MERRILL LYNCH
ASSET INCOME
FUND, INC.
FUND LOGO
Quarterly Report
March 31, 1998
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
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800)637-3863
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
March 31, 1998
Percent Breakdown of
Stocks & Fixed-Income Percent of
Securities by Country Net Assets++
United States* 83.8%
United Kingdom 2.7
Sweden 2.7
Canada 2.5
Denmark 1.7
Japan 1.0
Italy 0.9
France 0.7
Germany 0.5
Mexico 0.5
Argentina 0.2
Bahamas 0.2
Spain 0.2
Switzerland 0.2
Indonesia 0.2
Netherlands 0.1
South Africa 0.1
Australia 0.1
Norway 0.1
South Korea 0.0+++
[FN]
*Includes investments in short-term securities.
++Percent of net assets may not total 100%.
+++Percent of net assets is less than 0.1%.
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Telecommunications 2.0%
Insurance 1.9
Banking 1.9
Retail Stores 1.7
Computer Services & Software 1.6
Pharmaceuticals 1.3
Chemicals 1.0
Electronics 0.9
Aerospace 0.8
Entertainment 0.7
Ten Largest Holdings Country Percent of
(Equity Investments) of Origin Net Assets
Allmerica Financial Corp. US 0.8%
Great Lakes
Chemical Corp. US 0.7
Sears, Roebuck & Co. US 0.6
COMSAT Corporation US 0.6
International Business
Machines Corp. US 0.5
Pfizer Inc. US 0.5
General Electric
Company US 0.5
Premier Parks, Inc. US 0.5
WorldCom, Inc. US 0.4
Carnival Corp. (Class A) US 0.4
Merrill Lynch Asset Income Fund, Inc., March 31, 1998
DEAR SHAREHOLDER
The quarter ended March 31, 1998 was positive for most capital
markets worldwide, despite periods of volatility. Investors
continued to focus on the impact that the financial crisis in Asia
would have on economic growth worldwide. In the United States,
sentiment fluctuated between a variety of outlooks. At times, US
stock and bond prices reflected expectations that the slowdown in
Asian economic growth would lead to a sharp decline in US business
activity and, ultimately, a deflationary environment. The
deterioration of economic conditions in Japan continues to be of
particular concern. During the quarter, US investors appeared to
expect that the positive trends of a moderately expanding economy,
declining unemployment, enhanced productivity and corporate profits
growth would continue, unimpeded by the developments in Asia. To
date, there have been only a few signs that Asia's troubles are
influencing US economic activity.
The Federal Open Market Committee did not change monetary policy at
its meeting in early February. Subsequently, in his Humphrey-Hawkins
testimony before Congress, Federal Reserve Board Chairman Alan
Greenspan indicated that monetary policy might remain steady for
some time. This raised concerns among those US bond investors who
had expected imminent monetary policy easing. However, subsequent
data releases suggested that US economic growth would remain
moderate, which stabilized the bond market. As 1998 progresses, it
is likely that investor focus will remain on developments in Asia,
their potential impact on the US economy and the Federal Reserve
Board's response to them.
Portfolio Matters
As of March 31, 1998, the asset allocation of Merrill Lynch Asset
Income Fund, Inc. was: US bonds, 44% of net assets; foreign bonds,
8%; US stocks, 21%; foreign stocks, 7%; and cash reserves, 20%.
We adopted a more cautious stance toward US bonds in March. During
the month, we reduced the Fund's allocation to US bonds and cash
from 68% of net assets to 64%. Of greater significance is the
reduction we made in the average duration of the Fund's bond
holdings from 6.2 years to 4.7 years. The cutback in duration
reflected our assessment that the US economy remained somewhat
stronger than we had previously anticipated, with strong domestic
consumer demand resulting from a high level of consumer confidence.
At the same time, the problems in the Asian economies seemed to be
having a lesser impact on US business conditions than was the case
earlier in 1998. While we believe that the potential for significant
further declines in US interest rates is now more limited, we also
do not foresee a significant uptrend, given the evidence that US
inflation remains subdued and the supply of newly issued US
Government securities is likely to be reduced by an expanding budget
surplus.
The bulk of the Fund's weighting in the foreign bond sector remains
in Europe, including Denmark, Sweden, Italy and the United Kingdom.
Early in 1998, we became more optimistic in our outlook for the US
dollar. Consequently, we increased the size of the currency hedges
to include the equivalent of the full weighting in European stocks
and bonds and Japanese equities.
