MERRILL LYNCH
DEVELOPING
CAPITAL MARKETS
FUND, INC.
FUND LOGO
Semi-Annual Report
December 31, 1997
Investing in emerging market securities involves a number of risk
factors and special considerations, including restrictions on
foreign investments and on repatriation of capital invested in
emerging markets, currency fluctuations, and potential price
volatility and less liquidity of securities traded in emerging
markets. In addition, there may be less publicly available
information about the issuers of securities, and such issuers may
not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those to which US companies
are subject. Therefore, the Fund is designed as a long-term
investment for investors capable of assuming the risks of investing
in emerging markets. The Fund should be considered as a vehicle for
diversification and not as a complete investment program. Please
refer to the prospectus for details.
This report is not authorized for use as an offer of sale or
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
Merrill Lynch
Developing
Capital Markets
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH DEVELOPING CAPITAL MARKETS FUND, INC.
Asset Allocation
As a Percentage* of
Net Assets as of
December 31, 1997
Map Depicting the Fund's Asset Allocation As a Percentage*
of Net Assets as of December 31, 1997
VENEZUELA 3.1%
BRAZIL 13.0%
PORTUGAL 1.8%
HUNGARY 6.6%
POLAND 3.2%
RUSSIA 6.4%
GREECE 2.7%
TURKEY 3.3%
PAKISTAN 0.1%
INDIA 6.4%
MALAYSIA 2.2%
THAILAND 1.2%
CHINA 3.3%
SOUTH KOREA 0.9%
MEXICO 13.8%
CHILE 2.1%
ARGENTINA 3.6%
EGYPT 1.7%
SOUTH AFRICA 7.2%
ZIMBABWE 0.4%
ISRAEL 1.6%
INDONESIA 2.9%
HONG KONG 4.6%
PHILIPPINES 1.0%
TAIWAN 3.8%
<PAGE>
[FN]
*Total may not equal 100%.
Merrill Lynch Developing Capital Markets Fund, Inc., December 31, 1997
DEAR SHAREHOLDER
During the three-month period ended December 31, 1997, total returns
for Merrill Lynch Developing Capital Markets Fund, Inc.'s Class A,
Class B, Class C and Class D Shares were -17.59%, -17.83%, -17.77%
and -17.64%, 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 5--7 of this report to shareholders.) The
unmanaged Morgan Stanley Capital International (MSCI) Emerging
Markets Free Index fell 17.52% during the same period. (References
to securities markets of particular countries in this letter to
shareholders refer to those countries' market weightings in the MSCI
Emerging Markets Free Index.) Detrimental to the Fund's performance
were its overweighted positions in The People's Republic of China,
Hong Kong, Poland and Russia, whose markets fell 33.43%, 28.81%,
22.36% and 17.86%, respectively. Beneficial to performance were the
Fund's overweighted positions in Hungary and Turkey, whose markets
rose 12.60% and 24.45%, respectively.
Investment Review and Activities
During the three-month period ended December 31, 1997, most of the
emerging markets, with the exception of certain markets in emerging
Europe and the Middle East, corrected sharply. The declines were the
steepest in Asia, where the troubles began, but soon spread to Latin
America, emerging Europe and parts of the Middle East/Africa region.
In Asia, markets such as Malaysia, Indonesia, Thailand and South
Korea suffered declines of 38.1%, 57.7%, 50.9% and 64.5%,
respectively. Hong Kong, which has long been viewed as a relatively
stable market in the region, declined by 28.8% over the last three
months, and witnessed a drop of 10% in one day. Although each
country's situation was somewhat unique, many of the countries in
the region suffered from one or more of the following problems:
slowing economic growth, high and unstable interest rates, poorly
funded current account deficits, and falling currencies.
<PAGE>
The region's problems began in early summer in Thailand where losses
in the banking and property sectors pointed to other structural
weaknesses in the Thai economy. These concerns led to currency
speculation on the Thai baht. Thailand eventually was obliged to
seek aid from the International Monetary Fund (IMF). The next
country to falter was the Philippines, where the banking sector
experienced a sharp rise in non-performing loans and the currency
also came under attack. In order to defend the peso, the Philippine
government raised interest rates sharply. The Malaysian currency,
the ringgit, also came under attack. However, the Malaysian
government's initial response to the economic crisis was to lay the
blame on currency speculators and then implement short-lived
measures to limit capital outflows. In Indonesia, the outlook is
complicated by speculation about President Suharto's health and the
issues of succession and political stability.
South Korea is the world's eleventh-largest economy, and the
economic problems facing the country evoked a high level of concern.
As far back as 1996, many large industrial conglomerates in South
Korea experienced financial difficulties and began declaring
bankruptcy. As the number of these bankruptcies grew during 1997,
foreign banks, suffering through problems in Thailand and Indonesia,
took preemptive actions and withdrew support from South Korea. This
prompted a liquidity crisis, since South Korea had come to rely on
short-term foreign borrowings to finance its economic expansion.
Although most of the external bank debt was incurred by the South
Korean private sector, the liquidity crisis pointed out how quickly
massive private sector problems can become the government's problems
as well. The withdrawal of foreign bank support in the fall of 1997
wreaked havoc on the country's international reserves. The
possibilities of massive devaluation of the South Korean won and
outright default on bank debt loomed large. The South Korean
government, after failing to obtain direct aid from the United
States and Japan, agreed to an IMF-sponsored program. In early
December, a US$55 billion IMF-backed rescue package was hurriedly
announced for South Korea, with major contributions scheduled from
the IMF, other multilateral agencies and major economies.
Speculation that Hong Kong would devalue its currency pulled the
stock market down sharply in late October. Hong Kong has had to
defend its currency with high interest rates, which have depressed
both the stock and property markets. The Chinese stock market
declined by 33.4% during the three months ended December 31, 1997.
India remained insulated from the problems in the rest of Asia for a
long time. Its currency is basically non-convertible and therefore
not prey to speculation. In addition, the monetary and economic
cycles are in opposite stages as compared to the rest of Asia.
However, the Indian market did not escape the general negative
sentiment for the region. Furthermore, disappointing earnings and
concerns about political stability combined to pull the market down
by 12.3% for the December quarter.
<PAGE>
During the December quarter, we reduced the Fund's weighting in Asia
from 33.4% of net assets to 26.4%. This occurred partly as a result
of market declines and partly through our reducing further our
already underweighted positions in these markets.
In Asia, we hold several stocks in key sectors such as
telecommunications. For example, in the Philippines, our one holding
is in Philippine Long Distance Telephone Co., a company which should
actually benefit from the devaluation of the Philippine peso because
more than half of its revenues are generated from overseas tolls. In
Indonesia, a major holding is P.T. Indonesian Satellite Corp.
(Indosat), a provider of international telephone services. In
China, we hold China Telecom (Hong Kong) Ltd., a cellular
telecommunications company, and Eastern Communications Co., Ltd., a
telecommunications equipment company.
