MERRILL LYNCH
DRAGON FUND, INC.
FUND LOGO
Quarterly Report
September 30, 1995
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.
<PAGE>
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.
Asset Allocation
As a Percentage* of
Net Assets as of
September 30, 1995
A map illustrating the following percentages:
Pakistan 0.3%
India 1.3%
Indonesia 7.3%
Singapore 12.9%
Malaysia 17.0%
Thailand 12.1%
Hong Kong 32.4%
South Korea 4.9%
Taiwan 0.8%
Philippines 6.6%
[FN]
*Total may not equal 100%.
<PAGE>
DEAR SHAREHOLDER
During the quarter ended September 30, 1995, the "dragon" stock
markets consolidated somewhat, moving in very narrow trading ranges
with low trading volume. The best-performing stock markets in the
region were Hong Kong and Korea, with the worst performances
registered by Taiwan and the Philippines.
During the quarter, Merrill Lynch Dragon Fund, Inc.'s Class A, Class
B, Class C and Class D shares had total returns of +0.06%, -0.19%,
- -0.26%, and 0.0%, respectively, compared to a decline of 1.58% for
the unmanaged Morgan Stanley Capital International Combined Far East
Free (Ex-Japan) Index. The primary reason that the Fund did not
decline as much as the Index was its underweighted positions in
Thailand and Malaysia, which were among the worst performers in the
region with negative returns of 7.48% and 5.47%, respectively. (Fund
returns do not reflect applicable sales charges, and would be lower
if sales charges were included. Complete performance information,
including average annual total returns, can be found on pages 4 and
5 of this report to shareholders.)
Investment Outlook
Despite its relative strength, trading volume for the Hong Kong
stock market was relatively limited in the September quarter as
investors were uninspired by corporate earnings results which, while
meeting expectations, were very pedestrian by past Hong Kong
standards. In addition, the lack of an interest rate cut in the
United States in September was disappointing. Investors are still
unwilling to enter the Hong Kong stock market until there are more
convincing signs of an economic recovery, and there is also caution
regarding the US interest rate outlook. The stock market was
unaffected by the results of the latest legislative council
elections, in which "pro-democratic" candidates won a majority of
the seats. Hong Kong remains the Fund's largest country weighting at
32.4% of net assets as of September 30. This is approximately equal
to a market weighting. However, as the Hong Kong weighting
constitutes the largest in the Fund, and Hong Kong was the best-
performing market in the third quarter, the Fund's returns were
positively affected by this position.
<PAGE>
The Singapore stock market had a lackluster September quarter,
declining 2% for the period. Interest focused more on small-
capitalization stocks as investors sold off their blue chip holdings
based on somewhat disappointing interim earnings results. The
economy showed signs of slowing, which led to the belief that the
economy has already reached its peak and corporate earnings are
unlikely to show much of an increase in 1996. Although current share
prices seem well-supported by fundamental factors, a lack of
positive developments may limit upside potential. At 12.9% of net
assets, the Fund has a slightly less-than-market weighting in
Singapore.
In Malaysia, concerns about an overheating economy led to declining
share prices. There may be a possibility of further contraction of
price/earnings ratios over the next few months as the government
attempts to slow the economy either by raising interest rates or
implementing credit controls (or both). If the government does raise
interest rates, it may dampen activity in the manufacturing and
construction sectors. Therefore, the majority of negative
developments may not be fully discounted in current share prices. As
a result, the Fund is underweighted in the Malaysian stock market.
The stock market in Thailand declined during the September quarter
as concerns over rising inflation and interest rates depressed
investor sentiment. There is a growing expectation that the newly
elected government will pursue an accommodative fiscal policy. The
rising current account deficit has also added to investor concerns.
Our 12.1% exposure is a slightly less-than-market weighting.
The Indonesian stock market rallied in early May because of the cut
in US interest rates. Since then, the stock market has entered a
period of consolidation. Second-quarter corporate earnings were
strong and largely above expectations. Most analysts forecast full-
year corporate earnings growth to average 26% for 1995. On the
negative side, the economy is experiencing some inflationary
pressures. As a result, interest rates are not expected to fall in
the near term. However, based on the positive longer-term
fundamentals, we maintain an overweighted position in Indonesia.
