MERRILL LYNCH
ASSET INCOME
FUND, INC.
FUND LOGO
Semi-Annual Report
June 30, 2000
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
June 30, 2000
Breakdown of
Stocks & Fixed-Income Percent of
Securities by Country Net Assets++
United States* 87.3%
Japan 3.2
United Kingdom 2.0
France 1.5
Germany 0.8
Netherlands 0.8
Sweden 0.8
Spain 0.6
Canada 0.6
Switzerland 0.4
Italy 0.3
Brazil 0.2
Singapore 0.2
Ireland 0.1
South Korea 0.1
Australia 0.1
Norway 0.1
Hong Kong 0.0+++
Austria 0.0+++
Denmark 0.0+++
*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 Holdings Percent of
(Equity Investments) Net Assets
Wells Fargo Company 1.0%
Texas Instruments
Incorporated 0.7
American International
Group, Inc. 0.6
Yahoo! Inc. 0.6
Colgate-Palmolive Company 0.5
Oracle Corporation 0.5
Johnson & Johnson 0.4
General Electric Company 0.4
Telefonaktiebolaget LM
Ericsson AB 'B' 0.4
Fujitsu Limited 0.4
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Electronics 2.1%
Pharmaceuticals 2.0
Banking 1.8
Telecommunications 1.6
Computer Services/Software 1.2
Insurance 1.1
Internetworking 0.9
Computers 0.9
Food 0.6
Pharmaceutical--Diversified 0.6
Merrill Lynch Asset Income Fund, Inc., June 30, 2000
DEAR SHAREHOLDER
We are pleased to present this final report to shareholders for
Merrill Lynch Asset Income Fund, Inc. On July 21, 2000,
substantially all of the assets and liabilities of Merrill Lynch
Asset Income Fund, Inc., Merrill Lynch Asset Growth Fund, Inc. and
Global Opportunity Portfolio of The Asset Program, Inc. were
acquired by Merrill Lynch Global Allocation Fund, Inc. These Funds
are registered, open-end management investment companies and are
managed by Merrill Lynch Investment Managers, L.P. The investment
objective of Merrill Lynch Global Allocation Fund, Inc. is to
provide high total investment return through a fully managed
investment policy utilizing US and foreign equity, debt and money
market securities, the combination of which will be varied from time
to time with respect to types of securities and markets in response
to changing market and economic trends.
Investment Outlook
Economic slowing has finally arrived in the United States. As a
result, significant increases in inflation and interest rates appear
less likely, which is usually good news for financial assets. On the
other hand, profit growth is likely to decelerate from unsustainably
high levels.
Investor sentiment changed significantly during the first half of
2000. In general, concerns centered on economic growth being too
strong. A recent inflection could indicate healthy, but slower
economic and profit growth in the second half of the year. Following
potential uncertainty during the adjustment period, the
sustainability of the economic expansion could buoy investor
expectations.
During the first half of the year, equity investors switched gears
from an excessive focus on momentum, which was prevalent during most
of 1999. This transition to a more balanced focus on both valuation
and earnings growth, which began in March, can provide a healthier
investment backdrop. However, this change has caused deterioration
in many extremely highly valued securities with speculative
fundamentals and improvement in previously neglected, solidly
performing companies.
In the coming months, we believe investors are likely to focus on
continuing cyclical economic developments as well as the
presidential election campaign. Cyclical concerns remain increasing
labor costs as well as volatile, but rising, commodity prices.
Federal budget policy, social security funding options and trade
policy are likely to shape investor interest in the outcome of the
election. Generally, financial markets have tended to do better
under divided governments, preferring legislative gridlock. In part,
US markets historically have done well as a result of fiscal policy
restraint and could react poorly to any significant reversal of that
trend.
Despite near-term uncertainties surrounding economic slowdown,
earnings growth and valuation levels, long-term forces supporting US
economic and financial market leadership seem to us to remain in
place. Chief among these are continued heavy investments in
technology, telecommunications and other efficiency-enhancing
projects, thus potentially enabling productivity-led growth.
Portfolio Matters
As of June 30, 2000, the asset allocation for Merrill Lynch Asset
Income Fund, Inc. was: US bonds, 46%; US stocks, 12%; foreign
stocks, 12%; and cash reserves, 30%.
We increased the Fund's cash reserve position from 4% of net assets
to 30% during the six months ended June 30, 2000 in an effort to
facilitate the merger of the Fund with Merrill Lynch Global
Allocation Fund, Inc. At the same time, we reduced the Fund's
position in US bonds from 57% of net assets to 46% during the first
half of 2000. The appeal of US bonds seemed enhanced in an
environment of more aggressive tightening by the Federal Reserve
Board and since there was evidence of a beginning in the slowdown in
US economic activity. However, any significant decline in US
interest rates could hinge on expectations that the Federal Reserve
Board would actually reverse its restrictive monetary policy. Given
this outlook, the average duration of the Fund's US bond holdings
was maintained at a defensive average of less than one year.
