MERRILL LYNCH
DEVELOPING
CAPITAL MARKETS
FUND, INC.
FUND LOGO
Annual Report
June 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.
<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
June 30, 1997
Map Depicting the Fund's Asset Allocation As a Percentage* of Net Assets
as of June 30, 1997
<PAGE>
BRAZIL 13.5%
PORTUGAL 3.9%
FRANCE 0.0%++
HUNGARY 4.5%
CZECH REPUBLIC 0.6%
NETHERLANDS 0.6%
POLAND 1.3%
RUSSIA 4.4%
GREECE 2.0%
TURKEY 0.8%
PAKISTAN 0.1%
INDIA 7.6%
THAILAND 1.6%
CHINA 1.5%
SOUTH KOREA 2.8%
MEXICO 8.4%
CHILE 2.3%
ARGENTINA 3.3%
ITALY 1.0%
EGYPT 1.2%
SOUTH AFRICA 8.7%
ZIMBABWE 1.3%
ISRAEL 2.2%
MALAYSIA 8.3%
INDONESIA 6.4%
HONG KONG 4.3%
TAIWAN 1.2%
AUSTRALIA 0.9%
[FN]
++Holdings are less than 0.1%.
*Total may not equal 100%.
DEAR SHAREHOLDER
During the three-month period ended June 30, 1997, total returns for
Merrill Lynch Developing Capital Markets Fund, Inc.'s Class A, Class B,
Class C and Class D Shares were +9.40%, +9.09%, +9.05% and
+9.21%, respectively. The unmanaged Morgan Stanley Capital
International Emerging Markets Free (Ex-Taiwan) Index rose 7.83%
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--7 of this report to shareholders.) Beneficial
to the Fund's performance were its overweighted positions in
Hungary, Russia and India, whose markets performed well over the
June quarter with total returns of +25.98%, +44.80% and +28.41%,
respectively. The Fund's stock selection in South Africa also
contributed to performance, and our underweighted position in
Thailand, whose market fell 25.02% during the June quarter, limited
any negative effects to the Fund.
<PAGE>
Fiscal Year in Review
For the 12-month period ended June 30, 1997, the total returns for
Merrill Lynch Developing Capital Markets Fund, Inc.'s Class A, Class B,
Class C and Class D Shares were +17.66%, +16.39%, +16.37% and
+17.30%, respectively. The unmanaged Morgan Stanley Capital
International Emerging Markets Free (Ex-Taiwan) Index rose only
11.36% during the same 12 months. Beneficial to the Fund's
performance were its overweighted positions in Hungary, Russia,
Egypt and Zimbabwe, whose markets had total returns of +83.70%,
+110.61%, +99.28% and +52.03%, respectively. The Fund's
underweighted positions in both the Philippines and Thailand, whose
markets fell 16.12% and 59.06%, respectively, also limited any
negative effects to the Fund's performance during the same period.
Investment Review and Activities
During the quarter ended June 30, 1997, performance was strong in
most of the markets we invest in with the exception of Malaysia,
Poland, the Czech Republic and Thailand.
Within the Middle East region, the Israeli market had one of the
highest returns, rising 12.82% despite investor concern about the
scandals surrounding Prime Minister Netanyahu and the violent
outbreaks at the beginning of April. As local investors began to
focus on favorable developments such as the narrowing of the budget
deficit, the strong performance in the industrial sector and the
ongoing privatizations in the financial sector, trading volumes and
share prices picked up. One of our largest holdings is Bank Hapoalim
Ltd., the largest bank in Israel. With the majority of its shares
still held by the government, its potential privatization is likely
to enable cost reductions and rationalization which would enhance
its profitability. The bank has assets of $48 billion and indirectly
controls 8% of Israel's gross domestic product through its
investments which include Clal Industries Ltd. and Koor Industries
Ltd., Israel's largest industrial conglomerates.
All of the Latin American markets performed well, having benefited
from the improving economic fundamentals, especially in Argentina
and Mexico, declining interest rates in Mexico and Chile, increased
fund flows and reasonable stock valuations. In addition to the
positive domestic economic developments in Mexico, the performance
of stocks there had tended to follow changing investor expectations
for US interest rates and the periods of volatility which ensue.
During the June quarter, these two factors combined to drive an
18.58% rise in the market. We added to our investment in Grupo
Televisa, S.A. de C.V., the media conglomerate in Mexico, based on
the expectation that the company's revenues from advertising would
flourish as the economy recovered.
<PAGE>
In Brazil, the main impetus to the market's 26.48% rise was the
quickening pace of reforms, long awaited in this country. Among
these were the privatization of the mining conglomerate Companhia de
Vale do Rio Doce S.A. (CVRD) and the partial sale of the integrated
electric power company for the state of Minas Gerais, Companhia
Energetica de Minas Gerais S.A. (CEMIG). In addition, new oil and
gas legislation has been submitted to the Brazilian congress which
should benefit the petroleum company, Petroleo Brasilerio S.A.--
Petrobras, one of the Fund's largest holdings with a weighting of
2.9% of net assets at June 30, 1997.
We have maintained a large position in the Indian stock market since
the start of the year, a position that has contributed substantially
to performance. During the June quarter, this market's return of
+28.41% topped that of the major Asian markets. Behind this
performance were the prospect of improving industrial production,
declining interest rates as inflation has been well-contained, high
dividend yields and low stock valuations, and ebbing concerns
regarding political change.
In Thailand, the market's decline accelerated during the June
quarter, dropping 25.02% over the three-month period ended June 30,
1997 and 11.42% in June alone. Behind this decline were heightened
speculative pressure on the currency, the possibility of further
political turmoil, and investor concerns about the long-term
prospects of Thai companies. We maintain a small position in the
Thai stock market, 1.6% of net assets at June 30, 1997.
Among the emerging European stock markets, the Hungarian and Russian
markets showed the highest gains during the June quarter. The
Hungarian stock market, in which we have maintained a substantial
investment (4.5% of net assets at June 30, 1997), rose 25.98% during
the June quarter. The economic outlook is improving in Hungary, and
we added to the Fund's investments in Magyar TavKozlesi
Reszvenytarsasag (Matav) and OTP Bank to seek to enhance the
Fund's participation in this turnaround. Matav is the national
telecommunications operator, and OTP is a leading commercial bank.
The Russian market rose 44.80% as foreign investors became
increasingly comfortable with the country's leadership and
considered the likelihood of its addressing the widespread problem
of non-payment throughout the Russian economic system. Rostelecom--
RDC, the dominant provider of domestic and international long
distance telephone service in Russia, is one of the Fund's main
investments in this country.
