MERRILL LYNCH
PACIFIC FUND, INC.
FUND LOGO
Quarterly Report
September 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.
Merrill Lynch
Pacific Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
<PAGE>
MERRILL LYNCH PACIFIC FUND, INC.
DEAR SHAREHOLDER
Merrill Lynch Pacific Fund, Inc. declined modestly during the
quarter ended September 30, 1997, compared to a 13.5% decline for
the unmanaged Benchmark Index. For the September quarter, the Fund's
Class A, Class B, Class C and Class D Shares had total returns of
- -2.55%, -2.77%, -2.76% and -2.59%, respectively. For the nine-month
period ended September 30, the Fund outperformed the Benchmark Index
even more substantially, as Class A, Class B, Class C and Class D
Shares had total returns of +15.29%, +14.42%, +14.48% and +15.11%,
respectively, compared to a -8.72% decline for the unmanaged
Benchmark Index. (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.)
Most of the Fund's significant outperformance in 1997 has been the
result of superior stock selection. For example, some of our largest
holdings in Japan appreciated over 10% during the September quarter,
compared to a decline of 10.7% in the Japanese stock market. While
our goal is to select stocks that will substantially outperform
their relative markets, in the future we do not anticipate that our
investments will continue to outperform their respective markets to
such a great degree.
In most circumstances, the significant outperformance of our
investments would lead to higher-than-normal turnover as we sought
to realize some profits. However, with the exception of Hong Kong--
where we trimmed our holdings--we did not significantly reduce
positions and, as a result, portfolio turnover has remained at the
Fund's traditional low level.
Limited Exposure to Emerging Asia
Providing an additional boost to the Fund's performance during the
September quarter was our relatively light weightings in the
emerging Southeast Asian stock markets of Malaysia, Thailand, South
Korea and Indonesia, which have declined very sharply. For example,
during the quarter the Malaysian stock market lost 41% of its value
and the Thai stock market declined 27% (both in US dollar terms). As
of September 30, Malaysia, Thailand, South Korea and Indonesia
together represented only 2.9% of the Fund's net assets. At present,
we have no plans to dramatically alter these exposures. However, the
sharp declines in the emerging Asian stock markets have prompted us
to examine some stocks in these markets to determine whether their
current depressed prices overly discount the present economic
difficulties.
<PAGE>
In Hong Kong, we took advantage of significant appreciation in our
holdings to decrease our exposure during the September quarter. In
particular, since HSBC Holdings PLC had substantially outperformed
the Hong Kong stock market for an extended period of time, we
trimmed our investment from 7% of net assets to 5%. Although our
outlook for Hong Kong has remained somewhat more cautious over the
past few months, HSBC continues to be a core holding in this market.
In October, the Hong Kong stock market experienced a very rapid and
substantial decline. We are monitoring the situation to determine if
the Hong Kong stock market now offers more attractively valued
buying opportunities, or if the stock market will continue to
decline along with other Southeast Asian stock markets.
Major Positions Virtually Unchanged
Our largest Japanese positions remain essentially the same: Canon,
Inc., Murata Manufacturing Co., Ltd., Shin-Etsu Chemical Co., Ltd.,
Bridgestone Corporation, Rohm Co., Ltd., Sankyo Co., Ltd.,
Mitsubishi Heavy Industries, Ltd. and Ito-Yokado Co., Ltd. For a few
of these companies, the extraordinary degree of quarterly
outperformance has led us to seriously review current valuations in
light of future prospects and consider whether we should trim back
these issues and reallocate the proceeds. However, we have
determined that even at current levels, our major Japanese positions
remain reasonably valued in relation to their business prospects,
and we have chosen to maintain our positions.
In Australia, Lend Lease Corp. remains our one very large
commitment. We expect that Lend Lease stock will experience some
price volatility from time to time. However, we believe that the
company is very well positioned in financial services and property
development and management. Unless Lend Lease stock moves to very
high valuations, we are comfortable with the company's business
prospects, management and strategy.
