MERRILL
LYNCH
PACIFIC
FUND, INC.
Semi-Annual Report June 30, 1994
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.
Merrill Lynch
Pacific Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
MERRILL LYNCH PACIFIC FUND, INC.
DEAR SHAREHOLDER
For the quarter ended June 30, 1994, Merrill Lynch Pacific Fund,
Inc.'s Class A and Class B Shares had total investment returns of
+5.72% and +5.44%, respectively, compared to a 10.30% gain for the
unmanaged Morgan Stanley Capital International Pacific Basin Index.
For the six months ended June 30, total returns for the Fund's Class
A and Class B Shares were +9.81% and +9.26%, respectively, compared
to +19.27% for the Pacific Basin Index. (Complete performance
information, including average annual total returns, can be found on
pages 4, 5 and 6 of this report to shareholders.)
When we analyze Merrill Lynch Pacific Fund's performance, the
benchmark we use has a lower weighting in Japan than popular market-
weighted indexes. This is because corporate cross ownership of
shares in Japan inflates stock market capitalization, as discussed
in our last report to shareholders. However, even when comparing the
Fund's performance to the performance of an index with a more
accurate Japanese stock market weighting, the Fund has had a
relatively poor six months. Our yen forward selling early in the
year, relative overweightings in Southeast Asia and stock selection
in all of our markets have all impeded performance. We are currently
refocusing our research efforts on stock selection in response to
this relative underperformance.
Japanese Stock Market & Currency Outlook
The key question that Pacific Basin investors are asking at this
time is whether the Japanese stock market rally will be sustained or
whether the market's 1994 performance will be a replay of 1993. Last
year, the Nikkei 225 Stock Index rallied to 21,000 from 17,000, only
to fall back again very sharply in the last half of the year, giving
back almost all its gains and ending the year at virtually the same
level at which it began. Closely related to the question of
potential Japanese stock market performance is whether the weakness
seen in the Southeast Asian stock markets thus far in 1994 is simply
a normal correction following their buoyant performances in 1993, or
if recent performance is just a preview for even more significant
declines.
Japanese and Southeast Asian stock market prospects are related,
since worldwide liquidity (particularly institutional investors'
capital flows) was an important contributor to the extraordinary
performances of Southeast Asian stock markets, especially in the
final quarter of 1993. Moreover, capital flows may also help explain
the yen's strength relative to the US dollar.
<PAGE>
Regarding the yen, in previous reports to shareholders we have often
stated our view that the yen will weaken relative to the US dollar.
This has not occurred. One possible reason for continued yen
strength has been suggested by William P. Sterling, Manager,
International Economics, Merrill Lynch Global Securities Research &
Economics Group. Sterling notes that Japan's current account surplus
has gotten higher over the past few years. This trend, combined with
the Japanese reluctance to recycle this surplus through purchase of
US dollar-denominated assets such as government bonds and real
estate, puts upward pressure on the yen. Sterling concludes that as
long as Japan's basic balance (which is the current account balance
plus the balance on long-term capital transactions) remains positive
and large, the yen will tend to strengthen relative to the US
dollar. This will only change when Japan eases domestic credit
conditions and starts recycling its surplus again.
While Sterling's rationale for continued yen strength may be
correct, we continue to believe that some risk remains that the yen
will weaken relative to the US dollar, since the yen is overvalued
on a purchasing power parity basis. Therefore, we continue to hedge
against a weaker yen to some degree. We own the same yen put options
as we did during the March quarter. They have declined in value and
consequently represent a smaller portion of the portfolio and
therefore hedge less of the yen exposure.
The other capital flow occurrence that currently may be affecting
the currency is a recent Ministry of Finance (MoF) accounting rule
change regarding the valuation of fixed-income securities held by
insurance companies. Now, insurance companies may carry their
Japanese government bond holdings at acquisition cost rather than
market value. This change relieves the insurers of the burden of
ever marking down their portfolios in one particular asset class.
Marking down portfolios limits the insurers' capacity to underwrite
insurance. Therefore, this accounting change makes Japanese
government bonds a more attractive investment than foreign issues.
It may appear unusual that the MoF would implement such a change
that results in a stronger yen and thereby undercuts the
international competitiveness of Japanese exports. However, the
negative impact on Japan's export-oriented corporations may be far
less important than the need to bolster the government's
deteriorating finances. At this time, government borrowing is
necessary. The government must continue to stimulate the domestic
economy to lift the country out of its worst post-World War II
recession. In order to finance this enormous fiscal stimulation
package the government must issue deficit bonds. To attract buyers
to these bonds without paying much higher interest rates, the MoF
may have decided to change the accounting rules and create a large
class of buyers for its bonds.
<PAGE>
Therefore, while export-related areas of Japanese industry suffer
from a stronger yen, it may be that yen strength is the price Japan
must pay to achieve the much-needed fiscal stimulation at a
reasonable cost to the Japanese government's finances. Not only does
this explain why the yen continues to strengthen, but it also makes
us more convinced that the Japanese government is resolved to
stimulate the domestic economy. This stimulation might be sufficient
to provide the corporate revenue and earnings growth necessary to
justify current or higher Japanese stock prices, in our view.
Japanese Investments Increased
In our view, a Japanese economic recovery is taking place, albeit
slowly, largely through government stimulus. There is some evidence
that the economic pick up will increase corporate profits
sufficiently to justify further stock market appreciation. Although
we have doubts about the sustainability of overall corporate
profitability at high enough levels to prolong the rally, we are
comfortable with our almost 70% current weighting in Japan, an
increase from the nearly 63% exposure at the end of March.