In Conclusion
We thank you for your interest in Merrill Lynch Developing Capital
Markets Fund, Inc., and we look forward to discussing economic,
stock market and portfolio developments in our upcoming quarterly
report to shareholders.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Grace Pineda)
Grace Pineda
Vice President and Portfolio Manager
August 4, 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>
Total Return
Based on a
$10,000
Investment
Class A Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to growth of an investment in the Morgan
Stanley Capital International EAFE Index and the Morgan Stanley
Capital International Emerging Markets Free Index. Beginning and
ending values are:
9/01/89** 6/97
ML Developing Capital Markets Fund, Inc.++--
Class A Shares* $ 9,475 $23,300
Morgan Stanley Capital International
EAFE Index++++ $10,000 $15,437
Morgan Stanley Capital International
Emerging Markets Free Index++++++ $10,000 $36,843
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the Morgan
Stanley Capital International EAFE Index and the Morgan Stanley
Capital International Emerging Markets Free Index. Beginning and
ending values are:
7/01/94** 6/97
ML Developing Capital Markets Fund, Inc.++--
Class B Shares* $10,000 $12,731
Morgan Stanley Capital International
EAFE Index++++ $10,000 $12,993
Morgan Stanley Capital International
Emerging Markets Free Index++++++ $10,000 $12,077
<PAGE>
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the Morgan Stanley Capital International EAFE Index
and the Morgan Stanley Capital International Emerging Markets Free
Index. Beginning and ending values are:
10/21/94** 6/97
ML Developing Capital Markets Fund, Inc.++--
Class C Shares* $10,000 $11,249
ML Developing Capital Markets Fund, Inc.++--
Class D Shares* $ 9,475 $10,887
Morgan Stanley Capital International
EAFE Index++++ $10,000 $12,563
Morgan Stanley Capital International
Emerging Markets Free Index++++++ $10,000 $10,185
[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.
++++++This unmanaged Index measures the total returns of emerging
foreign stock markets in Europe, Asia and the Far East.
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 6/30/97 +17.66% +11.48%
Five Years Ended 6/30/97 +12.45 +11.25
Inception (9/1/89) through 6/30/97 +12.18 +11.41
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
<PAGE>
Year Ended 6/30/97 +16.39% +12.39%
Inception (7/1/94)
through 6/30/97 + 8.96 + 8.39
[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 6/30/97 +16.37% +15.37%
Inception (10/21/94)
through 6/30/97 + 4.47 + 4.47
[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 6/30/97 +17.30% +11.14%
Inception (10/21/94)
through 6/30/97 + 5.30 + 3.21
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<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
1996 13.18 14.53 0.027 0.364 +13.30
1/1/97--6/30/97 14.53 17.23 -- -- +18.58
------ ------
Total $1.286 Total $2.660
<PAGE>
Cumulative total return as of 6/30/97: +145.90%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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
1996 13.11 14.45 0.027 0.222 +12.17
1/1/97--6/30/97 14.45 17.04 -- -- +17.92
------ ------
Total $0.680 Total $0.758
Cumulative total return as of 6/30/97: +29.31%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<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
1996 13.08 14.41 0.027 0.231 +12.20
1/1/97--6/30/97 14.41 16.99 -- -- +17.90
------ ------
Total $0.680 Total $0.793
<PAGE>
Cumulative total return as of 6/30/97: +12.49%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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
1996 13.17 14.52 0.027 0.324 +13.00
1/1/97--6/30/97 14.52 17.19 -- -- +18.39
------ ------
Total $0.680 Total $0.980
Cumulative total return as of 6/30/97: +14.89%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
6/30/97 3/31/97 6 /30/96 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Developing Capital Markets Fund Class A Shares $17.23 $15.75 $15.05 +14.70%(1) +9.40%
ML Developing Capital Markets Fund Class B Shares 17.04 15.62 14.90 +14.58(1) +9.09
ML Developing Capital Markets Fund Class C Shares 16.99 15.58 14.87 +14.47(1) +9.05
ML Developing Capital Markets Fund Class D Shares 17.19 15.74 15.02 +14.66(1) +9.21
ML Developing Capital Markets Fund Class A Shares--Total Return +17.66(2) +9.40
ML Developing Capital Markets Fund Class B Shares--Total Return +16.39(3) +9.09
ML Developing Capital Markets Fund Class C Shares--Total Return +16.37(4) +9.05
ML Developing Capital Markets Fund Class D Shares--Total Return +17.30(5) +9.21
<PAGE>
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.027 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.364 per share ordinary
income dividends and $0.027 per share captial gains distributions.
(3)Percent change includes reinvestment of $0.222 per share ordinary
income dividends and $0.027 per share captial gains distributions.
(4)Percent change includes reinvestment of $0.231 per share ordinary
income dividends and $0.027 per share captial gains distributions.
(5)Percent change includes reinvestment of $0.324 per share ordinary
income dividends and $0.027 per share captial gains distributions.
</TABLE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (in US Dollars)
<CAPTION>
Value Percent of
AFRICA Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
South Banking 250,000 Nedcor Ltd. (Ordinary) $ 4,281,780 $ 5,541,464 0.5%
Africa
Beverage 234,813 South African Breweries Ltd. 5,728,608 7,211,670 0.7
58,010 South African Breweries Ltd.
(ADR)(a) 1,332,782 1,778,007 0.2
26,250 South African Breweries Ltd. (ADR)
(a)(d) 667,538 804,563 0.1
-------------- -------------- ------
7,728,928 9,794,240 1.0
Coal 340,900 Ingwe Coal Corporation Ltd. 2,444,740 2,180,437 0.2
Diversified 1,313,000 Rembrandt Controlling Investments
Holdings Ltd. 8,992,935 8,687,693 0.9
1,091,000 Rembrandt Group Ltd. 11,504,518 11,646,317 1.1
156,400 Rembrandt Group Ltd. (ADR)(a) 1,676,679 1,657,840 0.2
-------------- -------------- ------
22,174,132 21,991,850 2.2
<PAGE>
Financial 31,850 Anglo American Corp. of South
Services Africa, Ltd.(ADR)(a) 1,980,464 1,914,981 0.2
1,607,800 First National Bank Holdings Ltd. 12,391,390 13,829,775 1.4
-------------- -------------- ------
14,371,854 15,744,756 1.6
Mining 282,500 Beatrix Mines Ltd. 2,492,063 1,280,409 0.1
107,900 De Beers Centenary AG 3,362,087 3,986,160 0.4
142,000 De Beers Consolidated Mines Ltd.
(ADR)(a) 3,858,078 5,236,250 0.5
981,600 Gencor Ltd. 4,304,244 4,524,799 0.4
1,065,700 Gencor Ltd. (ADR)(a) 4,580,886 4,729,044 0.5
37,420 Gold Fields of South Africa Ltd. 956,438 883,092 0.1
-------------- -------------- ------
19,553,796 20,639,754 2.0
Newspaper/ 602,500 Nasionale Pers Beperk (Class A) 5,878,869 6,943,234 0.7
Publishing
Retail 3,537,600 Pick'n Pay Stores Ltd. 4,031,809 5,305,620 0.5
122,912 Pick'n Pay Stores Ltd. (N Shares) 171,056 170,786 0.0
-------------- -------------- ------
4,202,865 5,476,406 0.5
Steel 2,768 South Africa Iron & Steel
Industrial Corp., Ltd. 2,483 1,831 0.0
Total Investments in South Africa 80,639,447 88,313,972 8.7
Zimbabwe Beverage & 8,705,803 Delta Corporation Ltd. 5,698,363 13,370,035 1.3
Tobacco
Total Investments in Zimbabwe 5,698,363 13,370,035 1.3
Total Investments in Africa 86,337,810 101,684,007 10.0
EUROPE
Czech Telecommunications 58,722 ++SPT Telecom A.S. 5,885,222 6,165,230 0.6
Republic
Total Investments in the Czech
Republic 5,885,222 6,165,230 0.6
France Utilities--Water 105,239 Compagnie Generale des Eaux S.A.
