MERRILL LYNCH
DEVELOPING
CAPITAL MARKETS
FUND, INC.
FUND LOGO
Semi-Annual Report
December 31, 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, NY 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
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
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
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, 1995
<PAGE>
A map illustrating the following percentages:
Ecuador 0.1%
Panama 0.7%
Venezuela 0.5%
Brazil 10.3%
Portugal 2.3%
Hungary 0.7%
Czech Republic 0.2%
Poland 0.7%
Russia 1.6%
Greece 2.5%
Turkey 3.4%
Pakistan 0.2%
India 4.4%
Thailand 2.0%
China 0.2%
South Korea 10.1%
Taiwan 1.4%
Mexico 7.4%
Peru 0.3%
Chile 1.1%
Argentina 4.5%
Morocco 2.3%
South Africa 8.5%
Israel 1.7%
Zimbabwe 1.2%
Sri Lanka 0.1%
Malaysia 6.2%
Singapore 5.8%
Indonesia 6.0%
Hong Kong 5.7%
Philippines 0.8%
Australia 6.0%
[FN]
*Total may not equal 100%%.
<PAGE>
DEAR SHAREHOLDER
During the six-month period ended December 31, 1995, total returns
for Merrill Lynch Developing Capital Markets Fund, Inc.'s Class A,
Class B, Class C and Class D Shares were +0.55%, -0.03%, 0.00% and
+0.44%, respectively, while the unmanaged Morgan Stanley Capital
International Emerging Markets Free Index declined 1.98%. The Fund's
performance benefited from investments in South Korea and Brazil,
and its underweighting in Malaysia. However, the Fund's
underweighting in South Africa was detrimental to performance.
During the quarter ended December 31, 1995, total returns for the
Fund's Class A, Class B, Class C and Class D Shares were -1.87%,
- -2.10%, -2.15% and -1.91%, respectively. The unmanaged Morgan Stanley
Capital International Emerging Markets Free Index declined 1.35%,
for the same period. (Investment 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.)
Investment Outlook & Activities
During the past six months, we substantially reduced the Fund's cash
position from 18.4% of net assets to 0.4%, and our fixed-income
investments from 6.8% of net assets to 3.5%. While we reduced our
investments in emerging European markets such as Portugal, we
increased equity investments in the other regions which included the
Pacific Basin, the Middle East, Africa and Latin America.
In the Pacific Basin/Asia, our purchases--largely in Australia, Hong
Kong, Malaysia and South Korea--raised the Fund's allocation in this
region from 32.1% of net assets to 48.7%. In Malaysia, where
valuations dropped to more reasonable levels, we bought Telekom
Malaysia BHD, the country's dominant telecommunications utility.
Prospects for the company should improve with the growing trend
toward consolidation in the industry. In Hong Kong, where stocks
should continue to benefit from falling global interest rates, we
added investments in blue chip companies such as banking
multinational HSBC Holdings PLC, the conglomerate Cheung Kong
(Holdings) Ltd., and increased our investments in property
developer, Sun Hung Kai Properties Ltd. Of the Asian markets, Hong
Kong benefited most from the drop in US long-term bond yields and
expectations of further interest rate cuts. In contrast, persistent
worries over economic overheating negatively affected most of the
Southeast Asian markets. The Malaysian budget released in October
1995 disappointed many investors who believed it would not
sufficiently cool down the economy. In Thailand, continued political
uncertainty added to inflation and current account deficit concerns.
Our investment activities in Latin America, largely in Argentina,
Brazil and Mexico, increased the Funds' investments in that region
from 21.4% of net assets to 24.9%. Mexico's devaluation of the peso
on December 20, 1994 sent shock waves throughout Latin America. The
spillover effect into the other Latin American markets, which became
known as the "Tequila Effect," was quick and widespread. While there
was several rallies since then, none was sustained, and confidence
was not restored in the Latin American equity markets. Nonetheless,
during this period of uncertainty governments implemented policies
that were largely market-friendly. For example, in Brazil the
Finance Ministry approved an initial rebalancing of telephone
tariffs and the first inflation adjustment since the implementation
of the Real Plan. This is positive for Telecomunicacoes Brasileiras
S.A. (Telebras), the holding company for 27 telephone operating
subsidiaries, because of its positive impact on earnings. The
elimination of cross-subsidies between different services and
increased local and long-distance rates could potentially result in
a dramatic increase in net income for Telebras.
<PAGE>
We increased investments in Israel, which currently represents 1.7%
of the Fund's net assets. The assassination of Prime Minister
Yitzhak Rabin highlighted the disparity of views in Israel
concerning the country's peace talks with its neighbors, Palestine
and Syria. Under the leadership of former Foreign Minister Shimon
Peres, we believe these talks will continue and may even accelerate.
The Tel Aviv stock exchange was resilient in the days following the
assassination, likely indicating that, in the opinion of investors,
Middle East peace is not dependent on Mr. Rabin's efforts alone. We
anticipate that the potential "peace dividend" has yet to be
reflected in stock prices.
One of our holdings in Israel is Bank Hapoalim Ltd., Israel's
largest bank. The bank has a portfolio of non-banking assets, part
of which it is being required to divest. There is uncertainty over
the company's earnings prospects as a result of the divestiture
because these non-banking assets generate 20% of corporate earnings.
We believe this partial divestiture will benefit stock performance
as it will reveal the value of the remaining assets, and will
generate cash. Bank Hapoalim, which is 77% owned by the government,
is expected to be privatized in the coming term, which should
further increase investor interest.
The Fund's investments in South African equities increased to 8.5%
of net assets. Among the Fund's investments is Western Areas Gold
Mining Company Ltd. Over the past four years, Western Areas
underwent a radical transformation from a loss-making marginal mine
to a "blue chip" South African mine with the largest published ore
reserve figure in the world. Western Areas recently merged with
South Deep Mine, and remains inexpensive on a market capitalization
relative to reserves basis. Now that wage negotiations are concluded
in South Africa, we expect the gold mines to post higher production
levels. We believe the current environment will be more conducive to
changes that should benefit the gold mines and their labor force. In
fact, after a recent visit to some of the South African mines, we
sensed a better mood between labor and management. Both parties
appear to agree that better cooperation and communication, and
improved education and training, will lead to better productivity
and higher gold production.
We expect the valuation gap between South African mines (with gold
reserves valued at $35 per ounce) and many Australian mines (valued
at $85 per ounce) to narrow, potentially resulting in an upward
reevaluation of South African gold mining stocks. We expect Western
Areas and other gold mining shares to benefit from any potential
reevaluation as discussed earlier as well as weakness in the South
African currency.
<PAGE>
In Conclusion
Prospects for emerging markets are positive, but these markets are
volatile and investors should maintain a long-term investment view.
