MERRILL LYNCH
PACIFIC FUND, INC.
FUND LOGO
Semi-Annual Report
June 30, 1997
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
Printed on post-consumer recycled paper
MERRILL LYNCH PACIFIC FUND, INC.
DEAR SHAREHOLDER
Merrill Lynch Pacific Fund, Inc. performed in line with the
unmanaged Benchmark Index for the three-month period ended June 30,
1997, with Class A, Class B, Class C and Class D Shares registering
total returns of +18.03%, +17.68%, +17.68% and +17.95%, respectively,
compared to a +17.22% return for the Benchmark Index. Since the Fund's
performance was essentially flat during the first three months of 1997,
total returns for the first six months of the year are nearly the same
as for the June quarter: +18.30%, +17.68%, +17.73% and +18.17% for Class A,
Class B, Class C and Class D Shares, respectively, substantially
outperforming the +5.04% return for the unmanaged Benchmark Index
for the six months ended June 30, 1997. (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.)
<PAGE>
During the June quarter, the Japanese, Australian and Hong Kong
stock markets registered gains in local currency terms, and most of
our stock positions outperformed their respective stock markets.
Some of the other Asian stock markets--Singapore, Malaysia and, most
notably, Thailand--continued to perform poorly. Since the Fund has
very small positions in these markets, their weakness had little
negative impact on performance.
During the June quarter, the yen put options, which have greatly
benefited Fund performance since mid-1995 as the yen depreciated
relative to the US dollar, finally cost the Fund some relative
performance, since the yen appreciated by approximately 8% relative
to the US dollar. The Fund's yen put options are now very far "out
of the money." This means that the protection against yen
depreciation that these instruments provide will only become
effective if the yen depreciates by at least 6%--10% relative to the
US dollar, and that the portfolio is effectively unhedged if the yen
depreciates by a lesser amount.
At the close of the June quarter, the Fund's Japanese exposure was
64.5% of net assets, virtually unchanged from the prior three-month
period. During the period we added one new Japanese position,
Yamanouchi Pharmaceutical Co., Ltd. Yamanouchi is one of Japan's
larger pharmaceutical companies whose shares are selling at a
discount to the average price/earnings multiple for the Japanese
pharmaceutical industry and the Japanese stock market overall. This
discount does not appear justified in view of the company's strong
financial position and its large line-up of new drugs expected to
come to market over the next five years--ten years.
While the Japanese stock market appreciated meaningfully during the
June quarter, for the first six months of the year it was up only
5.6% in yen terms, a much lower gain than many other major stock
markets registered. For example, the US stock market rose over 20%,
and some major European markets were up over 30% in local currency
terms during this same period.
Given Japan's underperformance relative to other major stock
markets, many investors may have the view that Japanese stocks are
due for a catch-up phase. Although there are good reasons to justify
this point of view (for example, low individual and institutional
ownership of Japanese stocks and an economic pick up in Japan), we
continue to prefer to focus on investing in companies that we
believe are worth more than their shares are selling for, rather
than assessing the stock market's likely future direction.
<PAGE>
Nevertheless, the Japanese stock market is exhibiting some of the
healthiest signs in years. In particular, it does appear that
corporate profitability is picking up and that some companies are
exhibiting signs of trying to operate more efficiently, thereby
achieving better financial results. Finally, there is the
potentially very significant trend of managements contemplating the
idea that some of the benefits of improved corporate financial
performance should accrue to their shareholders. As this idea
spreads more broadly throughout corporate Japan (coupled with the
increased pressure on corporations to actually improve performance),
it is conceivable that the Japanese stock market will have many more
companies that merit serious investment interest.
In our view, one of the greatest attractions of the Japanese stock
market is that shares of the best companies are often very
reasonably valued relative to the rest of the stock market, which is
generally not the case in the United States. Although our largest
Japanese positions have appreciably outperformed Japanese stocks in
general, in our opinion, they still represent good values, and are
exceptionally undervalued relative to the Japanese stock market as a
whole. In addition, we continue to look for new investments in
companies whose managements appear to want to create shareholder
value. Although there is not yet widespread change in the way
corporate Japan functions, we are beginning to find a few candidates
for investment that are working toward enhancing shareholder value.
As discussed in our last report to shareholders, we continued to
trim some of our largest positions so that they do not each exceed
7% of net assets. Our largest positions range between 4.5% and 7.0%
of net assets: HSBC Holdings PLC (Hong Kong), Lend Lease Corp.
