MERRILL LYNCH
DEVELOPING
CAPITAL MARKETS
FUND, INC.
FUND LOGO
Semi-Annual Report
December 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 infor-
mation 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 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
Developing
Capital Markets
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Merrill Lynch Developing Capital Markets Fund, Inc.
Asset Allocation As a Percentage* of Net Assets as of
December 31, 1994
<PAGE>
A map illustrating the following percentages:
Ecuador 0.3%
Panama 0.3%
Venezuela 0.6%
Brazil 10.7%
Portugal 7.4%
Hungary 1.7%
Austria 0.9%
Poland 0.3%
Czech Republic 1.5%
Greece 2.3%
Pakistan 0.1%
India 5.0%
Thailand 2.6%
Singapore 0.6%
China 0.3%
Korea 5.4%
Mexico 8.2%
Peru 0.7%
Chile 1.0%
Argentina 3.1%
Morocco 2.4%
South Africa 4.5%
Turkey 2.1%
Sri Lanka 0.2%
Malaysia 8.2%
Indonesia 2.3%
Hong Kong 4.0%
Phillipines 3.9%
Australia 1.6%
Taiwan 0.8%
New Zealand 0.4%
[FN]
*Total may not equal 100%.
<PAGE>
DEAR SHAREHOLDER
The total return for Merrill Lynch
Developing Capital Markets Fund, Inc.'s
Class A Shares for the three months
ended December 31, 1994 was -12.12%
and for the Class B Shares, -12.30%.
During the six months ended December
31, 1994, the total return for the Fund's
Class A Shares was +2.38%, and Class B
Shares was +2.36 for the period since
inception (July 1, 1994) through
December 31, 1994. For the same period,
the unmanaged Morgan Stanley Capital
International Emerging Markets Free
Index rose 3.39%. For the period since
inception (October 21, 1994) through
December 31, 1994, the total return for
the Fund's Class C and Class D Shares
was -10.98% and -10.84%, respectively.
(Fund results do not include sales
charges; results would be lower if sales
charges were deducted. Complete per-
formance information, including average
annual total returns, can be found on
pages 4 and 5 of this report to share-
holders.) Detrimental to our perfor-
mance were our overweight positions in
the Latin American markets which
corrected substantially at the end of
the year. Our large cash position was
beneficial to performance, as were our
underweighting in Asia and our over-
weighting in southern European
markets.
Although there may be further interest
rate increases by the US Federal Reserve
Board in the coming weeks, we believe
that further moves will have a dimin-
ishing impact on world stock market
performance. We expect that an in-
creased focus by investors on earnings
fundamentals will favor the performance
of stocks in developing markets because
of their superior long-term growth
characteristics.
<PAGE>
Our research travels in Asia have con-
firmed our view that, in general, stock
prices reflect unrealistic growth expec-
tations. We are seeing some value in
the Asian markets, but we are expect-
ing further earnings downgrades and
declines in capital values which may
take some more time to correct earlier
excesses. The economies of Hong Kong,
Taiwan and China were volatile in 1994
as a result of decreasing liquidity. The
People's Republic of China's overheated
economy and political succession will
continue to cause uncertainty in China,
Hong Kong and Taiwan. However, the
Association of Southeast Asian nations
may benefit from a China in turmoil as
manufacturers relocate to the Philip-
pines, Malaysia, Thailand and Vietnam.
There are some companies in Asia
which are reasonably priced such as,
Bangkok Bank, Ltd., which will benefit
from financial deregulation in Thailand
because it leads its competitors in rela-
tionships, technology and management.
We are reassessing our investments in
Latin America in light of the sharp
devaluations of the Mexican peso during
recent weeks and the stock market cor-
rections that have ensued throughout
the region. The near-term outlook for
most countries in the region is good and
therefore we consider the selling to be
indiscriminate and overdone. As a result,
we are taking this opportunity to accum-
ulate investments in blue-chip
companies in markets such as Brazil.
<PAGE>
We believe that the Mexican market will
be unstable for several more weeks or
months. Our near-term caution arises
from several considerations which
include the country's leaders loss of
credibility and the deterioration in
Mexico's short-term economic and
corporate fundamentals. Furthermore,
although stock prices in dollar terms
have come down, valuations relative to
interest rates and relative to prospective
earnings are not low. We expect infla-
tion and interest rates will stay high
and for the government's austerity
measures to stifle domestic investment
and consumption. These factors,
together with foreign exchange losses,
will cause earnings to decline.
We remain positive on emerging markets
in Europe because of historically low
valuations, progress we see in restruc-
turing, and good prospects for earnings
recovery this year.
For the Middle East/Africa, we like
the less-discovered nature of this area;
however, we are deterred by high
valuations coupled with high interest
rates in two of the larger Middle East/
African markets, South Africa and
Israel. The notes of Transnet Ltd., a
profitable monopoly transportation provider
in South Africa which owns South African
Airways, provides a short-term high-
yield alternative to currently overvalued
South African equity markets.
<PAGE>
In Conclusion
As we look to the coming year, we
remind our shareholders that the
transition of developing countries to
"first world" status takes place over
years. Investment in these countries'
stock markets should likewise have
horizons of several years. During a
country's development, it will experi-
ence economic, political and market
trauma such as we are seeing in Mexico.
However, these events do not neces-
sarily reverse the country's past
achievements or halt its progress. It is
during these periods that we find the
most attractive opportunities to invest.
We appreciate your ongoing interest in
Merrill Lynch Developing Capital
Markets Fund, Inc., and we look forward
to assisting you with your financial
needs and objectives.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Grace Pineda)
Grace Pineda
Vice President and Portfolio Manager
February 1, 1995
<PAGE>
Officers and
Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Grace Pineda, Vice President and Portfolio Manager
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Chase Manhattan Bank, N.A.
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, New York 11245
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
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 mainte-
nance fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred
sales charge of 4% if redeemed during the first year, decreasing 1%
each year thereafter to 0% after the fourth year. In addition, Class
B Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after 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.
<PAGE>
* 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 A Shares are presented in
the "Performance Summary", "Recent Performance Results" and
"Average Annual Total Return" tables on pages 4 and 5. "Aggregate
Total Return" tables for Class B, Class C and Class D Shares are also
presented on page 5. Data for all of the Fund's shares, including
Class B, Class C and Class D Shares, are presented in the "Recent
Performance Results" table.
The "Recent Performance Results" table below shows investment
results before the deduction of any sales charges for Class A Shares
for the 12-month and 3-month periods ended December 31, 1994
and for Class B, Class C and Class D Shares for the periods since
inception through December 31, 1994. 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 representa-
tion 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.
<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>
9/1/89--12/31/89 $ 9.60 $10.13 $0.004 $0.132 + 6.97%
1990 10.13 9.04 -- 0.640 - 5.33
1991 9.04 10.89 -- 0.252 +23.35
1992 10.89 10.18 0.324 0.518 + 0.85
1993 10.18 16.80 0.278 0.069 +68.96
1994 16.80 13.90 0.653 0.447 -10.97
------ ------
Total $1.259 Total $2.058
Cumulative total return as of 12/31/94: +89.53%**
<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.
