MERRILL LYNCH
ASSET INCOME
FUND, INC.
FUND LOGO
Quarterly Report
March 31, 1999
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, 1999
Breakdown of
Stocks & Fixed-Income Percent of
Securities by Country Net Assets++
United States* 76.4%
Germany 9.0
Japan 3.8
United Kingdom 3.6
New Zealand 2.4
France 0.7
Sweden 0.5
Spain 0.4
Finland 0.3
Netherlands 0.2
Ireland 0.2
Brazil 0.2
Italy 0.2
Canada 0.2
Switzerland 0.1
Austria 0.1
Norway 0.0++++
Singapore 0.0++++
Denmark 0.0++++
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
Banking 1.3%
Telecommunications 1.2
Electronics 1.2
Computer Services & Software 1.1
Insurance 0.8
Pharmaceuticals 0.7
Retail-Stores 0.5
Computers 0.5
Automobiles 0.5
Financial Services 0.4
Country
Ten Largest Holdings of Percent of
(Equity Investments) Origin Net Assets
Microsoft Corporation US 0.5%
The Tokio Marine & Fire
Insurance Co. Ltd. Japan 0.3
The Bank of Tokyo-
Mitsubishi, Ltd. Japan 0.3
Matsushita Electric
Industrial Company, Ltd. Japan 0.3
Premier Parks Inc. US 0.3
MCI WorldCom Inc. US 0.3
Providian Financial
Corporation US 0.2
Bristol-Myers Squibb
Company US 0.2
Cisco Systems, Inc. US 0.2
AT&T Corp. US 0.2
Merrill Lynch Asset Income Fund, Inc., March 31, 1999
DEAR SHAREHOLDER
There were some conflicting signals regarding the future direction
of the US economy during the quarter ended March 31, 1999. However,
on balance the economic outlook continued to be positive. The US
economic expansion is ongoing, especially in the consumer sector.
Economic growth is not occurring at inflationary rates, although the
Organization for Petroleum Exporting Countries (OPEC) successfully
engineered a near-term increase in the price of crude oil. Against
this backdrop, the US Federal Reserve Board kept monetary policy on
hold. Outside of the United States, signs of growth are less
apparent in other major industrial economies, although the economic
outlook is improving in Europe. Although the crisis in Yugoslavia
has raised serious geopolitical concerns, it was not a significant
factor in the economic or investment outlook. In Japan, there are
not yet clear signs that Japan's economy is improving, and the
emerging economies remain tentative.
In the US capital markets, long-term interest rates have risen
somewhat thus far in 1999, but yield spreads between Treasury and
corporate issues are tightening. However, the major news was the Dow
Jones Industrial Average closing above the 10,000 level for the
first time; shortly after the end of the March quarter, other stock
market indexes reached record high levels. Nevertheless, the US
stock market's rise was very narrow in scope, with relatively few
large-capitalization issues accounting for the advance.
Portfolio Matters
As of March 31, 1999, the asset allocation of Merrill Lynch Asset
Income Fund, Inc. was: US bonds, 64% of net assets; foreign bonds,
15%; US stocks, 8%; foreign stocks, 7%; and cash reserves, 6%.
During the three months ended March 31, 1999, we shifted assets away
from foreign bonds and US stocks in favor of US bonds. We decreased
our allocation to US equities from 11% of net assets to 8% during
the three months ended March 31, 1999. Technology remained the
largest sector represented among US equities, reflecting the
continued high degree of earnings visibility for the group. Our new
commitment in this area was Lucent Technologies Inc. Other areas
with significant representation included healthcare, with newly
established positions in Pfizer Inc. and American Home Products
Corporation; and consumer staples, which included a new commitment
in Philip Morris Companies Inc.; and finance.
