MERRILL LYNCH
LATIN AMERICA
FUND, INC.
FUND LOGO
Semi-Annual Report
May 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.
<PAGE>
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Latin America
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH LATIN AMERICA FUND, INC.
Asset Allocation
As a Percentage* of
Net Assets as of
May 31, 1997
A map illustrating the following percentages:
Mexico 22.0%
Venezuela 4.0%
Colombia 1.9%
Peru 2.8%
Brazil 48.0%
Argentina 12.4%
Chile 5.1%
[FN]
*Total may not equal 100% and does not include short-term
securities.
<PAGE>
DEAR SHAREHOLDER
During the three-month period ended May 31, 1997, total returns for
Merrill Lynch Latin America Fund, Inc.'s Class A, Class B, Class C
and Class D Shares were +8.52%, +8.29%, +8.24% and +8.48%,
respectively. (Investment results shown do not reflect sales
charges, and would be lower if sales charges were included. Complete
performance information, including average annual total returns, can
be found on pages 4--6 of this report to shareholders.) The
unmanaged Morgan Stanley Capital International Latin America Free
Index rose 10.73%, and the unmanaged J.P. Morgan Latin Brady Bond
Index rose 3.12% during the same period. Hindering the Fund's
performance were its underweighted positions in Chile and Peru,
whose markets had total returns of +10.28% and +20.47%, respectively.
Beneficial to performance were the Fund's overweighted positions
in Argentina, Brazil and Venezuela, whose markets rose 10.98%,
13.87% and 8.74%, respectively, during the May quarter.
Investment Overview
All of the Latin American markets performed well during the three
months ended May 31, 1997, ranging from an increase of 4.25% for
Mexico to an increase of 20.47% for Peru. These markets (especially
Argentina, Peru and Mexico) benefited from improving economic
fundamentals, declining interest rates (especially in Mexico and
Colombia), increased funds flows (especially Argentina) and
reasonable stock valuations. During the May quarter, we added to our
investments in Argentina, Brazil, Venezuela and, to a lesser extent,
Colombia. We also took some profits in Mexico.
During the May quarter, the best-performing market was Peru for
several reasons. The country has a strengthening economy, which
included improving inflation and a rising gross domestic product
(GDP) outlook. The country also experienced a decrease in
unemployment and stimulus to the banking sector through reserve
requirement reductions, strong corporate earnings, and positive
fundamentals in the mining sector. Two of our major Peruvian
holdings are in the mining sector. Compania de Minas Buenaventura
S.A. registered good news on increased gold reserve prospects, and
Minsur Sociedad Limitada S.A. is a low-cost producer of tin. On a
year-to-date May 31, 1997 basis, the Peruvian stock market, with a
total return of +40.15% in US dollar terms, slightly outperformed
Brazil, which had previously been the market leader. Brazil had a
total return of +40.12% for the same period.
<PAGE>
Nevertheless, the Brazilian market also performed well during the
May quarter, rising by approximately 13.87% on a US dollar total
return basis. Among the factors driving the market were anticipation
of the privatization of Companhia de Vale do Rio Doce S.A., the
large mining conglomerate; the partial privatization of Companhia
Energetica de Minas Gerais S.A. (CEMIG), the electric utility for
the state of Minas Gerais; and the successful completion of the $1
billion issue for Uniao de Bancos Brasileiros S.A. (Unibanco), the
third-largest private bank in Brazil. During the May quarter, we
continued to add to our position in Centrais Eletricas Brasileiras
S.A. (Eletrobras), the state-owned electric utility company, in view
of the reform process underway in the electric utility sector. We
also continued to add to Petroleo Brasileiro S.A., the state-owned
petroleum company, which should benefit if the new oil and gas
legislation submitted to the Brazilian congress is passed.
The Colombian and Argentine markets were also strong performers
during the May quarter, appreciating by 12.43% and 10.98%,
respectively. In Colombia, various factors motivated investors,
including anticipation of an interest rate cut by the central bank,
news of strong demand in the cement and housing construction
sectors, and good earnings performance by two of the largest
retailers. We continued to add to our position in Banco Ganadero
S.A. to seek to enhance the Fund's participation in the Colombian
market's upturn. In Argentina, the market continued to rise on more
news about the economic recovery. Furthermore, during the May
quarter, Standard & Poor's Corp. rated several Argentine companies,
including some of the most liquid companies on the Argentine stock
exchange, investment grade. Since the Argentine market is the market
most highly correlated with movements in US interest rates, the fact
that the US Federal Reserve Board increased interest rates only once
during the May quarter also helped support the market. In Argentina,
we continued to add to our position in Yacimientos Petroliferos
Fiscales S.A., the oil and gas producer, a company which we believe
will play an important role in providing energy in future years to
Argentina's partners in Mercosur, the trading bloc in the southern
part of Latin America.
Performance of the Mexican stock market somewhat lagged that of the
other Latin American markets, as it appreciated only 4.25% for the
May quarter. Like Argentina, Mexico is negatively impacted by
investor concerns of rising US interest rates or when the US stock
market goes through a period of volatility. For most of the May
quarter, the Mexican market was relatively flat, or even declined,
as these external factors combined with poor earnings reports of the
major Mexican banks and retailers. However, by May, when investors
began to focus on the positive economic news (for example, GDP
growth, inflation and interest rates), the bolsa turned around.