<PAGE>
<CAPTION>
Recent
Performance 12 Month 3 Month
Results* 12/31/94 9/30/94++ 12/31/93 % Change % Change++
<S> <C> <C> <C> <C> <C>
ML Developing Capital Markets Fund Class A Shares $13.90 $17.02 $16.80 -13.53%(1) -14.64%(1)
ML Developing Capital Markets Fund Class B Shares 13.86 16.97 14.54+++ - 0.36(1)+++ -14.63(1)
ML Developing Capital Markets Fund Class C Shares 13.84 16.71 -- -- -13.42(1)
ML Developing Capital Markets Fund Class D Shares 13.90 16.77 -- -- -13.37(1)
ML Developing Capital Markets Fund Class A Shares--
Total Return -10.97(2) -12.12(2)
ML Developing Capital Markets Fund Class B Shares--
Total Return 2.36(3)+++ -12.30(3)
ML Developing Capital Markets Fund Class C Shares--
Total Return -- -10.98(4)
ML Developing Capital Markets Fund Class D Shares--
Total Return -- -10.84(5)
<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 C and Class D Shares are since inception (10/21/94).
+++Investment results shown for Class B Shares are since inception (7/01/94).
(1)Percent change includes reinvestment of $0.653 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.447 per share ordinary income dividends
and $0.653 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.412 per share ordinary income dividends
and $0.653 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.425 per share ordinary income dividends
and $0.653 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.442 per share ordinary income dividends
and $0.653 per share capital gains distributions.
<CAPTION>
Average Annual
Total Return-- % Return Without % Return With
Class A Shares* Period Covered Sales Charge Sales Charge*
<S> <C> <C>
Year Ended 12/31/94 -10.97% -15.64%
Five Years Ended 12/31/94 +12.12 +10.92
Inception (9/1/89) through 12/31/94 +12.73 +11.60
<FN>
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
<CAPTION>
Aggregate % Return % Return
Total Return Period Covered Without CDSC With CDSC**
<S> <C> <C>
Class B Shares
Inception (7/1/94) to 12/31/94 +2.36% -1.44%
<FN>
*Maximum contingent deferred sales charge is 4%
and is reduced to 0% after 4 years.
**Assuming payment of applicable contingent
deferred sales charge.
<CAPTION>
% Return % Return
Period Covered Without CDSC With CDSC**
<S> <C> <C>
Class C Shares*
Inception (10/21/94) to 12/31/94 -10.98% -11.81%
<FN>
*Maximum contingent deferred sales charge is
1% and is reduced to 0% after 1 year.
**Assuming payment of applicable contingent
deferred sales charge.
<CAPTION>
% Return Without % Return With
Period Covered Sales Charge Sales Charge**
<S> <C> <C>
Class D Shares*
Inception (10/21/94) to 12/31/94 -10.84% -15.52%
<FN>
*Maximum sales charge is 5.25 %.
**Assuming maximum sales charge.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Held/ Value Percent of
AFRICA Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Morocco Banking 5,000 Banque Marocaine du Commerce Exterieur $ 132,685 $ 182,267 0.0%
150,000 Wafa Bank 5,810,251 6,225,114 1.1
------------ ------------ ------
5,942,936 6,407,381 1.1
Building & Construction 163,154 Groupe Omnium Nord Africain 6,686,860 6,642,914 1.2
Building Materials 10,000 Les Ciments de l'Oriental 340,025 416,129 0.1
Total Investments in Morocco 12,969,821 13,466,424 2.4
South Africa Beverage 45,000 South African Breweries Ltd. 950,625 1,068,750 0.2
Mining 95,000 De Beers Consolidated Mines Ltd. (ADR) (b) 2,201,328 2,196,875 0.4
Multi-Industry 2,100 ASA Ltd. 92,329 94,238 0.0
289,400 ++The Morgan Stanley Africa
Investment Fund, Inc. 3,357,059 3,291,925 0.6
106,600 New South Africa Fund, Inc. 1,495,194 1,505,725 0.3
86,700 ++Southern Africa Fund, Inc. 1,272,863 1,202,962 0.2
------------ ------------ ------
6,217,445 6,094,850 1.1
Transportation ZAL63,000,000 Transnet Ltd., 15% due 10/01/1995 15,155,731 15,594,904 2.8
Total Investments in South Africa 24,525,129 24,955,379 4.5
Total Investments in Africa 37,494,950 38,421,803 6.9
<PAGE>
Shares
EUROPE Held
Austria Banking 20,500 Creditanstalt-Bankverein AG 786,450 1,191,839 0.2
Building & Construction 4,000 Bau Holding AG 362,527 295,644 0.1
Energy 18,562 Unternehmensgruppe OMV AG 1,164,668 1,572,791 0.3
Transportation 15,270 Jenbacher Transportsysteme AG 917,681 182,036 0.0
Utilities 12,500 Energie--Versorgung Niederosterreich
AG (EVN) 989,417 1,624,255 0.3
Total Investments in Austria 4,220,743 4,866,565 0.9
Czech Banking 13,500 Komercni Banka 2,034,490 696,026 0.1
Republic
Electrical Equipment 9,206 Podnik Vypocetni Techniky (PVT) 1,903,926 1,104,193 0.2
Food 43,000 Ceska General Food 4,520,734 4,464,733 0.8
Paper 60,807 SEPAP 3,025,696 2,177,121 0.4
Total Investments in the Czech Republic 11,484,846 8,442,073 1.5
Greece Banking 84,650 Ergo Bank (Registered) S.A. 3,038,469 3,491,504 0.6
Beverage 122,500 Hellenic Bottling Co. S.A. (Bearer) 2,892,532 4,340,350 0.8
Building & Construction 49,700 Michaniki S.A. 507,566 765,492 0.1
48,830 Titan Cement S.A. 1,960,315 1,434,979 0.3
------------ ------------ ------
2,467,881 2,200,471 0.4
Financial Services 18,130 Etba Leasing S.A. 566,077 366,530 0.1
Food 63,500 Delta Dairy S.A. (Ordinary) 1,671,986 1,482,284 0.3
41,170 Delta Dairy S.A. (Preferred) 1,170,377 734,504 0.1
------------ ------------ ------
2,842,363 2,216,788 0.4
Total Investments in Greece 11,807,322 12,615,643 2.3
<PAGE>
Hungary Food 56,807 Pick Szeged Reszvenytarsasag (GDS) (a) (g) 2,947,401 3,336,843 0.6
Insurance 225,000 Pharmauti Gyogyszer es Elelmiszeripari
Reszvenytarsasag (g) 2,587,500 2,418,750 0.4
Retail Stores 1,342,000 FOTEX RT-Fotex Elso Amerikai-Magyar
