MERRILL
LYNCH
DRAGON
FUND, INC.
FUND LOGO
Quarterly Report March 31, 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
MERRILL LYNCH DRAGON FUND, INC.
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX
GRAPHIC AND IMAGE MATERIAL: Item 1.
<PAGE>
DEAR SHAREHOLDER
Most of the world's financial markets corrected quite sharply in the
March quarter, and the various indexes of the emerging Asian stock
markets fell by 20%--25%. There are three main reasons for this de-
cline. First, the environment was characterized by mounting concerns
about rising interest rates. Second, there was a large amount of pro-
fit- taking after the strong increase in share prices in 1993 and
perceived overvaluation. Third, higher interest rates and negative
foreign in- vestor sentiment sharply curtailed liquidity, one of the
key factors which drove share prices higher in 1993.
Despite investors' initial concerns that higher US interest rates will
translate into similar increases in the emerging Asian countries, US
interest rate increases will not impact most of the economies in the
region. Monetary policies of countries such as Malaysia, Indonesia,
the Philippines and Korea are usually independent of US Federal Reserve
Board policies. Only Hong Kong, whose currency valuation is pegged to
that of the US dollar, is likely to experience higher interest rates
as a result of US developments. Nevertheless, because investor senti-
ment was so poor, all of the emerging Asian markets experienced sell-
offs during the March quarter.
Hong Kong's Hang Seng Index has retreated by about 25% since the
start of 1994. In line with US interest rate increases, interest rates
in Hong Kong have also risen, and there continue to be concerns about
The People's Republic of China's Most Favored Nation status. In ad-
dition, we are concerned that rising inflation in China might lead to
tightening of credit by the central government, thus slowing economic
growth in China this year. Furthermore, there are concerns regarding
the overheating of the real estate market in China. However, on the
positive side, valuations have fallen back to 12 times projected
1994 earnings, a level which is comparatively inexpensive on a his-
torical basis.
During the March quarter, the Malaysian market experienced a strong
sell-off because of perceived overvaluations. However, strong 1993 re-
sults supported much of the rise in share prices, and we expect Malay-
sian companies to have earnings growth rates on average of about 21% in
1994. Inflation seems to be contained although it has probably fallen
to its lowest level. Malaysian banks have recently cut interest rates,
and the Malaysian ringgit is expected to appreciate against the US
dollar. Therefore, we believe that the outlook for Malaysian equities
is quite positive, supported by the fact that valuations have fallen
back to about 22 times 1994 earnings.
<PAGE>
For the quarter ended March 31, 1994, the Singapore stock market was
one of the best performing among the markets in which the Fund invests.
We are slightly overweighted in the market because we believe earnings
growth is likely to be strong and market liquidity will increase as
local investors put pension savings into the equity market. In addition,
valuations have fallen back to about 19 times 1994 earnings. The Fund
has a strong weighting in financial and export-oriented companies in
Singapore.
The Thai stock market was among the worst performing of the develop-
ing Asian markets during the March quarter. Fears of rising interest
rates and large amounts of foreign selling have depressed the Stock Ex-
change of Thailand Index (SET). Also, concerns about declining profit
margins of the country's major banks have led to some profit-taking.
Banks make up about 25% of the SET. Some of them are trading at ten
times or below the forecast earnings for 1994. The portfolio is quite
overweighted in the banking sector because we believe that it still
offers attractive value.
We are overweighted in the Philippines stock market because we believe
that the positions we hold offer fundamental value. The Philippines
economy is beginning to recover after a few years of slow growth. In
addition, the country seems to have improved its power shortage problem.
We are focusing on consumer-related stocks and on the stocks of com-
panies which have diversified their operations outside the Philippines.
We expect Indonesia's economy to grow this year. Inflation is still
mild, interest rates are likely to decline and corporate earnings growth
should be strong. As with the Philippines, we are focusing on consumer-
related stocks.
The Fund has an overweight position in India. As a result of the coun-
try's liberalization program, the economy is likely to grow over the
next few years. Consequently, corporate earnings should be impressive.
We are currently underweighted in Korea, but hold several positions
with attractive value. Our largest holding is in Korean Electric & Power
Corp., the country's electrical utility company.
