MERRIL LYNCH
DRAGON FUND, INC.
FUND LOGO
Quarterly Report
March 31, 1997
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 and
Portfolio Manager
Gerald M. Richard, Treasurer
James W. Harshaw, Secretary
<PAGE>
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
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.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Dragon Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
<PAGE>
MERRILL LYNCH DRAGON FUND, INC.
Asset Allocation
Aa a Percentage* of
Net Assets as of
March 31, 1997
Map Depicting the Fund's Asset Allocation As a Percentage* of Net
Assets as of March 31, 1997
INDIA 0.0%**
INDONESIA 7.9%
SINGAPORE 8.9%
MALAYSIA 17.5%
THAILAND 4.2%
CHINA 4.2%
HONG KONG 46.1%
SOUTH KOREA 2.6%
PHILIPPINES 7.7%
[FN]
*Total may not equal 100%.
**Holdings are less than 0.1%.
DEAR SHAREHOLDER
For the three-month period ended March 31, 1997, Merrill Lynch
Dragon Fund, Inc.'s Class A, Class B, Class C and Class D Shares had
total returns of -5.58%, -5.81%, -5.77% and -5.63%, respectively, in
line with the -5.40% return for the unmanaged Morgan Stanley Capital
International (MSCI) Combined Far East (Ex-Japan and Ex-Taiwan) Free
Index. (Fund results shown 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 4--6 of this report to shareholders.)
Portfolio Matters
Many of the "dragon" countries are experiencing a recovery in their
business cycles, which should lead to higher corporate earnings
growth. Moreover, the long-term outlook for some countries, such as
the People's Republic of China, Indonesia and the Philippines, is
especially good, in our opinion, because they are still in the early
stages of economic development. Furthermore, compared to the US
stock market, valuations for many of the dragon stock markets are
currently very attractive. As a result of these factors, we believe
that the investment environment for many of the dragon stock markets
has become positive, although problems do remain in some countries.
<PAGE>
The Hong Kong stock market has been correcting in recent weeks
because of the increase in US interest rates. However, local
economic and corporate fundamentals remain strong. Residential
property prices are likely to be supported by end-user demand
outstripping supply for the next three years. Furthermore, there
should be a continuing recovery in retail spending. We expect
corporate earnings to be strong because of better results for
property development companies and banks. The slow but steady
economic recovery in The People's Republic of China has also
contributed to the improving economic conditions in Hong Kong.
The selection of Tung Chee Hwa as the first Chief Executive of Hong
Kong after the change in sovereignty has been well-received by
investors. His reappointment of the current top civil servants and a
competent cabinet has added to the positive sentiment.
In The People's Republic of China, the economy continues to recover
at a slow but steady rate. Exports are showing a strong pick up, and
bank credit is increasing, as is consumer spending growth. The Hong
Kong, Shenzhen and Shanghai stock markets held up reasonably well
after the death of Deng Xiao Ping. Political stability appears to
be continuing in China with Jiang Zemin still ostensibly in control.
The latest meeting of the National People's Congress stressed the
importance of continuing economic reform. We do not expect changes
in political leadership to take place immediately, but we will have
to watch unfolding events carefully in the next few months. However,
we believe that it is likely that the current government will be
maintained. Good economic and corporate fundamentals support our
overweighted position in China.
In Malaysia, the current account deficit continues to decline
because of decreasing imports and the weakness of the yen (Malaysia
is a large importer of Japanese capital equipment and components).
Malaysia even posted a small current account surplus in January.
However, we do not expect this trend to continue. The Malaysian
government has been delaying the imports of large items, such as
airplanes, in order to bring the current account deficit down.
Eventually, the government will have to make these purchases. The
business cycle in Malaysia has been extended despite increases in
interest rates. Money supply growth is still strong because of rapid
growth in lending and large amounts of spending by the government.
We believe that the stock market will be supported for the
intermediate term by large flows of liquidity, primarily from local
investors but also from foreign investors. The stock market is now
fairly valued on a historical basis. Earnings growth is quite
respectable and is forecast to be 15% for 1997. For these reasons,
the Fund increased its exposure to Malaysia, although it is still
underweighted relative to the MSCI Combined Far East (Ex-Japan and
Ex-Taiwan) Free Index.