Fotoszolgaltatasi Reszvenytarsasag 6,101,168 4,061,073 0.7
Total Investments in Hungary 11,636,069 9,816,666 1.7
Latvia Transportation 60,000 ++Baltic International USA, Inc. 403,200 112,500 0.0
Total Investments in Latvia 403,200 112,500 0.0
Poland Appliances & 89,000 Swarzedzkie Fabryki Mebli S.A. 2,102,193 730,706 0.1
Household Durables
Banking 243,000 Wielkopolski Bank Kredytowy 1,809,800 668,350 0.1
Electrical Equipment 15,000 Elektrim Towarzystwo Handlowe S.A. 1,916,544 671,182 0.1
Food 40,000 International Fast Food Corp. 267,500 90,000 0.0
Total Investments in Poland 6,096,037 2,160,238 0.3
Portugal Banking 352,212 Banco Comercial Portugues, S.A. (Registered) 4,850,549 4,608,133 0.8
77,000 Banco Totta E Acores, S.A. 1,657,285 1,724,242 0.3
------------ ------------ ------
6,507,834 6,332,375 1.1
Beverage 58,200 Uniao Cervejaria, S.A. (UNICER) 790,773 805,384 0.1
Building & Construction 72,600 Efacec S.A. 1,363,120 867,656 0.2
72,600 Efacec S.A. (New Shares) 1,238,401 867,656 0.2
280,000 Soares da Costa S.A. 5,551,268 5,283,683 1.0
56,000 Soares da Costa S.A. (Baby Shares) 0 1,056,737 0.2
28,000 Soares da Costa S.A. (New Shares) 350,219 528,368 0.1
172,200 Sociedade de Empreitadas Somague, S.A. 1,342,194 1,408,102 0.3
------------ ------------ ------
9,845,202 10,012,202 2.0
Retail 125,200 Jeronimo Martins S.A. 2,895,368 5,362,227 1.0
754,350 Sonae Investimentos-SGPS S.A. 16,218,946 17,371,212 3.2
------------ ------------ ------
19,114,314 22,733,439 4.2
Total Investments in Portugal 36,258,123 39,883,400 7.4
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Shares Held/ Value Percent of
(concluded) Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Turkey Beverage 1,708,160 Ege Biracilik Ve Malt Sanayii A.S. $ 472,057 $ 1,087,011 0.2%
650,000 Erciyas Biracilik Ve Malt Sanayii A.S. 640,556 481,169 0.1
------------ ------------ ------
1,112,613 1,568,180 0.3
Building Materials 2,502,000 Alarko Holdings A.S. 1,948,635 2,144,571 0.4
1,293,000 ++Cimentas Izmir Cimento Fabrikasi T.A.S. 1,002,327 906,779 0.2
------------ ------------ ------
2,950,962 3,051,350 0.6
Food 750,000 ++Kerevitas Gida Sanayii Ve Ticaret A.S. 546,032 603,896 0.1
Insurance 8,911,000 Akisgorta A.S. 2,227,750 1,805,345 0.3
Retail 507,000 Migros Turk A.S. 357,126 974,494 0.2
Steel 60,275,000 ++Izmir Demir Celik Sanayii A.S. 4,117,899 3,287,727 0.6
Total Investments in Turkey 11,312,382 11,290,992 2.1
Total Investments in Europe 93,218,722 89,188,077 16.2
LATIN
AMERICA
Argentina Automobiles 247,991 Compania Interamericana de
Automoviles S.A. (CINA) 3,740,197 2,169,921 0.4
Banking 132,250 Banco de Galicia y Buenos Aires S.A. 936,708 529,000 0.1
26,450 Banco de Galicia y Buenos Aires S.A.
(ADR) (b) 471,388 452,956 0.1
252,148 Banco Frances del Rio de la Plata S.A. 1,426,566 1,664,177 0.3
------------ ------------ ------
2,834,662 2,646,133 0.5
Oil & Related 1,551,800 Astra Compania Argentina de Petroleo S.A. 3,240,628 2,560,470 0.5
137,000 ++Yacimientos Petroliferos Fiscales S.A.
(Sponsored) (ADR) (b) 3,490,089 2,928,375 0.5
------------ ------------ ------
6,730,717 5,488,845 1.0
<PAGE>
Real Estate 21,000 ++Inversiones y Representaciones
S.A. (GDR) (d) 547,260 556,500 0.1
Telecommunications 200,000 Telecom Argentina Stet--France
Telecom S.A. 983,748 980,000 0.2
50,000 Telecom Argentina Stet--France
Telecom S.A. (ADR) (b) (g) 3,065,372 2,587,500 0.5
------------ ------------ ------
4,049,120 3,567,500 0.7
Utilities 205,000 Transportadora de Gas del Sur S.A. 2,815,251 1,921,875 0.4
Total Investments in Argentina 20,717,207 16,350,774 3.1
Brazil Automotive 242,800 ++CAPCO Automotive Products Corporation S.A. 3,021,788 2,913,600 0.5
Banking 679,339,024 Banco Bradesco S.A. 4,571,237 5,781,609 1.1
48,967,626 Banco Nacional S.A. 970,334 1,244,449 0.2
------------ ------------ ------
5,541,571 7,026,058 1.3
Beverage 5,644,200 Companhia Cervejaria Brahma
S.A. PN (Preferred) 1,094,100 1,860,384 0.3
574,872 ++Companhia Cervejaria Brahma S.A.
(Warrants) (c) 14,956 823 0.0
------------ ------------ ------
1,109,056 1,861,207 0.3
Chemicals 1,200,000 ++Bombril S.A. PN (Preferred) 30,521 33,333 0.0
Electrical Equipment 17,753,900 Light--Servicios de Eletricidade S.A. 6,393,851 6,421,623 1.2
Mining 23,957,000 Companhia Vale do Rio Doce S.A. PN
(CVRD) (Preferred) 2,236,502 4,587,511 0.8
Oil & Related 46,963,333 Petroleo Brasileiro S.A. 6,380,127 5,939,252 1.1
Paper & Forest 2,500,000 ++MelPaper S.A. (Preferred) 1,631,371 1,182,033 0.2
Producers
Retail 1,500,000 Mesbla S.A. 350,350 269,504 0.1
Steel 6,970,300,000 Usinas Siderurgicas de Minas
Gerais--Usiminas S.A. 5,007,302 9,474,994 1.7
Telecommunications 87,000 Telecomunicacoes Brasileiras
S.A.--Telebras (ADR) (b) 3,709,779 3,871,500 0.7
53,142,632 Telecomunicacoes Brasileiras
S.A.--Telebras ON 1,682,509 2,292,797 0.4
119,040,591 Telecomunicacoes Brasileiras S.A.--
Telebras PN (Preferred) 5,311,183 5,332,906 1.0
------------ ------------ ------
10,703,471 11,497,203 2.1
<PAGE>
Utilities 4,242,400 Centrais Eletricas Brasileiras S.A.--
Eletrobras (Preferred) 1,180,141 1,474,309 0.3
260,000 ++Companhia Energetica de Minas Gerais S.A.
(CEMIG) (ADR) (b) (g) 6,240,000 6,110,000 1.1
------------ ------------ ------
7,420,141 7,584,309 1.4
Total Investments in Brazil 49,826,051 58,790,627 10.7
Chile Apparel 6,800,201 Bata Chile S.A. 1,920,913 1,272,493 0.2
Broadcasting & 3,829,677 Editorial Lord Cochrane S.A. 2,201,313 2,102,118 0.4
Publishing
Telecommunications 28,000 Compania de Telefonos de Chile S.A.
