MERRILL LYNCH
ASSET INCOME
FUND, INC.
FUND LOGO
Semi-Annual Report
June 30, 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
June 30, 1996
<PAGE>
Percent Breakdown of
Stocks & Fixed-Income Percent of
Securities by Country Net Assets++
United States* 74.7%
Italy 7.2
Germany 3.2
Spain 3.2
Sweden 2.9
Japan 2.5
Canada 0.9
Mexico 0.9
United Kingdom 0.5
Brazil 0.5
Hong Kong 0.5
Switzerland 0.4
France 0.4
Argentina 0.4
Finland 0.3
Indonesia 0.3
Netherlands 0.2
Philippines 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
Chemicals 4.9%
Telecommunications 1.6
Electronics 1.4
Computer Software 1.2
Beverages 1.2
Petroleum 1.1
Pharmaceuticals 1.1
Electrical Equipment 1.1
Aerospace 1.0
Insurance 1.0
Country Percent
Ten Largest Holdings of of Net
(Equity Investments) Origin Assets
<PAGE>
PPG Industries, Inc. United States 4.4%
Carnival Corp.
(Class A) United States 0.5
Philip Morris
Companies, Inc. United States 0.5
First Data Corp. United States 0.4
Procter &
Gamble Co. United States 0.4
Merck & Co., Inc. United States 0.4
United Technologies
Corp. United States 0.4
International
Business
Machines Corp. United States 0.4
The Coca-Cola Co. United States 0.4
Sears, Roebuck
& Co. United States 0.4
DEAR SHAREHOLDER
As of June 30, 1996, the asset allocation for Merrill Lynch Asset
Income Fund, Inc. was: US bonds, 51% of net assets; foreign bonds,
15%; US stocks, 19%; foreign stocks, 10%; and cash and cash reserves,
5%.
During the three months ended June 30, 1996, we shifted assets from US
bonds to foreign bonds in the fixed-income sector of the Fund's
portfolio. In the reduced US bond sector, we maintained the duration
at under 3.5 years, after lowering it earlier in 1996. In recent
weeks, there has been further evidence that the US economy is more
vigorous than earlier in the year. This environment may encourage the
Federal Reserve Board to raise short-term interest rates in the coming
months and result in a further rise in intermediate-term and longer-
term interest rates. Given this outlook, it is our view that a
relatively short duration remains justified.
In the foreign bond sector of the Fund's holdings, we complemented
existing positions in German and Italian bonds with positions in other
higher-yielding European bond markets, namely Spain and Sweden.
Commitments were in bonds in the two-year--five-year maturity range.
We expect the returns on Spanish, Swedish and Italian bonds to be
enhanced by the convergence of yields in these markets with those in
Germany in response to a lackluster German economy, an accommodative
monetary policy by the Bundesbank and solid or better fiscal and
monetary rectitude in their economies. This policy should allow for
interest rate cuts by the central banks of Italy, Spain and Sweden,
even while enabling their currencies to strengthen relative to the
Deutschemark.
<PAGE>
In recent months, as we have moved to complete our portfolio
restructuring, we increased the commitment to US equities. However, we
are only neutral relative to the benchmark in our allocation to US
equities. We believe stock selection rather than industry focus is
more likely to yield positive results. We continued to allocate
significant assets to focused and restructured companies which enjoy
dominant franchises within their respective industries. Cincinnati
Milacron, Inc. is an example of a new position which fulfills these
criteria. Other new positions which appeared reasonably valued in
relationship to their asset values or earnings growth included
International Business Machines Corp. and Procter & Gamble Co. We also
continued to enlarge the representation in quality technology
companies, where new positions included Intel Corp. and Microsoft
Corp.
We also raised our allocation in the foreign equity sector. The
position in Japan remains the largest concentration among foreign
equity holdings, although it represented only 2.5% of net assets at
quarter-end. Among the Japanese holdings, we eliminated the positions
in Sumitomo Corp., Kamigumi Co., Ltd. and Dai Nippon Printing Co. Ltd.
