MERRILL LYNCH
DEVELOPING
CAPITAL MARKETS
FUND, INC.
FUND LOGO
Quarterly Report
September 30, 1997
Investing in emerging market securities involves a number of risk
factors and special considerations, including restrictions on
foreign investments and on repatriation of capital invested in
emerging markets, currency fluctuations, and potential price
volatility and less liquidity of securities traded in emerging
markets. In addition, there may be less publicly available
information about the issuers of securities, and such issuers may
not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those to which US companies
are subject. Therefore, the Fund is designed as a long-term
investment for investors capable of assuming the risks of investing
in emerging markets. The Fund should be considered as a vehicle for
diversification and not as a complete investment program. Please
refer to the prospectus for details.
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
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, 1997
A map illustrating the following percentages:
Venezuela 1.5%
Brazil 12.2%
Portugal 2.1%
Hungary 4.0%
Czech Republic 0.1%
Poland 2.8%
Russia 6.2%
Greece 3.1%
Turkey 1.3%
Pakistan 0.1%
India 6.2%
Thailand 1.9%
China 2.0%
Hong Kong 6.5%
South Korea 3.9%
Mexico 11.7%
Chile 2.6%
Argentina 4.6%
Egypt 1.6%
South Africa 7.0%
Zimbabwe 0.7%
Israel 2.1%
Indonesia 4.0%
Malaysia 3.0%
Taiwan 4.2%
Philippines 1.0%
Australia 0.6%
<PAGE>
[FN]
*Total may not equal 100%.
DEAR SHAREHOLDER
During the three-month period ended September 30, 1997, total
returns for Merrill Lynch Developing Capital Markets Fund, Inc.'s,
Class A, Class B, Class C and Class D Shares were -4.64%, -4.87%,
- -4.89% and -4.65%, respectively. The unmanaged Morgan Stanley Capital
International Emerging Markets Free (Ex-Taiwan) Index fell 9.05%
during the same period. (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.) The Fund's
underweighted positions in some of the Asian markets, including
Malaysia, the Philippines and Thailand, whose markets dropped
41.62%, 45.29% and 18.38%, respectively, limited the negative impact
of these declines on the Fund's performance. The Fund benefited from
its overweighted position in Russia, which rose 18.59%.
Investment Review and Activities
The currency and stock market corrections in Southeast Asia weighed
heavily on the performance of emerging markets funds during the
September quarter. Merrill Lynch Developing Capital Markets Fund,
Inc., although underweighted in the markets of the region for a long
time, was adversely affected because the devaluation of the Thai
baht triggered corrections not only in Southeast Asia, but also in
other markets where we invest. These included countries whose
economic fundamentals are different and unrelated such as Brazil,
Korea and the Czech Republic.
The collapse among the Southeast Asian nations of Thailand,
Malaysia, Indonesia and the Philippines was caused by the
characteristics which they had in common: growing current account
deficits, rising use of foreign currency-denominated debt, property
inflation, and overinvestment in unproductive assets. While the
depth of problems varies among these four, we viewed negatively the
near-term prospects for investment in the group. In our opinion, the
necessary policies to slow economic growth were not being
implemented, nor was the damage to the corporate sector being fully
recognized by investors. In addition, despite the deep declines in
prices, we found few bargains in these markets. However, one that we
identified was P.T. Indonesian Satellite Corporation (Indosat).
Indosat is the dominant provider of international telecommunications
in Indonesia. We believed that the current price did not fully
reflect the value of its non-core investments, particularly USA
Global Link. The Fund's overall exposure in Southeast Asia declined
from 14% of net assets to 9%, partly because of our active selling
and partly because of market declines.
<PAGE>
On the other hand, the economic growth recovery in Mexico and
Argentina, and the continuing flow of privatizations in Brazil,
argue strongly for investment in the region. To put it simply, these
countries have started to reap the rewards of the fiscal reforms,
monetary discipline or austerity measures introduced in the past. We
do not adhere to the view that capital will be drawn out of the
outperforming Latin markets and shifted to underperforming Asia. We
continued to find attractively valued equities in the region,
notwithstanding the strong performances already achieved. As a
result, our position in Latin America rose from 27.5% of net assets
to 32.6% during the September quarter.
Our largest holding in the Fund is Grupo Televisa, S.A. de C.V., a
media company. We increased our holdings in this company, since we
believed that the burgeoning retail sector improvement would lead to
increased advertising revenues and hence higher revenues for Grupo
Televisa.
Investments in Mediterranean and Eastern European countries
continued to comprise an important portion of the Fund. In Greece,
our largest investment is Hellenic Bottling Co. S.A., which is now
one of the core Coca-Cola bottlers in the fastest-growing markets of
the region, including Russia. Strong performance was also seen among
our Hungarian holdings as they released better-than-expected semi-
annual earnings. Our Polish portfolio also performed well as our
largest holding, Elektrim Spolka Akcyjna S.A., an industrial
conglomerate, continued to benefit from the accelerated pace of
infrastructure investment. We added to our stock investments in
Russia, focusing on the large-capitalized and liquid companies with
superior managements; that is, companies we believe qualify as
having potential to become the future blue chips of Russia.