First-half 1995 results have been reported for the majority of
listed companies in the Philippines. Corporate profits averaged a
23.5% gain, and earnings per share growth approximated 22%. A number
of large companies' results suffered as a result of a more
competitive environment and cost pressures. However, interest rates
have fallen over the past few months because of the absence of a
fiscal deficit and greater monetary expansion by the central bank.
While the economy may experience some of the negative effects
associated with overheating in the short term, we are still
optimistic about the country's long-term prospects and thus maintain
an overweighted position there.
<PAGE>
The Korean stock market was the best-performing among the dragon
stock markets during the September quarter. Investor sentiment has
improved significantly as the government has loosened monetary
policy and inflation seems to have been subdued. As a result,
liquidity has increased, leading to greater local investor
participation. The government's intention to increase foreign
investment limits has also improved local investor sentiment. The
Fund is currently neutrally weighted in the Korean market relative
to the benchmark index.
In Taiwan, the stock market continued to decline in the September
quarter as Chinese missile testing unnerved local investors.
Investor concerns did not abate when the central bank cut interest
rates in August. Despite sound macroeconomic fundamentals, the
Taiwanese market will be subject to the vagaries of US-People's
Republic of China-Taiwan political relations.
The Indian stock market continues to be plagued by political
concerns. If the ruling Congress party is unable to hold on to a
majority in the upcoming general election and the more nationalistic
Bharatiya Janata Party wins, the progress of further economic
reforms may be questionable. In addition, the collapse of the
agreement between Enron Corporation and the state of Maharashtra
also increased investor concerns about India's transition to a more
market-oriented economy. Increasing inflationary pressures and high
interest rates also add to stock market uncertainty at this time.
Therefore, even though the Indian stock market is inexpensive based
on historical valuations, there seems to be limited upside potential
until the general election, which will take place by June 1996.
Investment Strategy
We made relatively few changes to the Fund's overall asset
allocation during the September quarter. We sold individual holdings
where fundamentals had become less attractive, and invested the
proceeds in issues that possessed better prospects for capital
appreciation. For example, in Hong Kong, we sharply decreased our
investment in Oriental Press Group because of a likely decline in
profits resulting from the introduction of its English language
newspaper, which is the latest entrant in an already highly
competitive market. We believe that the outlook is much brighter for
First Pacific Company, which provides exposure to the growing Asian
telecommunications industry.
In the months ahead, we believe that investor interest may return to
the dragon stock markets. With 1996 corporate earnings likely to
improve over 1995 levels, stock markets are expected to be
attractive on a price/earnings basis. In addition, in our view, a
lackluster US economy is likely to maintain the benign interest rate
environment in the United States over the next several quarters,
which benefits those nations whose interest rates are tied to those
in the United States, such as Hong Kong.
<PAGE>
In Conclusion
We thank you for your continued 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 25, 1995
PERFORMANCE DATA
About Fund
Performance
Since October 21, 1994, investors have been 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, as detailed in the Fund's prospectus. If you were a Class
A shareholder prior to October 21, 1994, your Class A Shares were
redesignated to Class D Shares on October 21, 1994, which, in the
case of certain eligible investors, were simultaneously exchanged
for Class A Shares.
<PAGE>
* 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 8 years.
* 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).
Performance data for the Fund's Class B and Class D Shares are
presented in the "Average Annual Total Return" and "Performance
Summary" tables below and on page 5. "Aggregate Total Return" tables
for Class A and Class C Shares are also presented below. Data for
all of the Fund's shares, are presented in the "Recent Performance
Results" table on page 5.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class B and Class D
Shares for the 12-month and 3-month periods ended September 30, 1995
and for Class A and Class C Shares for the since inception and 3-
month periods ended September 30, 1995. All data in this table
assume imposition of the actual total expenses incurred by each
class of shares during the relevant period.
None of the past results shown should 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. 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>
Aggregate
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (10/21/94) through 9/30/95 - 5.84% - 10.79%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94) through 9/30/95 - 6.69% - 7.59%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
Average Annual
Total Return
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/95 - 5.99% - 9.67%
Inception (5/29/92) through 9/30/95 +15.70 +15.49
[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 Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 9/30/95 - 5.27% - 10.24%
Inception (5/29/92) through 9/30/95 + 16.59 + 14.73
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
<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
1994 18.74 15.03 0.241 0.122 -17.86
1/1/95--9/30/95 15.03 15.76 -- -- + 4.86
------ ------
Total $0.247 Total $0.245
Cumulative total return as of 9/30/95: +62.75%**
<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>
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>
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
1994 18.77 15.08 0.241 0.211 -17.24
1/1/95--9/30/95 15.08 15.91 -- -- + 5.50
------ ------
Total $0.247 Total $0.473
Cumulative total return as of 9/30/95: +66.99%**
<PAGE>
<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 charges; results would be lower if sales charge was
included.
