MERRILL LYNCH
DEVELOPING
CAPITAL MARKETS
FUND, INC.
FUND LOGO
Quarterly Report
March 31, 1998
Investing in emerging market securities involves a number of risk
factors and special considerations, including restrictions on
foreign investments and on repatriation of capital invested in
emerging markets, currency fluctuations, and potential price
volatility and less liquidity of securities traded in emerging
markets. In addition, there may be less publicly available
information about the issuers of securities, and such issuers may
not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those to which US companies
are subject. Therefore, the Fund is designed as a long-term
investment for investors capable of assuming the risks of investing
in emerging markets. The Fund should be considered as a vehicle for
diversification and not as a complete investment program. Please
refer to the prospectus for details.
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
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.
Map Depicting the Fund's Asset Allocation As a Percentage* of
Net Assets as of March 31, 1998
Venezuela 2.9%
Brazil 16.1%
Portugal 1.5%
Hungary 6.4%
Poland 5.8%
Russia 4.6%
Greece 3.8%
Turkey 4.4%
Pakistan 0.0%
India 5.7%
Thailand 1.5%
China 2.1%
Hong Kong 5.4%
South Korea 2.8%
Mexico 8.7%
Argentina 4.1%
Egypt 1.3%
South Africa 7.9%
Zimbabwe 0.2%
Israel 2.5%
Indonesia 2.1%
Malaysia 4.6%
Taiwan 2.0%
Philippines 1.3%
[FN]
*Total may not equal 100%.
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1998
DEAR SHAREHOLDER
During the three-month period ended March 31, 1998, Merrill Lynch
Developing Capital Markets Fund, Inc.'s Class A, Class B, Class C
and Class D Shares had total returns of +3.51%, +3.31%, +3.24% and
+3.44%, respectively. (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 and 5 of this report to shareholders.) The
unmanaged Morgan Stanley Capital International (MSCI) Emerging
Markets Free Index returned +6.19%, and the unmanaged Salomon
Brothers Brady Bond Index had a total return of +5.46% during the
same three-month period. (References to securities markets of all
countries in this letter to shareholders correspond to those
countries' market weightings in the MSCI Emerging Markets Free
Index.) Detrimental to the Fund's performance during the March
quarter were its underweighted positions in Malaysia and Taiwan,
whose markets appreciated by 30.22% and 8.59%, respectively. Also
hurting performance was the Fund's underweighted exposure in South
Africa, whose market had a total return of +16.86% during the March
quarter. However, the Fund's overweighted positions in both Greece
and Poland, which appreciated by 23.00% and 18.65%, respectively,
were beneficial to performance.
Investment Review and Activities
During the three-month period ended March 31, 1998, many of the
markets which had declined sharply during the December quarter began
to rally. Most notable among them were some of the markets in Asia
(South Korea, Thailand, Malaysia and the Philippines), Latin America
(Brazil) and Africa (South Africa). The Southeast Asian markets,
with the exception of Indonesia, had very strong returns as interest
rates started to decline and their currencies recovered against the
US dollar.
In South Korea, the market appreciated by 59.10% (in dollar terms),
responding to several developments which surprised us in their speed
and scope. First, newly elected President Kim Dae Jung gave strong
indications of support for International Monetary Fund (IMF) reform
proposals. Second, representatives of government, employers and
labor unions entered a labor reform agreement which permits
workforce reduction to aid the restructuring of companies. Third,
the giant conglomerates or "chaebols" made gestures pointing to
accelerating their corporate restructurings. Investor sentiment
improved on the prospects of a credit rating upgrade from Standard &
Poor's Corp. and Moody's Investors Service, Inc. and proposals to
lift restrictions on foreign bank ownership of South Korean banks.
The Indian stock market advanced 6.29% for the March quarter. A new
government stepped in and presented a budget that acknowledges the
country's economic problems, which investors viewed as a welcome
change. Expectations improved on the prospects for accelerated
privatization and increased foreign direct investments.
The equity market in the People's Republic of China declined 1.59%
during the March quarter. Investors saw similarities between China
and the rest of Southeast Asia and grew concerned about China's loss
of export competitiveness against these countries. There were brief
rallies on the announcements of a big infrastructure investment
program and the central bank's efforts to reform the banking system,
including efforts to clean up the sector's non-performing loans.
The Thai market rose 43.39% in US terms during the March quarter.
The rally was driven by several factors, including faster-than-
expected improvement in the current account; the Bank of Thailand's
removal of capital controls, which enhanced liquidity for investors
and at the same time sent a strong signal to the market that the
central bank is able to handle its current problems; and continued
Bank of Thailand efforts in reforming the financial sector according
to IMF conditions.