However, we are not seeking a broader exposure to the Japanese stock
market as a whole. Our purchases have instead served to increase the
concentration of our investments in some key Japanese holdings,
which currently are selling at even more attractive valuations.
During the June quarter we increased positions in Toyo Seikan
Kaisha, Ltd., Dai-Tokyo Fire & Marine Insurance Co., Ltd., Nichido
Fire & Marine Insurance Co., Ltd., Tokio Marine & Fire Insurance
Co., Ltd., Ito-Yokado Co., Ltd., Canon, Inc., Hitachi, Ltd. and
Mitsubishi Heavy Industries, Ltd. Our investments in each of these
companies now represent significant commitments. We expect to
continue to gradually increase our investments in the Fund's key
positions, creating a more concentrated portfolio, similar to the
Merrill Lynch Pacific Fund portfolio throughout most of the 1980s.
This emphasis on individual stock selection rather than general
market exposure incurs greater specific stock risk. Therefore, the
Fund's performance will be more closely linked to the performances
of its largest holdings.
<PAGE>
Increased Investment in Hong Kong Utilities
Greater capital flows into Japan by both domestic and foreign
investors suggests that the outlook for the Southeast Asian stock
markets may be less positive. Furthermore, since interest rates in
many of these countries move in tandem with those in the United
States, higher US interest rates also negatively impact Southeast
Asian stock markets. Although some Southeast Asian stock markets had
clearly reached speculative levels as 1993 drew to a close, it was
not clear to us that the Hong Kong stock market was overvalued at
the beginning of 1994. Now that Hong Kong stocks have declined by
approximately 30% from their 1993 highs, historical valuation
measures are more attractive. However, much of the value perceived
in Hong Kong in 1993 related to future business prospects in The
People's Republic of China, and these prospects may be regarded as
less positive now than at the beginning of 1994. It is certain that
the liquidity infusion that drove share prices higher in Hong Kong
and other Southeast Asian stock markets has abated for the time
being, and may now be directed toward Japanese stocks.
Nevertheless, we are expanding our investments in Hong Kong
utilities. We prefer to either purchase shares of good companies
selling at modest valuations or those of very good companies selling
at reasonable valuations. Our investments in Hong Kong utilities--
China Light & Power Co., Ltd., Hong Kong & China Gas Co., Ltd. and
Hong Kong Telecommunications, Ltd.--fall into the latter category.
As the Hong Kong stock market has declined, share prices of these
utilities have declined sufficiently so that we can build back our
positions. We have no particular view of the direction of the Hong
Kong stock market in the near term, other than the effects of the
negative flow of funds as we have discussed. However, we do believe
that each of these three utilities have very good businesses and are
now reasonably valued.
In Conclusion
We thank you for your investment in Merrill Lynch Pacific Fund,
Inc., and we look forward to reviewing our outlook and strategy with
you again in our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Stephen I. Silverman)
Stephen I. Silverman
Vice President and Portfolio Manager
<PAGE>
August 4, 1994
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Stephen I. Silverman, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Robert Harris, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Transfer Agent
Financial Data Services, Inc.
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
PERFORMANCE DATA
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
Class A and Class B Shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
"Results of a $1,000 Investment Since Inception" chart measures
performance since inception and may not reflect results of
investments made at any other time.
<PAGE>
Results of a $1,000 Investment Since Inception--Class A Shares
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX,
GRAPHIC AND IMAGE MATERIAL: Item 1.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/94 +20.20% +12.39%
Five Years Ended 6/30/94 +12.64 +11.14
Ten Years Ended 6/30/94 +21.35 +20.54
[FN]
*Maximum sales charge is 6.5%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/94 +18.93% +14.93%
Five Years Ended 6/30/94 +11.50 +11.50
Inception (10/21/88) through 6/30/94 +10.58 +10.58
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
9/23/76--12/31/76 $ 9.30 $ 9.81 -- -- + 5.48%
1977 9.81 9.20 -- $0.050 - 5.73
1978 9.20 14.48 $ 0.070 0.020 +58.87
1979 14.48 8.96 3.340 0.120 -23.40
1980 8.96 12.11 -- 0.220 +38.49
1981 12.11 12.78 1.460 0.230 +22.22
1982 12.78 12.07 0.420 0.320 + 0.46
1983 12.07 16.04 0.180 0.290 +38.54
1984 16.04 15.43 0.950 0.090 + 2.92
1985 15.43 19.59 1.380 0.160 +40.96
1986 19.59 34.32 0.190 0.110 +77.78
1987 34.32 16.15 22.154 0.183 +10.77
1988 16.15 19.11 2.064 0.196 +34.38
1989 19.11 20.65 1.042 0.061 +14.49
1990 20.65 16.52 1.668 0.766 - 8.39
1991 16.52 18.34 0.521 0.433 +17.04
1992 18.34 15.80 0.221 0.741 - 8.75
1993 15.80 21.21 -- 0.027 +34.41
1/1/94--6/30/94 21.21 23.29 -- -- + 9.81
------- ------
Total $35.660 Total $4.017
Cumulative total return as of 6/30/94: +1,709.25%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $17.93 $19.09 $1.034 $0.171 +13.37%
1989 19.09 20.49 1.042 -- +13.39
1990 20.49 16.30 1.668 0.653 - 9.29
1991 16.30 18.01 0.521 0.322 +15.87
1992 18.01 15.34 0.221 0.726 - 9.72
1993 15.34 20.41 -- -- +33.05
1/1/94--6/30/94 20.41 22.30 -- -- + 9.26
------ ------
Total $4.486 Total $1.872
Cumulative total return as of 6/30/94: +77.31%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
PERFORMANCE DATA (concluded)
<PAGE>
<TABLE>
Recent Performance Results*
<CAPTION>
Market Performance Market Capitalization
In Local Currency/In US Dollars (as of 3/31/94)
3 Month 12 Month In US Dollars % of Total
% Change % Change (Billions) (100.0%)
<S> <C> <C> <C> <C>
ML Pacific Fund, Inc. Class A Shares +5.72% +20.05%
ML Pacific Fund, Inc. Class B Shares +5.44 +18.93
ML Pacific Fund, Inc. Class A Shares--Total Investment Return +5.72 +20.20(1)
ML Pacific Fund, Inc. Class B Shares--Total Investment Return +5.44 +18.93
Market-Weighted Index** +9.79(2) +14.93(3)
Japan** +7.04/+11.44 + 5.88/+14.16 $3,346 81.9%
Australia** -3.12/+ 0.90 +14.44/+25.77 195 4.8
Singapore** +4.22/+ 7.19 +19.71/+27.33 118 2.9
Malaysia** +6.18/+ 9.39 +40.27/+38.40 161 3.9
Hong Kong** -3.01/- 3.03 +23.37/+23.61 266 6.5
<FN>
(1)Percent change includes reinvestment of $0.027 per share ordinary
income dividends.
