MERRILL LYNCH
PACIFIC FUND, INC.
FUND LOGO
Quarterly Report
March 31, 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
Although Merrill Lynch Pacific Fund, Inc.'s total returns were
virtually unchanged for the three months ended March 31, 1997, they
substantially outperformed the unmanaged Benchmark Index for the
same period. Total returns for the Fund's Class A, Class B, Class C
and Class D Shares were +0.23%, 0.00%, +0.05% and +0.19%, respectively,
compared to the unmanaged Benchmark Index's return of -10.19%. (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.)
Large Positions Trimmed
We made relatively few changes to Merrill Lynch Pacific Fund's
portfolio during the March quarter. We experienced net cash outflows
during the quarter, so we were obliged to identify appropriate sale
candidates. Fortunately, most of our major positions significantly
outperformed their relevant markets, so that there were a number of
opportunities for us to trim holdings.
<PAGE>
We sold modest amounts of some of the Fund's largest positions
including Canon, Inc., Murata Manufacturing Co., Ltd., HSBC Holdings
PLC, Sankyo Co., Ltd., Rohm Co., Ltd. and Bridgestone Corporation.
These sales were consistent with our strategy of maintaining
informal limits on the percentage of net assets that we wish to
commit to individual stocks, especially those whose prices have a
reasonably high correlation; that is, their prices tend to move
together. We seek to invest at least 6% of the Fund's assets in
individual companies that we believe represent especially attractive
long-term investment opportunities, but we generally prefer to keep
these positions below 7%--7.5% of the portfolio. These guidelines
are not strict limits, since there is always the possibility that we
will identify a stock that offers such an attractive risk/return
tradeoff that we will exceed the informal 7.5% investment limit. By
trimming some of our largest holdings, we reduced our exposures to
below the 7% level.
For the most part, we continue to view these companies as being in
growth industries and their shares reasonably valued. However,
Bridgestone Corporation is a somewhat different case. The company
has successfully trimmed debt and is rebuilding the US operation
acquired from The Firestone Tire & Rubber Co. Nevertheless, we view
its industry as more cyclical than others represented in the
portfolio's largest positions. In our opinion, the tire and rubber
industry has little unit growth. In addition, we believe that
consumers perceive little difference between various brands of
tires, so tire companies like Bridgestone have less pricing power
than companies with products that can be more clearly
differentiated. Given these factors, we believed that it was
appropriate to decrease our investment in Bridgestone as it reached
4.5% of net assets.
Currency Hedging Strategy
Another area in which we successfully raised cash was through the
sale and re-establishment of yen put options. As discussed in
previous reports to shareholders, we had sold yen forward when the
currency exchange rate was 85 yen/US $1 so that the Fund's portfolio
had no yen exposure. Now that the exchange rate is approximately 120
yen--125 yen/US $1, it seems less likely that there will be further
substantial US dollar appreciation. On the other hand, there still
are risks that the yen will weaken somewhat further. So rather than
sell yen forward for a fixed amount of US dollars (and thereby give
up profits if the yen were to strengthen), we chose to buy yen put
options in the March quarter. We regard these options as a means of
insuring the portfolio against further yen weakness. If the Japanese
currency does continue to depreciate, our yen put options become
further "in the money" and perform more like forward sale contracts.
Rather than keep too much unrealized profit in yen put options, we
try to realize these gains and restrike the options at levels closer
to the current spot rate for the currencies.
<PAGE>
Other Factors Affecting Performance
Although many of our largest investments performed well in both
absolute as well as relative terms, the Fund's total returns were
flat for the March quarter because the yen substantially depreciated
relative to the US dollar, and we were only partially hedged against
yen depreciation. In addition, some of our other large positions,
such as Mitsubishi Heavy Industries, Ltd., Toyo Seikan Kaisha, Ltd.,
Lend Lease Corp. and Coca-Cola Amatil, Ltd., declined in price.
Furthermore, for some time now, the Japanese property and casualty
insurance stocks have performed poorly. In many of our past reports
to shareholders, we have discussed why these stocks are undervalued
on both assets as well as earnings evaluations. Nevertheless, they
still have not provided positive total returns for the Fund. Since
these stocks all have liquidation values that are higher than their
current prices, we are unwilling to sell them. This is espe-cially
true in this environment, in which we perceive there are few
attractive investments in the Japanese stock market.