During the March quarter, foreign equity representation remained
unchanged at 7% of net assets. The primary shift within this sector
was the expansion of Japanese equity representation. We are
increasingly optimistic over the upside potential in the Japanese
stock market, given evidence of increasingly accommodative monetary
policy, some progress toward dealing with the financial crisis, and
evidence that a growing number of corporations are undertaking
corporate restructuring. By adding to Japanese equities, we
maintained a balance between export-oriented companies, as
exemplified by NEC Corporation and Toyota Motor Corporation, and
companies more dependent on the domestic economy, including
commitments in banking. We also initiated a position in Brazilian
equities, reflecting an improved post-devaluation environment. We
also reestablished a small position in emerging Asian markets
through the purchase of shares of Samsung Electronics Co., Ltd.
European equities remain the Fund's largest regional commitment
among the foreign equity holdings, with significant positions
remaining in telecommunications, telecommunications equipment, food,
healthcare and financials.
During the three months ended March 31, 1999, we reduced the Fund's
foreign bond commitment slightly from 16% of net assets to 15%.
Within the foreign bond commitment, we established positions in
Japan and New Zealand. We took advantage of a rise in yields in
Japanese bonds early in 1999 to initiate a commitment in these
obligations. The increasingly accommodative monetary policy, which
has led to a more positive stance toward Japanese equities, also
improved the potential for a near-term decline in Japanese bond
yields. At the same time, we believed that the shift in monetary
policy was likely to lead to a weaker yen. Consequently, we
reestablished the hedge of yen-denominated securities back to US
dollars. The New Zealand bond commitment reflects the attractive
yield of these obligations relative to US fixed-income securities.
We also maintained positions in German and UK bonds. The hedge of UK
stocks and bonds was eliminated as we believed that the pound would
recover relative to the US dollar following several months of
weakness.
During the three months ended March 31, 1999, we increased the
Fund's US bond representation from 61% of net assets to 64%. We also
extended the average duration of the US bond position from 5.5 years
to 6.8 years during the quarter. The extension of duration followed
a rise in US interest rates. In the months ahead, we expect US
interest rates to fall back, reflecting evidence of some slowing in
the pace of US economic activity.
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 report to shareholders.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Thomas R. Robinson)
Thomas R. Robinson
Senior Vice President and
Portfolio Manager
May 5, 1999
After more than 20 years of service, Arthur Zeikel recently retired
as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr.
Zeikel served as President of MLAM from 1977 to 1997 and as Chairman
since December 1997. Mr. Zeikel is one of the country's most
respected leaders in asset management and presided over the growth
of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500
billion. Mr. Zeikel will remain on Merrill Lynch Asset Income Fund,
Inc.'s Board of Directors. We are pleased to announce that Terry K.
Glenn has been elected President and Director of the Fund. Mr. Glenn
has held the position of Executive Vice President of MLAM since
1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors
in wishing him well in his retirement from Merrill Lynch and are
pleased that he will continue as a member of the Fund's Board of
Directors.
Merrill Lynch Asset Income Fund, Inc., March 31, 1999
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.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/99 +4.58% +0.40%
Inception (9/02/94)
through 3/31/99 +9.30 +8.33
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/99 +3.70% -0.21%
Inception (9/02/94)
through 3/31/99 +8.46 +8.46
[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 3/31/99 +3.65% +2.67%
Inception (10/21/94)
through 3/31/99 +8.82 +8.82
[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 3/31/99 +4.12% -0.04%
Inception (10/21/94)
through 3/31/99 +9.40 +8.40
[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 3/31/99
<S> <C> <C> <C> <C>
ML Asset Income Fund, Inc. Class A Shares +4.58% -1.40% +50.21% 4.14%
ML Asset Income Fund, Inc. Class B Shares +3.70 -1.67 +45.03 3.56
ML Asset Income Fund, Inc. Class C Shares +3.65 -1.68 +45.57 3.51
ML Asset Income Fund, Inc. Class D Shares +4.12 -1.55 +49.02 3.90
<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
since inception periods are Class A & Class B Shares, from 9/02/94
to 3/31/99 and Class C & Class D Shares, from 10/21/94 to 3/31/99.
