MERRILL LYNCH
ASSET INCOME
FUND, INC.
FUND LOGO
Quarterly Report
September 30, 1998
Investing in emerging market securities involves a number of risk
factors and special considerations, including restrictions on
foreign investments and on repatriation of capital invested in
emerging markets, currency fluctuations, and potential price
volatility and less liquidity of securities traded in emerging
markets. In addition, there may be less publicly available
information about the issuers of securities, and such issuers may
not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those to which US companies
are subject. Therefore, the Fund is designed as a long-term
investment for investors capable of assuming the risks of investing
in emerging markets. The Fund should be considered as a vehicle for
diversification and not as a complete investment program.Please
refer to the prospectus for details.
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
Printed on post-consumer recycled paper
MERRILL LYNCH ASSET INCOME FUND, INC.
Worldwide
Investments as of
September 30, 1998
Breakdown of
Stocks & Fixed-Income Percent of
Securities by Country Net Assets++
United States* 75.1%
United Kingdom 8.4
Germany 7.0
Sweden 3.3
France 1.7
Japan 0.9
Italy 0.5
Canada 0.4
Finland 0.4
Netherlands 0.4
Spain 0.3
Switzerland 0.2
Ireland 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
Banking 1.6%
Computer Services & Software 1.6
Insurance 1.5
Telecommunications 1.3
Retail Stores 1.2
Pharmaceuticals 1.1
Electronics 1.1
Computers 1.1
Financial Services 0.8
Chemicals 0.8
Country
Ten Largest Holdings of Percent of
(Equity Investments) Origin Net Assets
CompaqComputer
Corporation US 0.9%
Great Lakes Chemical
Corp. US 0.6
MCI WorldCom, Inc. US 0.5
Bristol-Myers Squibb Co. US 0.5
Warner-Lambert Company US 0.5
Providian Financial
Corporation US 0.5
Computer Associates
International, Inc. US 0.4
World Color Press, Inc. US 0.4
Tele-Communications
TCI Ventures Group
(Class A) US 0.4
GreenPoint Financial
Corp. US 0.4
Merrill Lynch Asset Income Fund, Inc., September 30, 1998
DEAR SHAREHOLDER
Concerns over the prospects for the worldwide economy spilled over
into the US stock market during the quarter ended September 30,
1998. The increased volatility in US share prices reflected the
deteriorating outlook for corporate profits amid signs of a
weakening US economy. The uncertain economic picture and the
resulting flight to quality by investors pushed the 30-year US
Treasury bond to record low yields. In contrast, corporate bonds,
mortgage-backed securities and emerging markets debt underperformed
Treasury securities by a wide margin. The leverage/derivatives-
related problems of a major hedge fund and possible impeachment of
President Clinton further heightened investor uncertainties, as did
Russia's devaluation and effective repudiation of its debt in
August. A one-quarter point cut in the Federal Funds rate in late
September did not restore investor confidence, since a more
significant easing of monetary policy was expected. However, the
central bank unexpectedly cut the Federal Funds rate another quarter
point in October, which investors viewed positively.
As long as worldwide economic prospects appear fragile, it is likely
that stock and bond market volatility will continue. For the overall
global economy, the deepening recession in Japan is of great concern
as well as the difficulties in emerging economies such as Russia and
Brazil.
Investors are awaiting decisive programs in Japan designed to
stabilize the financial system and stimulate the economy. Positive
developments in Japan, combined with continued monetary easing on
the part of the Federal Reserve Board, would likely provide an
important element of tability to the volatile investment
environment.
Portfolio Matters
As of September 30, 1998, the asset allocation for Merrill Lynch
Asset Income Fund, Inc. was: US bonds, 39% of net assets; foreign
bonds, 16%; US stocks, 18%; foreign stocks, 8%; and cash and cash
equivalents, 19%.
Global economic prospects became increasingly uncertain during the
three months ended September 30, 1998. Weakness in economic activity
in Asia seemed to be spreading as a result of problems in Russia and
Latin America. The increasing probability of a slowdown in global
economic activity led us to enlarge the Fund's fixed-income
representation, including cash and cash equivalents, from 68% of net
assets to 74% during the September quarter. We increased the Fund's
positions in cash and cash equivalents from 10% of net assets to 19%
and foreign bonds from 5% of net assets to 16% during the three-
month period ended September 30, 1998. We maintained representation
in German and British obligations, given the appeal of these markets
as safe havens during the current period of economic uncertainty,
and retained a position in Swedish bonds in view of the attractive
yields offered by these obligations.
