MERRILL
LYNCH
DEVELOPING
CAPITAL
MARKETS
FUND, INC.
Annual Report June 30, 1994
Investing in emerging market securities involves a number
of risk factors and special considerations, including restrictions
on foreign investments and on repatriation of capital invested in
emerging markets, currency fluctuations, and potential price
volatility and less liquidity of securities traded in emerging
markets. In addition, there may be less publicly available
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.
Custodian Transfer Agent
The Chase Manhattan Financial Data Services,
Bank, N.A. Inc.
Global Securities Services 4800 Deer Lake Drive East
Chase Metro Tech Center Jacksonville, FL 32246-6484
Brooklyn, NY 11245 (800) 637-3863
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.
<PAGE>
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
June 30, 1994
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX: GRAPHIC AND
IMAGE MATERIALS. ITEM 1.
DEAR SHAREHOLDER
During the fiscal year ended June 30,
1994, Merrill Lynch Developing Capital
Markets Fund, Inc.'s total return was
+28.73%, compared to a 37.16% gain
for the unmanaged MSCI Emerging
Markets Free Index. The markets in
which the Fund invests benefited
from declining interest rates in the
major economies, the shift of insti-
tutional investor assets from the
mature markets to emerging markets,
the improving prospects for the US
economic recovery, and the largely
successful structural reforms in
developing countries.
<PAGE>
The Fund's performance lagged that
of the MSCI Emerging Markets Free
Index principally because we were
overweighted in Mexico and Europe.
In 1993, there were significant benefits
from being overweighted in Mexico,
and the stock market was spurred on
by the passage of the North American
Free Trade Agreement. However, in
1994 our weighting worked against us
as the Chiapas uprising and the
Colosio assassination raised concerns
about the political situation and slow
economic growth depressed the stock
market. Our overweighted positions
in Greece and Portugal also had a
negative impact on performance
during the first half of 1994. However,
the portfolio's performance was
enhanced by profit-taking in the
Asian markets and by our relatively
large cash position during a portion
of the period.
During the quarter ended June 30, the
Fund's total return was -7.71%,
compared to a 1.44% decline for the
unmanaged MSCI Emerging Markets
Free Index. The poor performance
of global emerging markets during
the quarter resulted from lessened
liquidity for shares as US monetary
policy has progressively tightened,
increasing political uncertainties in
various parts of the world, and the
growing consensus that the major
economies now will have very little
growth through the rest of 1994. The
latter moderates the potential for
export growth in emerging countries
and may reduce the flow of invest-
ments from the mature countries.
<PAGE>
Key Developments & Activities
The declines in the world's equity
markets virtually across-the-board
provided selective buying oppor-
tunities in emerging market stocks.
As we have stated previously, we
believe that performance will be
determined more by company funda-
mentals and less by speculation,
liquidity and momentum. We are
therefore investing worldwide mainly
on a stock-by-stock, or bottom-
up, basis.
During the June quarter, we partici-
pated in the initial public offering
of Kerevitas Gida Sanayi Ve Ticaret
A.S. This Turkish company produces
canned and frozen foods and exports
a substantial portion of its products.
The devaluations of the Turkish
lira this year will strengthen the
company's export results. Its food
products are sold throughout Europe,
the United States and Japan.
In May we purchased ten-year global
bonds issued by the Philippine Long
Distance Telephone Co., the dominant
telecommunications firm in the Phil-
ippines. These dollar-denominated
bonds offer an attractive 10.625%
coupon. In addition, we expect to
benefit from capital gains as the
country's improving internal situation
reduces the political risk premium.
<PAGE>
We added to our investment in Usinas
Siderurgicas de Minas Gerais-
Usiminas S.A., which has been one
of our largest Brazilian holdings.
A leading producer of flat steel, it
is reputed to be one of the best-
managed industrial companies in
Brazil, despite its having been
privatized as recently as 1991. The
company was founded in 1956 as the
Japanese government's first industrial
joint venture after World War II. It
has benefited from the transfer of
technology from Japan, which contin-
ues to be its largest export market.
Investment Outlook
Our visits to a large number of com-
panies in The People's Republic of
China reaffirmed the long-term attrac-
tions of this market, but we remain
cautious on Asia. We plan to increase
investments in Latin America,
Morocco and Hungary, but stock selec-
tion will predominate over market
selection.
In Conclusion
We are pleased to report that as of
July 1, 1994, Merrill Lynch Developing
Capital Markets Fund, Inc. can be
purchased with either an initial sales
charge (Class A Shares) or a contin-
gent deferred sales charge (Class B
Shares). If you were a shareholder
prior to July 1, you now automatically
own Class A Shares. We thank you for
your continued investment in Merrill
Lynch Developing Capital Markets
Fund, Inc., and we look forward to
reviewing our outlook and strategy
with you in our next report to
shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Grace Pineda)
Grace Pineda
Vice President and Portfolio Manager
July 29, 1994
<PAGE>
PERFORMANCE DATA
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.
Total Return
Based on a
$10,000
Investment
GRAPIC MATERIAL APPEARS HERE. SEE APPENDIX: GRAPHIC AND IMAGE MATERIALS.
ITEM 2.
<TABLE>
Average Annual
Total Return
<CAPTION>
% Return Without % Return With
Period Covered Sales Charge Sales Charge*
<S> <C> <C>
Year Ended 6/30/94 +28.73% +20.36%
Inception (9/1/89) through 6/30/94 +13.60 +12.03
<FN>
*Assuming maximum sales charge. Maximum sales charge is 6.5%.
</TABLE>
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance
Summary
<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
1/1/94--6/30/94 16.80 14.61 -- -- -13.04
------ ------
Total $0.606 Total $1.611
Cumulative total return as of 6/30/94: +85.13%**
<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
6/30/94 3/31/94 6/30/93 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Developing Capital Markets Fund, Inc. $14.61 $15.83 $11.62 +28.00%(1) - 7.71%
ML Developing Capital Markets Fund, Inc.--Total Return +28.73(2) - 7.71
<FN>
*Investment results shown for the 3-month and 12-month periods are before the deduction of any sales charges.
(1)Percent change includes reinvestment of $0.278 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.069 per share ordinary income dividends and $0.278 per share
capital gains distributions.
