MERRILL LYNCH
ASSET INCOME
FUND, INC.
FUND LOGO
Quarterly Report
March 31, 1996
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
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Thomas R. Robinson, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Chase Manhattan Bank, N.A.
4 MetroTech Center, 18th Floor
Brooklyn, NY 11245
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 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
08543-9011
MERRILL LYNCH ASSET INCOME FUND, INC.
Worldwide
Investments as of
March 31, 1996
<PAGE>
Percent Breakdown of
Stocks & Fixed-Income Percent of
Securities by Country Net Assets++
United States* 74.2%
Germany 9.4
Italy 6.5
Japan 2.8
Canada 1.0
United Kingdom 0.5
Hong Kong 0.5
Philippines 0.4
Switzerland 0.4
France 0.4
Netherlands 0.4
Argentina 0.4
Mexico 0.3
Spain 0.3
Finland 0.3
Brazil 0.3
Indonesia 0.3
Panama 0.2
South Korea 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 1.8%
Electronics 1.3
Electrical Equipment 1.1
Pharmaceuticals 1.1
Petroleum 0.8
Banking 0.7
Oil Service 0.6
Chemicals 0.6
Insurance 0.6
Aerospace 0.5
Country Percent
Ten Largest Holdings of of Net
(Equity Investments) Origin Assets
<PAGE>
United Technologies
Corp. United States 0.4%
Merck & Co., Inc. United States 0.4
Schlumberger Ltd. United States 0.3
Dresser
Industries, Inc. United States 0.3
Imperial Chemical
Industries PLC
(ADR) United Kingdom 0.3
Kimberly-Clark
de Mexico, S.A.
de C.V. (ADR) Mexico 0.3
The Stanley
Works Co. United States 0.3
Mitsubishi Heavy
Industries, Ltd. Japan 0.3
Eastman Kodak Co. United States 0.3
Potash Corp. of
Saskatchewan
Inc. Canada 0.3
DEAR SHAREHOLDER
As 1995 ended and into the first two months of 1996, it appeared
that the US economy was losing momentum. Lackluster retail sales,
increases in initial unemployment claims (along with weak job and
income growth), and evidence of slowing in the manufacturing sector
all suggested that the rate of economic growth was slowing, with
some forecasters even suggesting the possibility of an imminent
recession. With inflationary pressures well subdued, these signs of
economic weakness led the Federal Reserve Board to lower short-term
interest rates at its January Federal Open Market Committee meeting.
However, investor perceptions regarding the rate of future economic
growth changed dramatically with the report of stronger-than-
expected employment data for February and March. As a result, the
consensus outlook regarding the direction of business activity
shifted from expectations of weakness to anticipation of a revival
in growth of the economy. Long-term interest rates rose, and the
Federal Reserve Board left monetary policy on hold.
<PAGE>
Investors are likely to continue to focus on the probable direction
of economic activity and Federal Reserve Board monetary policy in
the weeks ahead. At this time, inflationary pressures do not seem
to be building and the manufacturing sector is still relatively
weak, which suggest that the economy is not on the verge of
overheating. Nevertheless, it is likely that any further indication
of stronger economic activity in the weeks ahead may add to investor
concerns that accelerating economic activity could lead to higher
inflation and interest rates.
Portfolio Matters
As of March 31, 1996, the Fund's asset allocation was: US bonds, 48%
of net assets; foreign bonds, 15%; US stocks, 8%; foreign stocks,
9%; and cash reserves, 18%.
In early March, we reduced the proportion of the portfolio's US bond
allocation. We also significantly lowered the duration of the
remaining US bond holdings from more than 6 years to less than 3.5
years. This shift in strategy reflected our evolving perception that
the US economy was somewhat stronger than had previously appeared.
In such an environment, it seemed less likely that the Federal
Reserve Board would undertake a further easing of monetary policy in
the coming months. On this basis, we believed that interest rates on
US bonds could back up further over the near term--intermediate
term. By reducing the average duration of the US bond holdings, we
reduced the Fund's vulnerability to rising interest rates.
At the same time, we restored foreign bond representation during
March. We initiated positions in German obligations within a two-
year--three-year maturity range. We expect these commitments to
exhibit appreciation in response to anticipated further interest
rate reductions by the Bundesbank. These bonds could also prove
attractive to dollar-based investors, since the Deutschemark is
expected to appreciate modestly versus the dollar in the coming
months. We also established representation in three-year--five-year
Italian bonds. The appeal of Italian bonds is their attractive
current yields, which averaged 8.7%, as well as the expectation that
a dramatic improvement in Italy's level of inflation will allow the
central bank to lower short-term interest rates.