(Australia), Canon, Inc., Murata Manufacturing Co., Ltd., and
Mitsubishi Heavy Industries, Ltd. (Japan). The Fund's next-largest
holdings are all positions that represent 3.7%--4.1% of the
portfolio. As has been the case for some time, the Fund's ten-
largest positions comprise 40%--50% of portfolio net assets.
In Conclusion
Currently, we believe that our largest positions are still
attractively valued. Barring any major new developments (for
example, a sharp share price appreciation or a significant
deterioration in a company's economic prospects), we anticipate that
the portfolio's composition may remain relatively unchanged in the
near term. However, as noted, we may continue to add new positions
in Japan if we identify attractive new investment opportunities.
We thank you for your investment in Merrill Lynch Pacific Fund,
Inc., and we look forward to reviewing our investment outlook and
strategy with you again in our next report to shareholders.
Sincerely,
<PAGE>
(Arthur Zeikel)
Arthur Zeikel
President
(Stephen I. Silverman)
Stephen I. Silverman
Vice President and Portfolio Manager
August 7, 1997
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. (There is no initial
sales charge for automatic share conversions.)
* 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.
<PAGE>
* 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. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the ex-dividend 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.
<TABLE>
Recent Performance Results
<CAPTION>
Market Performance Market Capitalization
In Local Currency/In US Dollars (as of 3/31/97)
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--Total Investment Return* +18.03% +13.85%(1)
ML Pacific Fund, Inc. Class B Shares--Total Investment Return* +17.68 +12.68(2)
ML Pacific Fund, Inc. Class C Shares--Total Investment Return* +17.68 +12.66(3)
ML Pacific Fund, Inc. Class D Shares--Total Investment Return* +17.95 +13.54(4)
Market-Weighted Index** +17.00(5) -8.27(6)
Benchmark Index*** +17.22 -4.69
Japan +13.15/+22.02 -9.26/-13.17 $2,661 70.9%
Australia +12.53/+7.62 +21.58/+15.83 301 8.0
Hong Kong +21.24/+21.27 +37.89/+37.78 349 9.3
Malaysia -10.46/-12.11 -5.19/-6.31 283 7.5
Singapore -5.01/-4.03 -15.03/-16.15 137 3.7
Thailand -25.25/-25.11 -57.72/-58.50 22 0.6
<PAGE>
<FN>
(1)Percent change includes reinvestment of $1.403 per share ordinary
income dividends and $0.505 per share capital gains distributions.
(2)Percent change includes reinvestment of $1.167 per share ordinary
income dividends and $0.505 per share capital gains distributions.
(3)Percent change includes reinvestment of $1.194 per share ordinary
income dividends and $0.505 per share capital gains distributions.
(4)Percent change includes reinvestment of $1.337 per share ordinary
income dividends and $0.505 per share capital gains distributions.
(5)3/31/97 market weights used in this computation. The Market-
Weighted Index return and individual country returns do not include
dividends.
(6)6/30/96 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>
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 $21,815.90 on
June 30, 1997.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
<PAGE>
Year Ended 6/30/97 +13.85% + 7.87%
Five Years Ended 6/30/97 +12.91 +11.70
Ten Years Ended 6/30/97 + 8.77 + 8.18
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +12.68% + 8.68%
Five Years Ended 6/30/97 +11.74 +11.74
Inception (10/21/88) through 6/30/97 + 9.43 + 9.43
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/97 +12.66% +11.66%
Inception (10/21/94)
through 6/30/97 + 9.29 + 9.28
[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 6/30/97 +13.54% +7.58%