The Indonesian market declined 11.22% in US dollar terms.
International investors became increasingly frustrated with
President Suharto's refusal to work with the IMF. Social tensions
are seen to be mounting there. Also complicating the political
outlook are questions concerning Suharto's health and lack of a
clear successor. With the rupiah still very weak, many companies
will be unable to meet foreign debt obligations and hence the threat
of default still looms, despite the IMF package.
The Brazilian market registered a total return of +7.74% for the
March quarter in US dollar terms. Among the positive factors
influencing the market were: the decline in interest rates since
last October; less concern about the current account deficit in
Brazil, since the lower level of economic activity projected for
1998 would imply a slowdown in imports; and continuing advances in
the privatization process. The combination of positive factors led
many economists to upgrade their outlook for gross domestic product
growth for 1998 from zero or negative growth to a modest +1.0%.
Among the better-performing stocks during the March quarter were
those in banking and mining. Our holdings in the banking sector are
Banco Bradesco S.A., Banco Itau S.A. and Uniao de Bancos Brasileiros
S.A. (Unibanco). All three institutions represent true financial
services groups with significant market shares in insurance and
asset management. In mining, the Fund has an investment in Companhia
Vale do Rio Doce S.A. (CVRD), a conglomerate with holdings in the
natural resources and transportation sectors. Its iron ore mining
facilities are among the largest in the world. In addition, the
company has holdings in bauxite mining, pulp, aluminum and steel
production, and railways.
The Mexican market, which for most of 1997 was the best performer
among developing markets, declined 6.37% in US dollar terms during
the March quarter. Investors felt that the Mexican recovery picture
was unraveling because of sharp global oil price declines (declines
which prompted the Mexican government itself to revise its budget)
and surprisingly stagnant economic growth in the fourth quarter of
1997. Although on the trade front Mexico's main problem has been
oil, investors have also taken note of import acceleration and the
rising monthly trade deficits. However, the overall general outlook
for Mexico remains fairly positive, with interest rates and
inflation continuing to trend downward and the outlook for certain
sectors, such as banking, continuing to improve. In Venezuela, which
depreciated 9.31% in US dollar terms for the March quarter, the
decline in commodity prices, specifically petroleum, played a major
role. Investors in Venezuela were also concerned that economic
reforms had stalled.
Our view that there were stock bargains to be found in emerging
Europe was shared by other investors as macroeconomic and policy
developments triggered rallies in the region. In Poland, the market
rose 18.65% during the March quarter on the anticipation of interest
rate declines toward the end of the year and improving fiscal
performance. The Hungarian stock market was buoyed by a strong
domestic economy and rose 12.16% for the March quarter. The Greek
government announced plans to enter the European Monetary Union on
January 1, 2001 and simultaneously devalued the drachma. A set of
policy goals in preparation for European Monetary Union entry were
announced, including privatization, labor market reform and social
security reform, which have been deemed as credible and timely. This
helped drive the market's rally of 23% in US dollar terms during the
March quarter.
In South Africa, the outlook is for somewhat improved, though still
modest, economic growth, stable inflation and a decline in interest
rates. Also, because the expected severe drought caused by El Nino
never materialized, no severe pressure was put on food prices, as
investors had originally feared. There may also be scope for further
liberalization of exchange rate policy, which should build investor
confidence in the rand. One of the Fund's largest holdings in South
Africa is First National Bank Holdings Ltd. (FNB). FNB is the third
largest bank in South Africa in terms of total assets, and is a
leader in installment credit and the leasing market. The bank has
worked hard over the last few years to reduce its cost structure,
selling off weak subsidiaries and streamlining its operations.
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1998
In Conclusion
Many of the emerging markets have begun to recover from the effects
of the Asian crisis experienced in late 1997, and we believe that
the scope for an earnings upturn and for interest rate declines bode
well for a continuation of this recovery. Nonetheless, we believe
volatility will remain high in these markets, which warrants a
longer-term investment horizon.
We thank you for your investment in Merrill Lynch Developing Capital
Markets Fund, Inc., and we look forward to reviewing our outlook and
strategy with you in our upcoming annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Grace Pineda)
Grace Pineda
Senior Vice President and
Portfolio Manager
April 30, 1998
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 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.