***As a result of the implementation of the Merrill Lynch Select
Pricing SM System, Class A Shares of the Fund outstanding prior to
October 21, 1994 were redesignated to Class D Shares.
</TABLE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
9/30/95 6/30/95 9/30/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $15.89 $15.88 $17.43 -7.37%(1) +0.06%
Class B Shares 15.76 15.79 17.17 -6.74(1) -0.19
Class C Shares 15.64 15.68 17.29 -8.08(1) -0.26
Class D Shares 15.91 15.91 17.30 -6.56(1) 0.00
Class A Shares--Total Return -5.84(2) +0.06
Class B Shares--Total Return -5.99(3) -0.19
Class C Shares--Total Return -6.69(4) -0.26
Class D Shares--Total Return -5.27(5) 0.00
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
++Investment results shown for Class A and Class C Shares are since
inception (10/21/94).
(1)Percent change includes reinvestment of $0.241 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.251 per share ordinary
income dividends and $0.241 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.122 per share ordinary
income dividends and $0.241 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.229 per share ordinary
income dividends and $0.241 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.211 per share ordinary
income dividends and $0.241 per share capital gains distributions.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US Dollars)
<CAPTION>
Face Amount/ Percent of
COUNTRIES Industries Shares Held Long-Term Investments Cost Value Net Assets
<S> <S> <S> <C> <S> <C> <C> <C>
Hong Kong Banking 6,580,000 Guoco Group, Ltd. $ 26,766,050 $ 32,937,448 2.7%
2,937,606 HSBC Holdings, Ltd. 28,120,364 40,846,524 3.3
-------------- -------------- ------
54,886,414 73,783,972 6.0
Conglomerates 10,000,000 First Pacific Company Limited 10,107,172 10,671,047 0.9
16,808,000 Guangdong Investment, Ltd. 7,289,020 10,054,972 0.8
US$ 3,436,000 Guangdong Investment, Ltd., 4.50%
due 10/07/1998 4,364,558 4,123,200 0.3
7,423,000 Hutchison Whampoa, Ltd. 27,774,775 40,229,680 3.3
916,405 Jardine Matheson Holdings Ltd. (ADR)* 7,670,010 6,185,734 0.5
3,227,000 Swire Pacific Ltd.'A' 17,817,938 25,565,727 2.1
-------------- -------------- ------
75,023,473 96,830,360 7.9
Electrical 18,211,000 Innovative International
Equipment Holdings Ltd. 7,882,226 4,887,705 0.4
1,328,000 Johnson Electric Holdings Ltd. 2,917,841 2,645,282 0.2
-------------- -------------- ------
10,800,067 7,532,987 0.6
Electronic/ 12,200,000 ASM Pacific Technology 4,026,946 11,677,359 1.0
Semiconductors
Insurance 20,867,000 National Mutual Asia, Ltd. 8,681,172 16,059,428 1.3
Leisure 6,370,000 Hong Kong & Shanghai Hotels 5,697,738 7,950,965 0.6
Packaging 14,000,000 M.C. Packaging (HK), Ltd. 6,547,529 5,432,533 0.4
Publishing & 7,600,000 South China Morning Post Holdings 4,440,430 4,497,361 0.4
Broadcasting 3,616,000 Television Broadcast Ltd. 14,546,891 14,545,944 1.2
-------------- -------------- ------
18,987,321 19,043,305 1.6
Real Estate 2,813,000 Cheung Kong Holdings Ltd. 11,290,164 15,318,101 1.2
3,628,020 New World Development Co., Ltd. 9,331,350 14,312,734 1.2