Within Europe, representation was expanded through commitments in SGL
Carbon AG and Henkel KGaA in Germany, Bure Investment AB and
Sparbanken Sverige AB in Sweden. Uncertain prospects led us to
eliminate Philips Electronics N.V. We also continued to enlarge the
commitment to Latin America through the shares of Grupo Carso, S.A. de
C.V. in Mexico and Compania Cervejaria Brahma S.A. PN in Brazil. In
Asia, we sold Philippine Long Distance Telephone. Overall, our
expectation of a relatively synchronized global economic recovery has
led us to allocate the largest proportion of foreign equity assets to
the capital equipment area, including electronics and electrical
equipment. The most significant underweighting is in the finance area,
including banking, insurance and real estate, as the economic
environment we anticipate will not be conducive to declining interest
rates.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Thomas R. Robinson)
Thomas R. Robinson
Vice President and
Senior Portfolio Manager
(Joel Heymsfeld)
Joel Heymsfeld
Portfolio Manager
July 29, 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.
<PAGE>
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
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 6/30/96 +6.98% +2.70%
Inception (9/02/94)
through 6/30/96 +8.59 +6.19
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/96 +6.18% +2.18%
Inception (9/02/94)
through 6/30/96 +7.78 +6.23
[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 6/30/96 +6.12% +5.12%
Inception (10/21/94)
through 6/30/96 +8.75 +8.75
[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 6/30/96 +6.71% +2.45%
Inception (10/21/94)
through 6/30/96 +9.34 +6.74
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
6/30/96 3/31/96 6/30/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.40 $10.37 $10.35 +0.83%(1) +0.29%
Class B Shares* 10.40 10.37 10.35 +0.83(1) +0.29
Class C Shares* 10.40 10.37 10.35 +0.83(1) +0.29
Class D Shares* 10.40 10.37 10.35 +0.83(1) +0.29
Class A Shares-Total Return* +6.98(2) +1.49(3)
Class B Shares-Total Return* +6.18(4) +1.30(5)
Class C Shares-Total Return* +6.12(6) +1.29(7)
Class D Shares-Total Return* +6.71(8) +1.43(9)
Class A Shares-Standardized 30-day Yield 5.01%
Class B Shares-Standardized 30-day Yield 4.47%
Class C Shares-Standardized 30-day Yield 4.42%
Class D Shares-Standardized 30-day Yield 4.77%
<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 $0.625 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.126 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.547 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.106 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.541 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.105 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.599 per share ordinary
income dividends and $0.036 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.119 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**
<S> <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
1/01/96--6/30/96 10.62 10.40 -- 0.254 + 0.41
------ ------
Total $0.036 Total $1.100
Cumulative total return as of 6/30/96: +16.25%**
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change***
<S> <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
1/01/96--6/30/96 10.62 10.40 -- 0.216 + 0.04
------ ------
Total $0.036 Total $0.961
<PAGE>
Cumulative total return as of 6/30/96: +14.67%***
</TABLE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change***
<S> <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
1/01/96--6/30/96 10.62 10.40 -- 0.214 + 0.02
------ ------
Total $0.036 Total $0.891
Cumulative total return as of 6/30/96: +15.26%***
</TABLE>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <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
1/01/96--6/30/96 10.62 10.40 -- 0.241 + 0.29
------ ------
Total $0.036 Total $0.986
Cumulative total return as of 6/30/96: +16.33%**
<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>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<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 $ 19,838 0.1%
Petroleum 1,500 Yacimientos Petroliferos Fiscales
S.A. (Class D)(Sponsored) (ADR)* 32,550 33,750 0.3
Total Common Stocks in Argentina 51,144 53,588 0.4
Brazil Beverages 50,000 Companhia Cervejaria Brahma S.A.