In the US equity sector, our revised interest rate outlook led us to
reduce the weighting in the financial services sector in favor of
areas which are more sensitive to US economic growth. The most
notable sectors which we enlarged included capital goods,
communications and technology. Overall, we maintained a balance
between the largest-capitalization equities, such as AT&T Corp.,
General Electric Company and Microsoft Corporation, and secondary
companies with strong fundamentals. Examples of the latter included
recently established positions in Premier Parks, Inc., Gartner
Group, Inc., Orbital Sciences Corp. and Chancellor Media Corp.
In the foreign equity sector, we continued to place emphasis on
European companies, given the favorable economic fundamentals and
prospects for corporate restructuring. However, our concern over
prospects for the Japanese economy has led us to remain
underweighted in Japanese equities relative to the unmanaged
benchmark, the Morgan Stanley Europe, Australia, Far East Index. In
emerging markets, we continued to prefer Latin America, and in
particular, Mexico, over the shares of Asian companies.
In Conclusion
We thank you for your investment in Merrill Lynch Asset Income Fund,
Inc., and we look forward to reviewing our outlook and strategy with
you in our upcoming annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Thomas R. Robinson)
Thomas R. Robinson
Senior Vice President and
Portfolio Manager
April 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 "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., March 31, 1998
PERFORMANCE DATA (concluded)
Average Annual
Total Return
% Return % Return
Without CDSC With CDSC**
Class A Shares*
Year Ended 3/31/98 +16.00% +11.36%
Inception (9/02/94)
through 3/31/98 +10.66 + 9.40
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/98 +15.14% +11.14%
Inception (9/02/94)
through 3/31/98 + 9.83 + 9.61
[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 3/31/98 +15.08% +14.08%
Inception (10/21/94)
through 3/31/98 +10.37 +10.37
[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 3/31/98 +15.72% +11.09%
Inception (10/21/94)
through 3/31/98 +10.98 + 9.67
[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 3/31/98
<S> <C> <C> <C> <C>
ML Asset Income Fund, Inc. Class A Shares +16.00% +3.73% +43.63% 3.74%
ML Asset Income Fund, Inc. Class B Shares +15.14 +3.54 +39.85 3.16
ML Asset Income Fund, Inc. Class C Shares +15.08 +3.53 +40.44 3.11
ML Asset Income Fund, Inc. Class D Shares +15.72 +3.76 +43.12 3.50
<FN>
*Investment results shown do not reflect sales charges; results
shown 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 dates are: Class A and Class B Shares, 9/02/94; and
Class C and Class D Shares, 10/21/94.
</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 Oil & Gas Producers 700 Yacimientos Petroliferos
Fiscales S.A. (ADR)* $ 18,908 $ 23,800 0.2%
Total Common Stocks in Argentina 18,908 23,800 0.2
Australia Diversified 1,800 Broken Hill Proprietary Co., Ltd. 23,683 18,390 0.1
Total Common Stocks in Australia 23,683 18,390 0.1
Bahamas Hotels & Casinos 500 Sun International Hotels Ltd. 21,562 23,687 0.2
Total Common Stocks in the Bahamas 21,562 23,687 0.2
Canada Automobile Parts 300 Magna International, Inc. (Class A) 16,631 23,381 0.2
Leisure/Tourism 500 Imax Corp. 7,906 14,156 0.1
Total Common Stocks in Canada 24,537 37,537 0.3
France Electronics 500 Thomson CSF S.A. 18,420 20,205 0.1
Oil--Related 200 Elf Aquitaine S.A. 22,973 26,251 0.2
Reinsurance 400 Scor S.A. 15,237 22,953 0.2
Semiconductor Capital 300 SGS--Thomson Microelectronics N.V.
