MERRILL
LYNCH
DRAGON
FUND, INC.
FUND LOGO
Quarterly Report September 30, 1994
Investing in emerging market securities involves a number
of risk factors and special considerations, including
restrictions on foreign investments and on repatriation
of capital invested in emerging markets, currency
fluctuations, and potential price volatility and less
liquidity of securities traded in emerging markets. In
addition, there may be less publicly available information
about the issuers of securities, and such issuers may not
be subject to accounting, auditing and financial reporting
standards and requirements comparable to those to which
US companies are subject. Therefore, the Fund is designed
as a long-term investment for investors capable of
assuming the risks of investing in emerging markets. The
Fund should be considered as a vehicle for diversification
and not as a complete investment program. Please refer
to the prospectus for details.
This report is not authorized for use as an offer of sale
or a solicitation of an offer to buy shares of the Fund
unless accompanied or preceded by the Fund's current
prospectus. Past performance results shown in this report
should not be considered a representation of future
performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
Merrill Lynch
Dragon Fund, Inc.
Box 9011
Princeton, NJ 08543-9011
<PAGE>
MERRILL LYNCH DRAGON FUND, INC.
IMAGE MATERIAL APPEARS HERE.
SEE APPENDIX GRAPHIC AND IMAGE MATERIALS ITEM 1.
DEAR SHAREHOLDER
During the September quarter, the
"dragon" stock markets rebounded
from the corrections experienced
during the first half of 1994. Investors'
focus largely shifted away from macro-
economic concerns to corporate earn-
ings results, although concerns still
persist that higher US interest rates
will prove troublesome for the emerg-
ing Asian economies. As a result, the
stock markets in which Merrill Lynch
Dragon Fund, Inc. invests have
recovered from the lows reached
earlier this year, but have not yet
regained the highs achieved in 1993.
The total returns of the Fund's
Class A and Class B Shares for the
quarter ended September 30, 1994
reflected the general improvement in
the emerging Asian markets, appreci-
ating 11.68% and 11.49%, respectively.
(Results do not include sales charges,
which would lower returns. Complete
performance information, including
average annual total returns, can be
found on pages 4 and 5 of this report
to shareholders.)
<PAGE>
Investment Activities
Although Hong Kong continues as our
largest single stock market commit-
ment at 28.9% of net assets, this is
an underweighted exposure. There is
continued uncertainty in Hong Kong
regarding higher interest rates. The
Hong Kong economy is among the
most sensitive in Asia to US interest
rates, since the value of the Hong
Kong currency is pegged to the US
dollar. Another factor contributing to
our somewhat cautious outlook in
Hong Kong is the price weakness of
its real estate market which, follow-
ing its recent 10% decline, appears
likely to be flat for the next 12 months.
In addition, interim corporate earn-
ings results generally have been dis-
appointing, with clear evidence that
the rate of corporate earnings growth
is losing momentum.
Another source of concern for Hong
Kong is the contraction in economic
growth of the People's Republic of
China. Despite the austerity measures
implemented to combat runaway
inflation, recently announced data
show that Chinese inflation is not
under control. For example, food
prices continue to climb because of
shortages caused by widespread
flooding as well as higher government-
mandated prices to subsidize farmers
for growing certain foodstuffs. Fur-
thermore, it appears that the Chinese
government wants to stop real estate
speculation, so investments for
property development are depressed.
Nevertheless, the export sector
remains a strong positive for the
Chinese economy, as are private/
foreign joint ventures.
<PAGE>
While some developments in Hong
Kong are a cause for concern, we
believe that they are largely reflected
in current share prices. However,
given the current uncertainties, we
have restructured our Hong Kong
holdings more defensively. During
the September quarter, purchases in
Hong Kong were made to maintain
our exposure as we invested net cash
inflows during periods of declining
share prices. We primarily purchased
shares of blue-chip companies, with a
focus on industrial conglomerates.
We also expanded our position in
media companies, an important
growth area for the Hong Kong econ-
omy, through the purchase of shares
of Oriental Press Group when disap-
pointing earnings led to a stock price
decline. In addition, we increased
our existing investments in South
China Morning Post Holdings and
Television Broadcasts Ltd. The latter
company has a 21% share of the cable
television market in Taiwan.
