MERRILL LYNCH
LATIN AMERICA
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Quarterly Report
August 31, 1998
<PAGE>
MERRILL LYNCH LATIN AMERICA FUND, INC.
Asset Allocation As a Percentage* of Net Assets as of August 31, 1998
A map illustrating the following percentages:
Mexico 29.0%
Venezuela 1.4%
Colombia 3.4%
Peru 3.0%
Brazil 38.5%
Argentina 6.3%
Chile 3.5%
* Total may not equal 100% and does not include short-term securities.
<PAGE>
Merrill Lynch Latin America Fund, Inc., August 31, 1998
DEAR SHAREHOLDER
For the quarter ended August 31, 1998, total returns for Merrill Lynch Latin
America Fund, Inc.'s Class A, Class B, Class C and Class D Shares were -37.84%,
- -38.02%, -37.95%, -37.79%, respectively. (Investment results shown do not
reflect sales charges and would be lower if sales charges were included.
Complete performance information can be found on pages 5 and 6 of this report to
shareholders.)
The unmanaged Morgan Stanley Capital International (MSCI) Latin America Free
Index declined 35.51% and the J.P. Morgan Latin Brady Bond Index declined 24.01%
for the same three-month period. (References to securities markets of all
countries in this letter to shareholders correspond to those countries' market
weightings in the MSCI Latin America Free Index.) Detrimental to the Fund's
performance during the quarter was its overweighted position in Venezuela, whose
market declined 56.68%. Also hurting performance was the Fund's underweighted
position in Argentina, whose market, although down 30.12%, was the best
performer in the region.
Investment Overview
During the past three months, both emerging and developed capital markets
worldwide declined at double-digit rates. During this period, several
developments pointing to a rapid deterioration in the world's economic
performance coincided to deliver blows to nearly all markets. The MSCI World
Index, a proxy for the US and international stock markets combined, declined
11.38% for the three-month period and 13.32% for the month of August alone.
Among the key developments that created a mood of crisis were the currency
devaluation and unstable politics in Russia, the deflationary pressures on US
corporate earnings and the absence of recovery in Japanese and other Asian
economies. The ensuing volatility in markets heightened investor concerns about
the risk of further currency devaluations.
During the three months ended August 31, 1998, the Russian crisis affected the
Latin American markets largely through capital flows. Because Latin American
economies still depend heavily on external capital, any market turmoil that
reduces these inflows or raises the cost of borrowing is detrimental to their
markets. For example, some investors sold down Latin American securities, which
were among the most tradable emerging market securities, to cover margin calls
and losses suffered on Russian investments. Also, investor sentiment ties Russia
with Brazil because of their similarity in size, dependence on commodity
exports, large trade deficits and significant levels of foreign debt.
Nevertheless, this comparison overlooks the differences between the two--Brazil
has a longer tradition of capitalism, a larger reserve position and more
experience in dealing with turbulent capital flows.
However, aside from the capital flow effects, worldwide deflationary pressures
emanating from the ongoing Asian crisis are hurting economies in Latin America
through damage to trade balances. The main source is the weakness in the prices
of commodities, which are some of the region's chief exports. Notable in
importance are petroleum for Venezuela, Mexico and Colombia; copper for Chile
and Peru; and agricultural commodities for Argentina. Another source of problems
is the strength of the US dollar, which hampers the competitiveness of exports
from those Latin countries whose currencies are directly or indirectly pegged to
the US dollar. In addition, the slowdown in world economic growth will hamper
Latin American exports in general, with a US slowdown being particularly
detrimental to Mexican exports.