During the three-month period ended December 31, 1997, all of the
Latin American stock markets declined. Among the major Latin
American markets, the Brazilian market suffered the sharpest
correction. The sudden fall of the Hong Kong market prompted
investors to become impatient with the slow pace of reforms and the
growing current account deficit in Brazil. Rumors of a possible
devaluation of the Brazilian real led to panic selling during
October. Although the market rallied over 9% during December, this
rally was not strong enough to completely counter the October sell-
off, and hence the Brazilian market recorded a decline of 14.5% for
the three-month period. In the neighboring Argentine market, concern
over a possible devaluation of the real weighed heavily because of
the negative implications for Argentine exports to Brazil. The
Argentine market suffered a decline of 7.6% during the three-month
period, despite a rally of almost 5% during December.
The Mexican market was the best performer of the Latin American
markets during the December quarter, suffering a decline of 3.4%.
The Mexican domestic economy continued to improve, with the
construction and retail sectors showing sharp growth. In Mexico, we
established a position in Cementos Mexicanos, S.A. de C.V. (Cemex),
a major cement company.
The performance of the major markets in the Middle East/Africa
region varied widely during the last three months with South Africa
declining by 17.1%, Israel declining by 6.5%, and Turkey
appreciating by 24.5%. The South African market was negatively
affected not only by the sell-off in emerging markets in general,
but also by weak gold prices. Nonetheless, the underlying economy in
South Africa has remained relatively sound with inflation slowing
and the current account deficit decreasing. The outlook is for a
continued decline in interest rates, which should, in turn,
stimulate growth and benefit Nedcor Ltd. and First National Bank
Holdings Ltd., two bank stocks the Fund holds.
<PAGE>
Only two of the emerging European markets appreciated during the
December quarter. Portugal and Hungary increased by 3.25% and 12.6%,
respectively. Portugal graduated to developed market status as the
market became included in the unmanaged MSCI developed market
indexes on December 1, 1997. The Hungarian market posted strong
gains because of good corporate earnings and the Hungarian
government's decision to proceed with the Magyar TavKozlesi
Reszvenytarsasag (Matav) initial public offering, in which the
Fund participated and which became one of the Fund's ten largest
holdings.
Both the Polish and the Russian markets lost ground during the three
months ended December 31, 1997, declining by 22.4% and 17.9%,
respectively. In Poland, the prolonged crisis in the Asian markets
prompted investors to focus on the growing Polish trade deficit,
revised estimates of higher inflation and poor corporate earnings.
In Russia, investors became concerned that reserves were being run
down to defend the ruble and that the liquidity problems in South
Korea would lead to a massive sell-off of Russian debt instruments,
since it was rumored that the South Korean banks were large holders
of these instruments.
In Conclusion
We would caution our investors that the volatility exhibited during
the past three months is very much a part of investing in the
emerging markets. We would therefore remind you that it is advisable
to take a long-term view when investing in these markets. We
appreciate your ongoing interest in Merrill Lynch Developing Capital
Markets Fund, Inc., and we look forward to reviewing our outlook
with you in our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Grace Pineda)
Grace Pineda
Senior Vice President and
Portfolio Manager
February 11, 1998
<PAGE>
Merrill Lynch Developing Capital Markets Fund, Inc., December 31, 1997
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>
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 12/31/97 -6.81% -11.70%
Five Years Ended 12/31/97 +8.93 + 7.76
Inception (9/1/89) through 12/31/97 +8.23 + 7.53
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 12/31/97 -7.82% -11.34%
Inception (7/1/94) to 12/31/97 +0.31 + 0.06
[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 12/31/97 -7.78% -8.66%
Inception (10/21/94) to 12/31/97 -3.93 -3.93
[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 12/31/97 -7.03% -11.91%
Inception (10/21/94) to 12/31/97 -3.17 - 4.79
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
Merrill Lynch Developing Capital Markets Fund, Inc., December 31, 1997
PERFORMANCE DATA (concluded)
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
12/31/97 9/30/97 12/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Developing Capital Markets Fund Class A Shares $12.82 $16.43 $14.53 - 9.70%(1) -20.14%(1)
ML Developing Capital Markets Fund Class B Shares 12.69 16.21 14.45 -10.10(1) -19.87(1)
ML Developing Capital Markets Fund Class C Shares 12.65 16.16 14.41 -10.13(1) -19.86(1)
ML Developing Capital Markets Fund Class D Shares 12.80 16.39 14.52 - 9.78(1) -20.07(1)
ML Developing Capital Markets Fund Class A Shares--Total Return - 6.81(2) -17.59(2)
ML Developing Capital Markets Fund Class B Shares--Total Return - 7.82(3) -17.83(3)
ML Developing Capital Markets Fund Class C Shares--Total Return - 7.78(4) -17.77(4)
ML Developing Capital Markets Fund Class D Shares--Total Return - 7.03(5) -17.64(5)
<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 $0.289 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.405 per share ordinary
income dividends and $0.289 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.319 per share ordinary
income dividends and $0.289 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.326 per share ordinary
income dividends and $0.289 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.385 per share ordinary
income dividends and $0.289 per share capital gains distributions.
</TABLE>
<PAGE>
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
9/1/89--12/31/89 $ 9.60 $10.13 $0.004 $0.132 + 6.97%
1990 10.13 9.04 -- 0.640 - 5.33
1991 9.04 10.89 -- 0.252 +23.35
1992 10.89 10.18 0.324 0.518 + 0.85
1993 10.18 16.80 0.278 0.069 +68.96
1994 16.80 13.90 0.653 0.447 -10.97
1995 13.90 13.18 -- 0.238 - 3.43
1996 13.18 14.53 0.027 0.364 +13.30
1997 14.53 12.82 0.289 0.405 - 6.81
------ ------
Total $1.575 Total $3.065
Cumulative total return as of 12/31/97: +93.25%**
<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**
<C> <C> <C> <C> <C> <C>
7/1/94--12/31/94 $14.54 $13.86 $0.653 $0.412 + 2.36%
1995 13.86 13.11 -- 0.124 - 4.50
1996 13.11 14.45 0.027 0.222 +12.17
1997 14.45 12.69 0.289 0.319 - 7.82
------ ------
Total $0.969 Total $1.077
Cumulative total return as of 12/31/97: +1.08%**
<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>
<PAGE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $16.71 $13.84 $0.653 $0.425 -10.98%
1995 13.84 13.08 -- 0.137 - 4.48
1996 13.08 14.41 0.027 0.231 +12.20
1997 14.41 12.65 0.289 0.326 - 7.78
------ ------
Total $0.969 Total $1.119
Cumulative total return as of 12/31/97: -12.02%**
<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**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $16.77 $13.90 $0.653 $0.442 -10.84%
1995 13.90 13.17 -- 0.214 - 3.68
1996 13.17 14.52 0.027 0.324 +13.00
1997 14.52 12.80 0.289 0.385 - 7.03
------ ------
Total $0.969 Total $1.365
Cumulative total return as of 12/31/97: -9.77%**
<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>
Merrill Lynch Developing Capital Markets Fund, Inc., December 31, 1997
<PAGE>
<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 Africa Banking 134,255 Nedcor Ltd. (Ordinary) $ 2,302,682 $ 2,980,991 0.4%
Beverage 238,815 South African Breweries Ltd. 5,840,521 5,891,817 0.7
26,697 South African Breweries Ltd.