During the September quarter, the
composition of the Hang Seng Index
was changed. Shares of six of the
seven stocks added to the Index are
Fund holdings. We expect share
prices of these companies to benefit
as they will be followed by more
industry analysts and will also be
purchased by investors who are in-
dexing their Hong Kong holdings.
<PAGE>
Our investments in South Korea
outperformed the stock market in
general during the September quarter.
The Fund's holdings in companies
such as Pohang Iron & Steel Co., Ltd.
and Korean Electric & Power Corp.
were strong performers as blue-chip
companies led the Korean stock
market rally. As one of the more
mature dragon stock markets, cyclical
companies and basic industries such
as steel, petrochemicals, cement and
shipbuilding play a key role in Korean
stock market performance. As a re-
sult, the improvement in the Korean
economy has translated into higher
share prices. However, we are waiting
for the lifting of restrictions on
foreign share ownership before ex-
panding our investments there. As
of September month-end, 3.6% of the
Fund's net assets were invested
in Korea.
The Fund has a 23.2% market weight-
ing in Malaysia. We remain highly
positive on this country's prospects.
Bank Negara, the central bank, now
permits foreigners to hold ringgit-
denominated interest-bearing
accounts and has also allowed the
currency to appreciate relative to the
US dollar, thereby containing
"imported" inflation and improving
the inflationary outlook in general.
Malaysian share prices rallied strongly
in July and August as industrial
production and export growth were
reported to be at double-digit levels
and higher commodity prices also
boosted the outlook for this resource-
rich economy. Furthermore, we expect
that the government's budget to be
released at the end of October will
be expansionary and will include
corporate and individual tax cuts.
Our largest Malaysian industry expo-
sure is in banking, and Malaysian
banks have reported strong interim
earnings results. We increased our
investments in the leisure industry
during the quarter through the pur-
chase of additional shares of Resorts
World BHD.
<PAGE>
Our 5.9% weighting in the Philippines
is an overweighted exposure. We
believe that the country is at the
beginning of an economic develop-
ment cycle, and its long-term growth
prospects are good. The Ramos admin-
istration's pro-business stance is
positive and continued political
stability would further boost the
Philippine economic growth. We are
building positions in the Philippines
slowly. For example, during the
September quarter we participated in
the initial public offering of Petron
Corp., a petroleum refining and mar-
keting company recently privatized
by the government. We have also
invested in SM Prime Holdings, a
retail mall developer, whose shares
are likely to benefit from the surge in
consumer spending.
Our 12.4% market weighting in
Singapore reflects our generally posi-
tive outlook for this stock market.
However, we believe that Singapore
shares are not likely to appreciate
as rapidly as some of the more volatile
dragon stock markets. The stock
market continues to be liquidity-
driven, both from the retail and insti-
tutional sectors. The prospects for
economic growth are good, since
stronger economic growth in the
United States and Europe should
benefit this export-driven economy.
In Thailand we have a slightly under-
weighted 9.4% position. We continue
to believe that the outlook for banks
and financial stocks is positive and
maintain a heavy weighting in this
sector. During the September quarter,
we established a position in PTT
Exploration, an oil and gas company
that is likely to benefit from the
increase in energy demand we foresee
in Asia.
<PAGE>
At September quarter-end our invest-
ments in India comprised 2.2% of net
assets. Although the earnings outlook
for Indian companies is positive and
we are finding a number of attractive
investment opportunities there,
limited liquidity is constraining
our share purchases. During the
September quarter, we established a
position in Reliance Industries, a
fully integrated petrochemical
conglomerate.
Our Indian subcontinent investments
expanded further during the Sep-
tember quarter through an initial
investment in Pakistan. We purchased
shares of Pakistan Telecommunica-
tions, the monopoly telecommunica-
tions company that is in the process
of privatizing. We believe that the
company will experience strong earn-
ings growth in the years ahead as it
expands the relatively low penetra-
tion rate of its lines. In addition,
Pakistan Telecommunications' shares
were available at very attractive
valuation levels.