Within the equity sector, we reduced the Fund's exposure to foreign
issues from 21% of net assets to 12%, with most of the cutback
taking place in June. The commitment to US equities declined only
modestly, from 13% of net assets to 12% during the six-month period.
The most significant reduction within the equity sector was in
Japanese equities, which we believe are sensitive to the domestic
economy. Equities of this type could be vulnerable to earnings
disappointments resulting from the sluggish pace of Japanese
consumer spending. The remaining Japanese equity positions remained
hedged back into US dollars since we believe the yen may weaken in
coming months. We modestly increased the Fund's commitment to
Europe. Overall, we continue to allocate substantial assets to "new
economy" equities worldwide. Companies in technology-oriented areas
such as telecommunications equipment, computers, and software and
services could be relatively immune to a global economic slowdown of
modest proportions, in our view. Representation in old economy
sectors was maintained on a selective basis in order to maintain
diversification consistent with the Fund's objectives. Areas with
significant representation included financial services, consumer
staples and health care.
In Conclusion
We thank you for your support of Merrill Lynch Asset Income Fund,
Inc.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Thomas R. Robinson)
Thomas R. Robinson
Senior Vice President and
Portfolio Manager
August 8, 2000
<TABLE>
PROXY RESULTS
<CAPTION>
During the six-month period ended June 30, 2000, Merrill Lynch Asset
Income Fund, Inc.'s shareholders voted on the following proposal.
Proposal 1 was approved at a shareholders' meeting on May 31, 2000.
The description of the proposal and number of shares voted are as
follows:
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <C> <C>
1. To approve the Agreement and Plan of Reorganization between the Fund, Merrill
Lynch Asset Growth Fund, Inc. and Merrill Lynch Global Allocation Fund, Inc. 498,968 2,058 17,715
</TABLE>
Merrill Lynch Asset Income Fund, Inc., June 30, 2000
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. The Fund's Investment Adviser voluntarily waived a
portion of its management fee. Without such waiver, the Fund's
performance would have been lower.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/00 +5.98% +1.74%
Five Years Ended 6/30/00 +7.78 +6.90
Inception (9/02/94)
through 6/30/00 +8.17 +7.41
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/00 +5.19% +1.19%
Five Years Ended 6/30/00 +6.93 +6.93
Inception (9/02/94)
through 6/30/00 +7.33 +7.33
*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 6/30/00 +5.23% +4.24%
Five Years Ended 6/30/00 +6.90 +6.90
Inception (10/21/94)
through 6/30/00 +7.58 +7.58
*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 6/30/00 +5.82% +1.59%
Five Years Ended 6/30/00 +7.47 +6.60
Inception (10/21/94)
through 6/30/00 +8.16 +7.38
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results*
<CAPTION>
6 Month 12 Month Since Inception Standardized
As of June 30, 2000 Total Return Total Return Total Return 30-Day Yield
<S> <C> <C> <C>
ML Asset Income Fund, Inc. Class A Shares -0.69% +5.98% +58.02% 2.93%
ML Asset Income Fund, Inc. Class B Shares -1.16 +5.19 +50.99 2.30
ML Asset Income Fund, Inc. Class C Shares -1.09 +5.23 +51.61 2.25
ML Asset Income Fund, Inc. Class D Shares -0.82 +5.82 +56.27 2.69
*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 from 9/02/94 for Class A & Class B
Shares and from 10/21/94 for Class C & Class D Shares.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Common Stocks Value Net Assets
<S> <S> <C> <S> <C>
Australia Broadcasting & Publishing 200 The News Corporation Limited (Convertible
Preferred) (ADR)* $ 9,500 0.1%
Total Common Stocks in Australia 9,500 0.1
Austria Paper Products 87 Mayr-Melnhof Karton AG 4,132 0.0
Total Common Stocks in Austria 4,132 0.0
Brazil Forest Products 890 Aracruz Celulose SA (ADR)* 17,188 0.2
Total Common Stocks in Brazil 17,188 0.2