</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>
Austria Paper Products 200 Mayr-Melnhof Karton AG $ 10,113 $ 8,860 0.1%
Total Common Stocks in Austria 10,113 8,860 0.1
Brazil Forest Products 430 Aracruz Celulose SA (ADR)* 6,011 6,235 0.1
Mining 400 Companhia Vale do Rio Doce SA 'A'
(Preferred) 5,720 5,889 0.1
Telecommunications 334 Embratel Participacoes SA (ADR)* 5,522 5,574 0.0
72 Telecomunicacoes Brasileiras SA-Telebras
(Preferred Block) (ADR)* 5,687 5,805 0.0
----------- ----------- ------
11,209 11,379 0.0
Total Common Stocks in Brazil 22,940 23,503 0.2
Canada Computer Graphics 300 ATI Technologies Inc. 4,699 4,602 0.1
Paper & Forest 300 Domatar, Inc. 2,251 2,162 0.0
Products
Telecommunications 515 Teleglobe Inc. 14,542 15,611 0.1
Total Common Stocks in Canada 21,492 22,375 0.2
Denmark Commercial Services 50 ISS International Service System A/S 'B' 3,263 3,253 0.0
Total Common Stocks in Denmark 3,263 3,253 0.0
Finland Communications 89 Nokia Oyj 'A' 8,704 14,332 0.1
Equipment
Insurance 249 Sampro Insurance Company PLC 'A' 11,761 7,804 0.1
Paper & Forest 200 UPM-Kymmene Oyj 4,465 5,534 0.0
Products
Real Estate 1,500 Sponda Oyj 10,774 8,187 0.1
Investment Trusts
Total Common Stocks in Finland 35,704 35,857 0.3
</TABLE>
Merrill Lynch Asset Income Fund, Inc., March 31, 1999
<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>
France Electronics 500 Thomson CSF $ 19,299 $ 15,293 0.1%
Foods 43 Danone 11,620 10,833 0.1
Information 15 Cap Gemini SA 2,288 2,514 0.0
Processing
Insurance 94 Axa 10,195 12,476 0.1
Oil--Related 83 Elf Aquitaine SA 11,400 11,285 0.1
Reinsurance 170 SCOR SA 10,744 8,562 0.0
Semiconductor 113 STMicroelectronics NV (NY Registered Shares) 8,129 10,975 0.1
Capital
Equipment
Telecommunications 118 France Telecom SA 8,272 9,552 0.1
Utilities--Water 40 Vivendi 9,130 9,853 0.1
Total Common Stocks in France 91,077 91,343 0.7
Germany Automobiles 160 DaimlerChrysler AG 12,516 13,938 0.1
Chemicals 130 Henkel KGaA (Preferred) 11,987 9,554 0.1
Total Common Stocks in Germany 24,503 23,492 0.2
Ireland Banking 538 Bank of Ireland 11,526 11,184 0.1
Pharmaceuticals 200 Elan Corporation PLC (ADR)* 16,897 13,950 0.1
Total Common Stocks in Ireland 28,423 25,134 0.2
Italy Publishing 688 Mondadori (Arnoldo) Editore SpA 8,896 10,299 0.1
Telecommunications 1,200 Telecom Italia SpA 9,101 12,762 0.1
Total Common Stocks in Italy 17,997 23,061 0.2
Japan Automobiles 225 Honda Motor Co., Ltd. (ADR)* 17,591 20,025 0.2
285 Toyota Motor Corporation (ADR)* 15,331 16,281 0.1
----------- ----------- ------
32,922 36,306 0.3
Banking 3,000 The Bank of Tokyo-Mitsubishi, Ltd. 38,122 41,400 0.3
1,000 The Sanwa Bank, Ltd. 9,695 10,866 0.1
1,000 The Sumitomo Bank, Ltd. 11,598 13,555 0.1
----------- ----------- ------
59,415 65,821 0.5
Computers 2,000 NEC Corporation 20,080 24,099 0.2
139 TDK Corporation (ADR)* 11,163 11,224 0.1
----------- ----------- ------
31,243 35,323 0.3
Electrical 1,000 Fujikura Ltd. 5,324 5,412 0.0
Equipment