During the May quarter, we increased our holdings in the bellwether
Telefonos de Mexico, S.A. de C.V., and added substantially to our
position in Grupo Televisa, S.A. de C.V., the media conglomerate in
Mexico, on the belief that the company's revenues from advertising
would flourish as the economy recovered.
<PAGE>
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Latin America
Fund, Inc., and we look forward to reviewing our outlook and
strategy with you in the August quarterly report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Grace Pineda)
Grace Pineda
Vice President and
Portfolio Manager
June 27, 1997
Officers and
Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Grace Pineda, Vice President and Portfolio Manager
Gerald M. Richard, Treasurer
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors, as detailed in the Fund's prospectus. If you were a Class
A shareholder prior to October 21, 1994, your Class A Shares were
redesignated to Class D Shares on October 21, 1994. However, in the
case of certain eligible investors, the shares were simultaneously
exchanged for Class A Shares.
* 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).
<PAGE>
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.
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $18.22 $13.67 $0.396 $0.118 -22.63%
1995 13.67 10.41 -- -- -23.85
1996 10.41 12.64 -- 0.435 +25.65
1/1/97--5/31/97 12.64 16.18 -- -- +28.01
------ ------
Total $0.396 Total $0.553
Cumulative total return as of 5/31/97: -5.24%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
9/27/91--12/31/91 $10.00 $10.32 -- $0.098 + 4.22%
1992 10.32 10.22 -- 0.227 + 1.34
1993 10.22 16.61 -- 0.048 +63.05
1994 16.61 13.55 $0.396 0.118 -15.86
1995 13.55 10.21 -- -- -24.65
1996 10.21 12.39 -- 0.297 +24.29
1/1/97--5/31/97 12.39 15.80 -- -- +27.52
------ ------
Total $0.396 Total $0.788
<PAGE>
Cumulative total return as of 5/31/97: +73.05%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $18.10 $13.55 $0.396 $0.118 -22.78%
1995 13.55 10.21 -- -- -24.65
1996 10.21 12.37 -- 0.316 +24.28
1/1/97--5/31/97 12.37 15.77 -- -- +27.49
------ ------
Total $0.396 Total $0.434
Cumulative total return as of 5/31/97: -7.81%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
9/27/91--12/31/91 $10.00 $10.31 -- $0.125 + 4.40%
1992 10.31 10.19 -- 0.326 + 2.15
1993 10.19 16.62 -- 0.108 +64.27
1994 16.62 13.66 $0.396 0.118 -15.24
1995 13.66 10.38 -- -- -24.01
1996 10.38 12.61 -- 0.401 +25.39
1/1/97--5/31/97 12.61 16.12 -- -- +27.84
------ ------
Total $0.396 Total $1.078
<PAGE>
Cumulative total return as of 5/31/97: +80.87%**
<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>
PERFORMANCE DATA (concluded)
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
5/31/97 2/28/97 5/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $16.18 $14.91 $12.52 +29.23% +8.52%
Class B Shares 15.80 14.59 12.23 +29.19 +8.29
Class C Shares 15.77 14.57 12.23 +28.95 +8.24
Class D Shares 16.12 14.86 12.47 +29.27 +8.48
Class A Shares-Total Return +33.73(1) +8.52
Class B Shares-Total Return +32.32(2) +8.29
Class C Shares-Total Return +32.27(3) +8.24
Class D Shares-Total Return +33.43(4) +8.48
<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 $0.435 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.297 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.316 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.401 per share ordinary
income dividends.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
<PAGE>
Class A Shares*
Year Ended 3/31/97 +31.33% +24.43%
Inception (10/21/94) through 3/31/97 - 6.16 - 8.21
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/97 +29.96% +25.96%
Five Years Ended 3/31/97 + 5.32 + 5.32
Inception (9/27/91) through 3/31/97 + 8.49 + 8.49
[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
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/97 +29.97% +28.97%
Inception (10/21/94) through 3/31/97 - 7.13 - 7.13
[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
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/97 +31.09% +24.21%
Five Years Ended 3/31/97 + 6.16 + 5.02
Inception (9/27/91) through 3/31/97 + 9.35 + 8.28
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Long-Term Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Banking 82,847 Banco de Galicia y Buenos Aires
S.A. (ADR)(1) $ 1,010,375 $ 2,164,378 0.3%
235,768 Banco Frances del Rio de la Plata
S.A. (ADR)(1) 4,730,556 7,750,873 0.9
126,900 ++Bansud S.A. (Class B) 1,519,435 1,993,327 0.2
------------ ------------ ------
7,260,366 11,908,578 1.4
Merchandising 547,144 ++Grimoldi S.A. (Class B) 3,174,556 2,162,300 0.2
Multi-Industry 2,038,424 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A. 10,717,412 17,399,718 2.0
Oil & Gas 1,325,663 Yacimientos Petroliferos
Producers Fiscales S.A. (ADR)(1) 36,607,188 39,769,890 4.5
Real Estate 1,166,915 Inversiones y Representaciones
S.A. (IRSA) 3,126,377 4,599,945 0.5
132,481 Inversiones y Representaciones S.A.