Equipment (NY Registered Shares) 14,852 23,269 0.2
Total Common Stocks in France 71,482 92,678 0.7
Germany Banking 350 Bayerische Vereinsbank AG 21,687 25,582 0.2
Machinery & Equipment 45 Mannesmann AG 12,583 32,989 0.3
Total Common Stocks in Germany 34,270 58,571 0.5
Indonesia Telecommunications 1,320 P.T. Indonesian Satellite Corp. (ADR)* 29,767 20,378 0.2
Total Common Stocks in Indonesia 29,767 20,378 0.2
Italy Apparel 400 Gucci Group N.V. (NY Registered Shares) 27,509 19,000 0.1
Publishing 2,000 Arnoldo Mondadori Editore S.p.A. 16,894 23,061 0.2
Total Common Stocks in Italy 44,403 42,061 0.3
Japan Banking 2,000 The Bank of Tokyo--Mitsubishi, Ltd. 27,692 24,346 0.2
Building & 2,000 Matsushita Electric Works, Ltd. 20,763 19,687 0.1
Construction
Electronics 1,000 Matsushita Electric Industrial
Co., Ltd. 14,851 16,081 0.1
300 Sony Corporation (ADR)* 21,921 25,519 0.2
----------- ----------- ------
36,772 41,600 0.3
Insurance 2,000 Tokio Marine & Fire Insurance
Co., Ltd. 24,290 22,393 0.2
Machine Tools 3,000 Makino Milling Machine Co., Ltd. 21,273 20,424 0.2
& Machinery
Total Common Stocks in Japan 130,790 128,450 1.0
</TABLE>
Merrill Lynch Asset Income Fund, Inc., March 31, 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>
Mexico Beverages 600 Panamerican Beverages, Inc.
(Class A) $ 18,859 $ 24,075 0.2%
Financial Services 400 Grupo Financiera Bancomer
S.A. (Class B) (ADR)* 5,715 4,760 0.0
Multi-Industry 1,050 Grupo Carso, S.A. de C.V. (ADR)* 16,722 12,821 0.1
Telecommunications 350 Telefonos de Mexico, S.A. de
C.V. (ADR)* 16,888 19,731 0.2
Total Common Stocks in Mexico 58,184 61,387 0.5
Netherlands Oil--International 350 Royal Dutch Petroleum Co.
(NY Registered Shares) 19,143 19,884 0.1
Total Common Stocks in the Netherlands 19,143 19,884 0.1
Norway Cruise Lines 3,000 Color Line ASA 11,280 9,062 0.1
Total Common Stocks in Norway 11,280 9,062 0.1
South Africa Diversified 2,300 Sasol Limited 22,963 18,639 0.1
Total Common Stocks in South Africa 22,963 18,639 0.1
South Korea Engineering & 510 Hyundai Engineering & Construction
Construction Co., Ltd. (GDR)** 6,551 332 0.0
Total Common Stocks in South Korea 6,551 332 0.0
Spain Energy & Petroleum 450 Repsol S.A. (ADR)* 17,019 22,894 0.2
Total Common Stocks in Spain 17,019 22,894 0.2
Sweden Banking 1,200 ForeningsSparbanken AB 15,094 39,606 0.3
2,900 Nordbanken Holding AB 17,224 19,252 0.2
----------- ----------- ------
32,318 58,858 0.5
Chemicals 700 Perstorp AB (Class B) 13,135 12,977 0.1
Diversified 100 Custos AB (Class A) 2,576 2,624 0.1
100 Custos AB (Class B) 2,653 2,605 0.0
----------- ----------- ------
5,229 5,229 0.1
Investment Management 800 Bure Investment AB 6,704 12,125 0.1
Laser Components 800 Spectra-Physics AB (Class A) 19,323 16,033 0.1
Real Estate 1,600 Castellum AB 15,160 16,734 0.1
Investment Trusts
Total Common Stocks in Sweden 91,869 121,956 1.0
Switzerland Pharmaceuticals 2 Roche Holding AG 16,801 21,681 0.2
Total Common Stocks in Switzerland 16,801 21,681 0.2
United Aerospace 700 British Aerospace PLC 21,462 23,089 0.2
Kingdom
Automobile Parts 4,000 LucasVarity PLC 13,760 16,190 0.1
Beverages 1,382 Diageo PLC (Class B) 10,909 16,283 0.1
Chemicals 250 Imperial Chemical Industries
PLC (ADR)* 14,299 17,969 0.2
Foods 1,700 Devro PLC 12,755 14,445 0.1
Mining 1,050 Rio Tinto PLC 15,727 14,114 0.1
Retail Stores 1,100 Dixons Group PLC 11,578 9,697 0.1
Total Common Stocks in the
United Kingdom 100,490 111,787 0.9
United Aerospace 910 Allied Signal, Inc. 35,710 38,220 0.3
States 750 GenCorp, Inc. 20,484 23,063 0.2
150 Orbital Sciences Corp. 3,935 6,731 0.1