Inception (10/21/94)
through 6/30/97 +10.15 +7.97
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum 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**
<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
1996 22.16 21.58 0.505 1.403 + 6.09
1/1/97--6/30/97 21.58 25.53 -- -- +18.30
------- ------
Total $37.016 Total $5.937
Cumulative total return as of 6/30/97: +2,202.47%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charges; 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**
<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
1996 21.22 20.59 0.505 1.167 + 5.00
1/1/97--6/30/97 20.59 24.23 -- -- +17.68
------ ------
Total $5.842 Total $3.179
Cumulative total return as of 6/30/97: +118.78%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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
1996 20.97 20.30 0.505 1.194 + 5.00
1/1/97--6/30/97 20.30 23.90 -- -- +17.73
------ ------
Total $1.356 Total $1.564
Cumulative total return as of 6/30/97: +27.01%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<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
1996 22.14 21.57 0.505 1.337 + 5.84
1/1/97--6/30/97 21.57 25.49 -- -- +18.17
------ ------
Total $1.356 Total $1.805
Cumulative total return as of 6/30/97: +29.72%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Held/ Value Percent of
Industry Face Amount Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Japanese Securities
Automobile 4,794,000 Suzuki Motor Corp. $ 50,657,289 $ 60,725,954 2.8%
Beverage 380,000 Chukyo Coca-Cola Bottling Co., Ltd. 5,420,506 3,352,844 0.2
424,000 Hokkaido Coca-Cola Bottling Co., Ltd. 6,399,350 5,815,323 0.3
386,000 Kinki Coca-Cola Bottling Co., Ltd. 7,430,096 5,294,138 0.2
476,000 Mikuni Coca-Cola Bottling Co., Ltd. 8,487,431 7,069,101 0.3
470,000 Sanyo Coca-Cola Bottling Co., Ltd. 7,028,799 6,199,878 0.3
-------------- -------------- ------
34,766,182 27,731,284 1.3
Capital Goods 13,543,000 Mitsubishi Heavy Industries, Ltd. 99,257,428 103,994,907 4.8
<PAGE>
Chemicals 3,167,000 Shin-Etsu Chemical Co., Ltd. 57,554,546 84,106,578 3.8
Consumer YEN 409,000,000 Matsushita Electric Works, Ltd.--
Electronics C.E.W. #8, 2.70% due 5/31/2002
(Convertible) 4,543,869 4,930,724 0.2
Containers 1,816,000 Toyo Seikan Kaisha, Ltd. 50,677,095 40,295,623 1.8
Electric 1,886,000 Chudenko Corp. 55,413,216 50,581,113 2.3
Construction 3,365,000 Kinden Corp. 53,752,777 47,622,084 2.2
1,232,000 Taihei Dengyo Kaisha, Ltd. 24,789,475 8,502,490 0.4
-------------- -------------- ------
133,955,468 106,705,687 4.9
Electric Equipment 3,112,000 Murata Manufacturing Co., Ltd. 114,350,017 123,968,900 5.7
800,000 Rohm Co., Ltd. 40,123,279 82,467,022 3.8
169 ++Sumitomo Electric Industries, Ltd.,
#1 YEN(Warrants) (a) 185,351 537,398 0.0
-------------- -------------- ------
154,658,647 206,973,320 9.5
Office Equipment 5,220,000 Canon, Inc. 89,555,366 142,276,579 6.5
Pharmaceuticals 2,404,000 Sankyo Co., Ltd. 54,265,843 80,854,372 3.7
2,800,000 Yamanouchi Pharmaceutical Co., Ltd. 69,461,063 75,338,517 3.4
-------------- -------------- ------
123,726,906 156,192,889 7.1
Property & Casualty 8,790,000 Dai-Tokyo Fire & Marine Insurance
Insurance Co., Ltd. 53,840,330 50,987,682 2.3
4,492,000 Fuji Fire & Marine Insurance Co., Ltd. 16,261,457 19,581,620 0.9
7,539,000 Koa Fire & Marine Insurance Co., Ltd. 45,292,612 45,641,015 2.1
8,191,000 Nichido Fire & Marine Insurance
Co., Ltd. 46,307,188 59,820,704 2.7
7,119,000 Sumitomo Marine & Fire Insurance
Co., Ltd. 61,618,176 58,459,509 2.7
4,662,000 Tokio Marine & Fire Insurance
Co., Ltd. 46,990,608 61,090,242 2.8
-------------- -------------- ------