In Conclusion
At September quarter-end, the Fund
had an 8.4% cash position. We plan to
redeploy these and any additional
cash reserves in attractive investment
opportunities during periods of stock
market weakness. Following the
liquidity-driven stock markets of 1993
and the sharp corrections in the first
half of 1994, we believe that dragon
stock market investors will continue
to focus on corporate earnings results.
This suggests that on balance the
dragon stock markets may experience
less spectacular, but more sustain-
able, price appreciation in the months
ahead, since 1995 earnings growth
prospects appear strong for most
of them.
<PAGE>
We thank you for your investment in
Merrill Lynch Dragon 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
(Kara Tan Bhala)
Kara Tan Bhala
Vice President and Portfolio Manager
October 24, 1994
PERFORMANCE DATA
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of Class A
and Class B Shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
<TABLE>
<CAPTION>
Performance
Summary-- Net Asset Value Capital Gains
Class A Shares Period Covered Beginning Ending Distributed Dividends Paid* %Change**
<C> <C> <C> <C> <C> <C>
5/29/92-12/31/92 $10.00 $10.12 -- $0.080 + 2.02%
1993 10.12 18.77 $0.006 0.182 +87.46
1/1/94-9/30/94 18.77 17.30 -- -- - 7.83
------ ------
Total $0.006 Total $0.262
Cumulative total return as of 9/30/94: +76.27%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and
do not include sales charge; results would be lower if sales
charge was included.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Performance
Summary-- Net Asset Value Capital Gains
Class B Shares Period Covered Beginning Ending Distributed Dividends Paid* %Change**
<C> <C> <C> <C> <C> <C>
5/29/92-12/31/92 $10.00 $10.13 -- $0.020 + 1.50%
1993 10.13 18.74 $0.006 0.103 +86.15
1/1/94-9/30/94 18.74 17.17 -- -- - 8.38
------ ------
Total $0.006 Total $0.123
Cumulative total return as of 9/30/94: +73.12%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and
do not reflect deduction of any sales charge; results would be
lower if sales charge was deducted.
</TABLE>
<TABLE>
<CAPTION>
Recent
Performance 12 Month 3 Month
Results 9/30/94 6/30/94 9/30/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $17.30 $15.49 $13.44 +28.76%(1) +11.68%
Class B Shares* 17.17 15.40 13.38 +28.37(1) +11.49
Class A Shares--Total Return* +30.10(2) +11.68
Class B Shares--Total Return* +29.13(3) +11.49
<FN>
*Investment results shown do not reflect sales charges;
results shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.006 per share
capital gains distributions.
(2)Percent change includes reinvestment of $0.182 per share
ordinary income dividends and $0.006 per share capital gains
distributions.
(3)Percent change includes reinvestment of $0.103 per share
ordinary income dividends and $0.006 per share capital gains
distributions.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Average Annual % Return Without % Return With
Total Return Sales Charge Sales Charge**
<S> <C> <C>
Class A Shares*
Year Ended 9/30/94 +30.10% +21.64%
Inception (5/29/92) through 9/30/94 +27.41 +23.81
<FN>
*Maximum sales charge is 6.5%, which became effective on September 15, 1993.