(Warrants)(c) 0 63,055 0.0
Total Investments in France 0 63,055 0.0
<PAGE>
Greece Banking 189,034 Ergo Bank S.A. (Ordinary) 7,040,882 11,360,216 1.1
Beverage 122,660 Hellenic Bottling Co. S.A. 2,854,032 4,536,758 0.5
Telecommunications 101,880 Hellenic Telecommunication
Organization S.A. 2,745,723 2,393,378 0.2
160,000 Hellenic Telecommunication
Organization S.A. (GDR)(b) 1,961,806 1,848,000 0.2
96,100 Hellenic Telecommunication
Organization S.A. (Rights)(e) 0 11,200 0.0
-------------- -------------- ------
4,707,529 4,252,578 0.4
Total Investments in Greece 14,602,443 20,149,552 2.0
Hungary Banking 491,929 OTP Bank (GDR)(b) 10,942,817 13,036,119 1.3
Health/Personal 98,330 Gedeon Richter Ltd. (GDR)(b) 3,797,770 9,046,360 0.9
Care 73,700 Gedeon Richter Ltd. (GDR)(b)(d) 2,433,751 6,780,400 0.7
-------------- -------------- ------
6,231,521 15,826,760 1.6
Oil & Related 61,000 Mol Magyar Olay-es Gazipari
Reszvenytarsasag (GDR)(b) 648,125 1,364,875 0.1
319,000 Mol Magyar Olay-es Gazipari
Reszvenytarsasag (GDR)(b)(d) 3,688,894 7,137,625 0.7
-------------- -------------- ------
4,337,019 8,502,500 0.8
Telecommunications 22,280 ++Magyar TavKozlesi Reszvenytarsasag
(Matav)(Ordinary)(d) 5,953,294 8,094,460 0.8
Total Investments in Hungary 27,464,651 45,459,839 4.5
Italy Automobiles 2,748,623 Fiat S.p.A. 8,277,807 9,894,461 1.0
Total Investments in Italy 8,277,807 9,894,461 1.0
Nether- Electronics 91,900 Philips Electronics N.V. 3,740,578 6,588,385 0.6
lands
Total Investments in the
Netherlands 3,740,578 6,588,385 0.6
Poland Automotive 309,611 T.C. Debica 5,492,554 6,361,870 0.6
Banking 665,104 Wielkopolski Bank Kredytowy S.A. 4,413,586 3,806,379 0.4
Electrical 174,300 Elektrim Spolka Akcyjna S.A. 1,435,914 1,517,498 0.1
Components
<PAGE>
Multi-Industry 237,271 ++NIF Piast S.A. Fund 958,975 671,726 0.1
99,091 NIF Progress Fund 404,212 310,696 0.0
64,390 NIF 3 Trinity Fund 187,915 188,172 0.0
16,220 ++Polish National Investment Fund 809,897 691,263 0.1
-------------- -------------- ------
2,360,999 1,861,857 0.2
Total Investments in Poland 13,703,053 13,547,604 1.3
Portugal Building Products 860,814 Cimpor-Cimentos de Portugal S.A. 18,823,734 20,070,818 2.0
Telecommunications 315,990 Portugal Telecom S.A. 10,631,199 12,752,396 1.3
156,300 Portugal Telecom S.A. (ADR)(a) 5,154,710 6,271,538 0.6
-------------- -------------- ------
15,785,909 19,023,934 1.9
Total Investments in Portugal 34,609,643 39,094,752 3.9
</TABLE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US Dollars)
<CAPTION>
EUROPE Value Percent of
(concluded) Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Russia Energy Sources 366,662 AO Mosenergo (ADR)(a) $ 10,743,290 $ 15,216,473 1.5%
2,025,000 ++Irkutskenergo 255,917 686,475 0.1
-------------- -------------- ------
10,999,207 15,902,948 1.6
Natural Gas 128,700 RAO Gazprom (ADR)(a)(d) 2,027,025 2,213,640 0.2
Oil & Related 144,900 Lukoil Oil Company (ADR)(a) 7,034,300 11,302,200 1.1
Telecommuni- 2,578,000 ++Rostelecom--RDC 10,079,828 10,002,640 1.0
cations 220,000 ++Rostelecom--RDC (d) 825,000 847,000 0.1
212,500 ++Rostelecom--RDC (Preferred)(ADR)(a) 601,375 521,687 0.0
-------------- -------------- ------
11,506,203 11,371,327 1.1
Utilities-- 927,100 ++Bashkirenergo 502,868 450,571 0.0
Electric 11,074,620 ++Unified Energy Systems 3,557,628 3,995,723 0.4
-------------- -------------- ------
4,060,496 4,446,294 0.4
Total Investments in Russia 35,627,231 45,236,409 4.4
Turkey Banking 46,180,300 Akbank T.A.S. (Ordinary) 3,329,388 3,967,647 0.4
Building 29,701,711 Akcansa Cimento A.S. 4,320,614 4,102,999 0.4
Products
Total Investments in Turkey 7,650,002 8,070,646 0.8
Total Investments in Europe 151,560,630 194,269,933 19.1
<PAGE>
LATIN
AMERICA
Argentina Oil & Related 1,332,144 Companhia Naviera Perez Companc
S.A.C.F.I.M.F.A. (Class B) 6,859,310 10,685,505 1.1
327,774 Yacimientos Petroliferos Fiscales
S.A. (ADR)(a) 8,807,711 10,079,050 1.0
-------------- -------------- ------
15,667,021 20,764,555 2.1
Telecommuni- 275,000 ++Nortel Inversora S.A. (ADR)(a) 7,939,750 7,459,375 0.7
cations 100,523 Telecom Argentina Stet--France
Telecom S.A. (ADR)(a) 4,771,715 5,277,457 0.5
-------------- -------------- ------
12,711,465 12,736,832 1.2
Total Investments in Argentina 28,378,486 33,501,387 3.3
Brazil Banking 861,174,679 Banco Bradesco S.A. (Preferred) 5,170,352 8,679,745 0.9
5,391,000 Banco Itau S.A. (Preferred) 2,854,141 3,044,801 0.3
42,567,626 ++Banco Nacional S.A. (Preferred) 892,993 40 0.0
-------------- -------------- ------
8,917,486 11,724,586 1.2
Beverage 30,667,513 Companhia Cervejaria Brahma S.A.
PN (Preferred) 14,476,455 23,360,298 2.3
24,500 Companhia Cervejaria Brahma S.A.
PN (Preferred) (ADR)(a) 358,433 375,156 0.0
-------------- -------------- ------
14,834,888 23,735,454 2.3
Oil & Related 105,965,049 Petroleo Brasileiro S.A.--
Petrobras (Preferred) 19,399,628 29,432,852 2.9
Steel 30,881,000 Companhia Siderurgica Nacional S.A. 943,627 1,018,147 0.1
926,190 Usinas Siderurgicas de Minas
Gerais --Usiminas S.A. (Preferred) 9,594,875 10,315,855 1.0
-------------- -------------- ------
10,538,502 11,334,002 1.1
Telecommuni- 191,671 Telecomunicacoes Brasileiras S.A.
cations --Telebras(ADR)(a) 16,015,719 29,086,074 2.9
168,431,403 Telecomunicacoes Brasileiras S.A.