For the three-month period ended August 31, 1998, the Mexican stock market
declined by 40%. Investor uneasiness stemmed from a combination of concerns over
weak oil prices, a decelerating US economy (Mexico's main trading partner),
controversies surrounding the banking sector and political uncertainty. In
response to weaker oil prices, the government announced a series of spending
cuts that will inevitably halt what had been robust economic growth. Real gross
domestic product (GDP) grew by 7.0% in Mexico during 1997. Economic activity in
sectors such as construction is clearly already slowing down, partly because of
reduced government expenditures on infrastructure projects. In the Mexican
equity market, where it is estimated that foreign investment represents
approximately one-third of market capitalization, stocks suffering the largest
declines were the most liquid ones, representing evidence of foreign money
pressuring the markets. The banking sector in Mexico was especially hard-hit,
with bank stock declines of over 60% during the quarter as the controversy over
prior government bailout programs reached new levels. Also affecting bank stocks
was the hike in interest rates, in response to market turbulence.
One of the Fund's key holdings in Mexico is Fomento Economico Mexicano, S.A. de
C.V. (Femsa). This company's lines of business include beer, soft drinks,
packaging and retail sales. Our investment is predicated on the strength of its
underlying businesses: the resiliency of the beer business, the continued strong
performance of Coca-Cola Femsa, and the improvement in the retail division, as
witnessed by the increase in same-store sales during the August quarter.
Furthermore, management has taken steps to strengthen the balance sheet of the
company and enhance shareholder value by paying down a substantial amount of
debt during the quarter and declaring a significant dividend. While the
near-term outlook for the consumer goods and retail sectors may be dimming, we
believed that the long-term prospects for Femsa were strong.
For the August quarter, the Brazilian market declined by 34%. Foremost among
investor concerns is the stability of the real, Brazil's currency. There is a
general consensus that the real has become overvalued and that the current
foreign exchange regime, a currency band very closely tied to the dollar, allows
for little flexibility in solving this problem. Although progress has been made
on the fiscal balance, the fiscal deficit deteriorated substantially as interest
rates increased and economic growth was brought to a halt. Also of concern is
the size and maturity structure of government debt, with heavy components in
both dollar-linked and floating-rate debt. As of August 31, 1998, the level of
international reserves in Brazil has been quite healthy and the government has
been quick to respond to any attacks on the currency through monetary policy.
However, recent outflows of capital triggered by the global market downturn
hinder the Brazilian economic team's ability to defend the currency.
Brazil's political risk has abated somewhat from earlier in the quarter when the
Labor Party candidate for president, Luiz Ignacio (Lula) Da Silva, enjoyed a
strong showing in the polls. With the outlook now much more positive for
President Cardoso's re-election, and hence a continuation of the reform process,
political concerns have moved to the back burner. Elections are scheduled in
Brazil for October 1998.
A major development during the August quarter was the privatization of the
telecommunications holding company, Telebras. In July, Brazil celebrated Latin
America's largest privatization, selling its stake in the giant
telecommunications company for almost $19 billion, representing a premium of
approximately 70% above the asking price. As part of the privatization, the
former Telebras was split into 12 regional phone companies, with each company to
be listed on both the Sao Paulo and New York Stock Exchanges. Each holder of
Telebras could opt to receive shares in each of the 12 new holding companies
created, which will eventually be listed on both the Sao Paulo and the New York
Stock Exchanges, or holders could convert their Telebras holdings into a single
instrument, called Telebras Holders. Telebras has traditionally represented a
significant weight in the Fund. We have always considered it to be an attractive
investment given the depth and size of the home telecommunications market in
Brazil and the scope for efficiency improvements.
Recent history has shown that there is often a spillover effect from Brazil to
Argentina. During the quarter ended August 31, 1998, the Argentine market
declined by 30%, chiefly on concerns about Brazil, rising interest rates and a
growing current account deficit. However, despite market turmoil, international
reserves and bank deposits in Argentina continued to grow. In past episodes of
turbulence, deposit flight was one of the key pressure points, but improvements
in the financial system have bolstered depositor confidence. Nonetheless, with
capital flows to the region slowing down in the near future, and commodity
prices depressed, investors already began to factor in a
2 & 3
<PAGE>
Merrill Lynch Latin America Fund, Inc., August 31, 1998
slower growth scenario for Argentina. YPF S.A., a defensive stock held in
Argentina, is a large energy company with businesses in oil and gas. Despite
lower global petroleum prices, this stock held up relatively well compared to
similar Argentine energy companies during the August quarter.