(ADR)(a)(d) 680,055 650,072 0.1
------------ ------------ ------
6,520,576 6,541,889 0.8
Diversified 417,298 ++Billiton PLC (e) 1,556,510 1,069,243 0.1
Holdings 1,065,700 ++Billiton PLC (ADR)(a)(e) 3,893,109 2,610,965 0.4
1,313,000 Rembrandt Controlling
Investments Ltd. 8,992,935 6,478,618 0.8
930,350 Rembrandt Group Ltd. 9,763,074 6,790,178 0.9
1,132,214 Sasol Limited 14,204,908 11,871,487 1.6
------------ ------------ ------
38,410,536 28,820,491 3.8
Financial 628,764 First National Bank Holdings Ltd. 3,346,372 5,590,881 0.7
Services
Mining 885,959 Gencor Ltd. 2,174,963 1,466,277 0.2
213,140 Gencor Ltd. (ADR)(a) 687,777 352,576 0.0
------------ ------------ ------
2,862,740 1,818,853 0.2
Newspaper/ 609,300 Nasionale Pers Beperk (Class N) 5,953,882 5,010,691 0.7
Publishing
Retail 3,024,239 Pick'n Pay Stores Ltd. 3,446,731 4,408,276 0.6
82,874 Pick'n Pay Stores Ltd. (N Shares) 118,447 112,452 0.0
------------ ------------ ------
3,565,178 4,520,728 0.6
Steel 2,767 South Africa Iron & Steel
Industrial Corp., Ltd. 2,483 819 0.0
Total Investments in
South Africa 62,964,449 55,285,343 7.2
Zimbabwe Beverage & 4,977,100 Delta Corporation Ltd. 3,841,905 3,408,973 0.4
Tobacco
Total Investments in Zimbabwe 3,841,905 3,408,973 0.4
Total Investments in Africa 66,806,354 58,694,316 7.6
<PAGE>
EUROPE
Greece Beverage 830,002 Hellenic Bottling Co. S.A. 15,632,087 19,269,731 2.5
Telecommuni- 135,000 ++Hellenic Telecommunication
cations Organization S.A. (GDR)(b) 1,654,931 1,417,500 0.2
Total Investments in Greece 17,287,018 20,687,231 2.7
Hungary Banking 320,762 OTP Bank (GDR)(b) 7,545,169 12,188,956 1.6
Health/Personal 98,330 Gedeon Richter Ltd. (GDR)(b) 3,797,770 11,430,862 1.5
Care 73,700 Gedeon Richter Ltd. (GDR)(b)(d) 2,433,751 8,567,625 1.1
------------ ------------ ------
6,231,521 19,998,487 2.6
Oil & Related 61,000 Mol Magyar Olay-es Gazipari
Reszvenytarsasag (GDR)(b) 648,125 1,488,400 0.2
Telecommuni- 182,500 ++Magyar TavKozlesi
cations Reszvenytarsasag (Matav)
(ADR)(a) 3,403,625 4,745,000 0.6
2,228,000 ++Magyar TavKozlesi
Reszvenytarsasag (Matav)
(Ordinary) 5,953,294 11,840,722 1.6
------------ ------------ ------
9,356,919 16,585,722 2.2
Total Investments in Hungary 23,781,734 50,261,565 6.6
Poland Automotive 158,997 Debica S.A. 3,305,944 3,884,586 0.5
Banking 665,104 Wielkopolski Bank Kredytowy S.A. 4,413,586 3,344,415 0.4
Electrical 1,533,061 Elektrim Spolka Akcyjna S.A. 14,073,928 14,851,528 1.9
Components
Multi-Industry 603,529 ++NIF Piast S.A. Fund 1,873,952 1,645,988 0.2
497,511 ++NIF Progress S.A. Fund 1,550,828 1,173,108 0.2
------------ ------------ ------
3,424,780 2,819,096 0.4
Total Investments in Poland 25,218,238 24,899,625 3.2
Portugal Building 386,504 Cimpor-Cimentos de Portugal S.A. 8,775,947 10,144,153 1.3
Products
Telecommuni- 76,673 Portugal Telecom S.A. 2,740,568 3,562,500 0.5
cations
Total Investments in Portugal 11,516,515 13,706,653 1.8
<PAGE>
Russia Energy Sources 339,382 ++AO Mosenergo (ADR)(a) 10,042,232 12,523,196 1.6
2,025,000 ++Irkutskenergo 255,918 392,850 0.1
------------ ------------ ------
10,298,150 12,916,046 1.7
Natural Gas 128,700 RAO Gazprom (ADR)(a)(d) 2,027,025 3,104,887 0.4
Oil & Related 179,500 Lukoil Oil Company (ADR)(a) 10,232,550 16,514,000 2.1
Telecommuni- 544,800 ++Bashinformsvyaz 1,455,190 653,760 0.1
cations 2,272 Moscow City Telephone Network 5,607,050 2,726,400 0.3
169,200 ++Nizhny Novgorod Telephone 879,840 507,600 0.1
600,073 ++Rostelecom-RDC 2,308,421 2,070,252 0.3
------------ ------------ ------
10,250,501 5,958,012 0.8
Utilities-- 2,066,208 ++Bashkirenergo 1,187,599 1,053,766 0.1
Electric 21,806,270 ++Unified Energy Systems 7,888,304 6,541,881 0.9
102,150 ++Unified Energy Systems (GDR)(b) 4,003,959 3,064,500 0.4
------------ ------------ ------
13,079,862 10,660,147 1.4
Total Investments in Russia 45,888,088 49,153,092 6.4
Turkey Banking 46,180,300 Akbank T.A.S. (Ordinary) 3,329,388 4,071,452 0.5
117,260,000 Yapi ve Kredi Bankasi A.S. 2,835,574 4,475,140 0.6
------------ ------------ ------
6,164,962 8,546,592 1.1
Building 12,584,800 Adana Cimento Sanayii Turk
Products Anonim Sirketi (Class A) 1,139,019 1,063,932 0.1
57,053,813 Akcansa Cimento A.S. 8,697,365 7,993,046 1.1
------------ ------------ ------
9,836,384 9,056,978 1.2
Investment 7,500,000 ++Haci Omer Sabanci Holding A.S. 505,069 461,957 0.1
Management 263,149 ++Haci Omer Sabanci Holding
A.S. (ADR)(a) 3,810,968 4,013,022 0.5
------------ ------------ ------
4,316,037 4,474,979 0.6
Multi- 6,698,000 Alarko Holdings A.S. 1,365,443 1,439,908 0.2
Industry
Telecommuni 4,663,000 ++Northern Electric
cations Telekomunikasyon A.S. (NETAS) 1,555,843 1,689,493 0.2
Total Investments in Turkey 23,238,669 25,207,950 3.3
Total Investments in Europe 146,930,262 183,916,116 24.0
</TABLE>
<PAGE>
Merrill Lynch Developing Capital Markets Fund, Inc., December 31, 1997
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
LATIN Shares Held/ Value Percent of
AMERICA Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Banking 148,000 Banco de Galicia y Buenos
Aires S.A. (ADR)(a) $ 4,851,007 $ 3,811,000 0.5%
Oil & 1,321,878 Perez Companc S.A. 6,808,079 9,440,097 1.2
Related 425,084 Yacimientos Petroliferos
Fiscales S.A. (YPF)
(ADR)(a) 14,693,220 14,532,559 1.9
------------ ------------ ------
21,501,299 23,972,656 3.1
Total Investments in Argentina 26,352,306 27,783,656 3.6
Brazil Banking 418,934,679 Banco Bradesco S.A. (Preferred) 2,769,650 4,129,285 0.5
17,911,625 Banco Bradesco S.A. (Rights)(f) 0 32,100 0.0
12,545,000 Banco Itau S.A. (Preferred) 6,983,022 6,744,624 0.9
308,400 ++Uniao de Bancos Brasileiros S.A.