We appreciate your ongoing interest in Merrill Lynch Developing
Capital Markets Fund, Inc., and we look forward to assisting you
with your financial needs.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Grace Pineda)
Grace Pineda
Vice President and Portfolio Manager
February 2, 1996
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.
<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 approximately 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).
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.
<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>
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
1995 13.90 13.18 -- 0.238 - 3.43
------ ------
Total $1.259 Total $2.296
Cumulative total return as of 12/31/95: +83.03%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<PAGE>
<TABLE>
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>
7/1/94--12/31/94 $14.54 $13.86 $0.653 $0.412 + 2.36%
1995 13.86 13.11 -- 0.124 - 4.50
------ ------
Total $0.653 Total $0.536
Cumulative total return as of 12/31/95: - 2.24%**
<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>
Perform<TABLE>ance
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 $16.71 $13.84 $0.653 $0.425 -10.98%
1995 13.84 13.08 -- 0.137 - 4.48
------ ------
Total $0.653 Total $0.562
Cumulative total return as of 12/31/95: -14.97%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<PAGE>
<TABLE>
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>
10/21/94--12/31/94 $16.77 $13.90 $0.653 $0.442 -10.84%
1995 13.90 13.17 -- 0.214 - 3.68
------ ------
Total $0.653 Total $0.656
Cumulative total return as of 12/31/95: -14.12%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
12/31/95 9/30/95 12/31/94 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Developing Capital Markets Fund Class A Shares $13.18 $13.68 $13.90 -5.18% -3.65%
ML Developing Capital Markets Fund Class B Shares 13.11 13.52 13.86 -5.41 -3.03
ML Developing Capital Markets Fund Class C Shares 13.08 13.51 13.84 -5.49 -3.18
ML Developing Capital Markets Fund Class D Shares 13.17 13.65 13.90 -5.25 -3.52
ML Developing Capital Markets Fund Class A Shares--Total Return -3.43(1) -1.87(1)
ML Developing Capital Markets Fund Class B Shares--Total Return -4.50(2) -2.10(2)
ML Developing Capital Markets Fund Class C Shares--Total Return -4.48(3) -2.15(3)
ML Developing Capital Markets Fund Class D Shares--Total Return -3.68(4) -1.91(4)
<PAGE>
<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 $0.238 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.124 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.137 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.214 per share ordinary
income dividends.
</TABLE>
PERFORMANCE DATA (concluded)
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 12/31/95 - 3.43% - 8.50%
Five Years Ended 12/31/95 +12.57 +11.36
Inception (9/1/89) through 12/31/95 +10.01 + 9.08
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 12/31/95 - 4.50% - 8.28%
Inception (7/1/94) to 12/31/95 - 1.50 - 3.31
[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
Class C Shares* Without CDSC With CDSC**
Year Ended 12/31/95 - 4.48% - 5.43%
Inception (10/21/94) to 12/31/95 -12.69 -12.69
[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
Class D Shares* Sales Charge Sales Charge**
Year Ended 12/31/95 - 3.68% - 8.73%
Inception (10/21/94) to 12/31/95 -11.96 -15.85
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (in US Dollars)
<CAPTION>
Value Percent of
AFRICA Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Morocco Banking 150,000 Wafa Bank $ 5,810,251 $ 6,401,897 1.1%
Building Materials 8,000 Les Ciments de l'Oriental 272,020 303,497 0.1
Multi-Industry 161,154 Groupe Omnium Nord Africain 6,606,902 6,285,675 1.1
Total Investments in Morocco 12,689,173 12,991,069 2.3
South Beverage 193,300 South African Breweries Ltd. 4,536,254 7,080,683 1.3
Africa 45,955 South African Breweries Ltd.
(ADR)(a) 976,696 1,683,102 0.3
------------ ------------ ------
5,512,950 8,763,785 1.6
<PAGE>
Mining 571,100 Beatrix Mines Ltd. 4,980,435 5,131,987 0.9
95,000 De Beers Consolidated Mines
Ltd. (ADR)(a) 2,201,328 2,850,000 0.5
518,900 Driefontein Consolidated Ltd.
(ADR)(a) 7,581,381 6,421,388 1.1
620,900 Kinross Mines Ltd. 6,604,999 5,835,046 1.0
9,200 Vaal Reefs Exploration & Mining
Co. Ltd. 682,419 595,747 0.1
32,000 Western Areas Gold Mining
Company Ltd. 464,817 539,992 0.1
183,900 Western Areas Gold Mining
Company Ltd. (ADR)(a) 2,518,063 3,057,338 0.6
------------ ------------ ------
25,033,442 24,431,498 4.3
Multi-Industry 845,634 Malbak Ltd. (GDR)(b) 4,870,860 5,496,621 1.0
. 289,400 The Morgan Stanley Africa
Investment Fund, Inc. 3,357,059 3,726,025 0.6
106,600 New South Africa Fund, Inc. 1,495,194 1,599,000 0.3
90,900 Southern Africa Fund, Inc. 1,331,240 1,488,488 0.3
------------ ------------ ------
11,054,353 12,310,134 2.2
Steel 2,479,706 ++South Africa Iron & Steel
Industrial Corp., Ltd. 2,693,511 2,231,701 0.4
Total Investments in South Africa 44,294,256 47,737,118 8.5
Zimbabwe Beverages 3,829,000 Delta Corporation Ltd. 6,089,752 6,419,387 1.2
& Tobacco
Total Investments in Zimbabwe 6,089,752 6,419,387 1.2
Total Investments in Africa 63,073,181 67,147,574 12.0
EUROPE
Czech Electrical & 9,206 ++Podnik Vypocetni Techniky
Republic Electronics (PVT) (Preferred) 1,903,926 1,035,895 0.2