----------- ----------- ------
60,129 68,014 0.6
Airlines 450 US Airways Group, Inc. 28,357 33,356 0.3
Automobile Parts 850 Federal-Mogul Corp. 34,036 45,209 0.4
Automobile Rental 960 Avis Rent-A-Car, Inc. 30,409 31,140 0.2
900 Hertz Corp. (Class A) 28,734 41,400 0.3
----------- ----------- ------
59,143 72,540 0.5
Banking 750 Bank of New York Co., Inc. 20,839 47,109 0.4
350 BankAmerica Corp. 19,241 28,919 0.2
890 First Union Corp. 44,459 50,508 0.4
----------- ----------- ------
84,539 126,536 1.0
Broadcasting 850 Chancellor Media Corp. 27,513 38,994 0.3
Broadcasting/Cable 1,742 Tele-Communications TCI
Ventures Group (Class A) 16,670 30,594 0.2
Chemicals 1,600 Great Lakes Chemical Corp. 79,156 86,400 0.7
Commercial Services 940 Gartner Group, Inc. (Class A) 32,565 35,074 0.3
Computer Services & 450 BMC Software, Inc. 20,904 37,716 0.3
Software 370 Cisco Systems, Inc. 21,858 25,299 0.2
620 Computer Associates
International, Inc. 20,018 35,805 0.3
620 International Business Machines
Corp. 56,442 64,403 0.5
460 Microsoft Corporation 29,037 41,141 0.3
----------- ----------- ------
148,259 204,364 1.6
Computers 1,080 Compaq Computer Corp. 35,777 27,945 0.2
Consumer Products 1,530 Dial Corp. 30,536 36,624 0.3
Containers 1,150 Owens-Illinois, Inc. 32,914 49,738 0.4
Cosmetics 300 The Gillette Company 34,322 35,606 0.3
Cruise Lines 650 Royal Caribbean Cruises Ltd. 30,416 45,541 0.4
Electronics 700 General Electric Company 51,042 60,331 0.5
Entertainment 1,000 Premier Parks, Inc. 56,457 58,000 0.5
270 The Walt Disney Company 29,494 28,822 0.2
----------- ----------- ------
85,951 86,822 0.7
Financial Services 310 American Express Company 18,347 28,462 0.2
700 MGIC Investment Corporation 27,000 45,981 0.4
----------- ----------- ------
45,347 74,443 0.6
Foods 800 Keebler Foods Co. 22,608 24,000 0.2
Hardware Products 700 Black & Decker Corporation 23,461 37,144 0.3
Health Care 630 Columbia/HCA Healthcare Corp. 19,167 20,317 0.2
1,900 HEALTHSOUTH Corp. 49,816 53,319 0.4
----------- ----------- ------
68,983 73,636 0.6
</TABLE>
Merrill Lynch Asset Income Fund, Inc., March 31, 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>
United States Insurance 1,500 Allmerica Financial Corp. $ 92,207 $ 95,812 0.8%
(concluded) 900 The Equitable Companies Inc. 47,121 50,794 0.4
700 Travelers Group, Inc. 28,234 42,000 0.3
500 UNUM Corporation 15,861 27,594 0.2
----------- ----------- ------
183,423 216,200 1.7
Machine Tools 900 Ingersoll-Rand Co. 27,375 43,144 0.3
& Machinery 150 SPX Corp. 8,786 11,447 0.1
----------- ----------- ------
36,161 54,591 0.4
Manufacturing 500 Tyco International Ltd. 25,812 27,312 0.2
Medical Equipment 700 DENTSPLY International Inc. 19,237 21,787 0.2
Natural Gas 700 El Paso Natural Gas Co. 35,652 49,394 0.4
420 Enron Corp. 17,745 19,477 0.2
----------- ----------- ------
53,397 68,871 0.6
Office Equipment 300 Danka Business Systems PLC (ADR)*(a) 14,816 5,494 0.0
Oil Service 400 Schlumberger Ltd. 20,145 30,300 0.2
450 Smith International, Inc. 21,639 24,778 0.2
----------- ----------- ------
41,784 55,078 0.4
Petroleum 850 Unocal Corp. 28,542 32,884 0.3
Pharmaceuticals 350 Bristol-Myers Squibb Co. 33,277 36,509 0.3
610 Pfizer Inc. 46,981 60,809 0.5
230 Warner-Lambert Co. 32,904 39,172 0.3
----------- ----------- ------
113,162 136,490 1.1
Railroads 350 Burlington Northern Santa Fe Inc. 28,317 36,400 0.3
Real Estate Investment 380 Starwood Hotel & Resort 17,100 20,306 0.2
Trusts
Retail Specialty 350 Lowe's Companies, Inc. 25,050 24,566 0.2
Retail Stores 1,520 Rite Aid Corporation 24,882 52,060 0.4
950 Safeway Inc. 28,346 35,091 0.3