We reduced the Fund's allocation to US bonds from 52% of net assets
to 39% during the three months ended September 30, 1998, following
the strong rally in the US bond market. We slightly extended the
average duration of US fixed-income holdings from 5.2 years to 5.4
years. While the major portion of assets remain allocated to US
Treasury obligations, we also took advantage of an unusually large
yield differential between US Treasury issues and Federal National
Mortgage Association (FNMA) obligations to initiate commitments in
FNMA securities during August.
US equity exposure was virtually unchanged during the third quarter
of 1998. We continued to believe that consumer spending will remain
the strongest sector of the US economy. Consumer cyclical stocks
remained a major investment sector. However, we continued to
allocate substantial assets to the financial and consumer staples
sectors. Overall, we emphasized companies with relatively limited
exposure to economies with the most uncertain prospects in favor of
those more dependent on domestic sources of revenue.
We reduced the Fund's foreign equity representation from 14% of net
assets on June 30, 1998 to 8% as of September 30, 1998. In cutting
back on foreign equities, we concentrated on eliminating our
commitments to emerging markets through the elimination of our
remaining positions in Latin America and the sale of our shares of
P.T. Indonesian Satellite Corp. and Overseas Chinese Banking Corp.
Ltd. in Asia. In the residual foreign equity commitment, emphasis
remained on Western European equities. We continued to regard long-
term economic prospects as favorable, with the continuing potential
for economic restructuring. We also maintained a commitment to
Japanese equities, although our position remained underweighted
relative to the unmanaged benchmark Morgan Stanley Capital
International Europe Australasia Far East Index.
We lifted the hedge on continental European stocks and bonds because
it appeared that a period of US dollar weakness as compared to the
European currencies was under way. The hedge was retained on British
stocks and bonds given our expectation that the British pound could
weaken versus the US dollar in the coming months. We also retained
the hedge on the equivalent of the full weighting in Japanese stocks
back into US dollars as we continued to look for the dollar to
resume its strengthening trend relative to the Japanese yen.
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 next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Thomas R. Robinson)
Thomas R. Robinson
Senior Vice President and
Portfolio Manager
October 30, 1998
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. (There is no initial
sales charge for automatic share conversions.)
* 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).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. 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.
Merrill Lynch Asset Income Fund, Inc., September 30, 1998
PERFORMANCE DATA (concluded)
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/98 +5.29% +1.08%
Inception (9/02/94)
through 9/30/98 +9.49 +8.40
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/98 +4.50% +0.76%
Inception (9/02/94)
through 9/30/98 +8.68 +8.68
[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 9/30/98 +4.46% +3.52%
Inception (10/21/94)
through 9/30/98 +9.12 +9.12
[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 9/30/98 +5.03% +0.83%
Inception (10/21/94)
through 9/30/98 +9.70 +8.57
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results*
<CAPTION>
Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 9/30/98
<S> <C> <C> <C> <C>
ML Asset Income Fund, Inc. Class A Shares +5.29% -1.39% +44.74% 3.59%
ML Asset Income Fund, Inc. Class B Shares +4.50 -1.67 +40.40 3.00
ML Asset Income Fund, Inc. Class C Shares +4.46 -1.59 +41.09 2.95
ML Asset Income Fund, Inc. Class D Shares +5.03 -1.45 +44.04 3.35
<FN>
*Investment results shown do not reflect sales charges; results
would be lower if a sales charge was included. Total investment
returns are based on changes in net asset values for the periods
shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date. The Fund's
inception periods are Class A & Class B Shares, from 9/02/94 to
9/30/98 and Class C & Class D Shares, from 10/21/94 to 9/30/98.
</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>
Canada Automobile Parts 500 Magna International, Inc.