Now that the Japanese insurance market has opened to foreign
competition, these companies may begin to be followed more closely
by the investment community, although there are not yet signs of
renewed investor interest. These stocks appear to be categorized by
investors into the broad category of Japanese "financial stocks,"
which may in large measure account for their poor performances. In
contrast to the non-life insurance companies, other industries
within the finance sector are experiencing severe problems. Japanese
banks have very low capital ratios and their shares are selling at
very high price/earnings ratios. Japanese brokerage firms are
plagued by revelations of illegal activities that precipitated sharp
declines in their share prices. In contrast, the non-life insurance
companies have underwriting profits, in contrast to many other
insurance companies in the world. They also have the healthiest
financial positions (solvency ratios) of all Japanese financial
companies. The solvency ratios of Japanese property and casualty
insurance companies are on a par with the most strongly capitalized
insurance companies in the world. Although we cannot yet perceive
the catalyst that would lead to higher share prices for Japanese
property and casualty insurance companies, we plan to maintain our
positions since their current share prices are undervalued given
their strong fundamental positions.
<PAGE>
Our Other Markets
Our most significant investment activities outside of Japan during
the March quarter were the sales of Hong Kong investments so that
our portfolio exposure moved from an overweighted to a market-
weighted position. Although we believe that the transfer of Hong
Kong's government from the United Kingdom to The People's Republic
of China will be relatively smooth, there is still a possibility of
some political turmoil. In our view, current valuations in the Hong
Kong stock market do not fully reflect this risk; therefore, we
gradually pulled back from our overweighted position there.
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
April 30, 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:
<PAGE>
* 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.
* 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 12/31/96)
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* + 0.23 + 1.22(1)
ML Pacific Fund, Inc. Class B Shares--Total Investment Return* 0.00 + 0.19(2)
ML Pacific Fund, Inc. Class C Shares--Total Investment Return* + 0.05 + 0.18(3)
ML Pacific Fund, Inc. Class D Shares--Total Investment Return* + 0.19 + 0.93(4)
Market-Weighted Index** -10.19(5) -20.55(6)
Benchmark Index*** -10.18 -17.19
Japan - 6.64/-12.39 -16.11/-27.45 $3,071 72.7%
Australia - 0.09/-1.67 + 8.84/+8.81 306 7.2
Hong Kong - 6.82/-6.99 +14.39/+14.18 393 9.3
Malaysia - 2.58/-0.69 + 4.70/+6.88 283 6.7
Singapore - 4.70/-7.68 -11.05/-13.33 146 3.5
Thailand -15.17/-16.05 -45.30/-46.76 26 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)12/31/96 market weights used in this computation. The Market-
Weighted Index return and individual country returns do not include
dividends.
(6)3/31/96 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 $18,483.26 on
March 31, 1997.
<PAGE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/97 + 1.22% -4.09%
Five Years Ended 3/31/97 +10.40 +9.21
Ten Years Ended 3/31/97 + 7.49 +6.91
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/97 +0.19% -3.52%
Five Years Ended 3/31/97 +9.28 +9.28
Inception (10/21/88) through 3/31/97 +7.62 +7.62
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/97 +0.18% -0.75%
Inception (10/21/94)
through 3/31/97 +3.18 +3.18
[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**
<PAGE>
Class D Shares*
Year Ended 3/31/97 +0.93% -4.37%
Inception (10/21/94)
through 3/31/97 +3.97 +1.70
[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
1996 22.16 21.58 0.505 1.403 + 6.09
1/1/97--3/31/97 21.58 21.63 -- -- + 0.23
------- ------
Total $37.016 Total $5.937
Cumulative total return as of 3/31/97: +1,850.74%**
</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--3/31/97 20.59 20.59 -- -- + 0.00
------ ------
Total $5.842 Total $3.179
Cumulative total return as of 3/31/97: +85.91%***
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charges; results would be lower if
sales charge was included.
