MERRILL LYNCH
PACIFIC FUND, INC.
FUND LOGO
Quarterly Report
March 31, 1996
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.
<PAGE>
Merrill Lynch
Pacific Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH PACIFIC FUND, INC.
DEAR SHAREHOLDER
During the quarter ended March 31, 1996, Merrill Lynch Pacific Fund,
Inc.'s Class A, Class B, Class C and Class D Shares had total
returns of +5.05%, +4.81%, +4.86% and +5.06%, respectively. The Fund
outperformed the US dollar-based return of the Japanese stock market
(the dominant component of the Fund's investment universe), yet
underperformed the more buoyant stock markets of Southeast Asia.
During the quarter the Fund also outperformed its Benchmark Index,
which rose 2.95% in US dollar terms for the period. (See "Recent
Performance Results" on page 6 of this report to shareholders. Fund
results do not reflect sales charges, and would be lower if sales
charges were included. Complete performance information, including
average annual total returns, can be found on pages 3--6 of this
report to shareholders.)
During the March quarter the Japanese stock market appreciated 3.75%
in local currency terms. However, the yen continued to weaken
relative to the US dollar by 3.30% during the period, which lowered
the return to +0.33% when translated into US dollar terms. On the
other hand, the Australian stock market was virtually unchanged in
local currency terms, but provided a +6.23% return in US dollar
terms since the Australian dollar appreciated by 5.15% relative to
the US dollar. The Hong Kong, Malaysian, Singapore and Thai stock
markets rose by 8.75%, 15.92%, 6.55% and 0.50%, respectively, in US
dollar terms.
<PAGE>
Investment Strategy
We made no major changes to the Fund's portfolio during the March
quarter since we did not alter our outlook regarding the Pacific
Basin stock markets. However, as discussed in our December 31, 1995
annual report to shareholders, we are somewhat more optimistic on
the prospects for the Japanese stock market over the intermediate
term. The most recent bear market in Japanese stocks was
precipitated by the collapse of an asset price "bubble," which
affected stock prices, real estate prices, bank solvency, corporate
profitability and general economic activity. Although these problems
are far from being resolved, they are now being addressed in public
discussions, which is the first step that must be taken if solutions
are to be reached.
At the same time, there are two other important developments that
make us somewhat more confident regarding the Japanese stock
market's intermediate-term prospects. They are:
* Corporate managements are beginning to focus on corporate
profitability, and are viewing their activities in light of
potential benefits to shareholders.
* Japanese pension fund managers are beginning to recognize that Japan
has a daunting pension funding problem, which is likely to become
insurmountable if the investment returns on accumulated assets do
not increase.
It is by no means certain that these newly emerging trends will
develop and ultimately have a positive impact on the Japanese stock
market. However, since their potential significance is great, we
believe it is important to discuss their implications at this time.
In previous reports to shareholders, we mentioned that Japanese
corporate managements were discussing the importance of enhancing
shareholder value for the first time. We initially believed that
these discussions would not be supported by meaningful actions.
Historically, Japanese companies have appeared to adopt US-style
management strategies, but the changes were only superficial.
However, just as we had become convinced that Japan could not
survive as a vital and important economic superpower unless the yen
weakened relative to the US dollar from the 80 yen/$1 US level, we
now believe that Japanese corporate profitability must improve in
order for the stock market to function as a viable conduit for
capital allocation.
<PAGE>
In our view, those investors who experienced the recent Japanese
stock market collapse--in which share prices declined over 60% from
December 1989 to June 1995--will demand greater fundamental value
from Japanese stocks than they had in the past. It is implausible to
us that these investors will find it attractive to establish
meaningful positions in companies whose profitability levels are too
low to justify their share prices. When we first learned that share
buyback programs were being discussed in Japan, we believed that
they were mentioned as mere "talking points" to generate interest in
stocks, rather than a well-considered means for Japanese
corporations to enhance value to their shareholders. However, it now
seems more likely to us that investors will demand a greater degree
of corporate accountability in Japan, and that corporate managements
will increasingly focus on enhancing shareholder value through means
such as share buyback programs.