**Assuming maximum sales charge.
<CAPTION>
Average Annual % Return % Return
Total Return Without CDSC With CDSC**
<C> <C> <C>
Class B Shares*
Year Ended 9/30/94 +29.13% +25.13%
Inception (5/29/92) through 9/30/94 +26.44 +25.81
<FN>
*Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
**Assuming payment of applicable contingent deferred sales charge.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Held/ Percent of
COUNTRIES Industries Face Amount Long-Term Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Hong Kong Banking 1,733,300 Dah Sing Financial Holdings Ltd. $ 5,513,963 $ 5,159,499 0.4%
2,174,863 HSBC Holdings, Ltd. 18,601,224 24,277,108 1.9
------------ -------------- ------
24,115,187 29,436,607 2.3
Conglomerates 22,408,000 Guandong Investments, Ltd. 9,510,303 14,935,380 1.2
$ 3,436,000 Guandong Investments, Ltd., 4.50%
due 10/07/1998 4,364,558 4,458,210 0.3
4,323,000 Hutchison Whampoa, Ltd. 12,516,919 20,421,331 1.6
889,472 Jardine Matheson Holdings Ltd. 7,444,776 7,540,142 0.6
3,227,000 Swire Pacific 'A' Ltd. 16,726,748 25,267,385 2.0
------------ -------------- ------
50,563,304 72,622,448 5.7
Electrical Equipment 14,807,000 Innovative International Holdings Ltd. 6,841,251 4,311,770 0.3
4,225,000 Johnson Electric Holdings Ltd. 8,157,249 11,893,014 0.9
------------ -------------- ------
14,998,500 16,204,784 1.2
Electronics 16,600,000 ASM Pacific Technology 5,454,485 11,923,590 0.9
Finance 4,380,000 Guoco Group, Ltd. 16,323,506 21,597,577 1.7
5,500,000 Peregrine Investment Holdings 10,274,868 10,534,898 0.8
------------ -------------- ------
26,598,374 32,132,475 2.5
Insurance 19,767,000 National Mutual Asia, Ltd. 7,969,425 12,791,360 1.0
438,000 National Mutual Asia, Ltd. (Warrants) (a) 72,529 134,914 0.0
------------ -------------- ------
8,041,954 12,926,274 1.0
Leisure 5,964,000 Hong Kong & Shanghai Hotels 5,088,878 8,837,900 0.7
7,594,000 Shangri-La Asia, Ltd. 10,844,457 11,695,627 0.9
3,816,000 Television Broadcasts Ltd. 15,283,220 17,730,001 1.4
------------ -------------- ------
31,216,555 38,263,528 3.0
<PAGE>
Miscellaneous-- 17,912,000 C.P. Pokphand Co., Ltd. 7,227,529 5,355,031 0.4
Consumer 2,733,000 Gold Lion Holdings Ltd. 1,534,410 732,177 0.1
------------ -------------- ------
8,761,939 6,087,208 0.5
Newspaper/Publishing 8,750,000 Oriental Press Group 5,834,025 5,747,117 0.4
8,500,000 South China Morning Post Holdings 4,966,435 5,236,388 0.4
------------ -------------- ------
10,800,460 10,983,505 0.8
Packaging 14,000,000 M.C. Packaging (HK), Ltd. 6,547,529 6,522,836 0.5
Real Estate 7,940,000 Amoy Properties Ltd. 6,819,474 10,198,985 0.8
3,400,000 Amoy Properties Ltd. (Warrants) (a) 1,396,520 1,522,513 0.1
2,183,000 Cheung Kong Holdings Ltd. 8,152,206 10,623,009 0.8
3,280,000 Hong Kong Land Holdings Ltd. 6,443,132 8,107,989 0.6
3,628,020 New World Development Co., Ltd. 9,331,350 12,513,328 1.0
2,790,100 Sun Hung Kai Properties, Ltd. 12,644,845 20,763,165 1.6
5,015,000 Wharf Holdings Ltd. 19,610,562 20,185,396 1.6
------------ -------------- ------
64,398,089 83,914,385 6.5
Telecommunications 12,220,000 ABC Communications Holdings Ltd. 3,501,176 5,519,536 0.4
Transportation 1,154,000 Hong Kong Aircraft Engineering Co. 6,558,828 5,331,875 0.4
Utilities 2,225,200 China Light & Power Co., Ltd. 9,301,633 11,317,944 0.9
5,908,880 Hong Kong & China Gas Co. (The) 8,402,958 11,088,661 0.9
8,116,800 Hong Kong Telecommunications, Ltd. 12,760,935 16,230,028 1.3
1,650,000 Hong Kong Telecommunications, Ltd.