(IRSA) (GDR)(2) 3,675,577 5,183,319 0.6
------------ ------------ ------
6,801,954 9,783,264 1.1
Telecommuni- 336,400 Telecom Argentina Stet--France
cations Telecom S.A. (GDR)(2) 13,730,622 17,955,350 2.1
210,173 Telefonica de Argentina S.A. (ADR)(1) 6,343,531 7,618,771 0.9
525,000 Telefonica de Argentina S.A. (Class B) 1,497,352 1,890,945 0.2
------------ ------------ ------
21,571,505 27,465,066 3.2
Total Long-Term Investments in
Argentina 86,132,981 108,488,816 12.4
Brazil Automobiles 767,900 Companhia Fabricadora de Pecas S.A.
(COFAP) (Preferred) 6,292,603 7,884,719 0.9
Banking 2,185,990,217 Banco Bradesco S.A. (Preferred) 12,470,511 17,425,890 2.0
24,170,650 Banco Itau S.A. (Preferred) 6,116,595 12,409,089 1.4
364,129,908 ++Banco Nacional S.A. PN (Preferred) 9,903,203 340 0.0
------------ ------------ ------
28,490,309 29,835,319 3.4
Beverages & 34,685,732 Companhia Cervejaria Brahma S.A. PN
Tobacco (Preferred) 15,638,220 25,157,112 2.9
<PAGE>
Diversified 1,087,800 Souza Cruz S.A. 8,188,144 10,113,402 1.1
Energy Sources 185,553,034 Petroleo Brasileiro S.A. (Preferred) 30,250,612 44,340,126 5.1
Food & Household 424,300 ++Latas de Aluminio S.A. (GDR)(2) 6,800,382 6,788,800 0.8
Products
Forest Products 109,505,000 Votorantim Celulose e Papel S.A.
(Preferred) 2,186,585 2,974,513 0.3
Machinery & 9,088,000 Weg Exportadora S.A. (Preferred) 5,505,323 5,174,722 0.6
Engineering
</TABLE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Long-Term Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Brazil Metals & 1,090,891 Companhia de Vale do Rio Doce S.A.
(concluded) Steel (Preferred) $ 22,708,307 $ 24,082,490 2.8%
712,997,000 Companhia Siderurgica de Tubarao
S.A. 'B' (Preferred) 11,289,959 9,783,493 1.1
316,269,000 Companhia Siderurgica Nacional
S.A.--CSN 8,601,045 10,332,694 1.2
15,523,741,007 Usinas Siderurgicas de Minas Gerais
S.A.--Usiminas (Preferred) 16,718,073 16,809,060 1.9
------------ ------------ ------
59,317,384 61,007,737 7.0
Retail 105,000 ++Grupo Pao Acucar S.A. 2,100,000 2,205,000 0.3
89,000,000 Lojas Arapua S.A. (Preferred) 1,615,793 1,495,379 0.2
------------ ------------ ------
3,715,793 3,700,379 0.5
Telecommuni- 172,000 ++Multicanal Participacoes S.A.
cations (ADR)(1) 2,408,000 1,999,500 0.2
503,391 Telecomunicacoes Brasileiras
S.A.--Telebras (ADR)(1) 40,932,915 69,153,338 7.9
164,157,454 Telecomunicacoes Brasileiras
S.A.--Telebras (Ordinary) 10,546,082 21,374,333 2.4
215,590,596 Telecomunicacoes Brasileiras
S.A.--Telebras (Preferred) 10,839,862 29,723,449 3.4
540,493 ++Telecomunicacoes de Minejeros
S.A.--TELEMIG (Rights)(4) 0 0 0.0
3,265,379 ++Telecomunicacoes de Sao Paulo
S.A.--TELESP 524,948 1,079,011 0.1
142,297 ++Telecomunicacoes de Sao Paulo
S.A.--TELESP (Rights) 0 3,985 0.0
------------ ------------ ------
65,251,807 123,333,616 14.0
<PAGE>
Textiles & 19,351,093 Companhia de Tecidos Norte de Minas
Apparel S.A. (Preferred) 8,466,941 7,604,602 0.9
Utilities 25,930,000 Centrais Eletricas Brasileiras S.A.
(Eletrobras) 11,411,092 12,223,140 1.4
21,070,000 Centrais Eletricas Brasileiras S.A.
(Eletrobras) 'B' (Preferred) 7,441,245 10,364,874 1.2
80,800 ++Centrais Eletricas de Santa Catarina
S.A. (CELESC) (ADR)(1)(3) 6,499,552 9,878,907 1.1
995,199 Centrais Eletricas de Santa Catarina
S.A. (CELESC) 'B' (Preferred) 440,401 1,198,363 0.1
28,470 Companhia Energetica de Minas Gerais
S.A. (CEMIG) (ADR)(1) 638,750 1,284,709 0.1
72,229 Companhia Energetica de Minas Gerais
S.A. (CEMIG) (ADR)(1)(3) 1,549,104 3,276,228 0.4
227,010,000 Companhia Energetica de Minas Gerais
S.A. (CEMIG) (Preferred) 6,166,861 10,383,170 1.2
137,720,000 Companhia Paulista de Forca e Luz S.A. 8,054,097 20,131,571 2.3
1,005,419 Companhia Paulista de Forca e Luz S.A.