PN (Preferred) 28,674 29,831 0.2
Telecommunications 500 Telecomunicacoes Brasileiras S.A.--
Telebras (ADR)* 26,746 34,813 0.3
Total Common Stocks in Brazil 55,420 64,644 0.5
Canada Automotive & 700 Magna International Inc. (Class A) 31,704 32,200 0.2
Equipment
Mining 480 Potash Corp. of Saskatchewan, Inc. 30,663 31,800 0.2
Multi-Industry 1,500 Canadian Pacific, Ltd. 26,323 33,000 0.3
Telecommunications 500 Northern Telecommunications Ltd. 17,405 27,188 0.2
Equipment
Total Common Stocks in Canada 106,095 124,188 0.9
Finland Telecommunications 1,200 Nokia Corp. (Sponsored)(ADR)* 43,420 44,400 0.3
Equipment
Total Common Stocks in Finland 43,420 44,400 0.3
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
France Iron & Steel 1,200 Usinor-Sacilor S.A. $ 19,139 $ 17,318 0.1%
Tires & Rubber 800 Michelin (C.G.D.E.) S.A. (Class B) 34,759 39,121 0.3
Total Common Stocks in France 53,898 56,439 0.4
Germany Chemicals 75 Henkel KGaA (Preferred) 32,022 32,396 0.2
Electronics 500 Siemens AG 22,176 26,726 0.2
Industrial Components 400 SGL Carbon AG (ADR)* (b) 13,572 15,300 0.1
Machinery & Equipment 70 Mannesmann AG 19,573 24,208 0.2
Total Common Stocks in Germany 87,343 98,630 0.7
Hong Kong Banking 1,600 HSBC Holdings PLC 24,990 24,184 0.2
Telecommunications 2,000 Hong Kong Telecommunications Ltd. (ADR)* 35,697 36,000 0.3
Total Common Stocks in Hong Kong 60,687 60,184 0.5
Indonesia Telecommunications 1,020 P.T. Indonesian Satellite Corp. (ADR)* 37,802 34,170 0.3
Total Common Stocks in Indonesia 37,802 34,170 0.3
Italy Telecommunications 9,500 Societa Finanziara Telefonica
S.p.A. (STET) 27,872 32,138 0.2
Total Common Stocks in Italy 27,872 32,138 0.2
Japan Building & 4,000 Maeda Corp. 42,636 39,803 0.3
Construction 4,000 Okumura Corp. 35,729 33,449 0.2
----------- ----------- ------
78,365 73,252 0.5
Capital Goods 3,000 Mitsubishi Heavy Industries, Inc. 24,018 26,100 0.2
Electrical Equipment 5,000 Mitsubishi Electric Co. 35,451 34,873 0.3
Electronics 1,000 Canon, Inc. 19,005 20,814 0.1
2,000 Matsushita Electric Industrial Co., Ltd. 32,955 37,247 0.3
----------- ----------- ------
51,960 58,061 0.4
<PAGE>
Financial Services 1,000 Nomura Securities Co., Ltd. 22,237 19,536 0.1
Insurance 3,000 Tokio Marine & Fire Insurance Co., Ltd. 36,975 39,985 0.3
Pharmaceuticals 1,050 Eisai Co., Ltd. 18,533 19,842 0.2
Textiles 5,000 Toray Industries Ltd. 34,821 34,508 0.3
Warehouse & Storage 3,000 Mitsui-Soko Co., Ltd. 25,215 27,113 0.2
Total Common Stocks in Japan 327,575 333,270 2.5
Mexico Beverages 1,000 Panamerican Beverages, Inc. (Class A) 39,899 44,750 0.4
Conglomerates 2,100 ++Grupo Carso, S.A. de C.V.
(Sponsored)(ADR)* (b) 33,457 29,400 0.2
Household & 1,200 Kimberly-Clark de Mexico, S.A. de C.V.
Personal Care (ADR)* 43,130 42,900 0.3
Products
Total Common Stocks in Mexico 116,486 117,050 0.9
Netherlands Petroleum 200 Royal Dutch Petroleum Co. (NY
Registered Shares) 26,802 30,750 0.2
Total Common Stocks in the Netherlands 26,802 30,750 0.2
Philippines Beverages 8,750 San Miguel Corp. (Class B) 29,384 30,282 0.2
Total Common Stocks in the Philippines 29,384 30,282 0.2
South Korea Engineering & 700 ++Hyundai Engineering & Construction
Construction Co., Ltd. (GDR)** 9,121 8,750 0.1
Total Common Stocks in South Korea 9,121 8,750 0.1
<PAGE>
Spain Petroleum 1,100 Repsol S.A. (ADR)* 38,221 38,225 0.3
Total Common Stocks in Spain 38,221 38,225 0.3
Sweden Banking 2,100 Sparbanken Sverige AB (Class A) 26,415 27,191 0.2
Healthcare 2,300 Bure Investment AB 19,273 21,123 0.2
Total Common Stocks in Sweden 45,688 48,314 0.4
Switzerland Electrical Equipment 25 BBC Brown Boveri & Cie (Bearer) 22,679 30,935 0.2
Pharmaceuticals 500 Sandoz AG (ADR)* 21,705 28,500 0.2
Total Common Stocks in Switzerland 44,384 59,435 0.4
United Chemicals 800 Imperial Chemical Industries PLC (ADR)* 43,560 39,300 0.3
Kingdom
Electrical Equipment 5,000 General Electric Co. PLC (Ordinary) 22,639 26,902 0.2
Total Common Stocks in the
United Kingdom 66,199 66,202 0.5
United Aerospace 500 Boeing Co. 39,122 43,563 0.3
States 500 Northrop Grumman Corp. 32,683 34,063 0.3
500 United Technologies Corp. 31,448 57,500 0.4
----------- ----------- ------