***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--3/31/97 20.30 20.31 -- -- +0.05
------ ------
Total $1.356 Total $1.564
Cumulative total return as of 3/31/97: +7.93%**
<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>
<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
1996 22.14 21.57 0.505 1.337 +5.84
1/1/97--3/31/97 21.57 21.61 -- -- +0.19
------ ------
Total $1.356 Total $1.805
Cumulative total return as of 3/31/97: +9.97%**
<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/ Percent of
Industry Face Amount Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Japanese Securities
Automobile 4,794,000 Suzuki Motor Corp. $ 50,657,289 $ 46,600,243 2.6%
Beverage 380,000 Chukyo Coca-Cola Bottling Co., Ltd. 5,420,506 3,232,078 0.2
424,000 Hokkaido Coca-Cola Bottling Co., Ltd. 6,399,350 4,602,349 0.3
386,000 Kinki Coca-Cola Bottling Co., Ltd. 7,430,096 4,221,142 0.2
476,000 Mikuni Coca-Cola Bottling Co., Ltd. 8,487,431 5,745,160 0.3
470,000 Sanyo Coca-Cola Bottling Co., Ltd. 7,028,799 5,710,814 0.3
-------------- -------------- ------
34,766,182 23,511,543 1.3
Capital Goods 13,543,000 Mitsubishi Heavy Industries, Ltd. 99,257,428 88,311,989 4.9
Chemicals 3,167,000 Shin-Etsu Chemical Co., Ltd. 57,554,546 60,287,161 3.4
<PAGE>
Consumer YEN 409,000,000 Matsushita Electric Works, Ltd.--
Electronics C.E.W. #8, 2.70% due 5/31/2002
(Convertible) 4,543,868 4,124,787 0.2
Containers 2,103,200 Toyo Seikan Kaisha, Ltd. 57,600,127 39,184,771 2.2
Electric 1,886,500 Chudenko Corp. 55,422,512 49,970,474 2.8
Construction 3,365,000 Kinden Corp. 53,752,777 39,524,099 2.2
1,232,000 Taihei Dengyo Kaisha, Ltd. 24,789,475 7,584,609 0.4
-------------- -------------- ------
133,964,764 97,079,182 5.4
Electric Equipment 3,362,000 Murata Manufacturing Co., Ltd. 120,017,737 120,917,618 6.8
2,557,000 NEC Corporation 37,256,072 28,997,975 1.6
900,000 Rohm Co., Ltd. 43,718,151 66,488,457 3.7
169 Sumitomo Electric Industries,
Ltd., #1 YEN (Warrants)(a) 185,351 273,795 0.0
-------------- -------------- ------
201,177,311 216,677,845 12.1
Iron & Steel 475,000 Maruichi Steel Tube, Ltd. 6,023,843 7,618,469 0.4
Office Equipment 5,550,000 Canon, Inc. 93,692,031 119,137,303 6.7
Pharmaceuticals 2,364,000 Sankyo Co., Ltd. 52,929,370 65,299,636 3.7
Property & Casualty 8,790,000 Dai-Tokyo Fire & Marine Insurance
Insurance Co., Ltd. 53,840,330 42,721,750 2.4
4,492,000 Fuji Fire & Marine Insurance
Co., Ltd. 16,261,457 14,227,396 0.8
7,539,000 Koa Fire & Marine Insurance
Co., Ltd. 45,292,612 35,114,824 2.0
8,191,000 Nichido Fire & Marine Insurance
Co., Ltd. 46,307,188 44,322,301 2.5
7,119,000 Sumitomo Marine & Fire Insurance
Co., Ltd. 61,618,176 43,250,304 2.4
4,662,000 Tokio Marine & Fire Insurance
Co., Ltd. 46,990,608 47,582,989 2.6
-------------- -------------- ------
270,310,371 227,219,564 12.7
Retailing 1,524,000 Ito-Yokado Co., Ltd. 75,480,112 67,897,934 3.8
364,000 Sangetsu Co., Ltd. 8,382,717 6,309,923 0.4
352,000 Senshukai Co., Ltd. 5,696,494 2,731,600 0.1
-------------- -------------- ------
89,559,323 76,939,457 4.3
Tires & Rubber 4,060,000 Bridgestone Corporation 69,314,670 76,299,717 4.3
Total Investments in Japan 1,221,351,123 1,148,291,667 64.2
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Percent of
Industry Shares Held Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Australian Securities
Food & Beverage 4,635,222 Coca-Cola Amatil, Ltd. $ 27,179,148 $ 44,060,090 2.5%
Leisure 13,378,824 Village Roadshow Ltd. 'A'
(Preferred) 30,080,632 36,068,346 2.0
Property 6,088,350 Lend Lease Corp. 78,133,814 104,303,676 5.8
Total Investments in Australia 135,393,594 184,432,112 10.3
Hong Kong Securities
Agriculture 70,658,176 C.P. Pokphand Co. Ltd. (Ordinary) 24,172,280 22,797,372 1.3
Banking 4,493,893 HSBC Holdings PLC 68,353,184 104,394,494 5.8
Conglomerates 6,163,035 Hutchison Whampoa Ltd. 35,685,036 46,331,134 2.6
Property 7,928,000 Cheung Kong (Holdings) Ltd. 57,101,771 69,831,064 3.9
Total Investments in Hong Kong 185,312,271 243,354,064 13.6
Indian Securities
Banking 3,257,000 Industrial Development Bank of India 11,173,586 7,681,175 0.4
350 SCICI, Ltd. 1,051 232 0.0
-------------- -------------- ------
11,174,637 7,681,407 0.4
Broadcast/Media 620,000 BITV 3,557,822 190,343 0.0