We increased our investments in Hong Kong and the People's Republic
of China from 5.8% of net assets to 8.5%. One of the Fund's holdings
in this region is Beijing Yanhua Petrochemical Company Ltd., one of
the largest integrated petrochemical companies in China.
We slightly increased our investments in the Middle East from 3.4%
of net assets to 3.7%, and decreased our investments in Africa from
10.0% of net assets to 7.7%. Sasol Limited, one of our holdings in
South Africa, is a world leader in the conversion of coal to oil and
gas.
In Conclusion
Our outlook for emerging markets investments is a positive one
despite the profound corrections we saw in the markets of Southeast
Asia. We are taking a long-term view and believe that reversals such
as these may be short-term in nature, and often are the catalyst for
reforms which may improve the prospects for investment in these
markets.
<PAGE>
We thank you for your interest in Merrill Lynch Developing Capital
Markets Fund, Inc., and we look forward to reporting to you again in
our next report on economic, stock market and portfolio developments
in our upcoming semi-annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Grace Pineda)
Grace Pineda
Vice President and Portfolio Manager
October 22, 1997
Officers and
Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Grace Pineda, Vice President and Portfolio Manager
Gerald M. Richard, Treasurer
Barbara G. Fraser, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02119
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the ex-dividend date. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<PAGE>
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
9/1/89--12/31/89 $ 9.60 $10.13 $0.004 $0.132 + 6.97%
1990 10.13 9.04 -- 0.640 - 5.33
1991 9.04 10.89 -- 0.252 +23.35
1992 10.89 10.18 0.324 0.518 + 0.85
1993 10.18 16.80 0.278 0.069 +68.96
1994 16.80 13.90 0.653 0.447 -10.97
1995 13.90 13.18 -- 0.238 -3.43
1996 13.18 14.53 0.027 0.364 +13.30
1/1/97--9/30/97 14.53 16.43 -- -- +13.08
------ ------
Total $1.286 Total $2.660
Cumulative total return as of 9/30/97: +134.49%**
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change***
<C> <C> <C> <C> <C> <C>
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
1996 13.11 14.45 0.027 0.222 +12.17
1/1/97--9/30/97 14.45 16.21 -- -- +12.18
------ ------
Total $0.680 Total $0.758
Cumulative total return as of 9/30/97: +23.01%***
</TABLE>
<PAGE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change***
<C> <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
1996 13.08 14.41 0.027 0.231 +12.20
1/1/97--9/30/97 14.41 16.16 -- -- +12.14
------ ------
Total $0.680 Total $0.793
Cumulative total return as of 9/30/97: +6.99%***
</TABLE>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
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
1996 13.17 14.52 0.027 0.324 +13.00
1/1/97--9/30/97 14.52 16.39 -- -- +12.88
------ ------
Total $0.680 Total $0.980
Cumulative total return as of 9/30/97: +9.55%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
***Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<PAGE>
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 9/30/97 +14.71% + 8.69%
Five Years Ended 9/30/97 +12.80 +11.59
Inception (9/1/89) through 9/30/97 +11.12 +10.39
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 9/30/97 +13.54% +9.54%
Inception (7/1/94) to 9/30/97 + 6.58 +6.31
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 9/30/97 +13.51% +12.51%
Inception (10/21/94) to 9/30/97 + 2.32 + 2.32
[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 9/30/97 +14.43% +8.42%
Inception (10/21/94) to 9/30/97 +3.15 +1.27
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
9/30/97 6/30/97 9/30/96 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Developing Capital Markets Fund Class A Shares $16.43 $17.23 $14.72 +11.83%(1) -4.64%
ML Developing Capital Markets Fund Class B Shares 16.21 17.04 14.53 +11.77(1) -4.87
ML Developing Capital Markets Fund Class C Shares 16.16 16.99 14.50 +11.66(1) -4.89
ML Developing Capital Markets Fund Class D Shares 16.39 17.19 14.68 +11.86(1) -4.65
ML Developing Capital Markets Fund Class A Shares--Total Return +14.71(2) -4.64
ML Developing Capital Markets Fund Class B Shares--Total Return +13.54(3) -4.87
ML Developing Capital Markets Fund Class C Shares--Total Return +13.51(4) -4.89
ML Developing Capital Markets Fund Class D Shares--Total Return +14.43(5) -4.65
<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 $0.027 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.364 per share ordinary
income dividends and $0.027 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.222 per share ordinary
income dividends and $0.027 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.231 per share ordinary
income dividends and $0.027 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.324 per share ordinary
income dividends and $0.027 per share capital gains distributions.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Percent of
AFRICA Industries Shares Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
South Africa Banking 203,276 Nedcor Ltd. (Ordinary) $ 3,484,813 $ 4,383,016 0.4%
Beverage 238,815 South African Breweries Ltd. 5,840,521 6,929,785 0.7
26,697 South African Breweries Ltd.