<PAGE>
In Singapore, the economy appears to be recovering after last year's
slowdown caused by the decline in electronic exports. We expect the
recovery to be slow because the global electronics cycle is forecast
to pick up only in the middle of this year. Further positive news is
that the property sector has not had the severe correction many
investors expected. Prices have only declined marginally because of
government efforts to contain speculation. Although there are
positive trends underway in Singapore, the Fund is currently
underweighted there. With less-attractive corporate earnings growth
and share price valuations relative to other dragon stock markets,
we believe that Singapore will underperform in 1997.
The Philippine stock market is likely to be supported by strong
corporate earnings growth in 1997. In addition, a declining
inflation rate and increasing liquidity should lead to interest rate
cuts this year. There is a small concern about the current account
deficit, but we believe that the deficit is well funded by direct
foreign investment which is flowing into the country in large
amounts. The Philippine economy is still in the early stages of its
economic development and, in our view, is capable of sustaining a
high rate of growth for the next few years. Therefore, the Fund has
a very overweighted position in the Philippines.
Our Philippine investments are heavily weighted in infrastructure-
related and consumer stocks. The country needs a vast amount of
infrastructure in order to support the rate of economic growth and
investment into manufacturing. The rapid rate of economic growth has
increased GDP per capita, and therefore has also increased the
amount of disposable income for consumers.
The Indonesian economy is on the road to a strong recovery in 1997.
With the tight monetary policy pursued by the central bank over the
past year, the rate of inflation has been declining steadily. It
appears that the central bank now has the ability to lower interest
rates in the coming year. Liquidity in the system has increased
significantly, and both local and foreign sentiment has turned
increasingly bullish. Corporate earnings growth is likely to be in
the 20%--25% range, and the valuation for the stock market is quite
reasonable at 16 times estimated 1997 earnings. This valuation
compares favorably with the other dragon stock markets, as well as
to the US stock market. Accordingly, the Fund has increased its
position in Indonesia.
We remain underweighted in Thailand. The Thai economy is undergoing
a slowdown, which we do not expect to end soon. The government
appears unable to stimulate the economy through lowering interest
rates, since doing so would result in an outflow of funds and
thereby destabilize the baht peg. Therefore, Thai interest rates
remain high in order to support the baht, which is being threatened
with devaluation by speculators. High interest rates have caused
difficulties for the property sector, which is already suffering
from a heavy oversupply of residential as well as commercial real
estate. The interest rate environment has also eroded bank earnings.
<PAGE>
We do not expect the Thai economy to improve until there is a pick
up in exports and manufacturing. Domestic demand is unlikely to
recover because of the high interest rates. Corporate earnings are
likely to be poor in the first half of 1997, which will keep stock
prices depressed. The Fund has only a 4.2% weighting in the Thai
market.
The economic situation in South Korea is unlikely to improve in the
medium term. As a result of a severe decline in semiconductor prices
last year, the South Korean trade deficit has deteriorated sharply.
The worsening terms of trade also has resulted in a considerable
depreciation of the South Korean won. The bankruptcy of Hanbo Steel
and related government corruption scandals have further shaken
investor confidence. The Fund has a small position in South Korea at
2.6% of net assets. This underweighted position has been a positive
factor in the Fund's performance.
In Conclusion
In the near term, dragon stock markets may react negatively to
higher US interest rates and US stock market turbulence. However, we
believe that the outlook remains positive for many of the dragon
stock markets over the balance of 1997. In our view, current
valuations are attractive, and many of the dragon economies are
likely to experience a recovery in their business cycles. The
economic recoveries should, in turn, lead to higher earnings growth
and improving share prices.
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 next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Kara Tan Bhala)
Kara Tan Bhala
Vice President and Portfolio Manager
April 25, 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, 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. However, in the
case of certain eligible investors, the shares were simultaneously
exchanged for Class A Shares.