Canada Communications Equipment 377 Nortel Networks Corporation 25,723 0.3
Oil 300 Alberta Energy Company Ltd. 12,108 0.1
Paper & Forest Products 700 Domtar, Inc. 6,496 0.1
Telecommunications 240 BCE Inc. 5,715 0.1
Total Common Stocks in Canada 50,042 0.6
Denmark Information Processing 50 ++ISS A/S 3,823 0.0
Total Common Stocks in Denmark 3,823 0.0
</TABLE>
Merrill Lynch Asset Income Fund, Inc., June 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Common Stocks Value Net Assets
<S> <S> <C> <S> <C>
France Electronics 215 Thomson CSF $ 8,504 0.1%
Food 48 Groupe Danone 6,396 0.1
Information Processing 15 Cap Gemini SA 2,653 0.0
Insurance 174 Axa 27,521 0.3
Oil--Related 57 Total Fina SA 'B' 8,775 0.1
Pharmaceuticals 431 Aventis SA 31,586 0.3
Reinsurance 170 Scor 7,433 0.1
Telecommunications 123 France Telecom SA 17,262 0.2
Utilities--Water 295 Vivendi 26,144 0.3
Total Common Stocks in France 136,274 1.5
Germany Chemicals 395 Henkel KGaA (Preferred) 22,908 0.2
Diversified 742 RWE AG 25,037 0.3
Multi-Industry 483 Veba AG 23,798 0.3
Total Common Stocks in Germany 71,743 0.8
Hong Kong Multi-Industry 330 Hutchison Whampoa Limited 4,149 0.0
Total Common Stocks in Hong Kong 4,149 0.0
Ireland Banking 2,176 Bank of Ireland 13,673 0.1
Total Common Stocks in Ireland 13,673 0.1
Italy Oil & Gas Producers 3,000 ENI SpA 17,399 0.2
Publishing 388 Mondadori (Arnoldo) Editore SpA 8,889 0.1
Total Common Stocks in Italy 26,288 0.3
Japan Automobiles 251 Honda Motor Co., Ltd. (ADR)* 17,256 0.2
Computers 1,000 NEC Corporation 31,473 0.4
Distribution 200 Softbank Corp. 27,220 0.3
Electronic Components 195 Kyocera Corporation (ADR)* 33,503 0.4
Electronics 1,000 Fujitsu Limited 34,686 0.4
1,000 Matsushita Electric Industrial Company, Ltd. 25,991 0.3
122 Sony Corporation (ADR)* 11,506 0.1
---------- ------
72,183 0.8
Insurance 2,000 The Tokio Marine & Fire Insurance Co. Ltd. 23,137 0.2
Internet 100 ++Internet Initiative Japan Inc. (ADR)* 5,913 0.1
Telecommunications 1 NTT Mobile Communications Network, Inc. 27,125 0.3
2 Nippon Telegraph & Telephone Corporation (NTT) 26,653 0.3
53,778 0.6
Transport Services 3 East Japan Railway Company 17,466 0.2
Total Common Stocks in Japan 281,929 3.2
Netherlands Broadcasting & Publishing 256 Wolters Kluwer NV 'A' 6,847 0.1
Electronic Components 195 ++ASM Lithography Holding NV 8,415 0.1
Food 1,000 CSM NV 19,747 0.2
884 Koninklijke Ahold NV 26,125 0.3
---------- ------
45,872 0.5
Human Resources 250 Vedior NV 'A' 3,103 0.0
Retail 300 Vendex KBB NV 5,116 0.1
Total Common Stocks in the Netherlands 69,353 0.8
Norway Computer Software 356 ++Merkantildata ASA 1,837 0.0
Transport Services 200 Bergesen d.y. ASA 'B' 3,849 0.1
Total Common Stocks in Norway 5,686 0.1
Singapore Airlines 1,000 ++Singapore Airlines Limited 9,890 0.1
Construction & Housing 1,000 City Developments Limited 3,875 0.1
Total Common Stocks in Singapore 13,765 0.2
South Korea Electronics 30 Samsung Electronics 9,928 0.1
Total Common Stocks in South Korea 9,928 0.1
Spain Petroleum--Domestic 1,403 Repsol-YPF, SA 28,041 0.3
Utilities--Electric 1,363 Endesa SA 26,510 0.3
Total Common Stocks in Spain 54,551 0.6
Sweden Appliances 845 Electrolux AB 'B' 13,150 0.2
Auto & Truck 221 Autoliv, Inc. 5,442 0.1
Investment Management 1,070 Investment AB Bure 8,052 0.1
Real Estate 354 Fastighets AB Tornet 4,662 0.0
Investment Trusts
Telecommunications & 1,800 Telefonaktiebolaget LM Ericsson AB 'B' 35,811 0.4
Equipment
Total Common Stocks in Sweden 67,117 0.8
Switzerland Human Resources 8 Adecco SA (Registered Shares) 6,819 0.1
Pharmaceuticals 2 ++Givaudan (Registered) 611 0.0
6 Novartis AG (Registered Shares) 9,534 0.1
2 Roche Holding AG (Genuss) 19,531 0.2
---------- ------
29,676 0.3
Total Common Stocks in Switzerland 36,495 0.4
</TABLE>
Merrill Lynch Asset Income Fund, Inc., June 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Common Stocks Value Net Assets
<S> <S> <C> <S> <C>
United Banking 2,246 HSBC Holdings PLC $ 25,689 0.3%
Kingdom
Beverages 2,525 Diageo PLC 22,668 0.2