(ADR)(a) 680,055 770,208 0.1
------------ -------------- ------
6,520,576 7,699,993 0.8
<PAGE>
Diversified 1,313,000 Rembrandt Controlling
Holdings Investments Ltd. 8,992,935 7,577,709 0.8
930,350 Rembrandt Group Ltd. 9,763,074 8,423,250 0.8
1,100 Rembrandt Group Ltd. (ADR)(a) 11,803 9,900 0.0
893,136 Sasol Limited 11,735,775 12,311,519 1.2
------------ -------------- ------
30,503,587 28,322,378 2.8
Financial 1,313,862 First National Bank Holdings Ltd. 9,506,018 10,429,713 1.0
Services
Metals 417,298 Billiton PLC 1,556,510 1,616,576 0.2
1,065,700 Billiton PLC (ADR)(a) 3,893,109 4,049,660 0.4
------------ -------------- ------
5,449,619 5,666,236 0.6
Mining 885,959 Gencor Ltd. 2,174,963 2,090,871 0.2
213,140 Gencor Ltd. (ADR)(a) 687,777 502,840 0.1
8,310 Gold Fields of South Africa Ltd. 213,500 167,145 0.0
------------ -------------- ------
3,076,240 2,760,856 0.3
Newspaper/ 609,300 Nasionale Pers Beperk (Class A) 5,953,882 6,470,790 0.6
Publishing
Retail 3,069,399 Pick'n Pay Stores Ltd. 3,498,200 4,609,696 0.5
122,952 Pick'n Pay Stores Ltd. (N Shares) 171,112 170,408 0.0
------------ -------------- ------
3,669,312 4,780,104 0.5
Steel 2,768 South Africa Iron & Steel
Industrial Corp., Ltd. 2,483 1,764 0.0
Total Investments in South Africa 68,166,530 70,514,850 7.0
Zimbabwe Beverage & 4,977,100 Delta Corporation Ltd. 3,841,905 6,967,940 0.7
Tobacco
Total Investments in Zimbabwe 3,841,905 6,967,940 0.7
Total Investments in Africa 72,008,435 77,482,790 7.7
EUROPE
Czech Republic Telecommuni- 4,092 SPT Telecom A.S. 519,474 518,243 0.1
cations
Total Investments in the
Czech Republic 519,474 518,243 0.1
Greece Banking 151,585 Ergo Bank S.A. (Ordinary) 5,694,808 10,166,391 1.0
Beverage 376,069 Hellenic Bottling Co. S.A. 13,602,727 19,562,334 1.9
Telecommuni- 160,000 Hellenic Telecommunication
cations Organization S.A. (GDR)(b) 1,961,806 1,960,000 0.2
Total Investments in Greece 21,259,341 31,688,725 3.1
Hungary Banking 320,762 OTP Bank (GDR)(b) 7,545,169 10,384,670 1.1
Health/ 98,330 Gedeon Richter Ltd. (GDR)(b) 3,797,770 10,398,397 1.0
Personal Care 73,700 Gedeon Richter Ltd. (GDR)(b) 2,433,751 7,793,775 0.8
------------ -------------- ------
6,231,521 18,192,172 1.8
Oil & Related 61,000 Mol Magyar Olay-es Gazipari
Reszvenytarsasag (GDR)(b) 648,125 1,319,125 0.1
31,640 Mol Magyar Olay-es Gazipari
Reszvenytarsasag (GDR)(b) 347,440 684,215 0.1
------------ -------------- ------
995,565 2,003,340 0.2
Telecommuni- 22,280 Magyar TavKozlesi Reszvenytarsasag
cations (Matav)(Ordinary) 5,953,294 9,365,183 0.9
Total Investments in Hungary 20,725,549 39,945,365 4.0
Poland Automotive 158,997 Debica S.A. 3,305,944 4,630,529 0.5
Banking 665,104 Wielkopolski Bank Kredytowy S.A. 4,413,586 4,282,830 0.4
Electrical 1,466,939 Elektrim Spolka Akcyjna S.A. 13,407,939 16,444,831 1.6
Components
Multi-Industry 603,529 NIF Piast S.A. Fund 1,873,952 1,563,364 0.2
497,511 NIF Progress S.A. Fund 1,550,828 1,529,011 0.1
------------ -------------- ------
3,424,780 3,092,375 0.3
Total Investments in Poland 24,552,249 28,450,565 2.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Percent of
(concluded) Industries Shares Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Portugal Building 386,504 Cimpor-Cimentos de Portugal S.A. $ 8,775,947 $ 10,454,070 1.0%
Products
Telecommuni- 158,652 Portugal Telecom S.A. 5,536,163 6,885,830 0.7
cations 80,721 Portugal Telecom S.A. (ADR)(a) 2,762,719 3,506,318 0.4
------------ -------------- ------
8,298,882 10,392,148 1.1
Total Investments in Portugal 17,074,829 20,846,218 2.1
Russia Energy 339,382 AO Mosenergo (ADR)(a) 10,042,232 16,205,490 1.6
Sources 2,025,000 Irkutskenergo 255,918 662,175 0.1
------------ -------------- ------
10,298,150 16,867,665 1.7
Natural Gas 128,700 RAO Gazprom (ADR)(a) 2,027,025 3,230,370 0.3
Oil & Related 177,000 Lukoil Oil Company (ADR)(a) 10,042,550 17,301,750 1.7