(Unibanco) (GDR)(b) 8,864,675 9,926,625 1.3
------------ ------------ ------
18,617,347 20,832,634 2.7
Beverage 30,667,513 Companhia Cervejaria Brahma
S.A. PN (Preferred) 14,476,455 20,609,888 2.7
24,500 Companhia Cervejaria Brahma S.A.
PN (Preferred)(ADR)(a) 358,433 347,594 0.0
------------ ------------ ------
14,834,888 20,957,482 2.7
Foreign US$ 1,118,595 Republic of Brazil, C Bonds,
Government Floating Rate Brady Bonds,
Obligations 7.06% due 4/15/2014++++ (h) 789,855 875,301 0.1
Oil & 63,739,618 Petroleo Brasileiro
Related S.A.--Petrobras (Preferred) 13,400,897 14,906,846 1.9
Steel 750,790 Usinas Siderurgicas de Minas
Gerais-Usiminas S.A.
(Preferred) 7,659,182 4,440,156 0.6
<PAGE>
Telecommuni- 142,435 Telecomunicacoes Brasileiras
cations S.A.--Telebras
(ADR)(a) 17,044,172 16,584,775 2.2
85,902,904 Telecomunicacoes Brasileiras
S.A.--Telebras ON 6,170,203 8,736,541 1.1
100,000 Telecomunicacoes de Sao
Paulo S.A.--TELESP
(Preferred) 33,956 26,612 0.0
------------ ------------ ------
23,248,331 25,347,928 3.3
Utilities-- 235,944,000 Companhia Energetica de Minas
Electric Gerais S.A. (CEMIG)(Preferred) 11,567,951 10,251,725 1.4
175,300 Companhia Paranaense de Energia
S.A.--Copel (ADR)(a) 3,235,395 2,399,419 0.3
------------ ------------ ------
14,803,346 12,651,144 1.7
Total Investments in Brazil 93,353,846 100,011,491 13.0
Chile Telecommuni- 155,527 Compania de Telecomunicaciones
cations de Chile S.A. (ADR)(a) 4,720,057 4,646,369 0.6
495,300 ++Quinenco S.A. (ADR)(a) 9,215,945 5,695,950 0.7
------------ ------------ ------
13,936,002 10,342,319 1.3
Utilities-- 242,736 Chilgener S.A. (ADR)(a) 7,012,109 5,947,032 0.8
Electric
Total Investments in Chile 20,948,111 16,289,351 2.1
Mexico Brewery 70,000 Fomento Economico Mexicano,
S.A. de C.V. (Femsa)(ADR)(a)(g) 538,125 559,174 0.1
Broadcast-- 645,394 ++Grupo Televisa, S.A. de C.V.
Media (GDR)(b) 21,549,851 24,968,680 3.3
Building & 598,341 Apasco, S.A. de C.V. 3,284,301 4,128,538 0.5
Construction
Building 183,300 ++Cementos Mexicanos, S.A. de C.V.
Products (Cemex)(Class B) 907,657 978,146 0.1
300,000 ++Cementos Mexicanos, S.A. de C.V.
(Cemex)(Class B)(ADR)(a) 3,084,314 3,150,000 0.4
------------ ------------ ------
3,991,971 4,128,146 0.5
<PAGE>
Foreign US$ 4,110,000 United Mexican States,
Government Global Bonds, 11.50%
Obligations due 5/15/2026 4,693,106 4,870,350 0.7
US$ 1,250,000 United Mexican States, Par,
Series B, Floating Rate
Brady Bonds, 6.25% due
12/31/2019++++ 991,406 1,040,625 0.1
------------ ------------ ------
5,684,512 5,910,975 0.8
Health/ 2,164,934 Kimberly-Clark de Mexico, S.A.
Personal Care de C.V. (Series A) 6,602,173 10,370,620 1.4
Multi- 1,995,894 Grupo Carso, S.A. de C.V. 'A' 11,922,837 13,350,544 1.7
Industry 348,900 Grupo Carso, S.A. de C.V.
(ADR)(a) 4,028,200 4,622,925 0.6
------------ ------------ ------
15,951,037 17,973,469 2.3
Retail 6,696,987 Cifra, S.A. de C.V. 'C' 9,177,788 15,042,872 2.0
Telecommuni- 398,660 Telefonos de Mexico, S.A.
cations de C.V. (ADR)(a) 19,851,162 22,349,876 2.9
Total Investments in Mexico 86,630,920 105,432,350 13.8
Venezuela Foreign US$ 981,000 Republic of Venezuela, 9.25%
Government due 9/15/2027 822,814 878,976 0.1
Obligations
Telecommuni- 362,964 Compania Anonima Nacional
cations Telefonos de Venezuela S.A.
(CANTV)(ADR)(a) 15,581,748 15,108,376 2.0
Textiles 354,212 Sudamtex de Venezuela S.A.C.A.
(ADR)(a)(d) 5,055,422 3,187,911 0.4
Utilities-- 3,908,549 C.A. La Electricidad de Caracas
Electric S.A.I.C.A.--S.A.C.A. 5,259,064 4,693,672 0.6
Total Investments in Venezuela 26,719,048 23,868,935 3.1
Total Investments in
Latin America 254,004,231 273,385,783 35.6
<PAGE>
MIDDLE
EAST
Egypt Banking 168,430 Commercial International Bank
(Egypt) S.A.E. 1,992,666 3,406,304 0.4
244,349 Commercial International Bank
(Egypt) S.A.E. (GDR)(b) 2,901,644 5,113,003 0.7
------------ ------------ ------
4,894,310 8,519,307 1.1
Building 205,165 Torah Portland Cement Company 5,760,342 4,713,054 0.6
Products
Total Investments in Egypt 10,654,652 13,232,361 1.7
Israel Banking 4,895,330 Bank Hapoalim Ltd. 9,090,162 11,772,420 1.6
Total Investments in Israel 9,090,162 11,772,420 1.6
Total Investments in the
Middle East 19,744,814 25,004,781 3.3
</TABLE>
Merrill Lynch Developing Capital Markets Fund, Inc., December 31, 1997
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
PACIFIC BASIN/ Value Percent of
ASIA Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
China Automobiles 5,886,774 Qingling Motors Company
(Class H) $ 2,912,379 $ 2,887,350 0.4%
Brewery 2,578,000 ++Tsingtao Brewery Co.,
Ltd. (Class H) 968,891 602,282 0.1
Building 50,000 ++Huaxin Cement Co., Ltd.
Products (Class B) 8,638 4,500 0.0
Chemicals 175,918 ++Beijing Yanhua Petrochemical
Company Ltd. (ADR)(a) 1,929,339 1,671,221 0.2
Telecommuni- 3,598,000 ++China Telecom (Hong Kong) Ltd. 5,486,032 6,176,625 0.8
cations 9,859,500 Eastern Communications Co., Ltd.
