MERRILL LYNCH
DEVELOPING
CAPITAL MARKETS
FUND, INC.
FUND LOGO
Quarterly Report
March 31, 1999
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 hereinare as dated and are subject
to change.
Merrill Lynch
Developing
Capital Markets
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH DEVELOPING CAPITAL MARKETS FUND, INC.
Asset Allocation
As a Percentage* of
Net Assets as of
March 31, 1999
Peru 0.1%
Venezuela 0.6%
Brazil 16.5%
Hungary 3.8%
Czech Republic 0.5%
Poland 2.7%
Russia 0.2%
Greece 2.7%
Turkey 2.9%
Pakistan 0.0%++
India 6.2%
Thailand 3.2%
China 0.7%
Hong Kong 1.0%
South Korea 11.1%
Mexico 16.5%
Ecuador 0.3%
Chile 0.9%
Argentina 2.5%
Egypt 0.5%
South Africa 8.6%
Israel 2.6%
Indonesia 2.9%
Malaysia 5.1%
Taiwan 7.6%
Philippines 1.2%
[FN]
*Total may not equal 100%.
++Amount is less than 0.1%.
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1999
DEAR SHAREHOLDER
During the three-month period ended March 31, 1999, Merrill Lynch
Developing Capital Markets Fund, Inc.'s Class A, Class B, Class C
and Class D Shares had total returns of +7.52%, +7.33%, +7.35% and
+7.56%, respectively. (Results shown do not reflect sales charges
and would be lower if sales charges were included. Complete
performance information can be found on pages 4 and 5 of this report
to shareholders.) The total return of the unmanaged Morgan Stanley
Capital International Emerging Markets Free (MSCI EMF) Index was
+12.44% during the same period. (References to securities markets of
all countries in this letter to shareholders correspond to those
countries' market weightings in the MSCI EMF Index, unless otherwise
noted, and are for the three-month period ended March 31, 1999.)
Detrimental to performance were the Fund's overweighted positions in
Hungary and Poland. The Hungarian market declined 15.16% and the
Polish market rose only 2.31%. Beneficial to performance were the
Fund's underweighted positions in the Czech Republic, Colombia and
Venezuela, whose markets declined 18.05%, 14.21% and 13.25%,
respectively.
Investment Overview
Worldwide emerging markets performed strongly during the quarter
ended March 31, 1999. The MSCI EMF Index benefited from the rallies
in Turkey (+50.38%), Mexico Free (+28.75%) and India (+26.38%), and
the recovery in Brazil Free, which, despite its currency devaluation
in January, rose 5.52% for the quarter. Fiscal pressures and
diminishing reserves finally forced Brazil to abandon its currency
policy and allow the real to float. Unlike the currency devaluations
in Asia and Russia, the real devaluation was expected by investors
and largely discounted in prices of stocks. This explains the
relatively small impact the devaluation had on other emerging
markets. The problem has thus far been seen as an isolated, domestic
one. Nonetheless, it remains a large and critical one for its
leaders to solve. However, Brazil currently no longer has an
overvalued currency, and the real has stabilized. The new central
bank president, Arminio Fraga, has the confidence of foreign
investors and lenders, and the country regained access to external
funds. However, the key improvements in public finances will occur
only gradually over years.
During the March quarter, Latin American markets, whose performance
had been constrained by Brazil's problems, started to rally. Mexico
was the most resilient. The country's relative strength is rooted in
expected improvement in economic performance, particularly its trade
balance. More than 80% of Mexico's exports are directed to the
United States, and at the same time, Mexican domestic demand has
slowed to a more gradual pace than originally expected.
One of our key holdings in the portfolio is Grupo Televisa SA, the
dominant television programming producer and broadcaster in Mexico.
Televisa dominates roughly 70% of television advertising spending
and over 50% of total advertising spending. The company has been
undergoing very positive changes over the past two years under chief
executive officer, Emilio Azcarraga Jean, who has attracted
experienced and talented top management. The management team's
efforts in the areas of cost cutting, programming, and sales and
marketing are beginning to translate into growing profitability and
market share. We believe that the trend has a long way to go as the
company shifts its focus to restructuring unprofitable operations
that have been a drag on earnings.