Outlook and Strategy
The developing Asian stock markets are unlikely to rebound until in-
vestor sentiment toward equities improves worldwide. However, on a
fundamental basis, many of these markets are supported by strong earn-
ings growth, fair valuations and very high rates of economic growth.
Therefore, we still believe these markets have very good long-term ap-
preciation potential.
<PAGE>
We have brought our overweighting of Malaysia down to a neutral weight-
ing, and we are underweighted in Hong Kong because we believe it has
already peaked in its business cycle. We also are underweighted in Thai-
land and Korea and overweighted in Singapore, Indonesia, India and
the Philippines. We expect to maintain these weightings in the coming
quarter. In addition, we have about 7% in cash reserves.
In Conclusion
We thank you for your investment in Merrill Lynch Dragon Fund, Inc.,
and we look forward to continuing to serve your financial needs.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Kara Tan Bhala)
Kara Tan Bhala
Vice President and Portfolio Manager
April 21, 1994
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.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
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>
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>
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--3/31/94 18.77 15.08 -- -- -19.66
------ ------
Total $0.006 Total $0.262
Cumulative total return as of 3/31/94: +53.65%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and
do not include sales charge;results would be lower if sales
charge was included.
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<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--3/31/94 18.74 15.03 -- -- -19.80
------ ------
Total $0.006 Total $0.123
Cumulative total return as of 3/31/94: +51.54%**
<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>
<PAGE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
3/31/94 12/31/93 3/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $15.08 $18.77 $11.17 +35.05%(1) -19.66%
Class B Shares 15.03 18.74 11.17 +34.60(1) -19.80
Class A Shares--Total Return +36.45(2) -19.66
Class B Shares--Total Return +35.40(3) -19.80
<FN>
*Investment results shown for the 3-month and 12-month periods are before the
deduction of any sales charges.
(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>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/94 +36.45% +27.58%
Inception (5/29/92) through 3/31/94 +26.32 +21.78
[FN]
*Maximum sales charge is 6.5%, which became effective on
September 15, 1993.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/94 +35.40% +31.40%
Inception (5/29/92) through 3/31/94 +25.37 +24.02
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
**Assuming payment of applicable contingent deferred sales charge.
PORTFOLIO INFORMATION
For the Quarter Ended March 31, 1994
<PAGE>
Additions
Advanced Info Services
Amcol Holdings, Ltd.
Arvind Mills Ltd.
Berjaya Leisure, 5% due 4/10/1999
Berjaya Leisure TSR BHD (Warrants)
DBS Land Ltd.
DBS Land Ltd. (Warrants)
Dah Sing Financial Holdings Ltd.
Finance One Co., Ltd. 'Foreign'
Finance One Co., Ltd. (Warrants)
Hong Kong Aircraft Engineering Co.
Hong Kong Land Holdings Ltd. (Warrants)
Hong Kong Tel Flemings (Warrants)
JG Summit Holdings
Mardia Chemicals Ltd.
Overseas Chinese Banking Corp. (Warrants)
P.T. Bank International Indonesia
P.T. Indah Kiat Pulp & Paper Corp.
Phatra Thanakit Co., Ltd.
Pohang Iron & Steel Co., Ltd.
Samsung Heavy Industries
Van Der Horst Ltd.
Westmont BHD
Wharf Holdings Ltd.
Deletions
Consolidated Electric Power Inc.
Dao Heng Bank Group Ltd.
Hong Leong Properties BHD
Kumagai Gumi, Ltd.
Lam Soon (HK), Ltd.
Magnum Corp. BHD
Malaysian Resources Corp. BHD
Paul Y-ITC Construction Holdings Ltd.
UDL Holdings, Ltd.