Lackluster Investment Environment in
Japan Continues
Despite the strong relative performance of our Japanese holdings,
Japanese stocks in general were lackluster during the September
quarter, and the Japanese economy does not seem capable of
sustaining a recovery. The latter point is of greater concern since,
ultimately, Japanese companies require at least a reasonable rate of
domestic economic growth for them to continue to prosper.
<PAGE>
In past reports to shareholders, we have discussed our belief that
some fundamental shifts must take place in Japan in order for the
country to be competitive in today's global economy and to support a
long-term stock market rise. In our view, Japan must change its
generally accepted business practices, perhaps as part of a larger
shift away from a very structured and hierarchical society. In
addition, we believe that Japan needs to change the way its capital
markets function. Part of this change would entail an alignment of
interests between shareholders and managements so that managements
would make decisions that they believe would enhance shareholder
value. Over the past several years, we had been hopeful that
Japanese companies in general were beginning to envision operating
in a manner that enhanced the economic value of their businesses and
that this economic value would accrue to shareholders. We hoped that
company managements would begin to operate their enterprises to do
the best job for the shareholders, the owners of the companies. We
are still hopeful that these changes will take place, but we are
disappointed that they are not occurring more rapidly.
In Japan, shares of many companies are selling below book value, and
many are selling below replacement value. These factors contribute
to making the Japanese stock market a reasonably attractive area to
invest, despite the lackluster macroeconomic environment. In our
view, it would be healthy (although not currently feasible) for
investors to attempt to acquire companies, perhaps through leveraged
buyouts, and for companies to seek to take themselves private. We
will monitor developments in these areas in hopes of discovering
investment opportunities.
Furthermore, Japanese banks will sell off real estate and loan
portfolios to attempt to get their balance sheets in order. As such
trends develop, there may be new investment opportunities in asset
classes other than common stocks that we previously have not
considered in Japan.
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 upcoming annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Stephen I. Silverman)
Stephen I. Silverman
Senior Vice President and Portfolio Manager
November 10, 1997
<PAGE>
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.
* 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.
<PAGE>
<TABLE>
Recent Performance Results
<CAPTION>
Market Performance Market Capitalization
In Local Currency/In US Dollars (as of 6/30/97)
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* - 2.55% +12.70%(1)
ML Pacific Fund, Inc. Class B Shares--Total Investment Return* - 2.77 +11.58(2)
ML Pacific Fund, Inc. Class C Shares--Total Investment Return* - 2.76 +11.58(3)
ML Pacific Fund, Inc. Class D Shares--Total Investment Return* - 2.59 +12.44(4)
Market-Weighted Index** -14.36(5) -17.31(6)
Benchmark Index*** -13.53 -14.26
Japan -10.65/-15.23 -14.70/-21.17 $3,312 73.5%
Australia + 1.50/-1.92 +20.80/+10.60 327 7.3
Hong Kong - 0.97/-0.86 +26.44/+26.35 427 9.5
Malaysia -24.39/-41.16 -28.25/-44.56 282 6.3
Singapore - 1.56/-7.98 - 9.50/-16.69 135 3.0
Thailand + 3.27/-26.90 -56.33/-69.67 20 0.4
<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)6/30/97 market weights used in this computation. The Market-
Weighted Index return and individual country returns do not include
dividends.
(6)9/30/96 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>
<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 performance of a $1,000 investment
in the Fund's Class A Shares since inception (9/23/76) through 9/30/97.