103,253 135,126 1.0
Airlines 390 Delta Air Lines, Inc. 30,823 32,370 0.2
Automobile 860 Ford Motor Co. 23,041 27,843 0.2
600 General Motors Corp. 33,865 31,425 0.2
----------- ----------- ------
56,906 59,268 0.4
Banking 600 Bank of New York, Inc. 29,540 30,750 0.2
300 Citicorp 21,838 24,788 0.2
----------- ----------- ------
51,378 55,538 0.4
Beverages 1,080 The Coca-Cola Co. 51,590 52,785 0.4
Building Products 1,000 American Standard Companies, Inc.(b) 32,639 33,000 0.2
Chemicals 12,000 PPG Industries, Inc. 595,644 585,000 4.4
<PAGE>
Computer Services 300 Electronic Data Systems Corp. 15,424 16,125 0.1
580 International Business Machines Corp. 60,916 57,420 0.4
----------- ----------- ------
76,340 73,545 0.5
Computer Software 570 cisco Systems, Inc. 26,449 32,276 0.2
765 First Data Corp. 56,346 60,913 0.4
185 Microsoft Corp. (b) 20,731 22,200 0.2
1,252 Oracle Corp. (a) 41,831 49,298 0.4
----------- ----------- ------
145,357 164,687 1.2
Electrical Equipment 575 General Electric Co. 44,480 49,738 0.4
Electronics 700 Corning, Inc. 19,598 26,863 0.2
425 Intel Corp. 27,390 31,184 0.2
1,600 Lexmark International Group, Inc.
(Class A) (b) 34,249 32,200 0.3
200 Sun Microsystems, Inc. 12,612 11,750 0.1
----------- ----------- ------
93,849 101,997 0.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Engineering & 900 Foster Wheeler Corp. $ 39,684 $ 40,387 0.3%
States Construction
(concluded)
Entertainment 750 Viacom, Inc. (Class B) (b) 31,423 29,156 0.2
Environmental Control 1,900 Wheelabrator Technologies Inc. 31,172 28,975 0.2
Systems
Financial Services 675 American Express Company 31,449 30,122 0.3
100 Associates First Capital Corp. (b) 2,900 3,762 0.0
----------- ----------- ------
34,349 33,884 0.3
Hardware Products 1,600 The Stanley Works Co. 31,572 47,600 0.4
Healthcare 900 Baxter International Inc. 42,260 42,525 0.3
500 Humana, Inc. (b) 12,660 8,937 0.1
----------- ----------- ------
54,920 51,462 0.4
Household Products 650 Procter & Gamble Co. 56,634 58,906 0.4
<PAGE>
Insurance 700 Aetna Life & Casualty Co. 52,079 50,050 0.4
800 Allstate Corp. 32,201 36,500 0.3
----------- ----------- ------
84,280 86,550 0.7
Leisure 2,450 Carnival Corp. (Class A) 70,113 70,744 0.5
Machine Tools 1,400 Cincinnati Milacron, Inc. 35,046 33,600 0.3
Machinery & Equipment 700 Deere & Co. 29,526 28,000 0.2
Merchandising 1,000 AutoZone, Inc. (b) 35,000 34,750 0.3
2,000 The Limited, Inc. 44,594 43,000 0.3
----------- ----------- ------
79,594 77,750 0.6
Natural Gas 1,000 Enron Corp. 38,384 40,875 0.3
Oil Service 1,500 Dresser Industries, Inc. 30,407 44,250 0.3
600 Schlumberger Ltd. 33,232 50,550 0.4
----------- ----------- ------
63,639 94,800 0.7
Petroleum 700 Pennzoil Co. 29,082 32,375 0.2
400 Unocal Corp. 13,395 13,500 0.1
----------- ----------- ------
42,477 45,875 0.3
Pharmaceuticals 900 Abbott Laboratories 29,082 39,150 0.3
900 Merck & Co., Inc. 30,882 58,162 0.4
----------- ----------- ------
59,964 97,312 0.7
Photography 600 Eastman Kodak Co. 28,913 46,650 0.4
Railroads 600 Conrail, Inc. 42,554 39,825 0.3
Real Estate & Real 700 Spieker Properties, Inc. 17,850 19,075 0.1
Estate Investment
Trusts
Retail 1,060 Sears, Roebuck & Co. 47,686 51,542 0.4
Scientific Equipment 1,000 Fisher Scientific International, Inc. 30,407 37,500 0.3
Steel 800 AK Steel Holding Corp. 33,225 31,300 0.2
Telecommunications 400 AT&T Corp. 21,682 24,800 0.2
600 Bell Atlantic Corporation 30,590 38,250 0.3
----------- ----------- ------
52,272 63,050 0.5
<PAGE>
Telecommunications 1,000 Lucent Technologies, Inc. 27,000 37,875 0.3
Equipment
Tobacco 600 Philip Morris Companies, Inc. 56,750 62,400 0.5
Total Common Stocks in the
United States 2,401,693 2,598,147 19.4
Total Investments in Common Stocks 3,629,234 3,898,806 29.1
<CAPTION>
Face
Amount Fixed-Income Securities
<S> <S> <S> <S> <C> <C>
Germany DM 500,000 Bundes Obligations, 5.875% due 5/15/2000 336,900 336,391 2.5
Total Fixed-Income Securities in Germany 336,900 336,391 2.5
Italy Buoni Poliennali del Tesoro (Italian
Government Bonds):
Lit 700,000,000 9.50% due 2/01/1999 447,659 469,547 3.5
700,000,000 9.50% due 2/01/2001 441,777 471,970 3.5