</TABLE>
<PAGE>
PORTFOLIO INFORMATION
Ten Largest Equity Holdings Percent of
As of June 30, 1994 Net Assets
Telefonos de Mexico, S.A. de C.V.(ADR) 4.6%
Jardine Matheson Holdings, Ltd. 2.6
Cheung Kong Holdings Ltd. 2.4
Amway Asia Pacific Ltd. 2.3
Tolmex, S.A. de C.V.'B' 2.0
Usinas Siderurgicas de Minas Gerais--Usiminas S.A. 1.9
Grupo Carso, S.A. de C.V.'A' 1.9
Groupe Omnium Nord Africain 1.7
Maruichi (Malaysia) Steel Tube BHD 1.6
Bangkok Bank Ltd.'Foreign' 1.4
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Held/ Value Percent of
AFRICA Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Morocco Banking 5,000 Banque Marocaine du Commerce Exterieur $ 132,685 $ 194,661 0.0%
150,000 Wafa Bank 5,810,251 5,339,266 1.3
------------ ------------ ------
5,942,936 5,533,927 1.3
Building & 163,154 Groupe Omnium Nord Africain 6,686,860 6,805,645 1.7
Construction
Building Materials 10,000 Les Ciments de l'Oriental 340,025 342,603 0.1
Total Investments in Morocco 12,969,821 12,682,175 3.1
South Beverage 45,000 South African Breweries Ltd. 950,625 798,750 0.2
Africa
Mining 245,000 De Beers Consolidated Mines Ltd.(ADR)(b) 5,809,096 5,451,250 1.4
Total Investments in South Africa 6,759,721 6,250,000 1.6
Total Investments in Africa 19,729,542 18,932,175 4.7
<PAGE>
EUROPE
Austria Banking 20,500 Creditanstalt-Bankverein AG 786,450 1,311,633 0.3
Building & 4,000 Bau Holding AG 362,527 400,895 0.1
Construction
Oil 16,500 Unternehmensgruppe OMV AG 1,039,188 1,300,805 0.3
2,062 Unternehmensgruppe OMV AG (New Shares) 125,481 130,067 0.0
------------ ------------ ------
1,164,669 1,430,872 0.3
Textiles 18,000 Lenzing AG 916,404 2,015,034 0.5
Asch 3,600,000 Lenzing AG, Convertible Bond,
5.25% due 12/31/2001 324,793 322,148 0.1
------------ ------------ ------
1,241,197 2,337,182 0.6
Transportation 26,400 Jenbacher Transportsysteme AG 1,588,046 489,020 0.1
Utilities 12,500 Energie-Versorgung Niederosterreich AG(EVN) 989,417 1,529,083 0.4
Total Investments in Austria 6,132,306 7,498,685 1.8
Czech Banking 13,500 Komercni Banka 2,034,490 1,187,544 0.3
Republic
Electrical Equipment 9,206 Podnik Vypocetni Techniky(PVT) 1,903,926 1,068,958 0.3
Food 43,000 Ceska General Food 4,520,734 4,387,755 1.1
Paper 60,807 SEPAP 3,025,696 2,139,585 0.5
Total Investments in the Czech Republic 11,484,846 8,783,842 2.2
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Shares Held/ Value Percent of
(concluded)Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Greece Banking 15,780 Credit Bank S.A. $ 613,712 $ 629,609 0.2%
84,650 Ergo Bank(Registered)S.A. 3,038,469 3,146,378 0.8
------------ ------------ ------
3,652,181 3,775,987 1.0
Beverage 52,500 Hellenic Bottling Co. S.A.(Bearer) 818,772 1,514,805 0.4
Building & 55,730 Michaniki S.A. 1,320,551 2,181,451 0.5
Construction 5,060 Michaniki S.A.(Preferred) 195,004 161,406 0.0
48,830 Titan Cement S.A. 1,960,315 1,568,877 0.4
------------ ------------ ------
3,475,870 3,911,734 0.9
Financial Services 45,130 Etba Leasing S.A. 1,640,708 981,829 0.2
Food 62,940 J. Boutari & Son S.A.(Bearer) 1,088,749 462,600 0.1
63,504 Delta Dairy S.A.(Ordinary) 1,671,986 2,000,336 0.5
41,172 Delta Dairy S.A.(Preferred) 1,170,377 985,638 0.2
6,600 Katselis Sons S.A. 56,182 44,213 0.0
------------ ------------ ------
3,987,294 3,492,787 0.8
Total Investments in Greece 13,574,825 13,677,142 3.3
Hungary Food 54,807 Pick Szeged Reszvenytarsasag(GDS)(a)(d) 2,800,401 3,256,084 0.8
Insurance 225,000 Pharmauti Gyogyszer es Elelmiszeripari
Reszvenytarsasag(d) 2,587,500 2,587,500 0.6
Retail Stores 1,342,000 FOTEX RT--Fotex Elso Amerikai--Magyar
Fotoszolgaltatasi Reszvenytarsasag 6,101,168 5,584,161 1.4
Total Investments in Hungary 11,489,069 11,427,745 2.8
Latvia Transportation 70,000 ++Baltic International USA, Inc. 470,400 297,500 0.1
70,000 ++Baltic International USA, Inc.
(Warrants)(c) 19,600 13,125 0.0
------------ ------------ ------
490,000 310,625 0.1
Total Investments in Latvia 490,000 310,625 0.1
<PAGE>
Poland Appliances & 89,000,000 Swarzedzkie Fabryki Mebli S.A. 2,102,193 650,156 0.2
Household Durables
Banking 27,000,000 Wielkopolski Bank Kredytowy 1,795,589 1,022,272 0.3
Electrical Equipment 15,000,000 Elektrim Towarzystwo Handlowe S.A. 1,916,544 564,588 0.1
Food 40,000 International Fast Food Corp. 267,500 205,000 0.1
Total Investments in Poland 6,081,826 2,442,016 0.7
Portugal Banking 66,600 Banco Comercial Portugues, S.A.(ADR)(b) 959,270 807,525 0.2
352,212 Banco Comercial Portugues, S.A.