Beginning and ending values are $947.50 and $21,260.48.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/97 +12.70% + 6.79%
Five Years Ended 9/30/97 +12.22 +11.02
Ten Years Ended 9/30/97 + 7.25 + 6.67
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/97 +11.58% + 7.58%
Five Years Ended 9/30/97 +11.08 +11.08
Inception (10/21/88) through 9/30/97 + 8.81 + 8.81
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/97 +11.58% +10.58%
Inception (10/21/94)
through 9/30/97 + 7.44 + 7.44
[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 9/30/97 +12.44% +6.54%
Inception (10/21/94)
through 9/30/97 + 8.28 +6.31
[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**
<C> <C> <C> <C> <C> <C>
9/23/76--12/31/76 $ 9.30 $ 9.81 -- -- + 5.48%
1977 9.81 9.20 -- $0.050 - 5.73
1978 9.20 14.48 $ 0.070 0.020 +58.87
1979 14.48 8.96 3.340 0.120 -23.40
1980 8.96 12.11 -- 0.220 +38.49
1981 12.11 12.78 1.460 0.230 +22.22
1982 12.78 12.07 0.420 0.320 + 0.46
1983 12.07 16.04 0.180 0.290 +38.54
1984 16.04 15.43 0.950 0.090 + 2.92
1985 15.43 19.59 1.380 0.160 +40.96
1986 19.59 34.32 0.190 0.110 +77.78
1987 34.32 16.15 22.154 0.183 +10.77
1988 16.15 19.11 2.064 0.196 +34.38
1989 19.11 20.65 1.042 0.061 +14.49
1990 20.65 16.52 1.668 0.766 - 8.39
1991 16.52 18.34 0.521 0.433 +17.04
1992 18.34 15.80 0.221 0.741 - 8.75
1993 15.80 21.21 -- 0.027 +34.41
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--9/30/97 21.58 24.88 -- -- +15.29
------- ------
Total $37.016 Total $5.937
<PAGE>
Cumulative total return as of 9/30/97: +2,143.85%**
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change***
<C> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $17.93 $19.09 $1.034 $0.171 +13.37%
1989 19.09 20.49 1.042 -- +13.39
1990 20.49 16.30 1.668 0.653 - 9.29
1991 16.30 18.01 0.521 0.322 +15.87
1992 18.01 15.34 0.221 0.726 - 9.72
1993 15.34 20.41 -- -- +33.05
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--9/30/97 20.59 23.56 -- -- +14.42
------ ------
Total $5.842 Total $3.179
Cumulative total return as of 9/30/97: +112.73%***
<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**
<C> <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--9/30/97 20.30 23.24 -- -- +14.48
------ ------
Total $1.356 Total $1.564
Cumulative total return as of 9/30/97: +23.50%**
<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**
<C> <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--9/30/97 21.57 24.83 -- -- +15.11
------ ------
Total $1.356 Total $1.805
Cumulative total return as of 9/30/97: +26.36%**
<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
Japanese Securities
<S> <C> <S> <C> <C> <C>
Automobile 4,680,000 Suzuki Motor Corp. $ 49,672,928 $ 44,992,541 2.1%
Beverage 380,000 Chukyo Coca-Cola Bottling Co., Ltd. 5,420,506 2,991,878 0.1
424,000 Hokkaido Coca-Cola Bottling Co., Ltd. 6,399,350 4,603,348 0.2
386,000 Kinki Coca-Cola Bottling Co., Ltd. 7,430,096 4,702,636 0.2
476,000 Mikuni Coca-Cola Bottling Co., Ltd. 8,487,431 6,706,448 0.3
470,000 Sanyo Coca-Cola Bottling Co., Ltd. 7,028,799 5,648,102 0.3
-------------- -------------- ------
34,766,182 24,652,412 1.1
Capital Goods 14,239,000 Mitsubishi Heavy Industries, Ltd. 102,920,435 78,004,136 3.7
Chemicals 3,167,000 Shin-Etsu Chemical Co., Ltd. 57,554,546 87,141,058 4.1