In fourth quarter of 1998, India experienced some political
uncertainty because of government elections. However, during the
three months ended March 31, 1999, the Indian market rally was
fueled by the announcement of a budget that delivered several
capital market-friendly measures. These included lowering capital
gains taxes for individuals and corporations from 20% to 10%, and
eliminating the tax on income derived from mutual funds.
Information technology service is India's fastest growing export.
Pentafour Software & Exports Ltd., one of our main holdings in
India, is among the leaders in this sector in India. In addition,
the company has a well-established multimedia business that produces
animated films with the aid of computer technology for studios
around the world.
Aside from Pentafour, the Fund has investments in the technology
sector through holdings in South Korea and Taiwan. An example is the
Taiwan Semiconductor Manufacturing Company (TSMC), the dominant
semiconductor foundry company. TSMC management consistently delivers
impressive operating results with much lower volatility than the
semiconductor industry and its foundry peers. The company pioneered
the semiconductor foundry business model. The existence of these
foundries has enabled the development of independent integrated
circuit design companies, thereby accelerating the pace of
innovation in the computer industry.
With the exception of India, Taiwan and South Korea, the other Asian
emerging markets had comparatively lackluster performances during
the March quarter. This indicates a more sober and realistic outlook
on the pace of restructuring, recovery and growth. Nonetheless, the
reform process continues in the region. Thailand's bankruptcy and
foreclosure laws were passed, and we believe that the outlook for
foreign exchange liberalization in South Korea, financial
restructuring in Taiwan, and bank recapitalization in Indonesia is
extremely encouraging.
During the quarter ended March 31, 1999, the Middle Eastern and
African markets performed well as the Brazilian currency devalued.
Throughout the period, domestic developments rather than external
ones played a primary role in driving the performance of Middle East
and African stock markets. In Turkey, local political and economic
issues were particularly important in lowering the "risk premium"
attributed to the country and fueling the 50.38% rally in its stock
market. The capture of Abdullah Ocalan, the rebel Kurdish leader
sought by the Turkish Army for more than a decade, gave a boost to
the ruling parties, and raised hopes of greater political stability
and policy continuity. Interest rates declined as inflation was
stable, and the International Monetary Fund expressed a willingness
to provide a credit facility. The decline in interest rates has been
timely because the amount of debt that the Turkish Treasury needs to
roll over is substantial and will be rising in the coming months.
Many Turkish companies--both banks and non-banks--invest in Turkish
Treasury bills. Thus, the value of their investment portfolios rises
as interest rates decline. Given the high prevailing interest rates
in Turkey, there is scope for a further decline in rates. A holding
in our portfolio is Migros Turk T.A.S., the country's largest
supermarket retailer with approximately 28% market share. Aside from
its retailing expertise, Migros also benefits from a highly
favorable working capital position--that is, the company receives
payments from its customers more rapidly than it pays its suppliers.
Migros' expertise in retailing and cash management enabled the
company to continually expand its presence in the market without
sacrificing earnings. Also, the company's ability to generate large
cash flows enables it to diminish earnings volatility. We deem this
to be a critical advantage because we expect Turkish economic
conditions to be sluggish in the coming months.
There appears to be a major shift in South African monetary policy,
which has driven the market to perform relatively well (+13.14%) in
the past three months, despite volatility in the external
environment. Prior to 1999, the overriding monetary policy objective
was to maintain a stable currency. Since the beginning of 1999, the
policy appears to have shifted to a more growth-oriented strategy.
Interest rates have declined over 240 basis points in the past three
months. Surprisingly, the South African rand remained fairly stable
during the period, an indication of foreign capital inflow. We
believe this attests to investor recognition of the fair
fundamentals of the South African economy and companies, and to the
growing interest of investors in commodity stocks.