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
<S> <C> <C> <C>
ML Developing Capital Markets Fund Class A Shares -11.01% +3.51% +100.03%
ML Developing Capital Markets Fund Class B Shares -11.90 +3.31 + 4.43
ML Developing Capital Markets Fund Class C Shares -11.94 +3.24 - 9.17
ML Developing Capital Markets Fund Class D Shares -11.29 +3.44 - 6.67
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date. The
Fund's inception dates are: Class A Shares, 9/01/89; Class B Shares,
7/01/94; and Class C and Class D Shares, 10/21/94.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 3/31/98 -11.01% -15.68%
Five Years Ended 3/31/98 + 7.82 + 6.67
Inception (9/01/89) through 3/31/98 + 8.42 + 7.74
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 3/31/98 -11.90% -15.27%
Inception (7/01/94) to 3/31/98 + 1.16 + 0.93
[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 3/31/98 -11.94% -12.78%
Inception (10/21/94) to 3/31/98 - 2.76 - 2.76
[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 3/31/98 -11.29% -15.94%
Inception (10/21/94) to 3/31/98 - 1.99 - 3.51
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1998
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Percent of
AFRICA Industries Shares Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
South Africa Banking 126,006 Nedcor Ltd. (Ordinary) $ 2,171,019 $ 3,704,218 0.6%
Beverage 207,096 South African Breweries Ltd. 5,115,004 6,145,624 0.9
26,697 South African Breweries Ltd.
(ADR)(a) 680,055 779,819 0.1
------------ -------------- ------
5,795,059 6,925,443 1.0
Diversified Holdings 417,298 Billiton PLC (c) 1,556,510 1,124,272 0.2
1,065,700 Billiton PLC (ADR)(a)(c) 3,893,109 2,824,105 0.4
954,321 Rembrandt Controlling
Investments Ltd. 6,536,288 4,985,330 0.8
855,910 Rembrandt Group Ltd. 8,956,146 7,072,372 1.1
927,614 Sasol Limited 11,573,275 7,517,460 1.1
------------ -------------- ------
32,515,328 23,523,539 3.6
Entertainment 2,888 Sun International
(South Africa) Ltd. 3,660 1,348 0.0
Financial Services 576,280 First National Bank
Holdings Ltd. 3,170,741 7,932,507 1.2
Mining 885,959 Gencor Ltd. 2,174,963 1,812,569 0.3
213,140 Gencor Ltd. (ADR)(a) 687,777 435,679 0.0
------------ -------------- ------
2,862,740 2,248,248 0.3
Newspaper/Publishing 304,110 Nasionale Pers Beperk (Class N) 3,096,442 2,506,816 0.4
Retail 2,798,849 Pick'n Pay Stores Ltd. 3,189,853 5,114,591 0.8
82,874 Pick'n Pay Stores Ltd. (N Shares) 118,447 139,097 0.0
------------ -------------- ------
3,308,300 5,253,688 0.8
Total Investments in South Africa 52,923,289 52,095,807 7.9
Zimbabwe Beverage & Tobacco 1,839,451 Delta Corporation Ltd. 2,196,238 1,724,485 0.2
Total Investments in Zimbabwe 2,196,238 1,724,485 0.2
Total Investments in Africa 55,119,527 53,820,292 8.1
EUROPE
Greece Banking 45,860 Alpha Credit Bank S.A. 3,312,989 3,552,535 0.5
34,780 National Bank of Greece S.A 3,636,683 3,810,016 0.6
------------ -------------- ------
6,949,672 7,362,551 1.1
Beverage 503,818 Hellenic Bottling Co. S.A. 11,422,373 14,507,435 2.2
Metal Fabricating 139,120 Elval S.A. 1,737,997 1,817,922 0.3
Telecommunications 99,412 Hellenic Telecommunication
Organization S.A. (GDR)(b) 1,218,089 1,329,636 0.2
Total Investments in Greece 21,328,131 25,017,544 3.8
Hungary Banking 199,674 OTP Bank (GDR)(b) 5,323,949 10,133,456 1.5
Health/Personal Care 73,700 Gedeon Richter Ltd. (GDR)(b) 2,433,751 7,720,075 1.2
83,410 Gedeon Richter Ltd. (GDR)(b) 3,512,756 8,737,198 1.3
------------ -------------- ------
5,946,507 16,457,273 2.5
Oil & Related 170,200 Mol Magyar Olay-es Gazipari
Reszvenytarsasag (GDR)(b) 5,106,000 5,212,375 0.8
Telecommunications 1,742,794 Magyar TavKozlesi Reszvenytarsasag
(Matav)(Ordinary) 6,626,460 10,754,959 1.6
