MERRILL LYNCH
DEVELOPING
CAPITAL MARKETS
FUND, INC.
FUND LOGO
Quarterly Report
September 30, 1996
Investing in emerging market securities involves a number of risk
factors and special considerations, including restrictions on
foreign investments and on repatriation of capital invested in
emerging markets, currency fluctuations, and potential price
volatility and less liquidity of securities traded in emerging
markets. In addition, there may be less publicly available
information about the issuers of securities, and such issuers may
not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those to which US companies
are subject. Therefore, the Fund is designed as a long-term
investment for investors capable of assuming the risks of investing
in emerging markets. The Fund should be considered as a vehicle for
diversification and not as a complete investment program. Please
refer to the prospectus for details.
<PAGE>
This report is not authorized for use as an offer of sale or
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
Printed on post-consumer recycled paper
MERRILL LYNCH DEVELOPING CAPITAL MARKETS FUND, INC.
Asset Allocation
As a Percentage* of
Net Assets as of
September 30, 1996
Map Depicting the Fund's Asset Allocation As a Percentage* of
Net Assets as of September 30, 1996
<PAGE>
Venezuela 0.7%
Brazil 12.5%
Portugal 1.6%
France 2.7%
Hungary 1.9%
Poland 2.1%
Russia 1.2%
Greece 1.8%
Turkey 2.0%
Pakistan 0.3%
India 5.7%
Thailand 7.2%
China 0.1%
South Korea 3.1%
Mexico 11.1%
Chile 0.4%
Argentina 7.8%
Morocco 1.0%
Italy 1.1%
Egypt 1.0%
South Africa 5.6%
Zimbabwe 1.3%
Israel 1.8%
Malaysia 11.4%
Indonesia 3.3%
Hong Kong 8.4%
Australia 1.0%
[FN]
*Total may not equal 100%.
DEAR SHAREHOLDER
For the three-month period ended September 30, 1996, total returns
for Merrill Lynch Developing Capital Markets Fund, Inc.'s Class A,
Class B, Class C and Class D Shares were -2.19%, -2.48%, -2.49% and
- -2.26%, respectively. For the same period, the unmanaged Morgan
Stanley Emerging Markets Free Index declined 3.62%. (Complete
performance information, including average annual total returns, can
be found on pages 3-5 of this report to shareholders.) The Fund's
performance benefited from its underweighted positions in the
Philippines, Thailand and South Africa, whose markets declined
4.29%, 12.92% and 5.99%, respectively. Also helping performance was
the Fund's overweighted position in Poland, whose market had a total
return of +7.92% for the September quarter. Negatively impacting
performance were the Fund's overweighted positions in India and
Turkey, whose markets fell 17.34% and 8.16%, respectively, during
the three months ended September 30, 1996.
<PAGE>
Investment Outlook & Activities
During the September quarter, we slightly decreased the Fund's cash
position from 4.4% of net assets to 3.5%. We substantially added to
the Fund's fixed-income investments, which increased from 0.6% of
net assets at June 30, 1996 to 5.6% as of September 30, 1996. We
also increased the Fund's investments in Europe to 14.4% of net
assets from 13.6%, in Latin America from 28.7% of net assets to
32.5%, and in the Middle East/Africa region from 10.6% of net assets
to 10.7% at September 30, 1996. We slightly reduced the Fund's
investments in the Pacific region from 41.6% of net assets to 40.5%.
In emerging European markets, we increased our investments in Poland
and Russia. We added to our holdings in the banking sector in Poland
in response to good economic performance and corporate earnings
growth, the possibility of interest rate declines, and low stock
valuations. In Russia, there are reasons to be concerned about
President Yeltsin's health, and a possible power struggle in the
event of his incapacitation. However, we expect the nervousness
reflected in the currency, the ruble, and in interest rates to be
offset in the coming weeks by investor optimism concerning favorable
capital market developments. Among the developments we anticipate
are the issuance of a credit rating for government debt, the
issuance of a benchmark bond issue, and the resumption of major
privatizations. The most important of these is the international
offering of Rao Gazprom. Rao Gazprom owns 22% of the world's natural
gas reserves and is considered to be one of the "crown jewels" of
Russia. The privatization of Rao Gazprom is a clear indication of
Russia's continuous effort to develop a free-market economy.
In the Latin American region, we added to our investments in Mexico.
We expect good earnings results from companies such as Apasco, S.A.
de C.V. Apasco is the second-largest cement producer in Mexico. Last
year, the company reduced its fixed expenses substantially. With a
lower cost base and improved sales volumes and pricing going
forward, Apasco should be able to realize attractive earnings
leverage. In the political sphere, there have been concerns
pertaining to confrontations between armed rebel groups and
government troops in Oaxaca and Guerero. However, we do not expect
these events to have a prolonged impact on the equity market. They
should not deter the flow of investment to the country, break the
momentum of economic recovery, or discourage the government's
commitment to monetary and fiscal discipline.