Total Investments in the
Czech Republic 1,903,926 1,035,895 0.2
Greece Banking 84,650 Ergo Bank (Ordinary) S.A. 3,038,469 3,378,774 0.6
Beverage 93,750 Hellenic Bottling Co. S.A. 1,855,162 3,070,458 0.6
<PAGE>
Food 357,868 Delta Dairy S.A. (Ordinary) 7,142,607 6,729,969 1.2
45,287 Delta Dairy S.A. (Preferred) 1,170,377 669,841 0.1
------------ ------------ ------
8,312,984 7,399,810 1.3
Total Investments in Greece 13,206,615 13,849,042 2.5
Hungary Food 56,807 ++Pick Szeged Reszvenytarsasag
(ADR)(a)(d) 2,947,401 2,117,765 0.4
Health/Personal Care 12,000 Gedeon Richter Ltd.(GDR)(b) 199,500 230,400 0.0
Telecommunications 12,000 ++Magyar TavKozlesi Reszvenytarsasag
(Ordinary) 2,338,938 1,836,286 0.3
Total Investments in Hungary 5,485,839 4,184,451 0.7
Poland Appliances & 89,000 Swarzedzkie Fabryki Mebli S.A. 2,102,193 379,261 0.1
Household
Durables
Automotive 112,400 T.C. Debica 1,567,776 1,696,948 0.3
Banking 243,029 Wielkopolski Bank Kredytowy 1,809,800 503,023 0.1
Electrical & 150,000 Elektrim Towarzystow Handlowe S.A. 1,916,544 508,320 0.1
Electronics
Multi-Industry 385,032 Mostostal-Export S.A. 995,772 757,875 0.1
Total Investments in Poland 8,392,085 3,845,427 0.7
Portugal Construction 224,000 Sociedade de Constracoes
Soares da Costa S.A. 3,742,164 2,548,386 0.4
107,200 ++Sociedade de Empreitadas
Somague S.A. 755,699 559,904 0.1
------------ ------------ ------
4,497,863 3,108,290 0.5
Merchandising 59,800 Estabelecimentos Jeronimo
Martins & Filho S.A. 1,907,117 3,323,557 0.6
Multi-Industry 314,150 Sonae Investimentos-SGPS S.A. 6,802,343 6,729,382 1.2
Total Investments in Portugal 13,207,323 13,161,229 2.3
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US Dollars)
<CAPTION>
EUROPE Value Percent of
(concluded) Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <S> <C> <S> <C> <C> <C>
Russia Foreign DM 13,000,000 Russian Ven Loan $ 2,703,996 $ 3,439,574 0.6%
Government US$ 9,000,000 Russian Ven Loan 2,610,000 3,082,500 0.6
Obligations ------------ ------------ ------
5,313,996 6,522,074 1.2
Multi-Industry 158,700 Templeton Russia Fund, Inc. 2,309,085 2,182,125 0.4
Total Investments in Russia 7,623,081 8,704,199 1.6
Turkey Automotive 5,600,000 Tofas Turk Otomobil Fabrikasi A.S. 1,266,868 546,116 0.1
Beverage 3,928,768 Ege Biracilik Ve Malt Sanayii A.S. 472,057 1,363,705 0.2
Beverage and 796,000 Erciyas Biracilik Ve Malt
Tobacco Sanayii A.S. (GDR)(b) 10,706,200 7,761,000 1.4
Construction 5,630,940 Alarko Holdings A.S. 2,083,732 2,280,298 0.4
Food 8,685,725 Kerevitas Gida Sanayii Ve
Ticaret A.S. 397,272 803,968 0.1
Insurance 11,138,750 ++Aksigorta A.S. 2,227,750 874,530 0.2
Merchandising 7,002,600 Migros Turk A.S. 3,813,901 5,382,164 1.0
Total Investments in Turkey 20,967,780 19,011,781 3.4
Total Investments in Europe 70,786,649 63,792,024 11.4
LATIN
AMERICA
Argentina Banking 37,000 Banco Frances del Rio de la
Plata S.A. (ADR)(a) 1,005,016 994,375 0.2
Energy Sources 25,350 Astra Compania Argentina de
Petroleo S.A. 57,139 46,893 0.0
<PAGE>
Foreign US$ 15,250,000 Republic of Argentina, 6.812%
Government due 3/31/2005 9,718,500 10,865,625 1.9
Obligations
Oil & Related 115,800 Yacimientos Petroliferos Fiscales
S.A. (Sponsored) (ADR)(a) 2,213,085 2,504,175 0.5
Real Estate 31,572 Inversiones y Representaciones S.A.
(GDR)(b) 781,542 805,086 0.1
Telecommuni- 208,700 Telefonica de Argentina S.A.
cations (Class B) 509,721 563,434 0.1
344,800 Telefonica de Argentina S.A.
(Class B) (ADR)(a) 9,576,777 9,395,800 1.7
------------ ------------ ------
10,086,498 9,959,234 1.8
Total Investments in Argentina 23,861,780 25,175,388 4.5
Brazil Appliances & 2,640,000 Brasmotor Group S.A. (Preferred) 572,456 524,359 0.1
Household
Durables
Banking 672,365,239 Banco Bradesco S.A. (Preferred) 4,586,919 5,881,553 1.1
15,721,251 Banco Bradesco S.A. (Preferred)
(Receipts)** 111,785 137,523 0.0
42,567,626 Banco Nacional S.A. (Preferred) 892,993 0 0.0
------------ ------------ ------
5,591,697 6,019,076 1.1
Beverage 13,866,513 ++Companhia Cervejaria Brahma
S.A. PN (Preferred) 3,808,080 5,708,288 1.0
Chemicals 46,963,333 Petroleo Brasileiro S.A. (Preferred) 6,380,127 4,010,998 0.7
Electrical & 17,753,900 ++Light-Servicios de Eletricidade S.A. 6,393,851 5,682,271 1.0
Electronics
Steel 4,756,900,000 Usinas Siderurgicas de Minas
Gerais--Usiminas S.A. (Preferred) 3,918,468 3,867,398 0.7
Telecommuni- 302,000 Telecomunicacoes Brasileiras S.A.--
cations Telebras (ADR)(a) 11,742,526 14,307,250 2.6
58,731,403 Telecomunicacoes Brasileiras S.A.
--Telebras ON 1,935,582 2,272,616 0.4
150,111,413 Telecomunicacoes Brasileiras S.A.
--Telebras PN (Preferred) 6,708,628 7,229,818 1.3
------------ ------------ ------
20,386,736 23,809,684 4.3
<PAGE>
Utilities-- 11,190,400 Centrais Eletricas Brasileiras
Electrical & Gas S.A.--Eletrobras (Preferred) 3,139,385 3,028,790 0.6
216,740 Companhia Energetica de Minas
Gerais S.A.(CEMIG) (ADR)(a)(d) 5,141,012 4,632,818 0.8
------------ ------------ ------
8,280,397 7,661,608 1.4
Total Investments in Brazil 55,331,812 57,283,682 10.3
Chile Apparel 6,800,201 Bata Chile S.A. 1,920,913 1,004,956 0.2
Automotive 36,500 Chilectra Generacion S.A.
(Chilgener) 890,374 912,500 0.2
Broadcasting & 5,072,871 Editorial Lord Cochrane S.A. 2,830,178 1,683,668 0.3
Publishing 1,415,280 Editorial Lord Cochrane S.A.