--Telebras ON 8,671,392 22,843,460 2.2
-------------- -------------- ------
24,687,111 51,929,534 5.1
<PAGE>
Utilities-- 11,177,000 Centrais Eletricas Brasileiras
Electrical S.A.--Eletrobras 4,043,811 6,250,399 0.6
& Gas 3,890,000 Centrais Eletricas Brasileiras
S.A.--Eletrobras (Preferred) 1,454,583 2,323,521 0.3
-------------- -------------- ------
5,498,394 8,573,920 0.9
Total Investments in Brazil 83,876,009 136,730,348 13.5
Chile Telecommuni- 345,958 Compania de Telecomunicaciones de
cations Chile S.A. (ADR)(a) 9,136,095 11,416,614 1.1
300,000 ++Quinenco S.A. (ADR)(a) 5,665,560 5,550,000 0.5
-------------- -------------- ------
14,801,655 16,966,614 1.6
Utilities-- 242,736 Chilgener S.A. (ADR)(a) 7,057,718 6,796,608 0.7
Electric
Total Investments in Chile 21,859,373 23,763,222 2.3
Mexico Broadcast--Media 220,400 ++Grupo Televisa, S.A. de C.V.
(GDR)(b) 6,377,423 6,694,650 0.6
Building & 1,526,614 Apasco, S.A. de C.V. 6,977,237 10,913,993 1.1
Construction
Health/Personal 3,826,850 Kimberly-Clark de Mexico, S.A.
Care de C.V. (Series A) 10,217,228 15,268,867 1.5
Multi-Industry 1,995,894 Grupo Carso, S.A. de C.V. 'A' 11,922,837 13,892,126 1.4
348,900 Grupo Carso, S.A. de C.V. (ADR)(a) 4,028,200 4,710,150 0.4
-------------- -------------- ------
15,951,037 18,602,276 1.8
Retail 8,834,987 Cifra, S.A. de C.V. 'C' 13,399,774 14,122,635 1.4
Telecommunications 417,406 Telefonos de Mexico, S.A. de C.V.
(ADR)(a) 14,719,287 19,931,136 2.0
Total Investments in Mexico 67,641,986 85,533,557 8.4
Total Investments in
Latin America 201,755,854 279,528,514 27.5
MIDDLE
EAST
<PAGE>
Egypt Banking 168,430 Commercial International Bank
(Egypt) S.A.E. 1,992,666 3,524,760 0.3
248,789 Commercial International Bank
(Egypt) S.A.E. (GDR)(b) 2,954,369 5,125,053 0.5
-------------- -------------- ------
4,947,035 8,649,813 0.8
Building 153,095 Torah Portland Cement Company 4,351,308 3,875,252 0.4
Products
Total Investments in Egypt 9,298,343 12,525,065 1.2
</TABLE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US Dollars)
<CAPTION>
MIDDLE EAST Shares Held/ Value Percent of
(concluded) Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Israel Banking 4,974,330 Bank Hapoalim Ltd. $ 9,212,280 $ 10,346,761 1.0%
4,868,599 Bank Leumi Israel 7,014,411 7,378,511 0.8
-------------- -------------- ------
16,226,691 17,725,272 1.8
Merchandising 16,078 ++Blue Square Chain Stores
Properties & Investments Ltd. 96,958 156,439 0.0
Retail 1,387,600 Super-Sol Ltd. 3,741,902 4,448,994 0.4
Total Investments in Israel 20,065,551 22,330,705 2.2
Total Investments in the
Middle East 29,363,894 34,855,770 3.4
PACIFIC BASIN/
ASIA
Australia Merchandising 207,045 Amway Asia Pacific Ltd. 6,445,644 9,032,338 0.9
Total Investments in Australia 6,445,644 9,032,338 0.9
China Chemicals 440,000 ++Beijing Yanhua Petrochemical
Company Ltd. (ADR)(a) 5,059,120 5,060,000 0.5
Telecommuni- 6,606,000 Eastern Communications Co., Ltd.
cations (Class B) 5,747,207 9,750,456 1.0
Total Investments in China 10,806,327 14,810,456 1.5
<PAGE>
Hong Kong Food 23,545,000 C.P. Pokphand Co. Ltd. (Ordinary) 6,785,932 7,294,367 0.7
38,753,900 Tingyi (Cayman Islands)
Holdings, Co. 9,688,193 9,654,958 0.9
-------------- -------------- ------
16,474,125 16,949,325 1.6
Industrial 21,715,000 Sinocan Holdings Ltd. 8,217,244 10,721,830 1.1
Real Estate 3,700,900 China Overseas Land & Investment
Co. 1,862,948 2,985,830 0.3
2,249,100 Hang Lung Development Company 4,752,100 4,122,634 0.4
2,858,000 Henderson China Holding Ltd. 5,129,929 4,814,491 0.5
-------------- -------------- ------
11,744,977 11,922,955 1.2
Telecommunications 1,939,000 ++Smartone Telecommunications 4,065,347 4,405,225 0.4
Total Investments in Hong Kong 40,501,693 43,999,335 4.3
India Automobiles 37,500 Bajaj Auto Ltd. (GDR)(b) 1,293,750 1,288,125 0.1
Banking 978,964 State Bank of India 7,442,695 9,310,762 0.9
93,200 State Bank of India (GDR)(b)(d) 2,338,125 2,469,800 0.2
-------------- -------------- ------
9,780,820 11,780,562 1.1
Building Products 42,500 Associated Cement Companies Ltd. 1,640,597 1,725,542 0.2
Energy Sources 866,725 Bombay Suburban Electric Supply
Co. Ltd. 4,617,067 5,772,110 0.6
56,882 Bombay Suburban Electric Supply
Co. Ltd. (GDR)(b) 955,334 1,507,373 0.1
-------------- -------------- ------
5,572,401 7,279,483 0.7
Engineering 136,700 Larsen & Toubro Ltd. (GDR)(b) 1,845,087 2,358,075 0.2
Equipment
Financial 112,406 Housing Development Finance Corp. 9,283,077 12,828,109 1.3
Services 3,330,753 Industrial Credit & Investment
Corporation of India Ltd. 11,467,675 7,285,295 0.7
-------------- -------------- ------
20,750,752 20,113,404 2.0
Leisure & Tourism 410,875 East India Hotels Ltd. 4,640,089 4,995,964 0.5
Oil Services 847,000 Hindustan Petroleum Corporation
Ltd. 9,346,244 10,748,791 1.1
Recreation & 580,000 Suraj Diamonds Ltd. 1,522,715 269,126 0.0
Consumer Goods
<PAGE>
Telecommuni- 1,652,000 Mahanagar Telephone Nigram Ltd. 8,369,020 14,026,415 1.4
cations 24,000 ++Videsh Sanchar Nigam Ltd. (GDR)(b) 435,600 498,000 0.0
124,000 ++Videsh Sanchar Nigam Ltd.
(GDR)(b)(d) 2,046,000 2,573,000 0.3
-------------- -------------- ------
10,850,620 17,097,415 1.7
Textiles 678 Reliance Industries Ltd. 4,299 7,045 0.0
Total Investments in India 67,247,374 77,663,532 7.6
Indonesia Automobiles 2,296,500 P.T. Astra International 'Foreign' 7,071,851 9,450,617 0.9
Broadcasting US$ 3,900,000 P.T. Surya Citra Television,
& Publishing 4% due 7/01/1997 (Convertible) 4,111,085 4,665,570 0.4
US$ 745,000 P.T. Surya Citra Television,
4% due 7/01/1997 (Convertible)(d) 745,000 891,243 0.1
-------------- -------------- ------
4,856,085 5,556,813 0.5
Forest Products 4,977,050 P.T. Indah Kiat Pulp & Paper Corp.