Total Fixed-Income Securities in Italy 889,436 941,517 7.0
Spain Government of Spain:
Pta 25,000,000 7.40% due 7/30/1999 193,629 193,720 1.4
25,000,000 8.40% due 4/30/2001 194,772 197,592 1.5
Total Fixed-Income Securities in Spain 388,401 391,312 2.9
Sweden Government of Sweden:
Skr 1,000,000 11% due 1/21/1999 163,988 165,778 1.2
1,000,000 10.25% due 5/05/2000 163,574 166,320 1.3
Total Fixed-Income Securities in Sweden 327,562 332,098 2.5
United US$ 325,000 US Treasury Bond, 6.875% due 8/15/2025 317,738 321,698 2.4
States US Treasury Notes:
3,200,000 5.75% due 10/31/1997 3,188,500 3,192,000 23.8
3,400,000 5% due 1/31/1998 3,373,594 3,346,858 25.0
Total Fixed-Income Securities in the
United States 6,879,832 6,860,556 51.2
<PAGE>
Total Fixed-Income Securities 8,822,131 8,861,874 66.1
Short-Term Securities
United Commercial Paper*** 545,000 General Electric Capital Corp., 5.56%
States due 7/01/1996 545,000 545,000 4.1
Total Investments in Short-Term
Securities 545,000 545,000 4.1
Total Investments $12,996,365 13,305,680 99.3
===========
Other Assets Less Liabilities 92,647 0.7
----------- ------
Net Assets $13,398,327 100.0%
=========== ======
<FN>
*American Depositary Receipts (ADR).
**Global Depositary Receipts (GDR).
***Commercial Paper is traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the Fund.
(a)Formerly Oracle Systems Corp.
(b)Non-income producing security.
++Restricted securities as to resale. The value of the Fund's
investments in restricted securities was approximately $38,000,
representing 0.3% of net assets.
<CAPTION>
Acquisition Value
Issue Date Cost (Note 1a)
<S> <C> <C> <C>
Grupo Carso, S.A. de C.V. (Sponsored) (ADR) 4/01/96 $33,457 $29,400
Hyundai Engineering &
Construction Co., Ltd. (GDR) 3/19/96 9,121 8,750
Total $42,578 $38,150
======= =======
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<PAGE>
As of June 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$12,996,365) (Note 1a) $13,305,680
Cash 16,836
Foreign cash (Note 1d) 37,169
Receivables:
Interest $ 170,517
Securities sold 104,139
Capital shares sold 39,643
Dividends 7,674
Forward foreign exchange contracts (Note 1c) 7,168 329,141
-----------
Deferred organization expenses (Note 1g). 81,380
Prepaid registration fees and other assets (Note 1g) 143,466
-----------
Total assets 13,913,672
-----------
Liabilities: Payables:
Securities purchased 397,070
Capital shares redeemed 30,233
Dividends to shareholders (Note 1h) 9,862
Distributor (Note 2) 5,292
Forward foreign exchange contracts (Note 1c) 3,173 445,630
-----------
Accrued expenses and other liabilities 69,715
-----------
Total liabilities 515,345
-----------
Net Assets: Net assets $13,398,327
===========
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized $ 35,968
Class B Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 81,831
Class C Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 3,713
Class D Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 7,325
Paid-in capital in excess of par 12,806,371
Undistributed realized capital gains on investments and foreign
currency transactions--net 153,864
Unrealized appreciation on investments and foreign currency
transactions--net 309,255
-----------
Net assets $13,398,327
===========
<PAGE>
Net Asset Value: Class A--Based on net assets of $3,739,927 and 359,675 shares
outstanding $ 10.40
===========
Class B--Based on net assets of $8,510,538 and 818,312 shares
outstanding $ 10.40
===========
Class C--Based on net assets of $386,163 and 37,134 shares
outstanding $ 10.40
===========
Class D--Based on net assets of $761,699 and 73,246 shares
outstanding $ 10.40
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996
<S> <S> <C> <C>
Investment Interest and discount earned (net of $3,018 foreign witholding tax) $ 324,222
Income Dividends (net of $1,494 foreign witholding tax) 22,953
(Notes 1e & 1f): -----------
Total income 347,175
-----------
Expenses: Investment advisory fees (Note 2) $ 51,384
Printing and shareholder reports 40,343
Account maintenance and distribution fees--Class B (Note 2) 33,086
Professional fees 25,429
Registration fees (Note 1g) 24,372
Accounting services (Note 2) 21,696