(Registered) 4,850,549 4,380,962 1.1
77,000 Banco Totta E Acores, S.A. 1,657,285 1,410,560 0.4
------------ ------------ ------
7,467,104 6,599,047 1.7
Beverage 29,100 Uniao Cervejaria, S.A.(UNICER) 790,773 716,749 0.2
Building & 72,600 Efacec S.A. 1,363,120 1,028,202 0.3
Construction 72,600 Efacec S.A.(New Shares) 1,238,401 1,028,202 0.3
82,300 Soares da Costa S.A. 1,477,775 1,519,813 0.4
172,200 Sociedade de Empreitadas Somague, S.A. 1,342,194 1,643,535 0.4
------------ ------------ ------
5,421,490 5,219,752 1.4
Leisure & 3,500 Estoril-Sol S.A. 26,263 25,905 0.0
Entertainment
Retail 62,600 Jeronimo Martins S.A. 2,895,368 4,047,028 1.0
10,000 Sonae Investimentos S.A. 112,457 166,872 0.0
------------ ------------ ------
3,007,825 4,213,900 1.0
Total Investments in Portugal 16,713,455 16,775,353 4.3
Russia Telecommunications 39,450 Petersburg Long Distance Corp.(ADR)(b) 301,256 325,462 0.1
Total Investments in Russia 301,256 325,462 0.1
<PAGE>
Turkey Banking 5,098,000 Yapi Kredi Bankasi A.S. 1,914,651 425,447 0.1
Beverage 502,400 Ege Biracilik Ve Malt Sanayii A.S. 472,057 1,193,311 0.3
Food 650,000 ++Kerevitas Gida Sanayi Ve Ticaret A.S. 474,164 1,272,669 0.3
Multi-Industry 766,000 Dogan Sirketler Grubu Holding A.S. 927,803 248,326 0.1
Retail 507,000 Migros Turk A.S. 357,126 1,448,339 0.4
Steel 12,500,000 Izmir Demir Celik Sanayii A.S. 948,829 712,165 0.2
Total Investments in Turkey 5,094,630 5,300,257 1.4
Total Investments in Europe 71,362,213 66,541,127 16.7
LATIN
AMERICA
Argentina Automobiles 267,991 Compania Interamericana de Automoviles S.A.
(CINA) 4,032,563 2,953,809 0.7
Banking 138,000 Banco de Galicia y Buenos Aires S.A. 1,408,096 1,375,771 0.3
252,148 Banco Frances del Rio de la Plata S.A. 1,426,566 1,894,900 0.5
------------ ------------ ------
2,834,662 3,270,671 0.8
Energy 1,551,800 Astra Compania Argentina de Petroleo S.A. 3,240,628 3,078,721 0.8
205,000 Transportadora de Gas del Sur S.A.(d) 2,815,251 2,434,375 0.6
------------ ------------ ------
6,055,879 5,513,096 1.4
Telecommunications 200,000 Telecom Argentina Stet--France Telecom S.A. 983,748 1,038,076 0.3
50,000 Telecom Argentina Stet--France Telecom S.A.
(ADR)(b) 3,065,372 2,637,500 0.7
34,472 Telefonica de Argentina S.A.(ADR)(b)(d) 1,095,078 2,007,994 0.5
------------ ------------ ------
5,144,198 5,683,570 1.5
Total Investments in Argentina 18,067,302 17,421,146 4.4
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
LATIN
AMERICA Shares Held/ Value Percent of
(concluded)Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Brazil Automotive 91,300 ++Clark Automotive Products Corp. S.A. $ 1,006,260 $ 947,237 0.2%
Banking 679,339,024 Banco Bradesco S.A. 4,552,110 3,874,507 1.0
48,967,626 Banco Nacional S.A. 970,334 993,410 0.2
------------ ------------ ------
5,522,444 4,867,917 1.2
Beverage 5,644,200 Companhia Cervejaria Brahma PN(Preferred) 1,094,100 1,307,078 0.3
574,872 ++Companhia Cervejaria Brahma S.A.
(Warrants)(c) 14,956 733 0.0
------------ ------------ ------
1,109,056 1,307,811 0.3
Electrical Equipment 10,763,900 Light--Servicios de Eletricidade S.A. 3,549,779 2,455,611 0.6
Mining 29,037,000 Companhia Vale do Rio Doce S.A. PN(CVRD)
(Preferred) 2,704,603 3,012,068 0.7
Oil & Related 52,873,333 Petroleo Brasileiro S.A. 7,250,168 5,302,512 1.3
Retail 1,500,000 Mesbla S.A. 350,350 310,048 0.1
Steel 6,970,300,000 Usinas Siderurgicas de Minas
Gerais--Usiminas S.A. 5,007,302 7,523,923 1.9
Telecommunications 42,000 Telecomunicacoes Brasileiras S.A.--Telebras
(ADR)(b)(d) 1,471,188 1,606,500 0.4
54,205,810 Telecomunicacoes Brasileiras S.A.--
Telebras ON 1,682,509 1,566,309 0.4
240,591 Telecomunicacoes Brasileiras S.A.--
Telebras PN(Preferred) 13,688 9,532 0.0
------------ ------------ ------
3,167,385 3,182,341 0.8
Utilities 14,942,400 Centrais Eletricas Brasileiras S.A.--
Eletrobras (Preferred) 2,723,730 3,374,494 0.8
Total Investments in Brazil 32,391,077 32,283,962 7.9
<PAGE>
Chile Apparel 6,890,201 Bata Chile S.A. 1,945,911 1,896,941 0.5
Utilities 17,000 Compania de Telefonos de Chile S.A.(ADR)(b) 2,037,586 1,453,500 0.4
Total Investments in Chile 3,983,497 3,350,441 0.9
Mexico Banking 380,500 Grupo Financiero Banamex Accival, S.A.
de C.V.--Banacci 3,682,726 2,424,425 0.6
Beverage 50,000 Fomento Economico Mexicano, S.A. de C.V.
(FEMSA)(ADR)(b)(d) 195,000 204,375 0.0
447,500 Fomento Economico Mexicano, S.A. de C.V.