(Warrants) (a) 1,644,721 913,974 0.1
------------ -------------- ------
32,110,247 39,550,607 3.2
Total Investments in Hong Kong 293,666,627 371,419,658 28.9
India Chemicals 960,000 Mardia Chemicals Ltd. 4,415,127 6,122,937 0.5
Conglomerates 375,300 Reliance Industries (ADR)* 10,241,548 9,007,200 0.7
Consumer--Durables 456,000 IFB Industries Ltd. 3,998,087 3,926,333 0.3
Foreign Bonds $ 2,600,000 SCICI Ltd., 3.50% due 4/01/2004 2,699,375 2,860,000 0.2
Miscellaneous 45,610 Housing Development Finance 4,332,853 4,378,095 0.3
Steel Mills 270,000 Essar Gujarat Limited 1,004,300 990,194 0.1
Tobacco 32,000 Indian Tobacco Co. (GDR)** 816,000 628,160 0.1
Total Investments in India 27,507,290 27,912,919 2.2
<PAGE>
Indonesia Banking 1,744,000 P.T. Bank International Indonesia 7,223,733 6,332,200 0.5
Food 1,959,672 P.T. Mayorah Indah 5,799,651 10,357,674 0.8
Forest Products 5,359,200 P.T. Indah Kiat Pulp & Paper Corp. 6,453,834 7,019,818 0.5
Miscellaneous--Consumer 1,941,250 P.T. Modern Photo Film 5,119,000 10,884,847 0.9
Pharmaceuticals 1,774,500 P.T. Kalbe Farma 5,381,680 6,932,278 0.5
Real Estate 1,930,500 P.T. Duta Anggada Realty 5,056,298 3,371,587 0.3
Tobacco 5,425,000 P.T. Hanjaya Mandala Sampoerna 4,892,468 23,063,356 1.8
Total Investments in Indonesia 39,926,664 67,961,760 5.3
Malaysia Air Transport 612,800 Malaysian Helicopter Services BHD 300,328 1,900,804 0.2
Banking 4,256,000 Affin Holdings BHD 6,646,052 7,572,126 0.6
1,969,000 Arab-Malaysian Merchant Bank BHD 6,957,819 21,510,730 1.7
1,969,000 Arab-Malaysian Merchant Bank BHD
(Rights) (c) 0 0 0.0
2,850,000 Malayan Banking BHD 6,748,454 19,014,826 1.5
2,700,000 Public Bank BHD 'Foreign' 2,361,655 6,522,267 0.5
------------ -------------- ------
22,713,980 54,619,949 4.3
Building & 1,300,000 Bandar Raya Developments BHD 2,962,152 2,688,256 0.2
Construction 1,532,000 Ekran BHD 3,676,794 7,053,297 0.6
1,912,500 George Kent Holdings BHD 2,694,743 5,484,540 0.4
382,500 George Kent Holdings BHD (Rights) 100,464 101,483 0.0
2,355,000 I.J.M. Corp. BHD 5,257,205 8,958,740 0.7
4,671,000 Malayan Cement BHD 5,232,118 8,565,626 0.7
------------ -------------- ------
19,923,476 32,851,942 2.6
Conglomerates 9,000,000 Renong BHD 8,454,940 13,624,659 1.1
Construction & Housing 650,000 Golden Plus Holdings BHD 2,997,527 4,083,106 0.3
Finance 3,440,000 MBF Capital BHD 5,461,287 4,590,246 0.4
2,850,000 United Merchant Group BHD 7,467,775 7,505,853 0.6
------------ -------------- ------
12,929,062 12,096,099 1.0
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Held/ Percent of
COUNTRIES Industries Face Amount Long-Term Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Malaysia Financial Services 817,000 Hong Leong Credit BHD $ 6,084,234 $ 5,164,027 0.4%
(concluded) 577,000 Pengkalen Holdings BHD 3,099,796 3,016,699 0.2
------------ -------------- ------
9,184,030 8,180,726 0.6
Food 1,721,700 Nestle Malaysia BHD 7,333,320 10,613,679 0.8
Forest Products $ 2,000,000 Aokam Perdana, 3.50% due 6/13/2004 2,345,000 2,210,000 0.2
462,000 Aokam Perdana 'A' 1,220,396 3,641,202 0.3