270,310,371 295,580,772 13.5
Retailing 1,524,000 Ito-Yokado Co., Ltd. 75,480,112 88,534,987 4.1
364,000 Sangetsu Co., Ltd. 8,382,717 7,758,889 0.4
-------------- -------------- ------
83,862,829 96,293,876 4.5
Tires & Rubber 3,580,000 Bridgestone Corporation 61,174,772 83,190,356 3.8
Total Investments in Japan 1,214,700,768 1,408,998,549 64.5
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Value Percent of
Industry Shares Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Australian Securities
Food & Beverage 3,543,332 Coca-Cola Amatil, Ltd. $ 20,532,308 $ 45,678,510 2.1%
Leisure 13,378,824 Village Roadshow Ltd. 'A'
(Preferred) 30,080,632 33,591,886 1.5
Property 6,088,350 Lend Lease Corp. 78,133,814 127,770,113 5.9
Total Investments in Australia 128,746,754 207,040,509 9.5
Hong Kong Securities
Agriculture 70,658,176 C.P. Pokphand Co. Ltd. (Ordinary) 24,172,280 21,890,280 1.0
Banking 5,056,911 HSBC Holdings PLC 85,402,669 152,096,383 7.0
Conglomerates 8,732,035 Hutchison Whampoa Ltd. 59,630,333 75,521,034 3.4
Property 7,928,000 Cheung Kong (Holdings) Ltd 57,101,771 78,289,358 3.6
Total Investments in Hong Kong 226,307,053 327,797,055 15.0
Indian Securities
Banking 3,257,000 Industrial Development Bank of India 11,173,586 9,308,966 0.4
Broadcast/Media 620,000 ++BITV 3,557,823 242,628 0.0
Diversified Mutual 1,929,400 ++Master Plus 1,146,844 884,477 0.0
Fund
Financial Services 72,000 Housing Development Finance Corp. Ltd. 5,781,901 8,216,855 0.4
Total Investments in India 21,660,154 18,652,926 0.8
Indonesian Securities
Pharmaceuticals 2,831,500 P.T. Kalbe Farma 4,779,899 3,786,986 0.2
Total Investments in Indonesia 4,779,899 3,786,986 0.2
<PAGE>
Malaysian Securities
Conglomerates 35,998,000 Renong BHD 59,943,737 47,071,126 2.2
Transportation 212,000 Malaysian International Shipping BHD 694,398 550,224 0.0
Total Investments in Malaysia 60,638,135 47,621,350 2.2
New Zealand Securities
Diversified 50,947,756 Guinness Peat Group PLC 18,795,683 31,410,565 1.4
Total Investments in New Zealand 18,795,683 31,410,565 1.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Shares Held/ Value Percent of
Industry Face Amount Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Singaporean Securities
Transportation 78,000 Singapore Bus Co. Ltd.--Foreign
Registered $ 275,674 $ 373,819 0.0%
Total Investments in Singapore 275,674 373,819 0.0
South Korean Securities
Banking 512,360 Hana Bank (GDR) (b) 7,759,086 7,416,411 0.3
Total Investments in South Korea 7,759,086 7,416,411 0.3
Thailand Securities
Banking US$ 12,080,000 Bangkok Bank Public Company Ltd.,
3.25% due 3/03/2004 (Convertible) 13,552,370 9,241,200 0.4
Total Investments in Thailand 13,552,370 9,241,200 0.4
Short-Term Securities
Commercial Paper* US$ 70,000,000 General Electric Capital Corp.,
6.15% due 7/01/1997 70,000,000 70,000,000 3.2
US$ 71,323,000 General Motors Acceptance Corp.,
6.25% due 7/01/1997 71,323,000 71,323,000 3.3
Total Investments in Short-Term
Securities 141,323,000 141,323,000 6.5
<PAGE>
Nominal Value Premium
Covered by Options Issue Paid
Currency Put Options Purchased
US$ 477,000,000 Japanese Yen, expiring January 1998
at YEN 120 11,424,150 3,529,800 0.2
630,000,000 Japanese Yen, expiring March 1998
at YEN 125 14,834,727 2,268,000 0.1
Total Currency Put Options Purchased 26,258,877 5,797,800 0.3
Total Investments $1,864,797,453 2,209,460,170 101.1
==============
Liabilities in Excess of Other Assets (23,693,978) (1.1)
-------------- ------
Net Assets $2,185,766,192 100.0%
============== ======
<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)Global Depositary Receipts (GDR).
*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.