(Rights)*** 0 0 0.0
------------ ------------ ------
2,830,178 1,683,668 0.3
Telecommuni- 28,000 Compania de Telefonos de Chile
cations S.A. (ADR)(a) 3,037,806 2,320,500 0.4
Total Investments in Chile 8,679,271 5,921,624 1.1
Ecuador Construction 4,825 La Cemento Nacional C.A. (GDR)
(b) (d) 1,449,510 820,250 0.1
Total Investments in Ecuador 1,449,510 820,250 0.1
Mexico Beverage 859,000 Fomento Economico Mexicano,
S.A. de C.V. (Femsa) 'B' 1,993,943 1,927,458 0.4
583,000 Fomento Economico Mexicano, S.A.
de C.V. (Femsa) 'B' (ADR)(a)(d) 1,295,680 1,238,875 0.2
------------ ------------ ------
3,289,623 3,166,333 0.6
Building Materials 1,129,500 Apasco, S.A. de C.V. 4,043,587 4,629,339 0.8
Construction 167,000 Cementos Mexicanos, S.A. de C.V.
(Class B) (ADR) (a) 1,509,987 599,987 0.1
Financial Services 155,250 ++Banca Quadrum, S.A. de C.V.
(ADR)(a) 2,012,895 776,250 0.1
Health & 621,800 Kimberly-Clark de Mexico, S.A.
Personal Care de C.V. 7,578,802 9,387,486 1.7
21,000 Kimberly-Clark de Mexico, S.A.
de C.V. (ADR)(a) 548,375 609,000 0.1
------------ ------------ ------
8,127,177 9,996,486 1.8
<PAGE>
Merchandising 3,227,000 Cifra, S.A. de C.V. 'C' 5,644,060 3,264,669 0.6
Multi-Industry 1,286,787 ++Grupo Carso, S.A. de C.V. 'A' 9,370,220 6,959,665 1.3
348,900 ++Grupo Carso, S.A. de C.V.
(ADR)(a)(d) 4,028,200 3,532,613 0.6
------------ ------------ ------
13,398,420 10,492,278 1.9
Telecommuni- 266,550 Telefonos de Mexico, S.A. de
cations C.V. (ADR)(a) 14,534,412 8,496,281 1.5
Total Investments in Mexico 52,560,161 41,421,623 7.4
</TABLE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US Dollars)
<CAPTION>
LATIN AMERICA Value Percent of
(concluded) Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <S> <C> <S> <C> <C> <C>
Panama Beverage 117,750 Panamerican Beverages, Inc.
(Class A) $ 3,364,454 $ 3,768,000 0.7%
Total Investments in Panama 3,364,454 3,768,000 0.7
Peru Banking 18,765 Credicorp S.A. (c) 94,494 323,696 0.1
Metals & Steel 355,331 ++Southern Peru Copper Corp. S.A. 1,471,094 1,255,565 0.2
110,418 ++Southern Peru Copper Corp. S.A.
(T Shares) 350,031 303,193 0.0
------------ ------------ ------
1,821,125 1,558,758 0.2
Total Investments in Peru 1,915,619 1,882,454 0.3
Venezuela Cement 15,930 Venezolana de Cementos S.A.C.A.
(Vencemos) 28,303 19,712 0.0
Steel 311,472 Siderurgica Venezolana SIVENSA,
S.A.I.C.A.--S.A.C.A. 171,239 100,743 0.0
Textiles 1,023,882 Mantex S.A.C.A. 118,975 88,109 0.0
<PAGE>
Utilities-- 3,772,618 ++C.A. La Electricidad de Caracas
Electrical & Gas S.A.I.C.A.--S.A.C.A. 4,384,809 2,597,173 0.5
Total Investments in Venezuela 4,703,326 2,805,737 0.5
Total Investments in Latin America 151,865,933 139,078,758 24.9
MIDDLE EAST
Israel Banking 963,012 ++Bank Hapoalim Ltd. 1,542,640 1,591,501 0.3
3,843,099 ++Bank Leumi Israel 5,460,273 5,284,506 0.9
------------ ------------ ------
7,002,913 6,876,007 1.2
Merchandising 76,873 ++Blue Square Chain Stores
Properties & Investments Ltd. 438,729 517,735 0.1
Multi-Industry 21,618 ++Koor Industries Ltd. 1,829,649 2,143,385 0.4
Total Investments in Israel 9,271,291 9,537,127 1.7
Pakistan Electrical 1,313,365 ++Karachi Electric Supply Corp. Ltd. 1,121,386 1,017,196 0.2
Components
Total Investments in Pakistan 1,121,386 1,017,196 0.2
Total Investments in the
Middle East 10,392,677 10,554,323 1.9
PACIFIC
BASIN/ASIA
Australia Banking 971,000 National Australia Bank Ltd. 8,569,255 8,736,631 1.5
Entertainment 234,100 Burswood Property Trust Ltd. 284,401 313,338 0.1
Merchandising 325,450 Amway Asia Pacific Ltd. 9,629,634 11,594,156 2.1
Multi-Industry 3,126,000 Pacific Dunlop Ltd. 7,364,301 7,322,155 1.3
Recreation 3,064,971 ++Crown Casino Ltd. 3,903,370 5,697,781 1.0
Total Investments in Australia 29,750,961 33,664,061 6.0
<PAGE>
China Appliances 7,797,167 Shenzhen China Bicycles Co.
& Household (Holdings) Ltd. 'B' 3,066,711 1,280,704 0.2
Durables
Total Investments in China 3,066,711 1,280,704 0.2
Hong Kong Automotive 6,540,000 Sime Darby (Hong Kong) Ltd. 8,406,479 6,301,474 1.1
Banking 160,000 Hang Seng Bank Ltd. (Warrants)(e) 41,839 48,629 0.0
2,184,000 HSBC Holdings PLC (Warrants)(e) 940,652 1,052,535 0.2
6,915,666 JCG Holdings, Ltd. 5,141,460 5,053,481 0.9
------------ ------------ ------
6,123,951 6,154,645 1.1
Conglomerates 3,280,000 Citic Pacific Ltd. (Warrants)(e) 313,931 388,502 0.1
5,280,000 Hutchison Whampoa Ltd. (Warrants)(e) 1,104,396 1,303,156 0.2
1,370,000 Wharf (Holdings) Ltd. (Warrants)(e) 76,602 78,848 0.0
------------ ------------ ------
1,494,929 1,770,506 0.3
Food 23,939,000 C.P. Pokphand Co. Ltd. (Ordinary) 6,782,211 9,597,892 1.7
Property 9,160,000 Cheung Kong (Holdings) Ltd.
(Warrants)(e) 2,171,217 2,547,077 0.5
7,682,000 Henderson Land Development Co.,
Ltd. (Warrants)(e) 1,589,962 1,609,524 0.3
710,000 Sun Hung Kai Properties Ltd.
(Warrants) (e) 3,075,104 3,344,284 0.6
------------ ------------ ------
6,836,283 7,500,885 1.4
Utilities 3,663,000 China Light & Power Co., Ltd.
(Warrants)(e) 334,457 336,359 0.1
2,580,000 Hong Kong & China Gas Co., Ltd.