One of the Fund's largest positions is Nampak Limited, the premier
South African packaging company. Nampak is a good example of the
ideal investment opportunity in these markets. Nampak dominates the
South African packaging industry with significant market positions
in all areas. The company has one of the strongest management teams
in the country. Its cost structure is in line with international
packaging companies, despite the lower economies of scale in the
South African and other African markets that Nampak serves. The
stock price plunged as interest rates were hiked in May--June 1998
to defend the rand. While the high interest rates and slowdown in
the economy limited Nampak's growth in the short term, it has hurt
its smaller competitors much more severely. Weak competitors are
exiting the business, leading to a consolidation in segments of the
packaging industry in South Africa. From its strong balance sheet
perspective, Nampak took advantage of this consolidation by
acquiring capacity at reduced prices. Ultimately, the loss of
marginal players in the packaging industry will lead to a more
rational market and greater profitability for Nampak. In the short
term, we believe the company will benefit from cost savings
generated from rationalizing its acquisitions. Over the short-to-
medium term, the company's growth prospects improve as interest
rates decline.
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1999
Emerging European markets lived up to their reputations during the
March quarter as leverage played on the European Union. The market
performance of Hungary (-15.16%) and the Czech Republic (-18.05%)
followed that of the European Union in general direction, but with a
multiplier. This reflects concern regarding those countries'
deteriorating external balances as the outlook for European Union
economic growth worsened, and monetary policy was not eased to
address the problem.
In Conclusion
The March quarter proved once again how volatile emerging markets
can be. We see value throughout the markets with security valuations
comparing favorably to those elsewhere in the world. However, we
would remind shareholders that because of this volatility, there may
be periods of downturns and therefore investing in these markets
requires a long-term view.
Thank you for your ongoing interest in Merrill Lynch Developing
Capital Markets Fund, Inc., and we look forward to reviewing our
strategy with you in our next report to shareholders.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Grace Pineda)
Grace Pineda
Senior Vice President and
Portfolio Manager
May 13, 1999
After more than 20 years of service, Arthur Zeikel recently retired
as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr.
Zeikel served as President of MLAM from 1977 to 1997 and as Chairman
since December 1997. Mr. Zeikel is one of the country's most
respected leaders in asset management and presided over the growth
of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500
billion. Mr. Zeikel will remain on Merrill Lynch Developing Capital
Markets Fund, Inc.'s Board of Directors. We are pleased to announce
that Terry K. Glenn has been elected President and Director of the
Fund. Mr. Glenn has held the position of Executive Vice President of
MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors
in wishing him well in his retirement from Merrill Lynch and are
pleased that he will continue as a member of the Fund's Board of
Directors.
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 "Recent Performance
Results" and "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, distri-bution 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 -29.49% +7.52% +41.03%
ML Developing Capital Markets Fund Class B Shares -30.24 +7.33 -27.15
ML Developing Capital Markets Fund Class C Shares -30.20 +7.35 -36.60
ML Developing Capital Markets Fund Class D Shares -29.64 +7.56 -34.33
<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 periods are: Class A Shares, from 9/01/89 to
3/31/99; Class B Shares, from 7/01/94 to 3/31/99; and Class C &
Class D Shares, from 10/21/94 to 3/31/99.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 3/31/99 -29.49% -33.20%
Five Years Ended 3/31/99 - 6.80 - 7.80
Inception (9/01/89) through 3/31/99 + 3.65 + 3.07
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 3/31/99 -30.24% -33.01%
Inception (7/01/94) to 3/31/99 - 6.45 - 6.45
[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 3/31/99 -30.20% -30.89%
Inception (10/21/94) to 3/31/99 - 9.75 - 9.75