* 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>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $17.43 $15.05 $0.241 $0.251 -10.82%
1995 15.05 15.99 -- 0.176 + 7.44
1996 15.99 18.09 0.071 -- +13.59
1/1/97--3/31/97 18.09 17.08 -- -- - 5.58
------ ------
Total $0.312 Total $0.427
Cumulative total return as of 3/31/97: +2.77%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charges; 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**
<S> <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
1995 15.03 15.98 -- 0.025 + 6.49
1996 15.98 17.89 0.071 -- +12.41
1/1/97--3/31/97 17.89 16.85 -- -- - 5.81
------ ------
Total $0.318 Total $0.270
Cumulative total return as of 3/31/97: +75.00%**
<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 C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $17.29 $14.92 $0.241 $0.229 -10.98%
1995 14.92 15.79 -- 0.091 + 6.46
1996 15.79 17.68 0.071 -- +12.43
1/1/97--3/31/97 17.68 16.66 -- -- - 5.77
------ ------
Total $0.312 Total $0.320
Cumulative total return as of 3/31/97: +0.40%**
<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>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
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
1995 15.08 16.05 -- 0.136 + 7.35
1996 16.05 18.11 0.071 -- +13.29
1/1/97--3/31/97 18.11 17.09 -- -- - 5.63
------ ------
Total $0.318 Total $0.609
Cumulative total return as of 3/31/97: +81.66%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charges; results would be lower if
sales charge was included.
</TABLE>
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
3/31/97 12/31/96 3/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $17.08 $18.09 $17.24 -0.53%(1) -5.58%
Class B Shares 16.85 17.89 17.17 -1.46(1) -5.81
Class C Shares 16.66 17.68 16.98 -1.48(1) -5.77
Class D Shares 17.09 18.11 17.29 -0.76(1) -5.63
Class A Shares--Total Return -0.53(1) -5.58
Class B Shares--Total Return -1.46(1) -5.81
Class C Shares--Total Return -1.48(1) -5.77
Class D Shares--Total Return -0.76(1) -5.63
<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 $0.071 per share capital
gains distributions.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/97 -0.53% -5.75%
Inception (10/21/94) through 3/31/97 +1.12 -1.09
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/97 - 1.46% - 5.39%
Inception (5/29/92) through 3/31/97 +12.26 +12.26
[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 3/31/97 -1.48% -2.46%
Inception (10/21/94) through 3/31/97 +0.17 +0.17
[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 3/31/97 - 0.76% - 5.97%
Inception (5/29/92) through 3/31/97 +13.13 +11.88
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<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>
China Building & 2,606,800 New World Infrastructure, Ltd. $ 7,558,272 $ 7,468,666 0.6%
Construction
Conglomerates 28,729,104 Guangdong Investments, Ltd. 16,412,935 24,656,197 1.8
Manufacturing 1,675,205 Guangdong Tannery Ltd. 225,419 491,849 0.0
Real Estate 9,895,600 China Overseas Land & Investment Co. 4,981,217 5,363,815 0.4
5,346,000 China Resources Enterprise Ltd. 7,838,543 11,521,998 0.8
US$ 11,910,000 Henderson Capital International,
5% due 3/28/1997 (b) 12,771,694 8,188,125 0.6
--------------- --------------- ------
25,591,454 25,073,938 1.8
<PAGE>
Total Long-Term Investments in