We increased our investments in Hong Kong, Malaysia and Thailand,
while taking profits in South Korea. We believe that stock market
performance in Asia this year is reflecting investors' more sober
appraisals of the economic and stock market fundamentals of the
region. We had long been concerned about the region's slowdown of
economic growth and the high valuations of stocks as we made
investments across the region. However, in the current environment
it has become easier for us to find attractive equity values. For
example, China Overseas Land is a quality land developer backed by
the Chinese government that is trading at a significant discount to
the market.
<PAGE>
We maintained the Fund's position in South Africa during the
September quarter. We believe that a lot of the negatives have
already been discounted in the South African market. Many domestic
and international strategists are negative or cautious on the
country. With a long-term horizon, stock valuations of well-managed
companies are reasonable. Anglo American Corporation of South
Africa, Ltd. is South Africa's largest conglomerate with its primary
focus on the natural resources businesses. The company also has
other interests in basic industrial businesses and financial
services.
In Conclusion
We are optimistic on the long-term prospects for stocks in the
emerging markets. However, we remind our shareholders that the
emerging markets are more volatile than the securities markets of
more developed countries.
We appreciate your ongoing interest in Merrill Lynch Developing
Capital Markets Fund, Inc., and we look forward to reviewing our
outlook and strategy with you in our upcoming semi-annual report to
shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Grace Pineda)
Grace Pineda
Vice President and Portfolio Manager
<PAGE>
October 22, 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.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 8 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. 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.
PERFORMANCE DATA (concluded)
Average Annual
Total Return
<PAGE>
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 9/30/96 + 9.59% + 3.84%
Five Years Ended 9/30/96 +11.39 +10.19
Inception (9/1/89) through 9/30/96 +10.63 + 9.79
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 9/30/96 +8.51% +4.51%
Inception (7/1/94) to 9/30/96 +3.63 +2.77
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 9/30/96 +8.48% +7.48%
Inception (10/21/94) to 9/30/96 -2.99 -2.99
[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 9/30/96 +9.33% +3.59%
Inception (10/21/94) to 9/30/96 -2.22 -4.89
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
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
1/1/96--9/30/96 13.18 14.72 -- -- +11.68
------ ------
Total $1.259 Total $2.296
Cumulative total return as of 9/30/96: +104.42%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<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
1/1/96--9/30/96 13.11 14.53 -- -- +10.83
------ ------
Total $0.653 Total $0.536
Cumulative total return as of 9/30/96: +8.35%**
<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 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
1/1/96--9/30/96 13.08 14.50 -- -- +10.86
------ ------
Total $0.653 Total $0.562
Cumulative total return as of 9/30/96: -5.74%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<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
1/1/96--9/30/96 13.17 14.68 -- -- +11.47
------ ------
Total $0.653 Total $0.656
Cumulative total return as of 9/30/96: -4.27%**
<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>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
9/30/96 6/30/96 9/30/95 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Developing Capital Markets Fund Class A Shares $14.72 $15.05 $13.68 +7.60% -2.19%
ML Developing Capital Markets Fund Class B Shares 14.53 14.90 13.52 +7.47 -2.48
ML Developing Capital Markets Fund Class C Shares 14.50 14.87 13.51 +7.33 -2.49
ML Developing Capital Markets Fund Class D Shares 14.68 15.02 13.65 +7.55 -2.26
ML Developing Capital Markets Fund Class A Shares--Total Return +9.59(1) -2.19
ML Developing Capital Markets Fund Class B Shares--Total Return +8.51(2) -2.48
ML Developing Capital Markets Fund Class C Shares--Total Return +8.48(3) -2.49
ML Developing Capital Markets Fund Class D Shares--Total Return +9.33(4) -2.26
<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>
<TABLE>
SCHEDULE OF INVESTMENTS (in US Dollars)
<CAPTION>
Shares Held/ Percent of
AFRICA Industries Face Amount Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Morocco Banking 130,000 Wafa Bank $ 5,035,551 $ 7,500,286 1.0%
Total Investments in Morocco 5,035,551 7,500,286 1.0
South Beverage 234,813 South African Breweries Ltd. 5,728,608 6,267,205 0.9
Africa 58,010 South African Breweries Ltd.