(2)3/31/94 market weights used in this computation. The Market-
Weighted Index return and individual country returns do not include
dividends.
(3)6/30/93 market weights used in this computation. The Market-
Weighted Index return and individual country returns do not include
dividends.
*Investment results shown for the 3-month and 12-month periods are
before the deduction of any sales charges.
**Unmanaged. The Market-Weighted Index weights the US dollar-
adjusted Pacific Basin stock market returns by the relative market
capitalization of each individual country on the appropriate date.
</TABLE>
<PAGE>
PORTFOLIO INFORMATION
For the Quarter Ended June 30, 1994
Percent of
Ten Largest Equity Holdings Net Assets
Toyo Seikan Kaisha, Ltd. 4.1%
Ito-Yokado Co., Ltd. 3.4
Nichido Fire & Marine Insurance Co., Ltd. 3.3
Dai-Tokyo Fire & Marine Insurance Co., Ltd. 3.1
Mitsubishi Heavy Industries, Ltd. 3.1
Tokio Marine & Fire Insurance Co., Ltd. 3.0
Hitachi, Ltd. 2.9
Murata Manufacturing Co., Ltd. 2.8
Koa Fire & Marine Insurance Co., Ltd. 2.5
Matsushita Electric Industrial Co., Ltd. 2.4
Additions
City Development (Rights)
Hong Kong and China Gas Co., Ltd. (Warrants)
Shivalik Projects Ltd.
Sumitomo Marine & Fire Insurance Co. Ltd.
Sungei Way Holdings BHD (Rights)
Sungei Way Holdings BHD TSR (Rights)
<PAGE>
Deletions
Berjaya Singer BHD
Berjaya Singer BHD, 5.00% due 9/15/1998
Berjaya Singer BHD (Rights)
Berjaya Singer TSR
Citic Pacific, Ltd.
Daiwa House #4 US$ (Warrants)
Great Eastern Shipping (ADR)
Hang Lung Development Co., Ltd. (Warrants)
Hanil Bank
Heiwa Corp.
Indian Rayon & Industries, Ltd. (GDR)
Indo Gulf Fertilizer (GDR)
Korea First Bank
Malayan Cement BHD
Nippon Telegraph & Telephone Corp.
Nisshinbo Industries, Inc.
SCICI, Ltd.
Shin Han Bank
Sterlite Industries, 3.50% due 6/30/1999
Thai Farmers Bank Limited
Times Publishing, Ltd.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Held/ Value Percent of
Industry Face Amount Investments Cost (Note 1a) Net Assets
Japanese Securities
<S> <C> <S> <C> <C> <C>
Automobile 2,376,000 Suzuki Motor Corp. $ 21,327,773 $ 31,583,562 2.2%
1,150,000 Toyota Motor Corp. 16,537,556 25,788,940 1.8
-------------- -------------- ------
37,865,329 57,372,502 4.0
Beverage 363,000 Chukyo Coca-Cola Bottling Co., Ltd. 5,223,326 5,083,105 0.4
421,000 Hokkaido Coca-Cola Bottling Co., Ltd. 6,354,142 6,749,670 0.5
381,000 Kinki Coca-Cola Bottling Co., Ltd. 7,350,583 7,732,116 0.5
433,000 Mikuni Coca-Cola Bottling Co., Ltd. 7,892,009 7,205,682 0.5
428,000 Sanyo Coca-Cola Bottling Co., Ltd. 7,040,767 6,861,898 0.5
-------------- -------------- ------
33,860,827 33,632,471 2.4
<PAGE>
Capital Goods 5,500,000 Mitsubishi Heavy Industries, Ltd. 36,111,275 44,033,486 3.1
720 Mitsubishi Heavy Industries, Ltd.,
#3 US$(Warrants)(a) 588,000 580,500 0.0
-------------- -------------- ------
36,699,275 44,613,986 3.1
Chemicals 1,400,000 Shin-Etsu Chemical Co., Ltd. 24,090,347 29,974,632 2.1
Consumer 1,894,000 Matsushita Electric Industrial Co., Ltd. 23,636,780 34,785,794 2.4
Electronics Yen 409,000,000 Matsushita Electric Works, Ltd.--C.E.W.