Total Investments in Hungary 23,002,916 42,558,063 6.4
Poland Automotive 139,847 Debica S.A. 2,987,528 3,649,240 0.6
Banking 288,000 BIG Bank Gdanski S.A. (ADR)(a) 6,869,850 6,156,000 0.9
907,649 Wielkopolski Bank Kredytowy S.A. 6,739,019 6,710,655 1.0
------------ -------------- ------
13,608,869 12,866,655 1.9
Electrical 1,508,631 Elektrim Spolka Akcyjna S.A. 13,872,669 18,808,679 2.9
Components
Multi-Industry 603,529 NIF Piast S.A. Fund 1,873,952 1,461,139 0.2
497,511 NIF Progress S.A. Fund 1,550,828 1,319,868 0.2
------------ -------------- ------
3,424,780 2,781,007 0.4
Total Investments in Poland 33,893,846 38,105,581 5.8
Portugal Building Products 180,863 Cimpor-Cimentos de Portugal S.A. 3,906,834 6,379,914 1.0
Telecommunications 71,393 Portugal Telecom S.A. 2,551,129 3,717,190 0.5
Total Investments in Portugal 6,457,963 10,097,104 1.5
Russia Energy Sources 83,836 AO Mosenergo (ADR)(a) 2,663,306 3,018,096 0.5
2,025,000 Irkutskenergo 255,917 342,225 0.1
------------ -------------- ------
2,919,223 3,360,321 0.6
Oil & Related 171,700 Lukoil Oil Company (ADR)(a) 9,902,025 11,847,300 1.8
Telecommunications 544,800 Bashinformsvyaz 1,455,190 817,200 0.1
2,272 Moscow City Telephone Network 5,607,050 1,919,840 0.3
169,200 Nizhny Novgorod Telephone 879,840 609,120 0.1
141,561 Rostelecom--RDC 457,242 461,772 0.1
------------ -------------- ------
8,399,322 3,807,932 0.6
Utilities-- 2,066,208 Bashkirenergo 1,187,599 812,020 0.1
Electric 21,806,270 Unified Energy Systems 7,888,304 6,940,936 1.1
92,496 Unified Energy Systems (GDR)(b) 3,619,807 2,944,148 0.4
------------ -------------- ------
12,695,710 10,697,104 1.6
Total Investments in Russia 33,916,280 29,712,657 4.6
</TABLE>
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1998
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Percent of
(concluded) Industries Shares Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Turkey Banking 82,680,300 Akbank T.A.S. (Ordinary) $ 5,882,886 $ 6,039,405 0.9%
117,260,000 Yapi ve Kredi Bankasi A.S. 2,835,574 4,053,432 0.6
------------ -------------- ------
8,718,460 10,092,837 1.5
Building Products 12,584,800 Adana Cimento Sanayii T. A. S.
(Class A) 1,139,019 828,629 0.1
52,366,813 Akcansa Cimento A.S. 7,931,748 6,896,041 1.0
------------ -------------- ------
9,070,767 7,724,670 1.1
Investment 7,500,000 Haci Omer Sabanci Holding A.S. 505,069 439,815 0.1
Management 263,149 Haci Omer Sabanci Holding A.S.
(ADR)(a) 3,810,968 3,815,660 0.6
------------ -------------- ------
4,316,037 4,255,475 0.7
Multi-Industry 6,698,000 Alarko Holdings A.S. 1,365,443 1,185,243 0.2
Retail 5,084,100 Migros Turk T.A.S. 4,476,607 4,498,278 0.7
Telecommunications 4,275,100 Northern Electric
Telekomunikasyon A.S. (NETAS) 1,436,438 1,354,661 0.2
Total Investments in Turkey 29,383,752 29,111,164 4.4
Total Investments in Europe 147,982,888 174,602,113 26.5
LATIN
AMERICA
Argentina Banking 161,444 Banco de Galicia y Buenos
Aires S.A. (ADR)(a) 4,497,204 3,955,378 0.6
Oil & Related 923,878 Perez Companc S.A. (Class B) 4,844,019 6,255,718 0.9
495,484 Yacimientos Petroliferos Fiscales
S.A. (YPF)(ADR)(a) 17,117,290 16,846,456 2.6
------------ -------------- ------
21,961,309 23,102,174 3.5
Total Investments in Argentina 26,458,513 27,057,552 4.1
Brazil Banking 339,634,679 Banco Bradesco S.A. (Preferred) 2,450,768 3,510,166 0.5
12,613,000 Banco Itau S.A. (Preferred) 7,025,018 8,098,769 1.2
302,350 Uniao de Bancos Brasileiros
S.A. (Unibanco)(GDR)(b) 8,696,253 10,960,187 1.7
------------ -------------- ------
18,172,039 22,569,122 3.4
Beverage 15,137,529 Companhia Cervejaria Brahma
S.A. PN (Preferred) 10,238,353 11,730,287 1.8
24,500 Companhia Cervejaria Brahma S.A.