++Non-Income producing security.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of June 30, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$1,838,538,576)
(Note 1a) $2,203,662,370
Options purchased, at value (premiums paid--$26,258,877)
(Notes 1a & 1b) 5,797,800
Foreign cash (Note 1c) 12,046,013
Cash 609
Receivables:
Capital shares sold $ 9,572,036
Dividends 5,495,294
Securities sold 1,130,981
Interest 136,448 16,334,759
--------------
Prepaid registration fees and other assets (Note 1f) 90,322
--------------
Total assets 2,237,931,873
--------------
<PAGE>
Liabilities: Payables:
Securities purchased 43,255,700
Capital shares redeemed 4,901,717
Distributor (Note 2) 1,120,692
Investment adviser (Note 2) 1,079,754 50,357,863
--------------
Accrued expenses and other liabilities 1,807,818
--------------
Total liabilities 52,165,681
--------------
Net Assets: Net assets $2,185,766,192
==============
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized $ 2,691,580
Class B Shares of Common Stock, $0.10 par value, 200,000,000
shares authorized 4,989,938
Class C Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 457,335
Class D Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 707,284
Paid-in capital in excess of par 1,688,451,219
Accumulated investment loss--net (1,853,732)
Undistributed realized capital gains on investments and
foreign currency transactions--net 144,143,665
Unrealized appreciation on investments and foreign currency
transactions--net 346,178,903
--------------
Net assets $2,185,766,192
==============
Net Asset Value: Class A--Based on net assets of $687,074,549 and 26,915,796
shares outstanding $ 25.53
==============
Class B--Based on net assets of $1,209,119,687 and 49,899,378
shares outstanding $ 24.23
==============
Class C--Based on net assets of $109,295,047 and 4,573,347
shares outstanding $ 23.90
==============
Class D--Based on net assets of $180,276,909 and 7,072,844
shares outstanding $ 25.49
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statement of Operations for the Six Months Ended June 30, 1997
<S> <S> <C> <C>
Investment Dividends (net of $943,695 foreign withholding tax) $ 12,022,081
Income Interest and discount earned (net of $4,554 foreign
(Notes 1d & 1e): withholding tax) 1,311,503
--------------
Total income 13,333,584
--------------
Expenses: Investment advisory fees (Note 2) $ 5,733,589
Account maintenance and distribution fees--Class B (Note 2) 5,384,593
Transfer agent fees--Class B (Note 2) 1,234,307
Custodian fees 876,724
Transfer agent fees--Class A (Note 2) 605,711
Account maintenance and distribution fees--Class C (Note 2) 450,788
Account maintenance fees--Class D (Note 2) 170,230
Printing and shareholder reports 148,474
Transfer agent fees--Class D (Note 2) 134,687
Accounting services (Note 2) 123,764
Registration fees (Note 1f) 120,169
Transfer agent fees--Class C (Note 2) 105,953
Professional fees 49,097
Directors' fees and expenses 20,146
Pricing fees 6,046
Other 23,038
--------------
Total expenses 15,187,316
--------------
Investment loss--net (1,853,732)
--------------
Realized & Realized gain from:
Unrealized Gain Investments--net 67,413,696
(Loss) on Foreign currency transactions--net 78,425,512 145,839,208
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 219,041,621
(Notes 1b, 1c, Foreign currency transactions--net (45,859,279) 173,182,342
1d & 3): -------------- --------------
Net realized and unrealized gain on investments and foreign
currency transactions 319,021,550
--------------
Net Increase in Net Assets Resulting from Operations $ 317,167,818
==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
June 30, December 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment loss--net $ (1,853,732) $ (4,318,996)
Realized gain on investments and foreign currency transactions
--net 145,839,208 178,169,764
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 173,182,342 (70,760,953)
-------------- --------------
Net increase in net assets resulting from operations 317,167,818 103,089,815
-------------- --------------
Dividends & In excess of investment income--net:
Distributions to Class A -- (34,551,177)
Shareholders Class B -- (55,727,358)
(Note 1g): Class C -- (4,707,430)
Class D -- (6,918,235)
Realized gain on investments--net:
Class A -- (19,254,820)
Class B -- (38,434,097)
Class C -- (3,161,360)
Class D -- (4,073,091)
-------------- --------------
Net decrease in net assets resulting from dividends and
distributions to shareholders -- (166,827,568)
-------------- --------------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions share transactions (227,024,423) 365,961,817
(Note 4): -------------- --------------
Net Assets: Total increase in net assets 90,143,395 302,224,064
Beginning of period 2,095,622,797 1,793,398,733
-------------- --------------
End of period $2,185,766,192 $2,095,622,797
============== ==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995++ 1994++ 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 21.58 $ 22.16 $ 21.12 $ 21.21 $ 15.80
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .05 .11 .11 .10 .07
Realized and unrealized gain on
investments and foreign currency
transactions--net 3.90 1.21 1.61 .50 5.37
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.95 1.32 1.72 .60 5.44
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
In excess of investment income--net -- (1.22) -- (.22) (.03)
Realized gain on investments--net -- (.68) (.55) (.33) --
In excess of realized gain on
investments--net -- -- (.13) (.14) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions -- (1.90) (.68) (.69) (.03)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 25.53 $ 21.58 $ 22.16 $ 21.12 $ 21.21
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 18.30%+++ 6.09% 8.20% 2.90% 34.41%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .94%* .87% .93% .91% .90%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net .46%* .47% .53% .47% .47%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 687,074 $ 642,523 $ 607,598 $ 587,107 $ 472,322
========== ========== ========== ========== ==========
Portfolio turnover 6.54% 10.65% 26.73% 23.84% 13.25%
========== ========== ========== ========== ==========
Average commission rate paid++++ $ .0168 $ .0104 -- -- --
========== ========== ========== ========== ==========
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the period.