(ADR) (b) 3,037,806 2,205,000 0.4
Total Investments in Chile 7,160,032 5,579,611 1.0
Ecuador Building Materials 3,770 La Cemento Nacional C.A. 1,449,510 1,394,900 0.3
Total Investments in Ecuador 1,449,510 1,394,900 0.3
Mexico Beverage 20,000 Grupo Embotellador de Mexico, S.A. de C.V. 549,355 287,500 0.1
Building & 116,250 Grupo Tribasa, S.A. de C.V. (ADR) (b) 3,026,627 1,932,656 0.4
Construction 666,800 Tolmex, S.A. de C.V. 'B' 5,554,542 5,647,388 1.0
------------ ------------ ------
8,581,169 7,580,044 1.4
Building Materials 89,437 Cementos Mexicanos, S.A. de C.V. (Class B) 1,607,850 927,909 0.2
394,875 Cementos Mexicanos, S.A. de C.V. (Class B)
(ADR) (b) 2,952,927 2,099,284 0.4
------------ ------------ ------
4,560,777 3,027,193 0.6
Financial Services 66,700 Grupo Financiero Bancomer,
S.A. de C.V. (ADR) (b) (g) 2,224,175 804,569 0.1
195,250 ++Servicios Financieros Quadrum,
S.A. de C.V. (ADR) (b) (g) 2,452,895 1,220,312 0.2
------------ ------------ ------
4,677,070 2,024,881 0.3
<PAGE>
Food 1,600,000 Grupo Herdez, S.A. de C.V. 'A' 1,450,009 783,673 0.1
Glass Manufacturing 56,000 Vitro, S.A. de C.V. 387,158 262,286 0.1
79,500 Vitro, S.A. de C.V. (ADR) (b) 1,602,860 1,113,000 0.2
------------ ------------ ------
1,990,018 1,375,286 0.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
LATIN AMERICA Shares Held/ Value Percent of
(concluded) Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Mexico Health & Personal Care 125,000 Kimberly-Clark de Mexico, S.A. de C.V. $ 2,069,659 $ 1,487,245 0.3%
(concluded)
Leisure 810,650 Grupo Carso, S.A. de C.V. 'A' 6,799,551 6,071,603 1.1
72,000 ++Grupo Carso, S.A. de C.V. (ADR) (b) 1,411,188 1,116,000 0.2
94,302 Grupo Situr, S.A. de C.V. (ADR) (b) (g) 1,700,594 1,850,677 0.3
464,393 Grupo Situr, S.A. de C.V. 'B' (Ordinary) 1,419,439 966,696 0.2
------------ ------------ ------
11,330,772 10,004,976 1.8
Metals 82,700 Grupo Simec, S.A. de C.V. (ADR) (b) 1,464,457 1,250,837 0.2
745,000 Grupo Simec, S.A. de C.V. (Ordinary) 670,192 562,551 0.1
------------ ------------ ------
2,134,649 1,813,388 0.3
Retail 2,375,000 Cifra, S.A. de C.V. 'C' 4,796,743 4,594,898 0.8
287,800 Grupo Empresarial Fenix, S.A. de C.V.
(ELEKTRA) 'L' Shares 2,404,684 2,096,829 0.4
------------ ------------ ------
7,201,427 6,691,727 1.2
Telecommunications 240,450 Telefonos de Mexico, S.A. de C.V. (ADR) (b) 16,610,697 9,858,450 1.8
Total Investments in Mexico 61,155,602 44,934,363 8.2
Panama Beverage 54,750 Panamerican Beverages, Inc. (Class A) 1,654,974 1,731,469 0.3
Total Investments in Panama 1,654,974 1,731,469 0.3
Peru Banking 138,774 Banco de Credito de Peru S.A. 94,494 307,045 0.1
25,000 ++Banco Weise Limitado S.A. (ADR) (b) 493,750 468,750 0.1
------------ ------------ ------
588,244 775,795 0.2
<PAGE>
Mining 464,526 Southern Peru Copper Corp. S.A. 2,086,477 2,589,685 0.5
Total Investments in Peru 2,674,721 3,365,480 0.7
Venezuela Utilities 2,192,712 C.A. La Electricidad de Caracas
S.A.I.C.A.--S.A.C.A. 4,407,191 3,142,237 0.6
Total Investments in Venezuela 4,407,191 3,142,237 0.6
Total Investments in Latin America 149,045,288 135,289,461 24.9
MIDDLE
EAST
Pakistan Banking 41,360 Bank of Punjab 108,893 73,931 0.0
Electrical Equipment 435,775 Karachi Electric Supply Corp. Ltd. 455,662 463,828 0.1
Total Investments in Pakistan 564,555 537,759 0.1
Total Investments in the Middle East 564,555 537,759 0.1
PACIFIC
BASIN/ASIA
Australia Merchandising 265,000 Amway Asia Pacific Ltd. 7,549,106 8,612,500 1.6
Total Investments in Australia 7,549,106 8,612,500 1.6
China Appliances & 3,665,500 Shenzhen China Bicycles 'B' Co.
Household Durables (Holdings) Ltd. 2,354,673 1,611,001 0.3
Total Investments in China 2,354,673 1,611,001 0.3
Hong Kong Automotive 4,138,000 Sime Darby (Hong Kong) Ltd. 6,197,775 4,600,155 0.8
Diversified 1,514,000 Jardine Matheson Holdings, Ltd. 10,539,254 10,812,888 2.0
Financial Services 11,061,000 Winton Holdings Ltd. 3,863,542 2,802,425 0.5
Food 13,713,000 C.P. Pokphand Co. Ltd. (Ordinary) 4,000,521 3,208,445 0.6
Real Estate 416,000 ++Hong Kong Land Holdings Ltd.