#8, 2.70% due 5/31/2002 4,543,869 5,200,173 0.4
489,000 Sony Corp. 26,242,474 30,019,787 2.1
-------------- -------------- ------
54,423,123 70,005,754 4.9
Containers 1,800,000 Toyo Seikan Kaisha, Ltd. 31,538,847 58,447,489 4.1
Electric 611,000 Chudenko Corp. 17,046,408 25,357,585 1.8
Construction 365,000 Sanki Engineering Co., Ltd. 4,364,800 4,962,963 0.4
800,000 Taihei Dengyo Kaisha, Ltd. 19,865,480 23,378,995 1.6
-------------- -------------- ------
41,276,688 53,699,543 3.8
Electric 4,000,000 Hitachi, Ltd. 37,996,786 41,806,190 2.9
Equipment 854,000 Murata Manufacturing Co., Ltd. 24,295,689 40,208,625 2.8
520,000 Rohm Co., Ltd. 17,691,365 24,166,413 1.7
2,045,000 Sumitomo Electric Industries, Ltd. 23,549,160 31,333,841 2.2
169 Sumitomo Electric Industries, Ltd., #1 Yen
(Warrants)(a) 185,351 363,551 0.0
923,000 The Nippon Signal Co., Ltd. 13,935,321 11,988,229 0.8
-------------- -------------- ------
117,653,672 149,866,849 10.4
Iron & Steel 470,000 Maruichi Steel Tube, Ltd. 5,931,543 8,584,475 0.6
Office 1,955,000 Canon, Inc. 25,478,614 34,319,127 2.4
Equipment 14,250 Canon, Inc. #2 DM (Warrants)(a) 1,741,131 1,949,538 0.1
2,250 Canon, Inc. #4 US$ (Warrants)(a) 2,434,375 2,714,063 0.2
-------------- -------------- ------
29,654,120 38,982,728 2.7
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Held/ Value Percent of
Industry Face Amount Investments Cost (Note 1a) Net Assets
Japanese Securities (concluded)
<S> <C> <S> <C> <C> <C>
Pharmaceuticals 1,164,000 Sankyo Co., Ltd. $ 28,615,316 $ 25,984,779 1.8%
672,000 Taisho Pharmaceutical Co., Ltd. 9,783,498 13,433,181 0.9
-------------- -------------- ------
38,398,814 39,417,960 2.7
Photography 885,000 Fuji Photo Film Co., Ltd. 20,866,376 19,756,469 1.4
Property & 5,700,000 Dai-Tokyo Fire & Marine Insurance Co.,
Casualty Ltd. 32,260,159 44,709,285 3.1
Insurance 4,492,000 Fuji Fire & Marine Insurance Co., Ltd. 16,261,457 32,134,551 2.2
4,796,000 Koa Fire & Marine Insurance Co., Ltd. 28,347,268 35,525,926 2.5
5,338,000 Nichido Fire & Marine Insurance Co., Ltd. 26,925,257 48,098,874 3.3
2,680,000 Sumitomo Marine & Fire Insurance Co. Ltd. 25,396,350 26,188,128 1.8
3,293,000 Tokio Marine & Fire Insurance Co., Ltd. 31,567,953 42,436,428 3.0
-------------- -------------- ------
160,758,444 229,093,192 15.9
Retailing 896,000 Ito-Yokado Co., Ltd. 35,333,284 49,550,482 3.4
362,000 Sangetsu Co., Ltd. 8,312,345 12,819,685 0.8
389,400 Senshukai Co., Ltd. 6,286,430 13,631,963 0.9
208,000 Shimachu Co., Ltd. 3,046,441 8,379,097 0.5
-------------- -------------- ------
52,978,500 84,381,227 5.6
Transportation 2,444,000 Nippon Express Co., Ltd. 24,955,299 26,039,574 1.8
Total Investments in Japan 710,951,204 943,868,851 65.5
Australian Securities
Diversified 2,250,000 BTR Nylex Ltd. 4,919,240 4,732,344 0.3
<PAGE>
Food & Beverage 5,941,989 Burns Philp & Co., Ltd. 17,073,413 15,188,021 1.0
3,791,273 Coca-Cola Amatil, Ltd. 14,483,725 22,980,763 1.6
2,271,400 Goodman Fielder Ltd. 2,855,888 2,139,856 0.2
-------------- -------------- ------
34,413,026 40,308,640 2.8
Paper & Packaging 2,589,618 AMCOR Ltd. 18,728,076 17,134,254 1.2
Property 2,195,328 Lend Lease Corp. 27,759,501 26,132,943 1.8
A$ l,500,000 Lend Lease Finance International, 4.75%
due 6/01/2003 1,736,250 1,612,500 0.1
-------------- -------------- ------
29,495,751 27,745,443 1.9
Total Investments in Australia 87,556,093 89,920,681 6.2
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Held/ Value Percent of
Industry Face Amount Investments Cost (Note 1a) Net Assets
Hong Kong Securities
<S> <C> <S> <C> <C> <C>
Construction 3,066,000 Paul Y-ITC Construction Holdings, Inc. $ 1,070,608 $ 662,469 0.0%
Property 4,407,000 Hang Lung Development Co., Ltd. 3,560,209 6,842,282 0.5
Service 433,100 Hong Kong Aircraft Engineering Co. Ltd. 2,670,089 2,381,518 0.1
Utilities 6,623,800 China Light & Power Co., Ltd. 7,321,120 33,851,740 2.4
10,423,200 Hong Kong & China Gas Co., Ltd. 18,409,415 19,959,032 1.4
868,600 Hong Kong & China Gas Co., Ltd.