Household Products 535 Reckitt Benckiser PLC 5,994 0.1
Oil--Integrated 462 Shell Transport & Trading Company (ADR)* 23,071 0.3
Pharmaceuticals 448 AstraZeneca Group PLC 20,923 0.2
768 Glaxo Wellcome PLC 22,405 0.2
1,060 SmithKline Beecham PLC 13,881 0.2
---------- ------
57,209 0.6
Telecommunications 300 ++Cable & Wireless PLC 5,082 0.1
200 ++Energis PLC 7,503 0.1
7,232 Vodafone AirTouch PLC 29,233 0.3
---------- ------
41,818 0.5
Total Common Stocks in the United Kingdom 176,449 2.0
United Aerospace & Defense 100 The Boeing Company 4,181 0.0
States 261 United Technologies Corporation 15,366 0.2
---------- ------
19,547 0.2
Apparel 50 The Gap, Inc. 1,563 0.0
Application Development 50 ++Siebel Systems, Inc. 8,178 0.1
Software
Automotive Products 100 ++General Motors Corporation (Class H) 8,775 0.1
Banking 199 Bank of America Corporation 8,557 0.1
300 The Bank of New York Company, Inc. 13,950 0.2
150 The Chase Manhattan Corporation 6,909 0.1
2,350 Wells Fargo Company 91,063 1.0
---------- ------
120,479 1.4
Beverages 100 The Coca-Cola Company 5,744 0.1
375 PepsiCo, Inc. 16,664 0.2
---------- ------
22,408 0.3
Broadcasting & 200 ++TV Guide, Inc. (Class A) 6,850 0.1
Publishing
Cable 400 ++Charter Communications, Inc. (Class A) 6,575 0.1
Chemicals 400 Rohm and Haas Company 13,800 0.2
Commercial Services 150 ++Convergys Corporation 7,781 0.1
Computer Services/ 400 ++America Online, Inc. 21,100 0.2
Software 100 ++Cisco Systems, Inc. 6,356 0.1
150 International Business Machines Corporation 16,434 0.2
500 ++Oracle Corporation 42,000 0.5
200 ++VERITAS Software Corporation 22,600 0.2
---------- ------
108,490 1.2
Computer Technology 250 ++Solectron Corporation 10,469 0.1
Computers 100 Compaq Computer Corporation 2,556 0.0
300 ++EMC Corporation 23,081 0.3
125 RadioShack Corporation 5,922 0.1
100 ++Sun Microsystems, Inc. 9,094 0.1
---------- ------
40,653 0.5
Conglomerates 225 Honeywell International Inc. 7,580 0.1
Diversified 100 Corning Incorporated 26,987 0.3
Electric & Gas 400 ++Calpine Corporation 26,300 0.3
200 DPL Inc. 4,388 0.0
---------- ------
30,688 0.3
Electronic Components 100 ++LSI Logic Corporation 5,413 0.1
Electronics 755 General Electric Company 40,015 0.4
900 Texas Instruments Incorporated 61,819 0.7
---------- ------
101,834 1.1
Financial Services 150 Associates First Capital Corporation (Class A) 3,347 0.1
465 Citigroup Inc. 28,016 0.3
50 Federal Home Loan Mortgage Association 2,025 0.0
---------- ------
33,388 0.4
Healthcare--Products & 200 HCA-The Healthcare Corporation 6,075 0.1
Services
Household Products 724 Colgate-Palmolive Company 43,350 0.5
Insurance 450 American International Group, Inc. 52,875 0.6
Internetworking 200 ++Inktomi Corporation 23,650 0.3
100 ++IntraNet Solutions, Inc. 3,838 0.0
400 ++Yahoo! Inc. 49,550 0.6
---------- ------
77,038 0.9
Natural Gas 424 Enron Corp. 27,348 0.3
Natural Resources 250 Burlington Resources Inc. 9,562 0.1
Oil--Integrated 298 Exxon Mobil Corporation 23,393 0.3
Oil Services 100 Schlumberger Limited 7,463 0.1
Petroleum 160 Unocal Corporation 5,300 0.1
Pharmaceutical-- 280 American Home Products Corporation 16,450 0.2
Diversified 400 Johnson & Johnson 40,750 0.4
---------- ------
57,200 0.6
Pharmaceuticals 100 Cardinal Health, Inc. 7,400 0.1
100 Eli Lilly and Company 9,988 0.1
400 Merck & Co., Inc. 30,650 0.3
550 Pfizer Inc. 26,400 0.3
---------- ------
74,438 0.8
</TABLE>
Merrill Lynch Asset Income Fund, Inc., June 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Common Stocks Value Net Assets
<S> <S> <C> <S> <C>
United Radio & Television 150 ++AMFM Inc. $ 10,350 0.1%
States
(concluded) Retail--Specialty 160 Lowe's Companies, Inc. 6,570 0.1
Retail--Stores 262 ++Safeway Inc. 11,823 0.1
Scientific Equipment 110 Millipore Corporation 8,291 0.1
Semiconductors 450 Motorola, Inc. 13,078 0.1
Software 200 ++Network Associates, Inc. 4,075 0.0
Telecommunications 150 ++Amdocs Limited 11,512 0.1
100 ++Level 3 Communications, Inc. 8,794 0.1
---------- ------
20,306 0.2