1,887,000 Aokam Perdana BHD (Ordinary) 5,636,268 16,565,548 1.3
390,000 Aokam Perdana TSR (Warrants) (a) 1,338,769 2,708,545 0.2
3,944,000 Land & General BHD 8,186,738 18,158,096 1.4
736,000 Pacific Chemical BHD 4,004,307 4,996,645 0.4
------------ -------------- ------
22,731,478 48,280,036 3.8
Leisure 3,300,000 Berjaya Sports TOTO BHD 7,410,648 5,742,489 0.4
848,500 Genting BHD 7,511,393 7,614,319 0.6
4,000,000 Pernas International Hotels &
Properties BHD 3,815,457 5,961,764 0.5
3,056,000 Resorts World BHD 9,956,876 19,316,114 1.5
2,504,000 Tanjong PLC 7,760,037 11,137,573 0.9
------------ -------------- ------
36,454,411 49,772,259 3.9
Shipyards 830,000 Westmont BHD 6,278,222 6,379,633 0.5
Telecommunications 3,375,000 Leader Universal Cable BHD 7,763,214 19,357,199 1.5
1,532,000 Technology Resources Industries BHD 2,767,725 6,276,239 0.5
1,611,000 Telekom Malaysia BHD 8,939,145 12,634,062 1.0
------------ -------------- ------
19,470,084 38,267,500 3.0
Transportation 1,199,000 Malaysian Airlines System BHD 3,345,381 3,204,506 0.3
2,957,333 Malaysian International Shipping Co. BHD 6,043,232 9,865,469 0.8
------------ -------------- ------
9,388,613 13,069,975 1.1
Total Investments in Malaysia 178,159,471 293,740,367 23.2
Pakistan Telecommunications 41,905 Pakistan Telecommunications 7,533,262 8,003,855 0.6
Total Investments in Pakistan 7,533,262 8,003,855 0.6
<PAGE>
Philippines Beverages 4,804,800 San Miguel Corp. 'B' 10,222,586 22,871,217 1.8
Conglomerates 6,280,000 JG Summit Holdings 3,427,255 2,591,555 0.2
Food & Beverage 2,060,000 Universal Robina Corp. 1,872,295 1,897,889 0.1
International Trade 13,253,416 International Container Terminal 8,867,496 12,719,209 1.0
Oil 6,570,000 Petron Corp. 5,609,882 5,548,560 0.4
Real Estate 1,470,000 Ayala Land, Inc. 1,977,640 1,918,618 0.2
Retail 30,960,750 SM Prime Holdings 7,735,729 8,794,992 0.7
Telecommunications 78,880 Philippine Long Distance Telephone
Co.(ADR)* 4,027,836 4,417,280 0.3
Utilities--Electric 1,145,300 Manila Electric Co. (MERALCO) 'B' 7,460,188 14,838,340 1.2
Total Investments in the Philippines 51,200,907 75,597,660 5.9
Singapore Airlines 1,040,000 Singapore Airlines 'Foreign' Ltd. 6,170,157 10,175,439 0.8
Automotive 1,352,000 Cycle & Carriage, Ltd. 5,687,875 11,585,965 0.9
Banking 1,270,000 Development Bank of Singapore Ltd. 11,309,155 13,368,421 1.0
1,366,866 Overseas Chinese Banking Corp. 'Foreign' 8,900,801 13,096,827 1.0
220,000 Overseas Chinese Banking Corp. 'Foreign'
(Warrants) (a) 1,156,680 757,085 0.1
1,353,587 United Overseas Bank 9,322,123 13,608,938 1.1
------------ -------------- ------
30,688,759 40,831,271 3.2
Beverages 190,000 Fraser & Neave Ltd. (Warrants) (a) 1,139,529 1,096,154 0.1
Conglomerates 1,308,000 ACMA Ltd. 8,074,466 8,825,911 0.7
Electronics 14,340,000 I.P.C. Corp. 10,159,282 12,385,425 1.0
Marine/Offshore 2,807,500 Sembawang Maritime Ltd. 8,560,245 13,166,076 1.0
Oil Services SG$ 2,090,000 Sembawang Maritime Ltd., 1.50% due
10/25/1998 1,325,469 3,201,282 0.3
1,130,000 Van Der Horst Ltd. 6,229,305 5,184,885 0.4
------------ -------------- ------
16,115,019 21,552,243 1.7