(Warrants) (c) 340,988 107,549 0.0
<PAGE>
Textiles 7,640,000 United Success International
Holdings Ltd. 1,018,306 533,299 0.1
Total Investments in Hong Kong 25,960,386 22,064,761 4.0
India Broadcasting & 888,600 ++Videocon International Ltd. (ADR) (b) 7,773,607 4,114,218 0.8
Publishing
Building & 34,375 The Associated Cement Co. Ltd. 2,897,904 4,411,267 0.8
Construction
Business & 50,000 Western Paques (India) Ltd. 180,588 271,003 0.1
Public
Services
Chemicals 355,500 Mardia Chemical Ltd. 1,545,509 2,040,172 0.4
355,500 ++Mardia Chemical Ltd. (Rights) (f) 0 0 0.0
------------ ------------ ------
1,545,509 2,040,172 0.4
Energy 521,000 Bombay Suburban Electric Supply Co. Ltd. 3,333,464 3,571,337 0.7
$ 140,000 Bombay Suburban Electric Supply Co. Ltd.,
Convertible Debentures,
15% due 3/01/1995 267,793 267,814 0.1
------------ ------------ ------
3,601,257 3,839,151 0.8
Metals 60,000 ++Hindalco Industries Ltd. (GDS) (a) 1,911,000 2,010,000 0.4
7,900 ++Hindalco Industries Ltd. (Ordinary) 148,260 277,060 0.1
------------ ------------ ------
2,059,260 2,287,060 0.5
Tobacco 290,500 ++Indian Tobacco Co. Ltd. (I.T.C.) (GDR) (d) 3,851,562 2,905,000 0.5
Utilities 667,500 ++Kec International Ltd. 5,050,805 6,278,097 1.1
Total Investments in India 26,960,492 26,145,968 5.0
Indonesia Banking 1,826,500 P.T. Bank Bali 5,296,988 5,154,438 0.9
Broadcasting $ 745,000 P.T. Surya Citra Television,
& Publishing 4% due 7/01/1997 745,000 737,550 0.1
Telecommunications 147,420 P.T. Indonesia Satellite (ADR) (b) 5,600,335 5,270,265 1.0
Tobacco 420,000 P.T. Gudang Garam 2,010,276 1,796,996 0.3
<PAGE>
Total Investments in Indonesia 13,652,599 12,959,249 2.3
Korea Automotive 54,026 Dong Ah Tire Industries 2,989,649 4,389,099 0.8
Banking 69,507 Bank of Seoul (New Shares) 491,307 649,755 0.1
Financial Services 51,570 Hanyang Securities Corp. 1,209,785 798,014 0.1
9,892 ++Hanyang Securities Corp. (Rights) (e) 0 0 0.0
------------ ------------ ------
1,209,785 798,014 0.1
Food 15,680 Lotte Confectionery Corp. 1,426,379 2,324,952 0.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
PACIFIC BASIN/
ASIA Shares Held/ Value Percent of
(concluded) Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Korea Pharmaceuticals 66,012 Choong Wae Pharmaceutical Corp. $ 2,410,450 $ 6,823,919 1.2%
(concluded) 22,153 Choong Wae Pharmaceutical Corp.
(New Shares) 774,133 2,191,697 0.4
------------ ------------ ------
3,184,583 9,015,616 1.6
Retail Stores 12,132 Shinsegae Department Store 390,439 1,354,463 0.2
Telecommunications 9,317 Korea Mobile Telecommunications Corp. 3,084,445 6,700,582 1.2
Utilities 144,470 Korea Electric Power Corp. 4,966,027 5,482,677 1.0
Total Investments in Korea 17,742,614 30,715,158 5.4
Malaysia Automotive 3,301,200 Sime Darby BHD 8,424,680 7,565,924 1.4
Banking 2,860,000 Public Bank BHD 'Foreign' (Malaysia) 6,806,204 5,714,398 1.0
1,868,000 Public Bank BHD 'Foreign' (Singapore) 3,527,679 3,873,230 0.7
------------ ------------ ------
10,333,883 9,587,628 1.7
Broadcasting 1,725,000 Sistem Televisyen Malaysia BHD 5,065,561 3,750,735 0.7
Building & 221,000 IJM Corp. BHD 789,893 740,274 0.1
Construction
<PAGE>
Financial Services 2,324,333 Commerce Asset--Holdings BHD 8,323,364 9,379,287 1.7
Food 438,000 Nestle (Malaysia) BHD 2,836,136 2,917,140 0.5
Newspaper/Publishing 1,256,000 New Straits Times Press BHD 5,118,753 4,034,946 0.7
Steel 2,706,000 Maruichi (Malaysia) Steel Tube BHD 6,417,204 7,632,987 1.4
Total Investments in Malaysia 47,309,474 45,608,921 8.2
New Zealand Beverage 297,000 D.B. Group Ltd. 114,304 155,817 0.0
Transportation 1,700,000 Ports of Auckland Ltd. 2,117,611 2,447,235 0.4
Total Investments in New Zealand 2,231,915 2,603,052 0.4
Philippines Multi-Industry 250,500 ++Benpres Holdings Corp. (g) 2,487,375 2,254,500 0.4
Telecommunications $ 20,000,000 Philippine Long Distance Telephone Co.,
10.625% due 6/02/2004 20,390,000 19,200,000 3.5
Total Investments in the Philippines 22,877,375 21,454,500 3.9
Singapore Banking 561,269 ++United Overseas Bank Ltd. (Warrants) (c) 1,307,919 3,159,908 0.6
Total Investments in Singapore 1,307,919 3,159,908 0.6
Sri Lanka Building & 262,500 Lankan Tiles 337,398 395,570 0.1
Construction
Diversified 90,625 Aitken Spence 518,247 537,158 0.1
Total Investments in Sri Lanka 855,645 932,728 0.2
Taiwan Merchandising 202,873 ++Hocheng Group Corp. (ADR) (b) (g) 5,816,416 4,564,642 0.8
Total Investments in Taiwan 5,816,416 4,564,642 0.8
Thailand Appliances & 211,500 Karat Sanitary Ware Co., Ltd. 1,204,683 868,081 0.2
Household Durables
Banking 948,600 Bangkok Bank, Ltd. 'Foreign' 7,046,720 10,130,496 1.8
Insurance 117,700 Ayudhya Insurance Co. 'Foreign' 881,448 867,683 0.2
<PAGE>
Real Estate 530,000 Bangkok Land Company Ltd. 1,841,609 1,319,984 0.2
Utilities 43,800 Sanyo Universal Electric Co., Ltd. 1,040,154 1,015,804 0.2
Total Investments in Thailand 12,014,614 14,202,048 2.6
Total Investments in the Pacific
Basin/Asia 186,633,228 194,634,436 35.3
SHORT-TERM Face
SECURITIES Amount
Commercial Paper* $ 20,000,000 AT&T Capital Corp., 5.67% due 1/12/1995 19,962,200 19,962,200 3.6
10,000,000 Bankers Trust NY Corp.,
5.65% due 1/20/1995 9,968,611 9,968,611 1.8
20,000,000 Corporate Asset Funding Corp.,
5.85% due 2/01/1995 19,896,000 19,896,000 3.6
19,328,000 General Electric Capital Corp.,
5.80% due 1/03/1995 19,318,658 19,318,658 3.5
10,079,000 Matterhorn Capital Corp.,
5.71% due 1/20/1995 10,047,027 10,047,027 1.8
Commercial Paper*-- 3,000,000 Argentina Treasury Bills,
Foreign 18.25% due 2/24/1995 2,928,255 2,928,255 0.5
Mexican Cetes (Certificados de la Tesoreria
de la Federacion):
4,939,380 23.32% due 1/26/1995 1,012,221 992,597 0.2
6,717,630 23.32% due 2/02/1995 1,370,609 1,323,590 0.2
3,599,670 23.32% due 2/16/1995 728,073 711,924 0.1
8,910,000 23.32% due 2/23/1995 1,794,360 1,752,925 0.3
Total Investments in Short-Term Securities 87,026,014 86,901,787 15.6
Total Investments $553,982,757 544,973,323 99.0
============
Other Assets Less Liabilities 5,758,883 1.0
------------ ------
Net Assets $550,732,206 100.0%
============ ======
<PAGE>
<FN>
*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.
++Non-income producing security.
(a)Global Depositary Shares (GDS).
(b)American Depositary Shares (ADR).
(c)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 of certain conditions until the expiration date.
(d)Global Depositary Receipts (GDR).
(e)The rights may be exercised until 1/10/1995.
(f)The rights may be exercised until 1/13/1995.
(g)Restricted securities as to resale. The value of the Fund's investments
in restricted securities was approximately $25,148,000, representing
4.57% of net assets.