(Warrants)(e) 98,206 91,762 0.0
1,465,000 Hong Kong Electric Holdings, Ltd.
(Warrants)(e) 83,352 75,789 0.0
------------ ------------ ------
516,015 503,910 0.1
Total Investments in Hong Kong 30,159,868 31,829,312 5.7
<PAGE>
India Banking 586,000 State Bank of India 3,281,019 3,188,407 0.6
Broadcasting 180,600 ++Videocon International Ltd.
& Publishing (GDR)(b) 1,575,271 487,620 0.1
<PAGE>
Building Materials 3,770 The Associated Cement Co. Ltd. 400,888 298,168 0.1
Chemicals 62,300 Mardia Chemical Ltd. 270,844 89,506 0.0
Energy Sources 661,000 ++Bombay Suburban Electric
Supply Co. Ltd. 3,596,013 2,576,302 0.5
333,000 Cochin Refinery Ltd. 2,604,742 1,373,684 0.2
------------ ------------ ------
6,200,755 3,949,986 0.7
Financial Services 44,570 ++Housing Development Finance Corp. 3,409,195 3,442,605 0.6
2,111,000 Industrial Credit & Investment
Corporation of India Ltd. 8,138,060 4,774,523 0.9
------------ ------------ ------
11,547,255 8,217,128 1.5
Recreation & 580,000 ++Suraj Diamonds Ltd. 1,522,715 792,034 0.1
Consumer Goods
Textiles 92,600 ++Grasim Industries Ltd. 1,733,158 1,417,320 0.3
335,000 ++JCT Ltd. 581,358 209,673 0.0
103,900 Raymond Woolen Mills Ltd. 758,747 809,917 0.1
374,100 Reliance Industries Ltd. 3,127,997 2,203,092 0.4
------------ ------------ ------
6,201,260 4,640,002 0.8
Utilities-- 667,500 ++Kec International Ltd. 5,050,805 1,917,994 0.3
Electric & Gas 333,750 ++Kec International Ltd. (Bonus Shares) 0 958,997 0.2
------------ ------------ ------
5,050,805 2,876,991 0.5
Total Investments in India 36,050,812 24,539,842 4.4
</TABLE>
<TABLE>
CONSOLIDATED 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> <S> <C> <S> <C> <C> <C>
Indonesia Banking 2,790,500 ++P.T. Bank Bali $ 7,645,923 $ 5,497,920 1.0%
Broadcasting US$ 4,245,000 ++P.T. Surya Citra Television, 4%
& Publishing due 7/01/1997 (Convertible)(d) 4,411,585 4,245,849 0.8
Building 3,400,000 ++P.T. Mulia Industrindo 7,233,704 9,601,576 1.7
Materials
<PAGE>
Energy 5,197,000 ++P.T. Kabelmetal Indonesia 8,139,759 4,266,364 0.8
Equipment & 1,684,200 ++P.T. Supreme Cable Manufacturing
Services Corp. (Sucaco) 5,008,807 2,507,128 0.4
------------ ------------ ------
13,148,566 6,773,492 1.2
<PAGE>
Telecommuni- 147,420 P.T. Indonesian Satellite Corp.
cations (ADR)(a) 5,600,335 5,380,830 1.0
Mining--Tin 139,700 ++P.T. Tambang Timah (GDR)(b)(d) 1,778,381 1,624,711 0.3
Total Investments in Indonesia 39,818,494 33,124,378 6.0
Malaysia Banking 654,000 Malayan Banking BHD 5,389,660 5,513,335 1.0
Broadcasting & 1,566,000 New Straits Times Press BHD 6,103,192 5,243,648 0.9
Publishing 1,950,000 Sistem Televisyen Malaysia BHD 5,747,770 7,028,757 1.2
------------ ------------ ------
11,850,962 12,272,405 2.1
Steel 2,812,000 Maruichi (Malaysia) Steel Tube BHD 6,830,151 10,468,150 1.9
Telecommuni- 690,000 Telekom Malaysia BHD 5,039,383 5,381,918 1.0
cations
Utilities 250,000 Tenaga Nasional BHD 991,985 984,834 0.2
Total Investments in Malaysia 30,102,141 34,620,642 6.2
Philippines Banking US$ 4,000,000 Metropolitan Bank and Trust
Company, 2.75% due 9/10/2000
(Convertible)(d) 4,000,000 4,290,000 0.8
Total Investments in the Philippines 4,000,000 4,290,000 0.8
Singapore Automobiles 520,000 Cycle & Carriage Ltd. 5,117,680 5,185,290 0.9
Banking 420,000 Development Bank of Singapore Ltd. 5,026,576 5,227,723 1.0
Broadcasting 507,000 Singapore Press Holdings Ltd. 7,554,596 8,963,932 1.6
& Publishing
Real Estate 765,000 ++City Developments Ltd. 5,090,971 5,572,489 1.0
Shipping 943,000 Jurong Shipyard Ltd. 7,453,030 7,269,236 1.3
<PAGE>
Total Investments in Singapore 30,242,853 32,218,670 5.8
<PAGE>
South Korea Automotive 64,916 ++Dong Ah Tire Industries 3,636,388 4,786,896 0.9
Food 29,390 Lotte Confectionery Corp. 3,401,600 3,409,952 0.6
Telecommuni- 26,007 Korea Mobile Telecommunications
cations Corp. 16,122,160 28,537,628 5.1
187,290 Korea Mobile Telecommunications
Corp. (GDR)(b) 6,339,329 8,006,647 1.4
------------ ------------ ------
22,461,489 36,544,275 6.5
Utilities-- 273,470 Korea Electric Power Corp. 10,599,661 11,835,677 2.1
Electrical
& Gas
Total Investments in South Korea 40,099,138 56,576,800 10.1
Sri Lanka Appliances 262,500 Lankan Tiles 337,398 196,225 0.0
& Household
Durables
Leisure & Tourism 90,625 Aitken Spence 518,247 316,705 0.1
Total Investments in Sri Lanka 855,645 512,930 0.1
Taiwan Electrical & 275,000 ++Advanced Semiconductor
Electronics Engineering, Inc. (GDR)(b) 4,193,750 3,636,875 0.6
Multi-Industry 213,800 Taiwan Fund, Inc. 4,527,279 4,382,900 0.8
Total Investments in Taiwan 8,721,029 8,019,775 1.4
Thailand Banking 634,000 Thai Farmers Bank, Ltd. 5,977,718 6,395,393 1.1
Financial Services 805,000 Finance One Public Company Ltd.,
'Foreign' 5,402,491 5,083,201 0.9
Total Investments in Thailand 11,380,209 11,478,594 2.0
Total Investments in the Pacific
Basin/Asia 264,247,861 272,155,708 48.7
<PAGE>
<PAGE>
SHORT-TERM Face
SECURITIES Amount
Commercial US$ 1,985,000 General Electric Capital Corp.,
Paper* 5.90% due 1/02/1996 1,984,024 1,984,024 0.4
Total Investments in Short-Term
Securities 1,984,024 1,984,024 0.4
Total Investments $562,350,325 554,712,411 99.3
============
Other Assets Less Liabilities 3,891,974 0.7
------------ ------
Net Assets $558,604,385 100.0%
============ ======
<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.