Utilities--Electric & Gas 135 Constellation Energy Group 4,396 0.0
Wireless Communication 300 ++Sprint Corp. (PCS Group) 17,850 0.2
Equipment
Total Common Stocks in the United States 1,062,239 12.0
Total Investments in Common Stocks
(Cost--$1,811,955) 2,114,324 23.8
Face
Amount Fixed-Income Securities
United US Government Federal National Mortgage Association:
States Agency US$ 915,000 5.625% due 3/15/2001 907,277 10.2
Obligations 930,000 5.125% due 2/13/2004 872,889 9.9
US Government 2,300,000 US Treasury Notes, 5.50% due 8/31/2001 2,274,493 25.6
Obligations
Total Investments in Fixed-Income
Securities (Cost--$4,104,268) 4,054,659 45.7
Short-Term Securities
Commercial Paper** 400,000 Bell Atlantic Financial Services, 6.52% due
7/07/2000 399,710 4.5
400,000 CSW Credit Inc., 6.54% due 7/06/2000 399,782 4.5
400,000 Gannett Company, 6.55% due 7/18/2000 398,908 4.5
327,000 General Motors Acceptance Corp., 7.13% due
7/03/2000 327,000 3.7
Total Investments in Commercial Paper 1,525,400 17.2
US Government 800,000 Federal Home Loan Banks, 6.44% due 7/21/2000 797,424 9.0
Agency Obligations** 300,000 Federal Home Loan Mortgage Corporation, 6.47%
due 7/13/2000 299,461 3.4
Total Investments in US Government Agency Obligations 1,096,885 12.4
Total Investments in Short-Term Securities
(Cost--$2,622,285) 2,622,285 29.6
Total Investments (Cost--$8,538,508) 8,791,268 99.1
Unrealized Appreciation on Forward Foreign Exchange Contracts++++ 772 0.0
Other Assets Less Liabilities 78,090 0.9
---------- ------
Net Assets $8,870,130 100.0%
========== ======
*American Depositary Receipts (ADR).
**Commercial Paper and certain US Government Agency Obligations are
traded on a discount basis; the interest rates shown reflect the
discount rates paid at the time of purchase by the Fund.
++Non-income producing security.
++++Forward foreign exchange contracts as of June 30, 2000 were as follows:
Foreign Expiration Unrealized
Currency Sold Date Appreciation
YEN 30,000,000 July 2000 $ 772
------
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net
(US$ Commitment--$284,725) $ 772
======
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Income Fund, Inc., June 30, 2000
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of June 30, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$8,538,508) $ 8,791,268
Unrealized appreciation on forward foreign exchange contracts 772
Cash 760
Receivables:
Securities sold $ 2,372,927
Interest 76,487
Forward foreign exchange contracts 3,845
Dividends 2,912
Capital shares sold 453 2,456,624
-----------
Prepaid registration fees and other assets 350,788
-----------
Total assets 11,600,212
-----------
Liabilities: Payables:
Securities purchased 2,317,633
Capital shares redeemed 5,532
Dividends to shareholders 5,395
Distributor 5,002
Forward foreign exchange contracts 4,907 2,338,469
-----------
Accrued expenses and other liabilities 391,613
-----------
Total liabilities 2,730,082
-----------
Net Assets: Net assets $ 8,870,130
===========
Net Assets Class A Shares of Common Stock, $.10 par value,
Consist of: 100,000,000 shares authorized $ 5,063
Class B Shares of Common Stock, $.10 par value,
100,000,000 shares authorized 61,930
Class C Shares of Common Stock, $.10 par value,
100,000,000 shares authorized 6,176
Class D Shares of Common Stock, $.10 par value,
100,000,000 shares authorized 14,177
Paid-in capital in excess of par 8,484,930
Undistributed realized capital gains on investments
and foreign currency transactions--net 44,860
Unrealized appreciation on investments and foreign
currency transactions--net 252,994
-----------
Net assets $ 8,870,130
===========
Net Asset Value: Class A--Based on net assets of $514,897 and 50,630
shares outstanding $ 10.17
===========
Class B--Based on net assets of $6,288,878 and 619,295
shares outstanding $ 10.15
===========
Class C--Based on net assets of $627,433 and 61,757
shares outstanding $ 10.16
===========
Class D--Based on net assets of $1,438,922 and 141,772
shares outstanding. $ 10.15
===========
See Notes to Financial Statements.