(ADR)(a) 1,332,782 1,711,295 0.2
------------ ------------ ------
7,061,390 7,978,500 1.1
<PAGE>
Entertainment 2,054,900 Sun International, Ltd. 2,874,458 2,175,696 0.3
Financial Services 24,000 Anglo American Corporation of
South Africa, Ltd.(ADR)(a) 1,481,426 1,464,000 0.2
884,200 First National Bank Holdings Ltd. 8,540,288 5,275,749 0.7
------------ ------------ ------
10,021,714 6,739,749 0.9
Mining 369,100 Beatrix Mines Ltd. 3,247,494 2,564,608 0.3
107,900 De Beers Centenary AG 3,362,087 3,355,884 0.5
95,000 De Beers Consolidated Mines Ltd.
(ADR)(a) 2,201,328 2,933,125 0.4
518,900 Driefontein Consolidated Ltd.
(ADR)(a) 7,581,381 5,578,175 0.7
362,900 Kinross Mines Ltd. 3,840,151 2,985,810 0.4
43,243 Vaal Reefs Exploration & Mining
Co. Ltd. 3,935,763 3,529,262 0.5
32,317 Western Areas Gold Mining
Company Ltd. 469,861 509,687 0.1
186,806 Western Areas Gold Mining
Company Ltd. (ADR)(a) 2,518,063 2,965,549 0.4
------------ ------------ ------
27,156,128 24,422,100 3.3
Multi-Industry 100,634 Malbak Ltd. (GDR)(b) 587,110 377,378 0.0
Steel 2,768 South Africa Iron & Steel
Industrial Corp., Ltd. 2,483 1,826 0.0
Total Investments in South Africa 47,703,283 41,695,249 5.6
Zimbabwe Beverage & Tobacco 3,057,470 Delta Corporation Ltd. 4,930,120 9,323,360 1.3
Total Investments in Zimbabwe 4,930,120 9,323,360 1.3
Total Investments in Africa 57,668,954 58,518,895 7.9
EUROPE
France Merchandising 12,150 Carrefour S.A. (Ordinary) 5,924,651 6,824,811 0.9
Utilities--Water 120,500 Compagnie Generale des Eaux S.A. 12,943,162 13,098,334 1.8
Total Investments in France 18,867,813 19,923,145 2.7
Greece Banking 136,655 Ergo Bank S.A. (Ordinary) 6,296,114 7,882,416 1.1
Beverage 122,660 Hellenic Bottling Co. S.A. 2,854,032 4,173,840 0.5
<PAGE>
Telecommunications 88,000 Hellenic Telecommunication
Organization S.A. 1,457,617 1,480,787 0.2
Total Investments in Greece 10,607,763 13,537,043 1.8
Hungary Health/Personal Care 67,580 Gedeon Richter Ltd. (GDR)(b) 2,068,280 3,547,950 0.5
73,700 Gedeon Richter Ltd. (GDR)(b) 2,433,751 3,869,250 0.5
------------ ------------ ------
4,502,031 7,417,200 1.0
Oil & Related 76,000 Mol Magyar Olay-es Gazipari
Reszvenytarsasag (GDR)(b) 807,500 733,400 0.1
419,000 Mol Magyar Olay-es Gazipari
Reszvenytarsasag (GDR)(b) 4,733,895 4,043,350 0.6
------------ ------------ ------
5,541,395 4,776,750 0.7
Telecommunications 12,000 Magyar TavKozlesi
Reszvenytarsasag (Ordinary) 2,338,938 1,705,096 0.2
Total Investments in Hungary 12,382,364 13,899,046 1.9
Italy Broadcast--Media 1,627,000 Mediaset S.p.A. 7,628,004 8,074,044 1.1
Total Investments in Italy 7,628,004 8,074,044 1.1
Poland Automotive 309,611 T.C. Debica 5,492,554 6,619,627 0.9
Banking 186,017 Wielkopolski Bank Kredytowy S.A. 1,047,602 1,285,939 0.2
Electrical & 238,000 Elektrim Towarzystow Handlowe S.A. 2,442,163 2,332,252 0.3
Electronics
Financial Services 132,880 Bank Rozwoju Eksportu S.A. 3,249,915 4,545,658 0.6
Multi-Industry 385,032 Mostostal-Export S.A. 995,772 1,097,622 0.1
7,700 Mostostal-Export S.A. (Series E) 2,833 2,744 0.0
------------ ------------ ------
998,605 1,100,366 0.1
Total Investments in Poland 13,230,839 15,883,842 2.1
Portugal Multi-Industry 398,950 Sonae Investimentos-SGPS S.A. 9,078,115 11,571,221 1.6
Total Investments in Portugal 9,078,115 11,571,221 1.6
Russia Energy Sources 211,600 Mosenergo (ADR)(a) 5,416,509 5,554,500 0.8
Multi-Industry 158,700 Templeton Russia Fund, Inc. 2,309,085 3,253,350 0.4
Total Investments in Russia 7,725,594 8,807,850 1.2
<PAGE>
Turkey Beverage & Tobacco 796,000 Erciyas Biracilik Ve Malt
Sanayii A.S. (Class A) (GDR)(b) 10,706,200 8,159,000 1.1
Metal Fabricating 62,677,000 Eregli Demir Ve Celik Fabrikalari
T.A.S. 7,220,626 6,759,284 0.9
Total Investments in Turkey 17,926,826 14,918,284 2.0
Total Investments in Europe 97,447,318 106,614,475 14.4
LATIN
AMERICA
Argentina Banking 533,800 Banco Frances del Rio de la
Plata S.A. (ADR)(a) 13,925,535 13,945,525 1.9
304,320 Bansud S.A. (Class B) 3,502,170 2,746,900 0.4
------------ ------------ ------
17,427,705 16,692,425 2.3
Foreign US$ 34,303,500 Republic of Argentina, 6.625%
Government due 3/31/2005 26,544,818 28,729,181 3.9
Obligations
Oil & Related 1,085,750 Companhia Naviera Perez Companc
S.A.C.F.I.M.F.A. (Class B) 6,000,141 6,873,829 0.9
Telecommunications 211,109 Telefonica de Argentina S.A.