(FEMSA)(Ordinary) 1,780,336 1,848,083 0.5
61,900 Grupo Embotellador de Mexico, S.A. de C.V. 1,747,469 1,562,975 0.4
------------ ------------ ------
3,722,805 3,615,433 0.9
Building & 155,000 Grupo Tribasa, S.A. de C.V.(ADR)(b) 3,974,192 3,429,375 0.9
Construction 806,500 Tolmex, S.A. de C.V.'B' 5,928,905 8,160,162 2.0
------------ ------------ ------
9,903,097 11,589,537 2.9
Capital Goods 394,875 Cementos Mexicanos, S.A. de C.V.(Class B)
(ADR)(b)(d) 2,952,927 2,615,028 0.6
89,437 Cementos Mexicanos, S.A. de C.V.(Class B) 1,607,850 1,162,681 0.3
------------ ------------ ------
4,560,777 3,777,709 0.9
Electrical 287,800 Grupo Empresarial Fenix, S.A. de C.V.
(ELEKTRA)'L'Shares 2,404,684 2,644,534 0.7
Financial Services 66,700 Grupo Financiero Bancomer, S.A. de C.V.
(ADR)(b)(d) 2,224,175 1,467,400 0.4
75,500 Grupo Financiero (GBM) Atlantico, S.A.
de C.V. 1,528,241 1,510,000 0.4
195,250 ++Servicios Financieros Quadrum, S.A. de C.V.
(ADR)(b) 2,452,895 3,001,969 0.7
------------ ------------ ------
6,205,311 5,979,369 1.5
Food 1,600,000 Grupo Herdez, S.A. de C.V.'A' 1,450,009 1,864,307 0.5
Glass Manufacturing 56,000 Vitro, S.A. de C.V. 387,158 355,162 0.1
21,000 Vitro, S.A. de C.V.(ADR)(b) 442,658 399,000 0.1
------------ ------------ ------
829,816 754,162 0.2
<PAGE>
Health & 225,000 Kimberly-Clark de Mexico, S.A. de C.V. 3,291,367 4,168,142 1.0
Personal Care
Leisure 825,700 Grupo Carso, S.A. de C.V.'A' 6,725,536 7,477,578 1.9
105,000 ++Grupo Carso, S.A. de C.V.(ADR)(b)(d) 2,035,998 1,837,500 0.5
80,000 Grupo Posadas, S.A. de C.V.(ADR)(b)(d) 1,172,100 1,320,000 0.3
93,000 Grupo Situr, S.A. de C.V.(ADR)(b)(d) 1,700,594 2,418,000 0.6
458,000 Grupo Situr, S.A. de C.V.'B'(Ordinary) 1,419,439 1,202,419 0.3
------------ ------------ ------
13,053,667 14,255,497 3.6
Metals 450,000 Grupo Sidek, S.A. de C.V. 2,041,234 1,922,124 0.5
94,700 Grupo Simec, S.A. de C.V.(ADR)(b) 1,632,457 1,834,812 0.5
745,000 Grupo Simec, S.A. de C.V.(Ordinary) 670,192 723,024 0.2
------------ ------------ ------
4,343,883 4,479,960 1.2
Retail 2,375,000 Cifra, S.A. de C.V.'C' 4,796,743 5,534,661 1.4
Utilities 331,250 Telefonos de Mexico, S.A. de C.V.(ADR)(b) 19,736,780 18,508,594 4.6
Total Investments in Mexico 77,981,665 79,596,330 20.0
Panama Beverage 49,700 Panamerican Beverages, Inc.(Class A) 1,529,728 1,199,012 0.3
Total Investments in Panama 1,529,728 1,199,012 0.3
Peru Banking 138,774 Banco de Credito de Peru S.A. 94,494 253,122 0.1
Mining 61,268 Southern Peru Copper Corp. S.A. 200,896 243,060 0.1
Total Investments in Peru 295,390 496,182 0.2
Venezuela Building & 59,555 Corporacion Ceramica Carabobo CA--S.A.C.A.
Construction (Class A) 170,883 49,380 0.0
79,777 Corporacion Ceramica Carabobo CA--S.A.C.A.
(Class B) 131,693 70,156 0.0
------------ ------------ ------
302,576 119,536 0.0
Building Materials 32,236 Venezolana de Cementos S.A.C.A.(VENCEMOS) 42,076 46,167 0.0
Utilities 1,549,014 C.A. La Electricidad de Caracas
S.A.I.C.A.--S.A.C.A. 4,219,681 2,483,093 0.6
Total Investments in Venezuela 4,564,333 2,648,796 0.6
Total Investments in Latin America 138,812,992 136,995,869 34.3
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
MIDDLE Shares Held/ Value Percent of
EAST Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Israel Financial Services 633,600 Ampal-American Israel Corp. $ 7,841,524 $ 4,276,800 1.1%
543,600 ++Ampal-American Israel Corp.(Warrants)(c) 0 271,800 0.1
------------ ------------ ------
7,841,524 4,548,600 1.2
Total Investments in Israel 7,841,524 4,548,600 1.2
Pakistan Banking 190,060 Bank of Punjab 500,391 442,840 0.1
Electrical Equipment 198,875 Karachi Electric Supply Corp. Ltd. 130,550 338,185 0.1
Total Investments in Pakistan 630,941 781,025 0.2
Total Investments in the Middle East 8,472,465 5,329,625 1.4
PACIFIC
BASIN/ASIA
Australia Media/Publishing 458,300 Nine Network Australia Ltd. 949,114 1,422,460 0.4
Merchandising 265,000 Amway Asia Pacific Ltd. 7,549,106 9,208,750 2.3
Paper & Pulp 438,800 Spicers Paper Ltd. 808,666 801,139 0.2
Total Investments in Australia 9,306,886 11,432,349 2.9
China Appliances & 676,000 Shenzhen China Bicycles'B'Co.(Holdings)Ltd. 501,114 542,269 0.1
Household Durables
Total Investments in China 501,114 542,269 0.1
<PAGE>
Hong Kong Apparel 3,172,000 Top Form International Ltd. 909,258 459,651 0.1
Automotive 1,744,000 Sime Darby(Hong Kong)Ltd. 2,993,417 2,685,160 0.7
Banking 186,000 Hong Kong & Shanghai Banking Corp.
