
<PAGE>
Class D Shares for the Period
October 21, 1994++ to Dollar
December 31, 1994 Shares Amount
Shares sold 6,419 $ 62,936
Shares issued to shareholders in
reinvestment of dividends 31 303
-------- ----------
Total issued 6,450 63,239
Shares redeemed (11) (110)
-------- ----------
Net increase 6,439 $ 63,129
======== ==========
[FN]
++Commencement of Operations.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors,
Merrill Lynch Asset Income Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Asset Income Fund, Inc. as of December 31, 1995, the related
statements of operations for the year then ended and changes in net
assets for the year then ended and the period September 2, 1994
(commencement of operations) to December 31, 1994, and the financial
highlights for each of the periods presented. These financial
statements and the financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at December
31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
<PAGE>
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Asset Income Fund, Inc. as of December 31, 1995, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
February 14, 1996
</AUDIT-REPORT>
COMMON STOCK PORTFOLIO CHANGES (unaudited)
For the Quarter Ended December 31, 1995
Additions
Aetna Life & Casualty Co.
Allstate Corp.
Aluminum Company of America
Bank of New York Co., Inc.
Boeing Co.
Corning, Inc.
Enron Corp.
General Motors Corp. (Class E)
Hong Kong Telecommunications Ltd. (ADR)
National Re Corp.
Nomura Securities Co., Ltd.
Pennzoil Co.
Royal Dutch Petroleum Co. (ADR)
Sandoz AG (ADR)
Sears, Roebuck & Co.
Singer Co.
Texas Instruments Inc.
<PAGE>
Deletions
Alcatel Alsthom (ADR)
Asahi Glass Co., Ltd.
British Gas PLC (ADR)
CSR Ltd.
Cementos Mexicano, S.A. de C.V. (Class B)
(Cemex)
China Light & Power Co., Ltd.
Compagnie de Saint Gobain
Comsat Corp.
Empresas ICA Sociedad Controladora,
S.A. de C.V. (ADR)
GTE Corp.
General Signal Corp.
Grand Metropolitan PLC (ADR)
Ingersoll-Rand Company
Kandenko Co., Ltd.
Komatsu Ltd.
Kvaerner A.S. (Class B)
MDX Company Ltd. (Foreign)
Makino Milling Machine Co.
Makita Corp.
Neptune Orient Lines Ltd.
Nippon Fire & Marine Insurance Co., Ltd.
Nippon Oil Co., Ltd.
Pacific Dunlop Ltd.
Phillips Petroleum Company
Pitney Bowes, Inc.
SKF AB 'B' Free
Sekisui Chemical Co., Ltd.
Shanghai Petrochemical Co., Ltd.
Sharp Corp.
Stewart & Stevenson Services, Inc.
Sulzer Gebrueder AG
Sun Hung Kai Properties, Ltd.
Swire Pacific Ltd. 'A'
TOTAL S.A. (Class B)