<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 Apparel 16,900,000 Yue Yuen Industrial Holdings $ 3,678,253 $ 4,428,778 0.5%
Banking 300,000 Dah Sing Financial Holdings Ltd. 1,305,347 1,083,173 0.1
1,441,128 HSBC Holdings, Ltd. 10,630,225 16,225,349 1.7
664,800 Hang Seng Bank, Ltd. 4,356,088 4,344,648 0.4
------------ ------------ ------
16,291,660 21,653,170 2.2
<PAGE>
Diversified 24,448,000 Guandong Investments, Ltd. 9,907,098 14,079,122 1.4
3,499,000 Hutchison Whampoa, Ltd. 8,877,086 14,263,520 1.5
889,472 Jardine Matheson Holdings Ltd. 7,444,776 5,985,602 0.6
6,800,000 Swire 'A' Peregrine (Warrants) (a) 1,090,968 2,001,993 0.2
2,427,000 Swire Pacific Ltd. 'A' 12,331,978 16,803,347 1.7
------------ ------------ ------
39,651,906 53,133,584 5.4
Electrical Equipment 14,212,000 Innovative International Holdings Ltd. 6,660,162 5,977,379 0.6
4,225,000 Johnson Electric Holdings Ltd. 8,157,249 10,333,816 1.1
------------ ------------ ------
14,817,411 16,311,195 1.7
Electronics 16,600,000 ASM Pacific Technology 5,454,485 10,096,670 1.0
Finance 2,832,000 Guoco Group, Ltd. 9,420,942 12,552,379 1.3
1,500,000 Peregrine Investment Holdings 3,269,819 2,775,873 0.3
5,000,000 Sun Hung Kai & Co. Ltd. 3,350,915 2,669,108 0.3
------------ ------------ ------
16,041,676 17,997,360 1.9
Food Chains 14,884,000 Fairwood Holdings, Ltd. 6,784,010 3,351,515 0.3
Insurance 19,767,000 National Mutual Asia, Ltd. 7,969,425 10,488,101 1.1
1,744,000 National Mutual Asia, Ltd. (Warrants)
(a) 281,487 363,366 0.0
------------ ------------ ------
8,250,912 10,851,467 1.1
Leisure 5,670,000 Hong Kong & Shanghai Hotels 4,644,068 8,364,888 0.8
5,060,000 Shangri-La Asia, Ltd. 7,240,923 7,464,962 0.8
2,650,000 Television Broadcasts Ltd. 9,839,412 9,362,261 1.0
------------ ------------ ------
21,724,403 25,192,111 2.6
Miscellaneous-- 17,912,000 C.P. Pokphand Co., Ltd. 7,227,529 5,215,535 0.5
Consumer 13,642,000 Gold Lion Holdings Ltd. 5,708,124 4,148,758 0.4
------------ ------------ ------
12,935,653 9,364,293 0.9
Packaging 11,450,000 M.C. Packaging (HK), Ltd. 5,643,216 4,630,498 0.5
Real Estate 7,940,000 Amoy Properties Ltd. 6,819,474 10,891,773 1.1
3,400,000 Amoy Properties Ltd. (Warrants) (a) 1,396,520 1,935,993 0.2
1,983,000 Cheung Kong Holdings Ltd. 7,151,282 10,136,594 1.0
10,000,000 Great Eagle Holdings Co. 4,841,967 6,308,801 0.6
3,280,000 Hong Kong Land Holdings Ltd. 6,443,132 9,593,001 1.0
490,000 Hong Kong Land Holdings Ltd. (Warrants)
(a) 1,015,791 564,363 0.0
3,587,505 New World Development Co., Ltd. 9,202,537 12,395,841 1.3
1,500,000 New World Development Co., Ltd.