Consumer YEN 409,000,000 Matsushita Electric Works,
Electronics Ltd.--C.E.W.#8, 2.70% due 5/31/2002
(Convertible) 4,543,868 4,406,597 0.2
890,000 Sony Corporation 82,096,632 84,087,519 4.0
-------------- -------------- ------
86,640,500 88,494,116 4.2
<PAGE>
Containers 1,816,000 Toyo Seikan Kaisha, Ltd. 50,677,095 31,756,672 1.5
Electric 1,887,000 Chudenko Corp. 55,433,121 42,381,651 2.0
Construction 3,365,000 Kinden Corp. 53,752,777 43,226,836 2.0
1,232,000 Taihei Dengyo Kaisha, Ltd. 24,789,475 4,901,044 0.2
-------------- -------------- ------
133,975,373 90,509,531 4.2
Electric Equipment 2,962,000 Murata Manufacturing Co., Ltd. 110,024,468 128,142,218 6.0
4,870,000 NEC Corporation 70,296,869 59,331,179 2.8
724,000 Rohm Co., Ltd. 37,048,985 85,204,707 4.0
-------------- -------------- ------
217,370,322 272,678,104 12.8
Office Equipment 5,115,000 Canon, Inc. 88,209,576 149,643,212 7.1
Pharmaceuticals 2,404,000 Sankyo Co., Ltd. 54,265,843 83,281,286 3.9
2,800,000 Yamanouchi Pharmaceutical Co., Ltd. 69,461,063 69,152,992 3.3
-------------- -------------- ------
123,726,906 152,434,278 7.2
Property & Casualty 8,790,000 Dai-Tokyo Fire & Marine
Insurance Insurance Co., Ltd. 53,840,330 39,702,884 1.9
4,492,000 Fuji Fire & Marine Insurance
Co., Ltd. 16,261,457 14,109,630 0.7
7,539,000 Koa Fire & Marine Insurance
Co., Ltd. 45,292,612 40,550,398 1.9
8,191,000 Nichido Fire & Marine Insurance
Co., Ltd. 46,307,188 53,629,123 2.5
7,119,000 Sumitomo Marine & Fire Insurance
Co., Ltd. 61,618,176 49,265,415 2.3
4,662,000 Tokio Marine & Fire Insurance
Co., Ltd. 46,990,608 56,024,366 2.6
-------------- -------------- ------
270,310,371 253,281,816 11.9
Retailing 1,524,000 Ito-Yokado Co., Ltd. 75,480,112 82,603,680 3.9
364,000 Sangetsu Co., Ltd. 8,382,717 5,882,645 0.3
-------------- -------------- ------
83,862,829 88,486,325 4.2
Tires & Rubber 3,580,000 Bridgestone Corporation 61,174,772 86,043,428 4.1
Total Investments in Japan 1,360,861,835 1,448,117,629 68.2
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Percent of
Industry Shares Held Investments Cost Value Net Assets
Australian Securities
<S> <C> <S> <C> <C> <C>
Food & Beverage 3,063,942 Coca-Cola Amatil, Ltd. $ 17,504,495 $ 32,771,034 1.5%
Leisure 13,378,824 Village Roadshow Ltd. 'A'
(Preferred) 30,080,632 35,364,647 1.7
Property 6,188,224 Lend Lease Corp. 80,316,126 146,953,254 6.9
Total Investments in Australia 127,901,253 215,088,935 10.1
Hong Kong Securities
Agriculture 70,658,176 C.P. Pokphand Co. Ltd. (Ordinary) 24,172,280 23,513,156 1.1
Banking 3,247,603 HSBC Holdings PLC 60,300,407 108,701,108 5.1
Conglomerates 11,209,035 Hutchison Whampoa Ltd. 83,077,691 110,453,466 5.2
Diversified 3,885,000 Swire Pacific Ltd. 'A' 33,106,704 29,747,512 1.4
Total Investments in Hong Kong 200,657,082 272,415,242 12.8
Indian Securities
Banking 3,257,000 Industrial Development Bank of India 11,173,586 8,967,114 0.4
Broadcast/Media 620,000 BITV 3,557,822 240,177 0.0
Diversified Mutual 1,929,400 Master Plus 1,146,844 963,632 0.1
Fund
Financial Services 72,000 Housing Development Finance
Corp. Ltd. 5,781,901 6,501,218 0.3
Total Investments in India 21,660,153 16,672,141 0.8
Indonesian Securities
Pharmaceuticals 2,831,500 P.T. Kalbe Farma 4,779,899 2,139,836 0.1