(ADR)(a) 6,086,231 5,251,336 0.7
Total Investments in Argentina 56,058,895 57,546,771 7.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US Dollars)
<CAPTION>
LATIN AMERICA Percent of
(concluded) Industries Shares Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Brazil Banking 1,008,419,735 Banco Bradesco S.A. (Preferred) $ 5,782,350 $ 8,592,803 1.2%
42,567,626 Banco Nacional S.A. (Preferred) 892,993 42 0.0
------------ ------------ ------
6,675,343 8,592,845 1.2
Beverage 21,788,513 Companhia Cervejaria Brahma S.A.
PN (Preferred) 8,032,321 13,551,132 1.8
Oil & Related 29,963,333 Petroleo Brasileiro S.A. (Preferred) 3,705,777 3,521,352 0.5
<PAGE>
Steel 48,350,000 Companhia Siderurgica Nacional S.A. 1,407,906 1,032,351 0.1
2,594,900,000 Usinas Siderurgicas de Minas
Gerais--Usiminas S.A. (Preferred) 3,007,315 2,566,943 0.3
------------ ------------ ------
4,415,221 3,599,294 0.4
Telecommunications 281,100 Telecomunicacoes Brasileiras S.A.
--Telebras(ADR)(a) 12,056,502 22,066,350 3.0
168,431,403 Telecomunicacoes Brasileiras S.A.
--Telebras ON 8,671,392 10,953,815 1.5
133,742,256 Telecomunicacoes Brasileiras S.A.
--Telebras PN (Preferred) 5,978,192 10,518,612 1.4
64,857,331 Telecomunicacoes de Minas Gerais
S.A.--TELEMIG (Class B)(Preferred) 4,339,202 7,686,324 1.0
------------ ------------ ------
31,045,288 51,225,101 6.9
Utilities 17,753,900 Light Participacoes S.A. 1,616,186 2,807,933 0.4
Utilities-- 216,740 Companhia Energetica de Minas
Electrical & Gas Gerais S.A. (CEMIG)(ADR)(a) 5,141,012 6,475,108 0.9
92,500,000 Companhia Energetica de Minas
Gerais S.A. (CEMIG)(Preferred) 2,527,304 2,763,222 0.4
------------ ------------ ------
7,668,316 9,238,330 1.3
Total Investments in Brazil 63,158,452 92,535,987 12.5
Chile Apparel 3,504,672 Bata Chile S.A. 994,522 407,619 0.1
Broadcasting & 1,828,625 Editorial Lord Cochrane S.A. 966,585 398,779 0.0
Publishing
Telecommunications 21,000 Compania de Telecomunicaciones
de Chile S.A. (ADR)(a) 2,198,800 2,029,125 0.3
Total Investments in Chile 4,159,907 2,835,523 0.4
Mexico Beverage and Tobacco 180,050 Panamerican Beverages, Inc.
(Class A) 6,247,726 7,404,556 1.0
Building & 1,939,100 Apasco, S.A. de C.V. 8,476,855 13,302,262 1.8
Construction
Financial Services 139,250 Banca Quadrum, S.A. de C.V.