3,890,100 Sun Hung Kai Properties, Ltd. 20,918,378 31,573,853 2.6
1,795,000 Wharf Holdings Ltd. 6,952,014 5,595,444 0.5
US$ 9,840,000 Wharf Holdings Ltd., 5% due
7/15/2000 9,335,976 9,913,800 0.8
-------------- -------------- ------
57,827,882 76,713,932 6.3
<PAGE>
Telecommunications 12,220,000 ABC Communications Holdings Ltd. 3,501,176 2,449,943 0.2
23,137,000 Hong Kong Telecommunications, Ltd. 42,978,645 42,047,140 3.4
-------------- -------------- ------
46,479,821 44,497,083 3.6
Utilities-- 4,441,200 China Light & Power Co., Ltd. 20,428,753 22,978,063 1.9
Electric & Gas 8,990,656 Hong Kong & China Gas Co. (The) 11,559,886 14,478,175 1.2
-------------- -------------- ------
31,988,639 37,456,238 3.1
Total Long-Term Investments in
Hong Kong 320,947,002 396,978,162 32.4
India Chemicals 904,900 Mardia Chemicals Ltd. 4,161,717 1,774,575 0.1
Conglomerates 243,300 Reliance Industries (ADR)* 6,667,743 4,379,400 0.4
Consumer--Durables 456,000 IFB Industries Ltd. 3,998,087 1,882,631 0.2
Finance 66,210 Housing Development Finance 6,347,114 5,066,793 0.4
Pharmaceuticals 99,200 Ranbaxy Laboratories Limited 2,000,872 2,147,237 0.2
Steel Mills 131,320 Essar Gujarat Limited 376,037 182,012 0.0
Total Long-Term Investments in
India 23,551,570 15,432,648 1.3
Indonesia Banking 1,744,000 P.T. Bank International Indonesia 7,223,733 6,005,828 0.5
Food 6,182,016 P.T. Mayorah Indah 6,294,418 9,689,252 0.8
Miscellaneous-- 1,941,250 P.T. Modern Photo Film 5,119,000 11,141,832 0.9
Consumer
Pharmaceuticals 2,251,500 P.T. Kalbe Farma 7,362,735 8,996,060 0.7
Telecommunications 118,490 P.T. Indonesian Satellite Corp.
(Indosat) (ADR)* 4,045,632 4,161,961 0.3
Tobacco 5,425,000 P.T. Hanjaya Mandala Sampoerna 4,892,468 50,537,528 4.1
Total Long-Term Investments in
Indonesia 34,937,986 90,532,461 7.3
<PAGE>
Malaysia Banking 4,256,000 Affin Holdings BHD 6,646,052 8,101,824 0.7
2,129,000 Arab-Malaysian Merchant Bank BHD 8,958,689 26,283,951 2.1
MYR 1,969,000 Arab-Malaysian Merchant Bank BHD,
7.50% due 11/20/1999 768,091 1,097,810 0.1
2,850,000 Malayan Banking BHD 6,748,454 23,040,621 1.9
3,499,000 Public Bank BHD 'Foreign' 4,235,687 6,441,995 0.5
-------------- -------------- ------
27,356,973 64,966,201 5.3
Building & 5,200,000 I.J.M. Corp. BHD 6,266,933 9,277,579 0.8
Construction
Conglomerates 5,630,000 Renong BHD 5,468,820 9,775,707 0.8
US$ 9,025,000 Renong BHD, 2.50% due 1/15/2005 9,994,404 10,108,000 0.8
-------------- -------------- ------
15,463,224 19,883,707 1.6
Finance 938,000 Hong Leong Credit BHD 6,877,505 4,482,676 0.4
3,440,000 MBF Capital BHD 5,461,287 3,698,925 0.3
-------------- -------------- ------
12,338,792 8,181,601 0.7
Food 1,721,700 Nestle Malaysia BHD 7,333,320 12,204,803 1.0
Leisure 3,300,000 Berjaya Sports TOTO BHD 7,410,648 6,965,352 0.6
1,281,500 Genting BHD 11,837,879 11,074,691 0.9
3,000,000 Pernas International Hotels &
Properties BHD (Warrants)(a) 165,079 752,688 0.1
3,216,000 Resorts World BHD 10,967,664 16,009,558 1.3
-------------- -------------- ------
30,381,270 34,802,289 2.9