PN (Preferred)(ADR)(a) 358,433 379,750 0.0
------------ -------------- ------
10,596,786 12,110,037 1.8
Mining 312,400 Companhia Vale do Rio Doce S.A.
(Preferred) 6,671,317 7,501,557 1.1
Oil & Related 28,991,482 Petroleo Brasileiro
S.A.--Petrobras (Preferred) 6,944,275 6,910,627 1.1
Steel 696,703 Usinas Siderurgicas de Minas
Gerais--Usiminas S.A.
(Preferred) 7,112,719 5,637,846 0.9
Telecommunications 187,105 Telecomunicacoes Brasileiras
S.A.--Telebras (ADR)(a) 22,809,643 24,288,568 3.7
85,902,904 Telecomunicacoes Brasileiras
S.A.--Telebras ON 6,170,203 8,878,170 1.4
100,000 Telecomunicacoes de Sao Paulo
S.A.--TELESP (Preferred) 33,956 32,457 0.0
28,800,000 Telecomunicacoes do Rio de
Janeiro S.A.--TELERJ
(Preferred) 4,306,382 4,058,193 0.6
------------ -------------- ------
33,320,184 37,257,388 5.7
Utilities-- 235,664,000 Companhia Energetica de
Electric Minas Gerais S.A. (CEMIG)
(Preferred) 11,551,853 11,442,214 1.7
161,500 Companhia Paranaense de
Energia S.A.--Copel (ADR)(a) 2,981,503 2,351,844 0.4
------------ -------------- ------
14,533,356 13,794,058 2.1
Total Investments in Brazil 97,350,676 105,780,635 16.1
Mexico Broadcast--Media 234,039 Grupo Televisa, S.A. de C.V.
(GDR)(b) 8,195,510 8,571,678 1.3
Building & 461,141 Apasco, S.A. de C.V. 2,525,666 2,794,138 0.4
Construction
Building Products 183,300 Cementos Mexicanos, S.A. de
C.V. (Cemex)(Class B) 907,657 990,113 0.2
352,150 Cementos Mexicanos, S.A. de
C.V. (Cemex)(Class B) (ADR)(a) 3,667,742 3,895,659 0.6
------------ -------------- ------
4,575,399 4,885,772 0.8
Financial Services-- 340,900 Grupo Financiero Banamex
Commercial Accival S.A. 'B' (Banacci) 871,744 868,663 0.1
Health/Personal 2,020,764 Kimberly-Clark de Mexico,
Care S.A. de C.V. (Series A) 6,277,328 10,440,772 1.6
Multi-Industry 1,995,894 Grupo Carso, S.A. de C.V. 'A' 11,922,837 12,187,234 1.8
270,460 Grupo Carso, S.A. de C.V.
(ADR)(a) 3,067,310 3,302,317 0.5
------------ -------------- ------
14,990,147 15,489,551 2.3
Retail 3,796,987 Cifra, S.A. de C.V. 'C' 5,409,345 6,687,976 1.0
683,368 Cifra, S.A. de C.V. 'V' 1,404,237 1,250,220 0.2
------------ -------------- ------
6,813,582 7,938,196 1.2
Telecommunications 117,059 Telefonos de Mexico, S.A. de
C.V. (ADR)(a) 5,891,890 6,599,201 1.0
Total Investments in Mexico 50,141,266 57,587,971 8.7
Venezuela Telecommunications 351,704 Compania Anonima Nacional
Telefonos de Venezuela S.A.
(CANTV)(ADR)(a) 15,036,771 14,705,623 2.2
Textiles 354,212 Sudamtex de Venezuela
S.A.C.A. (ADR)(a) 5,055,422 1,593,954 0.3
Utilities--- 2,977,548 C.A. La Electricidad de Caracas
Electric S.A.I.C.A.--S.A.C.A. 4,017,667 2,810,883 0.4
Total Investments in Venezuela 24,109,860 19,110,460 2.9
Total Investments in
Latin America 198,060,315 209,536,618 31.8
</TABLE>
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1998
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
MIDDLE Percent of
EAST Industries Shares Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Egypt Banking 168,430 Commercial International Bank
(Egypt) S.A.E. $ 1,992,666 $ 3,167,970 0.5%
231,449 Commercial International Bank
(Egypt) S.A.E. (GDR)(b) 2,748,457 4,304,951 0.7
------------ -------------- ------
4,741,123 7,472,921 1.2
Beverage 21,324 Al-Ahram Beverages Co.