(Preferred) 84,733 139,837 0.0
288,000 Globex Utilidades S.A. (Preferred) 5,061,120 4,301,316 0.5
41,357,251 Light Participacoes S.A. 4,867,623 13,588,094 1.6
------------ ------------ ------
52,214,578 86,770,209 9.9
Utilities-- 1,143,900,000 ++Companhia Energetica do Ceara S.A. 4,912,770 5,125,287 0.6
Electric
Total Long-Term Investments in Brazil 297,231,451 419,810,543 48.0
Chile Merchandising 440,846 Santa Isabel S.A. 368,018 832,083 0.1
227,616 Santa Isabel S.A. (ADR)(1) 6,178,037 6,629,316 0.8
------------ ------------ ------
6,546,055 7,461,399 0.9
Supermarkets 248,500 ++Supermercados Unimarc S.A. 4,162,375 4,690,437 0.5
Telecommuni- 612,328 Compania de Telecomunicaciones de
cations Chile S.A. (ADR)(1) 14,586,043 20,972,234 2.4
Utilities 75,000 Distribuidora Chilectra Metropolitana
S.A. (ADR)(1)(3) 1,263,750 2,109,375 0.2
3,724,465 Empresa Nacional de Electricidad S.A.
(ENDESA) 2,032,168 2,687,345 0.3
2,057,425 Enersis S.A. 930,264 1,386,199 0.2
152,900 Enersis S.A. (ADR)(1) 3,878,773 5,313,275 0.6
------------ ------------ ------
8,104,955 11,496,194 1.3
Total Long-Term Investments in Chile 33,399,428 44,620,264 5.1
<PAGE>
Colombia Banking 1,407,052 Banco de Bogota S.A. 7,257,506 8,758,941 1.0
83,600 Banco Ganadero S.A. (Preferred)
(ADR)(1) 2,026,555 2,549,800 0.3
------------ ------------ ------
9,284,061 11,308,741 1.3
Beverages & Tobacco 502,854 La Compania Cervecera Bavaria S.A. 2,915,335 3,736,715 0.4
Merchandising 1,485,966 Gran Cadena de Almacenes Colombianos
S.A. (CADENALCO) 4,043,019 1,214,949 0.2
36,400 Gran Cadena de Almacenes Colombianos
S.A. (CADENALCO) (ADR)(1)(3) 611,250 382,200 0.0
------------ ------------ ------
4,654,269 1,597,149 0.2
Total Long-Term Investments in
Colombia 16,853,665 16,642,605 1.9
Mexico Banking 4,548,000 ++Grupo Financiero Banamex--Accival,
S.A. de C.V. 'B' (Banacci) 10,972,204 9,838,484 1.1
63,000 ++Grupo Financiero Banamex--Accival,
S.A. de C.V. 'L' (Banacci) 140,485 124,822 0.0
9,584,000 ++Grupo Financiero Bancomer, S.A. de
C.V. 'B' (Ordinary) 2,626,470 3,596,725 0.4
------------ ------------ ------
13,739,159 13,560,031 1.5
Beverages 452,320 Panamerican Beverages Inc. (Class A) 8,367,920 13,117,280 1.6
Beverages & 2,247,300 Fomento Economico Mexicano, S.A.
Tobacco de C.V. (Femsa) (ADR)(1)++++ 6,589,553 11,894,959 1.4
1,679,000 Fomento Economico Mexicano, S.A.
de C.V. (Femsa) (Ordinary) 'B' 4,255,011 8,910,538 1.0
------------ ------------ ------
10,844,564 20,805,497 2.4
</TABLE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Long-Term Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Mexico Building 2,695,000 Apasco, S.A. de C.V. 'A' $ 9,237,605 $ 17,605,699 2.0%
(concluded) Materials 2,249,000 Cementos Mexicanos, S.A. de C.V.
'B' (Cemex) 9,262,511 9,207,430 1.1
882,300 Cementos Mexicanos, S.A. de C.V.
'B' (Cemex) (ADR)(1) 7,697,293 7,058,400 0.8
------------ ------------ ------
26,197,409 33,871,529 3.9
<PAGE>
Chemicals 195,637 Desc, S.A. de C.V. (ADR)(1) 4,125,948 5,208,835 0.6
Construction/ 62,000 ++Bufete Industrial S.A. de C.V.
Housing (ADR)(1) 1,268,241 1,193,500 0.1
Financial Services 63,052 ++Grupo Financiero Bancomer, S.A.
de C.V. (Series L) 22,760 18,962 0.0
Health & Personal 1,515,980 Kimberly-Clark de Mexico, S.A. de
Care C.V. 'A' 3,994,088 5,248,654 0.6
Merchandising 1,381,799 Cifra, S.A. de C.V. 'A' 1,390,187 2,360,617 0.3
250,000 Cifra, S.A. de C.V. 'B' (ADR)(1) 338,325 412,500 0.0
11,193,450 Cifra, S.A. de C.V. 'C' 12,525,741 17,679,824 2.0
145,160 ++Sears Roebuck de Mexico, S.A.