Electronics 1,000 Fujitsu Limited 11,369 16,083 0.1
2,000 Matsushita Electric Industrial
Company, Ltd. 35,130 39,066 0.3
300 Sony Corporation (ADR)* 24,888 27,394 0.2
4,000 Toshiba Corporation 26,299 27,363 0.2
----------- ----------- ------
97,686 109,906 0.8
Glass 3,000 Nippon Sheet Glass Company, Ltd. 9,243 10,401 0.1
Insurance 4,000 The Tokio Marine & Fire Insurance Co., Ltd. 43,014 45,696 0.3
Machine Tools 1,000 Minebea Co., Ltd. 10,289 10,350 0.1
& Machinery
Photography 300 Fuji Photo Film (ADR)* 11,553 11,212 0.1
Retail 156 Ito-Yokado Co., Ltd. (ADR)* 9,048 9,994 0.1
Retail--Stores 1,000 The Daimaru, Inc. 4,673 4,735 0.1
Telecommunications 2 Nippon Telegraph & Telephone
Corporation (NTT) 16,607 19,618 0.1
Total Common Stocks in Japan 331,017 364,774 2.8
Netherlands Broadcasting & 64 Wolters Kluwer NV 'A' 9,797 11,621 0.1
Publishing
Electronic 65 ASM Lithography Holding NV 2,612 2,975 0.0
Components
Multi-Industry 165 Unilever NV 'A' 12,160 11,476 0.1
Total Common Stocks in the Netherlands 24,569 26,072 0.2
Norway Computer Software 800 Merkantildata ASA 6,117 7,203 0.0
Total Common Stocks in Norway 6,117 7,203 0.0
Singapore Electronic 140 Flextronics International Ltd. 4,895 7,157 0.0
Components
Total Common Stocks in Singapore 4,895 7,157 0.0
South Korea Electronics 30 Samsung Electronics Co., Ltd. 2,172 2,325 0.0
Total Common Stocks in South Korea 2,172 2,325 0.0
Spain Building Materials 1,300 Uralita, SA 17,880 11,592 0.1
Real Estate 300 Metrovacesa, SA 9,351 7,020 0.1
Telecommunications 204 Telefonica, SA 9,277 8,663 0.1
Utilities--Electric 628 Endesa, SA 16,451 15,869 0.1
Venture Capital 600 Dinamia Capital Privado-Sociedad de
Capital Riesgo, SA 10,671 6,939 0.0
Total Common Stocks in Spain 63,630 50,083 0.4
Sweden Auto & Truck 221 Autoliv, Inc. 6,964 8,428 0.1
Automobile Parts 1,000 Haldex AB 17,681 14,376 0.1
Automobiles 200 Volvo AB 'B' 5,577 5,251 0.0
Banking 500 ForeningsSparbanken AB 6,218 11,787 0.1
300 Nordbanken Holding AB 2,133 1,718 0.0
----------- ----------- ------
8,351 13,505 0.1
Communications 392 Telefonaktiebolaget LM Ericsson (ADR)* 9,647 9,335 0.1
Equipment
Diversified 235 Custos AB 'A' 6,409 4,567 0.0
</TABLE>
Merrill Lynch Asset Income Fund, Inc., March 31, 1999
<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 Investment 535 Bure Investment AB $ 8,761 $ 6,648 0.1%
(concluded) Management
Real Estate 700 Castellum AB 7,794 6,524 0.0
Investment Trusts 324 Fastighets AB Tornet 5,390 4,421 0.0
----------- ----------- ------
13,184 10,945 0.0
Total Common Stocks in Sweden 76,574 73,055 0.5
Switzerland Telecommunications 34 Swisscom AG (Registered Shares) 9,693 13,311 0.1
Total Common Stocks in Switzerland 9,693 13,311 0.1
United Banking 762 Bank of Scotland 8,304 10,122 0.1
Kingdom 346 HSBC Holdings PLC 9,228 11,158 0.1
1,000 Lloyds TSB Group PLC 12,426 15,123 0.1
467 National Westminster Bank PLC 8,388 10,763 0.1
----------- ----------- ------
38,346 47,166 0.4