<PAGE>
Publishing & 762,000 Singapore Press Holdings Ltd. 8,194,511 13,368,421 1.0
Broadcasting
Real Estate 2,524,000 DBS Land Ltd. 7,383,400 7,902,402 0.6
1,000,000 DBS Land Ltd. (Warrants) (a) 1,013,666 1,032,389 0.1
------------ -------------- ------
8,397,066 8,934,791 0.7
Shipping 1,644,000 Sembawang Corp. (e) 13,268,668 13,200,810 1.0
Steel 1,495,250 Natsteel Ltd. 3,407,562 3,248,789 0.3
Telecommunications 10,380,000 Goldtron, Ltd. 7,286,316 10,926,316 0.9
1,635,000 Goldtron, Ltd. (Warrants) (a) 1,194,319 1,020,496 0.1
------------ -------------- ------
8,480,635 11,946,812 1.0
Total Investments in Singapore 119,783,529 157,152,031 12.4
South Korea Automotive 22,045 Dong ah Tire Industries Co. 840,416 1,466,814 0.1
Building & Construction 100,230 Samsung Heavy Industries 5,565,018 5,467,776 0.4
12,438 Samsung Heavy Industries (New)
(Rights) (d) 402,781 403,437 0.0
------------ -------------- ------
5,967,799 5,871,213 0.4
Retail Stores 100,920 Shinsegae Department Stores Co. 3,492,485 10,538,146 0.8
Steel 89,000 Pohang Iron & Steel Co., Ltd. 8,236,443 13,247,792 1.0
Utilities 5,362 Korea Mobile Telecommunications Corp. 979,459 4,260,054 0.3
246,000 Korean Electric & Power Corp. 6,197,512 12,766,738 1.0
------------ -------------- ------
7,176,971 17,026,792 1.3
Total Investments in South Korea 25,714,114 48,150,757 3.6
Taiwan Closed-End Funds 343,300 The R.O.C. Taiwan 2,904,850 4,334,162 0.3
Food & Beverage 212,831 President Enterprises (ADR)* 3,119,745 3,538,315 0.3
Total Investments in Taiwan 6,024,595 7,872,477 0.6
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Held/ Percent of
COUNTRIES Industries Face Amount Long-Term Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Thailand Banking 2,256,000 Bangkok Bank $ 8,127,594 $ 23,309,892 1.8%
4,390,000 Industrial Finance Corp. of Thailand 8,764,194 10,900,280 0.9
1,324,000 Siam Commercial Bank, Ltd. (The) 6,086,647 12,831,718 1.0
------------ -------------- ------
22,978,435 47,041,890 3.7
Building & 1,097,000 Christiani & Nielsen 'Local' 7,169,983 7,512,495 0.6
Construction 329,100 Christiani & Nielsen 'Local'
(Warrants) (a) 647,325 909,407 0.1
886,000 Land & House Public Co. 6,096,294 17,599,359 1.4
------------ -------------- ------
13,913,602 26,021,261 2.1
Financial Services 347,600 Finance One Co., Ltd. 'Foreign' 6,645,675 6,904,670 0.5
667,000 Phatra Thanakit Co., Ltd. 5,543,101 6,624,589 0.5
------------ -------------- ------
12,188,776 13,529,259 1.0
Mining 781,000 PTT Exploration 7,121,826 7,006,167 0.5
Mutual Funds 12,600,000 Ruam Pattana Fund II 4,999,163 8,578,294 0.7
Publishing & 283,700 Post Publishing Public Co. Ltd. 2,672,649 2,635,899 0.2
Broadcasting
Telecommunications 450,000 Advanced Information Service 6,535,348 7,388,867 0.6
747,000 International Engineering Co. Ltd. 3,347,314 7,419,143 0.6
------------ -------------- ------
9,882,662 14,808,010 1.2
Total Investments in Thailand 73,757,113 119,620,780 9.4
Total Long-Term Investments 823,273,572 1,177,432,264 92.1
<CAPTION>
Face Amount Short-Term Investments
<S> <S> <C> <S> <C> <C> <C>