++++For fiscal years beginning on or after September 1, 1995,
the Fund is required to disclose its average commission rate
per share for purchases and sales of equity securities. The
"Average Commission Rate Paid" includes commissions paid in
foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of
the transaction. Such conversions may significantly affect
the rate shown.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B++
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 20.59 $ 21.22 $ 20.27 $ 20.41 $ 15.34
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment loss--net (.06) (.13) (.10) (.12) (.10)
Realized and unrealized gain on
investments and foreign currency
transactions--net 3.70 1.17 1.53 .49 5.17
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.64 1.04 1.43 .37 5.07
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
In excess of investment income--net -- (.99) -- (.04) --
Realized gain on investments--net -- (.68) (.38) (.33) --
In excess of realized gain on
investments--net -- -- (.10) (.14) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions -- (1.67) (.48) (.51) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 24.23 $ 20.59 $ 21.22 $ 20.27 $ 20.41
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 17.68%+++ 5.00% 7.10% 1.87% 33.05%
Return:** ========== ========== ========== ========== ==========
<PAGE>
Ratios to Average Expenses 1.97%* 1.90% 1.96% 1.94% 1.92%
Net Assets: ========== ========== ========== ========== ==========
Investment loss--net (.58%)* (.56%) (.50%) (.56%) (.56%)
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $1,209,120 $1,217,549 $1,041,763 $ 915,351 $ 508,008
========== ========== ========== ========== ==========
Portfolio turnover 6.54% 10.65% 26.73% 23.84% 13.25%
========== ========== ========== ========== ==========
Average commission rate paid++++ $ .0168 $ .0104 -- -- --
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the period.
++++For fiscal years beginning on or after September 1, 1995,
the Fund is required to disclose its average commission rate
per share for purchases and sales of equity securities. The
"Average Commission Rate Paid" includes commissions paid in
foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of
the transaction. Such conversions may significantly affect
the rate shown.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C++++
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended 1994++ to
June 30, December 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 20.30 $ 20.97 $ 20.12 $ 21.67
Operating -------- -------- -------- --------
Performance: Investment loss--net (.06) (.13) (.12) (.03)
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net 3.66 1.16 1.53 (.86)
-------- -------- -------- --------
Total from investment operations 3.60 1.03 1.41 (.89)
-------- -------- -------- --------
Less dividends and distributions:
In excess of investment income--net -- (1.02) -- (.19)
Realized gain on investments--net -- (.68) (.45) (.33)
In excess of realized gain on investments--net -- -- (.11) (.14)
-------- -------- -------- --------
Total dividends and distributions -- (1.70) (.56) (.66)
-------- -------- -------- --------
Net asset value, end of period $ 23.90 $ 20.30 $ 20.97 $ 20.12
======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 17.73%+++ 5.00% 7.07% (4.04%)+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 1.98%* 1.91% 1.97% 2.17%*
Net Assets: ======== ======== ======== ========
Investment loss--net (.58%)* (.58%) (.59%) (.79%)*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $109,295 $ 98,925 $ 46,092 $ 7,841
Data: ======== ======== ======== ========
Portfolio turnover 6.54% 10.65% 26.73% 23.84%
======== ======== ======== ========
Average commission rate paid+++++ $ .0168 $ .0104 -- --
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
+++Aggregate total investment return.
+++++For fiscal years beginning on or after September 1, 1995,
the Fund is required to disclose its average commission
rate per share for purchases and sales of equity securities.
The "Average Commission Rate Paid" includes commissions paid
in foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of
the transaction. Such conversions may significantly affect
the rate shown.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D++++
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended 1994++ to
June 30, December 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 21.57 $ 22.14 $ 21.11 $ 22.70
Operating -------- -------- -------- --------
Performance: Investment income--net .02 .04 .07 --
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net 3.90 1.23 1.60 (.91)
-------- -------- -------- --------
Total from investment operations 3.92 1.27 1.67 (.91)
-------- -------- -------- --------
Less dividends and distributions:
In excess of investment income--net -- (1.16) -- (.21)
Realized gain on investments--net -- (.68) (.51) (.33)
In excess of realized gain on investments--net -- -- (.13) (.14)
-------- -------- -------- --------
Total dividends and distributions -- (1.84) (.64) (.68)
-------- -------- -------- --------
Net asset value, end of period $ 25.49 $ 21.57 $ 22.14 $ 21.11
======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 18.17%+++ 5.84% 7.95% (3.93%)+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 1.19%* 1.12% 1.18% 1.42%*
Net Assets: ======== ======== ======== ========
Investment income--net .21%* .16% .31% .12%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $180,277 $136,626 $ 97,946 $ 22,012
Data: ======== ======== ======== ========
Portfolio turnover 6.54% 10.65% 26.73% 23.84%
======== ======== ======== ========
Average commission rate paid+++++ $ .0168 $ .0104 -- --
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
+++Aggregate total investment return.