<CAPTION>
Acquisition Value
Issue Date Cost (Note 1a)
<S> <C> <C> <C>
Benpres Holdings Corp. 10/25/1994 $ 2,487,375 $ 2,254,500
Companhia Energetica de Minas Gerais S.A. (CEMIG) (ADR) 9/22/1994 6,240,000 6,110,000
Grupo Financiero Bancomer, S.A. de C.V. (ADR) 7/13/1992 2,224,175 804,569
Grupo Situr, S.A. de C.V. (ADR) 10/27/1993 1,700,594 1,850,677
Hocheng Group Corp. (ADR) 8/09/1994 5,816,415 4,564,642
Pharmauti Gyogyszer es Elelmiszeripari Reszvenytarsasag 6/15/1994 2,587,500 2,418,750
Pick Szeged Reszvenytarsasag (GDS) 11/20/1992 2,947,401 3,336,843
Servicios Financieros Quadrum, S.A. de C.V. (ADR) 7/28/1993 2,452,895 1,220,312
Telecom Argentina Stet--France Telecom S.A. (ADR) 10/05/1993 3,065,372 2,587,500
Total Restricted Securities $29,521,727 $25,147,793
=========== ===========
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of December 31, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$553,982,757) (Note 1a) $544,973,323
Foreign cash 7,934,367
Receivables:
Securities sold $ 8,676,999
Capital shares sold 3,518,361
Interest 840,171
Dividends 599,772 13,635,303
------------
Deferred organization expenses (Note 1f) 4,362
Prepaid expenses and other assets (Note 1f) 150,209
------------
Total assets 566,697,564
------------
<PAGE>
Liabilities: Payables:
Securities purchased 11,014,265
Capital shares redeemed 2,338,004
Investment adviser (Note 2) 464,734
Distributor (Note 2) 109,008 13,926,011
------------
Accrued expenses and other liabilities 2,039,347
------------
Total liabilities 15,965,358
------------
Net Assets: Net assets $550,732,206
============
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized $ 2,923,264
Consist of: Class B Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized 912,709
Class C Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized 61,084
Class D Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized 67,760
Paid-in capital in excess of par 558,261,539
Undistributed investment income--net 1,601,304
Accumulated realized capital losses on investments and foreign
currency transactions--net (4,100,369)
Unrealized depreciation on investments and foreign currency transactions--net (8,995,085)
------------
Net assets $550,732,206
============
Net Asset Class A--Based on net assets of $406,388,476 and 29,232,641 shares outstanding $ 13.90
============
Value: Class B--Based on net assets of $126,469,448 and 9,127,092 shares outstanding $ 13.86
============
Class C--Based on net assets of $8,455,664 and 610,837 shares outstanding $ 13.84
============
Class D--Based on net assets of $9,418,618 and 677,599 shares outstanding $ 13.90
============
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended December 31, 1994
<S> <S> <C> <C>
Investment Dividends (net of $249,979 foreign withholding tax) $ 3,326,824
Income Interest and discount earned 2,819,340
(Notes 1d ------------
& 1e): Total income 6,146,164
------------
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 2,624,606
Custodian fees 393,216
Distribution fees--Class B (Note 2) 336,699
Transfer agent fees--Class A (Note 2) 272,796
Registration fees (Note 1f) 118,880
Printing and shareholder reports 103,719
Accounting services (Note 2) 58,571
Transfer agent fees--Class B (Note 2) 48,742
Professional fees 46,330
Directors' fees and expenses 16,973
Distribution fees--Class C (Note 2) 10,032
Pricing fees 4,953
Account maintenance fees--Class D (Note 2) 2,553
Amortization of organization expenses (Note 1f) 1,964
Transfer agent fees--Class C (Note 2) 1,439
Transfer agent fees--Class D (Note 2) 1,163
Other 57,869
------------
Total expenses 4,100,505
------------
Investment income--net 2,045,659
------------
Realized & Realized gain (loss) from:
Unrealized Investments--net $ 4,697,975
Gain (Loss) Foreign currency transactions--net (319,318) 4,378,657
on ------------
Investments & Change in unrealized appreciation/depreciation on:
Foreign Investments--net (11,733,822)
Currency Foreign currency transactions--net 89,919 (11,643,903)
Transactions ------------ ------------
- --Net (Notes Net realized and unrealized loss on investments and foreign currency transactions (7,265,246)
1b, 1c, 1e ------------
& 3): Net Decrease in Net Assets Resulting from Operations $ (5,219,587)
============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
December 31, June 30,
1994++ 1994
Increase (Decrease) in Net Assets:
<S> <S> <C> <C>
Operations: Investment income--net $ 2,045,659 $ 1,688,321
Realized gain on investments and foreign currency transactions--net 4,378,657 36,390,093
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net (11,643,903) (12,637,885)
------------ ------------
Net increase (decrease) in net assets resulting from operations (5,219,587) 25,440,529
------------ ------------
Dividends & Investment income--net:
Distributions Class A (987,487) (902,496)
to Class B -- --
Shareholders Class C (5,936) --
(Note 1g): Class D (15,439) --
Realized gain on investments--net:
Class A (29,559,968) (4,808,440)
Class B (8,425,721) --
Class C (477,867) --
Class D (537,034) --
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (40,009,452) (5,710,936)
------------ ------------
Capital Share Net increase in net assets derived from capital share transactions 193,965,498 239,981,410
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase in net assets 148,736,459 259,711,003
Beginning of period 401,995,747 142,284,744
------------ ------------
End of period* $550,732,206 $401,995,747
============ ============
<FN>
*Undistributed investment income--net $ 1,601,304 $ 564,507
============ ============
++Figures shown for Class C and Class D Shares are since inception (10/21/94).
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
December 31, For Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1994 1994 1993++ 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 14.61 $ 11.62 $ 11.92 $ 10.43 $ 11.58
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .07 .11 .12 .15 .24
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net .32 3.23 .42 1.59 (.75)
-------- -------- -------- -------- --------
Total from investment operations .39 3.34 .54 1.74 (.51)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.04) (.07) (.14) (.17) (.15)
Realized gain on investments-net (1.06) (.28) (.70) (.08) (.49)
-------- -------- -------- -------- --------
Total dividends and distributions (1.10) (.35) (.84) (.25) (.64)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.90 $ 14.61 $ 11.62 $ 11.92 $ 10.43
======== ======== ======== ======== ========
Total Based on net asset value per share 2.38%+++ 28.73% 5.17% 17.02% (4.45%)
Investment ======== ======== ======== ======== ========
Return:**
Ratios to Expenses 1.43%* 1.46% 1.17% 1.64% 1.77%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net .74%* .63% (.04%) 1.73% 1.98%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $406,388 $401,996 $142,285 $126,417 $111,947
Data: ======== ======== ======== ======== ========
Portfolio turnover 27.38% 66.85% 91.72% 71.05% 84.74%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads;
total returns would be lower if sales charges were included.
++Based on average number of shares outstanding during the period.
+++Aggregate total investment return.