Real Estate 4,156,000 Land & General BHD 5,065,849 10,923,775 0.9
Shipyards 830,000 Westmont BHD 6,278,222 3,371,565 0.3
Telecommuni- 5,925,000 Leader Universal Cable BHD 8,791,618 18,169,056 1.5
cations 1,041,000 Telekom Malaysia BHD 6,238,163 7,835,484 0.6
US$ 5,450,000 Telekom Malaysia BHD, 4% due
10/03/2004 4,732,023 5,123,000 0.4
-------------- -------------- ------
19,761,804 31,127,540 2.5
Transportation 1,199,000 Malaysian Airlines System BHD 3,345,381 3,437,993 0.3
2,957,333 Malaysian International
Shipping Co. BHD 6,043,232 8,892,021 0.7
-------------- -------------- ------
9,388,613 12,330,014 1.0
Total Long-Term Investments in
Malaysia 139,635,000 207,069,074 17.0
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US Dollars)
<CAPTION>
Face Amount/ Percent of
COUNTRIES Industries Shares Held Long-Term Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Pakistan Telecommunications 41,905 Pakistan Telecommunications
(GDR)** $ 7,533,262 $ 4,316,215 0.3%
Total Long-Term Investments
in Pakistan 7,533,262 4,316,215 0.3
Philippines Banking 339,900 Philippine Commercial Inter-
national Bank 2,822,740 3,067,454 0.3
Beverages 6,246,240 San Miguel Corp. 'B' 10,222,586 22,068,129 1.8
Conglomerates 909,183 Benpres Holdings Corp. (ADR)* 8,047,236 5,455,098 0.5
International 16,566,770 International Container Terminals 8,867,496 10,497,377 0.9
Trade
Real Estate 4,822,500 Ayala Land, Inc. 5,508,954 5,370,680 0.4
5,232,600 C & P Homes 2,628,722 3,265,351 0.3
-------------- -------------- ------
8,137,676 8,636,031 0.7
Retail 50,408,475 SM Prime Holdings 10,093,708 15,099,313 1.2
Telecommunications 78,880 Philippine Long Distance
Telephone Co. (ADR)* 4,027,836 5,235,660 0.4
Utilities-- 1,357,950 Manila Electric Co. (MERALCO) 'B' 6,429,540 10,377,575 0.8
Electric & Gas
Total Long-Term Investments in the
Philippines 58,648,818 80,436,637 6.6
<PAGE>
Singapore Airlines 1,862,000 Singapore Airlines 'Foreign' Ltd. 13,953,626 17,296,552 1.4
Automotive 1,610,000 Cycle & Carriage, Ltd. 7,464,505 14,389,163 1.2
Banking 2,026,000 Development Bank of Singapore Ltd. 18,809,266 23,097,255 1.9
1,366,866 Overseas Chinese Banking Corp.
'Foreign' 8,900,801 15,486,659 1.3
2,690,704 United Overseas Bank 18,536,290 23,290,401 1.9
-------------- -------------- ------
46,246,357 61,874,315 5.1
Beverages 190,000 Fraser & Neave Ltd. (Warrants)(a) 1,139,529 976,073 0.1
Conglomerates 2,616,000 ACMA Ltd. 8,074,466 9,665,025 0.8
Electronics 14,340,000 I.P.C. Corp. 10,159,282 10,696,974 0.9
Marine/Offshore 2,807,500 Sembawang Maritime Ltd. 8,560,245 9,878,607 0.8
Oil
Services SG$ 2,090,000 Sembawang Maritime Ltd., 1.50% due
10/25/1998 1,325,469 2,382,688 0.2
-------------- -------------- ------
9,885,714 12,261,295 1.0
Publishing & 1,142,400 Singapore Press Holdings Ltd. 11,734,325 17,525,911 1.4
Broadcasting
Real Estate 4,104,000 DBS Land Ltd. 12,091,181 12,187,811 1.0
Total Long-Term Investments in
Singapore 120,748,985 156,873,119 12.9
South Retail 78,020 Shinsegae Department Stores Co. 2,374,876 7,135,158 0.6
Korea 23,665 Shinsegae Department Stores Co.