Holdings PLC 2,012,703 2,033,510 0.5
Broadcasting & 1,772,000 Ming Pao Enterprise Corp. Ltd. 870,697 1,375,598 0.3
Publishing
Diversified 1,360,000 Jardine Matheson Holdings, Ltd. 9,627,936 10,469,660 2.6
Electrical Equipment 358,000 Johnson Electric Holdings Ltd. 897,892 838,375 0.2
Financial Services 11,005,000 Winton Holdings Ltd. 3,849,116 3,417,260 0.8
Food 9,039,000 C.P. Pokphand Co. Ltd.(Ordinary) 2,895,870 2,455,932 0.6
Multi-Industry 1,500,000 Jardine Strategic Holdings, Ltd. 5,455,767 5,686,376 1.4
Real Estate 2,200,000 Cheung Kong Holdings Ltd. 10,484,759 9,606,676 2.4
2,616,984 Hong Kong Resorts International Ltd. 3,065,333 2,454,798 0.6
5,894,000 Sun Hung Kai Properties Ltd. 3,575,674 2,974,072 0.7
------------ ------------ ------
17,125,766 15,035,546 3.7
Textiles 7,740,000 United Success International Holdings Ltd. 1,029,241 731,039 0.2
Utilities 2,510,000 The Hong Kong and China Gas Co. 5,090,848 4,806,314 1.2
Utilities--Electric 975,500 China Light & Power Co., Ltd. 5,056,996 4,985,412 1.2
Total Investments in Hong Kong 57,815,507 54,979,833 13.5
India Aluminum 60,000 Hindalco Industries Ltd.(GDS)(a)(d) 831,833 1,770,000 0.4
26,500 Hindalco Industries Ltd.(Ordinary) 496,362 781,524 0.2
30,000 ++Hindalco Industries Ltd.(Warrants)(c) 134,167 412,500 0.1
------------ ------------ ------
1,462,362 2,964,024 0.7
Broadcasting & 555,000 Videocon International Ltd.(ADR)(b)(d) 4,908,750 4,095,900 1.0
Publishing
Building & 31,250 The Associated Cement Co. Ltd. 2,499,847 3,915,591 1.0
Construction
Business & Public 65,000 Western Paques(India)Ltd. 233,861 518,093 0.1
Services
Chemicals 360,500 Mardia Chemicals Ltd. 1,567,246 1,724,055 0.4
<PAGE>
Energy 482,000 Bombay Suburban Electric Supply Co. Ltd. 3,020,772 3,211,797 0.8
$ 140,000 Bombay Suburban Electric Supply Co. Ltd.,
Convertible Debentures, 15.00%
due 3/01/1995 267,793 267,814 0.1
------------ ------------ ------
3,288,565 3,479,611 0.9
Total Investments in India 13,960,631 16,697,274 4.1
Indonesia Broadcasting & $ 745,000 P.T. Surya Citra Television, 4.00%
Publishing due 7/01/1997 745,000 741,275 0.2
Tobacco 420,000 P.T. Gudang Garam 2,010,276 1,819,606 0.5
Total Investments in Indonesia 2,755,276 2,560,881 0.7
Korea Automotive 27,026 Dong Ah Tire Industries 1,248,434 1,661,847 0.4
Banking 330,000 Bank of Seoul 3,820,202 3,218,012 0.8
69,507 Bank of Seoul(New Shares) 491,307 677,801 0.2
------------ ------------ ------
4,311,509 3,895,813 1.0
Financial Services 69,050 Hanyang Securities Corp. 1,619,850 1,200,870 0.3
Food 15,560 Lotte Confectionery Corp. 1,412,542 1,700,969 0.4
Pharmaceuticals 66,012 Choong Wae Pharmaceutical Corp. 2,678,277 3,247,298 0.8
14,138 Choong Wae Pharmaceutical Corp.(New Shares) 506,305 507,563 0.1
------------ ------------ ------
3,184,582 3,754,861 0.9
Retail Stores 12,132 Shinsegae Department Store 390,439 1,175,372 0.3
Telecommunications 6,817 Korea Mobile Telecommunications Corp. 1,328,813 3,544,840 0.9
Utilities 118,470 Korea Electric Power Corp. 4,008,319 4,417,386 1.1
Total Investments in Korea 17,504,488 21,351,958 5.3
Malaysia Building & 561,000 IJM Corp. BHD 2,018,065 1,874,885 0.5
Construction
Financial Services 1,053,333 Commerce Asset-Holdings BHD 2,206,151 3,742,828 0.9
1,000 Idris Hydraulic BHD 3,068 1,767 0.0
1,653,000 Public Bank BHD 'Foreign' 1,642,679 3,146,505 0.8
------------ ------------ ------
3,851,898 6,891,100 1.7
<PAGE>
Steel 2,484,000 Maruichi(Malaysia)Steel Tube BHD 5,701,653 6,631,761 1.6
Telecommunications 228,000 Leader Universal Holdings BHD 339,992 1,217,425 0.3
Total Investments in Malaysia 11,911,608 16,615,171 4.1
</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> <C> <S> <C> <C> <C>
New Beverage 1,000,000 D.B. Group Ltd. $ 384,967 $ 469,892 0.1%
Zealand
Transportation 1,600,000 Ports of Auckland Ltd. 1,991,529 2,046,112 0.5
Total Investments in New Zealand 2,376,496 2,516,004 0.6
Philip- Beverage 216,000 San Miguel Corp.'B' 501,254 1,088,060 0.3
pines
Electric Utilities 44,679 Manila Electric Co. (MERALCO)'B' 165,929 562,655 0.1
Telecommunications $ 20,000,000 Philippine Long Distance Telephone Co.,
10.625% due 6/02/2004 20,390,000 19,750,000 4.9
Total Investments in the Philippines 21,057,183 21,400,715 5.3
Singapore Banking 561,269 ++United Overseas Bank Ltd. (Warrants) (c) 1,307,919 2,302,547 0.5
Total Investments in Singapore 1,307,919 2,302,547 0.5
Sri Lanka Building & 262,500 Lankan Tiles 337,398 362,199 0.1
Construction
Diversified 90,625 Aitken Spence 518,247 559,903 0.1
Total Investments in Sri Lanka 855,645 922,102 0.2
<PAGE>
Thailand Banking 754,600 Bangkok Bank Ltd.'Foreign' 5,061,874 5,728,086 1.4
Insurance 159,000 Ayudhya Insurance Co.'Foreign' 1,187,126 1,715,142 0.4
Telecommunications 14,300 United Communication Industry Public
Co. Ltd. 130,577 270,803 0.1
Total Investments in Thailand 6,379,577 7,714,031 1.9
Total Investments in the
Pacific Basin/Asia 145,732,330 159,035,134 39.2
<CAPTION>
SHORT-TERM
SECURITIES Face Amount
<S> <S> <C> <S> <C> <C> <C>
United Commercial Paper* $ 13,510,000 General Electric Capital Corp.,
States 4.30% due 7/01/1994 13,510,000 13,510,000 3.3
Total Investments in Short-Term Securities 13,510,000 13,510,000 3.3
Total Investments $397,619,542 400,343,930 99.6
============
Other Assets Less Liabilities 1,651,817 0.4
------------ ------
Net Assets $401,995,747 100.0%
============ ======
<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.