1,350 Sears, Roebuck & Co. 68,791 77,541 0.6
850 Wal-Mart Stores, Inc. 35,032 43,191 0.3
----------- ----------- ------
157,051 207,883 1.6
Semiconductors 1,100 National Semiconductor Corporation 44,311 23,031 0.2
Telecommunications 300 AT&T Corp. 19,023 19,687 0.2
2,100 COMSAT Corporation 64,780 72,319 0.6
200 Globalstar Telecommunications Ltd. 12,877 12,675 0.1
450 SmarTalk Teleservices, Inc. 12,762 14,344 0.1
884 Tele-Communications, Inc. (Class A)
(Convertible Preferred) 18,169 27,459 0.2
1,300 WorldCom, Inc. 34,335 55,900 0.4
----------- ----------- ------
161,946 202,384 1.6
Tobacco 1,000 Philip Morris Companies, Inc. 43,659 41,687 0.3
Travel & Lodging 790 Carnival Corp. (Class A) 22,760 55,102 0.4
Utilities--Electric 500 Public Service Enterprise
Group, Inc. 15,737 18,938 0.1
Waste Management 1,060 USA Waste Services, Inc. 44,187 47,236 0.4
Total Common Stocks in the
United States 2,108,176 2,589,151 20.6
Total Investments in
Common Stocks 2,851,878 3,422,325 27.2
Face
Amount Fixed-Income Securities
Canada Federal C$ 350,000 Canadian Government Bonds, 7% due
Government 12/01/2006 265,903 273,797 2.2
Obligations
Total Fixed-Income Securities
in Canada 265,903 273,797 2.2
Denmark Federal Dkr 1,350,000 Government of Denmark, 7%
Government due 11/15/2007 216,925 218,142 1.7
Obligations
Total Fixed-Income Securities
in Denmark 216,925 218,142 1.7
Italy Federal Lit 125,000,000 Buoni Poliennali del Tesoro
Government (Italian Government Bonds),
Obligations 8.50% due 1/01/2004 88,557 80,796 0.6
Total Fixed-Income Securities
in Italy 88,557 80,796 0.6
Sweden Federal Skr 1,400,000 Government of Sweden, 8%
Government due 8/15/2007 204,289 209,965 1.7
Obligations
Total Fixed-Income Securities
in Sweden 204,289 209,965 1.7
United Federal Pound 125,000 UK Treasury Bills, 7.25% due
Kingdom Govern- Sterling 12/07/2007 206,901 230,188 1.8
ment
Obligations
Total Fixed-Income Securities
in the United Kingdom 206,901 230,188 1.8
United US US$ 1,680,000 US Treasury Bonds, 6.625% due
States Government 2/15/2027 1,745,298 1,822,800 14.5
Obligations US Treasury Notes:
1,425,000 6% due 8/15/1999 1,426,352 1,432,353 11.4
1,150,000 6.125% due 9/30/2000 1,171,023 1,163,294 9.3
750,000 6.50% due 5/31/2002 755,039 772,500 6.2
300,000 6.625% due 5/15/2007 303,734 318,468 2.5
----------- ----------- ------
3,656,148 3,686,615 29.4
Total Fixed-Income Securities
in the United States 5,401,446 5,509,415 43.9
Total Investments in Fixed-Income
Securities 6,384,021 6,522,303 51.9
</TABLE>
Merrill Lynch Asset Income Fund, Inc., March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Face Percent of
COUNTRY Amount Short-Term Securities Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United US US$ 2,424,000 Federal Home Loan Mortgage
States Government Corp., 5.90% due 4/01/1998 $ 2,424,000 $ 2,424,000 19.3%
Agency
Obligations***
Total Investments in
Short-Term Securities 2,424,000 2,424,000 19.3
Total Investments $11,659,899 12,368,628 98.4
===========
Unrealized Appreciation on Forward Foreign Exchange Contracts++ 9,591 0.1
Other Assets Less Liabilities 184,774 1.5
----------- ------
Net Assets $12,562,993 100.0%
=========== ======
Net Asset Value: Class A--Based on net assets of $3,209,914 and
303,087 shares outstanding $ 10.59
===========
Class B--Based on net assets of $8,385,813 and
791,838 shares outstanding $ 10.59
===========
Class C--Based on net assets of $509,351 and
48,077 shares outstanding $ 10.59
===========
Class D--Based on net assets of $457,915 and
43,259 shares outstanding $ 10.59
===========
<FN>
*American Depositary Receipts (ADR).