<CAPTION>
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2000
<S> <S> <C> <C>
Investment Interest and discount earned $ 195,602
Income: Dividends (net of $1,877 foreign witholding tax) 38,249
-----------
Total income 233,851
-----------
Expenses: Professional fees $ 40,322
Investment advisory fees 35,670
Accounting services 27,586
Account maintenance and distribution fees--Class B 26,054
Printing and shareholder reports 17,987
Registration fees 17,894
Directors' fees and expenses 10,393
Transfer agent fees--Class B 7,592
Custodian fees 6,482
Account maintenance and distribution fees--Class C 2,502
Account maintenance fees--Class D 1,851
Transfer agent fees--Class D 1,510
Transfer agent fees--Class C 740
Transfer agent fees--Class A 467
Other 14,356
-----------
Total expenses before reimbursement 211,406
Reimbursement of expenses (157,210)
-----------
Total expenses after reimbursement 54,196
-----------
Investment income--net 179,655
-----------
Realized & Realized gain (loss) from:
Unrealized Investments--net 111,167
Gain (Loss) on Foreign currency transactions--net (26,796) 84,371
Investments & -----------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net: Investments--net (372,568)
Foreign currency transactions--net 562 (372,006)
----------- -----------
Net Decrease in Net Assets Resulting from Operations $ (107,980)
===========
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Income Fund, Inc., June 30, 2000
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the For the
Six Months Year
Ended Ended
June 30, December 31,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 179,655 $ 417,765
Realized gain (loss) on investments and foreign
currency transactions--net 84,371 (128,968)
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net (372,006) 21,436
----------- -----------
Net increase (decrease) in net assets resulting from operations (107,980) 310,233
----------- -----------
Dividends & Investment income--net:
Distributions to Class A (10,348) (17,004)
Shareholders: Class B (127,102) (318,809)
Class C (11,368) (26,154)
Class D (30,837) (55,798)
Realized gain on investments--net:
Class A -- (5,656)
Class B -- (141,505)
Class C -- (14,422)
Class D -- (19,071)
In excess of realized gain on investments--net:
Class A -- (1,237)
Class B -- (30,949)
Class C -- (3,154)
Class D -- (4,171)
----------- -----------
Net decrease in net assets resulting from
dividends and distributions to shareholders (179,655) (637,930)
----------- -----------
Capital Share Net decrease in net assets derived from capital share
Transactions: transactions (1,193,990) (4,428,547)
----------- -----------
Net Assets: Total decrease in net assets (1,481,625) (4,756,244)
Beginning of period 10,351,755 15,107,999
----------- -----------
End of period $ 8,870,130 $10,351,755
=========== ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.47 $ 10.63 $ 10.32 $ 10.53 $ 10.62
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .23 .42 .43 .49 .50
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.30) .02 .58 .71 .23
-------- -------- -------- -------- --------
Total from investment operations (.07) .44 1.01 1.20 .73
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.23) (.42) (.43) (.49) (.50)
In excess of investment income--net -- -- -- -- (.05)
Realized gain on investments--net -- (.15) (.27) (.92) (.27)
In excess of realized gain on
investments--net -- (.03) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.23) (.60) (.70) (1.41) (.82)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.17 $ 10.47 $ 10.63 $ 10.32 $ 10.53
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (.69%)++ 4.45% 10.01% 11.67% 7.11%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .50%* .51% .50% .50% .25%
Average Net ======== ======== ======== ======== ========
Assets: Expenses 3.79%* 3.74% 3.10% 3.28% 3.48%
======== ======== ======== ======== ========
Investment income--net 4.51%* 4.14% 4.03% 4.58% 4.73%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 515 $ 339 $ 4,558 $ 2,188 $ 3,918
Data: ======== ======== ======== ======== ========
Portfolio turnover 39.53% 156.47% 155.44% 155.57% 342.71%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Aggregate total investment returns.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Income Fund, Inc., June 30, 2000
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
Class B
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.46 $ 10.63 $ 10.32 $ 10.53 $ 10.62
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .19 .34 .35 .41 .42
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.31) .01 .58 .71 .23
-------- -------- -------- -------- --------
Total from investment operations (.12) .35 .93 1.12 .65
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.19) (.34) (.35) (.41) (.42)
In excess of investment income--net -- -- -- -- (.05)
Realized gain on investments--net -- (.15) (.27) (.92) (.27)
In excess of realized gain on
investments--net -- (.03) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.19) (.52) (.62) (1.33) (.74)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.15 $ 10.46 $ 10.63 $ 10.32 $ 10.53
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (1.16%)++ 3.58% 9.19% 10.84% 6.31%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.25%* 1.26% 1.25% 1.25% 1.00%
Average Net ======== ======== ======== ======== ========
Assets: Expenses 4.54%* 4.58% 3.90% 4.01% 4.24%
======== ======== ======== ======== ========
Investment income--net 3.65%* 3.39% 3.32% 3.79% 3.99%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 6,289 $ 7,764 $ 9,230 $ 8,078 $ 8,690
Data: ======== ======== ======== ======== ========
Portfolio turnover 39.53% 156.47% 155.44% 155.57% 342.71%
======== ======== ======== ======== ========
<CAPTION>
Class C
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.46 $ 10.63 $ 10.32 $ 10.53 $ 10.62
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .18 .34 .35 .41 .41
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net (.30) .01 .58 .71 .23
-------- -------- -------- -------- --------
Total from investment operations (.12) .35 .93 1.12 .64