[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 3/31/99 -29.64% -33.33%
Inception (10/21/94) to 3/31/99 - 9.03 -10.13
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1999
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Held/ Percent of
AFRICA Industries Face Amount Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
South Africa Banking 157,531 Nedcor Limited $ 3,135,291 $ 3,524,596 1.9%
Beverages 319,554 South African Breweries PLC 2,273,623 2,792,295 1.5
35 South African Breweries PLC 297 303 0.0
------------- ------------- ------
2,273,920 2,792,598 1.5
Forest Products 615,670 Nampak Limited 938,199 1,276,389 0.7
Gold Mines 52,373 AngloGold Limited (ADR)(a) 1,140,567 1,054,007 0.6
Health Insurance 397,680 Sanlam Limited 419,309 345,303 0.2
Insurance 2,443,100 FirstRand Limited 3,501,755 2,343,787 1.3
Mining 654,876 Gencor Limited 1,536,879 1,501,423 0.8
107,730 Minorco SA (Minerals &
Resources Corporation
Limited) 1,862,218 1,850,192 1.0
------------- ------------- ------
3,399,097 3,351,615 1.8
Retail 259,388 Pepkor Limited 820,230 1,138,777 0.6
Retail--Stores 15,611 Edgars Stores Limited 49,707 80,720 0.0
Total Investments in Africa 15,678,075 15,907,792 8.6
EUROPE
Czech Republic Telephone Networks 71,025 SPT Telecom AS 946,409 939,543 0.5
Total Investments in
Czech Republic 946,409 939,543 0.5
Greece Banking 7,740 Alpha Credit Bank 503,723 514,718 0.3
34,649 National Bank of Greece SA 1,525,436 2,347,820 1.3
------------- ------------- ------
2,029,159 2,862,538 1.6
Beverages 27,253 Hellenic Bottling Co. 899,249 810,005 0.4
Building & 17,706 Titan Cement Company SA 1,490,168 1,349,364 0.7
Construction
Total Investments in Greece 4,418,576 5,021,907 2.7
Hungary Banking 47,029 OTP Bank Rt. (GDR)(b) 2,168,989 1,822,374 1.0
Oil & Related 112,172 MOL Magyar Olaj-es Gazipari
Rt. (GDR)(b) 3,202,690 2,394,872 1.3
Telecommunications 531,421 Magyar Tavkozlesi Rt.--Matav 3,098,568 2,835,779 1.5
Total Investments in Hungary 8,470,247 7,053,025 3.8
Poland Automotive 66,947 Debica SA 1,405,151 808,733 0.4
Banking 91,688 Wielkopolski Bank Kredytowy SA 901,581 505,548 0.3
Computers 109,835 ComputerLand SA 2,348,233 1,692,945 0.9
Electrical 192,176 Elektrim Spolka Akcyjna SA 1,864,028 2,046,987 1.1
Components
Total Investments in Poland 6,518,993 5,054,213 2.7
Russia Energy Sources 2,025,000 Irkutskenergo 255,917 100,238 0.1
Telecommunications 544,800 Bashinformsvyaz 1,455,190 157,992 0.1
169,200 Nizhnovsvyazinform 879,840 67,680 0.0
------------- ------------- ------
2,335,030 225,672 0.1
Utilities--Electric 2,066,208 Bashkirenergo 1,187,599 47,523 0.0
Total Investments in Russia 3,778,546 373,433 0.2
Turkey Banking 18,903,000 Turkiye Garanti Bankasi AS 780,410 786,462 0.4
53,343,402 Yapi ve Kredi Bankasi AS 768,749 987,973 0.5
------------- ------------- ------
1,549,159 1,774,435 0.9
Retail 2,806,287 Migros Turk T.A.S. 2,885,790 3,690,996 2.0
Total Investments in Turkey 4,434,949 5,465,431 2.9
Total Investments in Europe 28,567,720 23,907,552 12.8
Latin
America
Argentina Oil & Related 211,276 Perez Companc SA 'B' 1,344,732 993,713 0.5
86,089 YPF Sociedad Anonima (ADR)(a) 2,666,279 2,717,184 1.5
------------- ------------- ------
4,011,011 3,710,897 2.0
Real Estate 34,980 IRSA Inversiones y
Representaciones SA (GDR)(b) 965,700 922,597 0.5
Total Investments in Argentina 4,976,711 4,633,494 2.5
Brazil Banking 1,413,165 Banco Itau SA (Preferred) 735,798 720,994 0.4
134,800 Uniao de Bancos Brasileiros
SA (Unibanco)(GDR)(b) 1,874,356 2,594,900 1.4
------------- ------------- ------
2,610,154 3,315,894 1.8
Beverages 3,133,154 Companhia Cervejaria Brahma
(Preferred) 1,856,774 1,474,318 0.8
Foreign Republic of Brazil:
Government US$ 4,392,000 10.125% due 5/15/2027 3,347,160 3,184,200 1.7
Obligations US$ 5,580,741 'C', 6.90% due 4/15/2014++ (c) 3,406,351 3,533,307 1.9
US$ 2,677,000 'L', 5.50% due 4/15/2024++ (c) 1,914,185 1,612,893 0.9
------------- ------------- ------
8,667,696 8,330,400 4.5
Mining 194,254 Companhia Vale do Rio Doce 'A'
(Preferred) 3,836,787 2,860,008 1.5
Oil & Related 9,008,212 Petroleo Brasileiro
SA--Petrobras (Preferred) 2,151,036 1,250,119 0.7
Telecommunications 66,120,526 Tele Celular Sul Participacoes SA 130,355 99,855 0.0
45,320,526 Tele Norte Leste Participacoes SA 625,436 375,249 0.2
217,996 Tele Norte Leste Participacoes
SA (ADR)(a) 3,139,848 3,351,689 1.8
43,071 Telecomunicacoes Brasileiras
SA--Telebras(Preferred Block)
(ADR)(a) 3,404,332 3,472,599 1.9
4,000,000 Telerj Celular S.A.