(ADR)(a) 1,773,145 609,219 0.1
Health/Personal Care 21,000 Kimberly-Clark de Mexico, S.A.
de C.V. (ADR)(a) 548,375 787,500 0.1
936,000 Kimberly-Clark de Mexico, S.A.
de C.V. (Series A) 12,775,944 17,738,260 2.4
------------ ------------ ------
13,324,319 18,525,760 2.5
<PAGE>
Multi-Industry 2,938,287 Grupo Carso, S.A. de C.V. 'A' 19,589,007 13,463,744 1.8
348,900 Grupo Carso, S.A. de C.V.
(ADR)(a) 4,028,200 3,183,713 0.4
2,551,787 Invercorporacion, S.A. de
C.V. 'A-1' 336,204 341,320 0.1
348,900 Invercorporacion, S.A. de C.V.
'A-1' (ADR)(a) 48,846 38,379 0.0
------------ ------------ ------
24,002,257 17,027,156 2.3
Retail 150,000 Cifra, S.A. de C.V. 'B'
(ADR)(a) 202,080 207,000 0.0
9,609,400 Cifra, S.A. de C.V. 'C' 15,525,457 13,794,980 1.9
------------ ------------ ------
15,727,537 14,001,980 1.9
Telecommunications 2,551,787 Carso Global Telecom, S.A.
de C.V. 'A-1' 6,724,076 6,691,217 0.9
348,900 Carso Global Telecom, S.A.
de C.V. (ADR)(a) 1,657,275 1,788,113 0.2
99,068 Telefonos de Mexico, S.A.
de C.V. (ADR)(a) 3,211,800 3,182,560 0.4
------------ ------------ ------
11,593,151 11,661,890 1.5
Total Investments in Mexico 81,144,990 82,532,823 11.1
Venezuela Steel 1,561,472 Siderurgica Venezolana SIVENSA,
S.A.I.C.A.--S.A.C.A. 573,061 1,144,638 0.2
200,000 Siderurgica Venezolana SIVENSA,
S.A.I.C.A.--S.A.C.A. (ADR)(a) 390,000 730,000 0.1
46,573 Siderurgica Venezolana SIVENSA,
S.A.I.C.A.--S.A.C.A. (Class B)
(ADR)(a) 10,372 139,719 0.0
------------ ------------ ------
973,433 2,014,357 0.3
Utilities-- 3,328,669 C.A. La Electricidad de Caracas
Electrical & Gas S.A.I.C.A.--S.A.C.A. 3,572,081 3,307,512 0.4
Total Investments in Venezuela 4,545,514 5,321,869 0.7
Total Investments in Latin America 209,067,758 240,772,973 32.5
MIDDLE
EAST
<PAGE>
Egypt Banking 16,843 Commercial International Bank
(Egypt) S.A.E. 1,992,666 2,327,040 0.3
336,840 Commercial International Bank
(Egypt) S.A.E. (GDR)(b) 3,999,975 5,136,810 0.7
Total Investments in Egypt 5,992,641 7,463,850 1.0
Israel Banking 3,043,266 Bank Hapoalim Ltd. 4,838,495 4,182,661 0.6
3,843,099 Bank Leumi Israel 5,460,273 4,309,591 0.6
------------ ------------ ------
10,298,768 8,492,252 1.2
Merchandising 76,873 Blue Square Chain Stores
Properties & Investments Ltd. 438,729 553,724 0.1
25,800 Blue Square Chain Stores
Properties & Investments Ltd.
(ADR)(a) 336,956 380,550 0.0
------------ ------------ ------
775,685 934,274 0.1
Multi-Industry 26,308 Koor Industries Ltd. 2,291,571 2,338,252 0.3
86,020 Koor Industries Ltd. (ADR)(a) 1,589,636 1,548,360 0.2
------------ ------------ ------
3,881,207 3,886,612 0.5
Total Investments in Israel 14,955,660 13,313,138 1.8
Total Investments in the
Middle East 20,948,301 20,776,988 2.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US Dollars)
<CAPTION>
PACIFIC BASIN/ Shares Held/ Percent of
ASIA Industries Face Amount Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Australia Merchandising 207,045 Amway Asia Pacific Ltd. $ 6,445,644 $ 7,168,933 1.0%
Total Investments in Australia 6,445,644 7,168,933 1.0
China Telecommunications 1,485,000 Eastern Communications Co.,
Ltd. (Class B) 1,032,160 1,113,750 0.1
Total Investments in China 1,032,160 1,113,750 0.1
Hong Kong Automotive 5,134,000 Sime Darby (Hong Kong) Ltd. 6,061,900 6,108,111 0.8
<PAGE>
Banking 4,221,666 JCG Holdings, Ltd. 3,138,603 3,794,302 0.5
539,000 Wing Hang Bank Ltd. 1,989,929 2,021,389 0.3
------------ ------------ ------
5,128,532 5,815,691 0.8
Food 25,091,000 C.P. Pokphand Co. Ltd.