Transfer agent fees--Class B (Note 2) 15,913
Amortization of organization expenses (Note 1g) 10,823
Custodian fees 8,897
Transfer agent fees--Class A (Note 2) 6,321
Directors' fees and expenses 6,067
Account maintenance and distribution fees--Class C (Note 2) 1,585
Transfer agent fees--Class D (Note 2) 1,362
Account maintenance fees--Class D (Note 2) 994
Pricing fees 869
Transfer agent fees--Class C (Note 2) 725
Other 7,618
-----------
Total expenses before reimbursements 257,484
Reimbursement of expenses (Note 2) (221,819)
-----------
Total expenses after reimbursement 35,665
-----------
Investment income--net 311,510
-----------
<PAGE>
Realized & Realized gain from:
Unrealized Gain Investments--net 257,083
(Loss) on Foreign currency transactions--net 18,577 275,660
Investments & -----------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (529,650)
(Notes 1c, 1d, Foreign currency transactions--net (38,315) (567,965)
1f & 3): ----------- -----------
Net realized and unrealized loss on investments and foreign
currency transactions (292,305)
-----------
Net Increase in Net Assets Resulting from Operations $ 19,205
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the For the
Six Months Year
Ended Ended
June 30, Dec. 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 311,510 $ 556,494
Realized gain on investments and foreign currency transactions
--net 275,660 16,659
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net (567,965) 1,087,284
----------- -----------
Net increase in net assets resulting from operations 19,205 1,660,437
----------- -----------
Dividends & Investment income--net:
Distributions to Class A (93,453) (83,814)
Shareholders Class B (190,798) (424,788)
(Note 1h): Class C (8,468) (16,003)
Class D (19,138) (31,889)
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 (311,857) (694,724)
----------- -----------
<PAGE>
Capital Share Net increase (decrease) in net assets derived from capital
Transactions share transactions (606,301) 5,170,953
(Note 4): ----------- -----------
Net Assets: Total increase (decrease) in net assets (898,953) 6,136,666
Beginning of period 14,297,280 8,160,614
----------- -----------
End of period $13,398,327 $14,297,280
=========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A Class B
The following per share data and For the For the For the For the
ratios have been derived from Six For the Period Six For the Period
information provided in the Months Year Sept. 2, Months Year Sept. 2,
financial statements. Ended Ended 1994++ to Ended Ended 1994++ to
June 30, Dec. 31, Dec. 31, June 30, Dec. 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.62 $ 9.68 $ 10.00 $ 10.62 $ 9.68 $ 10.00
Operating ------- ------- ------- ------- ------- -------
Performance: Investment income--net .26 .60 .18 .22 .51 .16
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net (.22) 1.04 (.32) (.22) 1.04 (.32)
------- ------- ------- ------- ------- -------
Total from investment operations .04 1.64 (.14) -- 1.55 (.16)
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.26) (.60) (.18) (.22) (.51) (.16)
Realized gain on investments--net -- (.01) -- -- (.01) --
In excess of realized gain on
investments--net -- (.09) -- -- (.09) --
------- ------- ------- ------- ------- -------
Total dividends and distributions (.26) (.70) (.18) (.22) (.61) (.16)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 10.40 $ 10.62 $ 9.68 $ 10.40 $ 10.62 $ 9.68
======= ======= ======= ======= ======= =======
<PAGE>
Total Investment Based on net asset value per share .41%+++ 17.38% (1.37%)+++ .04%+++ 16.51% (1.62%)+++
Return:** ======= ======= ======= ======= ======= =======
Ratios to Expenses, net of reimbursement .00%* .00% .00%* .75%* .75% .75%*
Average Net ======= ======= ======= ======= ======= =======
Assets: Expenses 3.22%* 5.12% 5.20%* 3.98%* 5.94% 6.04%*
======= ======= ======= ======= ======= =======
Investment income--net 5.05%* 5.78% 5.64%* 4.31%* 5.06% 4.86%*
======= ======= ======= ======= ======= =======
Supplemental Net assets, end of period
Data: (in thousands) $ 3,740 $ 3,872 $ 1,147 $ 8,510 $ 9,236 $ 6,797
======= ======= ======= ======= ======= =======