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.18) (.34) (.35) (.41) (.42)
In excess of investment income--net -- -- -- -- (.04)
Realized gain on investments--net -- (.15) (.27) (.92) (.27)
In excess of realized gain on
investments--net -- (.03) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.18) (.52) (.62) (1.33) (.73)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.16 $ 10.46 $ 10.63 $ 10.32 $ 10.53
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (1.09%)++ 3.53% 9.14% 10.79% 6.25%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.30%* 1.31% 1.30% 1.30% 1.04%
Average Net ======== ======== ======== ======== ========
Assets: Expenses 4.62%* 4.67% 3.94% 4.12% 4.28%
======== ======== ======== ======== ========
Investment income--net 3.63%* 3.37% 3.25% 3.78% 3.95%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 627 $ 618 $ 656 $ 575 $ 357
Data: ======== ======== ======== ======== ========
Portfolio turnover 39.53% 156.47% 155.44% 155.57% 342.71%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Aggregate total investment returns.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Income Fund, Inc., June 30, 2000
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class D
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.45 $ 10.62 $ 10.31 $ 10.53 $ 10.62
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .21 .39 .41 .47 .46
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.30) .01 .58 .70 .24
-------- -------- -------- -------- --------
Total from investment operations (.09) .40 .99 1.17 .70
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.21) (.39) (.41) (.47) (.47)
In excess of investment income--net -- -- -- -- (.05)
Realized gain on investments--net -- (.15) (.27) (.92) (.27)
In excess of realized gain on
investments--net -- (.03) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.21) (.57) (.68) (1.39) (.79)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.15 $ 10.45 $ 10.62 $ 10.31 $ 10.53
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (.82%)++ 4.10% 9.74% 11.29% 6.84%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .75%* .76% .75% .75% .50%
Average Net ======== ======== ======== ======== ========
Assets: Expenses 4.04%* 4.19% 3.35% 3.54% 3.70%
======== ======== ======== ======== ========
Investment income--net 4.15%* 3.85% 3.78% 4.32% 4.48%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 1,439 $ 1,631 $ 664 $ 318 $ 633
Data: ======== ======== ======== ======== ========
Portfolio turnover 39.53% 156.47% 155.44% 155.57% 342.71%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Aggregate total investment returns.
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. The Fund's financial statements
are prepared in accordance with accounting principles generally
accepted in the United States of America, which may require the use
of management accruals and estimates. 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.
(a) Valuation of investments--Portfolio securities that 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 that 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 or
purchased are valued at the last sale price in the case of exchange-
traded options. In the case of options traded in the over-the-
counter market, valuation is the last asked price (options written)
or the last bid price (options purchased). 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. Under such agreements,
the counterparty 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. If the counterparty
defaults and the fair value of the collateral declines, liquidation
of the collateral by the Fund may be delayed or limited.
(c) Derivative financial instruments--The Fund may engage in various
portfolio investment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. 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
financial 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.
Merrill Lynch Asset Income Fund, Inc., June 30, 2000
NOTES TO FINANCIAL STATEMENTS (continued)
* 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.
* 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 and purchase call and 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.
(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. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Fund has determined 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) Prepaid registration fees--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 Investment Managers, L.P. ("MLIM"). The general
partner of MLIM 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 FAMDistributors,
Inc. ("FAMD" or the "Distributor"), which is a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLIM 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 .75%, on an annual basis,
of the average daily value of the Fund's net assets.
For the six months ended June 30, 1999, MLIM earned fees of $35,670,
all of which were waived. MLIM also reimbursed the Fund for
additional expenses of $121,540.
Pursuant to 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
Maintenance Distribution
Fee Fee
Class B .25% .50%
Class C .25% .55%
Class D .25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("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 six months ended June 30, 2000, FAMD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Fund's Class D Shares as follows:
FAMD MLPF&S
Class D $171 $202
For the six months ended June 30, 2000, MLPF&S received contingent
deferred sales charges of $67,034 and $782 relating to transactions
in Class B and Class C Shares, respectively.
During the six months ended June 30, 2000, the Fund paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $175 for
security price quotations to compute the net asset value of the
Fund.
In addition, MLPF&S received $700 in commissions on the execution of
portfolio security transactions for the Fund for the six months
ended June 30, 2000.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLIM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLIM, PSI, FDS, FAMD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended June 30, 2000 were $2,885,067 and
$6,334,888, respectively.