(Class B) 5,702,595 11,949,714 1.5
------------ ------------ ------
11,188,627 18,126,339 2.3
<PAGE>
Utilities-- 4,777,000 ++Beijing Datang Power Generation
Electric Company Limited(Class H) 2,213,496 2,188,880 0.3
Total Investments in China 19,221,370 25,480,572 3.3
Hong Kong Building 43,533,589 ++Anhui Conch Cement Co. Ltd. 12,932,579 7,585,717 1.0
Products
Electrical 8,560,000 Harbin Power Equipment Co. Ltd. 1,680,939 1,038,580 0.1
Equipment
Food 37,614,850 Tingyi (Cayman Islands)
Holdings, Co. 9,267,091 4,903,646 0.6
Industrial 37,503,056 Sinocan Holdings Ltd. 14,259,926 10,407,431 1.4
Mining 11,921,000 ++Jiangxi Copper Company Ltd.
(Class H) 3,365,310 1,323,273 0.2
Real Estate 5,483,000 Henderson China Holding Ltd. 9,536,806 4,387,815 0.6
Telecommuni- 9,479,000 City Telecom (H.K.) Ltd. 1,810,777 1,443,720 0.2
cations 1,956,000 Smartone Telecommunications 4,112,405 3,774,405 0.5
------------ ------------ ------
5,923,182 5,218,125 0.7
Total Investments in Hong Kong 56,965,833 34,864,587 4.6
India Automobiles 280,150 Bajaj Auto Ltd. (GDR)(b) 6,393,261 5,624,011 0.7
Banking 978,964 State Bank of India 7,442,695 6,084,099 0.8
102,500 State Bank of India (GDR)(b) 2,342,125 1,865,500 0.3
93,200 State Bank of India (GDR)(b)(d) 2,338,125 1,696,240 0.2
------------ ------------ ------
12,122,945 9,645,839 1.3
Building 42,500 Associated Cement Companies Ltd. 1,640,597 1,507,337 0.2
Products 462,100 Gujarat Ambujaya Cements Ltd.
(GDR)(b) 3,987,695 3,292,462 0.4
------------ ------------ ------
5,628,292 4,799,799 0.6
Energy Sources 8,194 Bombay Suburban Electric
Supply Co. Ltd. 45,879 35,836 0.0
11,682 Bombay Suburban Electric
Supply Co. Ltd. (GDR)(b) 207,274 204,435 0.0
------------ ------------ ------
253,153 240,271 0.0
<PAGE>
Financial 406 Housing Development Finance Corp. 34,604 31,956 0.0
Services 2,709,503 Industrial Credit & Investment
Corporation of India Ltd. 7,610,672 5,301,202 0.7
------------ ------------ ------
7,645,276 5,333,158 0.7
Leisure & 410,875 EIH Ltd. 4,640,089 4,429,254 0.6
Tourism 174,895 EIH Ltd. (GDR)(b)(d) 2,669,592 2,334,848 0.3
98,400 Indian Hotels Company Ltd.
(GDR)(b) 2,014,862 1,879,440 0.2
------------ ------------ ------
9,324,543 8,643,542 1.1
Oil Services 458,300 Hindustan Petroleum
Corporation Ltd. 5,287,927 5,678,935 0.8
Recreation & 423,000 ++Suraj Diamonds Ltd. 1,107,505 97,366 0.0
Consumer Goods
Telecommuni- 281,100 Mahanagar Telephone Nigram Ltd. 2,104,541 1,854,829 0.3
cations 24,000 ++Videsh Sanchar Nigam Ltd.
(GDR)(b) 435,600 336,600 0.0
124,000 ++Videsh Sanchar Nigam Ltd.
(GDR)(b)(d) 2,046,000 1,739,100 0.2
------------ ------------ ------
4,586,141 3,930,529 0.5
Textiles 1,356 ++Reliance Industries Ltd. 4,299 5,740 0.0
599,200 ++Reliance Industries Ltd.
(GDR)(b) 6,780,132 5,153,120 0.7
------------ ------------ ------
6,784,431 5,158,860 0.7
Total Investments in India 59,133,474 49,152,310 6.4
Indonesia Automobiles 4,593,000 P.T. Astra International
'Foreign' 7,071,851 1,212,042 0.1
Building 1,126,000 P.T. Semen Gresik 'Foreign' 1,304,708 672,472 0.1
Products
Forest 4,977,050 P.T. Indah Kiat Pulp &
Products & Paper Corp. 'Foreign' 2,925,564 898,634 0.1
Paper 419,120 P.T. Indah Kiat Pulp & Paper
Corp. 'Foreign' (Warrants)(c) 0 11,642 0.0
------------ ------------ ------
2,925,564 910,276 0.1
Insurance 15,217,800 P.T. Lippo Life Insurance
'Foreign' 8,737,476 563,622 0.1
Telecommuni- 685,525 P.T. Indonesian Satellite Corp.
cations (Indosat)(ADR)(a) 18,847,801 13,239,202 1.7
3,590,500 P.T. Telekomunikasi Indonesia 5,463,605 1,944,854 0.3
342,554 P.T. Telekomunikasi Indonesia
(ADR)(a) 10,113,958 3,789,504 0.5
------------ ------------ ------
34,425,364 18,973,560 2.5
Total Investments in Indonesia 54,464,963 22,331,972 2.9
<PAGE>
Malaysia Diversified 2,935,000 Magnum Corporation BHD 5,460,673 1,767,799 0.2
Holdings
Food 659,000 Nestle (Malaysia) BHD 5,103,824 3,053,282 0.4
Multi- 2,525,000 Hicom Holdings BHD 5,991,165 1,455,856 0.2
Industry
Natural Gas 894,000 Petronas Gas BHD 3,724,209 2,036,525 0.3
Oil & Related 1,545,500 Petronas Dagangan BHD 4,054,663 1,312,780 0.2
Telecommuni- 1,641,000 Telekom Malaysia BHD 5,054,733 4,857,529 0.6
cations
Tobacco 305,000 Rothmans of Pall Mall
(Malaysia) BHD 3,201,767 2,374,839 0.3
Total Investments in Malaysia 32,591,034 16,858,610 2.2
Pakistan Chemicals-- 10,300 Fauji Fertilizer Co. Ltd. 21,455 19,719 0.0
Fertilizers
Electrical 100 ++Karachi Electric Supply Corp. Ltd. 66 54 0.0
Components
Telecommuni- 1,405,000 Pakistan Telecommunications Corp. 1,489,569 1,061,588 0.1
cations
Total Investments in Pakistan 1,511,090 1,081,361 0.1
Philippines Telecommuni- 161,240 Philippine Long Distance
cations Telephone Co. 5,608,779 3,547,280 0.5
167,515 Philippine Long Distance
Telephone Co. (ADR)(a) 5,364,323 3,769,087 0.5
Total Investments in the
Philippines 10,973,102 7,316,367 1.0
</TABLE>
Merrill Lynch Developing Capital Markets Fund, Inc., December 31, 1997
<PAGE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
PACIFIC BASIN Value Percent of
ASIA (concluded) Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
South Korea Banking 670,290 ++Kookmin Bank (GDR)(b)(d) $ 10,343,028 $ 3,180,526 0.4%
Chemicals 376,980 L.G. Chemical Ltd. 5,328,189 1,734,775 0.2
Electrical 109,965 Samsung Display Devices Co. 5,928,552 2,076,035 0.3
Components
Total Investments in South Korea 21,599,769 6,991,336 0.9
Taiwan Banking 3,804,444 ++Bank Sinopac 4,239,984 2,907,557 0.4
2,653,000 E. Sun Commercial Bank 2,045,284 2,060,265 0.2
------------ ------------ ------
6,285,268 4,967,822 0.6
Forest 10,354,000 ++Cheng Loong Company 7,166,727 5,424,283 0.7
Products 11,449,680 ++Chung Hwa Pulp Corporation 10,318,821 6,598,121 0.9
& Paper ------------ ------------ ------
17,485,548 12,022,404 1.6
Insurance 650,000 Fubon Insurance Co. 1,515,585 1,382,126 0.2
Real Estate 4,508,000 Hung Poo Real Estate
Development Corp. 8,842,211 6,043,082 0.8
Trans- 5,745,000 ++Yang Ming Marine Transport 7,827,476 4,656,194 0.6
portation
--Marine
Total Investments in Taiwan 41,956,088 29,071,628 3.8
Thailand Banking 982,000 Bangkok Bank Public Co.,
Ltd. (Registered Shares) 6,522,676 2,478,233 0.3
1,600,000 Thai Farmers Bank Company
Limited 'Foreign' 6,539,906 2,944,269 0.4
13,062,582 5,422,502 0.7