Total Investments in Indonesia 4,779,899 2,139,836 0.1
Malaysian Securities
Conglomerates 35,998,000 Renong BHD 59,943,737 35,520,691 1.7
Total Investments in Malaysia 59,943,737 35,520,691 1.7
<PAGE>
New Zealand Securities
Diversified 50,947,756 Guiness Peat Group PLC 18,795,683 32,596,374 1.5
Total Investments in New Zealand 18,795,683 32,596,374 1.5
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Shares Held/ Percent of
Industry Face Amount Investments Cost Value Net Assets
South Korean Securities
<S> <C> <S> <C> <C> <C>
Banking 462,360 Hana Bank (GDR)(a) $ 7,001,895 $ 4,986,553 0.2%
Total Investments in South Korea 7,001,895 4,986,553 0.2
Thailand Securities
Banking US$ 8,302,000 Bangkok Bank Public Company Ltd.,
3.25% due 3/03/2004 (Convertible) 8,952,815 4,773,650 0.2
Television 2,190,000 BEC World Public Company Limited 17,568,308 14,140,629 0.7
Total Investments in Thailand 26,521,123 18,914,279 0.9
Short-Term Securities
Commercial US$ 16,378,000 General Motors Acceptance Corp.,
Paper* 6.50% due 10/01/1997 16,378,000 16,378,000 0.8
Total Investments in
Short-Term Securities 16,378,000 16,378,000 0.8
Nominal Value Premiums
Covered by Options Issue Paid
<PAGE>
Currency Put Options Purchased
US$ 477,000,000 Japanese Yen, expiring January
1998 at YEN 120 11,424,150 11,510,010 0.5
630,000,000 Japanese Yen, expiring March 1998
at YEN 125 14,834,727 8,284,500 0.4
Total Currency Put Options Purchased 26,258,877 19,794,510 0.9
Total Investments $1,870,759,537 2,082,624,190 98.0
==============
Other Assets Less Liabilities 41,488,922 2.0
-------------- ------
Net Assets $2,124,113,112 100.0%
============== ======
Net Asset Value: Class A--Based on net assets of $706,079,026 and
28,376,004 shares outstanding $ 24.88
==============
Class B--Based on net assets of $1,144,056,335 and
48,561,125 shares outstanding $ 23.56
==============
Class C--Based on net assets of $108,814,871 and
4,683,164 shares outstanding $ 23.24
==============
Class D--Based on net assets of $165,162,880 and
6,651,749 shares outstanding $ 24.83
==============
<FN>
(a)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.
</TABLE>
<PAGE>
PORTFOLIO INFORMATION
For the Quarter Ended September 30, 1997
Percent of
Ten Largest Equity Holdings Net Assets
Canon, Inc. 7.1%
Lend Lease Corp. 6.9
Murata Manufacturing Co., Ltd. 6.0
Hutchison Whampoa Ltd. 5.2
HSBC Holdings PLC 5.1
Shin-Etsu Chemical Co., Ltd. 4.1
Bridgestone Corporation 4.1
Rohm Co., Ltd. 4.0
Sony Corporation 4.0
Sankyo Co., Ltd. 3.9
Percent of
Ten Largest Industries Net Assets
Electric Equipment 12.8%
Property & Casualty Insurance 11.9
Pharmaceuticals 7.3
Office Equipment 7.1
Property 6.9
Conglomerates 6.9
Banking 5.9
Electric Construction 4.2
Consumer Electronics 4.2
Retailing 4.2
Additions (Equity Investments)
BEC World Public Company Limited
NEC Corporation
Sony Corporation
Swire Pacific Ltd. 'A'
Deletions (Equity Investments)
Cheung Kong (Holdings) Ltd.
Malaysian International Shipping BHD
Singapore Bus Co. Ltd.--Foreign Registered
<PAGE>
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
Stephen I. Silverman, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President
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