de C.V. 'B' (ADR)(1)(3) 3,719,725 663,817 0.1
------------ ------------ ------
17,973,978 21,116,758 2.4
Multi-Industry 55,579 ++Grupo Carso, S.A. de C.V. 'A'
(ADR)(1) 618,941 618,316 0.1
3,594,126 Grupo Carso, S.A. de C.V. 'A1' 21,837,646 20,436,653 2.3
------------ ------------ ------
22,456,587 21,054,969 2.4
Telecommuni- 717,312 ++Grupo Televisa, S.A. de C.V.
cations (GDR)(2) 18,755,136 20,533,056 2.3
821,682 Telefonos de Mexico, S.A. de
C.V. (ADR)(1) 26,385,348 36,462,139 4.2
------------ ------------ ------
45,140,484 56,995,195 6.5
Total Long-Term Investments in Mexico 154,131,138 192,191,210 22.0
Peru Financial Services 419,769 Credicorp Ltd. S.A. 6,349,438 9,497,273 1.0
Food & Household 2,885,636 ++Consorcio Alimentos Fabril
Products Pacifico S.A. 5,303,100 5,024,147 0.6
Metals--Non-Ferrous 272,100 Compania de Minas Buenaventura S.A. 4,421,121 6,428,362 0.7
910,102 Minsur Sociedad Limitada S.A.
(T Shares) 2,575,220 3,961,419 0.5
------------ ------------ ------
6,996,341 10,389,781 1.2
Total Long-Term Investments in Peru 18,648,879 24,911,201 2.8
Venezuela Building Materials 622,251 Venezolana de Cementos S.A.C.A.
(Vencemos) 866,981 1,621,585 0.2
Food & Household 23,457,438 Mavesa S.A. 2,075,657 4,354,302 0.5
Products
<PAGE>
Metals & Steel 10,780,332 Siderurgica Venenzolana Sivensa,
S.A.I.C.A.--S.A.C.A. 2,716,069 3,924,175 0.5
Telecommuni- 418,750 ++Compania Anonima Nacional Telefonos
cations de Venezuela (CANTV) (ADR)(1) 12,357,546 15,546,094 1.7
Utilities 8,497,081 C.A. La Electricidad de Caracas
S.A.I.C.A.--S.A.C.A. 7,351,435 9,665,759 1.1
Total Long-Term Investments in
Venezuela 25,367,688 35,111,915 4.0
Total Long-Term Investments in
Latin America 631,765,230 841,776,554 96.2
Face
Amount Short-Term Investments
United Commercial US$ 962,000 General Motors Acceptance Corp.,
States Paper* 5.62% due 6/02/1997 961,700 961,700 0.1
Total Short-Term Investments 961,700 961,700 0.1
Total Investments $632,726,930 842,738,254 96.3
============
Other Assets Less Liabilities 32,144,070 3.7
------------ ------
Net Assets $874,882,324 100.0%
============ ======
<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.
(1)American Depositary Receipts (ADR).
(2)Global Depositary Receipts (GDR).
(3)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(4)The rights may be exercised until June 13, 1997.
++Non-income producing security.
++++Restricted security as to resale. The value of the Fund's
investment in restricted securities was approximately $11,895,000,
representing 1.4% of net assets.
<CAPTION>
Acquisition Value
Issue Date(s) Cost (Note 1a)
<S> <S> <C> <C>
Fomento Economico Mexicano, S.A. 8/07/1995--
de C.V. (Femsa) (ADR) 9/04/1996 $ 6,589,553 $11,894,959
Total $ 6,589,553 $11,894,959
=========== ===========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
EQUITY PORTFOLIO CHANGES
For the Quarter Ended May 31, 1997
Additions
Bufete Industrial S.A. de C.V. (ADR)
Cifra, S.A. de C.V. 'A'
Companhia Energetica do Ceara S.A.
Companhia Paulista de Forca e Luz S.A.
(Preferred)
Grupo Financiero Banamex--Accival, S.A.
de C.V. 'B' (Banacci)
Grupo Financiero Banamex--Accival, S.A.
de C.V. 'L' (Banacci)
Grupo Pao Acucar S.A.
Latas de Aluminio S.A. (GDR)
Supermercados Unimarc S.A.
Deletions
Banca Quadrum, S.A. de C.V. (ADR)
The Chile Fund, Inc.
Grupo Financiero Banamex--Accival, S.A.