United States Commercial Paper*** $ 30,000,000 Corporate Asset Funding Co., 4.90%
due 11/01/1994 29,873,416 29,873,416 2.3
46,097,000 General Electric Capital Corp., 4.95%
due 10/03/1994 46,084,323 46,084,323 3.5
25,000,000 Matterhorn Capital Corp., 4.73%
due 10/12/1994 24,963,868 24,963,868 1.9
10,000,000 Toshiba America, Inc., 4.92%
due 10/27/1994 9,964,466 9,964,466 0.7
------------ -------------- ------
110,886,073 110,886,073 8.4
<PAGE>
Total Short-Term Investments 110,886,073 110,886,073 8.4
Total Investments $934,159,645 1,288,318,337 100.5
============
Liabilities in Excess of Other Assets (5,921,109) (0.5)
-------------- ------
Net Assets $1,282,397,228 100.0%
============== ======
Net Asset Value: Class A--Based on net assets of $281,492,011 and
16,275,035 shares outstanding $ 17.30
==============
Class B--Based on net assets of $1,000,905,217 and
58,307,607 shares outstanding $ 17.17
==============
<FN>
*American Depositary Receipt (ADR).
**Global Depositary Receipt (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.
(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)The rights may be exercised until December 31, 1999.
(c)The rights may be exercised until October 5, 1994.
(d)The rights may be exercised until October 24, 1994.
(e)Previously held as Sembawang Shipyard Ltd.
</TABLE>
<PAGE>
PORTFOLIO INFORMATION
For the Quarter Ended September 30, 1994
Additions Aokam Perdana, 3.50% due 6/13/2004
Arab-Malaysian Merchant Bank BHD (Rights)
Ayala Land, Inc.
Bandar Raya Developments BHD
Essar Gujarat Limited
George Kent Holdings BHD (Rights)
Golden Plus Holdings BHD
Guandong Investments, Ltd., 4.50% due 10/07/1998
Hong Leong Credit BHD
MBF Capital BHD
Malaysian Airlines System BHD
Malaysian Helicopter Services BHD
Oriental Press Group
PTT Exploration
Pakistan Telecommunications
Pengkalen Holdings BHD
Petron Corp.
Reliance Industries (ADR)
Samsung Heavy Industries (New) (Rights)
United Merchant Group BHD
Deletions Arvind Mills Ltd.
Berjaya Singer (Ordinary) BHD
Berjaya Singer TSR
Core Parenterals
Fairwood Holdings, Ltd.
Finance One Co., 3.50% due 12/31/2001
Finance One Co., Ltd. 'Foreign' (Warrants)
Giordano Holdings Ltd.
Great Eagle Holdings Co.
Hong Kong Land Holdings Ltd. (Warrants)
International Cosmetics Co.
New World Development Co., Ltd. (Warrants)
Rothmans of Pall Mall (Malaysia) BHD
Swire 'A' Peregrine (Warrants)
Tan Chong Motor Holdings BHD
Yue Yen Industrial Holdings
<PAGE>
Officers and
Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Kara W. Y. Tan Bhala, Vice President and Portfolio Manager
Gerald M. Richard, Treasurer
Michael J. Hennewinkel, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Transfer Agent
Financial Data Services, Inc.
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
APPENDIX GRAPHIC AND IMAGE MATERIAL.
ITEM 1:
Asset Allocation as a Percentage* of Net Assets as of September
30, 1994
A map illustrating the following percentages:
Pakistan 0.6%
India 2.2%
Indonesia 5.3%
Singapore 12.4%
Malaysia 23.2%
Thailand 9.4%
Hong Kong 28.9%
South Korea 3.6%
Taiwan 0.6%
Philippines 5.9%
[FN]
*Total may not equal 100%.