& Paper 'Foreign' 2,925,564 2,918,640 0.3
419,120 P.T. Indah Kiat Pulp & Paper Corp.
'Foreign' (Warrants)(c) 0 145,454 0.0
-------------- -------------- ------
2,925,564 3,064,094 0.3
Insurance 3,902,000 P.T. Lippo Life Insurance 'Foreign' 4,782,530 4,616,564 0.5
Multi-Industry 5,118,000 P.T. Bimantara Citra 5,711,762 8,951,235 0.9
Real Estate 6,928,000 P.T. Ciputra Development 5,539,548 6,913,745 0.7
Telecommuni- 313,100 P.T. Indosat (ADR)(a) 9,166,338 9,373,431 0.9
cations 3,590,500 P.T. Telekomunikasi Indonesia 5,463,605 5,873,349 0.6
342,554 P.T. Telekomunikasi Indonesia
(ADR)(a) 10,113,958 11,133,005 1.1
-------------- -------------- ------
24,743,901 26,379,785 2.6
Total Investments in Indonesia 55,631,241 64,932,853 6.4
Malaysia Airlines 814,000 Malaysian Airline System BHD 2,301,094 2,032,016 0.2
Banking 3,592,200 Commerce Asset Holding BHD 10,658,807 9,465,519 0.9
144,500 Commerce Asset Holding BHD
(Rights)(f) 0 22,330 0.0
966,000 Malayan Banking BHD 9,975,017 10,143,440 1.0
1,000 Public Bank BHD 'Foreign' 2,016 1,561 0.0
-------------- -------------- ------
20,635,840 19,632,850 1.9
<PAGE>
Broadcasting 1,912,000 New Straits Times Press BHD 9,970,360 11,212,743 1.1
& Publishing
Building 645,000 Hume Industries (Malaysia) BHD 3,424,640 2,964,695 0.3
Materials
Chemicals 604,500 Nylex (Malaysia) BHD 1,586,821 1,029,976 0.1
</TABLE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) (in US Dollars)
<CAPTION>
PACIFIC BASIN/ Shares Held/ Value Percent of
ASIA Industries Face Amount Investments Cost (Note 1a) Net Assets
(concluded)
<S> <S> <C> <S> <C> <C> <C>
Malaysia Diversified 2,935,000 Magnum Corporation BHD $ 5,460,673 $ 4,419,305 0.4%
(concluded) Holdings 354,000 OYL Industries BHD 3,658,275 2,244,324 0.2
621,000 United Engineers (Malaysia) Ltd. 5,771,221 4,478,425 0.5
-------------- -------------- ------
14,890,169 11,142,054 1.1
Engineering & 1,065,000 Malaysian Resources Corp. BHD 3,698,194 2,932,896 0.3
Construction
Food 601,000 Nestle (Malaysia) BHD 4,659,797 4,500,892 0.4
Multi-Industry 149,000 Ekran BHD (Rights)(g) 0 11,808 0.0
2,525,000 Hicom Holdings BHD 5,991,165 4,782,462 0.5
5,534,000 Renong BHD 8,750,843 7,236,280 0.7
3,561,800 Sungei Way Holdings BHD 7,620,767 6,717,981 0.7
-------------- -------------- ------
22,362,775 18,748,531 1.9
Natural Gas 894,000 Petronas Gas BHD 3,724,209 3,259,024 0.3
Oil & Related 1,545,500 Petronas Dagangan BHD 4,054,663 3,674,367 0.4
Tobacco 305,000 Rothmans of Pall Mall (Malaysia)
BHD 3,201,767 2,997,187 0.3
Total Investments in Malaysia 94,510,329 84,127,231 8.3
Pakistan Chemicals-- 82,000 Fauji Fertilizer Co. Ltd. 170,811 161,284 0.0
Fertilizers
Electrical 16,227 ++Karachi Electric Supply Corp. Ltd. 10,630 4,818 0.0
Components
<PAGE>
Telecommuni- 1,405,000 Pakistan Telecommunications Corp. 1,489,569 1,068,884 0.1
cations
Total Investments in Pakistan 1,671,010 1,234,986 0.1
South Automotive 67,538 ++Dong Ah Tire Industries 3,636,374 4,017,215 0.4
Korea
Banking 1,432,520 Cho Hung Bank Co. Ltd. 11,874,409 9,730,141 1.0
209,033 ++Kookmin Bank (GDR)(b)(d) 3,464,599 4,546,468 0.4
-------------- -------------- ------
15,339,008 14,276,609 1.4
Chemicals 376,980 L.G. Chemical Ltd. 5,328,189 5,233,470 0.5
Electrical 5,367 Samsung Display Devices Co. 309,066 296,009 0.0
Components
Telecommuni- 130 ++SK Telecom Co. Ltd. 65,985 95,887 0.0
cations 482,039 ++SK Telecom Co. Ltd. (ADR)(a)(d) 7,346,241 4,850,517 0.5
-------------- -------------- ------
7,412,226 4,946,404 0.5
Total Investments in South Korea 32,024,863 28,769,707 2.8
Taiwan Banking 3,409,000 ++Bank Sinopac 3,926,912 3,251,926 0.3
Insurance 650,000 ++Fubon Insurance Co. 1,515,585 1,684,665 0.2
Transportation 5,745,000 Yang Ming Marine Transport 7,827,476 6,741,793 0.7
Marine
Total Investments in Taiwan 13,269,973 11,678,384 1.2
Thailand Banking 345,000 Bangkok Bank Public Co., Ltd.
(Registered Shares) 2,476,062 2,373,792 0.2
Building 50,000 Siam Cement Public Company Limited
Products 'Foreign' 1,482,104 865,868 0.1
731,400 Siam City Cement Public Company
Limited 'Foreign' 3,929,465 2,968,574 0.3
-------------- -------------- ------
5,411,569 3,834,442 0.4
Real Estate Chf 11,300,000 Bangkok Land Public Co., Ltd.,
3.125% due 3/31/2001 (Convertible) 3,974,841 1,821,705 0.2
US$ 1,565,000 Bangkok Land Public Co., Ltd.,
4.50% due 10/13/2003 (Convertible) 1,155,250 626,000 0.1
US$ 3,731,000 Hemaraj Land and Development
Public Co., Ltd., 3.50% due
9/09/2003 (Convertible) 3,662,886 3,693,690 0.3
US$ 3,013,000 Tanayong Public Co. Ltd., 3.50%
due 3/01/2004 (Convertible) 2,728,316 1,687,280 0.2
-------------- -------------- ------
11,521,293 7,828,675 0.8
<PAGE>
Telecommuni- 1,498,000 ++TelecomAsia Corporation Public
cations Company Ltd. 'Foreign' 3,247,616 1,809,528 0.2
Total Investments in Thailand 22,656,540 15,846,437 1.6
Total Investments in the Pacific
Basin/Asia 344,764,994 352,095,259 34.7
SHORT-TERM Face
SECURITIES Amount
Commercial US$ 20,000,000 General Electric Capital Corp.,
Paper* 5.50% due 7/09/1997 19,975,556 19,975,556 2.0
35,201,000 General Motors Acceptance Corp.,
6.25% due 7/01/1997 35,201,000 35,201,000 3.5
Total Investments in Short-Term
Securities 55,176,556 55,176,556 5.5
Total Investments $ 868,959,738 1,017,610,039 100.2
==============
Time Deposit++++ 4,600,000 0.4
Liabilities in Excess of Other Assets (6,496,880) (0.6)
-------------- ------
Net Assets $1,015,713,159 100.0%
============== ======
<FN>
*Commercial Paper is traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by the
Fund.