(Warrants)(a) 0 382,099 0.0
6,446,800 Hong Kong Telecommunications, Ltd. 11,199,792 12,177,938 0.9
670,500 Hong Kong Telecommunications, Ltd.
(ADR)(b) 4,896,660 12,571,875 0.9
-------------- -------------- ------
41,826,987 78,942,684 5.6
Total Investments in Hong Kong 49,127,893 88,828,953 6.2
Indian Securities
<PAGE>
Broadcast/Media 700,000 Shivalik Projects Ltd. 4,016,896 4,017,217 0.3
Shipping 250,000 Great Eastern Shipping 1,057,768 637,653 0.0
70,000 Great Eastern Shipping (New) 22,316 178,543 0.0
-------------- -------------- ------
1,080,084 816,196 0.0
Total Investments in India 5,096,980 4,833,413 0.3
Indonesian Securities
Food 136,000 PT Charoen Pokphand Indonesian 622,002 589,206 0.0
Pharmaceuticals 1,634,000 PT Kalbe Farma 5,525,626 5,572,936 0.4
Total Investments in Indonesia 6,147,628 6,162,142 0.4
Malaysian Securities
Building & 2,400,000 Sungei Way Holdings BHD 5,728,884 7,191,149 0.5
Construction 400,000 Sungei Way Holdings BHD (Rights)(d) 0 0 0.0
400,000 Sungei Way Holdings BHD TSR (Rights)(d) 0 0 0.0
-------------- -------------- ------
5,728,884 7,191,149 0.5
Diversified 3,000,000 Sime Darby BHD 7,022,934 7,606,023 0.5
Forest Products 412,000 Aokam Perdana BHD ("A") 2,121,509 2,374,001 0.2
1,030,000 Aokam Perdana BHD (Ordinary) 6,864,359 6,488,937 0.5
-------------- -------------- ------
8,985,868 8,862,938 0.7
Leisure 750,000 Genting BHD 1,759,320 9,058,090 0.6
1,450,000 Resorts World BHD 2,382,084 8,355,101 0.6
-------------- -------------- ------
4,141,404 17,413,191 1.2
Total Investments in Malaysia 25,879,090 41,073,301 2.9
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Value Percent of
Industry Shares Held Investments Cost (Note 1a) Net Assets
Singaporean Securities
<S> <C> <S> <C> <C> <C>
Airlines 1,168,000 Singapore Airlines, Ltd.--Foreign
Registered $ 6,389,427 $ 9,659,862 0.7%
Banking 317,500 Development Bank of Singapore, Ltd.--
Foreign Registered 2,411,221 3,042,665 0.2
Electronics 610,000 Creative Technology, Ltd. 7,609,990 10,522,500 0.7
Food 3,600,000 Cerebos Pacific Ltd. 5,153,632 18,313,095 1.2
Property 888,000 City Development 4,164,079 3,759,501 0.3
177,600 City Development (Rights)(e) 0 0 0.0
905,000 First Capital Corp. Ltd. 3,465,885 2,934,493 0.2
-------------- -------------- ------
7,629,964 6,693,994 0.5
Transportation 300,000 Singapore Bus Co. Ltd.--Foreign
Registered 1,060,285 2,579,587 0.2
Total Investments in Singapore 30,254,519 50,811,703 3.5
South Korean Securities
Automobile 8,286 ++Kia Motors Corp.(GDS)(c) 267,155 229,936 0.0
Textiles 3,080 Taekwang Industries Co. 716,353 1,701,843 0.1
Total Investments in South Korea 983,508 1,931,779 0.1
Taiwanese Securities
Steel 76,400 ++China Steel Corp. (ADR)(b) 1,390,480 1,413,400 0.1
<PAGE>
Total Investments in Taiwan 1,390,480 1,413,400 0.1
Thai Securities
Banking 59,100 Bangkok Bank Public Co., Ltd. 419,378 448,622 0.3
Total Investments in Thailand 419,378 448,622 0.3
<CAPTION>
Face
Amount
Short-Term Securities
<S> <C> <S> <C> <C> <C>
Commercial Paper* $15,000,000 CSW Credit Inc., 4.35% due 7/01/1994 15,000,000 15,000,000 1.0
62,423,000 General Electric Capital Corp., 4.30%
due 7/01/1994 62,423,000 62,423,000 4.3
20,000,000 Miles Inc., 4.25% due 7/12/1994 19,974,028 19,974,028 1.4
30,000,000 Nomura Holding America Inc., 4.30%
due 7/29/1994 29,899,667 29,899,667 2.1
20,000,000 Preferred Receivables Funding Corp.,
4.32% due 7/11/1994 19,976,000 19,976,000 1.4
10,000,000 USL Capital Corp., 4.30% due 7/25/1994 9,971,333 9,971,333 0.7
-------------- -------------- ------
157,244,028 157,244,028 10.9
US Government & 4,000,000 United States Treasury Bills, 4.12%
Agency due 9/15/1994 3,965,209 3,963,923 0.2
Obligations*
Total Investments in Short-Term
Securities 161,209,237 161,207,951 11.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Par Premiums Value Percent of
Industry Value Issue Paid (Note 1a) Net Assets
Currency Put Options Purchased
<S> <C> <S> <C> <C> <C>
$600,000,000 Japanese Yen Expiring March 1995 at
Yen 106.5 $ 16,002,000 $ 5,913,000 0.4%
<PAGE>
Total Currency Put Options Purchased 16,002,000 5,913,000 0.4
Total Investments $1,095,018,010 1,396,413,796 97.0
==============
Unrealized Appreciation on Forward Foreign Exchange Contracts** 5,026,958 0.3
Variation Margin on Stock Index Futures Contracts*** 868,167 0.1
Other Assets Less Liabilities 37,735,451 2.6
-------------- ------
Net Assets $1,440,044,372 100.0%
============== ======
<FN>
(a)Warrants entitle the Fund to purchase a predetermined
number of shares of Common Stock. The purchase price and
number of shares are subject to adjustment under certain
conditions until the expiration date.