This development is interrelated with the coming Japanese pension
fund crisis. Japanese pension funds must earn higher returns if
there is any likelihood that they will be able to pay the benefits
that they owe. US investment and actuarial consulting firms are
advising Japanese pension plans that they are heading for a crisis
unless they improve investment returns. This is what happened in the
United States more than 20 years ago, with the result that pension
fund managers decided that their long-term obligations were best
funded by the asset class that historically has provided the most
attractive results: common stocks.
Despite the similarities between the Japanese pension funds of today
and US pension funds in the past, it is far from certain that their
conclusions will be the same, since the liabilities are different
and the historical returns and risks of Japanese and US common
stocks are different. However, what is clear is that the low returns
earned on Japanese fixed-income investments (the current investment
vehicle of Japanese pension plans) are insufficient to sustain the
integrity of these pension plans. Pension fund managers must either
change the benefits to be paid by the plans or invest in an asset
class that has the potential to achieve higher returns. This does
not necessarily mean that the asset class chosen will be Japanese
stocks, but equity investments are likely to be given careful
consideration.
Presumably, when evaluating potential stock market investments,
pension plan sponsors will examine their fundamental valuations. For
example, if a company earns 4% on book value and its shares sell at
three times book value, there appears to be little potential for
long-term appreciation. However, if a stock sells for 1.5 times book
value and earns 9% on book value, an investor may conclude that its
potential for appreciation is greater than the approximate 3%
current yield of the Japanese long bond. Moreover, if earnings per
share and cash flow per share have the potential to accrete at a
rate of 5%--10% per year, it becomes more likely that stocks will be
the investment of choice for pension fund sponsors seeking to meet
future obligations.
<PAGE>
Even with our more positive view of the Japanese stock market, we
are not inclined to increase the Fund's 60% weighting in Japan to
the benchmark weighting of 68%. First, it is by no means certain
that Japanese corporations will attempt or prove successful in
enhancing shareholder value nor that Japanese pension funds will
turn to the stock market in search of better investment returns.
Second, our view of the risk/potential return tradeoff between
increased investment in Japan and other Asian stock markets
continues to favor the markets outside of Japan. Therefore, we
maintain meaningful weightings in Hong Kong and Australian stocks
and recently added modest investments in Malaysia and Thailand.
Over time, we would expect that the smaller Southeast Asian markets
will constitute a larger part of the portfolio. We do not anticipate
increasing our slightly less than market weighting in Hong Kong,
since share prices are not sufficiently inexpensive to warrant
taking on the additional political and economic risks associated
with the 1997 takeover by The People's Republic of China. The
potential of an organized labor dispute in Australia may create
share price weakness, which could afford us an opportunity to
increase Australian investments in the near term.
In Conclusion
As has been the case for some time, the Fund's exposure to the
Japanese yen is largely hedged back into US dollars. Our Japanese
investments continue to be focused on those companies which will
profit from a weaker yen, and will not perform well if the yen
strengthens meaningfully relative to the US dollar. On the other
hand, if Japanese interest rates stay relatively low and the yen
gradually weakens relative to the US dollar, we expect that our
Japanese investments will perform well. If Japanese corporations put
greater emphasis on enhancing shareholder value and Japanese pension
plans choose to invest in attractively valued companies that offer
the potential for long-term capital appreciation, we expect that the
Fund's Japanese investments would benefit from these trends.
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
<PAGE>
(Stephen I. Silverman)
Stephen I. Silverman
Vice President and Portfolio Manager
April 22, 1996
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 5.25% 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 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 8 years.
* Class C Shares are subject to a distribution fee of 0.75% 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 5.25% 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. 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.