Beverages 1,082 Diageo PLC 13,308 12,155 0.1
Cable Television 700 TeleWest Communications PLC 2,711 3,036 0.0
Services
Diversified 4,200 Billiton PLC 10,145 10,151 0.1
Drugs 275 Zeneca Group PLC 11,229 12,996 0.1
Foods 3,700 Devro PLC 29,536 8,540 0.1
Metals & Mining 800 Rio Tinto PLC (Registered Shares) 9,870 11,098 0.1
Oil--Integrated 262 Shell Transport & Trading Company (ADR)* 9,424 10,644 0.1
Oil--Related 700 BP Amoco PLC 10,787 11,931 0.1
Pharmaceuticals 330 Glaxo Wellcome PLC 10,650 11,041 0.1
100 Pharmacia & Upjohn, Inc. 6,320 6,238 0.0
----------- ----------- ------
16,970 17,279 0.1
Telecommunications 300 British Telecommunications PLC 4,951 4,895 0.0
300 Cable & Wireless PLC 4,925 3,748 0.0
200 Energis PLC 5,456 5,688 0.0
600 Vodafone Group PLC 10,880 11,146 0.1
----------- ----------- ------
26,212 25,477 0.1
Total Common Stocks in the
United Kingdom 178,538 170,473 1.3
United Aerospace & Defense 110 United Technologies Corporation 8,622 14,898 0.1
States
Automobile Rental 150 Avis Rent A Car, Inc. 4,997 4,153 0.0
190 The Hertz Corporation (Class A) 7,600 10,165 0.1
----------- ----------- ------
12,597 14,318 0.1
Automobiles 300 Delphi Automotive Systems Corporation 5,100 5,325 0.0
150 General Motors Corporation 11,108 13,031 0.1
----------- ----------- ------
16,208 18,356 0.1
Banking 262 The Bank of New York Company, Inc. 7,088 9,416 0.1
199 BankAmerica Corporation 10,399 14,054 0.1
150 Mellon Bank Corporation 9,128 10,556 0.1
150 Wells Fargo Company 5,839 5,259 0.0
----------- ----------- ------
32,454 39,285 0.3
Beverages 375 PepsiCo, Inc. 11,283 14,695 0.1
Broadcasting/Cable 487 AT&T Corp.-Liberty Media Group (Class A) 15,741 25,628 0.2
Business Services 225 Oracle Corporation 8,674 5,934 0.0
Capital Equipment 100 Eaton Corporation 6,737 7,150 0.1
Chemicals 150 E.I. du Pont de Nemours and Company 9,880 8,709 0.1
Computer Services/ 150 America Online, Inc. 13,024 21,900 0.2
Software 262 Cisco Systems, Inc. 15,617 28,705 0.2
150 International Business Machines Corporation 17,873 26,588 0.2
800 Microsoft Corporation 58,527 71,650 0.5
----------- ----------- ------
105,041 148,843 1.1
Computers 75 EMC Corporation 5,053 9,581 0.1
262 Tandy Corporation 15,134 16,719 0.1
----------- ----------- ------
20,187 26,300 0.2
Consumer-- 175 Dell Computer Corporation 5,463 7,153 0.1
Electronics
Consumer Products 600 The Dial Corporation 13,580 20,625 0.2
Cruise Lines 225 Royal Caribbean Cruises Ltd. 5,670 8,775 0.1
Data Processing 215 Keane, Inc. 8,773 4,582 0.0
Drugs 150 Centocor, Inc. 5,861 5,541 0.0
Electronics 150 General Electric Company 13,306 16,594 0.1
187 Intel Corporation 22,358 22,230 0.2
----------- ----------- ------
35,664 38,824 0.3
Entertainment 900 Premier Parks Inc. 15,759 33,525 0.3
75 The Walt Disney Company 2,619 2,334 0.0
----------- ----------- ------
18,378 35,859 0.3
Financial 300 Associates First Capital Corporation
Services (Class A) 10,330 13,500 0.1
112 Morgan Stanley Dean Witter & Co. 10,077 11,193 0.1