Net realized gains (losses) for the six months ended June 30, 2000
and net unrealized gains (losses) as of June 30, 2000 were as
follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 111,167 $ 252,760
Forward foreign exchange contracts 11,346 772
Foreign currency transactions (38,142) (538)
--------- ----------
Total $ 84,371 $ 252,994
========= ==========
As of June 30, 2000, net unrealized appreciation for Federal income
tax purposes aggregated $252,760, of which $433,229 related to
appreciated securities and $180,469 related to depreciated
securities. At June 30, 2000, the aggregate cost of investments for
Federal income tax purposes was $8,538,508.
Merrill Lynch Asset Income Fund, Inc., June 30, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
were $1,193,990 and $4,428,547 for the six months ended June 30,
2000 and for the year December 31, 1999, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Six Dollar
Months Ended June 30, 2000 Shares Amount
Shares sold 18,985 $ 196,332
Shares issued to shareholders in
reinvestment of dividends 900 9,160
---------- -----------
Total issued 19,885 205,492
Shares redeemed (1,605) (16,731)
---------- -----------
Net increase 18,280 $ 188,761
========== ===========
Class A Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
Shares sold 3,453 $ 35,429
Shares issued to shareholders in
reinvestment of dividends and
distributions 1,623 16,515
---------- -----------
Total issued 5,076 51,944
Shares redeemed (401,551) (4,282,208)
---------- -----------
Net decrease (396,475) $(4,230,264)
========== ===========
Class B Shares for the Six Dollar
Months Ended June 30, 2000 Shares Amount
Shares sold 38,841 $ 398,828
Shares issued to shareholders in
reinvestment of dividends 5,887 59,907
---------- -----------
Total issued 44,728 458,735
Automatic conversion of shares (30) (308)
Shares redeemed (167,798) (1,722,466)
---------- -----------
Net decrease (123,100) $(1,264,039)
========== ===========
Class B Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
Shares sold 375,072 $ 3,935,303
Shares issued to shareholders in
reinvestment of dividends and
distributions 30,635 311,122
---------- -----------
Total issued 405,707 4,246,425
Shares redeemed (531,698) (5,418,929)
---------- -----------
Net decrease (125,991) $(1,172,504)
========== ===========
Class C Shares for the Six Dollar
Months Ended June 30, 2000 Shares Amount
Shares sold 13,975 $ 144,550
Shares issued to shareholders in
reinvestment of dividends 805 8,191
---------- -----------
Total issued 14,780 152,741
Shares redeemed (12,104) (125,063)
---------- -----------
Net increase 2,676 $ 27,678
========== ===========
Class C Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
Shares sold 61,795 $ 639,663
Shares issued to shareholders in
reinvestment of dividends and
distributions 3,208 32,533
---------- -----------
Total issued 65,003 672,196
Shares redeemed (67,586) (677,431)
---------- -----------
Net decrease (2,583) $ (5,235)
========== ===========
Class D Shares for the Six Dollar
Months Ended June 30, 2000 Shares Amount
Shares sold 7,186 $ 73,843
Automatic conversion of shares 30 308
Shares issued to shareholders in
reinvestment of dividends 1,065 10,825
---------- -----------
Total issued 8,281 84,976
Shares redeemed (22,565) (231,366)
---------- -----------
Net decrease (14,284) $ (146,390)
========== ===========
Class D Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
Shares sold 123,226 $ 1,279,704
Shares issued to shareholders in
reinvestment of dividends and
distributions 4,888 49,572
---------- -----------
Total issued 128,114 1,329,276
Shares redeemed (34,578) (349,820)
---------- -----------
Net increase 93,536 $ 979,456
========== ===========
5. Capital Loss Carryforward:
At December 31, 1999, the Fund had a net capital loss carryforward
of approximately $61,000, all of which expires in 2007. This amount
will be available to offset like amounts of any future taxable
gains.
6. Commitments:
At June 30, 2000, the Fund had foreign exchange contracts, in
addition to the contract listed on the Schedule of Investments,
under which it had agreed to sell various foreign currencies with an
approximate value of $300,000.
7. Reorganization Plan:
On January 12, 2000, the Fund's Board of Directors approved a plan
of reorganization, subject to shareholder approval and certain other
conditions, whereby Merrill Lynch Global Allocation Fund, Inc. would
acquire substantially all of the assets and liabilities of the Fund,
Merrill Lynch Asset Growth Fund, Inc. and the Global Opportunity
Portfolio of The Asset Program, Inc. in exchange for newly issued
shares of Merrill Lynch Global Allocation Fund, Inc. These Funds are
registered, non-diversified, open-end management investment
companies, except the Global Opportunity Portfolio, which is
diversified. All four entities are managed by MLIM.
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
Robert C. Doll, Jr., Senior Vice President
Thomas R. Robinson, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Allan J. Oster, Secretary
Barbara G. Fraser, Secretary of Merrill Lynch Asset Income Fund,
Inc. has recently retired. The Fund's Board of Directors wishes Ms.
Fraser well in her retirement.
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