<PAGE>
PERFORMANCE DATA (continued)
Results of a $1,000 Investment Since Inception--Class A Shares
(5.25% sales charge--$947.50 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 $947.50 on September 23, 1976
to $18,260.22 on March 31, 1996.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/96 +16.32% +10.21%
Five Years Ended 3/31/96 + 9.76 + 8.58
Ten Years Ended 3/31/96 +13.66 +13.05
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/96 +15.15% +11.15%
Five Years Ended 3/31/96 + 8.64 + 8.64
Inception (10/21/88) through 3/31/96 + 8.66 + 8.66
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
<PAGE>
Class C Shares*
Year Ended 3/31/96 +15.13% +14.13%
Inception (10/21/94)
through 3/31/96 + 5.30 + 5.30
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/96 +16.05% + 9.96%
Inception (10/21/94)
through 3/31/96 + 6.12 + 2.23
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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
1994 21.21 21.12 0.469 0.219 + 2.90
1995 21.12 22.16 0.382 0.298 + 8.20
1/1/96--3/31/96 22.16 23.28 -- -- + 5.05
------- ------
Total $36.511 Total $4.534
Cumulative total return as of 3/31/96: +1,827.20%**
<PAGE>
<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>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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
1994 20.41 20.27 0.469 0.041 + 1.87
1995 20.27 21.22 0.382 0.099 + 7.10
1/1/96--3/31/96 21.22 22.24 -- -- + 4.81
------ ------
Total $5.337 Total $2.012
Cumulative total return as of 3/31/96: +85.57%**
<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)
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change***
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $21.67 $20.12 $0.469 $0.191 - 4.04%
1995 20.12 20.97 0.382 0.179 + 7.07
1/1/96--3/31/96 20.97 21.99 -- -- + 4.86
------ ------
Total $0.851 Total $0.370
Cumulative total return as of 3/31/96: + 7.74%***
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $22.70 $21.11 $0.469 $0.213 - 3.93%
1995 21.11 22.14 0.382 0.255 + 7.95
1/1/96--3/31/96 22.14 23.26 -- -- + 5.06
------ ------
Total $0.851 Total $0.468
Cumulative total return as of 3/31/96: + 8.95%**
<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.
***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>
<TABLE>
Recent Performance Results
<CAPTION>
Market Performance Market Capitalization
In Local Currency/In US Dollars (as of 12/31/95)
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* +5.05% +14.77%(1)
ML Pacific Fund, Inc. Class B Shares* +4.81 +14.61(1)
ML Pacific Fund, Inc. Class C Shares* +4.86 +14.16(1)
ML Pacific Fund, Inc. Class D Shares* +5.06 +14.73(1)
ML Pacific Fund, Inc. Class A Shares--Total Investment Return* +5.05 +16.32(2)
ML Pacific Fund, Inc. Class B Shares--Total Investment Return* +4.81 +15.15(3)
ML Pacific Fund, Inc. Class C Shares--Total Investment Return* +4.86 +15.13(4)
ML Pacific Fund, Inc. Class D Shares--Total Investment Return* +5.06 +16.05(5)
Market-Weighted Index** +2.08(6) + 5.52(7)
Benchmark Index*** +2.95 + 8.59
Japan + 3.75/+ 0.33 +25.15/+ 2.11 $3,583 79.7%
Australia + 1.03/+ 6.23 +16.73/+24.64 245 5.4
Hong Kong + 8.77/+ 8.75 +27.59/+27.55 274 6.1
Malaysia +15.47/+15.92 +16.77/+16.77 205 4.6
Singapore + 6.02/+ 6.55 +16.37/+16.70 149 3.3
Thailand + 0.70/+ 0.50 + 6.00/+ 3.42 41 0.9
<PAGE>
<FN>
(1)Percent change includes reinvestment of $0.382 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.298 per share ordinary
income dividends and $0.382 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.099 per share ordinary
income dividends and $0.382 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.179 per share ordinary
income dividends and $0.382 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.255 per share ordinary
income dividends and $0.382 per share capital gains distributions.
(6)12/31/95 market weights used in this computation. The Market-
Weighted Index return and individual country returns do not include
dividends.
(7)3/31/95 market weights used in this computation. The Market-
Weighted Index return and individual country returns do not include
dividends.