++Non-income producing security.
(a)Global Depositary Shares(GDS).
(b)American Depositary Receipt(ADR).
(c)Warrants entitle the Fund to purchase a predetermined number of shares of
Common Stock. The purchase price and number of shares are subject to adjustment
of certain conditions until the expiration date.
(d)Restricted securities. The value of the Fund's investment in restricted securities
was approximately $27,621,000, representing 6.87% of net assets.
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of June 30, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$397,619,542) (Note 1a) $400,343,930
Foreign cash 2,473,712
Cash 197,741
Deposit for trade settlement 334,401
Receivables:
Capital shares sold $ 1,074,539
Dividends 501,775
Securities sold 438,349
Interest 226,736 2,241,399
------------
Deferred organization expenses (Note 1g) 4,362
Prepaid registration fees and other assets (Note 1g) 63,164
------------
Total assets 405,658,709
------------
Liabilities: Payables:
Securities purchased 1,925,708
Capital shares redeemed 1,176,574
Investment adviser (Note 2) 339,563 3,441,845
------------
Accrued expenses and other liabilities 221,117
------------
Total liabilities 3,662,962
------------
Net Assets: Net assets $401,995,747
============
Net Assets Common Stock, $0.10 par value, 200,000,000 shares authorized $ 2,751,386
Consist of: Paid-in capital in excess of par 365,509,472
Undistributed investment income-net 564,507
Undistributed realized capital gains on investments and foreign currency
transactions--net 30,521,564
Unrealized appreciation on investments and foreign currency transactions--net 2,648,818
------------
Net assets--Equivalent to $14.61 per share based on 27,513,862 shares of
capital outstanding $401,995,747
============
Maximum offering price per share ($14.61/.935) $ 15.63
============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended June 30, 1994
<S> <S> <C> <C>
Investment Dividends (net of $75,801 foreign withholding tax) $ 5,002,484
Income Interest and discount earned (net of $329,092 foreign withholding tax) 1,111,136
(Notes 1c & Other income 2,509
1d): ------------
Total income 6,116,129
------------
Expenses: Investment advisory fees (Note 2) 3,033,147
Custodian fees 633,035
Transfer agent fees (Note 2) 205,494
Printing and shareholder reports 107,754
Accounting services (Note 2) 101,404
Foreign tax expense 96,715
Registration fees (Note 1g) 93,793
Professional fees 75,061
Directors' fees and expenses 30,870
Amortization of organization expenses (Note 1g) 26,165
Other 24,370
------------
Total expenses 4,427,808
------------
Investment income--net 1,688,321
------------
Realized & Realized gain (loss) from:
Unrealized Investments--net $ 37,400,204
Gain(Loss) on Foreign currency transactions--net (1,010,111) 36,390,093
Investments & ------------
Foreign Change in unrealized appreciation/depreciation on:
Currency Investments--net (12,722,686)
Transactions Foreign currency transactions--net 84,801 (12,637,885)
- --Net(Notes ------------ ------------
1b, 1d & 3): Net realized and unrealized gain on investments and foreign currency transactions 23,752,208
------------
Net Increase in Net Assets Resulting from Operations $ 25,440,529
============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended June 30,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 1,688,321 $ 1,546,983
Realized gain (loss) on investments and foreign currency transactions--net 36,390,093 (1,811,821)
Change in unrealized appreciation/depreciation on investments and foreign currency
transactions--net (12,637,885) 6,852,494
------------ ------------
Net increase in net assets resulting from operations 25,440,529 6,587,656
------------ ------------
Dividends & Investment income--net (902,496) (1,572,465)
Distributions Realized gain on investments--net (4,808,440) (8,062,455)
To Share- ------------ ------------
holders Net decrease in net assets resulting from dividends and distributions to shareholders (5,710,936) (9,634,920)
(Note 1h): ------------ ------------
Capital Share Net increase in net assets derived from capital share transactions 239,981,410 18,914,752
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase in net assets 259,711,003 15,867,488
Beginning of year 142,284,744 126,417,256
------------ ------------
End of year* $401,995,747 $142,284,744
============ ============
<FN>
*Undistributed investment income--net $ 564,507 $ (221,318)
============ ============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Sept. 1, 1989++
For the Year Ended June 30, to June 30,
Increase (Decrease) in Net Asset Value: 1994 1993++++ 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.62 $ 11.92 $ 10.43 $ 11.58 $ 9.60
Operating -------- -------- -------- -------- --------
Performance: Investment income--net(1) .11 .12 .15 .24 .24
Realized and unrealized gain (loss) on investments
--net(1) 3.23 .42 1.59 (.75) 1.88
-------- -------- -------- -------- --------
Total from investment operations 3.34 .54 1.74 (.51) 2.12
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.07) (.14) (.17) (.15) (.13)
Realized gain on investments--net (.28) (.70) (.08) (.49) (.01)
-------- -------- -------- -------- --------
Total dividends and distributions (.35) (.84) (.25) (.64) (.14)
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.61 $ 11.62 $ 11.92 $ 10.43 $ 11.58
======== ======== ======== ======== ========
Total Based on net asset value per share 28.73% 5.17% 17.02% (4.45%) 22.29%+++
Investment ======== ======== ======== ======== ========
Return:**
Ratios to Expenses 1.46% 1.71% 1.64% 1.77% 1.71%*
Average ======== ======== ======== ======== ========
Net Assets: Investment income (loss)--net .63% (.04%) 1.73% 1.98% 2.69%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $401,996 $142,285 $126,417 $111,947 $104,033
Data: ======== ======== ======== ======== ========
Portfolio turnover 66.85% 91.72% 71.05% 84.74% 64.53%
======== ======== ======== ======== ========
<FN>
+++Aggregate total investment return.