(Preferred "B" ) 331,299 67,638 0.0
68,460,526 Telesp Participacoes SA 1,598,920 898,170 0.5
44,800 Telesp Participacoes SA (ADR)(a) 957,463 924,000 0.5
------------- ------------- ------
10,187,653 9,189,200 4.9
</TABLE>
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1999
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
LATIN AMERICA Shares Held/ Percent of
(concluded) Industries Face Amount Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Brazil Utilities-- 128,838,000 Centrais Eletricas Basileiras
(concluded) Electric SA--Eletrobras $ 3,969,906 $ 2,515,158 1.3%
81,103,533 Companhia Energetica de
Minas Gerais SA--CEMIG
(Preferred) 2,169,430 1,813,598 1.0
------------- ------------- ------
6,139,336 4,328,756 2.3
Total Investments in Brazil 35,449,436 30,748,695 16.5
Chile Banking 62,072 Banco Santander Chile (ADR)(a) 791,605 931,080 0.5
Utilities-- 29,155 Enersis SA (ADR)(a) 687,061 781,718 0.4
Electric &
Gas
Total Investments in Chile 1,478,666 1,712,798 0.9
Ecuador Foreign US$ 1,583,000 Republic of Ecuador,
Government 4% due 2/28/2025++ 627,555 629,243 0.3
Obligations
Total Investments in Ecuador 627,555 629,243 0.3
Mexico Beverages 99,873 Panamerican Beverages, Inc. 'A'
(US Registered Shares) 3,114,502 1,754,020 0.9
Broadcast--Media 171,255 Grupo Televisa SA (GDR)(b) 4,003,922 5,373,126 2.9
Building Products 7,914 Cemex, SA de CV (ADR)(a) 60,963 64,801 0.0
60,800 Cemex, SA de CV 'B' 162,661 255,543 0.2
162,355 Cemex, SA de CV 'B' (ADR)(a) 1,603,563 1,363,457 0.7
------------- ------------- ------
1,827,187 1,683,801 0.9
Foreign United Mexican States:
Government US$ 4,547,000 11.50% due 5/15/2026 4,575,301 5,064,221 2.7
Obligations US$ 6,436,000 Series W-A, 6.25% due
12/31/2019++ 4,814,808 5,060,305 2.7
------------- ------------- ------
9,390,109 10,124,526 5.4
Healthcare/ 1,016,909 Kimberly-Clark de Mexico,
Personal SA de CV 'A' 3,464,785 3,825,296 2.1
Care
Multi-Industry 496,000 Grupo Carso, SA de CV 'A1' 1,490,672 2,032,573 1.1
Telecommunications 87,273 Telefonos de Mexico SA (ADR)(a) 3,962,668 5,716,381 3.1
Television 31,800 TV Azteca, SA de CV (ADR)(a) 438,272 198,750 0.1
Total Investments in Mexico 27,692,117 30,708,473 16.5
Peru Financial Services 24,000 Credicorp Limited 217,176 234,000 0.1
Total Investments in Peru 217,176 234,000 0.1
Venezuela Telecommunications 57,828 Compania Anonima Nacional
Telefonos de Venezuela
(CANTV)(ADR)(a) 933,733 1,051,747 0.6
Total Investments in Venezuela 933,733 1,051,747 0.6
Total Investments in
Latin America 71,375,394 69,718,450 37.4
Middle
East
Egypt Banking 92,677 Commercial International 846,571 942,988 0.5
Total Investments in Egypt 846,571 942,988 0.5
Israel Banking 812,663 Bank Hapoalim 1,650,907 1,912,529 1.0
1,066,401 Bank Leumi Le-Israel 2,001,724 1,896,850 1.0
------------- ------------- ------
3,652,631 3,809,379 2.0
Drugs 21,790 Teva Pharmaceutical Industries
Ltd. (ADR)(a) 813,347 1,032,301 0.6
Total Investments in Israel 4,465,978 4,841,680 2.6
Total Investments in the
Middle East 5,312,549 5,784,668 3.1