Of all the Latin American stock markets, the market in Venezuela declined the
most--down 57% for the August quarter. The belief that a devaluation of the
bolivar was imminent set off a strong round of selling in August. While a
devaluation is still possible for Venezuela, we believed that its impact on the
region would probably be more psychological than economic. Given the very low
valuations in the Venezuelan market, it is likely that much of the devaluation
risk is already priced in. The most immediate problem confronting Venezuela is
one of weak petroleum prices, the country's main export. Compounding this
underlying weakness is a reform program that has stalled in recent years,
mounting inflation and unemployment and the political rhetoric of various
political parties. Many fear that the reform process would be set back even
further if Comandante Chavez, the front runner in the polls, is elected
president. Mr. Chavez, a populist candidate, once attempted a military coup
against former President Carlos Andres Perez.
One of the Fund's key holdings in Venezuela is Mavesa S.A., the food and
household products firm. Mavesa was originally founded as a producer of
margarines, but has expanded its products to include mayonnaise, fruit juices,
mineral water, chocolate drinks and soaps. Despite recent expansion into other
Andean countries, Mavesa's businesses have remained focused in the Venezuelan
domestic market. For this reason, the company's earnings for the first six
months of 1998 were hurt by the worsening economic situation in Venezuela.
However, from a long-term perspective, we believed the company did possess
positive aspects, including a low level of debt, a history of profitability,
even in difficult times, and strong domestic market share in its key products.
In Conclusion
The quarter ended August 31, 1998 proved once again that Latin American equity
markets remain extremely sensitive to world developments. Until this period, the
economic fundamentals of Latin America had been relatively strong and improving.
But the rush of investors to exit from emerging markets and the absence of
strong sources for growth in the developed countries triggered a vicious cycle
of economic and financial deterioration. We would note that the continuation of
global downtrends will probably take a higher toll on the region than we had
originally anticipated. However, despite the slower outlook for Latin American
growth and a higher risk premium attributed to Latin American investments,
security valuations in the region compare favorably to those elsewhere in the
developing world. Although value does not provide a catalyst for a recovery in
prices, it can provide a firmer floor.
We thank you for your continued support of Merrill Lynch Latin America Fund,
Inc., and we look forward to reviewing our outlook and strategy with you in our
next report to shareholders.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Grace Pineda
Grace Pineda
Senior Vice President and Portfolio Manager
October 1, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill Lynch
Select Pricing(SM) System, which offers four pricing alternatives:
o 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.
o 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.)
o 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.
o 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, distribution and transfer agency fees applicable to each class,
which are deducted from the income available to be paid to shareholders.
Recent Performance Results*
<TABLE>
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
=============================================================================================
<S> <C> <C> <C>
ML Latin America Fund, Inc. Class A Shares -49.02% -37.84% -49.87%
- ---------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class B Shares -49.57 -38.02 - 9.64
- ---------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class C Shares -49.54 -37.95 -51.83
- ---------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class D Shares -49.10 -37.79 - 4.52
=============================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. The Fund's inception dates are Class A &
Class C Shares, 10/21/94 and Class B & Class D Shares, 9/27/91.