de C.V. (Banacci)
Grupo Financiero Inbursa, S.A. de C.V. 'B'
Grupo Financiero Inbursa, S.A. de C.V. 'B'
(ADR)
Telecomunicacoes de Minejeros S.A.--
TELEMIG (Class B) (Preferred)
<TABLE>
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
As of May 31, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$632,726,930) (Note 1a) $ 842,738,254
Cash 13
Foreign cash (Note 1b) 15,775,698
Receivables:
Securities sold $ 18,235,598
Dividends 4,747,148
Capital shares sold 1,243,451 24,226,197
-------------
Prepaid registration fees and other assets (Note 1f) 60,212
-------------
Total assets 882,800,374
-------------
<PAGE>
Liabilities: Payables:
Securities purchased 3,758,246
Capital shares redeemed 1,888,255
Investment adviser (Note 2) 697,492
Distributor (Note 2) 553,303 6,897,296
-------------
Accrued expenses and other liabilities 1,020,754
-------------
Total liabilities 7,918,050
-------------
Net Assets: Net assets $ 874,882,324
=============
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares
Consist of: authorized $ 485,644
Class B Common Stock, $0.10 par value, 100,000,000 shares
authorized 3,941,250
Class C Common Stock, $0.10 par value, 100,000,000 shares
authorized 222,060
Class D Common Stock, $0.10 par value, 100,000,000 shares
authorized 859,213
Paid-in capital in excess of par 872,386,580
Undistributed investment income--net 3,997,055
Accumulated realized capital losses on investments and foreign currency
transactions--net (Note 6) (216,024,315)
Accumulated distributions in excess of realized capital gains--net
(Note 1g) (601,566)
Unrealized appreciation on investments and foreign currency
transactions--net 209,616,403
-------------
Net assets $ 874,882,324
=============
Net Asset Class A--Based on net assets of $78,593,406 and 4,856,439
Value: shares outstanding $ 16.18
=============
Class B--Based on net assets of $622,730,623 and 39,412,503
shares outstanding $ 15.80
=============
Class C--Based on net assets of $35,026,715 and 2,220,598
shares outstanding $ 15.77
=============
Class D--Based on net assets of $138,531,580 and 8,592,131
shares outstanding $ 16.12
=============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 1997
<S> <S> <C> <C>
Investment Income Dividends (net of $404,371 foreign withholding tax) $ 12,333,407
(Notes 1d & 1e): Interest and discount earned 813,690
-------------
Total income 13,147,097
-------------
Expenses: Investment advisory fees (Note 2) 3,929,980
Account maintenance and distribution fees--Class B (Note 2) 2,849,547
Custodian fees 810,335
Transfer agent fees--Class B (Note 2) 721,457
Account maintenance fees--Class D (Note 2) 151,794
Account maintenance and distribution fees--Class C (Note 2) 145,864
Transfer agent fees--Class D (Note 2) 128,573
Printing and shareholder reports 102,564
Accounting services (Note 2) 71,887
Transfer agent fees--Class A (Note 2) 69,327
Registration fees (Note 1f) 49,752
Professional fees 38,622
Transfer agent fees--Class C (Note 2) 38,022
Directors' fees and expenses 19,164
Pricing fees 5,013
Other 6,804
-------------
Total expenses 9,138,705
-------------
Investment income--net 4,008,392
-------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net $ 48,545,286
(Loss) on Foreign currency transactions--net (864,398) 47,680,888
Investments & -------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 151,797,056
(Notes 1b, 1c, Foreign currency transactions--net (273,379) 151,523,677
1e & 3): ------------- -------------
Net realized and unrealized gain on investments and foreign
currency transactions 199,204,565
-------------
Net Increase in Net Assets Resulting from Operations $ 203,212,957
=============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
May 31, Nov. 30,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 4,008,392 $ 20,415,852
Realized gain (loss) on investments and foreign currency
transactions--net 47,680,888 (77,935,512)
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 151,523,677 189,511,752
------------- -------------
Net increase in net assets resulting from operations 203,212,957 131,992,092
------------- -------------
Dividends to Investment income--net:
Shareholders Class A (1,603,289) --
(Note 1g): Class B (12,117,748) --
Class C (579,869) --
Class D (3,322,519) --
------------- -------------
Net decrease in net assets resulting from dividends to
shareholders (17,623,425) --
------------- -------------
Capital Share Net decrease in net assets derived from capital share
Transactions transactions (11,957,117) (82,303,224)
(Note 4): ------------- -------------
Net Assets: Total increase in net assets 173,632,415 49,688,868
Beginning of period 701,249,909 651,561,041
------------- -------------
End of period* $ 874,882,324 $ 701,249,909
============= =============
<FN>
*Undistributed investment income--net $ 3,997,055 $ 17,612,088
============= =============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
<CAPTION>
Class A++++
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year 1994++ to
May 31, Ended November 30, Nov. 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.83 $ 10.50 $ 17.37 $ 18.22
Operating -------- -------- -------- --------
Performance: Investment income--net .15 .46 .16 --
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net 3.64 1.87 (6.52) (.85)
-------- -------- -------- --------
Total from investment operations 3.79 2.33 (6.36) (.85)
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.44) -- -- --
Realized gain on investments--net -- -- (.50) --
In excess of realized gain on investments--net -- -- (.01) --
-------- -------- -------- --------
Total dividends and distributions (.44) -- (.51) --
-------- -------- -------- --------
Net asset value, end of period $ 16.18 $ 12.83 $ 10.50 $ 17.37
======== ======== ======== ========
Total Investment Based on net asset value per share 30.50%+++ 22.19% (37.66%) (4.67%)+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 1.49%* 1.48% 1.66% 1.85%*
Net Assets: ======== ======== ======== ========
Investment income (loss)--net 2.05%* 3.74% 1.40% (.20%)*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 78,593 $ 46,369 $ 26,034 $ 10,350
Data: ======== ======== ======== ========
Portfolio turnover 32.42% 66.14% 54.86% 30.15%
======== ======== ======== ========
Average commission rate paid++++++ $ .0005 $ .0001 -- --
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
++++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
+++Aggregate total investment return.