Pacific Basin/
Asia
China Automobile 3,372,774 Qingling Motor Company 'H' 1,590,816 483,106 0.3
Telecommunications 641,500 Eastern Communication Co.,
Ltd. (Class B) 582,047 263,015 0.1
Utilities-- 2,202,000 Beijing Datang Power Generation
Electric Company Limited 'H' 1,015,876 589,613 0.3
Total Investments in China 3,188,739 1,335,734 0.7
Hong Kong Building Products 10,916,589 Anhui Conch Cement Co. Ltd. 'H' 3,089,494 1,098,787 0.6
Transportation 9,662,000 Sichuan Expressway Co. 'H' 966,714 710,680 0.4
Total Investments in Hong Kong 4,056,208 1,809,467 1.0
India Aluminum 133,000 Hindalco Industries Ltd. 1,347,790 1,463,471 0.8
Banking 2,850 State Bank of India 21,141 14,361 0.0
Building Products 800 Associated Cement Companies Ltd. 30,882 27,136 0.0
Computer Software 84,800 Pentafour Software &
Exports Ltd. 1,525,477 2,512,963 1.3
Energy Sources 1,161 BSES Ltd. 6,441 3,975 0.0
155,231 BSES Ltd. (GDR)(b) 2,024,281 1,563,952 0.9
682 Bombay Electrical Supply 3,819 2,335 0.0
------------- ------------- ------
2,034,541 1,570,262 0.9
Financial Services 106 Housing Development Finance
Corporation Ltd. (HDFC) 9,035 5,976 0.0
1,127,078 ICICI Ltd. 2,774,972 1,252,157 0.7
------------- ------------- ------
2,784,007 1,258,133 0.7
Healthcare/Personal 69,700 Hindustan Lever Limited 2,798,407 3,726,111 2.0
Care
Leisure & Tourism 51,397 EIH Limited 575,881 277,920 0.1
Oil Services 400 Hindustan Petroleum Corporation Ltd. 5,058 1,906 0.0
Telecommunications 71,797 Videsh Sanchar Nigam Ltd. (GDR)(b) 928,676 732,329 0.4
Textiles 1,264 Reliance Industries Ltd 4,169 3,892 0.0
Total Investments in India 12,056,029 11,588,484 6.2
</TABLE>
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1999
<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>
Indonesia Building Products 1,153,500 P.T. Semen Gresik
(Persero) Tbk $ 878,893 $ 1,280,922 0.7%
Telecommunications 310,137 P.T. Indosat (Persero)
Tbk (ADR)(a) 8,016,673 4,012,397 2.2
Total Investments in Indonesia 8,895,566 5,293,319 2.9
Malaysia+++ Banking 473,000 Malayan Banking Berhad 993,395 883,763 0.4
Natural Gas 713,000 Petronas Gas Berhad 2,966,536 1,444,763 0.8
Telecommunications 1,740,000 Telekom Malaysia Berhad 4,490,496 3,502,895 1.9
Tobacco 627,400 Rothmans of Pall Mall
(Malaysia) Berhad 4,240,742 3,714,868 2.0
Total Investments in Malaysia 12,691,169 9,546,289 5.1
Pakistan Electrical 100 Karachi Electric Supply 66 20 0.0
Components
Total Investments in Pakistan 66 20 0.0
Philippines Banking 176,870 Metropolitan Bank &
Trust Company 1,401,265 1,409,003 0.8
Utilities-- 255,070 Manila Electric Company 'B' 866,756 845,828 0.4
Electric & Gas
Total Investments
in the Philippines 2,268,021 2,254,831 1.2
South Korea Auto & Truck 51,220 Hyundai Motor Company Ltd. 939,075 820,940 0.5
Banking 50,100 Housing & Commercial Bank, Korea 836,541 1,001,183 0.5
50,420 Shinhan Bank 389,899 409,200 0.2
------------- ------------- ------
1,226,440 1,410,383 0.7
Chemical Producers 14,330 Honam Petrochemical Corporation 220,760 202,210 0.1