(b)ADR--American Depositary Receipts.
(c)GDS--Global Depositary Shares.
(d)The rights may be exercised until August 3, 1994.
(e)The rights may be exercised until July 24, 1994.
*Commercial Paper and certain US Government & Agency
Obligations are traded on a discount basis; the interest
rates shown are the discount rates paid at the time of
purchase by the Fund.
**Forward foreign exchange contracts as of June 30, 1994 are as follows:
Foreign Expiration Unrealized
Currency Purchased Date Appreciation
Yen 14,493,846,800 September 1994 $ 5,026,958
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net
(US$ Commitment--$142,677,037) $ 5,026,958
===========
***Stock index futures contracts as of June 30, 1994 are as follows:
Number of Expiration Value
Contracts Issue Date (Note 1h)
423 Simex Nikkei September 1994 $42,054,507
Total Stock Index Futures Contracts Purchased
(Total Contract Price--$43,344,812) $42,054,507
===========
++Restricted securities pursuant to Rule 144A. The value of the Fund's
investment in restricted securities was approximately $1,643,000,
representing 0.1% of net assets.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of June 30, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$1,079,016,010) (Note 1a) $1,390,500,796
Put options purchased, at value (cost--$16,002,000) (Notes 1a & 1g) 5,913,000
Unrealized appreciation on forward foreign exchange contracts (Note 1b) 5,026,958
Variation margin on stock index futures contracts (Note 1h) 868,167
Foreign cash 17,151,514
Cash 42
Receivables:
Capital shares sold $ 14,987,130
Securities sold 12,947,853
Dividends 3,440,035
Interest 14,405 31,389,423
--------------
Prepaid registration fees and other assets (Note 1e) 31,300
--------------
Total assets 1,450,881,200
--------------
Liabilities: Payables:
Securities purchased 4,863,388
Capital shares redeemed 4,209,066
Investment adviser (Note 2) 683,006
Distributor (Note 2) 648,377 10,403,837
--------------
Accrued expenses and other liabilities 432,991
--------------
Total liabilities 10,836,828
--------------
Net Assets: Net assets $1,440,044,372
==============
<PAGE>
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized $ 2,623,663
Class B Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 3,717,247
Paid-in capital in excess of par 1,130,005,052
Undistributed investment income--net 34,493
Accumulated realized capital losses on investments and foreign
currency transactions--net (1,703,444)
Unrealized appreciation on investments and foreign currency
transactions--net 305,367,361
--------------
Net assets $1,440,044,372
==============
Net Asset Value: Class A--Based on net assets of $611,022,333 and 26,236,634 shares
outstanding $ 23.29
==============
Class B--Based on net assets of $829,022,039 and 37,172,465 shares
outstanding $ 22.30
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Six Months Ended June 30, 1994
<CAPTION>
<S> <S> <C> <C>
Investment Dividends (net of $770,948 foreign withholding tax) $ 6,451,587
Income Interest and discount earned (net of $7,487 foreign withholding tax) 1,791,625
(Notes 1c & 1d): --------------
Total income 8,243,212
--------------
Expenses: Investment advisory fees (Note 2) 3,512,804
Distribution fees--Class B (Note 2) 3,183,500
Custodian fees 574,146
Transfer agent fees--Class B (Note 2) 363,505
Transfer agent fees--Class A (Note 2) 259,800
Registration fees (Note 1e) 105,419
Printing and shareholder reports 90,965
Accounting services (Note 2) 54,596
Professional fees 32,302
Directors' fees and expenses 17,470
Other 14,212
--------------
Total expenses 8,208,719
--------------
Investment income--net 34,493
--------------
<PAGE>
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net $ 12,492,271
(Loss) on Foreign currency transactions--net (6,441,174) 6,051,097
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions Investments--net 107,435,691
- --Net Foreign currency transactions--net (8,021,150) 99,414,541
(Notes 1b, -------------- --------------
1c & 3): Net realized and unrealized gain on investments and foreign
currency transactions 105,465,638
--------------
Net Increase in Net Assets Resulting from Operations $ 105,500,131
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: June 30,1994 Dec. 31, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 34,493 $ 44,290
Realized gain (loss) on investments and foreign currency
transactions--net 6,051,097 (2,056,308)
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net 99,414,541 168,301,414
-------------- --------------
Net increase in net assets resulting from operations 105,500,131 166,289,396
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A -- (44,290)
(Note 1f): In excess of investment income--net:
Class A -- (559,299)
-------------- --------------
Net decrease in net assets resulting from dividends to shareholders -- (603,589)
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 354,214,874 364,954,305
Transactions -------------- --------------
(Note 4):
<PAGE>
Net Assets: Total increase in net assets 459,715,005 530,640,112
Beginning of period 980,329,367 449,689,255
-------------- --------------
End of period* $1,440,044,372 $ 980,329,367
============== ==============
*Undistributed investment income--net $ 34,493 $ 0
============== ==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1994+++ 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 21.21 $ 15.80 $ 18.34 $ 16.52 $ 20.65
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .06 .07 .05 .04 .10
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 2.02 5.37 (1.63) 2.73 (1.80)
-------- -------- -------- -------- --------
Total from investment operations 2.08 5.44 (1.58) 2.77 (1.70)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- (.01) (.11) (.11)
In excess of investment income--net -- (.03) -- -- --
Realized gain on investments--net -- -- (.95) (.84) (2.32)
-------- -------- -------- -------- --------
Total dividends and distributions -- (.03) (.96) (.95) (2.43)
-------- -------- -------- -------- --------
Net asset value, end of period $ 23.29 $ 21.21 $ 15.80 $ 18.34 $ 16.52
======== ======== ======== ======== ========
Total Based on net asset value per share 9.81%++ 34.41% (8.75%) 17.04% (8.39%)
Investment ======== ======== ======== ======== ========
Return:**
Ratios to Expenses .85%* .90% .98% 1.02% 1.07%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net .56%* .47% .40% .43% .94%
======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $611,022 $472,322 $284,674 $304,712 $242,104
Data: ======== ======== ======== ======== ========
Portfolio turnover 11.90% 13.25% 7.62% 5.91% 31.06%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Aggregate total investment return.