S.A.E. (GDR)(b) 634,389 657,845 0.1
Total Investments in Egypt 5,375,512 8,130,766 1.3
Israel Banking 4,579,130 Bank Hapoalim Ltd. 8,585,656 12,554,981 1.9
2,249,576 Bank Leumi Le-Israel 4,058,477 4,259,945 0.6
Total Investments in Israel 12,644,133 16,814,926 2.5
Total Investments in the
Middle East 18,019,645 24,945,692 3.8
PACIFIC BASIN/
ASIA
China Automobiles 6,355,774 Qingling Motors Company
(Class H) 3,041,025 2,953,122 0.5
Chemicals 170,652 Beijing Yanhua Petrochemical
Company Ltd. (Class H)(ADR)(a) 1,871,097 1,429,210 0.2
Telecommunications 8,621,500 Eastern Communications Co.,
Ltd. (Class B) 5,128,947 7,724,864 1.2
Utilities--Electric 3,398,000 Beijing Datang Power
Generation Company Limited
(Class H) 1,592,104 1,567,869 0.2
Total Investments in China 11,633,173 13,675,065 2.1
Hong Kong Building Products 40,914,589 Anhui Conch Cement Co. Ltd. 12,152,671 9,082,743 1.4
Electrical 11,570,000 Harbin Power Equipment Co. Ltd. 1,914,111 1,612,752 0.3
Equipment
Food 23,962,850 Tingyi (Cayman Islands)
Holdings Co. 5,589,936 2,845,356 0.4
Industrial 34,560,056 Sinocan Holdings Ltd. 13,208,012 6,200,113 0.9
Real Estate 5,087,000 Henderson China Holding Ltd. 8,809,785 3,939,339 0.6
Telecommunications 9,479,000 City Telecom (H.K.) Ltd. 1,810,777 1,345,754 0.2
2,569,000 Smartone Telecommunications 5,775,641 7,277,949 1.1
------------ -------------- ------
7,586,418 8,623,703 1.3
Transportation 17,803,000 Sichuan Expressway Co.
(Class H) 1,748,841 3,078,991 0.5
Total Investments in Hong Kong 51,009,774 35,382,997 5.4
India Banking 978,964 State Bank of India 7,442,695 6,992,600 1.1
29,091 State Bank of India (GDR)(b) 727,275 519,856 0.1
------------ -------------- ------
8,169,970 7,512,456 1.2
Building Products 1,300 Associated Cement
Companies Ltd. 50,183 47,877 0.0
462,100 Gujarat Ambujaya Cements
Ltd. (GDR)(b) 3,987,695 2,784,152 0.4
4,037,878 2,832,029 0.4
Energy Sources 8,194 Bombay Suburban Electric
Supply Co. Ltd. 45,879 43,502 0.0
36,137 Bombay Suburban Electric
Supply Co. Ltd. (GDR)(b) 629,123 641,432 0.1
------------ -------------- ------
675,002 684,934 0.1
Financial Services 406 Housing Development Finance Corp. 34,604 32,692 0.0
2,607,103 Industrial Credit & Investment
Corporation of India Ltd. 7,237,914 6,081,920 0.9
------------ -------------- ------
7,272,518 6,114,612 0.9
Leisure & Tourism 397,875 EIH Ltd. 4,517,830 3,945,493 0.6
38,350 Indian Hotels Company Ltd.
(The)(GDR)(b) 642,362 642,362 0.1
------------ -------------- ------
5,160,192 4,587,855 0.7
Oil Services 458,300 Hindustan Petroleum
Corporation Ltd. 5,287,927 5,113,504 0.8
Telecommunications 281,100 Mahanagar Telephone Nigam Ltd. 2,104,541 1,871,152 0.3
147,000 Mahanagar Telephone Nigam
Ltd. (ADR)(a) 2,469,144 2,524,725 0.4
40,517 Videsh Sanchar Nigam Ltd.
(GDR)(b) 639,998 496,333 0.1
124,000 Videsh Sanchar Nigam Ltd.
(GDR)(b) 2,046,000 1,519,000 0.2
------------ -------------- ------
7,259,683 6,411,210 1.0
Textiles 1,356 Reliance Industries Ltd. 4,300 6,076 0.0
497,717 Reliance Industries Ltd.