Portfolio turnover 176.25% 46.75% .83% 176.25% 46.75% .83%
======= ======= ======= ======= ======= =======
Average commission rate paid++++ $ .0414 -- -- $ .0414 -- --
======= ======= ======= ======= ======= =======
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
++++For fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose its average commission rate per share for
purchases and sales of equity securities.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class C Class D
The following per share data and For the For the For the For the
ratios have been derived from Six For the Period Six For the Period
information provided in the Months Year Oct. 21, Months Year Oct.21,
financial statements. Ended Ended 1994++ to Ended Ended 1994++ to
June 30, Dec. 31, Dec. 31, June 30, Dec. 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.62 $ 9.69 $ 9.88 $ 10.62 $ 9.69 $ 9.88
Operating ------- ------- ------- ------- ------- -------
Performance: Investment income--net .22 .52 .10 .25 .57 .11
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net (.22) 1.03 (.19) (.22) 1.03 (.19)
------- ------- ------- ------- ------- -------
Total from investment operations -- 1.55 (.09) .03 1.60 (.08)
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.22) (.52) (.10) (.25) (.57) (.11)
Realized gain on investments--net -- (.01) -- -- (.01) --
In excess of realized gain on
investments--net -- (.09) -- -- (.09) --
------- ------- ------- ------- ------- -------
Total dividends and distributions (.22) (.62) (.10) (.25) (.67) (.11)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 10.40 $ 10.62 $ 9.69 $ 10.40 $ 10.62 $ 9.69
======= ======= ======= ======= ======= =======
Total Investment Based on net asset value per share .02%+++ 16.33% (.94%)+++ .29%+++ 16.97% (.83%)+++
Return:** ======= ======= ======= ======= ======= =======
<PAGE>
Ratios to Expenses, net of reimbursement .80%* .80% .80%* .25%* .25% .25%*
Average Net ======= ======= ======= ======= ======= =======
Assets: Expenses 4.04%* 6.02% 5.75%* 3.47%* 5.44% 5.14%*
======= ======= ======= ======= ======= =======
Investment income--net 4.26%* 4.99% 5.19%* 4.80%* 5.53% 5.70%*
======= ======= ======= ======= ======= =======
Supplemental Net assets, end of period
Data: (in thousands) $ 386 $ 418 $ 154 $ 762 $ 771 $ 63
======= ======= ======= ======= ======= =======
Portfolio turnover 176.25% 46.75% .83% 176.25% 46.75% .83%
======= ======= ======= ======= ======= =======
Average commission rate paid++++ $ .0414 -- -- $ .0414 -- --
======= ======= ======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
++++For fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose its average commission rate per share for
purchases and sales of equity securities.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature. 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.
<PAGE>
(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.
(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.
<PAGE>
* 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.
* 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.
<PAGE>
(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.
(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 six months ended June 30, 1996,
MLAM earned fees of $51,384, all of which were waived. MLAM also
reimbursed the Fund for additional expenses of $170,435.
<PAGE>
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:
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 period ended June 30, 1996, 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 $ 4 $ 48
Class D $11 $113
For the six months ended June 30, 1996, MLPF&S received contingent
deferred sales charges of $10,711 and $292 relating to transactions in
Class B and Class C Shares, respectively.
In addition, MLPF&S received $420 in commissions on the execution of
portfolio security transactions for the Fund for the period ended June
30, 1996.
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 six months ended June 30, 1996, the Fund paid Merrill Lynch
Security Pricing Service, an affiliate of MLPF&S, $74 for security
price quotations to compute the net asset value of the Fund.