(Warrants) (a) 1,771,859 2,562,344 0.3
2,530,100 Sun Hung Kai Properties Ltd. 10,663,645 17,353,448 1.8
750,000 Wharf Holdings Ltd. 3,210,810 2,892,343 0.3
------------ ------------ ------
52,517,017 74,634,501 7.6
<PAGE>
Retail Stores 11,658,000 Giordano Holdings Ltd. 5,547,674 5,619,822 0.6
Telecommunications 11,486,000 ABC Communications Holdings Ltd. 3,202,274 5,165,303 0.5
Transportation 734,000 Hong Kong Aircraft Engineering Co. 4,513,929 3,989,492 0.4
Utilities 2,125,200 China Light & Power Co., Ltd. 8,790,293 10,932,240 1.1
4,272,400 Hong Kong & China Gas Co. (The) 6,874,118 10,670,910 1.1
1,650,000 Hong Kong Tel Flemings (Warrants) (a) 1,644,721 736,674 0.1
5,716,800 Hong Kong Telecommunications, Ltd. 7,803,114 9,469,678 1.0
------------ ------------ ------
25,112,246 31,809,502 3.3
Total Investments in Hong Kong 242,166,725 298,229,261 30.5
India Chemicals 960,000 Mardia Chemicals Ltd. 4,415,127 5,355,862 0.6
Foreign Bonds $ 2,600,000 SCICI Ltd., 3.50% due 4/01/2004 2,699,375 3,016,000 0.3
Miscellaneous 26,000 Housing Development Finance 2,196,574 2,320,873 0.2
Textiles 179,783 Arvind Mills Ltd. 1,873,005 1,147,016 0.1
Total Investments in India 11,184,081 11,839,751 1.2
Indonesia Banking 1,504,000 P.T. Bank International Indonesia 6,373,192 4,748,004 0.5
Food 1,884,300 P.T. Mayorah Indah 5,799,651 8,835,390 0.9
Forest Products 3,725,000 P.T. Indah Kiat Pulp & Paper Corp. 6,286,535 4,280,118 0.4
Miscellaneous-- 1,941,250 P.T. Modern Photo Film 5,119,000 9,012,303 0.9
Consumer
Pharmaceuticals 663,000 P.T. Kalbe Farma 3,774,666 3,570,473 0.4
Real Estate 1,930,500 P.T. Duta Anggada Realty 5,056,298 5,220,595 0.5
Tobacco 2,170,000 P.T. Hanjaya Mandala Sampoerna 4,892,468 15,514,392 1.6
Total Investments in Indonesia 37,301,810 51,181,275 5.2
</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 Automotive 4,875,000 Tan Chong Motor Holdings BHD $ 5,021,389 $ 5,271,253 0.5%
Banking 4,256,000 Affin Holdings BHD 6,646,052 6,125,339 0.6
1,969,000 Arab-Malaysian Merchant Bank BHD 6,957,819 15,857,718 1.6
2,850,000 Malayan Banking BHD 6,748,454 14,770,694 1.5
2,700,000 Public Bank BHD 'Foreign' 2,361,655 4,548,819 0.5
------------ ------------ ------
22,713,980 41,302,570 4.2
Building & 1,266,000 Ekran BHD 4,942,249 8,638,255 0.9
Construction 1,712,500 George Kent Holdings BHD 2,197,862 3,192,580 0.3
2,355,000 I.J.M. Corp. BHD 5,257,205 7,507,550 0.8
4,671,000 Malayan Cement BHD 5,232,118 7,488,926 0.7
------------ ------------ ------
17,629,434 26,827,311 2.7
Conglomerate 9,000,000 Renong BHD 8,454,940 11,342,282 1.2
Consumer Products 1,760,000 Berjaya Singer BHD 4,105,157 2,716,779 0.3
1,500,000 Berjaya Singer TSR 1,298,343 788,591 0.1
------------ ------------ ------
5,403,500 3,505,370 0.4
Food 1,721,700 Nestle Malaysia BHD 7,333,320 9,436,611 1.0
Forest Products 1,155,000 Aokam Perdana (Ordinary) 5,176,410 11,196,868 1.1
989,000 Aokam Perdana TSR (Warrants) (a) 3,184,415 8,518,233 0.9
736,000 Pacific Chemical 4,004,307 4,445,638 0.5
------------ ------------ ------
12,365,132 24,160,739 2.5
Leisure $ 704,000 Berjaya Leisure, 5% due 4/01/1999 254,152 262,491 0.0
704,000 Berjaya Leisure TSR BHD (Warrants)
(a) 0 0 0.0
2,350,000 Berjaya Sports TOTO BHD 5,396,601 3,942,953 0.4
4,000,000 Pernas International Hotels &
Properties BHD 3,815,457 4,533,930 0.5
2,756,000 Resorts World BHD 7,986,931 13,255,928 1.3
2,504,000 Tanjong PLC 7,760,037 10,363,311 1.1
------------ ------------ ------
25,213,178 32,358,613 3.3
Oil & Gas Offshore 7,500,000 Promet BHD 5,754,101 8,109,620 0.8
Development
Property & Forest 3,944,000 Land & General BHD 8,186,739 12,793,736 1.3
Products
Shipyards 705,000 Westmont BHD 5,273,593 3,942,953 0.4
<PAGE>
Telecommunications 3,375,000 Leader Universal Cable BHD 7,763,214 14,848,993 1.5
2,690,000 Technology Resources Industries BHD 5,219,289 12,136,092 1.3
1,611,000 Telekom Malaysia BHD 8,939,145 10,812,081 1.1
------------ ------------ ------
21,921,648 37,797,166 3.9
Tobacco 1,167,000 Rothmans of Pall Mall (Malaysia) BHD 6,320,033 7,701,678 0.8
Transportation 2,218,000 Malaysian International Shipping Co.