(1)Foreign currency transaction amounts have been reclassified to conform to the
1994 presentation.
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Based on average number of shares outstanding during the year.
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Developing Capital Markets Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a non-diver-
sified, open-end management investment company. The following
is a summary of significant accounting policies followed by the Fund:
(a) Valuation of Securities--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the principal
market 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 prices obtained
from one or more dealers in the over-the-counter market prior to the
time of valuation. Portfolio securities which are traded both in the
over-the-counter market and on a stock exchange are valued
according to the broadest and most representative market. Options
written by the Fund are valued at the last asked price in the case of
exchange-traded options or, in the case of options traded in the
over-the-counter market, the average of the last asked price as
obtained from one or more dealers. Options purchased by the Fund
are valued at their last bid price in the case of exchange-traded
options or, in the case of options traded in the over-the-counter
market, the average of the last bid price as obtained from two or
more dealers. Other investments, including futures contracts and
related options, are stated at market value. Short-term securities
are valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Fund's Board of Directors.
(b) 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.
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.
<PAGE>
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 deliv-
ered, or committed or anticipated to be purchased by the Fund.
(c) Income Taxes--It is the Fund's policy to comply with the require-
ments of the Internal Revenue Code applicable to regulated invest-
ment companies and to distribute all of its taxable income to its
shareholders. Therefore, no Federal income tax provision is required.
Under the applicable foreign tax law, a withholding tax may be
imposed on interest, dividends and capital gains at various rates.
(d) Security Transactions and Investment Income--Security trans-
actions are recorded on the dates the transactions are entered into
(the trade dates). Dividend income is recorded on the ex-dividend
date, except that 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.
(e) Options--The Fund can 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 value of the option written.
When a security is sold through an exercise of an option, the
related premium received (or paid) is deducted from (or added to)
the basis of the security sold. When an option expires (or the Fund
enters into a closing transaction), the Fund realizes a gain or loss
on the option to the extent of the premiums received or paid
(or gain or loss to the extent the cost of the closing transaction
exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(f) Financial Futures Contracts--The Fund may purchase or sell stock
index futures contracts and options on such futures contracts. Upon
entering into a contract, the Fund deposits and maintains as collateral
such initial margin as required by the exchange on which the trans-
action 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 fluctua-
tion in value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Fund as unrealized gains
or losses. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
<PAGE>
(g) 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.
(h) Dividends and Distributions--Dividends and distributions paid
by the Fund are recorded on the ex-dividend dates.
(i) Basis of Consolidation--The accompanying consolidated financial
statements include the accounts of Inversiones en Mercado Accionario
de Valores Chile Limitada, a wholly-owned subsidiary, which primarily
invests in Chilean securities. Intercompany accounts and transac-
tions have been eliminated.
(j) Reclassification--Certain 1993 amounts have been reclassified
to conform to the 1994 presentation.
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"). Effective
January 1, 1994, the investment advisory business of MLAM was
reorganized from a corporation to a limited partnership. Both prior
to and after the reorganization, ultimate control of MLAM was vested
with Merrill Lynch & Co., Inc. ("ML & Co."). The general partner of
MLAM is Princeton Services, Inc., an indirect wholly-owned sub-
sidiary of ML & Co. The limited partners are ML & Co. and Merrill
Lynch Investment Management, Inc. ("MLIM"), which is also an
indirect wholly-owned subsidiary of ML & Co. The Fund has also
entered into a Distribution Agreement and a Distribution Plan with
Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"),
a wholly-owned subsidiary of MLIM.
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.
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.
<PAGE>
During the year ended June 30, 1994, MLFD earned underwriting
discounts of $589,253 and Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S") earned dealer concessions of $9,594,931 on sales
of the Fund's shares. MLPF&S also received $116,527 in commissions
on the execution of portfolio security transactions during the year.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLIM, FDS, MLFD, MLPF&S, and/or ML & Co., Inc.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended June 30, 1994 were $404,119,381 and $178,087,326,
respectively.
Net realized and unrealized gains (losses) as of June 30, 1994 were
as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $37,399,996 $2,724,388
Short-term investments 208 --
Foreign currency transactions (1,010,111) (75,570)
----------- ----------
Total $36,390,093 $2,648,818
=========== ==========
As of June 30, 1994, net unrealized appreciation for Federal income
tax purposes aggregated $2,724,388, of which $43,106,966 related
to appreciated securities and $40,382,578 related to depreciated
securities. The aggregate cost of investments at June 30, 1994 for
Federal income tax purposes was $397,619,542.
<PAGE>
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Year Ended Dollar
June 30, 1994 Shares Amount
Shares sold 20,121,319 $316,594,559
Shares issued to shareholders in reinvestment
of dividends & distributions to shareholders 332,847 4,929,176
----------- ------------
Total issued 20,454,166 321,523,735
Shares redeemed (5,183,789) (81,542,325)
----------- ------------
Net increase 15,270,377 $239,981,410
=========== ============
For the Year Ended Dollar
June 30, 1993 Shares Amount
Shares sold 2,825,803 $ 31,697,736
Shares issued to shareholders in reinvestment
of dividends & distributions to shareholders 744,456 7,999,187
---------- ------------
Total issued 3,570,259 39,696,923
Shares redeemed (1,927,987) (20,782,171)
---------- ------------
Net increase 1,642,272 $ 18,914,752
========== ============
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded)
5. Commitments:
At June 30, 1994, the Fund entered into forward exchange contracts
under which it had agreed to sell foreign currencies with values of
approximately $89,000.