Telecommuni- 544,800 Bashinformsvyaz 1,455,190 1,280,280 0.1
cations 2,272 Moscow City Telephone Network 5,607,050 5,225,600 0.5
169,200 Nizhny Novgorod Telephone 879,840 1,015,200 0.1
879,259 Rostelecom--RDC 3,382,551 3,675,303 0.4
------------ -------------- ------
11,324,631 11,196,383 1.1
Utilities-- 2,066,208 Bashkirenergo 1,187,599 1,556,888 0.1
Electric 21,806,270 Unified Energy Systems 7,888,304 8,724,689 0.9
95,300 Unified Energy Systems (GDR)(b) 3,791,666 3,812,953 0.4
------------ -------------- ------
12,867,569 14,094,530 1.4
Total Investments in Russia 46,559,925 62,690,698 6.2
Turkey Banking 46,180,300 Akbank T.A.S. (Ordinary) 3,329,388 3,579,457 0.4
59,860,000 Yapi ve Kredi Bankasi A.S. 1,278,947 1,495,039 0.1
------------ -------------- ------
4,608,335 5,074,496 0.5
Building 50,254,111 Akcansa Cimento A.S. 7,593,965 7,501,906 0.7
Products
Telecommuni- 2,697,000 Northern Electric Telekomunikasyon
cations A.S. (NETAS) 860,189 898,122 0.1
Total Investments in Turkey 13,062,489 13,474,524 1.3
Total Investments in Europe 143,753,856 197,614,338 19.6
<PAGE>
LATIN AMERICA
Argentina Oil & Related 1,332,144 Perez Companc S.A. 6,859,310 10,739,121 1.1
579,384 Yacimientos Petroliferos Fiscales
S.A. (ADR)(a) 17,504,039 21,364,785 2.1
------------ -------------- ------
24,363,349 32,103,906 3.2
Telecommuni- 300,700 Nortel Inversora S.A. (ADR)(a) 8,674,040 8,344,425 0.8
cations 201,046 Telecom Argentina Stet--France
Telecom S.A. (ADR)(a) 4,771,715 6,119,338 0.6
------------ -------------- ------
13,445,755 14,463,763 1.4
Total Investments in Argentina 37,809,104 46,567,669 4.6
Brazil Banking 861,174,679 Banco Bradesco S.A. (Preferred) 5,170,352 9,080,306 0.9
23,216,000 Banco Itau S.A. (Preferred) 13,121,156 15,005,412 1.5
------------ -------------- ------
18,291,508 24,085,718 2.4
Beverage 30,667,513 Companhia Cervejaria Brahma S.A.
PN (Preferred) 14,476,455 23,517,173 2.3
24,500 Companhia Cervejaria Brahma S.A.
PN (Preferred) (ADR)(a) 358,433 376,687 0.0
------------ -------------- ------
14,834,888 23,893,860 2.3
Oil & 81,048,740 Petroleo Brasileiro S.A.--
Related Petrobras (Preferred) 16,002,689 23,084,907 2.3
Steel 926,190 Usinas Siderurgicas de Minas
Gerais--Usiminas S.A.
(Preferred) 9,594,875 10,120,955 1.0
Telecommuni- 135,941 Telecomunicacoes Brasileiras
cations S.A.--Telebras (ADR)(a) 19,376,673 17,502,404 1.7
126,953,214 Telecomunicacoes Brasileiras
S.A.--Telebras ON 8,589,839 14,660,929 1.5
------------ -------------- ------
27,966,512 32,163,333 3.2
Utilities-- 572,000 Companhia Paranaense de Energia
Electric S.A.--Copel (ADR)(a) 10,570,878 9,867,000 1.0
Total Investments in Brazil 97,261,350 123,215,773 12.2
<PAGE>
Chile Telecommuni- 345,958 Compania de Telecomunicaciones
cations de Chile S.A. (ADR)(a) 9,136,095 11,200,390 1.1
495,300 Quinenco S.A.(ADR)(a) 9,215,945 7,862,887 0.8
------------ -------------- ------
18,352,040 19,063,277 1.9
Utilities-- 242,736 Chilgener S.A. (ADR)(a) 7,012,109 6,660,069 0.7
Electric
Total Investments in Chile 25,364,149 25,723,346 2.6
Mexico Brewery 70,000 Fomento Economico Mexicano,
S.A. de C.V. (Femsa)(ADR)(a) 538,125 603,169 0.1
Broadcast-- 1,052,139 Grupo Televisa, S.A. de
Media C.V. (GDR)(b) 33,763,378 37,679,728 3.7
Building & 1,526,614 Apasco, S.A. de C.V. 6,977,237 11,693,297 1.2
Construction
Health/ 2,164,934 Kimberly-Clark de Mexico,
Personal Care S.A. de C.V. (Series A) 6,602,173 11,315,180 1.1
Multi-Industry 12,400 ALFA, S.A. de C.V. (Class A) 108,180 116,529 0.0
1,995,894 Grupo Carso, S.A. de C.V. 'A' 11,922,837 15,981,540 1.6
348,900 Grupo Carso, S.A. de C.V. (ADR)(a) 4,028,200 5,538,787 0.5
------------ -------------- ------
16,059,217 21,636,856 2.1
Retail 8,834,987 Cifra, S.A. de C.V. 'C' 13,399,774 19,357,811 1.9
Telecommuni- 304,440 Telefonos de Mexico, S.A.