After the restructuring of the Fund's US holdings undertaken in late
1995, we have gradually increased the commitment to US equities. In
selecting new positions, we emphasized the shares of companies which
have dominant positions in their industries, are either in the midst
of or have completed restructuring programs and represent attractive
values. Examples of new positions in restructured companies which
enjoy dominant positions within their respective industries are
American Express Company, Deere & Co. and Citicorp. We also added
Delta Air Lines, Inc., which is in the process of restructuring. The
other major area of expansion was in technology companies. New
positions included cisco Systems, Inc. and Oracle Systems Corp.
These companies dominate their industries, although their shares
weakened in recent months with no apparent deterioration in
fundamentals.
<PAGE>
Japan remains the largest Fund commitment in the foreign equity
sector, even after our sales of Sanwa Bank, Ltd., Mitsubishi Trust
&Banking Corp. and Hitachi Cable Ltd. We initiated a new position in
Eisai Co., Ltd. while eliminating the currency hedge against the
yen. Following the substantial recovery of the dollar versus the yen
since the spring of 1995, we deemed the potential for further dollar
strengthening to be limited.
Within Europe, we added a number of commitments which seemed to
offer exceptional value, consistent with a selective approach to
European equity markets. These commitments included Philips
Electronics N.V. in the Netherlands, Michelin (C.G.D.E.) S.A. and
Usinor-Sacilor S.A. in France, and Nokia Corp. in Finland. We also
enlarged our position in Canada through the purchase of shares of
Magna International Inc. and Potash Corp. of Saskatchewan Inc.
We expanded the Fund's position in the emerging markets of Asia and
Latin America. In Asia, we initiated new positions in HSBC Holdings
PLC in Hong Kong and in San Miguel Corp. in the Philippines. In
Latin America, we purchased shares of Telecomunicacoes Brasileiras
S.A.-Telebras, Kimberly-Clark de Mexico, S.A. de C.V. and
Panamerican Beverages, Inc. On balance, we expect the Asian and
Latin American markets to perform well in the coming months in
response to improving economic prospects.
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 semi-annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Thomas R. Robinson)
Thomas R. Robinson
Vice President and
Senior Portfolio Manager
<PAGE>
(Joel Heymsfeld)
Joel Heymsfeld
Portfolio Manager
May 3, 1996
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.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/96 +11.42% +6.96%
Inception (9/02/94)
through 3/31/96 + 8.99 +6.20
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/96 +10.60% +6.60%
Inception (9/02/94)
through 3/31/96 + 8.18 +6.36
[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*
<PAGE>
Year Ended 3/31/96 +10.54% +9.54%
Inception (10/21/94)
through 3/31/96 + 9.37 +9.37
[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 3/31/96 +11.15% +6.70%
Inception (10/21/94)
through 3/31/96 + 9.96 +6.90
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
3/31/96 12/31/95 3/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.37 $10.62 $9.94 + 4.68%(1) -2.35%
Class B Shares* 10.37 10.62 9.94 + 4.68(1) -2.35
Class C Shares* 10.37 10.62 9.94 + 4.68(1) -2.35
Class D Shares* 10.37 10.62 9.94 + 4.68(1) -2.35
Class A Shares-Total Return* +11.42(2) -1.06(3)
Class B Shares-Total Return* +10.60(4) -1.23(5)
Class C Shares-Total Return* +10.54(6) -1.24(7)
Class D Shares-Total Return* +11.15(8) -1.12(9)
Class A Shares-Standardized 30-day Yield 4.74%
Class B Shares-Standardized 30-day Yield 4.18%
Class C Shares-Standardized 30-day Yield 4.13%
Class D Shares-Standardized 30-day Yield 4.49%
<PAGE>
<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 $0.653 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.128 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.575 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.110 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.570 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.109 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.627 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.122 per share ordinary
income dividends.