Chemicals 38,950 L.G. Chemical Limited 475,775 495,612 0.3
Cosmetics 11,750 Pacific Corporation 223,445 196,472 0.1
Electronic Components 71,106 Samsung Display Devices
Co., Ltd. 2,900,273 3,497,302 1.9
Electronics 69,966 Samsung Electronics Co., Ltd. 2,796,956 5,421,509 2.9
Financial Services-- 94,470 Kookmin Bank 867,462 932,371 0.5
Commercial
Retail--Stores 25,330 Keumkang Development Ind. Company 216,479 267,556 0.1
Steel 39,634 Pohang Iron & Steel Company,
Ltd. (ADR)(a) 604,418 708,458 0.4
Utilities--Electric 163,960 Korea Electric Power
Corporation 3,950,464 3,958,577 2.1
216,500 Korea Electric Power
Corporation (ADR)(a) 2,598,000 2,746,844 1.5
------------- ------------- ------
6,548,464 6,705,421 3.6
Total Investments in
South Korea 17,019,547 20,658,234 11.1
Taiwan Banking 1,241,545 Bank Sinopac 923,224 689,747 0.4
2,865,240 E. Sun Commercial Bank 2,045,284 1,470,685 0.8
------------- ------------- ------
2,968,508 2,160,432 1.2
Building Products 689,000 Asia Cement Corporation 598,150 509,677 0.3
Cement 628,000 Taiwan Cement Corporation 569,152 477,826 0.2
Chemicals 1,570,446 Formosa Plastic Corporation 2,847,525 2,584,218 1.4
Electronic 509,636 Mosel Vitelic, Inc. 564,878 483,169 0.2
Components
Health Insurance 517,000 Cathay Life Insurance
Co., Ltd. 1,768,737 1,670,260 0.9
Semiconductors 1,144,000 Taiwan Semiconductor
Manufacturing Company 2,436,050 3,592,271 1.9
Steel 2,261,000 China Steel Corporation 1,493,092 1,481,392 0.8
Transportation-- 805,335 Yang Ming Marine Transport Corp. 889,728 517,924 0.3
Marine
Venture Capital 430,000 China Development Industrial
Bank Inc. 854,947 727,053 0.4
Total Investments in Taiwan 14,990,767 14,204,222 7.6
Thailand Banking 576,200 Bangkok Bank Public Company
Limited 'Foreign' 1,392,363 1,183,131 0.6
982,900 Thai Farmers Bank Public
Company Limited 'Foreign' 3,625,019 1,992,011 1.1
------------- ------------- ------
5,017,382 3,175,142 1.7
Television 558,500 BEC World Public Company
Limited 'Foreign' 5,182,856 2,710,587 1.5
Total Investments in Thailand 10,200,238 5,885,729 3.2
Total Investments in the
Pacific Basin/Asia 85,366,350 72,576,329 39.0
Total Investments $ 206,300,088 187,894,791 100.9
=============
Liabilities in Excess of Other Assets (1,679,671) (0.9)
------------- ------
Net Assets $ 186,215,120 100.0%
============= ======
Net Asset Value: Class A--Based on net assets of $72,081,922
and 7,755,668 shares outstanding $ 9.29
=============
Class B--Based on net assets of $82,297,998
and 9,063,167 shares outstanding $ 9.08
=============
Class C--Based on net assets of $15,966,948
and 1,765,039 shares outstanding $ 9.05
=============
Class D--Based on net assets of $15,868,252
and 1,715,467 shares outstanding $ 9.25
=============
<FN>
++Brady Bonds are securities which have been issued to refinance
commercial bank loans and other debt. The risk associated with these
instruments is the amount of any uncollateralized principal or
interest payments since there is a high default rate of commercial
bank loans by countries issuing these securities.