4 & 5
<PAGE>
Merrill Lynch Latin America Fund, Inc., August 31, 1998
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 6/30/98 -26.75% -30.59%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 6/30/98 - 7.32 - 8.66
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 6/30/98 -27.53% -30.43%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/98 + 3.43 + 3.43
- --------------------------------------------------------------------------------
Inception (9/27/91) through 6/30/98 + 4.70 + 4.70
- --------------------------------------------------------------------------------
* 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 6/30/98 -27.52% -28.25%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 6/30/98 - 8.29 - 8.29
- --------------------------------------------------------------------------------
* 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 6/30/98 -26.91% -30.75%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/98 + 4.25 + 3.13
- --------------------------------------------------------------------------------
Inception (9/27/91) through 6/30/98 + 5.53 + 4.69
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
CONSOLIDATED SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Shares Held/ Percent of
COUNTRY Industries Face Amount Long-Term Investments Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Argentina Banking 122,195 Banco de Galicia y Buenos Aires S.A.
(ADR) (1) $ 3,519,977 $ 1,397,605 0.5%
---------------------------------------------------------------------------------------------------------------------
Beverages 502,883 Quilmes Industrial S.A. (ADR) (1) 5,958,037 3,551,611 1.3
---------------------------------------------------------------------------------------------------------------------
Merchandising 547,144 Grimoldi S.A. (Class B) 3,174,556 985,076 0.4
---------------------------------------------------------------------------------------------------------------------
Oil & Gas Producers 239,413 YPF S.A. (ADR) (1) 6,887,671 5,297,013 2.0
---------------------------------------------------------------------------------------------------------------------
Real Estate 1,166,915 Inversiones y Representaciones S.A.
(IRSA) 3,126,377 2,801,212 1.1
33,506 Inversiones y Representaciones S.A.
(IRSA) (GDR) (2) 1,091,833 795,767 0.3
------------ ------------ ------
4,218,210 3,596,979 1.4
---------------------------------------------------------------------------------------------------------------------
Telecommunications 30,766 Telefonica de Argentina S.A. (ADR) (1) 908,361 688,389 0.3
525,000 Telefonica de Argentina S.A. (Class B) 1,497,352 1,181,510 0.4
------------ ------------ ------
2,405,713 1,869,899 0.7
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in
Argentina 26,164,164 16,698,183 6.3
====================================================================================================================================
Brazil Banking 983,999,592 Banco Bradesco S.A. (Preferred) 6,222,047 5,518,693 2.0
10,729,655 Banco Itau S.A. (Preferred) 7,064,466 4,558,827 1.7
229,327 Uniao de Bancos Brasileiros S.A.
(Unibanco) (GDR) (2) 6,677,919 3,439,905 1.3
15,000,000 Uniao de Bancos Brasileiros S.A.
(Unibanco) (Units) (3) 1,198,257 458,872 0.2
------------ ------------ ------
21,162,689 13,976,297 5.2
---------------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 17,282,558 Companhia Cervejaria Brahma S.A. PN
(Preferred) 10,773,720 8,136,078 3.0
27,200 Companhia Cervejaria Brahma S.A. PN
(Preferred) (ADR) (1) 397,933 251,600 0.1
------------ ------------ ------
11,171,653 8,387,678 3.1
---------------------------------------------------------------------------------------------------------------------
Diversified 622,204 Souza Cruz S.A. 4,584,833 3,785,674 1.4
---------------------------------------------------------------------------------------------------------------------
Energy Sources 1,082,757 Companhia Paranaense de Energia S.A.
(Copel) (ADR) (1) 19,356,682 5,955,163 2.2
37,879,446 Petroleo Brasileiro S.A. (Preferred) 10,069,150 3,698,461 1.4
------------ ------------ ------
29,425,832 9,653,624 3.6
---------------------------------------------------------------------------------------------------------------------
Foreign Government US$ 1,884,000 Republic of Brazil, Global Bonds,
Obligations 10.125% due 5/15/2027 1,632,015 1,055,040 0.4
---------------------------------------------------------------------------------------------------------------------
Forest Products 288,086,000 Votorantim Celulose e Papel S.A.