(Class A) $ 34,305 $ 29,062 0.2%
Telecommunications 1,200 Teleglobe Inc. 32,531 31,125 0.2
Total Common Stocks in Canada 66,836 60,187 0.4
Finland Holding Company 1,000 Amer Group Ltd. 21,663 13,169 0.1
Insurance 400 Sampro Insurance Co. (Class A) 18,682 11,408 0.1
Pharmaceuticals 700 Orion-Yhtymae Oyj (Class B ) 21,766 14,887 0.1
Real Estate 3,000 Sponda Oyj 21,548 20,049 0.1
Investment Trusts
Total Common Stocks in Finland 83,659 59,513 0.4
France Electronics 1,300 Thomson CSF S.A. 49,235 39,661 0.3
Insurance 500 AXA-UAP 57,799 45,763 0.3
Machinery & Equipment 1,200 Alstom S.A. 40,918 25,691 0.2
Oil--Related 400 Elf Aquitaine S.A. 50,791 49,313 0.3
Reinsurance 400 Scor S.A. 22,770 23,765 0.2
Semiconductor Capital 800 STMicroelectronics N.V.
Equipment (NY Registered Shares) 54,057 35,950 0.2
Utilities--Water 125 Vivendi S.A. 26,739 24,888 0.2
Total Common Stocks in France 302,309 245,031 1.7
Germany Banking 550 Bayerische Vereinsbank AG 37,658 40,509 0.3
Chemicals 300 Henkel KGaA (Preferred) 27,661 22,733 0.2
Total Common Stocks in Germany 65,319 63,242 0.5
Ireland Banking 1,000 Bank of Ireland 21,156 17,844 0.1
Total Common Stocks in Ireland 21,156 17,844 0.1
Italy Banking 19,000 Banca Di Roma S.p.A. 41,544 33,918 0.2
Publishing 3,500 Arnoldo Mondadori Editore S.p.A. 36,289 40,644 0.3
Total Common Stocks in Italy 77,833 74,562 0.5
Japan Computers 1,000 Tokyo Electron Limited 34,531 24,466 0.2
Electronics 2,000 Matsushita Electric Industrial
Co., Ltd. 31,938 27,257 0.2
400 Sony Corporation (ADR)* 31,740 27,500 0.2
----------- ----------- ------
63,678 54,757 0.4
Insurance 3,000 Tokio Marine & Fire Insurance
Co., Ltd. 31,300 26,890 0.2
Machine Tools 2,000 Minebea Co., Ltd. 21,069 16,325 0.1
& Machinery
Total Common Stocks in Japan 150,578 122,438 0.9
Netherlands Broadcasting 300 Wolters Kluwer N.V. 45,925 57,574 0.4
& Publishing
Total Common Stocks
in the Netherlands 45,925 57,574 0.4
Spain Building Materials 1,300 Uralita, S.A. 18,230 10,524 0.1
Real Estate 600 Metrovacesa, S.A. 18,788 15,523 0.1
Venture Capital 1,400 Dinamia Capital Privado-Sociedad
de Capital Riesgo, S.A. 25,340 17,444 0.1
Total Common Stocks in Spain 62,358 43,491 0.3
</TABLE>
Merrill Lynch Asset Income Fund, Inc., September 30, 1998
<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>
Sweden Auto & Truck 700 Autoliv, Inc. $ 22,059 $ 21,543 0.1%
Automobile Parts 1,000 Haldex AB 17,681 11,557 0.1
Banking 500 ForeningsSparbanken AB 6,218 11,493 0.1
300 Nordbanken Holding AB 2,133 1,724 0.0
----------- ----------- ------
8,351 13,217 0.1
Diversified 900 Custos AB (Class A) 24,393 18,216 0.1
100 Custos AB (Class B) 2,653 2,018 0.0
----------- ----------- ------
27,046 20,234 0.1
Investment Management 1,800 Bure Investment AB 23,080 23,905 0.2
Laser Components 800 Spectra-Physics AB (Class A) 19,323 7,406 0.1
Real Estate 1,000 Fastighets Tornet AB 16,637 14,685 0.1
Real Estate 1,600 Castellum AB 15,160 15,834 0.1
Investment Trusts
Telecommunications 1,400 Telefonaktiebolaget LM
Ericsson (ADR)* 35,934 25,725 0.2
Total Common Stocks in Sweden 185,271 154,106 1.1
Switzerland Machinery 22 Schindler Holding AG 38,788 25,038 0.1
Merchandising 35 Merkur (Registered Shares) 9,581 7,903 0.1
Total Common Stocks in Switzerland 48,369 32,941 0.2
United Aerospace 7,200 British Aerospace PLC 56,813 43,640 0.3