<PAGE>
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class B
The following per share data and ratios
have been derived from information provided For the Six
in the financial statements. Months Ended
May 31, For the Year Ended November 30,
Increase (Decrease) in Net Asset Value: 1997++++ 1996++++ 1995++++ 1994++++ 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.46 $ 10.31 $ 17.24 $ 14.39 $ 9.83
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net .06 .32 .05 (.09) .10
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 3.58 1.83 (6.47) 2.99 4.68
-------- -------- -------- -------- --------
Total from investment operations 3.64 2.15 (6.42) 2.90 4.78
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.30) -- -- (.05) (.13)
Realized gain on investments--net -- -- (.50) -- (.09)
In excess of realized gain on
investments--net -- -- (.01) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.30) -- (.51) (.05) (.22)
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.80 $ 12.46 $ 10.31 $ 17.24 $ 14.39
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 29.88%+++ 20.85% (38.32%) 20.19% 49.80%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 2.53%* 2.54% 2.71% 2.51% 2.59%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net .79%* 2.69% .43% (.54%) 1.09%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $622,731 $518,865 $505,038 $937,221 $305,301
Data: ======== ======== ======== ======== ========
Portfolio turnover 32.42% 66.14% 54.86% 30.15% 24.74%
======== ======== ======== ======== ========
Average commission rate paid++++++ $ .0005 $ .0001 -- -- --
======== ======== ======== ======== ========
<PAGE>
<CAPTION>
Class C++++
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year 1994++ to
May 31, Ended November 30, Nov. 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.46 $ 10.31 $ 17.24 $ 18.10
Operating -------- -------- -------- --------
Performance: Investment income (loss)--net .06 .32 .03 (.02)
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net 3.57 1.83 (6.45) (.84)
-------- -------- -------- --------
Total from investment operations 3.63 2.15 (6.42) (.86)
-------- -------- -------- --------
Less distributions:
Investment income--net (.32) -- -- --
Realized gain on investments--net -- -- (.50) --
In excess of realized gain on investments--net -- -- (.01) --
-------- -------- -------- --------
Total distributions (.32) -- (.51) --
-------- -------- -------- --------
Net asset value, end of period $ 15.77 $ 12.46 $ 10.31 $ 17.24
======== ======== ======== ========
Total Investment Based on net asset value per share 29.83%+++ 20.85% (38.32%) (4.75%)+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 2.54%* 2.54% 2.72% 2.93%*
Net Assets: ======== ======== ======== ========
Investment income (loss)--net .86%* 2.68% .30% (1.22%)*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 35,027 $ 23,183 $ 14,659 $ 5,069
Data: ======== ======== ======== ========
Portfolio turnover 32.42% 66.14% 54.86% 30.15%
======== ======== ======== ========
Average commission rate paid++++++ $ .0005 $ .0001 -- --
======== ======== ======== ========
<PAGE>
<CAPTION>
Class D
The following per share data and ratios
have been derived from information provided For the Six
in the financial statements. Months Ended
May 31, For the Year Ended November 30,
Increase (Decrease) in Net Asset Value: 1997++++ 1996++++ 1995++++ 1994++++ 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.77 $ 10.47 $ 7.37 $ 14.45 $ 9.90
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .11 .42 .14 .03 .18
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 3.64 1.88 (6.53) 3.00 4.69
-------- -------- -------- -------- --------
Total from investment operations 3.75 2.30 (6.39) 3.03 4.87
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.40) -- -- (.11) (.23)
Realized gain on investments--net -- -- (.50) -- (.09)
In excess of realized gain on
investments--net -- -- (.01) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.40) -- (.51) (.11) (.32)
-------- -------- -------- -------- --------
Net asset value, end of period $ 16.12 $ 12.77 $ 10.47 $ 17.37 $ 14.45
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 30.30%+++ 21.97% (37.84%) 21.07% 50.86%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.74%* 1.74% 1.91% 1.73% 1.83%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 1.59%* 3.47% 1.18% .23% 1.83%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $138,531 $112,833 $105,830 $204,907 $ 75,085
Data: ======== ======== ======== ======== ========
Portfolio turnover 32.42% 66.14% 54.86% 30.15% 24.74%
======== ======== ======== ======== ========
Average commission rate paid++++++ $ .0005 $ .0001 -- -- --
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
++++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
+++Aggregate total investment return.
<PAGE>
See Notes to Consolidated Financial Statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Latin America 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.
(a) Valuation of investments--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.
<PAGE>
(b) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(c) 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.
* Options--The Fund is authorized to write and purchase call and 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.
* 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>
* 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.
(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 substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends, and capital
gains at various rates.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Fund has determined the ex-dividend date. Interest income (including
amortization of discount) is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on
the identified cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates. Distributions in
excess of realized capital gains are due primarily to differing tax
treatments for post-October losses.
(h) Basis of consolidation--The accompanying consolidated financial
statements include the accounts of Merrill Lynch Latin America Fund
Chile Ltd., 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
the limited partner. The Fund has 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.
<PAGE>
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee of 1.0%, on an annual basis,
of the average daily value of the Fund's net assets.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded)
For the six months ended May 31, 1997, MLFD earned underwriting
discounts and direct 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 $ 81 $ 934
Class D $8,214 $110,437
<PAGE>
For the six months ended May 31, 1997, MLPF&S received contingent
deferred sales charges of $961,017 and $7,797 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $40,957 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended May 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 May 31, 1997 were $241,625,600 and
$278,582,868, respectively.