(Preferred) 7,636,997 3,549,666 1.3
---------------------------------------------------------------------------------------------------------------------
Machinery & 8,848,000 Weg Exportadora S.A. (Preferred) 5,270,921 5,639,021 2.1
Engineering
---------------------------------------------------------------------------------------------------------------------
Metals & Steel US$ 1,099,391 Companhia de Vale do Rio Doce S.A.,
0.0% due 12/31/2049** 0 0 0.0
431,579 Companhia de Vale do Rio Doce S.A.
(Preferred) 8,763,695 5,721,136 2.1
514,495,000 Companhia Siderurgica de Tubarao S.A.
(Preferred) 8,243,683 3,672,466 1.4
949 Companhia Siderurgica Nacional S.A.--
CSN 23 15 0.0
------------ ------------ ------
17,007,401 9,393,617 3.5
---------------------------------------------------------------------------------------------------------------------
Retail 125,100 Companhia Brasileira de Distribuicao
Grupo Pao de Acucar S.A. (ADR) (1) 2,571,085 1,688,850 0.6
---------------------------------------------------------------------------------------------------------------------
Telecommunications 273,449 Telecomunicacoes Brasileiras S.A.--
Telebras (ADR) (1) 32,868,498 19,329,426 7.2
149,205,637 Telecomunicacoes Brasileiras S.A.--
Telebras (Ordinary) 9,932,085 7,480,568 2.8
9,845,775 Telecomunicacoes de Minas Gerais S.A.
-- TELEMIG (Ordinary) 837,551 267,730 0.1
9,845,775 Telemig Celular S.A. 343,357 167,331 0.1
------------ ------------ ------
43,981,491 27,245,055 10.2
---------------------------------------------------------------------------------------------------------------------
Textiles & Apparel 20,431,686 Companhia de Tecidos Norte de Minas
S.A.--Coteminas (Preferred) 8,466,529 2,083,449 0.8
21,491,685 Empresa Nasional de Comercio S.A. 6,971 35,430 0.0
------------ ------------ ------
8,473,500 2,118,879 0.8
---------------------------------------------------------------------------------------------------------------------
Utilities 1,122,012 Centrais Eletricas de Santa Catarina
S.A. (CELESC) 'B' (Preferred) 591,246 467,187 0.2
74,917 Centrais Eletricas de Santa Catarina
S.A. (CELESC) (GDR) (2) 6,026,323 3,182,676 1.2
29,288 Companhia Energetica de Minas Gerais
S.A. (CEMIG) (ADR) (1) 536,560 534,506 0.2
72,502 Companhia Energetica de Minas Gerais
S.A. (CEMIG) (ADR) (1) 1,416,102 1,355,236 0.5
213,732,914 Companhia Energetica de Minas Gerais
S.A.(CEMIG) (Preferred) 7,902,085 3,995,687 1.5
</TABLE>
6 & 7
<PAGE>
Merrill Lynch Latin America Fund, Inc., August 31, 1998
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
Shares Held/ Percent of
COUNTRY Industries Face Amount Long-Term Investments Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Brazil Utilities 163,811 Companhia Paulista de Forca e Luz S.A.
(concluded) (concluded) (Rights) $ 14,058 $ 11,971 0.0%
288,000 Globex Utilidades S.A. (Preferred) 5,061,120 1,346,023 0.5
------------ ------------ ------
21,547,494 10,893,286 4.1
---------------------------------------------------------------------------------------------------------------------
Utilities--Electric 47,070,000 Companhia Energetica de Sao Paulo S.A.
(CESP) (Preferred) 2,475,423 639,973 0.2
1,164,600,000 Companhia Energetica do Ceara S.A.
(Preferred) 4,963,587 1,979,266 0.8
55,930 Espirito Santo Centrais Eletricas S.A.
(Escelsa) 10,012,656 3,136,795 1.2
------------ ------------ ------
17,451,666 5,756,034 2.2
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Brazil 191,917,577 103,142,721 38.5
====================================================================================================================================
Chile Telecommunications 299,925 Compania de Telecomunicaciones de
Chile S.A. (ADR) (1) 7,704,729 4,592,602 1.7
---------------------------------------------------------------------------------------------------------------------
Utilities 75,000 Chilectra S.A. (ADR) (1) 1,263,750 1,205,962 0.4
3,724,465 Empresa Nacional de Electricidad S.A.