Kingdom
Automobile Parts 8,700 LucasVarity PLC 35,770 26,735 0.2
Beverages 4,382 Diageo PLC (Class B) 47,807 41,663 0.3
Foods 3,700 Devro PLC 29,536 15,328 0.1
Travel & Lodging 13,000 Thomson Travel Group PLC 42,117 30,017 0.2
Total Common Stocks
in the United Kingdom 212,043 157,383 1.1
United Aerospace 1,000 GenCorp, Inc. 25,562 19,250 0.1
States 200 United Technologies Corporation 15,741 15,287 0.1
----------- ----------- ------
41,303 34,537 0.2
Airlines 600 US Airways Group, Inc. 31,804 30,375 0.2
Automobile Parts 700 Federal-Mogul Corp. 32,326 32,725 0.2
Automobile Rental 860 Avis Rent A Car, Inc. 28,709 18,544 0.1
540 Hertz Corp. (Class A) 18,819 22,343 0.2
----------- ----------- ------
47,528 40,887 0.3
Banking 1,600 Bank of New York Co., Inc. 27,507 43,800 0.3
500 BankAmerica Corp. 28,146 30,062 0.2
1,000 First Union Corp. 50,555 51,188 0.4
----------- ----------- ------
106,208 125,050 0.9
Beverages 1,200 PepsiCo, Inc. 43,267 35,325 0.2
Broadcasting/Cable 1,200 Tele-Communications (Class A) 29,892 46,950 0.3
3,400 Tele-Communications TCI
Ventures Group (Class A) 47,362 60,775 0.4
----------- ----------- ------
77,254 107,725 0.7
Chemicals 2,100 Great Lakes Chemical Corp. 89,165 81,638 0.6
Computer Services 900 BMC Software, Inc. 41,194 54,000 0.4
& Software 900 Cisco Systems, Inc. 45,450 55,631 0.4
1,750 Computer Associates
International, Inc. 71,148 64,750 0.4
400 International Business
Machines Corp. 46,794 51,200 0.4
----------- ----------- ------
204,586 225,581 1.6
Computers 3,800 Compaq Computer Corporation 114,071 120,175 0.9
Consumer Products 2,000 Dial Corp. 41,022 41,250 0.3
Containers 850 Owens--Illinois, Inc. 27,687 21,250 0.1
Electronic/Instruments 800 Texas Instruments Inc. 49,492 42,200 0.3
Electronics 700 General Electric Company 53,280 55,694 0.4
Entertainment 3,200 Premier Parks, Inc. 80,841 56,000 0.4
Financial Services 1,700 Heller Financial, Inc. 45,392 40,800 0.3
800 Providian Financial Corporation 50,089 67,850 0.5
----------- ----------- ------
95,481 108,650 0.8
Foods 1,400 Keebler Foods Co. 38,036 36,400 0.3
Hardware Products 700 Black & Decker Corporation 27,191 29,138 0.2
Health Care 1,200 Columbia/HCA Healthcare
Corporation 35,493 24,075 0.2
1,200 HEALTHSOUTH Corporation 28,453 12,675 0.1
----------- ----------- ------
63,946 36,750 0.3
Industrial 300 Millipore Corporation 6,703 5,719 0.0
Insurance 900 Allmerica Financial Corp. 55,841 53,662 0.4
900 Equitable Companies Inc. (The) 46,184 37,238 0.3
500 UNUM Corporation 15,861 24,844 0.2
----------- ----------- ------
117,886 115,744 0.9
Machine Tools 1,400 Ingersoll-Rand Co. 48,746 53,113 0.4
& Machinery
Manufacturing 700 Tyco International Ltd. 36,628 38,675 0.3
Medical 800 Beckman Coulter Inc. 47,152 41,300 0.3
Natural Gas 1,500 El Paso Energy Corporation 39,390 48,656 0.3
1,100 Enron Corp. 50,669 58,094 0.4
----------- ----------- ------
90,059 106,750 0.7
Oil Services 330 Schlumberger Ltd. 17,776 16,603 0.1
Petroleum 900 Unocal Corp. 30,277 32,625 0.2
Pharmaceuticals 700 Bristol-Myers Squibb Co. 69,700 72,713 0.5
900 Warner-Lambert Company 47,162 67,950 0.5
----------- ----------- ------
116,862 140,663 1.0
Printing & Publishing 2,000 World Color Press, Inc. 59,478 62,000 0.4
Radio & Television 2,000 Capstar Broadcasting Corp.