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class B Class C Class D
For the For the For the
Period Period Period
The following per share data and ratios have been derived July 1, Oct. 21, Oct. 21,
from information provided in the financial statements. 1994++ to 1994++ to 1994++ to
Dec. 31, Dec. 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1994 1994++++ 1994++++
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 14.54 $ 16.71 $ 16.77
Operating -------- -------- -------
Performance: Investment income--net .01 .01 .03
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net .37 (1.81) (1.81)
-------- -------- -------
Total from investment operations .38 (1.80) (1.78)
-------- -------- -------
Less dividends and distributions:
Investment income--net -- (.01) (.03)
Realized gain on investments--net (1.06) (1.06) (1.06)
-------- -------- -------
Total dividends and ditributions (1.06) (1.07) (1.09)
-------- -------- -------
Net asset value, end of period $ 13.86 $ 13.84 $ 13.90
======== ======== =======
Total Based on net asset value per share 2.36%+++ (10.98%)+++ (10.84%)+++
Investment ======== ======== =======
Return:**
Ratios to Expenses, excluding distribution fees 1.43%* 1.44%* 1.41%*
Average ======== ======== =======
Net Assets: Expenses 2.43%* 2.44%* 1.66%*
======== ======== =======
Investment income--net .19%* .43%* 1.24%*
======== ======== =======
Supplemental Net assets, end of period (in thousands) $126,469 $ 8,456 $ 9,419
Data: ======== ======== =======
Portfolio turnover 27.38% 27.38% 27.38%
======== ======== =======
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads;
total returns would be lower if sales charges were included.
+++Aggregate total investment return.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Developing Capital Markets Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a non-
diversified, open-end management investment company. These
unaudited interim financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of
the results for the interim period presented. All such adjustments
are of a normal recurring nature. The Fund offers four classes of
shares under the Merrill Lynch Select Pricing SM System. Shares of
Class A and Class D are sold with a front-end sales charge. Shares of
Class B and Class C may be subject to a contingent deferred sales
charge. All classes of shares have identical voting, dividend, liquida-
tion and other rights and the same terms and conditions, except
that Class B, Class C, and Class D Shares bear certain expenses
related to the account maintenance of such shares, and Class B and
Class C Shares also bear certain expenses related to the distribution
of such shares. Each class has exclusive voting rights with respect
to matters relating to its account maintenance and distribution
expenditures. The following is a summary of significant accounting
policies followed by the Fund:
(a) Valuation of securities--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at the
last available bid price. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as
the primary market. Securities traded in the over-the-counter
market are valued at the last available bid price in the over-the-
counter market prior to the time of valuation. Portfolio securities
which are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representa-
tive market. Options written by the Fund are valued at the last
sale price in the case of exchange-traded options or, in the case of
options traded in the over-the-counter market, the last asked price.
Options purchased by the Fund are valued at their last sale price in
the case of exchange-traded options or, in the case of options traded
in the over-the-counter market, the last bid price. Other invest-
ments, including futures contracts and related options, are stated at
market value. Short-term securities are valued at amortized cost,
which approximates market value. Securities and assets for which
market quotations are not readily available are valued at fair value
as determined in good faith by or under the direction of the Fund's
Board of Directors.
<PAGE>
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its port-
folio against adverse movements in the equity, debt and currency
markets. Losses may arise due to changes in the value of the contract
or if the counter party does not perform under the contract.
* Forward foreign exchange contracts--The Fund is authorized to
enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. Such contracts are
not entered on the Fund's records. However, the effect on operations
is recorded from the date the Fund enters into such contracts. Premium
or discount is amortized over the life of the contracts.
* Foreign currency options and futures--The Fund may also pur-
chase or sell listed or over-the-counter foreign currency options,
foreign currency futures and related options on foreign currency
futures as a short or long hedge against possible variations in
foreign exchange rates. Such transactions may be effected with
respect to hedges on non-US dollar denominated securities owned
by the Fund, sold by the Fund but not yet delivered, or committed
or anticipated to be purchased by the Fund.
* Options--The Fund is authorized to write and purchase call and
put options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current value of the option written.
When a security is sold through an exercise of an option, the related
premium received (or paid) is deducted from (or added to) the basis
of the security sold. When an option expires (or the Fund enters
into a closing transaction), the Fund realizes a gain or loss on the
option to the extent of the premiums received or paid (or gain or
loss to the extent the cost of the closing transaction exceeds the
premium paid or received).
Written and purchased options are non-income producing
investments.
* Financial futures contracts--The Fund may purchase or sell stock
index futures contracts and options on such futures contracts. Upon
entering into a contract, the Fund deposits and maintains as collateral
such initial margin as required by the exchange on which the
transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments
are known as variation margin and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
<PAGE>
(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or valuing
(unrealized) assets or liabilities expressed in foreign currencies into
US dollars. Realized and unrealized gains or losses from investments
include the effects of foreign exchange rates on investments.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded)
(d) Income taxes--It is the Fund's policy to comply with the require-
ments of the Internal Revenue Code applicable to regulated invest-
ment companies and to distribute all of its taxable income to its
shareholders. Therefore, no Federal income tax provision is required.
Under the applicable foreign tax law, a withholding tax may be
imposed on interest, dividends and capital gains at various rates.
(e) Security transactions and investment income--Security trans-
actions are recorded on the dates the transactions are entered into
(the trade dates). Dividend income is recorded on the ex-dividend
date, except that if the ex-dividend date has passed certain dividends
from foreign securities are recorded as soon as the Fund is informed
of the ex-dividend date. Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and losses
on security transactions are determined on the identified cost basis.
(f) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid
by the Fund are recorded on the ex-dividend dates.
(h) Basis of consolidation--The accompanying consolidated finan-
cial statements include the accounts of Inversiones en Marcado
Accionario de Valores Chile Limitada, a wholly-owned subsidiary,
which primarily invests in Chilean securities. Intercompany accounts
and transactions have been eliminated.
<PAGE>
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement
with Merrill Lynch Asset Management, L.P. ("MLAM"). The general
partner of MLAM is Princeton Services, Inc. ("PSI"), an indirect,
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."),
which is a limited partner.
MLAM is responsible for the management of the Fund's portfolio
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund.
For such services, the Fund pays a monthly fee of 1.0%, on an
annual basis, of the average daily value of the Fund's net assets. The
Investment Advisory Agreement obligates MLAM to reimburse the
Fund to the extent the Fund's expenses (excluding interest, taxes,
distribution fees, brokerage fees and commissions, and extraordinary
items) exceed 2.5% of the Fund's first $30 million of average daily
net assets, 2.0% of the Fund's next $70 million of average daily net
assets, and 1.5% of the average daily net assets in excess thereof.
MLAM's obligation to reimburse the Fund is limited to the amount of
the management fee. No fee payment will be made to MLAM during
any fiscal year which will cause such expenses to exceed the
expense limitations at the time of such payment.
The Fund has entered into a Distribution Agreement and a Distribu-
tion Plan with Merrill Lynch Funds Distributor, Inc. ("MLFD" or
"Distributor"), a wholly-owned subsidiary of Merrill Lynch Group, Inc.