</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
1/1/96--3/31/96 10.62 10.37 -- 0.128 - 1.06
------ ------
Total $0.036 Total $0.974
Cumulative total return as of 3/31/96: +14.54%**
<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)
<PAGE>
<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
1/1/96--3/31/96 10.62 10.37 -- 0.110 - 1.23
------ ------
Total $0.036 Total $0.855
Cumulative total return as of 3/31/96: +13.21%***
</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
1/1/96--3/31/96 10.62 10.37 -- 0.109 - 1.24
------ ------
Total $0.036 Total $0.786
Cumulative total return as of 3/31/96: +13.81%***
</TABLE>
<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
1/1/96--3/31/96 10.62 10.37 -- 0.122 - 1.12
------ ------
Total $0.036 Total $0.867
Cumulative total return as of 3/31/96: +14.70%**
<PAGE>
<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 US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Common Stocks Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Banking 690 Banco Frances del Rio de la
Plata S.A. (ADR)* $ 18,594 $ 18,889 0.2%
Petroleum 1,600 Yacimientos Petroliferos Fiscales S.A.
(Class D) (Sponsored)(ADR)* 34,973 32,200 0.2
Total Common Stocks in Argentina 53,567 51,089 0.4
Brazil Telecommunications 700 Telecomunicacoes Brasileiras
S.A.-Telebras (ADR)* 37,529 34,825 0.3
Total Common Stocks in Brazil 37,529 34,825 0.3
Canada Automotive & Equipment 700 Magna International Inc. (Class A) 31,087 32,288 0.2
Mining 680 Potash Corp. of Saskatchewan Inc. 45,790 42,500 0.3
Multi-Industry 1,900 Canadian Pacific, Ltd. 33,447 38,000 0.3
Telecommunications 500 Northern Telecommunications Ltd. 17,405 23,875 0.2
Equipment
Total Common Stocks in Canada 127,729 136,663 1.0
Finland Telecommunications 1,200 Nokia Corp. (Sponsored) (ADR)* 43,420 41,100 0.3
Equipment
Total Common Stocks in Finland 43,420 41,100 0.3
<PAGE>
France Iron & Steel 1,200 Usinor-Sacilor S.A. 19,139 19,648 0.1
Tires & Rubber 800 Michelin (C.G.D.E.) S.A. (Class B) 34,759 38,175 0.3
Total Common Stocks in France 53,898 57,823 0.4
Germany Electrical Equipment 50 Siemens AG 22,176 27,539 0.2
Machinery & Equipment 70 Mannesmann AG 19,573 25,529 0.2
Total Common Stocks in Germany 41,749 53,068 0.4
Hong Kong Banking 2,000 HSBC Holdings PLC 32,204 29,997 0.2
Telecommunications 2,000 Hong Kong Telecommunications Ltd. (ADR)* 35,697 40,000 0.3
Total Common Stocks in Hong Kong 67,901 69,997 0.5
Indonesia Telecommunications 1,020 P.T. Indonesian Satellite Corp.(ADR)* 37,802 34,808 0.3
Total Common Stocks in Indonesia 37,802 34,808 0.3
Italy Telecommunications 12,000 Societa Finanziara Telefonica S.p.A. (STET) 35,458 33,350 0.2
Total Common Stocks in Italy 35,458 33,350 0.2
Japan Building & Construction 2,000 Maeda Corp. 22,346 19,858 0.1
2,000 Okumura Corp. 17,151 18,509 0.1
----------- ----------- ------
39,497 38,367 0.2
Capital Goods 5,000 Mitsubishi Heavy Industries, Inc. 40,174 43,275 0.3
Electrical Equipment 5,000 Mitsubishi Electric Co. 35,451 37,280 0.3
Electronics 2,000 Canon, Inc. 36,445 38,217 0.3
2,000 Matsushita Electric Industrial Co., Ltd. 32,955 32,596 0.2
----------- ----------- ------
69,400 70,813 0.5
</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>
Japan Financial Services 1,000 Nomura Securities Co., Ltd. $ 20,384 $ 22,012 0.2%
(concluded)
Insurance 2,000 Tokio Marine & Fire Insurance Co., Ltd. 23,827 26,040 0.2
Pharmaceuticals 1,050 Eisai Co., Ltd. 18,533 21,047 0.2
Printing & Publishing 1,000 Dai Nippon Printing Co., Ltd. 18,630 18,265 0.1
Textiles 5,000 Toray Industries Ltd. 34,821 32,409 0.2
Trading 2,000 Kamigumi Co., Ltd. 23,315 20,420 0.1
4,000 Sumitomo Corp. 39,891 42,338 0.3
----------- ----------- ------
63,206 62,758 0.4
Warehouse & Storage 3,000 Mitsui-Soko Co., Ltd. 25,215 25,852 0.2
Total Common Stocks in Japan 389,138 398,118 2.8
Mexico Household & 1,200 Kimberly-Clark de Mexico, S.A.