**Global Depositary Receipts (GDR).
***Certain USGovernment Agency Obligations are traded on a discount
basis; the interest rate shown is the discount rate paid at the time
of purchase by the Fund.
(a)Consistent with the general policy of the Securities and Exchange
Commission, the nationality or domicile of an issuer for
determination of foreign issuer status may be (i) the country under
whose laws the issuer is organized, (ii) the country in which the
issuer's securities are principally traded, or (iii) the country in
which the issuer derives a significant proportion (at least 50%) of
its revenue or profits from goods produced and sold, investments
made, or services performed in the country, or in which at least 50%
of the assets of the issuer are situated.
++Forward foreign exchange contracts as of March 31, 1998 were as
follows:
Unrealized
Foreign Expiration Appreciation
Currency Sold Date (Depreciation)
A$ 25,000 April 1998 $ 10
C$ 435,000 May 1998 1,872
Chf 35,000 April 1998 752
Dkr 1,550,000 April 1998 3,275
DM 140,000 April 1998 941
Frf 950,000 April 1998 1,964
Pound Sterling 215,000 April 1998 (1,011)
Lit 240,000,000 April 1998 1,563
Pta 3,400,000 April 1998 249
Skr 2,800,000 April 1998 (1,604)
YEN 12,300,000 April 1998 3,258
Total (US$ Commitment--$1,763,986) 11,269
-------
Foreign
Currency Purchased
Frf 400,000 April 1998 (919)
YEN 2,300,000 April 1998 (759)
Total (US$ Commitment--$83,723) (1,678)
-------
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net
(US$Commitment--$1,847,709) $ 9,591
=======
</TABLE>
COMMON STOCK PORTFOLIO CHANGES
For the Quarter Ended March 31, 1998
Additions
AT&T Corp.
Allmerica Financial Corp.
The Bank of Tokyo--Mitsubishi, Ltd.
British Aerospace PLC
COMSAT Corporation
Columbia/HCA Healthcare Corp.
Custos AB (Class A)
Custos AB (Class B)
Devro PLC
Elf Aquitaine S.A.
The Equitable Companies Inc.
ForeningsSparbanken AB
The Gillette Company
Globalstar Telecommunications Ltd.
Great Lakes Chemical Corp.
*Illinova Corp.
Keebler Foods Co.
*Lockheed Martin Corporation
Lowe's Companies, Inc.
Makino Milling Machine Co., Ltd.
Matsushita Electric Industrial Co., Ltd.
Philip Morris Companies, Inc.
Premier Parks, Inc.
Public Service Enterprise Group, Inc.
Smartalk Teleservices, Inc.
Sun International Hotels Ltd.
Tyco International Ltd.
USA Waste Services, Inc.
The Walt Disney Company
Deletions
Bridgestone Corporation
Brunswick Corporation
De Beers Consolidated Mines Limited (ADR)
Edison International
Gulf Canada Resources Ltd.
Glenborough Realty Trust
Harnischfeger Industries, Inc.
Hartford Life, Inc. (Class A)
*Illinova Corp.
Lilly (Eli) & Co.
*Lockheed Martin Corporation
Maeda Corp.
Novartis AG (ADR)
OMI Corporation
Okumura Corp.
Prentiss Properties Trust
Provident Companies, Inc.
Quantum Corp.
San Miguel Corp. (Class B)
Sparbanken Sverige AB (Class A)
Sunbeam Corporation
Telecommunicacoes Brasileiras S.A.--
Telebras (ADR)
Texas Utilities Company
Tricon Global Restaurants, Inc.
Travelers Property Casualty Corp. (Class A)
Uniao de Bancos Brasileiros S.A.
(Unibanco) (GDR)
[FN]
*Added and deleted in the same quarter.