270 Providian Financial Corporation 10,541 29,700 0.2
----------- ----------- ------
30,948 54,393 0.4
Financial Services 375 Household International, Inc. 16,366 17,109 0.1
--Consumer
Foods 450 Keebler Foods Company 11,349 16,425 0.1
Household Products 262 Colgate-Palmolive Company 23,417 24,104 0.2
Information 75 Unisys Corporation 2,276 2,077 0.0
Processing
</TABLE>
Merrill Lynch Asset Income Fund, Inc., March 31, 1999
<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 Insurance 150 American International Group, Inc. $ 17,816 $ 18,094 0.1%
States 262 The Equitable Companies Incorporated 12,527 18,340 0.2
(concluded) ----------- ----------- ------
30,343 36,434 0.3
Laser Systems & 100 Uniphase Corporation 9,782 11,475 0.1
Components
Machine Tools 375 Ingersoll-Rand Company 14,942 18,609 0.1
& Machinery
Machinery 112 Case Corporation 3,023 2,842 0.0
Machinery & 75 Sundstrand Corporation 3,859 5,213 0.0
Equipment
Manufacturing 235 Tyco International Ltd. 13,512 16,861 0.1
Medical Technology 225 Johnson & Johnson 18,474 21,080 0.2
Metals 300 Alcoa Inc. 11,699 12,356 0.1
Natural Gas 262 Enron Corporation 11,758 16,834 0.1
Oil--Integrated 150 Mobil Corporation 11,996 13,200 0.1
Oil Services 150 Schlumberger Limited 7,884 9,028 0.1
Petroleum 360 Unocal Corporation 12,079 13,253 0.1
Pharmaceutical 225 American Home Products Corporation 13,387 14,681 0.1
--Diversified
Pharmaceuticals 450 Bristol-Myers Squibb Company 22,936 28,941 0.2
150 Cardinal Health, Inc. 11,082 9,900 0.1
150 Pfizer Inc. 19,539 20,813 0.2
----------- ----------- ------
53,557 59,654 0.5
Radio & Television 750 Capstar Broadcasting Corporation (Class A) 13,312 17,203 0.1
Retail--Specialty 350 Lowe's Companies, Inc. 12,062 21,175 0.2
Retail--Stores 74 Best Buy Co., Inc. 3,480 3,848 0.0
150 Dayton Hudson Corporation 9,861 9,994 0.1
400 Rite Aid Corporation 15,153 10,000 0.1
262 Safeway Inc. 11,462 13,444 0.1
225 Wal-Mart Stores, Inc. 13,331 20,742 0.1
----------- ----------- ------
53,287 58,028 0.4
Savings & Loan 600 GreenPoint Financial Corp. 19,372 20,850 0.2
Associations
Scientific Equipment 110 Millipore Corporation 2,219 2,654 0.0
Semiconductors 240 Motorola, Inc. 12,446 17,580 0.1
Services 300 Quintiles Transnational Corp. 14,071 11,250 0.1
Telecommunications 350 AT&T Corp. 17,468 27,888 0.2
200 GTE Corporation 10,704 12,100 0.1
150 Lucent Technologies Inc. 16,564 16,163 0.1
375 MCI WorldCom Inc. 17,163 33,188 0.3
----------- ----------- ------
61,899 89,339 0.7
Tobacco 200 Philip Morris Companies Inc. 9,369 7,038 0.1
Utilities-- 275 Ameritech Corporation 13,859 15,916 0.1
Communication
Utilities-- 150 PECO Energy Company 5,119 6,938 0.0
Electric 225 Public Service Enterprise Group
Incorporated 8,735 8,592 0.1
----------- ----------- ------
13,854 15,530 0.1
Waste Management 262 Waste Management, Inc. 12,362 11,626 0.1
Wireless 300 American Tower Corporation (Class A) 7,500 7,350 0.1
Communication
Equipment
Total Common Stocks in the