China 49,788,080 57,690,650 4.2
Hong Kong Banking 500 Dao Heng Bank Group Ltd. 2,502 2,284 0.0
7,504,000 Guoco Group, Ltd. 33,753,379 37,091,463 2.7
4,009,106 HSBC Holdings, Ltd. 49,574,031 93,132,746 6.8
--------------- --------------- ------
83,329,912 130,226,493 9.5
Conglomerates 7,548,000 Citic Pacific Ltd. 27,942,719 37,406,363 2.7
21,971,159 First Pacific Company Ltd. 24,857,722 27,930,040 2.0
10,796,000 Hutchison Whampoa, Ltd. 51,036,357 81,159,837 6.0
3,615,000 Swire Pacific Ltd. 'A' 21,539,530 28,459,057 2.1
8,058,000 Swire Pacific Ltd. 'B' 10,707,902 10,243,441 0.8
--------------- --------------- ------
136,084,230 185,198,738 13.6
Electronic/ 12,200,000 ASM Pacific Technology Ltd. 4,026,946 8,266,116 0.6
Semiconductors
Insurance 25,633,000 National Mutual Asia, Ltd. 13,051,294 26,795,806 2.0
Leisure US$ 12,367,000 HSH Overseas Finance Ltd., 5% due
1/06/2001 (b) 13,702,646 12,614,340 0.9
Publishing & 8,270,000 South China Morning Post Holdings Ltd. 5,040,886 7,044,202 0.5
Broadcasting 5,213,000 Television Broadcasts Ltd. 20,622,840 21,192,424 1.6
--------------- --------------- ------
25,663,726 28,236,626 2.1
Real Estate 8,975,000 Cheung Kong Holdings Ltd. 51,672,900 79,053,204 5.8
4,165,109 New World Development Co., Ltd. 13,922,847 22,469,066 1.7
US$ 5,150,000 New World Development Co., Ltd.,
4.375% due 12/11/2000 (b) 5,822,455 6,115,625 0.4
6,402,100 Sun Hung Kai Properties, Ltd. 46,348,749 67,751,462 5.0
7,280,751 Wharf Holdings Ltd. 25,378,541 27,860,136 2.0
--------------- --------------- ------
143,145,492 203,249,493 14.9
Utilities-- 18,132,665 Hong Kong and China Gas Company Ltd. 24,017,834 34,049,206 2.5
Electric & Gas
Total Long-Term Investments in
Hong Kong 443,022,080 628,636,818 46.1
</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>
India Finance 747 Housing Development Finance Corp.,
Ltd. $ 73,237 $ 57,333 0.0%
Steel 740 Essar Steel Ltd. 2,110 361 0.0
Total Long-Term Investments in India 75,347 57,694 0.0
Indonesia Banking 33,757,772 P.T. Bank International Indonesia
(Foreign) 20,826,968 25,669,972 1.9
2,150,736 P.T. Bank International Indonesia
(Foreign) (Warrants) (a) 276,391 761,719 0.1
--------------- --------------- ------
21,103,359 26,431,691 2.0
Conglomerates 887,500 P.T. Astra International (Foreign) 3,051,080 2,884,375 0.2
Infrastructure 19,400,500 P.T. Citra Marga Nusaphala Persada
(Foreign) 12,949,979 17,379,615 1.3
Insurance 11,721,000 P.T. Lippo Life Insurance (Foreign) 12,047,256 12,697,750 0.9
Telecommunications 240,500 P.T. Telekomunikasi Indonesia
(Series B) (ADR)* 6,793,351 7,245,063 0.5
Tobacco 8,698,500 P.T. Hanjaya Mandala Sampoerna
(Foreign) 4,016,929 40,774,219 3.0
Total Long-Term Investments in
Indonesia 59,961,954 107,412,713 7.9
Malaysia Banking 3,692,000 Affin Holdings BHD 5,854,154 10,508,115 0.8
3,014,400 Arab-Malaysian Merchant Bank BHD 7,134,948 25,069,294 1.8
3,014,400 Arab-Malaysian Merchant Bank BHD
(Preferred) 1,219,270 1,216,956 0.1
MYR 3,014,400 Arab-Malaysian Merchant Bank BHD,
5% due 4/15/2002 1,219,269 1,216,956 0.1
2,465,000 Malayan Banking BHD 9,836,948 28,113,141 2.1
7,382,333 Public Bank BHD (Foreign) 11,225,061 14,544,120 1.1
--------------- --------------- ------
36,489,650 80,668,582 6.0
<PAGE>
Conglomerates 2,798,000 Hicom Holdings BHD 8,018,257 7,285,870 0.5