+++Based on average number of shares outstanding during the period.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class B
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1994+++ 1993+++ 1992+++ 1991+++ 1990+++
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 20.41 $ 15.34 $ 18.01 $ 16.30 $ 20.49
Operating -------- -------- -------- -------- --------
Performance: Investment income--net (.05) (.10) (.12) (.14) (.09)
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.94 5.17 (1.60) 2.69 (1.78)
-------- -------- -------- -------- --------
Total from investment operations 1.89 5.07 (1.72) 2.55 (1.87)
-------- -------- -------- -------- --------
Less distributions:
Realized gain on investments--net -- -- (.95) (.84) (2.32)
-------- -------- -------- -------- --------
Total distributions -- -- (.95) (.84) (2.32)
-------- -------- -------- -------- --------
Net asset value, end of period $ 22.30 $ 20.41 $ 15.34 $ 18.01 $ 16.30
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 9.26%++ 33.05% (9.72%) 15.87% (9.29%)
Return:** ======== ======== ======== ======== ========
<PAGE>
Ratios to Expenses, excluding distribution fees .87%* .92% 1.00% 1.04% 1.10%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.87%* 1.92% 2.00% 2.04% 2.10%
======== ======== ======== ======== ========
Investment income--net (.46%)* (.56%) (.61%) (.60%) (.05%)
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $829,022 $508,008 $165,015 $105,669 $ 58,013
Data: ======== ======== ======== ======== ========
Portfolio turnover 11.90% 13.25% 7.62% 5.91% 31.06%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Aggregate total investment return.
+++Based on average number of shares outstanding.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Pacific Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Fund offers both Class A and
Class B Shares. Class A Shares are sold with a front-end sales
charge. Class B Shares may be subject to a contingent deferred sales
charge. Both classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class B Shares bear certain expenses related to the
distribution of such shares and have exclusive voting rights with
respect to matters relating to such distribution expenditures. The
following is a summary of significant accounting policies followed
by the Fund.
<PAGE>
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. However, in certain circumstances, the
Fund will value a security traded on a Japanese stock exchange based
upon the last bid or ask price as reported on such exchange after
trading in such security has been halted for the day. Japanese stock
exchanges may impose limits, based on a percentage of a security's
value, on the amount such security may move in a single day. If the
security reaches its limit during the day, further trading is
halted. However, a bid or ask quotation may be reported following
the suspension of trading. In situations where both a bid and ask
price are reported following a trading suspension due to the
circumstances described above, the Fund will utilize the bid price
for valuation purposes. 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 traded in the over-the-counter market
are valued at the last available bid price in the over-the-counter
market prior to the time of valuation. Options written by the
Company are based upon the last asked price in the case of exchange-
traded options, or in the case of options traded in the over-the-
counter market, the average of the last asked price as obtained from
two or more dealers unless there is only one dealer, in which case,
that dealer's price is used. Options purchased by the Fund are
valued at their last bid price in the case of exchange-traded options
or, in the case of options traded in over-the-counter market, the
average of the last bid price as obtained from two or more dealers
unless there is only one dealer, in which case that dealer's price
is used. Short-term securities are valued at amortized cost, which
approximates market value. Securities and assets for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board
of Directors of the Fund.
(b) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
<PAGE>
The Fund is authorized to enter into forward foreign exchange
contracts as a hedge against either specific transactions or
portfolio positions. Such contracts are not entered on the Fund's
records. However, the effect on operations is recorded from the date
the Fund enters into such contracts. Premium or discount is
amortized over the life of the contracts.
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 exchanges 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.
(c) 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 date, except that if the ex-dividend date has passed,
certain dividends from foreign securities are recorded as soon as
the funds are informed of the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
NOTES TO FINANCIAL STATEMENTS (concluded)
(d) 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 dividends and interest at various
rates. There is no tax imposed on capital gains arising from the
sale of foreign investments.
(e) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends and distributions to shareholders--Dividends and
distributions paid by the Fund are recorded on the ex-dividend
dates.
(g) Options--The Fund can write covered call options and purchase
put options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written.
<PAGE>
When a security is sold through an exercise of an option, the
related premium received (or paid) is deducted from (or added to)
the basis 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 the premium paid or received).
Written and purchased options are non-income producing investments.