+++Effective February 16, 1999, the Fund's Board of Directors
adopted a change in valuation for Malaysian securities. The Fund
will utilize a Malaysian exchange rate of 3.80 and the value of any
investments made before February 15, 1999 will be discounted, based
upon its value as of August 31, 1998, by 30% through March 31, 1999,
20% from April 1, 1999 through May 31, 1999 and 10% from June 1,
1999 through August 31, 1999. These changes are due to the capital
controls implemented by the Malaysian government, which froze the
Malaysian ringgit at 3.80 until September 1, 1999 and initiated a
tax at various rates, as described above, on any funds repatriated
from Malaysia.
(a)American Depositary Receipts (ADR).
(b)Global Depositary Receipts (GDR).
(c)Floating Rate Note.
</TABLE>
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1999
EQUITY PORTFOLIO CHANGES
For the Quarter Ended March 31, 1999
Additions
*Agora
Alpha Credit Bank
AngloGold Limited (ADR)
Edgars Stores Limited
Hindalco Industries Ltd.
Honam Petrochemical Corporation
Housing & Commercial Bank, Korea
Hyundai Motor Company Ltd.
Keumkang Development Ind. Company
Kookmin Bank
Korea Electric Power Corporation (ADR)
L.G. Chemical Limited
Manila Electric Company 'B'
Metropolitan Bank & Trust Company
Minorco SA (Minerals & Resources
Corporation Limited)
Pacific Corporation
SPT Telecom AS
Shinhan Bank
Telesp Participacoes SA (ADR)
Titan Cement Company SA
Turkiye Garanti Bankasi AS
Uniao de Bancos Brasileiros SA
(Unibanco)(GDR)
Deletions
*Agora
Akcansa Cimento AS
Coca-Cola Beverages PLC
Embratel Participacoes SA
Empresa Nacional de Electricidad SA
(Endesa)(ADR)
Gedeon Richter (GDR)
Gujarat Ambuja Cements Ltd. (GDR)
Hellenic Telecommunication Organization
SA (OTE)(ADR)
Liberty Life Association of Africa Limited
Mahanagar Telephone Nigam Ltd.
Nestle (Malaysia) BHD
Panfon Hellenic Telecom Co.
Petronas Dagangan Berhad
Pohang Iron & Steel Company Ltd.
Portugal Telecom SA
South African Breweries (ADR)
Sasol Limited
Tele Centro Oeste Celular Participacoes SA
Tele Centro Sul Participacoes SA
Tele Leste Celular Participacoes SA
Tele Nordeste Celular Participacoes SA
Tele Norte Celular Participacoes SA
Tele Sudeste Celular Participacoes SA
Telecomunicacoes Brasileiras SA--
Telebras
Telemig Celular Participacoes SA
Telesp Celular Participacoes SA
[FN]
*Added and deleted in the same quarter.
PORTFOLIO INFORMATION
Ten Largest Equity Holdings Percent of
As of March 31, 1999 Net Assets
Korea Electric Power Corporation* 3.6%
Telefonos de Mexico SA (ADR) 3.1
Samsung Electronics Co., Ltd. 2.9
Grupo Televisa SA (GDR) 2.9
P.T. Indosat (Persero) Tbk (ADR) 2.2
Kimberly-Clark de Mexico, SA de CV 'A' 2.1
Hindustan Lever Limited 2.0
Rothmans of Pall Mall (Malaysia) Berhad 2.0
Migros Turk T.A.S. 2.0
TeleNorte leste Participacoes SA* 2.0
[FN]
*Includes combined holdings.
Merrill Lynch Developing Capital Markets Fund, Inc., March 31, 1999
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Donald Cecil, Director
Roland M. Machold, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, Director
Grace Pineda, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Barbara G. Fraser, Secretary
Gerald M. Richard, Treasurer and Norman R. Harvey, Senior Vice
President of Merrill Lynch Developing Capital Markets Fund, Inc.
have recently retired. Their colleagues at Merrill Lynch Asset
Management, L.P. join the Fund's Board of Directors in wishing Mr.
Richard and Mr. Harvey well in their retirements.
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02119
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