(Ordinary) 7,330,535 7,949,637 1.1
67,755,000 Tingyi (Cayman Islands)
Holdings, Co. 17,964,259 14,282,103 1.9
------------ ------------ ------
25,294,794 22,231,740 3.0
Industrial 20,042,000 Sinocan Holdings Ltd. 7,543,493 8,941,768 1.2
Real Estate 56,822,000 China Overseas Land & Investment 15,814,727 19,288,970 2.6
Total Investments in Hong Kong 59,843,446 62,386,280 8.4
India Banking 979,000 State Bank of India 7,442,961 6,980,035 0.9
Energy Sources 995,500 Bombay Suburban Electric Supply
Co. Ltd. 5,290,246 4,851,132 0.7
60,000 Bombay Suburban Electric Supply
Co. Ltd. (GDR)(b) 993,000 1,059,000 0.1
500 Cochin Refinery Ltd. 3,764 1,805 0.0
------------ ------------ ------
6,287,010 5,911,937 0.8
Financial Services 123,750 Housing Development Finance Corp. 10,139,790 8,024,550 1.1
3,145,850 Industrial Credit & Investment
Corporation of India Ltd. 11,154,057 6,455,870 0.9
------------ ------------ ------
21,293,847 14,480,420 2.0
Leisure & Tourism 250,000 East India Hotels Ltd. 4,272,543 4,040,903 0.5
Recreation & 580,000 Suraj Diamonds Ltd. 1,522,715 449,929 0.1
Consumer Goods
Telecommunications 1,617,000 Mahanagar Telephone Nigam Ltd. 8,143,975 9,384,986 1.3
Textiles 44,800 Grasim Industries Ltd. 698,147 492,231 0.1
3,600 JCT Ltd. 5,877 1,071 0.0
40,100 Reliance Industries Ltd. 254,289 215,488 0.0
------------ ------------ ------
958,313 708,790 0.1
Total Investments in India 49,921,364 41,957,000 5.7
Indonesia Broadcasting & US$ 4,645,000 P.T. Surya Citra Television,
Publishing 4% due 7/01/1997 (Convertible) 4,856,085 4,647,346 0.6
<PAGE>
Energy Equipment & 1,282,800 P.T. Kabelmetal Indonesia 2,184,615 524,606 0.1
Services
Food 1,703,000 P.T. Indofood Sukses Makmur 3,270,783 3,628,864 0.5
Multi-Industry 4,693,000 P.T. Bimantara Citra 5,241,468 5,202,099 0.7
Real Estate 7,056,000 P.T. Ciputra Development 7,328,623 5,619,285 0.8
3,528,000 P.T. Ciputra Development
(Rights)(d) 0 683,427 0.1
------------ ------------ ------
7,328,623 6,302,712 0.9
Telecommunications 2,537,000 P.T. Telekomunikasi Indonesia 3,800,242 3,931,640 0.5
Total Investments in Indonesia 26,681,816 24,237,267 3.3
Malaysia Airlines 1,325,000 Malaysian Airline System BHD 3,743,852 3,437,163 0.5
Banking 578,000 Commerce Asset Holding BHD 3,712,883 3,598,515 0.5
3,616,000 Public Bank BHD Foreign 7,311,962 6,696,029 0.9
------------ ------------ ------
11,024,845 10,294,544 1.4
Broadcasting & 1,048,000 New Straits Times Press BHD 5,107,457 5,520,852 0.7
Publishing 2,024,000 Sistem Televisyen Malaysia BHD 3,436,617 4,200,343 0.6
2,705,000 Sistem Televisyen Malaysia
BHD (Class A) 4,324,599 4,944,287 0.7
------------ ------------ ------
12,868,673 14,665,482 2.0
Building US$ 3,800,000 Aokam Perdana BHD, 3.50% due
Materials 6/13/2004 (Convertible) 2,968,250 3,154,000 0.4
713,000 Hume Industries (Malaysia) BHD 3,782,705 3,784,531 0.5
------------ ------------ ------
6,750,955 6,938,531 0.9
Chemicals 93,000 Chemical Company of Malaysia BHD 288,297 289,500 0.0
1,135,500 Nylex (Malaysia) BHD 3,000,783 2,333,809 0.3
------------ ------------ ------
3,289,080 2,623,309 0.3
Diversified Holdings 373,000 OYL Industries BHD 3,849,130 3,795,945 0.5
Engineering & 1,083,000 Malaysian Resources Corp. BHD 3,760,699 3,673,824 0.5
Construction
Financial Services 800,000 Arab-Malaysian Merchant Bank
Holdings BHD 5,804,222 5,810,752 0.8
Food 473,000 Nestle (Malaysia) BHD 3,702,794 3,643,253 0.5
<PAGE>
Multi-Industry 843,000 Ekran BHD 3,768,820 3,633,476 0.5
3,556,000 Renong BHD 6,035,265 5,449,591 0.7
1,125,000 Sime Darby BHD 3,759,870 3,726,504 0.5
414,000 Sungei Way Holdings BHD 2,249,601 2,213,992 0.3
------------ ------------ ------