(GDR)(b) 5,659,185 4,143,494 0.6
------------ -------------- ------
5,663,485 4,149,570 0.6
Total Investments in India 43,526,655 37,406,170 5.7
Indonesia Building Products 1,602,000 P.T. Semen Gresik 'Foreign' 1,214,202 1,185,295 0.2
Telecommunications 337,241 P.T. Indonesian Satellite
Corp. (Indosat)(ADR)(a) 8,743,678 5,206,158 0.8
733,000 P.T. Telekomunikasi Indonesia
(ADR)(a) 7,275,214 7,192,562 1.1
------------ -------------- ------
16,018,892 12,398,720 1.9
Total Investments in Indonesia 17,233,094 13,584,015 2.1
Malaysia Banking 1,674,000 Malayan Banking BHD 6,641,444 6,456,198 1.0
Diversified 2,705,000 Magnum Corporation BHD 5,006,276 2,324,959 0.4
Holdings
Food 603,000 Nestle (Malaysia) BHD 4,659,146 3,355,537 0.5
Multi-Industry 2,312,000 Hicom Holdings BHD 5,435,411 1,324,782 0.2
Natural Gas 820,000 Petronas Gas BHD 3,414,442 2,191,185 0.3
Oil & Related 1,389,500 Petronas Dagangan BHD 3,597,300 1,638,309 0.2
Telecommunications 3,051,000 Telekom Malaysia BHD 9,189,927 10,590,248 1.6
Tobacco 278,000 Rothmans of Pall Mall
(Malaysia) BHD 2,927,851 2,335,813 0.4
Total Investments in Malaysia 40,871,797 30,217,031 4.6
</TABLE>
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1998
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
PACIFIC BASIN/ Percent of
ASIA(concluded) Industries Shares Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Pakistan Electrical Components 100 Karachi Electric Supply
Corp. Ltd. $ 66 $ 47 0.0%
Telecommunications 52,000 Pakistan Telecommunications
Corp. 55,130 34,796 0.0
Total Investments in Pakistan 55,196 34,843 0.0
Philippines Telecommunications 161,240 Philippine Long Distance
Telephone Co. 5,608,779 4,503,791 0.7
142,817 Philippine Long Distance
Telephone Co. (ADR)(a) 4,556,967 3,981,024 0.6
Total Investments in the
Philippines 10,165,746 8,484,815 1.3
South Korea Banking 16,822 Kookmin Bank (GDR)(b) 250,031 123,642 0.0
6,152 Kookmin Bank (Rights)(d) 0 5,189 0.0
------------ -------------- ------
250,031 128,831 0.0
Chemicals 401,190 L.G. Chemical Ltd. 5,512,602 3,319,094 0.5
Electrical 109,965 Samsung Display Devices Co. 5,928,552 5,164,541 0.8
Components
Electronics 135,850 Samsung Electronics Co., Ltd. 5,390,736 7,165,499 1.1
Utilities--Electric 206,600 Korea Electric Power
Corporation 2,672,535 2,686,994 0.4
Total Investments in
South Korea 19,754,456 18,464,959 2.8
Taiwan Banking 3,804,444 Bank Sinopac 4,239,984 2,934,525 0.4
2,653,000 E. Sun Commercial Bank 2,045,284 1,925,043 0.3
------------ -------------- ------
6,285,268 4,859,568 0.7
Chemicals 1,516,000 Formosa Plastic
Corporation (FPC) 3,201,169 2,842,500 0.4
Electronic 466,000 Mosel Vitelic Inc. 643,574 738,780 0.1
Component
Steel 2,829,000 China Steel Corporation 1,868,182 1,897,500 0.3
Transportation-- 4,470,750 Yang Ming Marine Transport 5,306,866 3,230,389 0.5
Marine
Total Investments in Taiwan 17,305,059 13,568,737 2.0
Thailand Banking 739,000 Bangkok Bank Public Co.,
Ltd. (Registered Shares) 4,768,337 1,941,760 0.3
1,108,000 Thai Farmers Bank Company
Limited 'Foreign' 4,178,585 2,755,867 0.4
------------ -------------- ------
8,946,922 4,697,627 0.7
Building Products 1,272,954 Siam City Cement Public
Company Limited 'Foreign' 5,271,873 3,409,698 0.5
Television 428,000 BEC World Public Company
Limited 4,511,592 2,183,673 0.3
Total Investments in Thailand 18,730,387 10,290,998 1.5
Total Investments in the
Pacific Basin/Asia 230,285,337 181,109,630 27.5
SHORT-TERM Face
SECURITIES Amount
Commercial US$ 14,676,000 General Motors Acceptance Corp.,
Paper* 6.13% due 4/01/1998 14,676,000 14,676,000 2.2
Total Investments in
Short-Term Securities 14,676,000 14,676,000 2.2
Total Investments $664,143,712 658,690,345 99.9
============
Other Assets Less Liabilities 649,824 0.1
-------------- -------
Net Assets $ 659,340,169 100.0%
============== =======
Net Asset Value: Class A--Based on net assets of $302,597,695
and 22,799,374 shares outstanding $ 13.27
==============
Class B--Based on net assets of $256,183,411
and 19,544,327 shares outstanding $ 13.11
==============
Class C--Based on net assets of $51,134,870
and 3,915,530 shares outstanding $ 13.06
==============
Class D--Based on net assets of $49,424,193
and 3,732,083 shares outstanding $ 13.24
==============
<FN>
*Commercial Paper is traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the Fund.