(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.
(d)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(e)The rights may be exercised until 7/08/1997.
(f)The rights may be exercised until 7/04/1997.
(g)The rights may be exercised until 7/01/1997.
++Non-income producing security.
++++This time deposit bears interest at 5.25% and matures on
7/01/1997.
<PAGE>
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of June 30, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$868,959,738) (Note 1a) $1,017,610,039
Cash 323,936
Foreign cash (Note 1c) 6,452,167
Time deposit 4,600,000
Receivables:
Securities sold $ 10,292,687
Dividends 4,756,778
Capital shares sold 3,144,426
Interest 438,515 18,632,406
--------------
Prepaid expenses and other assets (Note 1f) 46,287
--------------
Total assets 1,047,664,835
--------------
Liabilities: Payables:
Securities purchased 27,259,466
Capital shares redeemed 2,375,988
Investment adviser (Note 2) 840,698
Distributor (Note 2) 404,868 30,881,020
--------------
Accrued expenses and other liabilities 1,070,656
--------------
Total liabilities 31,951,676
--------------
Net Assets: Net assets $1,015,713,159
==============
Net Assets Class A Shares of Common Stock, $.10 par value, 100,000,000
Consist of: shares authorized $ 2,738,779
Class B Shares of Common Stock, $.10 par value, 100,000,000
shares authorized 2,338,450
Class C Shares of Common Stock, $.10 par value, 100,000,000
shares authorized 422,385
Class D Shares of Common Stock, $.10 par value, 100,000,000
shares authorized 428,554
Paid-in capital in excess of par 849,753,384
Undistributed investment income--net 5,431,534
Undistributed realized capital gains on investments and foreign
currency transactions--net 5,987,614
Unrealized appreciation on investments and foreign currency
transactions--net 148,612,459
--------------
Net assets $1,015,713,159
==============
<PAGE>
Net Asset Class A--Based on net assets of $471,789,710 and 27,387,793
Value: shares outstanding $ 17.23
==============
Class B--Based on net assets of $398,468,543 and 23,384,498
shares outstanding $ 17.04
==============
Class C--Based on net assets of $71,768,973 and 4,223,846
shares outstanding $ 16.99
==============
Class D--Based on net assets of $73,685,933 and 4,285,540
shares outstanding $ 17.19
==============
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended June 30, 1997
<S> <S> <C> <C>
Investment Income Dividends (net of $999,738 foreign withholding tax) $ 26,573,975
(Notes 1d & 1e): Interest and discount earned 4,599,900
--------------
Total income 31,173,875
--------------
Expenses: Investment advisory fees (Note 2) $ 8,154,217
Account maintenance and distribution fees--Class B (Note 2) 3,339,731
Custodian fees 2,100,785
Transfer agent fees--Class B (Note 2) 744,726
Transfer agent fees--Class A (Note 2) 665,366
Account maintenance and distribution fees--Class C (Note 2) 558,946
Accounting services (Note 2) 198,942
Registration fees (Note 1f) 160,078
Account maintenance fees--Class D (Note 2) 153,420
Printing and shareholder reports 150,537
Transfer agent fees--Class C (Note 2) 126,461
Transfer agent fees--Class D (Note 2) 112,323
Professional fees 99,637
Dividend fees 62,607
Directors' fees and expenses 36,857
Pricing fees 15,172
Other 34,628
--------------
Total expenses 16,714,433
--------------
Investment income--net 14,459,442
--------------
<PAGE>
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 44,061,153
(Loss) on Foreign currency transactions--net (1,382,848) 42,678,305
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 78,455,481
(Notes 1b, 1c, Foreign currency transactions--net 25,630 78,481,111
1e & 3): -------------- --------------
Net realized and unrealized gain on investments and foreign
currency transactions 121,159,416
--------------
Net Increase in Net Assets Resulting from Operations $ 135,618,858
==============
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year
Ended June 30,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 14,459,442 $ 7,784,215
Realized gain (loss) on investments and foreign currency
transactions--net 42,678,305 (19,609,742)
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net 78,481,111 94,930,812
-------------- --------------
Net increase in net assets resulting from operations 135,618,858 83,105,285
-------------- --------------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (6,147,015) (5,561,685)
Shareholders Class B (2,959,341) (1,835,760)
(Note 1g): Class C (523,137) (257,907)
Class D (823,715) (462,153)
Realized gain on investments--net:
Class A (2,372,022) --
Class B (2,299,701) --
Class C (380,478) --
Class D (369,485) --
-------------- --------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (15,874,894) (8,117,505)
-------------- --------------
Capital Share Net increase in net assets derived from capital share
Transactions transactions 146,098,497 121,555,763
(Note 4): -------------- --------------
Net Assets: Total increase in net assets 265,842,461 196,543,543
Beginning of year 749,870,698 553,327,155
-------------- --------------
End of year* $1,015,713,159 $ 749,870,698
============== ==============
<FN>
*Undistributed investment income--net (Note 1i) $ 5,431,534 $ 2,661,403
============== ==============
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have Class A
been derived from information provided in the
financial statements.
For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995 1994 1993++
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 15.05 $ 13.35 $ 14.61 $ 11.62 $ 11.92
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .36 .23 .24 .11 .12
Realized and unrealized gain (loss) on
investments and foreign currency transactions
--net 2.21 1.71 (.40) 3.23 .42
-------- -------- -------- -------- --------
Total from investment operations 2.57 1.94 (.16) 3.34 .54
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.28) (.24) (.04) (.07) (.14)
Realized gain on investments--net (.11) -- (.60) (.28) (.70)
In excess of realized gain on investments
--net -- -- (.46) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.39) (.24) (1.10) (.35) (.84)
-------- -------- -------- -------- --------
Net asset value, end of year $ 17.23 $ 15.05 $ 13.35 $ 14.61 $ 11.62
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 17.66% 14.82% (1.67%) 28.73% 5.17%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses 1.53% 1.54% 1.62% 1.46% 1.71%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net 2.32% 1.66% 1.56% .63% (.04%)
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $471,790 $342,884 $350,081 $401,996 $142,285
Data: ======== ======== ======== ======== ========
Portfolio turnover 86.68% 71.01% 63.37% 66.85% 91.72%
======== ======== ======== ======== ========
Average commission rate paid++++ $ .0003 $ .0012 -- -- --
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the period.
++++For fiscal years beginning on or after September 1, 1995,
the Fund is required to disclose its average commission rate
per share for purchases and sales of equity securities. The
"Average Commission Rate Paid" includes commissions paid in
foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of
the transaction. Such conversions may significantly affect
the rate shown.