+++++For fiscal years beginning on or after September 1, 1995,
the Fund is required to disclose its average commission rate
per share for purchases and sales of equity securities. The
"Average Commission Rate Paid" includes commissions paid in
foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of
the transaction. Such conversions may significantly affect
the rate shown.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
<PAGE>
1. Significant Accounting Policies:
Merrill Lynch Pacific Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a non-diversified, open-end
management investment company. 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 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 prior to the time of
valuation. Securities which 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 are valued at the
last sale price in the case of exchange-traded options or, in the
case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. 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 readily available are valued at
their fair value as determined in good faith by or under the
direction of the fund's Board of Directors.
<PAGE>
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt and currency
markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
* 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. Premium or discount is amortized over the life of the
contracts.
* 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 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).
NOTES TO FINANCIAL STATEMENTS (continued)
Written and purchased options are non-income producing investments.
* 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
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.
<PAGE>
(c) 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.
(d) 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.
(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 dividends and interest at various
rates. There is no tax imposed on capital gains arising from the
sale of foreign investments.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions to shareholders--Dividends and
distributions paid by the Fund are recorded on the ex-dividend
dates.
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. ("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 Merrill Lynch Funds Dis-
tributor, Inc. ("MLFD" or "Distributor"), a wholly-owned subsidiary
of Merrill Lynch Group, Inc.
MLAM 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 0.60% of the average daily
net assets of the Fund.
<PAGE>
Pursuant to the distribution plans (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 Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("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, 1997, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Fund's Class A and Class D Shares as
follows:
MLFD MLPF&S
Class A $ 5,821 $ 65,185
Class D $23,901 $358,355
For the six months ended June 30, 1997, MLPF&S received contingent
deferred sales charges of $3,121,315 and $27,247 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $26,732 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended June 30, 1997.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
<PAGE>
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended June 30, 1997 were $121,989,492 and
$396,231,634, respectively.
Net realized and unrealized gains (losses) as of June 30, 1997 were
as follows:
Unrealized
Realized Gains
Gains (Losses)
Investments:
Long-term $ 66,940,915 $365,123,794
Options written 472,781 --
------------ ------------
Total investments 67,413,696 365,123,794
------------ ------------
Currency transactions:
Options purchased 29,131,054 (20,461,077)
Options written 46,488,015 --
Foreign currency
transactions 2,806,443 1,516,186
------------ ------------
Total currency transactions 78,425,512 (18,944,891)
------------ ------------
Total $145,839,208 $346,178,903
============ ============
As of June 30, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $365,123,794, of which $442,812,814 related
to appreciated securities and $77,689,020 related to depreciated
securities. At June 30, 1997, the aggregate cost of investments for
Federal income tax purposes was $1,838,538,576.
Transactions in options written for the six months ended June 30,
1997 were as follows:
Nominal Value
Covered by Premiums
Call Options Written Written Options Received
<PAGE>
Outstanding call options
written, beginning of period 4,573,044 $ 380,363
Options written 1,203,289 92,417
Options exercised (4,573,044) (380,363)
Options expired (1,203,289) (92,417)
------------ ------------
Outstanding call options
written, end of period -- $ --
============ ============
Nominal Value
Covered by Premiums
Put Options Written Written Options Received
Outstanding put options
written, beginning of period -- --
Options written 973,152,689 $ 46,488,016
Options exercised (973,152,689) (46,488,016)
------------ ------------
Outstanding put options
written, end of period -- $ --
============ ============
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions was $(227,024,423) and $365,961,817 for the six months
ended June 30, 1997 and the year ended December 31, 1996,
respectively.