**The receipts may be exchanged for shares until approximately
2/27/96.
***The rights may be exercised until 1/16/96.
++Non-income producing security.
(a)American Depositary Receipts (ADR).
(b)Global Depositary Receipts (GDR).
(c)Formerly known as Banco de Credito de Peru S.A.
(d)Restricted securities as to resale. The value of the Fund's
investment in restricted securities was approximately $22,503,000,
representing 4.03% of net assets.
<CAPTION>
Acquisition Value
Issue Date(s) Cost (Note 1a)
<S> <C> <C> <C>
Companhia Energetica de Minas
Gerais S.A. (CEMIG) (ADR) 9/22/1994 to 8/01/1995 $ 5,141,012 $ 4,632,818
Fomento Economico Mexicano, S.A.
de C.V. (Femsa) 'B' (ADR) 4/28/1995 to 12/12/1995 1,295,680 1,238,875
Grupo Carso, S.A. de C.V. (ADR) 2/10/1995 to 12/14/1995 4,028,200 3,532,613
La Cemento Nacional C.A. (GDR) 12/27/1994 1,449,510 820,250
Metropolitan Bank and Trust Company,
2.75% due 9/10/2000 (Convertible) 8/01/1995 4,000,000 4,290,000
Pick Szeged Reszvenytarsasag (GDR) 11/20/1992 to 8/11/1994 2,947,401 2,117,765
P.T. Tambang Timah (GDR) 10/06/1995 1,778,381 1,624,711
P.T. Surya Citra Television, 4%
due 7/01/1997 (Convertible) 6/24/1995 4,411,585 4,245,849
<PAGE>
Total Restricted Securities $25,051,769 $22,502,881
=========== ===========
<PAGE>
(e)Warrants entitle the Fund to purchase a predetermined number of
shares of stock at a predetermined price until the expiration date.
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of December 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$562,350,325) (Note 1a) $554,712,411
Foreign cash (Note 1c) 4,311,631
Receivables:
Securities sold $ 6,168,963
Capital shares sold 1,532,951
Dividends 1,488,622
Interest 389,726 9,580,262
------------
Prepaid expenses and other assets (Note 1f) 46,146
------------
Total assets 568,650,450
------------
Liabilities: Payables:
Securities purchased 6,998,008
Capital shares redeemed 1,746,006
Investment adviser (Note 2) 437,235
Distributor (Note 2) 177,604 9,358,853
------------
Accrued expenses and other liabilities 687,212
------------
Total liabilities 10,046,065
------------
<PAGE>
Net Assets: Net assets $558,604,385
============
<PAGE>
Net Assets Class A Shares of Common Stock, $.10 par value, 100,000,000 shares
Consist of: authorized $ 2,322,392
Class B Shares of Common Stock, $.10 par value, 100,000,000 shares
authorized 1,504,313
Class C Shares of Common Stock, $.10 par value, 100,000,000 shares
authorized 194,617
Class D Shares of Common Stock, $.10 par value, 100,000,000 shares
authorized 226,882
Paid-in capital in excess of par 595,688,302
Accumulated investment loss--net (1,170,055)
Accumulated distributions in excess of realized capital losses on
investments and foreign currency transactions--net (17,076,473)
Accumulated realized capital losses on investments and foreign
currency transactions--net (15,307,048)
Unrealized depreciation on investments and foreign currency
transactions--net (7,778,545)
------------
Net assets $558,604,385
============
Net Asset Class A--Based on net assets of $306,031,381 and 23,223,920
Value: shares outstanding $ 13.18
============
Class B--Based on net assets of $197,236,797 and 15,043,134
shares outstanding $ 13.11
============
Class C--Based on net assets of $25,463,546 and 1,946,172
shares outstanding $ 13.08
============
Class D--Based on net assets of $29,872,661 and 2,268,821
shares outstanding $ 13.17
============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended December 31, 1995
<S> <S> <C> <C>
Investment Income Dividends (net of $420,172 foreign withholding tax) $ 6,069,207
(Notes 1d & 1e): Interest and discount earned 2,793,467
------------
Total income 8,862,674
------------
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 2,819,340
Account maintenance and distribution fees--Class B (Note 2) 917,673
Custodian fees 660,514
Transfer agent fees--Class A (Note 2) 360,814
Transfer agent fees--Class B (Note 2) 237,957
Printing and shareholder reports 143,939
Account maintenance and distribution fees--Class C (Note 2) 112,165
Accounting services (Note 2) 75,564
Registration fees (Note 1f) 73,725
Professional fees 51,490
Account maintenance fees--Class D (Note 2) 32,976
Transfer agent fees--Class C (Note 2) 29,665
Transfer agent fees--Class D (Note 2) 27,548
Directors' fees and expenses 19,727
Pricing fees 4,012
Other 37,195
------------
Total expenses 5,604,304
------------
Investment income--net 3,258,370
------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net (19,833,906)
(Loss) on Foreign currency transactions--net 1,040,139 (18,793,767)
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 17,225,021
(Notes 1b, 1c, Foreign currency transactions--net (204,102) 17,020,919
1e & 3): ------------ ------------
Net realized and unrealized loss on investments and foreign
currency transactions (1,772,848)
------------
Net Increase in Net Assets Resulting from Operations $ 1,485,522
============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
December 31, June 30,
Increase (Decrease) in Net Assets: 1995 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 3,258,370 $ 7,620,101
Realized loss on investments and foreign currency
transactions--net (18,793,767) (8,597,447)
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net 17,020,919 (27,448,282)
------------ ------------
Net increase (decrease) in net assets resulting from
operations 1,485,522 (28,425,628)
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (5,561,685) (987,487)
Shareholders Class B (1,835,761) --
(Note 1g): Class C (257,907) (5,936)
Class D (462,153) (15,439)
Realized gain on investments--net:
Class A -- (16,617,087)
Class B -- (4,736,505)
Class C -- (268,632)
Class D -- (301,893)
In excess of realized gain on investments--net:
Class A -- (12,942,881)
Class B -- (3,689,216)
Class C -- (209,235)
Class D -- (235,141)
------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (8,117,506) (40,009,452)
------------ ------------
Capital Share Net increase in net assets derived from capital
Transactions share transactions 11,909,214 219,766,488
(Note 4): ------------ ------------
Net Assets: Total increase in net assets 5,277,230 151,331,408
Beginning of period 553,327,155 401,995,747
------------ ------------
End of period* $558,604,385 $553,327,155
============ ============
<FN>
*Undistributed (accumulated) investment income
(loss)--net $ (1,170,055) $ 3,689,081
============ ============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have Class A
been derived from information provided in the
financial statements. For the Six
Months Ended For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: Dec. 31, 1995++ 1995 1994 1993++ 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.35 $ 14.61 $ 11.62 $ 11.92 $ 10.43
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .10 .24 .11 .12 .15
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.03) (.40) 3.23 .42 1.59
-------- -------- -------- -------- --------
Total from investment operations .07 (.16) 3.34 .54 1.74
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.24) (.04) (.07) (.14) (.17)
Realized gain on investments--net -- (.60) (.28) (.70) (.08)
In excess of realized gain on
investments--net -- (.46) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.24) (1.10) (.35) (.84) (.25)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.18 $ 13.35 $ 14.61 $ 11.62 $ 11.92
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 0.55%+++ (1.67%) 28.73% 5.17% 17.02%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.60%* 1.62% 1.46% 1.71% 1.64%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net 1.56%* 1.56% .63% (.04%) 1.73%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $306,031 $350,081 $401,996 $142,285 $126,417
Data: ======== ======== ======== ======== ========
Portfolio turnover 23.40% 63.37% 66.85% 91.72% 71.05%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Based on average shares outstanding during the period.