Diversified Mutual Fund 1,929,400 Master Plus 1,146,844 743,112 0.1
Financial Services 72,000 Housing Development Finance
Corp. Ltd. 5,781,901 5,526,095 0.3
Total Investments in India 21,661,204 14,140,957 0.8
<PAGE>
Indonesian Securities
Pharmaceuticals 2,831,500 P.T. Kalbe Farma 4,779,899 3,185,438 0.2
Total Investments in Indonesia 4,779,899 3,185,438 0.2
Malaysian Securities
Conglomerates 35,998,000 Renong BHD 59,943,737 61,038,191 3.4
Transportation 987,000 Malaysian International Shipping
BHD 3,530,497 2,450,565 0.2
Total Investments in Malaysia 63,474,234 63,488,756 3.6
New Zealand Securities
Diversified 45,962,584 Guiness Peat Group PLC 18,582,889 28,082,403 1.6
Total Investments in New Zealand 18,582,889 28,082,403 1.6
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Shares Held/ Percent of
Industry Face Amount Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Singaporean Securities
Transportation 300,000 Singapore Bus Co. Ltd.--Foreign
Registered $ 1,060,285 $ 1,495,845 0.1%
Total Investments in Singapore 1,060,285 1,495,845 0.1
South Korean Securities
Banking 531,600 Hana Bank (GDR) (b) 7,774,650 7,495,560 0.4
Total Investments in South Korea 7,774,650 7,495,560 0.4
Thailand Securities
Banking US$ 12,080,000 Bangkok Bank Public Company Ltd.,
3.25% due 3/03/2004 (Convertible) 13,552,370 11,234,400 0.6
<PAGE>
Total Investments in Thailand 13,552,370 11,234,400 0.6
Short-Term Securities
Commercial Paper* US$ 42,860,000 General Motors Acceptance Corp.,
6.75% due 4/01/1997 42,860,000 42,860,000 2.4
Total Investments in Short-Term
Securities 42,860,000 42,860,000 2.4
<CAPTION>
Nominal Value Premiums
Covered by Options Issue Paid
Currency Put Options Purchased
US$ 477,000,000 Japanese Yen, expiring January 1998
at YEN 120 11,424,150 18,507,600 1.0
630,000,000 Japanese Yen, expiring March 1998
at YEN 125 14,834,727 13,986,000 0.8
Total Currency Put Options Purchased 26,258,877 32,493,600 1.8
Total Investments $1,742,061,396 1,780,554,802 99.6
==============
Unrealized Appreciation on Forward Foreign Exchange Contracts** 1,127,299 0.1
Other Assets Less Liabilities 5,604,539 0.3
-------------- ------
Net Assets $1,787,286,640 100.0%
============== ======
Net Asset Value: Class A--Based on net assets of $577,623,126 and
26,700,931 shares outstanding $ 21.63
==============
Class B--Based on net assets of $1,002,909,363 and
48,714,251 shares outstanding $ 20.59
==============
Class C--Based on net assets of $82,879,688 and
4,081,732 shares outstanding $ 20.31
==============
Class D--Based on net assets of $123,874,463 and
5,731,156 shares outstanding $ 21.61
==============
<PAGE>
<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.
**Forward foreign exchange contracts as of March 31, 1997 were as
follows:
Unrealized
Expiration Appreciation
Foreign Currency Purchased Date (Depreciation)
YEN 7,957,445,461 April 1997 $(11,675,086)
Total (US$ Commitment--$76,133,940) (11,675,086)
------------
Foreign Currency Sold
YEN 7,957,445,461 April 1997 12,802,385
Total (US$ Commitment--$77,261,239) 12,802,385
------------
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net $ 1,127,299
============
</TABLE>
PORTFOLIO INFORMATION
For the Quarter Ended March 31, 1997
Percent of
Ten Largest Equity Holdings Net Assets
Murata Manufacturing Co., Ltd. 6.8%
Canon, Inc. 6.7
HSBC Holdings PLC 5.8
Lend Lease Corp. 5.8
Mitsubishi Heavy Industries, Ltd. 4.9
Bridgestone Corporation 4.3
Cheung Kong (Holdings) Ltd. 3.9
Ito-Yokado Co., Ltd. 3.8
Rohm Co., Ltd. 3.7
Sankyo Co., Ltd. 3.7
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Percent of
Ten Largest Industries Net Assets
Property & Casualty Insurance 12.7%
Electric Equipment 12.1
Property 9.7
Banking 7.3
Office Equipment 6.7
Conglomerates 6.0
Electric Construction 5.4
Capital Goods 4.9
Retailing 4.3
Tires & Rubber 4.3
Addition (Equity Investments)
*Siam Commercial Bank Public Co.
Deletions (Equity Investments)
Cerebos Pacific Ltd.
Guangshen Railway Company Ltd.
Henderson Land Development Company Ltd.
*Siam Commercial Bank Public Co.
Swire Pacific Ltd. 'A'
Taekwang Industries Co.
[FN]
*Added and deleted in the same quarter.
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
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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