cations de C.V. (ADR)(a) 15,213,932 15,754,770 1.6
Total Investments in Mexico 92,553,836 118,040,811 11.7
Venezuela Telecommuni- 114,200 Companhia Anonima Nacional
cations Telefonos de Venezuela
S.A. (CANTV)(ADR)(a) 5,520,478 5,224,650 0.5
Textiles 240,200 Sudamtex de Venezuela S.A.C.A.
(ADR)(a) 3,843,200 3,843,200 0.4
Utilities-- 3,758,220 C.A. La Electricidad de Caracas
Electric S.A.I.C.A.-S.A.C.A. 5,259,064 6,062,621 0.6
Total Investments in Venezuela 14,622,742 15,130,471 1.5
Total Investments in
Latin America 267,611,181 328,678,070 32.6
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
MIDDLE Percent of
EAST Industries Shares Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Egypt Banking 168,430 Commercial International Bank
(Egypt) S.A.E. $ 1,992,666 $ 4,101,985 0.4%
248,789 Commercial International Bank
(Egypt) S.A.E. (GDR)(b) 2,954,369 5,970,936 0.6
------------ -------------- ------
4,947,035 10,072,921 1.0
Building 205,165 Torah Portland Cement Company 5,760,342 5,481,161 0.6
Products
Total Investments in Egypt 10,707,377 15,554,082 1.6
Israel Banking 4,974,330 Bank Hapoalim Ltd. 9,212,280 11,547,018 1.1
3,100,915 Bank Leumi Israel 4,518,362 5,085,795 0.5
------------ -------------- ------
13,730,642 16,632,813 1.6
Retail 1,387,600 Super-Sol Ltd. 3,741,902 4,515,846 0.5
Total Investments in Israel 17,472,544 21,148,659 2.1
Total Investments in the
Middle East 28,179,921 36,702,741 3.7
PACIFIC BASIN/
ASIA
Australia Merchandising 207,045 Amway Asia Pacific Ltd. 6,445,644 6,069,007 0.6
Total Investments in Australia 6,445,644 6,069,007 0.6
China Automobiles 3,534,000 Qingling Motors Company (Class H) 1,714,714 2,237,865 0.2
Brewery 194,000 Tsingtao Brewery Co., Ltd. (Class H) 75,591 80,227 0.0
Building 50,000 Huaxin Cement Co., Ltd. (Class B) 8,638 7,700 0.0
Products
Chemicals 257,565 Beijing Yanhua Petrochemical
Company Ltd. (ADR)(a) 2,813,615 5,424,963 0.5
Telecommuni 6,573,000 Eastern Communications Co., Ltd.
cations (Class B) 5,702,595 11,831,400 1.2
Utilities-- 1,600,000 Beijing Datang Power Generation
Electric Company Ltd. (Class H) 720,977 899,457 0.1
Total Investments in China 11,036,130 20,481,612 2.0
<PAGE>
Hong Kong Food 14,675,000 C.P. Pokphand Co. Ltd. (Ordinary) 4,186,916 4,883,449 0.5
41,274,850 Tingyi (Cayman Islands)
Holdings, Co. 10,308,873 8,214,431 0.8
------------ -------------- ------
14,495,789 13,097,880 1.3
Industrial 37,503,056 Sinocan Holdings Ltd. 14,259,926 13,812,834 1.4
Mining 12,511,000 Jiangxi Copper Company Ltd.
(Class H) 3,625,425 3,557,017 0.4
Real Estate 17,572,000 Amoy Properties Limited 22,057,734 19,188,860 1.9
4,968,000 Henderson China Holding Ltd. 8,669,839 8,442,647 0.8
------------ -------------- ------
30,727,573 27,631,507 2.7
Telecommuni- 6,874,000 City Telecom (H.K.) Ltd. 1,304,126 1,332,515 0.1
cations 1,956,000 Smartone Telecommunications 4,112,405 5,965,572 0.6
------------ -------------- ------
5,416,531 7,298,087 0.7
Total Investments in Hong Kong 68,525,244 65,397,325 6.5
India Automobiles 222,700 Bajaj Auto Ltd. (GDR)(b) 7,754,399 6,513,975 0.7
Banking 978,964 State Bank of India 7,442,695 7,496,632 0.8
102,500 State Bank of India (GDR)(b) 2,342,125 2,383,125 0.2
93,200 State Bank of India (GDR)(b) 2,338,125 2,166,900 0.2
------------ -------------- ------
12,122,945 12,046,657 1.2
Building 42,500 Associated Cement Companies Ltd. 1,640,597 1,417,941 0.1
Products
Energy Sources 8,194 Bombay Suburban Electric
Supply Co. Ltd. 45,879 43,815 0.0
11,682 Bombay Suburban Electric
Supply Co. Ltd. (GDR)(b) 207,275 239,481 0.0
------------ -------------- ------
253,154 283,296 0.0
Financial 112,406 Housing Development Finance Corp. 9,283,077 10,149,665 1.0
Services 4,337,803 Industrial Credit & Investment
Corporation of India Ltd. 14,039,407 10,622,456 1.1
------------ -------------- ------
23,322,484 20,772,121 2.1
Leisure & 410,875 EIH Limited 4,640,089 4,303,160 0.4
Tourism 133,000 EIH Limited (GDR)(b) 2,025,456 2,028,250 0.2
98,400 Indian Hotels Company Ltd.