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
**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.
***Unmanaged. The Benchmark Index weights US dollar-adjusted returns
based on 68% Japan, 7% Australia, 14% Hong Kong, 5% Malaysia, 4%
Singapore and 2% Thailand.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Held/ Percent of
Industry Face Amount Investments Cost Value Net Assets
Japanese Securities
<S> <C> <S> <C> <C> <C>
Automobile 4,794,000 Suzuki Motor Corp. $ 50,657,289 $ 59,273,885 2.7%
Beverage 380,000 Chukyo Coca-Cola Bottling Co., Ltd. 5,420,506 3,950,918 0.2
424,000 Hokkaido Coca-Cola Bottling Co., Ltd. 6,399,350 5,440,989 0.2
386,000 Kinki Coca-Cola Bottling Co., Ltd. 7,430,096 5,640,315 0.3
476,000 Mikuni Coca-Cola Bottling Co., Ltd. 8,487,431 6,375,796 0.3
470,000 Sanyo Coca-Cola Bottling Co., Ltd. 7,028,799 6,735,669 0.3
------------- ------------- ------
34,766,182 28,143,687 1.3
<PAGE>
Capital Goods 12,243,000 Mitsubishi Heavy Industries, Ltd. 88,713,718 105,962,271 4.9
Chemicals 3,311,700 Shin-Etsu Chemical Co., Ltd. 59,275,435 63,901,293 2.9
Consumer YEN 409,000,000 Matsushita Electric Works, Ltd.--
Electronics C.E.W. #8, 2.70% due 5/31/2002 4,543,869 4,827,089 0.2
Containers 2,926,000 Toyo Seikan Kaisha, Ltd. 66,781,230 103,325,403 4.7
Electric 1,458,000 Chudenko Corp. 46,798,690 49,437,617 2.3
Construction 3,092,100 Kinden Corp. 49,569,735 48,078,737 2.2
1,232,000 Taihei Dengyo Kaisha, Ltd. 24,789,475 17,771,450 0.8
------------- ------------- ------
121,157,900 115,287,804 5.3
Electric Equipment 3,640,000 Murata Manufacturing Co., Ltd. 125,325,684 125,470,214 5.8
2,557,000 NEC Corporation 37,256,072 29,699,138 1.4
1,244,000 Rohm Co., Ltd. 54,740,350 71,079,056 3.2
169 Sumitomo Electric Industries,
Ltd.,#1 Y (Warrants)(a) 185,351 197,874 0.0
------------- ------------- ------
217,507,457 226,446,282 10.4
Iron & Steel 475,000 Maruichi Steel Tube, Ltd. 6,023,843 9,298,895 0.4
Office Equipment 6,250,000 Canon, Inc. 101,729,125 119,426,752 5.5
Pharmaceuticals 2,680,000 Sankyo Co., Ltd. 60,554,336 61,502,435 2.8
Property & Casualty 8,690,000 Dai-Tokyo Fire & Marine Insurance
Insurance Co., Ltd. 53,154,586 64,304,047 2.9
4,492,000 Fuji Fire & Marine Insurance
Co., Ltd. 16,261,457 23,772,761 1.1
7,539,000 Koa Fire & Marine Insurance
Co., Ltd. 45,292,612 46,959,863 2.2
8,097,600 Nichido Fire & Marine Insurance
Co., Ltd. 45,627,235 61,058,149 2.8
7,029,000 Sumitomo Marine & Fire Insurance
Co., Ltd. 60,908,083 60,440,446 2.8
4,550,000 Tokio Marine & Fire Insurance
Co., Ltd. 45,703,327 59,240,352 2.7
------------- ------------- ------
266,947,300 315,775,618 14.5
<PAGE>
Retailing 1,464,000 Ito-Yokado Co., Ltd. 72,277,909 87,077,557 4.0
364,000 Sangetsu Co., Ltd. 8,382,717 8,796,553 0.4
352,000 Senshukai Co., Ltd. 5,696,494 5,802,922 0.3
------------- ------------- ------
86,357,120 101,677,032 4.7
Total Investments in Japan 1,165,014,804 1,314,848,446 60.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Held/ Percent of
Industry Face Amount Investments Cost Value Net Assets
Australian Securities
<S> <C> <S> <C> <C> <C>
Food & Beverage 7,601,222 Coca-Cola Amatil, Ltd. $ 36,627,845 $ 76,550,934 3.5%