+++Aggregate total investment return.
<PAGE>
<PAGE>
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class B Class C Class D
The following per share data and
ratios have been derived from For For the For For the For For the
information provided in the the Six Period the Six Period the Six Period
financial statements. Months July 1, Months Oct. 21, Months Oct. 21,
Ended 1994++++ Ended 1994++++ Ended 1994++++
Increase (Decrease) in Dec. 31, to June 30, Dec. 31, to June 30, Dec. 31, to June 30,
Net Asset Value: 1995++ 1995 1995++ 1995 1995++ 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of
Operating period $ 13.24 $ 14.54 $ 13.22 $ 16.71 $ 13.33 $ 16.77
Performance: -------- -------- -------- -------- -------- --------
Investment income--net .03 .08 .03 .08 .08 .13
Realized and unrealized loss
on investments and foreign
currency transactions--net (.04) (.32) (.03) (2.50) (.03) (2.48)
-------- -------- -------- -------- -------- --------
Total from investment
operations (.01) (.24) -- (2.42) .05 (2.35)
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.12) -- (.14) (.01) (.21) (.03)
Realized gain on invest-
ments--net -- (.60) -- (.60) -- (.60)
In excess of realized gain on
investments--net -- (.46) -- (.46) -- (.46)
-------- -------- -------- -------- -------- --------
Total dividends and dis-
tributions (.12) (1.06) (.14) (1.07) (.21) (1.09)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 13.11 $ 13.24 $ 13.08 $ 13.22 $ 13.17 $ 13.33
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value
Return:** per share (0.03%)+++ (2.22%)+++ 0.00%+++ (14.97%)+++ 0.44%+++ (14.49%)+++
======== ======== ======== ======== ======== ========
<PAGE>
<PAGE>
Ratios to Expenses, excluding account
Average maintenance and distribution
Net Assets: fees 1.63%* 1.79%* 1.63%* 1.96%* 1.58%* 1.94%*
======== ======== ======== ======== ======== ========
Expenses 2.63%* 2.79%* 2.63%* 2.96%* 1.83%* 2.19%*
======== ======== ======== ======== ======== ========
Investment income--net .49%* 1.01%* 0.47%* 1.32%* 1.28%* 2.10%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $197,237 $162,774 $ 25,463 $ 18,573 $ 29,873 $ 21,899
======== ======== ======== ======== ======== ========
Portfolio turnover 23.40% 63.37% 23.40% 63.37% 23.40% 63.37%
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Based on average shares outstanding during the period.
++++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Consolidated Financial Statements.
</TABLE>
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
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, liquidation
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:
<PAGE>
(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. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. 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 which are traded both in the over-the-
counter market and on a stock exchange are valued according to the
broadest and most representative market. Options written 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 are valued at the last sale price in
the case of exchange-traded or, in the case of options traded in the
over-the-counter market, the last bid price. Short-term securities
are valued at amortized cost, which approximates market value. Other
investments, including futures contracts and related options, are
stated at market value. Securities and assets for which market value
quotations are not available are valued at their fair value as
determined in good faith by or under the direction of the Fund's
Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio 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 counterparty 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 purchase
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.
<PAGE>
* Options--The Fund is authorized to write covered call options and
purchase 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 market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. 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.
(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.
<PAGE>
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment 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
transactions 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. Distributions in
excess of realized capital gains are due primarily to differing tax
treatments for futures transactions and post-October losses.
(h) Basis of consolidation--The accompanying consolidated financial
statements include the accounts of Inversiones en Marcado Accionario
de Valores Chile Limitada., a wholly-owned subsidiary, which
primarily invests in Chilean securities. Inter-company accounts and
transactions have been eliminated.
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. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
<PAGE>
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.
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.
For the six months ended December 31, 1995, MLFD earned underwriting
discounts and commissions 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 $ 8,872 $128,368
Class D $13,666 $196,983
<PAGE>
For the six months ended December 31, 1995, MLPF&S received
contingent deferred sales charges of $205,051 and $11,047 relating
to transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $60,427 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended December 31, 1995.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), 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, MLFDS, MLFD, MLPF&S, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended December 31, 1995 were $224,276,483 and
$119,949,376, respectively.
Net realized and unrealized gains (losses) as of December 31, 1995
were as follows:
Realized
Gains Unrealized
(Losses) Losses
Long-term investments $(19,383,112) $ (7,637,914)
Short-term investments (450,794) --
Foreign currency transactions 1,040,139 (140,631)
------------ ------------
Total $(18,793,767) $ (7,778,545)
============ ============
As of December 31, 1995, net unrealized depreciation for Federal
income tax purposes aggregated $7,637,914, of which $61,961,224
related to appreciated securities and $69,599,138 related to
depreciate securities. The aggregate cost of investments at December
31, 1995 for Federal income tax purposes was $562,350,325.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $11,909,214 and $219,766,488 for the six months ended December
31, 1995 and the year ended June 30, 1995, respectively.