(Class A) 38,000 30,875 0.2
Railroads 1,500 Burlington Northern Santa Fe Inc. 41,588 48,000 0.3
</TABLE>
Merrill Lynch Asset Income Fund, Inc., September 30, 1998
<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 Real Estate 200 Starwood Hotels & Resorts $ 7,387 $ 6,100 0.0%
States Investment Trusts
(concluded)
Retail--Specialty 1,100 Lowe's Companies, Inc. 38,955 34,994 0.2
Retail--Stores 700 Consolidated Stores Corporation 23,820 13,738 0.1
1,600 Rite Aid Corporation 35,457 56,800 0.4
1,300 Safeway Inc. 43,658 60,288 0.4
900 Wal-Mart Stores, Inc. 41,623 49,162 0.3
----------- ----------- ------
144,558 179,988 1.2
Savings & 1,900 GreenPoint Financial Corp. 71,555 60,563 0.4
Loan Associations
Services 500 Quintiles Transnational Corp. 23,351 21,875 0.2
Telecommunications 1,000 GTE Corporation 51,129 55,000 0.4
1,500 MCI WorldCom, Inc 47,542 73,312 0.5
----------- ----------- ------
98,671 128,312 0.9
Travel & Lodging 1,000 Carnival Corporation (Class A) 20,456 31,813 0.2
810 Royal Caribbean Cruises Ltd. 20,139 21,516 0.1
----------- ----------- ------
40,595 53,329 0.3
Utilities-- 1,100 Ameritech Corporation 53,318 52,112 0.4
Communication
Utilities--Electric 800 PECO Energy Co. 27,330 29,250 0.2
700 Public Service Enterprise
Group Incorporated 27,203 27,519 0.2
600 Texas Utilities Company 26,856 27,937 0.2
----------- ----------- ------
81,389 84,706 0.6
Waste Management 1,100 Waste Management, Inc. 48,049 52,869 0.4
Total Common Stocks
in the United States 2,523,471 2,628,265 18.3
Total Investments
in Common Stocks 3,845,127 3,716,577 25.9
Face
Amount Fixed-Income Securities
Germany Federal Government Bundesrepublik Deutschland:
Obligations DM 1,200,000 6% due 7/04/2007 789,258 823,257 5.7
160,000 5.625% due 1/04/2028 92,224 106,683 0.8
Total Fixed-Income Securities
in Germany 881,482 929,940 6.5
Sweden Federal Government Government of Sweden:
Obligations Skr 700,000 5.50% due 4/12/2002 88,977 92,492 0.7
1,400,000 8% due 8/15/2007 204,289 221,290 1.5
Total Fixed-Income Securities
in Sweden 293,266 313,782 2.2
United Federal Pound 525,000 UK Treasury Bills, 7.25% due
Kingdom Government Sterling 12/07/2007 967,944 1,048,445 7.3
Obligations
Total Fixed-Income Securities
in the United Kingdom 967,944 1,048,445 7.3
United US Government Federal National Mortgage
States Agency Association:
Obligations US$ 1,240,000 5.625% due 3/15/2001 1,243,245 1,269,834 8.9
1,240,000 5.75% due 4/15/2003 1,246,248 1,293,469 9.0
1,510,000 5.75% due 2/15/2008 1,501,712 1,597,535 11.1
----------- ----------- ------
3,991,205 4,160,838 29.0
US Government US Treasury Notes:
Obligations 100,000 6% due 8/15/1999 100,477 101,141 0.7
230,000 6.125% due 9/30/2000 234,205 237,583 1.7
895,000 6.625% due 2/15/2027 1,004,130 1,087,425 7.6
----------- ----------- ------
1,338,812 1,426,149 10.0
Total Fixed-Income Securities
in the United States 5,330,017 5,586,987 39.0
Total Investments in
Fixed-Income Securities 7,472,709 7,879,154 55.0
Short-Term Securities
United US Government Federal Home Loan Mortgage
States Agency Corporation:
Obligations** US$ 758,000 5.38% due 10/01/1998 758,000 758,000 5.3
1,300,000 5.14% due 10/02/1998 1,299,814 1,299,814 9.0
500,000 5.25% due 10/05/1998 499,708 499,708 3.5
Total Investments in
Short-Term Securities 2,557,522 2,557,522 17.8
Total Investments $13,875,358 14,153,253 98.7
===========
Unrealized Depreciation on Forward Foreign Exchange Contracts*** (829) (0.0)
Other Assets Less Liabilities 189,931 1.3
----------- ------
Net Assets $14,342,355 100.0%
=========== ======
Net Asset Value: Class A--Based on net assets of $4,404,115
and 420,926 shares outstanding $ 10.46
===========
Class B--Based on net assets of $8,696,596
and 831,145 shares outstanding $ 10.46
===========
Class C--Based on net assets of $612,366
and 58,504 shares outstanding $ 10.47
===========
Class D--Based on net assets of $629,278
and 60,172 shares outstanding $ 10.46
===========
<FN>
*American Depositary Receipts (ADR).