BHD 6,043,232 7,029,456 0.7
Total Investments in Malaysia 157,634,219 231,579,358 23.7
Philip- Beverages 2,352,400 San Miguel Corp. 'B' 9,778,846 19,059,591 1.9
pines
Conglomerate 5,180,000 JG Summit Holdings 2,990,644 1,937,774 0.2
International Trade 11,193,416 International Container Terminal 6,447,223 12,664,084 1.3
Telecommunications 42,380 Philippine Long Distance Telephone Co.
(ADR)* 1,802,121 2,606,370 0.3
Utilities--Electric 621,200 Manila Electric Co. (MERALCO) 'B' 4,550,915 10,655,620 1.1
Total Investments in the Philippines 25,569,749 46,923,439 4.8
Singapore Airlines 1,040,000 Singapore Airlines 'Foreign' Ltd. 6,170,157 7,499,681 0.8
Automotive 1,352,000 Cycle & Carriage, Ltd. 5,687,875 8,196,554 0.8
Banking 1,020,000 Development Bank of Singapore Ltd. 8,793,050 9,047,862 0.9
1,366,866 Overseas Chinese Banking Corp.
'Foreign' 8,900,801 10,380,157 1.0
220,000 Overseas Chinese Banking Corp.
(Warrants) (a) 1,156,680 634,588 0.1
1,139,625 United Overseas Bank 8,026,670 8,145,373 0.8
------------ ------------ ------
26,877,201 28,207,980 2.8
Beverages 190,000 Fraser & Neave Ltd. (Warrants) (a) 1,139,529 909,381 0.1
Conglomerate 1,308,000 ACMA Ltd. 8,074,466 7,595,915 0.8
Electronics 14,340,000 I.P.C. Corp. 10,159,282 12,262,668 1.3
Marine/Offshore 2,807,500 Sembawang Maritime Ltd. 8,560,245 12,183,153 1.2
Oil Services $ 2,090,000 Sembawang Maritime Ltd., 1.50% due
10/25/1998 1,325,469 3,000,957 0.3
1,130,000 Van Der Horst Ltd. 6,229,305 4,326,739 0.4
------------ ------------ ------
16,115,019 19,510,849 1.9
<PAGE>
Publishing & 762,000 Singapore Press Holdings Ltd. 8,194,511 10,503,638 1.1
Broadcasting
Real Estate 450,000 Amcol Holdings, Ltd. 1,366,707 976,388 0.1
1,370,000 DBS Land Ltd. 3,865,864 3,584,556 0.3
1,000,000 DBS Land Ltd. (Warrants) (a) 1,013,666 663,689 0.1
------------ ------------ ------
6,246,237 5,224,633 0.5
Shipping 1,386,000 Sembawang Shipyard Ltd. 11,225,157 9,552,521 1.0
Steel 3,413,000 Natsteel Ltd. 9,506,408 10,454,627 1.1
Telecommunications 10,380,000 Goldtron, Ltd. 7,286,316 10,333,631 1.1
1,635,000 Goldtron, Ltd. (Warrants) (a) 1,194,319 1,158,168 0.1
------------ ------------ ------
8,480,635 11,491,799 1.2
Total Investments in Singapore 117,876,477 131,410,246 13.4
</TABLE>
<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>
South Automotive 22,045 Dong ah Tire Industries Co. $ 839,781 $ 1,261,899 0.1%
Korea
Building & 100,230 Samsung Heavy Industries 5,565,018 5,116,437 0.5
Construction
Retail Stores 100,920 Shinsegae Department Stores Co. 3,492,485 7,877,537 0.8
Steel 75,000 Pohang Iron & Steel Co., Ltd. 6,752,634 6,425,226 0.7
Utilities 5,362 Korea Mobile Telecommunications Corp. 979,459 2,267,108 0.3
246,000 Korean Electric & Power Corp. 6,197,512 8,046,587 0.8
------------ ------------ ------
7,176,971 10,313,695 1.1
Total Investments in South Korea 23,826,889 30,994,794 3.2
Taiwan Closed-End Funds 343,300 The R.O.C. Taiwan 2,904,850 3,347,175 0.3
Food & Beverages 182,880 President Enterprises (ADR)* 3,119,745 3,497,580 0.4