(GDR)(b) 2,014,863 1,918,800 0.2
------------ -------------- ------
8,680,408 8,250,210 0.8
<PAGE>
Oil Services 458,300 Hindustan Petroleum Corporation
Ltd. 5,287,927 6,074,314 0.6
Recreation & 580,000 Suraj Diamonds Ltd. 1,522,715 199,004 0.0
Consumer Goods
Telecommunications 100 Mahanagar Telephone Nigram Ltd. 643 711 0.0
24,000 Videsh Sanchar Nigam Ltd. (GDR)(b) 435,600 405,000 0.1
124,000 Videsh Sanchar Nigam Ltd. (GDR)(b) 2,046,000 2,092,500 0.2
------------ -------------- ------
2,482,243 2,498,211 0.3
Textiles 678 Reliance Industries Ltd. 4,299 6,758 0.0
177,100 Reliance Industries Ltd. (GDR)(b) 3,983,269 4,062,231 0.4
------------ -------------- ------
3,987,568 4,068,989 0.4
Total Investments in India 67,054,440 62,124,718 6.2
Indonesia Automobiles 4,593,000 P.T. Astra International 'Foreign' 7,071,851 4,172,267 0.4
Building 1,126,000 P.T. Semen Gresik 'Foreign' 1,304,708 1,100,214 0.1
Products
Forest 4,977,050 P.T. Indah Kiat Pulp &
Products & Paper Corp. 'Foreign' 2,925,564 1,937,630 0.2
Paper 419,120 P.T. Indah Kiat Pulp & Paper
Corp. 'Foreign' (Warrants)(c) 0 38,393 0.0
------------ -------------- ------
2,925,564 1,976,023 0.2
Insurance 15,217,800 P.T. Lippo Life Insurance
'Foreign' 8,737,476 3,020,327 0.3
Real Estate 7,365,500 P.T. Ciputra Development 5,988,744 1,799,206 0.2
Telecommuni- 633,800 P.T. Indonesian Satellite
cations Corporation (Indosat) (ADR)(a) 17,514,562 16,637,250 1.6
3,590,500 P.T. Telekomunikasi Indonesia 5,463,605 3,974,218 0.4
342,554 P.T. Telekomunikasi Indonesia
(ADR)(a) 10,113,958 7,664,646 0.8
------------ -------------- ------
33,092,125 28,276,114 2.8
Total Investments in Indonesia 59,120,468 40,344,151 4.0
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
PACIFIC BASIN/ Percent of
ASIA (concluded)Industries Shares Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Malaysia Broadcasting 1,912,000 New Straits Times Press BHD $ 9,970,360 $ 5,777,860 0.6%
& Publishing
Diversified 2,935,000 Magnum Corporation BHD 5,460,673 2,579,325 0.3
Holdings 621,000 United Engineers (Malaysia)
Ltd. BHD 5,771,221 1,991,489 0.2
------------ -------------- ------
11,231,894 4,570,814 0.5
Engineering & 355,000 Malaysian Resources Corp. BHD 924,548 309,790 0.0
Construction
Food 659,000 Nestle (Malaysia) BHD 5,103,824 3,881,252 0.4
Multi- 2,525,000 Hicom Holdings BHD 5,991,165 2,974,252 0.3
Industry 3,561,800 Sungei Way Holdings BHD 7,620,767 3,272,946 0.3
------------ -------------- ------
13,611,932 6,247,198 0.6
Natural Gas 894,000 Petronas Gas BHD 3,724,209 2,646,438 0.3
Oil & Related 1,545,500 Petronas Dagangan BHD 4,054,663 2,478,138 0.2
Telecommuni- 594,000 Telekom Malaysia BHD 1,829,896 1,804,163 0.2
cations
Tobacco 305,000 Rothmans of Pall Mall
(Malaysia) BHD 3,201,767 2,468,779 0.2
Total Investments in Malaysia 53,653,093 30,184,432 3.0
Pakistan Chemicals-- 10,300 Fauji Fertilizer Co. Ltd. 21,455 21,857 0.0
Fertilizers
Electrical 100 Karachi Electric Supply Corp. Ltd. 66 70 0.0
Components
Telecommuni- 1,405,000 Pakistan Telecommunications Corp. 1,489,569 1,348,442 0.1
cations
Total Investments in Pakistan 1,511,090 1,370,369 0.1
<PAGE>
Philippines Brewery 501,000 San Miguel Corp. (Class B) 1,161,824 815,411 0.1
Telecommuni- 161,240 Philippine Long Distance
cations Telephone Co. 5,608,779 4,397,455 0.4
167,515 Philippine Long Distance
Telephone Co. (ADR)(a) 5,364,324 4,543,844 0.5
------------ -------------- ------
10,973,103 8,941,299 0.9
Total Investments in the