6. Subsequent Event:
On April 19, 1994, a second class of shares, Class B, was created
by action of the Fund's Board of Directors. The Class B Shares com-
menced operations on July 1, 1994. Class A Shares are sold with a
front-end sales charge and Class B Shares may be subject to a
contingent deferred sales charge.
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Developing Capital Markets Fund, Inc.:
We have audited the accompanying consolidated statement of assets
and liabilities, including the consolidated schedule of investments,
of Merrill Lynch Developing Capital Markets Fund, Inc. and its
subsidiary as of June 30, 1994, the related consolidated statements
of operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
consolidated financial highlights for each of the years in the four-
year period then ended and the period September 1, 1989 (com-
mencement of operations) to June 30, 1990. These financial state-
ments and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at June 30,
1994 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such consolidated financial statements and consoli-
dated financial highlights present fairly, in all material respects, the
financial position of Merrill Lynch Developing Capital Markets
Fund, Inc. and its subsidiary as of June 30, 1994, the results of their
operations, the changes in their net assets, and the consolidated
financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche
Princeton, New Jersey
July 29, 1994
</AUDIT-REPORT>
<PAGE>
IMPORTANT TAX INFORMATION (unaudited)
The following information summarizes all per share distributions paid by
Merrill Lynch Developing Capital Markets Fund, Inc. during the fiscal
year ended June 30, 1994:
<TABLE>
<CAPTION>
Record Payable Qualifying Domestic Non-Qualifying Domestic Foreign Source Total Ordinary Foreign Taxes Long-Term
Date Date Ordinary Income Ordinary Income Income Income Paid or Withheld Capital Gains
<C> <C> <C> <C> <C> <C> <C> <C>
8/03/93 8/11/93 $0.002911 $0.022002 $0.044111 $0.069024 $0.017166 $ --
12/14/93 12/22/93 $ -- $ -- $ -- $ -- $ -- $0.278020
</TABLE>
The qualifying domestic ordinary income qualifies for the dividends
received deduction for corporations.
Substantially all of the foreign taxes paid or withheld represent
taxes incurred by the Fund on dividends received by the Fund from
foreign sources. Foreign taxes paid or withheld should be included
in taxable income with an offsetting deduction from gross income or
as a credit for taxes paid to foreign governments. You should consult
your tax counsel or other tax advisers regarding the appropriate
treatment of foreign taxes paid.
Please retain this information for your records.
<PAGE>
PORTFOLIO CHANGES
For the Quarter Ended June 30, 1994
Additions
Baltic International USA, Inc.(Ordinary)
Baltic International USA, Inc.(Warrants)
Bank of Seoul(New Shares)
China Light & Power Co., Ltd.
Choong Wae Pharmaceutical Corp.
(New Shares)
Clark Automotive Products Corp. S.A.
*Coflexip
Efacec S.A.(New Shares)
Grupo Carso, S.A. de C.V.(ADR)
Grupo Embotellador de Mexico, S.A. de C.V.
Grupo Financiero(GBM)Atlantico,
S.A. de C.V.
Grupo Sidek, S.A. de C.V.
Grupo Tribasa, S.A. de C.V.(ADR)
The Hong Kong and China Gas Co.
Jardine Matheson Holdings, Ltd.
Jardine Strategic Holdings, Ltd.
Kerevitas Gida Sanayi Ve Ticaret A.S.
Lenzing AG, 5.25% due 12/31/2001
Mesbla S.A.
P.T. Surya Citra Television, 4.00% due 7/01/1997
Panamerican Beverages, Inc.(Class A)
Pharmauti Gyogyszer es
Elelmiszeripari Reszvenytarsasag
Philippine Long Distance Telephone Co.,
10.625% due 6/02/2004
Telecomunicacoes Brasileiras S.A.--
Telebras PN(Preferred)
Transportadora de Gas del Sur S.A.
Unternehmensgruppe OMV AG(New Shares)
Vitro, S.A. de C.V.(ADR)
Vitro, S.A. de C.V.
<PAGE>
Deletions
CIN--Corporacao Industrial do Norte S.A.
*Coflexip
Coflexip(ADR)
Empresas ICA Sociedad Controladora,
S.A. de C.V.
Fiat Group S.p.A.(Preferred)(Warrants)
Finance One PLC, 5.75% due 6/17/2003
Golden Plus Holdings BHD
Hang Lung Development Co. Ltd.(Warrants)
La Rinascente S.p.A.
Lonrho PLC
P.T. Hanjaya Mandala Sampoerna
Parkway Holdings Ltd.
Sino Land Co., Ltd.
Sino Land Co., Ltd.(1995 Warrants)
Tan & Tan Development BHD
Tat Konservecili A.S.
[FN]
*Added and deleted in the same quarter.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, 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>
APPENDIX: GRAPHIC AND IMAGE MATERIALS.
ITEM 1.
Asset Allocation as a Percentage* of Net Assets as of June 30, 1994
A map illustrating the following percentages:
Peru 0.2% Mexico 20.0%
Panama 0.3 Chile 0.9
Venezuela 0.6 Argentina 4.4
Brazil 7.9 Morocco 3.1
Portugal 4.3 South Africa 1.6
Hungary 2.8 Turkey 1.4
Austria 1.8 Israel 1.2
Poland 0.7 Sri Lanka 0.2
Czech Republic 2.2 Malaysia 4.1
Latvia 0.1 Indonesia 0.7
Russia 0.1 Hong Kong 13.5
Greece 3.3 Philippines 5.3
Pakistan 0.2 Australia 2.9
India 4.1 New Zealand 0.6
Thailand 1.9
Singapore 0.5
China 0.1
Korea 5.3
[FN]
*Total may not equal 100%.
<PAGE>
ITEM 2:
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund
compared to growth of an investment in the Morgan Stanley Capital
International EAFE Index. Beginning and ending values are:
9/01/89** 6/94
ML Developing Capital Markets
Fund, Inc.*++ $ 9,350 $17,309
Morgan Stanley Capital International
EAFE Index++++ $10,000 $11,881
[FN]
* Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
** Commencement of Operations.
++ ML Developing Capital Markets Fund, Inc. invests in
securities, principally equities, of issuers in countries
having smaller capital markets.
++++This unmanaged Index measures the total returns of developed
foreign stock markets in Europe, Asia and the Far East.