(New) 1,022,205 2,070,418 0.2
-------------- -------------- ------
3,397,081 9,205,576 0.8
Steel 152,800 Pohang Iron & Steel Co., Ltd. 14,015,924 15,827,064 1.3
Telecommunications 16,104 Korea Mobile Telecommuni-
cations Corp. 8,995,064 16,085,131 1.3
Utilities-- 428,900 Korean Electric & Power Corp. 12,196,137 18,073,995 1.5
Electric & Gas
Total Long-Term Investments
in South Korea 38,604,206 59,191,766 4.9
<PAGE>
Taiwan Closed-End Funds 343,300 The R.O.C. Taiwan (ADR)* 2,904,850 3,647,563 0.3
Electronic/ 377,000 Advanced Semiconductor
Semiconductors Engineering (GDR)** 5,892,909 5,044,260 0.4
Food & Beverage 64,704 President Enterprises (ADR)* 697,370 768,684 0.1
Total Long-Term Investments in
Taiwan 9,495,129 9,460,507 0.8
Thailand Banking 2,570,300 Bangkok Bank 12,770,736 28,900,502 2.4
US$ 1,857,000 Bangkok Bank, 3.25% due 3/03/2004 1,884,855 1,875,570 0.1
3,453,333 Industrial Finance Corp. of
Thailand 5,771,637 10,602,338 0.9
1,734,000 Siam Commercial Bank, Ltd. (The) 10,374,076 19,497,129 1.6
1,652,300 Thai Farmers Bank, Ltd. 15,531,720 14,362,097 1.2
-------------- -------------- ------
46,333,024 75,237,636 6.2
Financial Services 1,834,800 Finance One Co., Ltd. 'Foreign' 12,567,383 11,193,158 0.9
1,698,000 Phatra Thanakit Co., Ltd. 15,255,671 12,322,010 1.0
-------------- -------------- ------
27,823,054 23,515,168 1.9
Mutual Funds 15,977,000 Ruam Pattana Fund II 6,993,984 9,714,882 0.8
Oil & Gas 1,331,500 PITT Exploration 12,867,796 12,953,987 1.1
Real Estate 936,000 Land & House Public Co. 7,122,664 14,704,306 1.2
Telecommunications 510,000 Advanced Information Service 7,561,746 8,052,632 0.6
636,300 International Engineering Co. Ltd. 2,159,198 3,298,206 0.3
-------------- -------------- ------
9,720,944 11,350,838 0.9
Total Long-Term Investments in
Thailand 110,861,466 147,476,817 12.1
Total Long-Term Investments 864,963,424 1,167,767,406 95.6
Face
Amount Short-Term Securities
<PAGE>
United Commercial US$ 51,617,000 General Electric Capital
States Paper*** Corp., 6.45% due 10/02/1995 51,598,504 51,598,504 4.2
Total Investments in Short-Term
Securities 51,598,504 51,598,504 4.2
Total Investments $ 916,561,928 1,219,365,910 99.8
==============
Other Assets Less Liabilities 2,904,678 0.2
-------------- ------
Net Assets $1,222,270,588 100.0%
============== ======
Net Asset Class A--Based on net assets of $24,033,555 and
Value: 1,512,586 shares outstanding $ 15.89
==============
Class B--Based on net assets of $930,018,593 and
59,012,194 shares outstanding $ 15.76
==============
Class C--Based on net assets of $17,871,605 and
1,142,459 shares outstanding $ 15.64
==============
Class D--Based on net assets of $250,346,835 and
15,733,053 shares outstanding $ 15.91
==============
<FN>
*American Depositary Receipts (ADR).
**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.
(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>
<PAGE>
PORTFOLIO INFORMATION
Investments
As of 9/30/95
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
P.T. Hanjaya Mandala Sampoerna 4.1%
Hong Kong Telecommunications, Ltd. 3.4
HSBC Holdings, Ltd. 3.3
Hutchison Whampoa, Ltd. 3.3
Guoco Group, Ltd. 2.7
Sun Hung Kai Properties, Ltd. 2.6
Bangkok Bank 2.4
Arab-Malaysian Merchant Bank BHD 2.1
Swire Pacific Ltd. 'A' 2.1
United Overseas Bank 1.9
Ten Largest Industries Percent of
Represented in the Portfolio Net Assets
Banking 23.4%
Conglomerates 11.2
Real Estate 10.1
Telecommunications 9.3
Utilities--Electric & Gas 5.4
Tobacco 4.1
Leisure 3.5
Publishing & Broadcasting 3.0
Retail 2.0
Beverages 1.9
EQUITY PORTFOLIO CHANGES
For the Quarter Ended September 30, 1995
Additions
Advanced Semiconductor Engineering
(GDR)
C & P Homes
First Pacific Company Limited
Philippine Commercial International Bank
<PAGE>
Deletions
Affin Holdings BHD (Rights)
George Kent Holdings BHD
Goldtron, Ltd.
Oriental Press Group
Pan Pacific Asia BHD
Petron Corp.
Universal Robina Corp.
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, Senior Vice President
Donald C. Burke, Vice President
Kara W.Y. Tan Bhala, Vice President
Gerald M. Richard, Treasurer
Michael J. Hennewinkel, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