Transactions in capital shares for each class were as follows:
<PAGE>
Class A Shares for the Six Months Dollar
Ended June 30, 1997 Shares Amount
Shares sold 7,010,500 $ 157,715,661
Shares redeemed (9,873,509) (216,989,438)
------------- -------------
Net decrease (2,863,009) $ (59,273,777)
============= =============
Class A Shares for the Year Dollar
Ended December 31, 1996 Shares Amount
Shares sold 10,503,252 $ 243,976,070
Shares issued to share-
holders in reinvestment of
dividends and distributions 2,231,131 47,590,033
------------- -------------
Total issued 12,734,383 291,566,103
Shares redeemed (10,379,092) (241,055,211)
------------- -------------
Net increase 2,355,291 $ 50,510,892
============= =============
NOTES TO FINANCIAL STATEMENTS (concluded)
Class B Shares for the Six Months Dollar
Ended June 30, 1997 Shares Amount
Shares sold 8,843,895 $ 195,940,291
Automatic conversion of
shares (420,609) (9,053,342)
Shares redeemed (17,668,306) (369,549,806)
------------- -------------
Net decrease (9,245,020) $(182,662,857)
============= =============
Class B Shares for the Year Dollar
Ended December 31, 1996 Shares Amount
Shares sold 22,731,772 $504,265,222
Shares issued to share-
holders in reinvestment of
dividends and distributions 3,942,177 80,262,723
------------ ------------
Total issued 26,673,949 584,527,945
Automatic conversion of
shares (198,470) (4,412,958)
Shares redeemed (16,434,419) (365,153,210)
------------ ------------
Net increase 10,041,060 $214,961,777
============ ============
Class C Shares for the Six Months Dollar
Ended June 30, 1997 Shares Amount
<PAGE>
Shares sold 2,187,884 $ 48,223,659
Shares redeemed (2,486,911) (52,558,613)
------------ ------------
Net decrease (299,027) $ (4,334,954)
============ ============
Class C Shares for the Year Dollar
Ended December 31, 1996 Shares Amount
Shares sold 4,757,784 $104,489,958
Shares issued to shareholders
in reinvestment of dividends
and distributions 332,904 6,684,703
------------ ------------
Total issued 5,090,688 111,174,661
Shares redeemed (2,416,196) (53,314,914)
------------ ------------
Net increase 2,674,492 $ 57,859,747
============ ============
Class D Shares for the Six Months Dollar
Ended June 30, 1997 Shares Amount
Shares sold 3,091,129 $ 72,280,736
Automatic conversion of
shares 400,578 9,053,342
------------ ------------
Total issued 3,491,707 81,334,078
Shares redeemed (2,752,577) (62,086,913)
------------ ------------
Net increase 739,130 $ 19,247,165
============ ============
Class D Shares for the Year Dollar
Ended December 31, 1996 Shares Amount
Shares sold 10,226,462 $234,370,104
Shares issued to shareholders
in reinvestment of dividends
and distributions 454,781 9,695,929
Automatic conversion of
shares 190,840 4,412,958
------------ ------------
Total issued 10,872,083 248,478,991
Shares redeemed (8,962,823) (205,849,590)
------------ ------------
Net increase 1,909,260 $ 42,629,401
============ ============
<PAGE>
5. Commitments:
At June 30, 1997, the Fund had entered into foreign exchange
contracts, under which it had agreed to purchase and sell various
foreign currencies with approximate values of $48,978,000 and
$309,000, respectively.
PORTFOLIO INFORMATION
For the Quarter Ended June 30, 1997
Percent of
Ten Largest Equity Holdings Net Assets
HSBC Holdings PLC 7.0%
Canon Inc. 6.5
Lend Lease Corp. 5.9
Murata Manufacturing Co., Ltd. 5.7
Mitsubishi Heavy Industries, Ltd. 4.8
Ito-Yokado Co., Ltd. 4.1
Shin-Etsu Chemical Co., Ltd. 3.8
Bridgestone Corporation 3.8
Rohm Company, Ltd. 3.8
Sankyo Co., Ltd. 3.7
Percent of
Ten Largest Industries Net Assets
Property & Casualty Insurance 13.5%
Electric Equipment 9.5
Property 9.5
Banking 8.1
Pharmaceuticals 7.3
Office Equipment 6.5
Conglomerates 5.6
Electric Construction 4.9
Capital Goods 4.8
Retailing 4.5
<PAGE>
Addition (Equity Investments)
Yamanouchi Pharmaceutical Co., Ltd.
Deletions (Equity Investments)
Maruichi Steel Tube, Ltd.
NEC Corporation
SCICI, Ltd.
Senshukai Co., Ltd.
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
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