Building 50,000 Siam Cement Public Company
Products Limited 'Foreign' 1,482,104 399,579 0.0
1,342,955 Siam City Cement Public Company
Limited 'Foreign' 5,650,195 1,412,150 0.2
------------ ------------ ------
7,132,299 1,811,729 0.2
Telecommuni- 1,498,000 ++TelecomAsia Corporation Public
cations Company Ltd. 'Foreign' 3,247,616 289,834 0.0
Television 458,000 BEC World Public Company Limited 4,827,825 1,849,338 0.3
Total Investments in Thailand 28,270,322 9,373,403 1.2
Total Investments in the
Pacific Basin/Asia 326,687,045 202,522,146 26.4
<PAGE>
SHORT-TERM Face
SECURITIES Amount
Commercial US$ 5,019,000 General Motors Acceptance Corp.,
Paper* 6.75% due 1/02/1998 5,018,059 5,018,059 0.7
Total Investments in
Short-Term Securities 5,018,059 5,018,059 0.7
Total Investments $819,190,765 748,541,201 97.6
============
Other Assets Less Liabilities 18,594,272 2.4
------------ -------
Net Assets $767,135,473 100.0%
============ =======
<FN>
*Commercial Paper is traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the Fund.
++Non-income producing security.
++++Brady Bonds are securities which have been issued to refinance
commercial bank loansand other debt. The risk associated with these
instruments is the amount of uncollateralized principal or interest
payments since there is a high default rate of commercial bank loans
by countries issuing these securities.
(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 apredetermined price until the expiration date.
See Notes to Consolidated Financial Statements.
(d)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(e)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.
(f)The rights may be exercised until 2/09/1998.
(g)Restricted securities as to resale. The value of the Fund's
investments in restricted securities was approximately $559,000,
representing 0.1% of net assets.
<PAGE> Acquisition Value
Issue Date Cost (Note 1a)
Fomento Economico Mexicano, S.A. de C.V.
(Femsa) (ADR) 8/12/1997 $ 538,125 $ 559,174
----------- -----------
Total $ 538,125 $ 559,174
=========== ===========
(h)Represents a pay-in-kind security which may pay
interest/dividends in additional face/shares.
</TABLE>
PORTFOLIO INFORMATION
Ten Largest Equity Holdings Percent of
As of December 31, 1997 Net Assets
Telecomunicacoes Brasileiras S.A.--Telebras* 3.3%
Grupo Televisa, S.A. de C.V. (GDR) 3.3
Telefonos de Mexico, S.A. de C.V. (ADR) 2.9
Companhia Cervejaria Brahma S.A. PN (Preferred)* 2.7
Gedeon Richter Ltd. (GDR)* 2.6
Hellenic Bottling Co. S.A. 2.5
Grupo Carso, S.A. de C.V.* 2.3
Magyar TavKozlesi Reszvenytarsasag (Matav)* 2.2
Lukoil Oil Company (ADR) 2.1
Compania Anonima Nacional Telefonos
de Venezuela S.A. (CANTV) (ADR) 2.0
[FN]
*Includes combined holdings.
Merrill Lynch Developing Capital Markets Fund, Inc., December 31, 1997
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of December 31, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$819,190,765) (Note 1a) $ 748,541,201
Cash 2,299
Foreign cash (Note 1c) 24,154,196
Receivables:
Dividends $ 1,355,277
Capital shares sold 995,113
Interest 124,248
Securities sold 40,728 2,515,366
--------------
Prepaid expenses and other assets (Note 1f) 46,534
--------------
Total assets 775,259,596
--------------
Liabilities: Payables:
Capital shares redeemed 6,291,872
Investment adviser (Note 2) 691,813
Distributor (Note 2) 310,046 7,293,731
--------------
Accrued expenses and other liabilities 830,392
--------------
Total liabilities 8,124,123
--------------
Net Assets: Net assets $ 767,135,473
==============
Net Assets Class A Shares of Common Stock, $0.10 par value,
Consist of: 100,000,000 shares authorized $ 3,036,586
Class B Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 2,152,977
Class C Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 418,419
Class D Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 403,897
Paid-in capital in excess of par 868,850,633
Accumulated investment loss--net (7,545,308)
Accumulated realized capital losses on investments and foreign
currency transactions--net (28,167,660)
Unrealized depreciation on investments and foreign
currency transactions--net (72,014,071)
--------------
Net assets $ 767,135,473
==============
<PAGE>
Net Asset Class A--Based on net assets of $389,262,990 and
Value: 30,365,856 shares outstanding $ 12.82
==============
Class B--Based on net assets of $273,266,186 and
21,529,771 shares outstanding $ 12.69
==============
Class C--Based on net assets of $52,914,203 and
4,184,192 shares outstanding $ 12.65
==============
Class D--Based on net assets of $51,692,094 and
4,038,969 shares outstanding $ 12.80
==============
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended December 31, 1997
<S> <S> <C> <C>
Investment Income Dividends (net of $380,512 foreign withholding tax) $ 5,850,997
(Notes 1d & 1e): Interest and discount earned 918,086
--------------
Total income 6,769,083
--------------
Expenses: Investment advisory fees (Note 2) $ 4,740,368
Account maintenance and distribution fees--Class B (Note 2) 1,808,320
Custodian fees 1,033,058
Transfer agent fees--Class A (Note 2) 396,893
Transfer agent fees--Class B (Note 2) 381,475
Account maintenance and distribution fees--Class C (Note 2) 334,487
Accounting services (Note 2) 84,902
Account maintenance fees--Class D (Note 2) 83,237
Printing and shareholder reports 76,098
Transfer agent fees--Class C (Note 2) 71,607
Transfer agent fees--Class D (Note 2) 57,833
Registration fees (Note 1f) 50,216
Professional fees 41,621
Dividend fees 30,134
Directors' fees and expenses 18,664
Pricing fees 5,595
Other 316,703
--------------
Total expenses 9,531,211
--------------
Investment loss--net (2,762,128)
--------------
<PAGE>
Realized & Realized loss from:
Unrealized Investments--net (1,425,003)
Loss on Foreign currency transactions--net (4,398,612) (5,823,615)
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (219,299,865)
(Notes 1b, 1c, Foreign currency transactions--net (1,326,665) (220,626,530)
1e & 3): -------------- --------------
Net realized and unrealized loss on investments and
foreign currency transactions (226,450,145)
--------------
Net Decrease in Net Assets Resulting from Operations $ (229,212,273)
==============
See Notes to Consolidated Financial Statements.