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class B
<PAGE>
For the
For the Period
The following per share data and ratios have been derived Year July 1,
from information provided in the financial statements. Ended 1994++++ to
June 30, June 30,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 14.90 $ 13.24 $ 14.54
Operating -------- -------- --------
Performance: Investment income--net .19 .09 .08
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net 2.20 1.69 (.32)
-------- -------- --------
Total from investment operations 2.39 1.78 (.24)
-------- -------- --------
Less dividends and distributions:
Investment income--net (.14) (.12) --
Realized gain on investments--net (.11) -- (.60)
In excess of realized gain on investments--net -- -- (.46)
-------- -------- --------
Total dividends and distributions (.25) (.12) (1.06)
-------- -------- --------
Net asset value, end of period $ 17.04 $ 14.90 $ 13.24
======== ======== ========
Total Investment Based on net asset value per share 16.39% 13.63% (2.22%)+++
Return:** ======== ======== ========
Ratios to Average Expenses 2.57% 2.56% 2.79%*
Net Assets: ======== ======== ========
Investment income--net 1.22% .65% 1.01%*
======== ======== ========
Supplemental Net assets, end of period (in thousands) $398,468 $302,183 $162,774
Data: ======== ======== ========
Portfolio turnover 86.68% 71.01% 63.37%
======== ======== ========
Average commission rate paid++++++ $ .0003 $ .0012 --
======== ======== ========
<CAPTION>
Class C Class D
<PAGE>
The following per share data and For the For the
ratios have been derived from For the Period For the Period
information provided in the Year Oct. 21, Year Oct. 21,
financial statements. Ended 1994++++ to Ended 1994++++ to
June 30, June 30, June 30, June 30,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 14.87 $ 13.22 $ 16.71 $ 15.02 $ 13.33 $ 16.77
Operating -------- -------- -------- -------- -------- --------
Performance: Investment income--net .18 .09 .08 .32 .21 .13
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net 2.20 1.70 (2.50) 2.20 1.69 (2.48)
-------- -------- -------- -------- -------- --------
Total from investment operations 2.38 1.79 (2.42) 2.52 1.90 (2.35)
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.15) (.14) (.01) (.24) (.21) (.03)
Realized gain on investments--net (.11) -- (.60) (.11) -- (.60)
In excess of realized gain on
investments--net -- -- (.46) -- -- (.46)
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.26) (.14) (1.07) (.35) (.21) (1.09)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 16.99 $ 14.87 $ 13.22 $ 17.19 $ 15.02 $ 13.33
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value per share 16.37% 13.68% (14.97%)+++17.30% 14.55% (14.49%)+++
Return:** ======== ======== ======== ======== ======== ========
Ratios to Average Expenses 2.58% 2.56% 2.96%* 1.78% 1.76% 2.19%*
Net Assets: ======== ======== ======== ======== ======== ========
Investment income--net 1.19% 0.67% 1.32%* 2.06% 1.48% 2.10%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 71,769 $ 46,983 $ 18,573 $ 73,686 $ 57,821 $ 21,899
======== ======== ======== ======== ======== ========
Portfolio turnover 86.68% 71.01% 63.37% 86.68% 71.01% 63.37%
======== ======== ======== ======== ======== ========
Average commission rate paid++++++ $ .0003 $ .0012 -- $ .0003 $ .0012 --
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the period.
++++Commencement of Operations.
++++++For fiscal years beginning on or after September 1, 1995,
the Fund is required to disclose its average commission rate
per share for purchases and sales of equity securities. The
"Average Commission Rate Paid" includes commissions paid in
foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of
the transaction. Such conversions may significantly affect
the rate shown.
+++Aggregate total investment return.
<PAGE>
See Notes to Consolidated Financial Statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Developing Capital Markets Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a non-
diversified, open-end management investment company. The Fund offers
four classes of shares under the Merrill Lynch Select Pricing SM
System. Shares of Class A and Class D are sold with a front-end
sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of
such shares, and Class B and Class C Shares also bear certain
expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures. The following is
a summary of significant accounting policies followed by the Fund.
(a) Valuation of securities--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as
the primary market. Securities which are traded both in the over-the-
counter market and on a stock exchange are valued according to the
broadest and most representative market. Options written are valued
at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. Short-
term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets
for which market value quotations are not available are valued at
their fair value as determined in good faith by or under the
direction of the Fund's Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt and currency
markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
<PAGE>
* Forward foreign exchange contracts--The Fund is authorized to
enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. Such contracts
are not entered on the Fund's records. However, the effect on
operations is recorded from the date the Fund enters into such
contracts. Premium or discount is amortized over the life of the
contracts.
* Foreign currency options and futures--The Fund may also purchase
or sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
<PAGE>
(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends and capital gains at various
rates.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Fund has determined the ex-dividend date. Interest income (including
amortization of discount) is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on
the identified cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(h) Basis of consolidation--The accompanying consolidated financial
statements include the accounts of Inversiones en Marcado Accionario
de Valores Chile Limitada., a wholly-owned subsidiary, which
primarily invests in Chilean securities. Intercompany accounts and
transactions have been eliminated.
(i) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$1,236,103 have been reclassified between undistributed net realized
capital gains and undistributed net investment income. These
reclassifications have no effect on net assets or net asset values
per share.
<PAGE>
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect, wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
a limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
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.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended June 30, 1997, MLFD earned underwriting discounts
and commissions and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $ 8,940 $130,119
Class D $22,866 $279,492
For the year ended June 30, 1997, MLPF&S received contingent
deferred sales charges of $1,075,771 and $20,007 relating to
transactions in Class B and Class C Shares, respectively.
<PAGE>
In addition, MLPF&S received $413,827 in commissions on the
execution of portfolio security transactions for the Fund for the
year ended June 30, 1997.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded)
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended June 30, 1997 were $794,474,642 and $660,407,830,
respectively.
Net realized and unrealized gains (losses) as of June 30, 1997 were
as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 44,091,466 $148,650,301
Short-term investments (30,313) --
Forward foreign exchange
contracts (117,875) --
Foreign currency transactions (1,264,973) (37,842)
------------ ------------
Total $ 42,678,305 $148,612,459
============ ============
As of June 30, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $144,333,213, of which $182,901,105 related
to appreciated securities and $38,567,892 related to depreciated
securities. The aggregate cost of investments at June 30, 1997 for
Federal income tax purposes was $873,276,826.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $146,098,497 and $121,555,763 for the years ended June 30, 1997
and June 30, 1996, respectively.