15,813,556 15,023,563 2.0
Natural Gas 910,000 Petronas Gas BHD 3,791,186 3,704,354 0.5
Oil & Related 646,000 Petronas Dagangan BHD 1,888,810 1,920,701 0.3
Telecommunications 3,370,700 Technology Resources
Industries BHD 11,945,377 8,878,405 1.2
Total Investments in Malaysia 88,233,179 84,409,826 11.4
Pakistan Chemicals-- 220,500 Fauji Fertilizer Co. Ltd. 513,824 411,949 0.1
Fertilizers
Electrical 1,446,227 Karachi Electric Supply Corp. Ltd. 1,121,386 826,236 0.1
Components
Telecommunications 14,050 Pakistan Telecommunications Corp. 1,489,569 1,257,283 0.1
Total Investments in Pakistan 3,124,779 2,495,468 0.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US Dollars)
<CAPTION>
PACIFIC BASIN/
ASIA Shares Held/ Percent of
(concluded) Industries Face Amount Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
South Korea Automotive 66,214 Dong Ah Tire Industries $ 3,636,388 $ 5,037,237 0.7%
Telecommunications 1,048,606 Korea Mobile Telecommunications
Corp. (ADR)(a) 16,981,527 15,991,242 2.1
Utilities-- 69,900 Korea Electric Power Corp. 2,751,350 2,311,654 0.3
Electrical & Gas
Total Investments in South Korea 23,369,265 23,340,133 3.1
<PAGE>
Thailand Banking 1,456,000 Krung Thai Bank Public Co. Ltd. 6,874,574 6,245,238 0.8
690,800 Phatra Thanakit Public Co. Ltd. 7,324,993 3,941,681 0.6
117,000 Siam Commercial Bank Public Co.
Ltd. Foreign 1,862,717 1,418,070 0.2
1,210,700 Thai Farmers Bank, Ltd. Foreign 12,946,596 12,768,283 1.7
151,337 Thai Farmers Bank, Ltd. Foreign
(Warrants) (c) 149,542 148,883 0.0
------------ ------------ ------
29,158,422 24,522,155 3.3
Financial Services 1,216,000 Finance One Public Company Ltd.
Foreign 8,846,979 7,177,711 1.0
Merchandising 755,000 Siam Makro Public Co. Ltd. 3,676,984 3,565,245 0.5
Real Estate Chf 11,300,000 Bangkok Land Public Co., Ltd.,
3.125% due 3/31/2001 (Convertible) 4,006,762 3,695,756 0.5
US$ 1,565,000 Bangkok Land Public Co., Ltd.,
4.50% due 10/13/2003 (Convertible) 1,155,250 1,150,275 0.2
3,731,000 Hemaraj Land and Development
Public Co., Ltd., 3.50% due
9/09/2003 3,662,886 3,703,018 0.5
2,000,000 Tanayong Public Co. Ltd., 3.50%
due 3/01/2004 (Convertible) 1,807,500 1,830,000 0.2
------------ ------------ ------
10,632,398 10,379,049 1.4
Telecommunications 558,000 Advanced Info Service Public
Company Ltd. Foreign 10,457,207 7,641,429 1.0
Total Investments in Thailand 62,771,990 53,285,589 7.2
Total Investments in the Pacific
Basin/Asia 321,423,643 300,394,246 40.5
<CAPTION>
SHORT-TERM Face
SECURITIES Amount
<S> <C> <S> <C> <C> <C>
Commercial US$ 6,470,000 Delaware Funding Corp., 5.35% due
Paper* 10/15/1996 6,456,539 6,456,539 0.9
9,108,000 General Electric Capital Corp.,
5.80% due 10/01/1996 9,108,000 9,108,000 1.2
4,918,000 Goldman Sachs Group L.P., 5.40%
due 11/04/1996 4,892,918 4,892,918 0.6
6,000,000 National Fleet Funding Corp., 5.36%
due 11/08/1996 5,966,053 5,966,053 0.8
Total Investments in Short-Term
Securities 26,423,510 26,423,510 3.5
<PAGE>
Total Investments $732,979,484 753,501,087 101.6
============
Liabilities in Excess of Other Assets (11,932,455) (1.6)
------------ ------
Net Assets $741,568,632 100.0%
============ ======
Net Asset Value: Class A--Based on net assets of $328,504,346 and
22,323,990 shares outstanding $ 14.72
============
Class B--Based on net assets of $306,265,020 and
21,082,163 shares outstanding $ 14.53
============
Class C--Based on net assets of $48,899,406 and
3,373,083 shares outstanding $ 14.50
============
Class D--Based on net assets of $57,899,860 and
3,945,074 shares outstanding $ 14.68
============
<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.