3,599,000 Malaysian Plantation BHD 8,521,158 7,264,836 0.5
3,680,000 Malaysian Resources Corporation BHD 15,200,810 13,222,447 1.0
8,251,560 Renong BHD 11,568,275 13,991,341 1.0
US$ 5,180,000 Renong BHD, 2.50% due 1/15/2005 6,179,222 6,008,800 0.4
--------------- --------------- ------
49,487,722 47,773,294 3.4
Construction 5,200,000 I.J.M. Corp. BHD 6,266,933 12,805,813 0.9
1,702,984 United Engineers BHD 14,880,712 14,850,405 1.1
--------------- --------------- ------
21,147,645 27,656,218 2.0
Food 1,526,700 Nestle Malaysia BHD 6,587,194 12,080,468 0.9
Leisure 5,116,000 Berjaya Sports ToTo BHD 12,957,878 26,230,602 1.9
Publishing & 1,944,000 Star Publications Malaysia BHD 6,682,690 8,005,168 0.6
Broadcasting
Telecommuni- 1,791,000 Telekom Malaysia BHD 12,287,753 13,954,905 1.0
cations US$ 12,895,000 Telekom Malaysia BHD, 4% due
10/03/2004 (b) 13,379,386 12,153,537 0.9
--------------- --------------- ------
25,667,139 26,108,442 1.9
Utilities-- 2,106,000 Tenaga Nasional BHD 9,538,501 10,287,687 0.8
Electric & Gas
Total Long-Term Investments in
Malaysia 168,558,419 238,810,461 17.5
Philippines Banking 1,144,900 Philippine Commercial International
Bank, Inc. 13,448,889 16,951,822 1.2
Beverages 3,337,864 San Miguel Corporation 'B' 5,224,182 11,595,086 0.9
Conglomerates 1,076,183 Benpres Holdings Corp. (GDR)** 8,255,098 8,178,991 0.6
Construction 11,451,300 DMCI Holdings Inc. 7,179,793 8,151,552 0.6
International 20,047,155 International Container Terminal
Trade Services, Inc. (ICTSI) 7,713,352 11,987,194 0.9
Real Estate 12,711,990 Ayala Land, Inc. 'B' 12,689,126 14,478,349 1.1
Retail 57,964,170 SM Prime Holdings, Inc. 10,530,912 16,944,727 1.2
Utilities-- 1,997,995 Manila Electric Co. (MERALCO) 'B' 8,541,192 15,929,345 1.2
Electric & Gas
<PAGE>
Total Long-Term Investments in the
Philippines 73,582,544 104,217,066 7.7
Singapore Airlines 1,605,000 Singapore Airlines Ltd. (Foreign) 12,704,463 12,893,352 0.9
Automotive 672,000 Cycle & Carriage, Ltd. 3,535,144 6,794,460 0.5
Banking 1,822,000 Development Bank of Singapore Ltd.
(Foreign) 21,632,157 21,197,784 1.6
1,147,976 Overseas Chinese Banking Corp.
(Foreign) 6,877,709 13,673,952 1.0
1,981,704 United Overseas Bank (Foreign) 14,572,348 20,311,094 1.5
--------------- --------------- ------
43,082,214 55,182,830 4.1
Beverages 1,078,600 Fraser & Neave Ltd. 12,657,565 8,814,044 0.6
Conglomerates 400 ACMA Ltd. 1,358 742 0.0
Publishing & 754,400 Singapore Press Holdings Ltd.
Broadcasting (Foreign) 8,746,669 13,740,111 1.0
Real Estate 1,374,000 City Development Ltd. 11,205,791 12,179,501 0.9
3,488,000 DBS Land Ltd. 11,085,609 11,932,632 0.9
--------------- --------------- ------
22,291,400 24,112,133 1.8
Total Long-Term Investments in
Singapore 103,018,813 121,537,672 8.9
South Korea Steel 51,770 Pohang Iron & Steel Co., Ltd. 4,665,271 3,273,221 0.3
Telecommunications 41,795 Korea Mobile Telecommunications Corp. 17,206,771 18,765,780 1.4
Utilities--Electric 437,580 Korean Electric & Power Corp. 15,055,387 12,740,291 0.9
& Gas
Total Long-Term Investments in
South Korea 36,927,429 34,779,292 2.6
</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 797,360 Bangkok Bank Public Company Ltd. $ 7,003,762 $ 7,743,149 0.6%
US$ 18,544,000 Bangkok Bank Public Company Ltd.,
3.25% due 3/03/2004 (b) 20,867,247 17,245,920 1.3
74,347 Siam Commercial Bank Public Co.