Net realized and unrealized gains (losses) as of May 31, 1997 were
as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $48,545,286 $210,011,324
Foreign currency transactions (864,398) (394,921)
----------- ------------
Total $47,680,888 $209,616,403
=========== ============
As of May 31, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $210,011,324, of which $234,641,645 related
to appreciated securities and $24,630,321 related to depreciated
securities. At May 31, 1997, the aggregate cost of investments for
Federal income tax purposes was $632,726,930.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $11,957,117 and $82,303,224 for the six months ended May 31,
1997 and the year ended November 30, 1996, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Six Months Dollar
Ended May 31, 1997 Shares Amount
<PAGE>
Shares sold 3,782,534 $ 54,727,842
Shares issued to shareholders in
reinvestment of dividends 108,885 1,362,155
----------- ------------
Total issued 3,891,419 56,089,997
Shares redeemed (2,649,236) (38,792,817)
----------- ------------
Net increase 1,242,183 $ 17,297,180
=========== ============
Class A Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 2,334,477 $ 27,998,108
Shares redeemed (1,199,157) (14,535,235)
----------- ------------
Net increase 1,135,320 $ 13,462,873
=========== ============
Class B Shares for the
Six Months Ended Dollar
May 31, 1997 Shares Amount
Shares sold 4,440,539 $ 62,970,485
Shares issued to shareholders in
reinvestment of dividends 862,151 10,578,592
----------- ------------
Total issued 5,302,690 73,549,077
Automatic conversion of shares (84,967) (1,221,298)
Shares redeemed (7,438,746) (104,056,284)
----------- ------------
Net decrease (2,221,023) $(31,728,505)
=========== ============
Class B Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 10,055,825 $ 115,213,232
Automatic conversion of shares (137,908) (1,581,919)
Shares redeemed (17,283,572) (199,308,905)
------------ -------------
Net decrease (7,365,655) $ (85,677,592)
============ =============
<PAGE>
Class C Shares for the
Six Months Ended Dollar
May 31, 1997 Shares Amount
Shares sold 956,013 $ 13,573,379
Shares issued to shareholders in
reinvestment of dividends 41,877 512,997
----------- ------------
Total issued 997,890 14,086,376
Shares redeemed (637,792) (9,041,985)
----------- ------------
Net increase 360,098 $ 5,044,391
=========== ============
Class C Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 1,248,519 $ 14,588,140
Shares redeemed (810,190) (9,591,529)
----------- ------------
Net increase 438,329 $ 4,996,611
=========== ============
Class D Shares for the
Six Months Ended Dollar
May 31, 1997 Shares Amount
Shares sold 2,050,942 $ 30,150,730
Automatic conversion of shares 83,380 1,221,298
Shares issued to shareholders in
reinvestment of dividends 224,831 2,803,638
----------- ------------
Total issued 2,359,153 34,175,666
Shares redeemed (2,605,852) (36,745,849)
----------- ------------
Net decrease (246,699) $ (2,570,183)
=========== ============
Class D Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 5,255,871 $ 59,496,466
Automatic conversion of shares 135,283 1,581,919
----------- ------------
Total issued 5,391,154 61,078,385
Shares redeemed (6,658,036) (76,163,501)
----------- ------------
Net decrease (1,266,882) $(15,085,116)
=========== ============
<PAGE>
5. Commitments:
At May 31, 1997, the Fund had entered into foreign exchange
contracts under which it had agreed to sell various foreign
currencies with an approximately value of $7,936,446.
6. Capital Loss Carryforward:
At November 30, 1996, the Fund had a net capital loss carryforward
of approximately $261,094,000, of which $145,157,000 expires in 2003
and $115,937,000 expires in 2004. This amount will be available to
offset like amounts of any future taxable gains.
PORTFOLIO INFORMATION
As of May 31, 1997
Percent of
Ten Largest Equity Holdings Net Assets
Telecomunicacoes Brasileiras S.A.--
Telebras* 13.7%
Petroleo Brasileiro S.A. (Preferred) 5.1
Yacimientos Petroliferos Fiscales S.A. (ADR) 4.5
Telefonos de Mexico, S.A. de C.V. (ADR) 4.2
Companhia Cervejaria Brahma S.A. PN
(Preferred) 2.9
Companhia Vale do Rio Doce S.A. (Preferred) 2.8
Centrais Eletricas Brasileiras S.A.
(Eletrobras)* 2.6
Grupo Carso, S.A. de C.V.* 2.4
Compania de Telecomunicaciones de Chile S.A.
(ADR) 2.4
Fomento Economico Mexicano, S.A. de C.V.
(Femsa)* 2.4
[FN]
*Includes combined holdings.
<PAGE>
Percent of
Ten Largest Industries Net Assets
Telecommunications 27.8%
Utilities 12.3
Banking 7.7
Metals & Steel 7.5
Beverages & Tobacco 5.7
Energy Sources 5.1
Oil & Gas Producers 4.5
Multi-Industry 4.4
Building Materials 4.1
Merchandising 3.7