Philippines 12,134,927 9,756,710 1.0
South Korea Automotive 67,538 Dong Ah Tire Company 3,636,374 3,661,699 0.4
Banking 572,610 Cho Hung Bank Co. Ltd. 3,843,133 2,715,664 0.3
652,033 Kookmin Bank (GDR)(b) 10,343,028 8,476,429 0.8
------------ -------------- ------
14,186,161 11,192,093 1.1
Chemicals 376,980 L.G. Chemical Ltd. 5,328,189 6,110,957 0.6
Electrical 108,215 Samsung Display Devices Co. 5,850,072 5,513,276 0.6
Components
Telecommuni- 130 SK Telecom Co. Ltd. 65,985 79,595 0.0
cations 482,039 SK Telecom Co. Ltd. (ADR)(a) 7,346,241 4,338,351 0.4
------------ -------------- ------
7,412,226 4,417,946 0.4
Utilities-- 372,950 Korea Electric Power Corp. 9,829,754 8,292,317 0.8
Electric
Total Investments in South Korea 46,242,776 39,188,288 3.9
Taiwan Banking 3,804,444 Bank Sinopac 4,239,984 3,183,691 0.3
2,653,000 E. Sun Commercial Bank 2,045,284 2,396,618 0.2
------------ -------------- ------
6,285,268 5,580,309 0.5
Forest 10,354,000 Cheng Loong Company 7,166,727 6,453,123 0.6
Products & 11,449,680 Chung Hwa Pulp Corporation 10,318,821 8,980,141 0.9
Paper 5,792,000 Taiwan Pulp & Paper Corp. 4,672,605 4,096,583 0.4
4,414,000 Yuen Foong Yu Paper Manufacturing
Company, Ltd. 3,147,942 2,936,485 0.3
------------ -------------- ------
25,306,095 22,466,332 2.2
Insurance 650,000 Fubon Insurance Co. 1,515,585 1,581,758 0.2
Real Estate 4,508,000 Hung Poo Real Estate
Development Corp. 8,842,211 7,750,098 0.8
Trans- 5,745,000 Yang Ming Marine Transport 7,827,476 5,109,349 0.5
portation
Marine
Total Investments in Taiwan 49,776,635 42,487,846 4.2
<PAGE>
Thailand Banking 982,000 Bangkok Bank Public Co., Ltd.
(Registered Shares) 6,522,676 4,970,451 0.5
1,600,000 Thai Farmers Bank Company
Limited 'Foreign' 6,539,906 5,559,507 0.6
------------ -------------- ------
13,062,582 10,529,958 1.1
Building 50,000 Siam Cement Public Company
Products Limited 'Foreign' 1,482,104 815,321 0.1
1,047,800 Siam City Cement Public Company
Limited 'Foreign' 5,194,943 3,698,118 0.3
------------ -------------- ------
6,677,047 4,513,439 0.4
Telecommuni- 1,498,000 TelecomAsia Corporation Public
cations Company Ltd. 'Foreign' 3,247,616 1,209,056 0.1
Television 458,000 BEC World Public Company Limited 4,827,825 2,957,264 0.3
Total Investments in Thailand 27,815,070 19,209,717 1.9
Total Investments in the
Pacific Basin/Asia 403,315,517 336,614,175 33.4
SHORT-TERM Face
SECURITIES Amount
Commercial US$ 27,433,000 General Motors Acceptance Corp.,
Paper* 6.50% due 10/01/1997 27,433,000 27,433,000 2.7
Total Investments in
Short-Term Securities 27,433,000 27,433,000 2.7
Total Investments $942,301,910 1,004,525,114 99.7
============
Other Assets Less Liabilities 2,790,713 0.3
-------------- ------
Net Assets $1,007,315,827 100.0%
============== ======
Net Asset Value: Class A--Based on net assets of $479,182,501
and 29,163,471 shares outstanding $ 16.43
==============
Class B--Based on net assets of $387,139,699
and 23,881,778 shares outstanding $ 16.21
==============
Class C--Based on net assets of $71,224,704
and 4,406,260 shares outstanding $ 16.16
==============
Class D--Based on net assets of $69,768,923
and 4,256,593 shares outstanding $ 16.39
==============
<PAGE>
<FN>
*Commercial Paper is traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the Fund.
(a)American Depositary Receipts (ADR).
(b)Global Depositary Receipts (GDR).
(c)Warrants entitle the Fund to purchase a predetermined number of
shares of stock at a predetermined price until the expiration date.