Personal Care de C.V. (ADR)* 43,130 45,150 0.3
Products
Total Common Stocks in Mexico 43,130 45,150 0.3
Netherlands Electronics 700 Philips Electronics N.V. 27,055 25,483 0.2
Petroleum 200 Royal Dutch Petroleum Co. (ADR)* 26,802 28,250 0.2
Total Common Stocks in the Netherlands 53,857 53,733 0.4
Panama Beverages 600 Panamerican Beverages, Inc. (Class A) 23,640 24,225 0.2
Total Common Stocks in Panama 23,640 24,225 0.2
Philippines Beverages 9,500 San Miguel Corp. (Class B) 36,622 31,994 0.2
Telecommunications 600 Philippine Long Distance
Telephone Co. (ADR)* 37,658 31,950 0.2
Total Common Stocks in the Philippines 74,280 63,944 0.4
<PAGE>
South Korea Engineering & 700 Hyundai Engineering & Construction
Construction Co., Ltd. (ADR)* 9,121 8,750 0.1
Total Common Stocks in South Korea 9,121 8,750 0.1
Spain Petroleum 1,100 Repsol S.A. (ADR)* 38,221 41,113 0.3
Total Common Stocks in Spain 38,221 41,113 0.3
Switzerland Electrical Equipment 25 BBC Brown Boveri & Cie (Bearer) 22,679 30,432 0.2
Pharmaceuticals 500 Sandoz AG (ADR)* 21,705 29,188 0.2
Total Common Stocks in Switzerland 44,384 59,620 0.4
United Chemicals 800 Imperial Chemical Industries PLC (ADR)* 43,560 45,600 0.3
Kingdom
Electrical Equipment 5,000 General Electric Co. PLC (Ordinary) 22,639 27,931 0.2
Total Common Stocks in the United Kingdom 66,199 73,531 0.5
United Aerospace 200 Boeing Co. 14,651 17,325 0.1
States 500 United Technologies Corp. 31,448 56,125 0.4
----------- ----------- ------
46,099 73,450 0.5
Airlines 390 Delta Air Lines, Inc. 30,823 29,981 0.2
Automobile 1,200 Ford Motor Co. 32,137 41,250 0.3
Banking 400 Bank of New York Co., Inc. 18,903 20,600 0.1
300 Citicorp 21,838 24,000 0.2
----------- ----------- ------
40,741 44,600 0.3
Chemicals 500 Eastman Chemical Co. 26,198 34,562 0.3
Computer Software 470 cisco Systems, Inc. 20,987 21,796 0.2
400 First Data Corp. 28,219 28,200 0.2
435 Oracle Systems Corp. 21,656 20,391 0.1
----------- ----------- ------
70,862 70,387 0.5
<PAGE>
Electrical Equipment 275 General Electric Co. 20,871 21,416 0.2
Electronics 700 Corning, Inc. 19,598 24,500 0.2
300 General Motors Corp. (Class E) 15,424 17,100 0.1
800 Lexmark International Group, Inc.
(Class A) 17,093 15,500 0.1
600 Texas Instruments Inc. 33,421 30,525 0.2
----------- ----------- ------
85,536 87,625 0.6
Engineering & 500 Foster Wheeler Corp. 21,960 22,187 0.2
Construction
Environmental Control 1,900 Wheelabrator Technologies Inc. 31,172 31,587 0.2
Systems
Financial Services 675 American Express Company 31,449 33,328 0.2
Hardware Products 800 The Stanley Works Co. 31,572 44,000 0.3
Home Appliances 1,000 Singer Co. 26,787 26,625 0.2
600 Whirlpool Corporation 34,736 33,150 0.2
----------- ----------- ------
61,523 59,775 0.4
Insurance 200 Aetna Life & Casualty Co. 14,884 15,100 0.1
400 Allstate Corp. 16,373 16,850 0.1
500 National Re Corp. 16,611 16,875 0.2
----------- ----------- ------
47,868 48,825 0.4
Machinery & Equipment 700 Deere & Co. 29,526 29,225 0.2
Natural Gas 1,000 Enron Corp. 38,384 36,875 0.3
Oil Service 1,500 Dresser Industries, Inc. 30,407 45,750 0.3
600 Schlumberger Ltd. 33,232 47,475 0.3
----------- ----------- ------
63,639 93,225 0.6
Petroleum 500 Pennzoil Co. 20,095 19,875 0.1
Pharmaceuticals 900 Abbott Laboratories 29,082 36,675 0.3
900 Merck & Co., Inc. 30,882 56,025 0.4
----------- ----------- ------
59,964 92,700 0.7
Photography 600 Eastman Kodak Co. 28,913 42,600 0.3
Real Estate & 700 Spieker Properties, Inc. 17,850 17,762 0.1