(ENDESA) 2,032,168 1,119,310 0.4
2,057,425 Enersis S.A. 930,264 740,238 0.3
98,000 Enersis S.A. (ADR) (1) 2,451,109 1,776,250 0.7
------------ ------------ ------
6,677,291 4,841,760 1.8
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Chile 14,382,020 9,434,362 3.5
====================================================================================================================================
Colombia Banking 1,503,010 Banco de Bogota S.A. 7,261,871 4,464,479 1.7
79,971 Banco Ganadero S.A. (Preferred) (ADR)
(1) 1,833,706 1,219,558 0.4
------------ ------------ ------
9,095,577 5,684,037 2.1
---------------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 488,354 Bavaria S.A. 1,797,411 1,879,600 0.7
---------------------------------------------------------------------------------------------------------------------
Financial Services 488,354 Valores Bavaria S.A. 1,033,615 553,282 0.2
---------------------------------------------------------------------------------------------------------------------
Merchandising 1,485,966 Gran Cadena de Almacenes Colombianos
S.A. (CADENALCO) 4,043,019 916,977 0.3
36,400 Gran Cadena de Almacenes Colombianos
S.A. (CADENALCO) (ADR) (1) 611,250 136,500 0.1
------------ ------------ ------
4,654,269 1,053,477 0.4
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in
Colombia 16,580,872 9,170,396 3.4
====================================================================================================================================
Mexico Banking 3,410,757 Grupo Financiero Banamex--Accival,
S.A. de C.V. 'B' (Banacci) 8,137,719 2,875,099 1.1
63,000 Grupo Financiero Banamex--Accival,
S.A. de C.V. 'L' (Banacci) 140,485 45,519 0.0
------------ ------------ ------
8,278,204 2,920,618 1.1
---------------------------------------------------------------------------------------------------------------------
Beverages 256,000 Panamerican Beverages Inc. (Class A)
(US Registered Shares) 5,244,270 4,080,000 1.5
---------------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 202,301 Fomento Economico Mexicano, S.A. de
C.V. (Femsa) (ADR) (1) 2,605,540 3,464,405 1.3
---------------------------------------------------------------------------------------------------------------------
Broadcast--Media 2,870,000 Grupo Radio Centro, S.A. de C.V. 4,647,848 2,160,060 0.8
64,400 Grupo Radio Centro, S.A. de C.V. (ADR)
(1) 905,464 406,525 0.2
------------ ------------ ------
5,553,312 2,566,585 1.0
---------------------------------------------------------------------------------------------------------------------
Building Materials 28,491 Cemex, S.A. de C.V. 106,996 57,325 0.0
29,019 Cemex, S.A. de C.V. (ADR) (1) 223,537 128,656 0.0
410,030 Cemex, S.A. de C.V. 'B' 2,090,049 987,528 0.4
967,308 Cemex, S.A. de C.V. 'B' (ADR) (1) 9,069,909 5,064,728 1.9
------------ ------------ ------
11,490,491 6,238,237 2.3
---------------------------------------------------------------------------------------------------------------------
Chemicals 180,118 Desc, S.A. de C.V. (ADR) (1) 3,843,752 2,791,829 1.0
---------------------------------------------------------------------------------------------------------------------
Construction 223,600 Grupo Tribasa, S.A. de C.V. 'A1'
(ADR) (1) 1,477,673 545,025 0.2
---------------------------------------------------------------------------------------------------------------------
Diversified 766,268 Alfa, S.A. de C.V. (Class A) 6,379,317 1,730,159 0.6
---------------------------------------------------------------------------------------------------------------------
Foreign Government US$ 15,540,000 United Mexican States, Global Bonds,
Obligations 11.50% due 5/15/2026 17,797,888 13,442,100 5.0
---------------------------------------------------------------------------------------------------------------------
Health & Personal 1,530,980 Kimberly-Clark de Mexico, S.A. de
Care C.V. 'A' 4,088,426 3,364,622 1.3
---------------------------------------------------------------------------------------------------------------------