</TABLE>
EQUITY PORTFOLIO CHANGES
For the Quarter Ended September 30, 1997
Additions
ALFA, S.A. de C.V. (Class A)
Amoy Properties Limited
BEC World Public Company Limited
Bashinformsvyaz
Beijing Datang Power Generation Company
Ltd. (Class H)
Billiton PLC
Billiton PLC (ADR)
C.A. La Electricidad de Caracas
S.A.I.C.A.--S.A.C.A.
Cheng Loong Company
Chung Hwa Pulp Corporation
City Telecom (H.K.) Ltd.
Companhia Anonima Nacional Telefonos
de Venezuela S.A. (CANTV)(ADR)
Companhia Paranaense de Energia S.A.--
Copel (ADR)
E. Sun Commercial Bank
EIH Limited (GDR)
Fomento Economico Mexicano, S.A. de C.V.
(Femsa)(ADR)
Huaxin Cement Co., Ltd. (Class B)
Hung Poo Real Estate Development Corp.
Indian Hotels Company Ltd. (GDR)
Jiangxi Copper Company Ltd. (Class H)
Korea Electric Power Corp.
Moscow City Telephone Network
*NIF Drugi S.A.
*NIF Eugeniusza Kwiatkowskieg S.A.
*NIF Foksal S.A.
<PAGE>
*NIF Fortuna S.A.
*NIF Hetman S.A.
*NIF Jedenasty S.A.
*NIF Kazimierza Wielkigo S.A.
*NIF Magna Polonia S.A.
*NIF Octava S.A.
*NIF Pierwszy S.A.
*NIF Trzeci S.A.
*NIF Victoria S.A.
*NIF Zachodni S.A.
Nizhny Novgorod Telephone
Northern Electric Telekomunikasyon
A.S. (NETAS)
P.T. Semen Gresik 'Foreign'
Philippine Long Distance Telephone Co.
Philippine Long Distance Telephone Co.
(ADR)
Qingling Motors Company (Class H)
Reliance Industries Ltd. (GDR)
San Miguel Corp. (Class B)
Sasol Limited
Sudamtex de Venezuela S.A.C.A. (ADR)
Taiwan Pulp & Paper Corp.
Telekom Malaysia BHD
Thai Farmers Bank Company
Limited 'Foreign'
Tsingtao Brewery Co., Ltd. (Class H)
Unified Energy Systems (GDR)
Yapi ve Kredi Bankasi A.S.
Yuen Foong Yu Paper Manufacturing
Company, Ltd.
Deletions
Anglo American Corp. of South Africa,
Ltd. (ADR)
Banco Nacional S.A. (Preferred)
Beatrix Mines Ltd.
Blue Square Chain Stores Properties &
Investments Ltd.
Centrais Eletricas Brasileiras S.A.--
Eletrobras
Centrais Eletricas Brasileiras S.A.--
Eletrobras (Preferred)
China Overseas Land & Investment Co.
Commerce Asset Holding BHD
Companhia Siderurgica Nacional S.A.
<PAGE>
De Beers Centenary AG
De Beers Consolidated Mines Ltd. (ADR)
Fiat S.p.A.
Hang Lung Development Company
Hellenic Telecommunication
Organization S.A.
Hume Industries (Malaysia) BHD
Ingwe Coal Corporation Ltd.
Larsen & Toubro Ltd. (GDR)
Malayan Banking BHD
Malaysian Airline System BHD
NIF 3 Trinity Fund
*NIF Drugi S.A.
*NIF Eugeniusza Kwiatkowskieg S.A.
*NIF Foksal S.A.
*NIF Fortuna S.A.
*NIF Hetman S.A.
*NIF Jedenasty S.A.
*NIF Kazimierza Wielkigo S.A.
*NIF Magna Polonia S.A.
*NIF Octava S.A.
*NIF Pierwszy S.A.
*NIF Trzeci S.A.
*NIF Victoria S.A.
*NIF Zachodni S.A.
Nylex (Malaysia) BHD
OYL Industries BHD
P.T. Bimantra Citra
Philips Electronics N.V.
Polish National Investment Fund
Public Bank BHD 'Foreign'
Renong BHD
Rostelecom--RDC (Preferred)(ADR)
[FN]
*Added and deleted in the same quarter.
<PAGE>
PORTFOLIO INFORMATION
Ten Largest Equity Holdings Percent of
As of September 30, 1997 Net Assets
Grupo Televisa, S.A. de C.V. (GDR) 3.7%
Telecomunicacoes Brasileiras S.A.--Telebras* 3.2
Companhia Cervejaria Brahma S.A.
PN (Preferred)* 2.3
Petroleo Brasileiro S.A.--Petrobras (Preferred) 2.3
Grupo Carso, S.A. de C.V.* 2.1
Yacimientos Petroliferos Fiscales S.A. (ADR) 2.1
Hellenic Bottling Co. S.A. 1.9
Cifra, S.A. de C.V. 'C' 1.9
Amoy Properties Limited 1.9
Gedeon Richter Ltd. (GDR)* 1.8
[FN]
*Includes combined holdings.