Leisure 13,840,684 Village Roadshow Ltd. 'A' (Preferred) 24,574,258 45,452,529 2.1
Property 5,925,180 Lend Lease Corp. 75,437,603 85,801,275 3.9
US$ 1,500,000 Lend Lease Finance International,
4.75% due 6/01/2003 1,736,250 1,847,100 0.1
------------- ------------- ------
77,173,853 87,648,375 4.0
Total Investments in Australia 138,375,956 209,651,838 9.6
Hong Kong Securities
Banking 6,288,450 HSBC Holdings PLC 89,029,293 94,318,619 4.3
Conglomerates 10,694,035 Hutchison Whampoa Limited 59,060,809 67,477,231 3.1
Diversified 7,752,500 Swire Pacific Ltd. 'A' 64,199,931 68,162,658 3.2
Property 6,533,000 Cheung Kong (Holdings) Limited 47,626,996 46,036,786 2.1
Total Investments in Hong Kong 259,917,029 275,995,294 12.7
<PAGE>
Indian Securities
Banking 5,100 SCICI, Ltd. 15,309 6,835 0.0
Broadcast/Media 620,000 BITV 3,557,823 3,287,187 0.2
Diversified Mutual Fund 1,929,400 Master Plus 1,146,844 684,809 0.0
Financial Services 72,000 Housing Development Finance Corp.
Limited 5,781,901 6,871,281 0.3
Total Investments in India 10,501,877 10,850,112 0.5
Indonesian Securities
Pharmaceuticals 1,634,000 P.T. Kalbe Farma 5,525,626 4,981,707 0.2
Total Investments in Indonesia 5,525,626 4,981,707 0.2
Malaysian Securities
Conglomerates 25,060,000 Renong BHD 41,632,279 40,833,380 1.8
3,132,500 Renong BHD (Rights) (c) 0 0 0.0
5,012,000 Renong BHD (Rights) (d) 0 3 0.0
------------- ------------- ------
41,632,279 40,833,383 1.8
Transportation 3,661,000 Malaysian International Shipping BHD 12,515,710 10,352,442 0.5
Total Investments in Malaysia 54,147,989 51,185,825 2.3
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Held/ Percent of
Industry Face Amount Investments Cost Value Net Assets
New Zealand Securities
<S> <C> <S> <C> <C> <C>
Diversified 36,600,000 Guiness Peat Group PLC $ 15,917,954 $ 22,438,728 1.0%
Total Investments in New Zealand 15,917,954 22,438,728 1.0
Pakistan Securities
Utilities 43,298 Pakistan Telecommunications (GDR)(b) 7,783,681 4,156,608 0.2
Total Investments in Pakistan 7,783,681 4,156,608 0.2
Singaporean Securities
Food 3,600,000 Cerebos Pacific Ltd. 5,153,632 30,703,625 1.4
Transportation 300,000 Singapore Bus Co. Ltd.--Foreign
Registered 1,060,285 2,196,162 0.1
Total Investments in Singapore 6,213,917 32,899,787 1.5
South Korean Securities
Textiles 3,080 Taekwang Industries Co. 716,353 1,870,366 0.1
Total Investments in South Korea 716,353 1,870,366 0.1
Thailand Securities
<PAGE>
Banking US$ 12,631,000 Bangkok Bank Public Company Limited,
3.25% due 3/03/2004 15,233,380 14,620,383 0.7
US$ 19,535,000 Siam Commercial Bank Public Co.,
3.25% due 1/24/2004 25,441,125 24,223,400 1.1
------------- ------------- ------
40,674,505 38,843,783 1.8
Total Investments in Thailand 40,674,505 38,843,783 1.8
Face Amount
Short-Term Securities
Commercial Paper* US$ 20,000,000 AI Credit Corp., 5.32% due 4/01/1996 19,994,089 19,994,089 0.9
67,616,000 Ford Motor Credit Co., 5.50% due
4/01/1996 67,595,339 67,595,339 3.1
30,617,000 Sheffield Receivables Corp., 5.50%
due 4/02/1996 30,602,967 30,602,967 1.4
30,000,000 UBS Finance Delaware Inc., 5.45%
due 4/01/1996 29,990,917 29,990,917 1.4
------------- ------------- ------