Transactions in capital shares for each class were as follows:
<PAGE>
Class A Shares for the
Six Months Ended Dollar
December 31, 1995 Shares Amount
Shares sold 1,197,700 $ 16,102,135
Shares issued to shareholders
in reinvestment of dividends 372,866 4,809,974
----------- ------------
Total issued 1,570,566 20,912,109
Shares redeemed (4,571,820) (60,917,803)
----------- ------------
Net decrease (3,001,254) $(40,005,694)
=========== ============
Class A Shares for the Year Dollar
Ended June 30, 1995 Shares Amount
Shares sold 5,308,700 $ 81,203,014
Shares issued to shareholders
in reinvestment of dividends &
distributions 1,836,555 26,556,587
----------- ------------
Total issued 7,145,255 107,759,601
Shares redeemed (8,433,943) (120,621,522)
----------- ------------
Net decrease (1,288,688) $(12,861,921)
=========== ============
Class B Shares for the
Six Months Ended Dollar
December 31, 1995 Shares Amount
Shares sold 5,552,983 $ 73,705,277
Shares issued to shareholders
in reinvestment of dividends 128,947 1,655,685
----------- ------------
Total issued 5,681,930 75,360,962
Shares redeemed (2,888,329) (38,368,152)
Automatic conversion of shares (48,448) (642,616)
----------- ------------
Net increase 2,745,153 $ 36,350,194
=========== ============
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded)
Class B Shares for the Period Dollar
July 1, 1994++ to June 30, 1995 Shares Amount
Shares sold 14,365,857 $217,255,334
Shares issued to shareholders
in reinvestment of distributions 530,932 7,656,040
----------- ------------
Total issued. 14,896,789 224,911,374
Shares redeemed (2,458,974) (33,445,698)
Automatic conversion of shares (139,834) (2,000,726)
----------- ------------
Net increase 12,297,981 $189,464,950
=========== ============
[FN]
++Commencement of Operations.
Class C Shares for the Six Dollar
Months Ended December 31, 1995 Shares Amount
Shares sold 845,288 $ 11,218,421
Shares issued to shareholders
in reinvestment of dividends 18,269 234,019
----------- ------------
Total issued. 863,557 11,452,440
Shares redeemed (322,020) (4,285,113)
----------- ------------
Net increase 541,537 $ 7,167,327
=========== ============
Class C Shares for the Period Dollar
October 21, 1994++ to June 30, 1995 Shares Amount
Shares sold 1,551,655 $ 21,809,222
Shares issued to shareholders
in reinvestment of dividends &
distributions 31,002 446,738
----------- ------------
Total issued. 1,582,657 22,255,960
Shares redeemed (178,022) (2,376,474)
----------- ------------
Net increase 1,404,635 $ 19,879,486
=========== ============
<PAGE>
[FN]
++Commencement of Operations.
Class D Shares for the Six Dollar
Months Ended December 31, 1995 Shares Amount
Shares sold 1,152,095 $ 15,317,963
Automatic conversion of shares 48,010 642,616
Shares issued to shareholders
in reinvestment of dividends 31,584 407,120
----------- ------------
Total issued. 1,231,689 16,367,699
Shares redeemed (605,664) (7,970,312)
----------- ------------
Net increase 626,025 $ 8,397,387
=========== ============
Class D Shares for the Period Dollar
October 21, 1994++ to June 30, 1995 Shares Amount
Shares sold 2,389,119 $ 33,003,605
Automatic conversion of shares 139,223 2,000,726
Shares issued to shareholders
in reinvestment of dividends &
distributions 36,193 523,355
----------- ------------
Total issued. 2,564,535 35,527,686
Shares redeemed (921,739) (12,243,713)
----------- ------------
Net increase 1,642,796 $ 23,283,973
=========== ============
[FN]
++Commencement of Operations.
5. Commitments:
At December 31, 1995, the Fund entered into foreign exchange
contracts under which it had agreed to purchase and sell various
foreign currencies with approximate values of $3,744,000 and
$1,319,000, respectively.
<PAGE>
EQUITY PORTFOLIO CHANGES
For the Quarter Ended December 31, 1995
Additions
Banco Bradesco S.A. (Preferred) (Receipts)
Banco Frances del Rio de la Plata S.A. (ADR)
*Canadian National Railway System Co.
Cheung Kong (Holdings) Ltd. (Warrants)
Chilectra Generacion S.A. (Chilgener)
(ADR)
China Light & Power Co., Ltd. (Warrants)
Citic Pacific Ltd. (Warrants)
Editorial Lord Cochrane S.A. (Rights)
Finance One Public Company, Ltd., 'Foreign'
HSBC Holdings PLC (Warrants)
Hang Seng Bank Ltd. (Warrants)
Henderson Land Development Co., Ltd.
(Warrants)
Hong Kong & China Gas Co., Ltd. (Warrants)
Hong Kong Electric Holdings, Ltd. (Warrants)
Hutchison Whampoa Ltd. (Warrants)
JCG Holdings, Ltd.
Kimberley-Clark de Mexico, S.A.
de C.V. (ADR)
Malayan Banking BHD
P.T. Tambang Timah (GDR)
Siderurgica Venezolana SIVENSA,
S.A.I.C.A.-S.A.C.A.
Sun Hung Kai Properties Ltd. (Warrants)
Telekom Malaysia BHD
Tenaga Nasional BHD
Thai Farmers Bank, Ltd.
Venezolana de Cementos S.A.C.A. (Vencemos)
Wharf (Holdings) Ltd. (Warrants)
<PAGE>
Deletions
*Canadian National Railway System Co.
Compania Interamericana de
Automoviles S.A. (CINA)
Empresa Fabril de Maguinas Electricas S.A.
(EFACEC)
FOTEX RT--Fotex Elso Amerikai-Magyar
Fotoszolgaltatasi Reszvenytarsasag
Grupo Empresarial Fenix, S.A. de C.V.
(ELEKTRA) 'L' Shares
Grupo Herdez, S.A. de C.V. 'A'
Hocheng Group Corp. (ADR)
International Fast Food Corp.
Komercni Banka
Mesbla S.A. (Preferred)
Pharmauti Gyogyszer es Elelmiszeripari
Reszvenytarsasag (ADR)
Pilipino Telephone Corp.
Sun Hung Kai Properties Ltd.
Winton Holdings Ltd.
Zaklady Piwowarskie w Zywcu S.A. (Zywiec)
[FN]
*Added and deleted in the same quarter.
PORTFOLIO INFORMATION
Ten Largest Equity Holdings Percent of
As of December 31, 1995 Net Assets
Korea Mobile Telecommunications Corp. 5.1%
Telecomunicacoes Brasileiras S.A.--Telebras* 4.3
Korea Electric Power Corp. 2.1
Amway Asia Pacific Ltd. 2.1
Maruichi (Malaysia) Steel Tube BHD 1.9
P.T. Mulia Industrindo 1.7
C.P. Pokphand Co. Ltd. (Ordinary) 1.7
Telefonica de Argentina S.A. (Class B) (ADR) 1.7
Kimberly-Clark de Mexico, S.A. de C.V. 1.7
Singapore Press Holdings Ltd. 1.6
[FN]
*Includes combined holdings.