</TABLE>
Merrill Lynch Developing Capital Markets Fund, Inc., December 31, 1997
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
December 31, June 30,
Increase (Decrease) in Net Assets: 1997 1997
<S> <S> <C> <C>
Operations: Investment income (loss)--net $ (2,762,128) $ 14,459,442
Realized gain (loss) on investments and foreign
currency transactions--net (5,823,615) 42,678,305
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net (220,626,530) 78,481,111
-------------- --------------
Net increase (decrease) in net assets resulting from operations (229,212,273) 135,618,858
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (6,214,424) (6,147,015)
Shareholders Class B (2,700,574) (2,959,341)
(Note 1g): Class C (547,062) (523,137)
Class D (752,654) (823,715)
Realized gain on investments--net:
Class A (14,124,131) (2,372,022)
Class B (10,342,043) (2,299,701)
Class C (1,974,039) (380,478)
Class D (1,891,446) (369,485)
-------------- --------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (38,546,373) (15,874,894)
-------------- --------------
<PAGE>
Capital Share Net increase in net assets derived from capital
Transactions share transactions 19,180,960 146,098,497
(Note 4): -------------- --------------
Net Assets: Total increase (decrease) in net assets (248,577,686) 265,842,461
Beginning of period 1,015,713,159 749,870,698
-------------- --------------
End of period* $ 767,135,473 $1,015,713,159
============== ==============
<FN>
*Undistributed (accumulated) investment income (loss)--net $ (7,545,308) $ 5,431,534
============== ==============
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
The following per share data and For the
ratios have been derived from information Six Months
provided in the financial statements. Ended
Dec. 31, For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1997++ 1997++ 1996++ 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 17.23 $ 15.05 $ 13.35 $ 14.61 $ 11.62
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.01) .36 .23 .24 .11
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net (3.71) 2.21 1.71 (.40) 3.23
-------- -------- -------- -------- --------
Total from investment operations (3.72) 2.57 1.94 (.16) 3.34
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.21) (.28) (.24) (.04) (.07)
Realized gain on investments--net (.48) (.11) -- (.60) (.28)
In excess of realized gain on investments--net -- -- -- (.46) --
-------- -------- -------- -------- --------
Total dividends and distributions (.69) (.39) (.24) (1.10) (.35)
-------- -------- -------- -------- --------
Net asset value, end of period $ 12.82 $ 17.23 $ 15.05 $ 13.35 $ 14.61
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (21.41%)+++ 17.66% 14.82% (1.67%) 28.73%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.53%* 1.53% 1.54% 1.62% 1.46%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net (.09%)* 2.32% 1.66% 1.56% .63%
======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $389,263 $471,790 $342,884 $350,081 $401,996
Data: ======== ======== ======== ======== ========
Portfolio turnover 56.28% 86.68% 71.01% 63.37% 66.85%
======== ======== ======== ======== ========
Average commission rate paid++++ $ .0023 $ .0003 $ .0012 -- --
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
++++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 dollarsusing the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
+++Aggregate total investment return.
See Notes to Consolidated Financial Statements.
</TABLE>
Merrill Lynch Developing Capital Markets Fund, Inc., December 31, 1997
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class B
For the For the
Six Period
The following per share data and ratios have been derived Months July 1,
from information provided in the financial statements. Ended For the Year 1994++++ to
Dec. 31, Ended June 30, June 30,
Increase (Decrease) in Net Asset Value: 1997++ 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 17.04 $ 14.90 $ 13.24 $ 14.54
Operating -------- -------- -------- --------
Performance: Investment income (loss)--net (.09) .19 .09 .08
Realized and unrealized gain (loss) on
investments and foreign currency transactions--net (3.65) 2.20 1.69 (.32)
-------- -------- -------- --------
Total from investment operations (3.74) 2.39 1.78 (.24)
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.13) (.14) (.12) --
Realized gain on investments--net (.48) (.11) -- (.60)
In excess of realized gain on investments--net -- -- -- (.46)
-------- -------- -------- --------
Total dividends and distributions (.61) (.25) (.12) (1.06)
-------- -------- -------- --------
Net asset value, end of period $ 12.69 $ 17.04 $ 14.90 $ 13.24
======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share (21.83%)+++ 16.39% 13.63% (2.22%)+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 2.56%* 2.57% 2.56% 2.79%*
Net Assets: ======== ======== ======== ========
Investment income (loss)--net (1.14%)* 1.22% .65% 1.01%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $273,266 $398,468 $302,183 $162,774
Data: ======== ======== ======== ========
Portfolio turnover 56.28% 86.68% 71.01% 63.37%
======== ======== ======== ========
Average commission rate paid++++++ $ .0023 $ .0003 $ .0012 --
======== ======== ======== ========
<CAPTION>
Class C
For the For the
Six Period
The following per share data and ratios have been derived Months July 1,
from information provided in the financial statements. Ended For the Year 1994++++ to
Dec. 31, Ended June 30, June 30,
Increase (Decrease) in Net Asset Value: 1997++ 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.99 $ 14.87 $ 13.22 $ 16.71
Operating -------- -------- -------- --------
Performance: Investment income (loss)--net (.09) .18 .09 .08
Realized and unrealized gain (loss) on
investments and foreign currency transactions--net (3.64) 2.20 1.70 (2.50)
-------- -------- -------- --------
Total from investment operations (3.73) 2.38 1.79 (2.42)
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.13) (.15) (.14) (.01)
Realized gain on investments--net (.48) (.11) -- (.60)
In excess of realized gain on investments--net -- -- -- (.46)
-------- -------- -------- --------
Total dividends and distributions (.61) (.26) (.14) (1.07)
-------- -------- -------- --------
Net asset value, end of period $ 12.65 $ 16.99 $ 14.87 $ 13.22
======== ======== ======== ========
Total Investment Based on net asset value per share (21.78%)+++ 16.37% 13.68% (14.97%)+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 2.56%* 2.58% 2.56% 2.96%*
Net Assets: ======== ======== ======== ========
Investment income (loss)--net (1.14%)* 1.19% 0.67% 1.32%*
======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $ 52,914 $ 71,769 $ 46,983 $ 18,573
Data: ======== ======== ======== ========
Portfolio turnover 56.28% 86.68% 71.01% 63.37%
======== ======== ======== ========
Average commission rate paid++++++ $ .0023 $ .0003 $ .0012 --
======== ======== ======== ========
<CAPTION>
Class D
For the For the
Six Period
The following per share data and ratios have been derived Months July 1,
from information provided in the financial statements. Ended For the Year 1994++++ to
Dec. 31, Ended June 30, June 30,
Increase (Decrease) in Net Asset Value: 1997++ 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 17.19 $ 15.02 $ 13.33 $ 16.77
Operating -------- -------- -------- --------
Performance: Investment income (loss)--net (.03) .32 .21 .13
Realized and unrealized gain (loss) on
investments and foreign currency transactions--net (3.69) 2.20 1.69 (2.48)
-------- -------- -------- --------
Total from investment operations (3.72) 2.52 1.90 (2.35)
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.19) (.24) (.21) (.03)
Realized gain on investments--net (.48) (.11) -- (.60)
In excess of realized gain on investments--net -- -- -- (.46)
-------- -------- -------- --------
Total dividends and distributions (.67) (.35) (.21) (1.09)
-------- -------- -------- --------
Net asset value, end of period $ 12.80 $ 17.19 $ 15.02 $ 13.33
======== ======== ======== ========
Total Investment Based on net asset value per share (21.47%)+++ 17.30% 14.55% (14.49%)+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 1.77%* 1.78% 1.76% 2.19%*
Net Assets: ======== ======== ======== ========
Investment income (loss)--net (.35%)* 2.06% 1.48% 2.10%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 51,692 $ 73,686 $ 57,821 $ 21,899
Data: ======== ======== ======== ========
Portfolio turnover 56.28% 86.68% 71.01% 63.37%
======== ======== ======== ========
Average commission rate paid++++++ $ .0023 $ .0003 $ .0012 --
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
++++Commencement of operations.