(a)American Depositary Receipt (ADR).
(b)Global Depositary Receipt (GDR).
(c)Warrants entitle the Fund to purchase a predetermined number of
shares of stock at a predetermined price until the expiration date.
(d)The rights may be exercised until 11/12/1996.
</TABLE>
EQUITY PORTFOLIO CHANGES
For the Quarter Ended September 30, 1996
Additions
<PAGE>
Anglo American Corporation of
South Africa, Ltd. (ADR)
Arab-Malaysian Merchant Bank
Holdings BHD
Blue Square Chain Stores Properties &
Investments Ltd. (ADR)
Carso Global Telecom, S.A. de C.V. A-1
Carso Global Telecom, S.A. de C.V. (ADR)
Chemical Company of Malaysia BHD
China Overseas Land & Investment
Cifra, S.A. de C.V. B (ADR)
Commerce Asset Holding BHD
Commercial International Bank
(Egypt) S.A.E.
De Beers Centenary AG
Eastern Communications Co., Ltd. (Class B)
Ekran BHD
Hume Industries (Malaysia) BHD
Invercorporacion, S.A. de C.V. A-1
Invercorporacion, S.A. de C.V. A-1 (ADR)
Malaysian Airline System BHD
Malaysian Resources Corp. BHD
Mediaset S.p.A.
Mosenergo (ADR)
Mostostal-Export S.A. (Series E)
Nestle (Malaysia) BHD
OYL Industries BHD
P.T. Bimantara Citra
P.T. Ciputra Development (Rights)
P.T. Indofood Sukses Makmur
P.T. Telekomunikasi Indonesia
Petronas Dagangan BHD
Petronas Gas BHD
Siam Makro Public Co. Ltd.
Siderurgica Venezolana SIVENSA,
S.A.I.C.A.--S.A.C.A. (Class B) (ADR)
*Siderurgica Venezolana SIVENSA,
S.A.I.C.A.--S.A.C.A. (Rights)
Sime Darby BHD
Sistem Televisyen Malaysia BHD (Class A)
Sungei Way Holdings BHD
Thai Farmers Bank, Ltd. Foreign
(Warrants)
Wielkopolski Bank Kredytowy S.A.
Wing Hang Bank Ltd.
Deletions
Carrefour S.A. (Rights)
Companhia Vale do Rio Doce S.A. (Preferred)
Crown Casino Ltd.
Delta Dairy S.A. (Preferred)
Groupe Omnium Nord Africain
Inversiones y Representaciones S.A.
Inversiones y Representaciones S.A. (GDR)
Korea Mobile Telecommunications Corp.
Lankan Tiles
Leader Universal Holdings BHD (Class A)
Les Ciments de l'Oriental
Malayan Banking BHD
Mantex S.A.C.A.
Migros Turk A.S.
Mostostal-Export S.A. (Rights)
P.T. Bank Bali Foreign
P.T. Mulia Industrindo
*Siderurgica Venezolana SIVENSA,
S.A.I.C.A.--S.A.C.A. (Rights)
Telefonica de Argentina S.A. (Class B)
Venezolana de Cementos S.A.C.A.
(Vencemos)
<PAGE>
[FN]
*Added and deleted in the same quarter.
PORTFOLIO INFORMATION
Ten Largest Equity Holdings Percent of
As of September 30, 1996 Net Assets
Telecomunicacoes Brasileiras S.A.--Telebras* 5.9%
China Overseas Land & Investment 2.6
Kimberly-Clark de Mexico, S.A. de C.V.* 2.5
Grupo Carso, S.A. de C.V.* 2.2
Korea Mobile Telecommunications Corp. (ADR) 2.1
Tingyi (Cayman Islands) Holdings, Co. 1.9
Cifra, S.A. de C.V.* 1.9
Banco Frances del Rio de la Plata S.A. (ADR) 1.9
Companhia Cervejaria Brahma S.A. PN (Preferred) 1.8
Apasco, S.A. de C.V. 1.8
[FN]
*Includes combined holdings.
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
<PAGE>
Custodian
The Chase Manhattan Bank, N.A.
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, New York 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