148,183,312 148,183,312 6.8
Total Investments in Short-Term
Securities 148,183,312 148,183,312 6.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Premiums Percent of
Face Amount Issue Paid Value Net Assets
Currency Put Options Purchased
<C> <S> <C> <C> <C>
US$ 300,000,000 Japanese Yen, expiring November
1996 at YEN 107 $ 9,765,000 $ 7,935,000 0.4%
300,000,000 Japanese Yen, expiring December
1996 at YEN 107 10,155,000 8,400,000 0.4
300,000,000 Japanese Yen, expiring January
1997 at YEN 107 10,440,000 8,730,000 0.4
-------------- -------------- ------
30,360,000 25,065,000 1.2
<PAGE>
Total Currency Put Options Purchased 30,360,000 25,065,000 1.2
Total Investments $1,883,333,003 2,140,970,806 98.2
==============
Unrealized Appreciation on Forward Foreign Exchange Contracts** 27,018,207 1.2
Other Assets Less Liabilities 12,040,834 0.6
-------------- ------
Net Assets $2,180,029,847 100.0%
============== ======
Net Asset Value: Class A--Based on net assets of $682,471,114 and
29,310,173 shares outstanding $ 23.28
=============
Class B--Based on net assets of $1,264,067,791 and
56,839,228 shares outstanding $ 22.24
=============
Class C--Based on net assets of $84,573,405 and
3,846,842 shares outstanding $ 21.99
=============
Class D--Based on net assets of $148,917,537 and
6,403,210 shares outstanding $ 23.26
=============
<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)GDR--Global Depositary Receipts.
(c)The rights may be exercised until May 3, 1996 to acquire
warrants.
(d)The rights may be exercised until May 3, 1996 to acquire
irredeemable unsecured loan stock.
*Commercial Paper is 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 March 31, 1996 were as
follows:
<PAGE>
<CAPTION>
Unrealized
Expiration Appreciation
Foreign Currency Purchased Date (Depreciation)
<S> <S> <C>
YEN 103,107,055 July 1996 $ (18,165)
Total (US$ Commitment--$998,527) $ (18,165)
-----------
Foreign Currency Sold
YEN 49,977,132,716 July 1996 $27,036,372
Total (US$ Commitment--$502,250,244) $27,036,372
-----------
Total Unrealized Appreciation--Net on
Forward Foreign Exchange Contracts $27,018,207
===========
</TABLE>
PORTFOLIO INFORMATION
For the Quarter Ended March 31, 1996
Percent of
Ten Largest Equity Holdings Net Assets
Murata Manufacturing Co., Ltd. 5.8%
Canon, Inc. 5.5
Mitsubishi Heavy Industries, Ltd. 4.9
Toyo Seikan Kaisha, Ltd. 4.7
HSBC Holdings PLC 4.3
Ito-Yokado Co., Ltd. 4.0
Lend Lease Corp. 3.9
Coca-Cola Amatil, Ltd. 3.5
Rohm Co., Ltd. 3.2
Swire Pacific Ltd. 'A' 3.2
<PAGE>
Percent of
Ten Largest Industries Net Assets
Property & Casualty Insurance 14.5%
Electric Equipment 10.4
Banking 6.1
Property 6.1
Office Equipment 5.5
Electric Construction 5.3
Conglomerates 4.9
Capital Goods 4.9
Containers 4.7
Retailing 4.7
Additions (Equity Investments)
Cheung Kong (Holdings) Limited
Renong BHD (Rights)
Deletions (Equity Investments)
The Nippon Signal Co., Ltd.
SCICI, Ltd. (Rights)
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Executive Vice President
Donald C. Burke, Vice President
Stephen I. Silverman, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Robert Harris, Secretary
<PAGE>
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