<PAGE>
See Notes to Consolidated Financial Statements.
++++++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.
</TABLE>
Merrill Lynch Developing Capital Markets Fund, Inc., December 31, 1997
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. These unaudited
financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a
normal recurring nature. 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.
<PAGE>
(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.
* 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.
<PAGE>
* Options--The Fund is authorized to write covered call options and
purchase and write 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.
(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.
<PAGE>
(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.
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 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% --
<PAGE>
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 six months ended December 31, 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 $3,772 $47,415
Class D $7,045 $87,810
Merrill Lynch Developing Capital Markets Fund, Inc., December 31, 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded)
For the six months ended December 31, 1997, MLPF&S received
contingent deferred sales charges of $600,743 and $13,541 relating
to transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $134,202 in commissions on the
execution of portfolio security transactions for the Fund for the
six months ended December 31, 1997.
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, PSI, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended December 31, 1997 were $492,535,625 and
$490,751,036, respectively.
Net realized and unrealized gains (losses) as of December 31, 1997
were as follows:
<PAGE> Realized
Gains Unrealized
(Losses) Losses
Long-term investments $ (1,425,078) $(70,649,564)
Short-term investments 75 --
Foreign currency transactions (4,398,612) (1,364,507)
------------ ------------
Total $ (5,823,615) $(72,014,071)
============ ============
As of December 31, 1997, net unrealized depreciation for Federal
income tax purposes aggregated $70,649,564, of which $98,267,021
related to appreciated securities and $168,916,585 related to
depreciated securities. The aggregate cost of investments at
December 31, 1997 for Federal income tax purposes was $819,190,765.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $19,180,960 and $146,098,497 for the six months ended December
31, 1997 and the year ended June 30, 1997, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the
Six Months Ended Dollar
December 31, 1997 Shares Amount
Shares sold 7,160,931 $109,089,029
Shares issued to shareholders
in reinvestment of dividends
and distributions 433,031 5,347,931
------------ ------------
Total issued 7,593,962 114,436,960
Shares redeemed (4,615,899) (68,285,119)
------------ ------------
Net increase 2,978,063 $ 46,151,841
============ ============
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
============ ============
<PAGE>
Class B Shares for the
Six Months Ended Dollar
December 31, 1997 Shares Amount
Shares sold 3,998,172 $ 61,232,108
Shares issued to shareholders
in reinvestment of dividends
and distributions 192,372 2,354,635
------------ ------------
Total issued 4,190,544 63,586,743
Automatic conversion of shares (78,497) (1,202,869)
Shares redeemed (5,966,774) (85,914,259)
------------ ------------
Net decrease (1,854,727) $(23,530,385)
============ ============
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
============ ============
Class C Shares for the
Six Months Ended Dollar
December 31, 1997 Shares Amount
Shares sold 1,057,679 $ 16,347,303
Shares issued to shareholders
in reinvestment of dividends
and distributions 39,130 476,992
------------ ------------
Total issued 1,096,809 16,824,295
Shares redeemed (1,136,463) (16,769,416)
------------ ------------
Net increase (decrease) (39,654) $ 54,879
============ ============
Class C Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
<PAGE>
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 D Shares for the
Six Months Ended Dollar
December 31, 1997 Shares Amount
Shares sold 2,345,189 $ 36,498,256
Automatic conversion of shares 77,627 1,202,869
Shares issued to shareholders
in reinvestment of dividends
and distributions 51,478 634,722
------------ ------------
Total issued 2,474,294 38,335,847
Shares redeemed (2,720,865) (41,831,222)
------------ ------------
Net decrease (246,571) $ (3,495,375)
============ ============
Class D Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
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
============ ============
Merrill Lynch Developing Capital Markets Fund, Inc., December 31, 1997
EQUITY PORTFOLIO CHANGES
<PAGE>
For the Quarter Ended December 31, 1997
Additions
Adana Cimento Sanayii Turk Anonim
Sirketi (Class A)
Alarko Holdings A.S.
Anhui Conch Cement Co. Ltd.
Banco de Galicia y Buenos Aires
S.A. (ADR)
Cementos Mexicanos, S.A. de C.V.
(Cemex) (Class B)
Cementos Mexicanos, S.A. de C.V.
(Cemex) (Class B) (ADR)
China Telecom (Hong Kong) Ltd.
Companhia Energetica de Minas Gerais S.A.
(CEMIG) (Preferred)
Gujarat Ambujaya Cements Ltd. (GDR)
Haci Omer Sabanci Holding A.S.
Haci Omer Sabanci Holding A.S. (ADR)
Harbin Power Equipment Co. Ltd.
*Maanshan Iron and Steel Co.
Magyar TavKozlesi Reszvenytarsasag
(Matav) (ADR)
Telecomunicacoes de Sao Paulo S.A.--
TELESP (Preferred)
Uniao de Bancos Brasileiros S.A.
(Unibanco) (GDR)
Deletions
Alfa, S.A de C.V. (Class A)
Amoy Properties Limited
Amway Asia Pacific Ltd.
Bank Leumi Israel
C.P. Pokphand Co. Ltd. (Ordinary)
Cho Hung Bank Co. Ltd.
Dong Ah Tire Company
Ergo Bank S.A. (Ordinary)
Gold Fields of South Africa Ltd.
Korea Electric Power Corp.
*Maanshan Iron and Steel Co.
Malaysian Resources Corp. BHD
New Straits Times Press BHD
Nortel Inversora S.A. (ADR)
P.T. Ciputra Development
Portugal Telecom S.A. (ADR)
Rembrandt Group Ltd. (ADR)
San Miguel Corp. (Class B)
SK Telecom Co. Ltd.
SK Telecom Co. Ltd. (ADR)
SPT Telecom A.S.
Sungei Way Holdings BHD
Super-Sol Ltd.
Taiwan Pulp & Paper Corp.
Telecom Argentina Stet-France
Telecom S.A. (ADR)
United Engineers (Malaysia) Ltd. BHD
Yuen Foong Yu Paper Manufacturing
Company, Ltd.
<PAGE>
[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