<PAGE>
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 10,813,691 $171,055,059
Shares issued to shareholders
in reinvestment of dividends
and distributions 520,090 7,328,070
------------ ------------
Total issued 11,333,781 178,383,129
Shares redeemed (6,726,711) (103,736,501)
------------ ------------
Net increase 4,607,070 $ 74,646,628
============ ============
Class A Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 2,735,667 $ 38,556,805
Shares issued to shareholders
in reinvestment of dividends 372,866 4,809,974
------------ ------------
Total issued 3,108,533 43,366,779
Shares redeemed (6,552,984) (89,771,385)
------------ ------------
Net decrease (3,444,451) $(46,404,606)
============ ============
Class B Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 10,187,663 $157,219,448
Shares issued to shareholders
in reinvestment of dividends
and distributions 337,691 4,734,432
------------ ------------
Total issued 10,525,354 161,953,880
Automatic conversion of shares (98,887) (1,536,359)
Shares redeemed (7,323,938) (112,319,608)
------------ ------------
Net increase 3,102,529 $ 48,097,913
============ ============
<PAGE>
Class B Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 12,840,731 $179,107,988
Shares issued to shareholders
in reinvestment of dividends 128,947 1,655,685
------------ ------------
Total issued 12,969,678 180,763,673
Automatic conversion of shares (92,406) (1,275,022)
Shares redeemed (4,893,284) (67,373,581)
------------ ------------
Net increase 7,983,988 $112,115,070
============ ============
Class C Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 2,216,284 $ 34,190,472
Shares issued to shareholders
in reinvestment of dividends
and distributions 59,048 825,497
------------ ------------
Total issued 2,275,332 35,015,969
Shares redeemed (1,211,472) (18,623,703)
------------ ------------
Net increase 1,063,860 $ 16,392,266
============ ============
Class C Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 2,350,884 $ 32,960,409
Shares issued to shareholders
in reinvestment of dividends 18,269 234,019
------------ ------------
Total issued 2,369,153 33,194,428
Shares redeemed (613,802) (8,506,773)
------------ ------------
Net increase 1,755,351 $ 24,687,655
============ ============
Class D Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
<PAGE>
Shares sold 6,551,739 $102,865,774
Automatic conversion of shares 98,081 1,536,359
Shares issued to shareholders
in reinvestment of dividends
and distributions 74,296 1,046,092
------------ ------------
Total issued 6,724,116 105,448,225
Shares redeemed (6,287,797) (98,486,535)
------------ ------------
Net increase 436,319 $ 6,961,690
============ ============
Class D Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 4,465,997 $ 63,170,949
Automatic conversion of shares 91,700 1,275,022
Shares issued to shareholders
in reinvestment of dividends 31,584 407,120
------------ ------------
Total issued 4,589,281 64,853,091
Shares redeemed (2,382,856) (33,695,447)
------------ ------------
Net increase 2,206,425 $ 31,157,644
============ ============
5. Commitments:
At June 30, 1997, the Fund entered into forward exchange contracts
under which it had agreed to purchase and sell various foreign
currencies with approximate values of $11,552,000 and $2,543,000,
respectively.
<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, 1997, 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 five-
year period then ended. These financial statements 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.
<PAGE>
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,
1997 by correspondence with the custodian and brokers or other
alternative procedures. 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
consolidated 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, 1997, 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 LLP
Princeton, New Jersey
August 13, 1997
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
<TABLE>
The following information summarizes all per share distributions
paid by Merrill Lynch Developing Capital Markets Fund, Inc. during
its fiscal year ended June 30, 1997:
<CAPTION>
Record Payable Non-Qualifying Domestic Foreign Source Total Ordinary Foreign Taxes Long-Term
Date Date Ordinary Income Income Income Paid or Withheld Capital Gains
<S> <S> <S> <C> <C> <C> <C> <C>
Class A Shares 12/11/96 12/19/96 $.078445 $.285162 $.363607 $.021451 $.026595
Class B Shares 12/11/96 12/19/96 $.047865 $.173998 $.221863 $.021451 $.026595
Class C Shares 12/11/96 12/19/96 $.049930 $.181506 $.231436 $.021451 $.026595
Class D Shares 12/11/96 12/19/96 $.069957 $.254308 $.324265 $.021451 $.026595
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
adviser regarding the appropriate treatment of foreign taxes paid.
Please retain this information for your records.
</TABLE>
<PAGE>
PORTFOLIO INFORMATION (unaudited)
Ten Largest Equity Holdings Percent of
As of June 30, 1997 Net Assets
Telecomunicacoes Brasileiras S.A.--Telebras* 5.1%
Petroleo Brasileiro S.A.--Petrobras (Preferred) 2.9
Companhia Cervejaria Brahma S.A. PN
(Preferred) 2.3
Cimpor-Cimentos de Portugal S.A. 2.0
Telefonos de Mexico, S.A. de C.V. (ADR) 2.0
Portugal Telecom S.A.* 1.9
Grupo Carso, S.A. de C.V.* 1.8
P.T. Telekomunikasi Indonesia* 1.7
Gedeon Richter Ltd. (GDR)* 1.6
Kimberly-Clark de Mexico, S.A. de C.V. (Series A) 1.5
[FN]
*Includes combined holdings.
EQUITY PORTFOLIO CHANGES (unaudited)
For the Quarter Ended June 30, 1997
Additions
<PAGE>
Akcansa Cimento A.S.
Amway Asia Pacific Ltd.
Associated Cement Companies Ltd.
Bajaj Auto Ltd. (GDR)
Banco Itau S.A. (Preferred)
Bangkok Bank Public Co., Ltd.
(Registered Shares)
Bashkirenergo
Beijing Yanhua Petrochemical Company Ltd.
Chilenger S.A. (ADR)
Companhia Cervejaria Brahma
S.A. PN (Preferred) (ADR)
*Electricidad de Portugal
Elektrim Spolka Akcyjna S.A.
Goldfields of South Africa Ltd.
Grupo Televisa, S.A. de C.V. (GDR)
Hellenic Telecommunication
Organization S.A.
Hellenic Telecommunication Organization
S.A. (GDR)
Henderson China Holding Ltd.
Irkutskenergo
L.G. Chemical Ltd.
Larsen & Toubro Ltd. (GDR)
NIF Piast S.A. Fund
NIF Progress Fund
NIF 3 Trinity Fund
Nortel Inversora S.A. (ADR)
P.T. Indosat (ADR)
Pick'n Pay Stores Ltd. (N Shares)
*Pohang Iron & Steel Co.
Polish National Investment Fund
Quinenco S.A. (ADR)
Rembrandt Controlling Investments Ltd.
Rostelecom--RDC
Rostelecom--RDC (Preferred) (ADR)
SK Telecom Co. Ltd.
SK Telecom Co. Ltd. (ADR)
SPT Telecom A.S.
Samsung Display Devices Co.
Smartone Telecommunications
State Bank of India (GDR)
Unified Energy Systems
Deletions
<PAGE>
AMMB Holdings BHD
Amway Asia Pacific Ltd. (GDR)
Amway (Malaysia) Holdings BHD
Banca Quadrum, S.A. de C.V. (ADR)
Banco Espirito Santo e Comercial de
Lisboa S.A.
Bansud S.A. (Class B)
Beijing Datang Power Generation Company
Ltd.
Carso Global Telecom, S.A. de C.V. 'A-1'
Central European Media Enterprises Ltd.
(Class A) (GDR)
Cifra, S.A. de C.V. 'A'
Cifra, S.A. de C.V. 'B' (ADR)
Compagnie Generale des Eaux S.A.
Ekran BHD
*Electricidad de Portugal
Eregli Demir Ve Celik Fabrikalari T.A.S.
Finance One Public Company Ltd. 'Foreign'
Grupo Financiero Inbursa, S.A. de C.V.
(Class B)
Irkutskenergo (GDR)
JCT Ltd.
Koor Industries Ltd.
Koor Industries Ltd. (ADR)
Korea Electric Power Corporation
Korea Mobile Telecommunications Corp.
(ADR)
Mediaset S.p.A.
Peregrine Investments Holdings Ltd.
Philips Electronics N.V. (NY Registered
Shares)
*Pohang Iron & Steel Co.
Rostelecom--RDC (Registered Shares)
Siam City Cement Public Company Limited
Sime Darby BHD
Sonae Investimentos-SGPS S.A.
Telecomunicacoes Brasileiras S.A.--
Telebras PN (Preferred)
Telefonica de Argentina S.A. (ADR)
Vaal Reefs Exploration & Mining Co. Ltd.
Wing Hang Bank Ltd.
[FN]
*Added and deleted in the same quarter.