Pursuant to the distribution plans ("the Distribution Plans") adopted
by the Fund in accordance with Rule 12b-1 under the Investment
Company Act of 1940, the Fund pays the Distributor ongoing account
maintenance and distribution fees. The fees are accrued daily and
paid monthly at annual rates based upon the average daily net assets
of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to
the Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance
services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for
providing shareholder and distribution-related services to Class B
and Class C shareholders.
<PAGE>
During the six months ended December 31, 1994, MLFD earned
underwriting discounts and MLPF&S earned dealer concessions on
sales of the Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $60,554 $979,961
Class D $10,187 $166,595
MLPF&S received contingent deferred sales charges of $26,107
relating to capital share transactions for the sale of Class B
Shares, $95 relating to capital share transactions for the sale of
Class C Shares, and $31,436 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended
December 31, 1994.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary
of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, FDS, MLFD, MLPF&S, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended December 31, 1994 were $205,459,655
and $127,226,157, respectively.
Net realized and unrealized gains (losses) as of December 31, 1994
were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 4,698,714 $ (8,885,206)
Short-term investments (739) (124,228)
Foreign currency transactions (319,318) 14,349
----------- ------------
Total $ 4,378,657 $ (8,995,085)
=========== ============
As of December 31, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $9,009,434, of which $49,667,636
related to appreciated securities and $58,677,070 related to depre-
ciated securities. The aggregate cost of investments at December 31,
1994 for Federal income tax purposes was $553,982,757.
<PAGE>
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $193,965,498, and $239,981,410, respectively. Transactions in
capital shares for Class A, Class B, Class C and Class D were as follows:
Class A Shares for the Six Months Dollar
Ended December 31, 1994 Shares Amount
Shares sold 3,572,254 $ 58,476,129
Shares issued to shareholders in reinvestment
of dividends & distributions 1,836,555 26,556,587
----------- ------------
Total issued 5,408,809 85,032,716
Shares redeemed (3,690,030) (59,161,521)
----------- ------------
Net increase 1,718,779 $ 25,871,195
=========== ============
Class A Shares for the Year Dollar
Ended June 30, 1994 Shares Amount
Shares sold 20,121,319 $316,594,559
Shares issued to shareholders in reinvestment
of dividends & distributions 332,847 4,929,176
----------- ------------
Total issued 20,454,166 321,523,735
Shares redeemed (5,183,789) (81,542,325)
----------- ------------
Net increase 15,270,377 $239,981,410
=========== ============
Class B Shares for the Period Dollar
July 1, 1994++ to December 31, 1994 Shares Amount
Shares sold 9,294,014 $151,263,611
Shares issued to shareholders in reinvestment
of dividends & distributions 530,932 7,656,041
----------- ------------
Total issued 9,824,946 158,919,652
Shares redeemed (697,854) (11,015,715)
----------- ------------
Net increase 9,127,092 $147,903,937
=========== ============
[FN]
++Commencement of Operations.
<PAGE>
Class C Shares for the Period Dollar
October 21, 1994++ to December 31, 1994 Shares Amount
Shares sold 612,311 $ 9,627,921
Shares issued to shareholders in reinvestment
of dividends & distributions 31,002 446,738
----------- ------------
Total issued 643,313 10,074,659
Shares redeemed (32,476) (494,577)
----------- ------------
Net increase 610,837 $ 9,580,082
=========== ============
[FN]
++Commencement of Operations.
Class D Shares for the Period Dollar
October 21, 1994++ to December 31, 1994 Shares Amount
Shares sold 657,385 $ 10,335,772
Shares issued to shareholders in reinvestment
of dividends & distributions 36,193 523,355
----------- ------------
Total issued 693,578 10,859,127
Shares redeemed (15,979) (248,843)
----------- ------------
Net increase 677,599 $ 10,610,284
=========== ============
[FN]
++Commencement of Operations.
5. Commitments:
At December 31, 1994, the Fund entered into forward exchange
contracts under which it had agreed to purchase and sell various
foreign currencies with approximate values of $4,535,000 and
$5,798,000, respectively.
<PAGE>
PORTFOLIO CHANGES
For the Quarter Ended December 31, 1994
Additions
ASA Ltd.
Akisgorta A.S.
*Associated Cement Co., Ltd. (Rights)
Banco de Galicia y Buenos Aires S.A. (ADR)
Benpres Holdings Corp.
Bombril S.A. PN (Preferred)
*Etba Leasing S.A. (Rights)
Hanyang Securities Corp. (Rights)
Inversiones y Representaciones S.A. (GDR)
La Cemento Nacional C.A.
Mardia Chemical Ltd. (Rights)
Melpaper S.A. (Preferred)
The Morgan Stanley Africa Investment
Fund, Inc.
New South Africa Fund, Inc.
P.T. Indonesia Satellite (ADR)
Public Bank BHD 'Foreign' (Singapore)
Soares da Costa S.A. (Baby Shares)
Soares da Costa S.A. (New Shares)
Southern Africa Fund, Inc.
Transnet Ltd., 15% due 10/01/1995
<PAGE>
Deletions
*Associated Cement Co., Ltd. (Rights)
Baltic International USA, Inc. (Warrants)
Bank of Seoul
Centrais Eletricas Brasileiras S.A.--
Eletrobras (Preferred) (Rights)
Cheung Kong Holdings Ltd.
Corporacion Ceramica Carabobo CA--
S.A.C.A. (Class A)
Corporacion Ceramica Carabobo CA--
S.A.C.A. (Class B)
Credit Bank S.A.
*Etba Leasing S.A. (Rights)
Fomento Economico Mexicano,
S.A. de C.V. (FEMSA) (ADR)
Fomento Economico Mexicano,
S.A. de C.V. (FEMSA) (Ordinary)
Grupo Financiero Banamex Accival,
S.A. de C.V.--Banacci
Grupo Sidek, S.A. de C.V.
Grupo Sidek, S.A. de C.V. 'L'
Hindalco Industries Ltd. (Warrants)
Hong Kong Resorts International Ltd.
Leader Universal Holdings BHD
Lenzing AG
Lenzing AG, Convertible Bonds, 5.25% due
12/31/2001
Manila Electric Co. (MERALCO) 'B'
Nine Network Australia Ltd.
Petersburg Long Distance Corp. (ADR)
P.T. Wicaksana Overseas International
Spicers Paper Ltd.
Telefonica de Argentina S.A. (ADR)
Thai Reinsurance Co., Ltd.
Top Form International Ltd.
Venezolana de Cementos S.A.C.A.
(VENCEMOS)
[FN]
*Added and deleted in the same quarter.
<PAGE>
PORTFOLIO INFORMATION
Ten Largest Equity Holdings Percent of
As of December 31, 1994 Net Assets
Sonae Investimentos--SGPS S.A. 3.2%
Jardine Matheson Holdings, Ltd. 2.0
Bangkok Bank, Ltd. 'Foreign' 1.8
Telefonos de Mexico, S.A. de C.V. (ADR) 1.8
Usinas Siderurgicas de Minas Gerais--Usiminas S.A. 1.7
Commerce Asset--Holdings BHD 1.7
Amway Asia Pacific Ltd. 1.6
Maruichi (Malaysia) Steel Tube BHD 1.4
Sime Darby BHD 1.4
Choong Wae Pharmaceutical Corp. 1.2