(a)American Depositary Receipts (ADR).
(b)Global Depositary Receipts (GDR).
(c)Consistent with the general policy of the Securities and Exchange
Commission, the nationality or domicile of an issuer for
determination of foreign issuer status may be (i) the country under
whose laws the issuer is organized, (ii) the country in which the
issuer's securities are principally traded, or (iii) the country in
which the issuer derives a significant proportion (at least 50%) of
its revenue or profits from goods produced or sold, investments
made, or services performed in the country, or in which at least 50%
of the assets of the issuer are situated.
(d)The rights may be exercised until 4/08/1998.
</TABLE>
PORTFOLIO INFORMATION
Ten Largest Equity Holdings Percent of
As of March 31, 1998 Net Assets
Telecomunicacoes Brasileiras S.A.--Telebras* 5.1%
Elektrim Spolka Akcyjna S.A. 2.9
Yacimientos Petroliferos Fiscales S.A. (YPF)(ADR) 2.6
Grupo Carso, S.A. de C.V.* 2.3
Compania Anonima Nacional Telefonos
de Venezuela S.A. (CANTV)(ADR) 2.2
Hellenic Bottling Co. S.A. 2.2
Bank Hapoalim Ltd. 1.9
Companhia Cervejaria Brahma S.A.
PN (Preferred)* 1.8
Lukoil Oil Company (ADR) 1.8
Companhia Energetica de Minas Gerais S.A.
(CEMIG)(Preferred) 1.7
[FN]
*Includes combined holdings.
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1998
EQUITY PORTFOLIO CHANGES
For the Quarter Ended March 31, 1998
Additions
Al-Ahram Beverages Co. S.A.E. (GDR)
Alpha Credit Bank S.A.
BIG Bank Gdanski S.A. (ADR)
*Bank Handlowy W Warszawie (GDR)
Bank Leumi Le-Israel
China Steel Corporation
Cifra, S.A. de C.V. 'V'
Companhia Vale do Rio Doce S.A.
(Preferred)
Elval S.A.
Formosa Plastic Corporation (FPC)
Grupo Financiero Banamex Accival S.A.
'B' (Banacci)
Korea Electric Power Corporation
Mahanagar Telephone Nigam Ltd. (ADR)
Malayan Banking BHD
Migros Turk T.A.S.
Mosel Vitelic Inc.
National Bank of Greece S.A.
Samsung Electronics Co., Ltd.
Sichuan Expressway Co. (Class H)
Sun International (South Africa) Ltd.
Telecomunicacoes do Rio de Janeiro S.A.--
TELERJ (Preferred)
Deletions
Bajaj Auto Ltd. (GDR)
*Bank Handlowy W Warszawie (GDR)
Cheng Loong Company
Chilgener S.A. (ADR)
China Telecom (Hong Kong) Ltd.
Chung Hwa Pulp Corporation
Compania de Telecomunicaciones
de Chile S.A. (ADR)
EIH Ltd. (GDR)
Fauji Fertilizer Co. Ltd.
Fomento Economico Mexicano, S.A.
de C.V. (Femsa)(ADR)
Fubon Insurance Co.
Huaxin Cement Co., Ltd. (Class B)
Hung Poo Real Estate Development Corp.
Jiangxi Copper Company Ltd. (Class H)
Magyar TavKozlesi Reszvenytarsasag
(Matav)(ADR)
P.T. Astra International 'Foreign'
P.T. Indah Kiat Pulp & Paper Corp. 'Foreign'
P.T. Lippo Life Insurance 'Foreign'
P.T. Telekomunikasi Indonesia
Quinenco S.A. (ADR)
RAO Gazprom (ADR)
Siam Cement Public Company Limited
'Foreign'
South Africa Iron & Steel Industrial
Corp., Ltd.
State Bank of India (GDR)
Suraj Diamonds Ltd.
TelecomAsia Corporation Public
Company Ltd. 'Foreign'
Torah Portland Cement Company
Tsingtao Brewery Co., Ltd. (Class H)
[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
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Grace Pineda, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Barbara G. Fraser, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02119
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