(h) Financial futures contracts--The Fund may purchase or sell stock
index futures contracts and options on such futures contracts. Upon
entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which
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.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc., an indirect wholly-owned
subsidiary of Merrill Lynch & Co. ("ML & Co."). The limited partners
are ML & Co. and Merrill Lynch Investment Management, Inc. ("MLIM"),
which is also an indirect wholly-owned subsidiary of ML & Co. The
Fund has also entered into a Distribution Agreement and a
Distribution Plan with Merrill Lynch Funds Distributor, Inc. ("MLFD"
or "Distributor"), a wholly-owned subsidiary of MLIM. MLAM is respon-
sible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Fund. For such services,
the Fund pays a monthly fee of 0.60% of the average daily net assets
of the Fund. The Management Agreement obligates MLAM to reimburse
the Fund to the extent the Fund's expenses (excluding interest,
taxes, distribution fees, brokerage fees and commissions, and
extraordinary items) exceed 2.5% of the Fund's first $30 million of
average daily net assets, 2.0% of the next $70 million of average
daily net assets, and 1.5% of the average daily net assets in excess
thereof. MLAM's obligation to reimburse the Fund is limited to the
amount of the management fee. No fee payment will be made to MLAM
during any fiscal year which will cause such expenses to exceed the
most restrictive expense limitation applicable at the time of such
payment.
<PAGE>
Pursuant to a distribution plan (the "Distribution Plan") in
accordance with Rule 12b-1 under the Investment Company Act of 1940,
the Fund pays the Distributor an ongoing account maintenance fee and
a distribution fee, which are accrued daily and paid monthly, at the
annual rates of 0.25% and 0.75%, respectively, of the average daily
net assets of the Class B Shares of the Fund. This fee is to
compensate the Distributor for the services it provides and the
expenses borne by the Distributor under the Distribution Agreement.
As authorized by the Plan, the Distributor has entered into an
agreement with Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), an affiliate of MLIM, which provides for the
compensation of MLPF&S for providing distribution-related services
to the Fund. For the six months ended June 30, 1994, MLFD earned
$3,183,500 under the Plan, all of which was paid to MLPF&S pursuant
to the agreement.
For the six months ended June 30, 1994, MLFD earned underwriting
discounts of $43,246, and MLPF&S earned dealer concessions of
$1,989,927 on the sale of the Fund's Class A Shares.
MLPF&S received contingent deferred sales charges of $715,653
relating to capital share transactions for the sale of Class B
Shares and $20,914 in commissions on the execution of portfolio
security transactions for the Fund during the period.
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 MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLIM, MLPF&S, FDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended June 30, 1994 were $327,356,458 and
$127,756,357, respectively.
Net realized and unrealized gains (losses) as of June
30, 1994 were as follows:
<PAGE>
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 7,156,634 $311,486,071
Short-term investments -- (1,285)
Stock index future contracts 5,335,637 (1,290,305)
Foreign currency
transactions (732,679) 234,922
Forward foreign exchange
contracts (2,836,495) 5,026,958
Currency put options
purchased (2,872,000) (10,089,000)
----------- ------------
Total $ 6,051,097 $305,367,361
=========== ============
As of June 30, 1994, net unrealized appreciation for Federal income
tax purposes aggregated $311,484,786, of which $326,817,204 related
to appreciated securities and $15,332,418 related to depreciated
securities. At June 30, 1994, the aggregate cost of investments,
including put options purchased, for Federal income tax purposes was
$1,079,016,010.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $354,214,874 and $364,954,305 for the six months ended June 30,
1994 and the year ended December 31, 1993, respectively.
Transactions in capital shares for Class A and Class B Shares were
as follows:
Class A Shares for the Six Months Dollar
Ended June 30, 1994 Shares Amount
Shares sold 7,206,105 $161,316,992
Shares issued to shareholders
in reinvestment of dividends
to shareholders 28 572
----------- ------------
Total issued 7,206,133 161,317,564
Shares redeemed (3,237,266) (72,319,131)
----------- ------------
Net increase 3,968,867 $ 88,998,433
=========== ============
<PAGE>
Class A Shares for the Year Dollar
Ended December 31, 1993 Shares Amount
Shares sold 10,009,773 $199,420,932
Shares issued to shareholders
in reinvestment of dividends
to shareholders 24,089 502,981
----------- ------------
Total issued 10,033,862 199,923,913
Shares redeemed (5,781,892) (111,793,605)
----------- ------------
Net increase 4,251,970 $ 88,130,308
=========== ============
Class B Shares for the Six Months Dollar
Ended June 30, 1994 Shares Amount
Shares sold 15,919,181 $342,550,811
Shares issued to shareholders
in reinvestment of dividends
to shareholders -- --
----------- ------------
Total issued 15,919,181 342,550,811
Shares redeemed (3,630,944) (77,334,370)
----------- ------------
Net increase 12,288,237 $265,216,441
=========== ============
Class B Shares for the Year Dollar
Ended December 31, 1993 Shares Amount
Shares sold 20,303,772 $393,836,066
Shares redeemed (6,173,424) (117,012,069)
----------- ------------
Net increase 14,130,348 $276,823,997
=========== ============
5. Commitments:
At June 30, 1994, the Fund had entered into forward exchange
contracts under which it had agreed to purchase and sell various
foreign currencies with an approximate value of $394,000 and
$10,990,000, respectively.
6. Capital Loss Carryforward:
At December 31, 1993, the Fund had a net capital loss carryforward
of approximately $3,332,000, all of which expires in 2001. This
amount will be available to offset like amounts of any future
taxable gains.
<PAGE>
APPENDIX: GRAPHIC AND IMAGE MATERIAL:
Item 1:
Results of a $1,000 Investment Since Inception--Class A Shares
(6.5% sales charge--$935.00 net amount invested; assuming
reinvestment of all dividends and capital gains distributions)
A mountain chart depicting the growth of an investment in the
Fund's Class A Shares from $935 on September 23, 1976 to
$16,916.44 on June 30, 1994.