**Certain US Government Agency Obligations are traded on a discount
basis; the interest rates shown reflect the discount rate paid at
the time of purchase by the Fund.
***Forward foreign exchange contracts as of September 30, 1998 were
as follows:
Unrealized
Foreign Expiration Appreciation
Currency Sold Date (Depreciation)
C$ 90,000 November 1998 $ (108)
Pound Sterling 475,000 October 1998 (6,377)
Pound Sterling 230,000 December 1998 1,746
YEN 17,000,000 November 1998 3,910
-------
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net
(US$Commitment--$1,377,971) $ (829)
=======
</TABLE>
Merrill Lynch Asset Income Fund, Inc., September 30, 1998
COMMON STOCK PORTFOLIO CHANGES
For the Quarter Ended September 30, 1998
Additions
Ameritech Corporation
Banca Di Roma S.p.A.
Consolidated Stores Corporation
GTE Corporation
GreenPoint Financial Corp.
Merkur (Registered Shares)
Millipore Corporation
Minebea Co., Ltd.
PECO Energy Co.
PepsiCo, Inc.
Public Service Enterprise Group, Inc.
Quintiles Transnational Corp.
Tele-Communications (Class A)
Telefonaktiebolaget LMEricsson (ADR)
Teleglobe Inc.
Texas Utilities Company
*United Healthcare Corp.
United Technologies Corporation
Vivendi S.A.
Wolters Kluwer N.V.
Deletions
Bank of Tokyo Mitsubishi, Ltd. (The)
Chancellor Media Corp.
Color Line ASA
Daimler-Benz AG
Danieli & Company--RNC
Finnlines Oyj
Gartner Group, Inc. (Class A)
Gillette Company (The)
Grupo Carso, S.A. de C.V. (ADR)
Hyundai Engineering & Construction Co.,
Ltd. (GDR)
Imax Corp.
Imperial Chemical Industries PLC (ADR)
Intel Corporation
Makino Milling Machine Co., Ltd.
Mannesman AG
Orbital Science Corp.
Overseas Chinese Banking Corp. Ltd.
P.T. Indonesian Satellite Corp. (ADR)
Panamerican Beverages, Inc. (Class A)
(US Registered Shares)
Perstorp AB (Class B)
Repsol, S.A. (ADR)
Royal Dutch Petroleum Co.
(NY Registered Shares)
Sanwa Bank, Ltd.
Seagram Company Ltd. (The)
Sears, Roebuck & Co.
SmarTalk TeleService, Inc.
Tele-Communications, Inc. (Class A)
(Convertible Preferred)
Telefonos de Mexico, S.A. de C.V. (ADR)
Travelers Group, Inc.
UBS AG
UPM-Kymmene Oyj
*United Healthcare Corp.
Valora Holdings AG
Yacimientos Petroliferos Fiscales S.A. (ADR)
[FN]
*Added and deleted in the same quarter.
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
Thomas R. Robinson, Senior Vice President
and Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Barbara G. Fraser, Secretary
Custodian
The Chase Manhattan Bank
4 MetroTech Center, 18th Floor
Brooklyn, NY 11245
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800)637-3863