(Foreign) 772,917 435,481 0.0
US$ 9,791,000 Siam Commercial Bank Public Co.,
3.25% due 1/24/2004 (b) 10,884,329 6,829,222 0.5
--------------- --------------- ------
39,528,255 32,253,772 2.4
Financial 1,534,800 Finance One Co., Ltd. (Foreign) 6,904,837 1,404,682 0.1
Services 1,763,333 Industrial Finance Corp. of Thailand 2,173,462 4,416,826 0.3
--------------- --------------- ------
9,078,299 5,821,508 0.4
Mutual Funds 10,277,000 Ruam Pattana Fund II 5,389,931 3,841,499 0.3
Oil & Gas 1,014,500 PTT Exploration and Production
Public Co. Ltd. (Foreign) 9,964,256 15,090,443 1.1
Total Long-Term Investments in
Thailand 63,960,741 57,007,222 4.2
Total Long-Term Investments 998,895,407 1,350,149,588 99.1
Short-Term Securities
United Commercial US$ 10,037,000 General Motors Acceptance Corp.,
States Paper*** 6.75% due 4/01/1997 10,037,000 10,037,000 0.8
Total Investments in Short-Term
Securities 10,037,000 10,037,000 0.8
Total Investments $1,008,932,407 1,360,186,588 99.9
==============
Other Assets Less Liabilities 1,773,603 0.1
-------------- ------
Net Assets $1,361,960,191 100.0%
============== ======
<PAGE>
Net Asset Value: Class A--Based on net assets of $37,203,101 and
2,177,818 shares outstanding $ 17.08
==============
Class B--Based on net assets of $1,011,823,383 and
60,045,148 shares outstanding $ 16.85
==============
Class C--Based on net assets of $53,342,838 and
3,202,566 shares outstanding $ 16.66
==============
Class D--Based on net assets of $259,590,869 and
15,185,705 shares outstanding $ 17.09
==============
<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.
(b)Convertible security.
</TABLE>
PORTFOLIO INFORMATION
Investments
As of 3/31/97
Ten Largest Equity Holdings Percent of
Represented in the Portfolio Net Assets
HSBC Holdings, Ltd. 6.8%
Hutchison Whampoa, Ltd. 6.0
Cheung Kong Holdings Ltd. 5.8
Sun Hung Kai Properties, Ltd. 5.0
P.T. Hanjaya Mandala Sampoerna (Foreign) 3.0
Citic Pacific Ltd. 2.7
Guoco Group, Ltd. 2.7
Hong Kong and China Gas Company Ltd. 2.5
Swire Pacific Ltd. 'A' 2.1
Malayan Banking BHD 2.1
<PAGE>
Ten Largest Industries Percent of
Represented in the Portfolio Net Assets
Banking 26.1%
Conglomerates 19.6
Real Estate 19.6
Utilities--Electric & Gas 5.4
Telecommunications 3.8
Publishing & Broadcasting 3.7
Tobacco 3.0
Insurance 2.9
Leisure 2.8
Construction 2.6
EQUITY PORTFOLIO CHANGES
For the Quarter Ended March 31, 1997
Additions
Arab-Malaysian Merchant Bank BHD
(Preferred)
*Arab-Malaysian Merchant Bank BHD
(Preferred)(Rights)
China Overseas Land & Investment Co.
Hicom Holdings BHD
Malaysian Plantation BHD
*Mardia Chemical
P.T. Astra International (Foreign)
P.T. Bank International Indonesia
(Foreign)(Warrants)
Deletions
Advanced Information Service Public
Company Ltd.
*Arab-Malaysian Merchant Bank BHD
(Preferred)(Rights)
Hong Leong Credit BHD
Land & General BHD
Land & House Public Co. (Foreign)
*Mardia Chemical
Phatra Thanakit Co., Ltd.
Resorts World BHD
Thai Farmers Bank, Ltd. (Foreign)
Thai Farmers Bank, Ltd. (Foreign) (Warrants)
<PAGE>
[FN]
*Added and deleted in the same quarter.