United States 887,076 1,106,642 8.4
Total Investments in Common Stocks 1,839,793 2,077,973 15.8
Face
Amount Fixed-Income Securities
<S> <S> <S> <C> <S> <C> <C> <C>
Germany Foreign Euro 470,000 BundesObligation, 4.75% due 11/20/2001 570,167 529,814 4.0
Government 340,307 Bundesrepublik Deutschland, 4.75% due
Obligations 7/04/2008 429,492 388,879 3.0
220,000 Deutschland Republic, 4.75% due 7/04/2028 260,034 229,447 1.8
Total Fixed-Income Securities in Germany 1,259,693 1,148,140 8.8
Japan Foreign YEN 17,500,000 Japan-207, 0.90% due 12/22/2008 135,121 136,259 1.0
Government
Obligations
Total Fixed-Income Securities in Japan 135,121 136,259 1.0
New Zealand Foreign NZ$ 600,000 Interamerican Development Bank, 5.75% due
Government 4/15/2004 322,478 314,370 2.4
Obligations
Total Fixed-Income Securities in
New Zealand 322,478 314,370 2.4
United Foreign Pound 160,000 United Kingdom Treasury Gilt, 7.25% due
Kingdom Government Sterling 12/07/2007 300,321 306,188 2.3
Obligations
Total Fixed-Income Securities in the
United Kingdom 300,321 306,188 2.3
United US Federal National Mortgage Association:
States Government US$ 1,240,000 5.625% due 3/15/2001 1,243,245 1,249,498 9.5
Agency 930,000 5.75% due 4/15/2003 934,686 937,989 7.2
Obligations 1,510,000 5.75% due 2/15/2008 1,501,712 1,500,562 11.4
----------- ----------- ------
3,679,643 3,688,049 28.1
US Government 2,465,000 US Treasury Bonds, 6.625% due 2/15/2027 2,843,445 2,717,268 20.7
Obligations US Treasury Notes:
960,000 6% due 8/15/1999 968,775 964,502 7.4
970,000 5.50% due 2/15/2008 996,675 980,912 7.5
----------- ----------- ------
4,808,895 4,662,682 35.6
Total Fixed-Income Securities in the
United States 8,488,538 8,350,731 63.7
Total Investments in Fixed-Income
Securities 10,506,151 10,255,688 78.2
</TABLE>
Merrill Lynch Asset Income Fund, Inc., March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Face Percent of
COUNTRY Amount Short-Term Securities Cost Value Net Assets
<S> <S> <S> <C> <S> <C> <C> <C>
United Commercial US$ 564,000 General Electric Capital Corp., 5.08%
States Paper** due 4/01/1999 $ 564,000 $ 564,000 4.3%
Total Investments in Short-Term Securities 564,000 564,000 4.3
Total Investments $12,909,944 12,897,661 98.3
===========
Unrealized Appreciation on Forward Foreign Exchange Contracts*** 11,215 0.1
Other Assets Less Liabilities 212,538 1.6
----------- ------
Net Assets $13,121,414 100.0%
=========== ======
Net Asset Value: Class A--Based on net assets of $395,946 and 38,133
shares outstanding $ 10.38
===========
Class B--Based on net assets of $10,577,146 and
1,020,139 shares outstanding $ 10.37
===========
Class C--Based on net assets of $750,889 and
72,387 shares outstanding $ 10.37
===========
Class D--Based on net assets of $1,397,433 and
134,865 shares outstanding $ 10.36
===========
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper is traded on a discount basis; the interest rate
shown reflects the discount rate paid at the time of purchase by the
Fund.