<PAGE>
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended June 30, 1996 were $22,088,670 and
$20,175,165, respectively.
Net realized and unrealized gains (losses) as of June 30, 1996 were as
follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 257,372 $ 309,315
Short-term investments (289) --
Forward foreign exchange contracts 48,271 --
Foreign currency transactions (29,694) (60)
--------- ---------
Total $ 275,660 $ 309,255
========= =========
As of June 30, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $309,315, of which $400,945 related to
appreciated securities and $91,630 related to depreciated securities.
At June 30, 1996, the aggregate cost of investments for Federal income
tax purposes was $12,996,365.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions was $(606,301) for the six months ended June 30, 1996 and
$5,170,953 for the year ended December 31, 1995.
Transactions in capital shares for each class were as follows:
Class A Shares for the Six Months Dollar
Ended June 30, 1996 Shares Amount
Shares sold 80,213 $ 837,990
Shares issued to shareholders in
reinvestment of dividends 4,247 44,075
--------- ---------
Total issued 84,460 882,065
Shares redeemed (89,522) (934,945)
--------- ---------
Net decrease (5,062) $ (52,880)
========= =========
NOTES TO FINANCIAL STATEMENTS (concluded)
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 B Shares for the Six Months Dollar
Ended June 30, 1996 Shares Amount
Shares sold 98,933 $1,037,235
Shares issued to shareholders
in reinvestment of dividends 6,488 67,204
--------- ----------
Total issued 105,421 1,104,439
Shares redeemed (153,390) (1,605,885)
Automatic conversion of shares (3,440) (35,577)
--------- ----------
Net decrease (51,409) $ (537,023)
========= ==========
Class B Shares for the Year Dollar
Ended 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 C Shares for the Six Months Dollar
Ended June 30, 1996 Shares Amount
Shares sold 2,541 $ 26,708
Shares issued to shareholders in
reinvestment of dividends 357 3,690
--------- ----------
Total issued 2,898 30,398
Shares redeemed (5,126) (53,719)
--------- ----------
Net decrease (2,228) $ (23,321)
========= ==========
Class C Shares for the Year Dollar
Ended 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
========= ==========
<PAGE>
Class D Shares for the Six Months Dollar
Ended June 30, 1996 Shares Amount
Shares sold 10,780 $ 123,186
Automatic conversion of shares 3,440 35,577
Shares issued to shareholders
in reinvestment of dividends 2,228 12,775
--------- ----------
Total issued 16,448 171,538
Shares redeemed (15,795) (164,615)
--------- ----------
Net increase 653 $ 6,923
========= ==========
Class D Shares for the Year Dollar
Ended 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
========= ==========
5. Commitments:
At June 30, 1996, the Fund entered into foreign exchange contracts
under which it had agreed to sell various foreign currencies with a
value of approximately $40,000.
COMMON STOCK PORTFOLIO CHANGES
For the Quarter Ended June 30, 1996
Additions
<PAGE>
AK Steel Holding Corp.
*Applied Materials, Inc.
American Standard Companies, Inc.
Associates First Capital Corp.
AutoZone, Inc.
Baxter International, Inc.
Bure Investment AB
Carnival Corp. (Class A)
Cincinnati Milacron, Inc.
The Coca-Cola Co.
Companhia Cervejaria Brahma S.A.
PN (Preferred)
Conrail, Inc.
*Dell Computer Corp.
Electronic Data Systems Corp.
General Motors Corp.
Grupo Carso, S.A. de C.V.
(Sponsored) (ADR)
Henkel KGaA (Preferred)
Humana, Inc.
Intel Corp.
International Business Machines Corp.
The Limited, Inc.
Lucent Technologies, Inc.
Microsoft Corp.
Northrop Grumman Corp.
PPG Industries, Inc.
Procter & Gamble Co.
SGL Carbon AG (ADR)
Sparbanken Sverige AB (Class A)
Sun Microsystems, Inc.
Unocal Corp.
Viacom, Inc. (Class B)
Deletions
*Applied Materials, Inc.
Dai Nippon Printing Co., Ltd.
*Dell Computer Corp.
Eastman Chemical Co.
General Motors Corp. (Class E)
Kamigumi Co., Ltd.
National Re Corp.
Philippine Long Distance
Telephone Co. (ADR)
Philips Electronics N.V.
Singer Co.
Sumitomo Corp.
Texas Instruments Inc.
Whirlpool Corporation
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[FN]
*Added and deleted in the same quarter.