Real Estate
Investment Trusts
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Common Stocks Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Retail 500 Sears, Roebuck & Co. $ 19,932 $ 24,375 0.2%
States
(concluded) Scientific Equipment 1,000 Fisher Scientific International, Inc. 30,407 38,250 0.3
Telecommunications 400 AT&T Corp. 21,682 24,500 0.2
600 Bell Atlantic Corporation 30,590 37,050 0.3
----------- ----------- ------
52,272 61,550 0.5
Tobacco 300 Philip Morris Companies, Inc. 29,692 26,325 0.2
Total Common Stocks in the United States 969,485 1,125,735 8.1
Total Investments in Common Stocks 2,210,508 2,406,642 17.3
Face
Amount Fixed-Income Securities
Germany DM 900,000 Bundes Obligationen, 6% due 2/20/1998 634,085 632,538 4.5
900,000 Treuhandanstalt-Obligationen, 5%
due 1/14/1999 622,561 620,574 4.5
Total Fixed-Income Securities in Germany 1,256,646 1,253,112 9.0
Italy Buoni Poliennali del Tesoro
(Italian Government Bonds):
LIT 700,000,000 9.50% due 2/01/1999 447,659 441,666 3.2
700,000,000 9.50% due 2/01/2001 441,777 434,831 3.1
Total Fixed-Income Securities in Italy 889,436 876,497 6.3
United States US Treasury Notes:
US$ 2,300,000 5% due 1/31/1998 2,293,531 2,269,456 16.3
2,300,000 5% due 2/15/1999 2,280,594 2,246,088 16.1
2,300,000 5.25% due 1/31/2001 2,270,352 2,220,926 15.9
Total Fixed-Income Securities in the
United States 6,844,477 6,736,470 48.3
<PAGE>
Total Investments in
Fixed-Income Securities 8,990,559 8,866,079 63.6
Short-Term Securities
United Commercial US$ 693,000 General Electric Capital Corp.,
States Paper** 5.50% due 4/01/1996 693,000 693,000 4.9
US Government & Federal Home Loan Bank:
Agency 500,000 5.30% due 4/22/1996 498,454 498,454 3.6
Obligations** 1,300,000 5.30% due 4/23/1996 1,295,789 1,295,789 9.3
----------- ----------- ------
1,794,243 1,794,243 12.9
Total Investments in
Short-Term Securities 2,487,243 2,487,243 17.8
Total Investments $13,688,310 13,759,964 98.7
===========
Other Assets Less Liabilities 181,288 1.3
----------- ------
Net Assets $13,941,252 100.0%
=========== ======
Net Asset Value: Class A--Based on net assets of $3,754,932 and
362,074 shares outstanding $ 10.37
===========
Class B--Based on net assets of $8,970,684 and
864,846 shares outstanding $ 10.37
===========
Class C--Based on net assets of $399,284 and
38,497 shares outstanding $ 10.37
===========
Class D--Based on net assets of $816,352 and
78,708 shares outstanding $ 10.37
===========
<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.
<PAGE>
COMMON STOCK PORTFOLIO CHANGES
For the Quarter Ended March 31, 1996
Additions
American Express Company
cisco Systems, Inc.
Citicorp
Deere & Co.
Delta Air Lines, Inc.
Eisai Co., Ltd.
First Data Corp.
Foster Wheeler Corp.
General Electric Co.
HSBC Holdings PLC
Hyundai Engineering & Construction
Co., Ltd. (ADR)
Kimberly-Clark de Mexico, S.A. de C.V. (ADR)
Lexmark International Group, Inc. (Class A)
Magna International Inc. (Class A)
Michelin (C.G.D.E.) S.A. (Class B)
Mitsui-Soko Co., Ltd.
Nokia Corp. (Sponsored) (ADR)
Oracle Systems Corp.
Panamerican Beverages, Inc. (Class A)
Philip Morris Companies, Inc.
Philips Electronics N.V.
Potash Corp. of Saskatchewan Inc.
San Miguel Corp. (Class B)
Spieker Properties, Inc.
Telecomunicacoes Brasileiras
S.A.-Telebras (ADR)
Usinor-Sacilor S.A.
Deletions
Aluminum Company of America
Hitachi Cable Ltd.
Mitsubishi Trust & Banking Corp.
Sanwa Bank, Ltd.
</TABLE>