***Forward foreign exchange contracts sold as of March 31, 1999 were
as follows:
Unrealized
Foreign Expiration Appreciation
Currency Sold Date (Depreciation)
C$ 35,000 May 1999 $ 357
NZ$ 575,000 April 1999 (3,369)
YEN 58,000,000 April 1999 14,227
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net
(US$Commitment--$832,421) $11,215
=======
</TABLE>
COMMON STOCK PORTFOLIO CHANGES
For the Quarter Ended March 31, 1999
Additions
ASM Lithography Holding NV
AT&T Corp.
AT&T Corp.-Liberty Media Group (Class A)
ATI Technologies Inc.
America Online, Inc.
American Home Products Corporation
American International Group, Inc.
American Tower Corporation (Class A)
Aracruz Celulose SA (ADR)
The Bank of Tokyo-Mitsubishi, Ltd.
Best Buy Co., Inc.
British Telecommunications PLC
Cable & Wireless PLC
Cardinal Health, Inc.
Centocor, Inc.
Colgate-Palmolive Company
Companhia Vale do Rio Doce SA 'A'
(Preferred)
The Daimaru, Inc.
Dayton Hudson Corporation
Delphi Automotive Systems Corporation
Domatar, Inc.
Eaton Corporation
Elan Corporation PLC (ADR)
Embratel Participacoes SA (ADR)
Energis PLC
Fuji Photo Film (ADR)
Honda Motor Co., Ltd. (ADR)
Household International, Inc.
Ito-Yokado Co., Ltd. (ADR)
Lucent Technologies Inc.
Morgan Stanley Dean Witter & Co.
NEC Corporation
Nippon Sheet Glass Company, Ltd.
Oracle Corporation
Pfizer Inc.
Pharmacia & Upjohn, Inc.
Philip Morris Companies Inc.
Samsung Electronics Co., Ltd.
The Sanwa Bank, Ltd.
Sony Corporation (ADR)
The Sumitomo Bank, Ltd.
Sundstrand Corporation
TDK Corporation (ADR)
Tandy Corporation
TeleWest Communications PLC
Telecomunicacoes Brasileiras SA-Telebras
(Preferred Block) (ADR)
Toshiba Corporation
Toyota Motor Corporation (ADR)
Uniphase Corporation
Unisys Corporation
Vodafone Group PLC
Volvo AB 'B'
The Walt Disney Company
Wells Fargo Company
Deletions
3Com Corporation
Allmerica Financial Corporation
BMC Software, Inc.
Banca di Roma
Beckman Coulter Inc.
Bethlehem Steel Corporation
The Black & Decker Corporation
British Aerospace PLC
Burlington Northern Santa Fe Corp.
COMPAQ Computer Corporation
El Paso Energy Corporation
Federal-Mogul Corporation
First Union Corporation
Fox Entertainment Group, Inc. (Class A)
GenCorp Inc.
HEALTHSOUTH Corporation
Heller Financial, Inc.
Kimberly-Clark Corporation
LucasVarity PLC
Mattel, Inc.
Micron Technology, Inc.
Morton International, Inc.
Nabisco Holdings Corp. (Class A)
Nestle SA (Registered Shares)
Novartis AG (Registered Shares)
Orion-Yhtyma OY 'B'
Spectra-Physics AB 'A'
Tele-Communications, Inc. (Class A)
Tele-Communications TCI Ventures Group
(Class A)
Texas Utilities Company
UNUM Corporation
USX-U.S. Steel Group
Valora Holding AG
Warner-Lambert Company
World Color Press, Inc.
Merrill Lynch Asset Income Fund, Inc., March 31, 1999
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Arthur Zeikel, Director
Thomas R. Robinson, Senior Vice President
and Portfolio Manager
Donald C. Burke, Vice President and 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
Gerald M. Richard, Treasurer and Norman R. Harvey, Senior Vice
President of Merrill Lynch Asset Income Fund, Inc. have recently
retired. Their colleagues at Merrill Lynch Asset Management,
L.P. join the Fund's Board of Directors in wishing Mr. Richard
and Mr. Harvey well in their retirements.