Total Investments in Taiwan 6,024,595 6,844,755 0.7
<PAGE>
Thailand Banking 2,160,000 Bangkok Bank 7,125,428 15,245,044 1.6
4,390,000 Industrial Finance Corp. of Thailand 8,764,194 7,093,278 0.7
1,228,000 The Siam Commercial Bank, Ltd. 5,096,511 7,498,493 0.8
------------ ------------ ------
20,986,133 29,836,815 3.1
Building & 1,097,000 Christiani & Nielson 'Local' 7,169,983 10,178,350 1.0
Construction 329,100 Christiani & Nielson 'Local'
(Warrants) (a) 647,325 652,458 0.1
886,000 Land & House Public Co. 6,096,295 19,321,967 2.0
------------ ------------ ------
13,913,603 30,152,775 3.1
Financial Services 202,600 Finance One Co., Ltd. 'Foreign' 3,895,946 2,506,392 0.2
36,836 Finance One Co., Ltd. (Warrants) (a) 0 0 0.0
88,400 Phatra Thanakit Co., Ltd. 3,332,226 2,720,000 0.3
------------ ------------ ------
7,228,172 5,226,392 0.5
Foreign Government $ 3,683 Finance One Co., Ltd., 3.50% due
Obligations 12/31/2001 145,516 146,035 0.0
Health & Personal 147,400 International Cosmetics Co. 4,652,742 4,114,576 0.4
Care
Industrials 294,400 Thai Glass Industries Ltd. 2,722,371 2,894,972 0.3
Mutual Funds 12,600,000 Ruam Pattana Fund II 4,999,163 7,369,151 0.8
Publishing & 283,700 Post Publishing Public Co. Ltd. 2,672,649 2,362,292 0.2
Broadcasting
Telecommunications 127,000 Advanced Info Services 5,406,502 4,048,692 0.4
39,000 International Engineering Co. Ltd. 895,817 927,835 0.1
210,000 International Engineering Co. Ltd.
'Local' 2,253,878 4,912,768 0.5
------------ ------------ ------
8,556,197 9,889,295 1.0
Total Investments in Thailand 65,876,546 91,992,303 9.4
Total Long-Term Investments 687,461,091 900,995,182 92.1
<PAGE>
<CAPTION>
Face Amount Short-Term Investments
<S> <S> <C> <S> <C> <C> <C>
United Commercial Paper** $10,000,000 Bank One Diversified, 3.50% due 4/08/1994 9,993,194 9,993,194 1.0
States 44,022,000 General Electric Capital Corp., 3.53%
due 4/04/1994 44,009,050 44,009,050 4.5
6,000,000 PHH Corp., 3.60% due 4/22/1994 5,987,400 5,987,400 0.6
10,000,000 Preferred Receivable Funding Corp., 3.60%
due 4/07/1994 9,994,000 9,994,000 1.0
Total Short-Term Investments 69,983,644 69,983,644 7.1
Total Investments $757,444,735 970,978,826 99.2
============
Other Assets Less Liabilities 7,237,909 0.8
------------ ------
Net Assets $978,216,735 100.0%
============ ======
Net Asset Value: Class A--Based on net assets of $231,687,008
and 15,361,717 shares outstanding $ 15.08
============
Class B--Based on net assets of $746,529,727
and 49,681,813 shares outstanding $ 15.03
============
<FN>
*American Depositary Receipt (ADR).
**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.
</TABLE>
APPENDIX, GRAPHIC AND IMAGE MATERIAL.
Item 1:
MERRILL LYNCH DRAGON FUND, Inc.
Asset Allocation as a Percentage* of Net Assets as of
March 31, 1994
<PAGE>
A map illustrating the following percentages:
India 1.2%
Indonesia 5.2%
Singapore 13.4%
Malaysia 23.7%
Thailand 9.4%
Hong Kong 30.5%
South Korea 3.2%
Taiwan 0.7%
Philipines 4.8%
[FN]
*Total may not equal 100%.