Merchandising 5,000,930 Cifra, S.A. de C.V. 'C' 5,904,765 5,520,344 2.1
---------------------------------------------------------------------------------------------------------------------
Multi-Industry 2,078,374 Grupo Carso, S.A. de C.V. 'A1' 9,768,402 5,109,901 1.9
30,833 Grupo Carso, S.A. de C.V. (ADR) (1) 346,980 152,932 0.1
------------ ------------ ------
10,115,382 5,262,833 2.0
---------------------------------------------------------------------------------------------------------------------
Steel 1,488,000 Hylsamex, S.A. de C.V. 6,905,138 1,968,072 0.7
---------------------------------------------------------------------------------------------------------------------
Telecommunications 244,797 Grupo Televisa, S.A. de C.V. (GDR) (2) 7,443,298 4,222,748 1.6
546,157 Telefonos de Mexico, S.A. de C.V.
(ADR) (1) 26,908,746 19,490,978 7.3
------------ ------------ ------
34,352,044 23,713,726 8.9
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Mexico 124,036,202 77,608,555 29.0
====================================================================================================================================
Peru Financial Services 202,792 Credicorp Ltd. S.A. 3,147,988 1,939,198 0.7
---------------------------------------------------------------------------------------------------------------------
Food & Household 6,996,882 Consorcio Alimentos Fabril Pacifico S.A. 5,483,960 1,601,808 0.6
Products
---------------------------------------------------------------------------------------------------------------------
Metals--Non-Ferrous 392,200 Compania de Minas Buenaventura S.A.
(ADR) (1) 6,771,689 2,990,525 1.1
1,173,498 Minsur S.A. (T Shares) 2,575,220 1,479,526 0.6
------------ ------------ ------
9,346,909 4,470,051 1.7
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Peru 17,978,857 8,011,057 3.0
====================================================================================================================================
Venezuela Building Materials 764,789 Corporacion Venezolana de Cementos I,
S.A.C.A. 361,820 179,021 0.1
1,156,928 Corporacion Venezolana de Cementos II,
S.A.C.A. 505,161 278,778 0.1
------------ ------------ ------
866,981 457,799 0.2
---------------------------------------------------------------------------------------------------------------------
Food & Household 28,061,157 Mavesa S.A. 1,748,791 1,125,344 0.4
Products
---------------------------------------------------------------------------------------------------------------------
Metal Processing 46,750 International Briquettes Holding, Inc. 610,672 227,906 0.1
---------------------------------------------------------------------------------------------------------------------
Textiles 757,926 Sudamtex de Venezuela S.A.C.A. (ADR)
(1) 10,150,880 911,558 0.3
---------------------------------------------------------------------------------------------------------------------
Utilities 4,479,201 C.A. La Electricidad de Caracas
S.A.I.C.A.--S.A.C.A. 4,837,080 1,079,326 0.4
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in
Venezuela 18,214,404 3,801,933 1.4
====================================================================================================================================
Total Long-Term Investments in Latin
America 409,274,096 227,867,207 85.1
====================================================================================================================================
</TABLE>
8 & 9
<PAGE>
Merrill Lynch Latin America Fund, Inc., August 31, 1998
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
Percent of
COUNTRY Face Amount Short-Term Investments Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
United States Commercial Paper* US$ 4,967,000 General Motors Acceptance Corp., 5.81%
due 9/01/1998 $ 4,967,000 $ 4,967,000 1.8%
---------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments 4,967,000 4,967,000 1.8
====================================================================================================================================
Total Investments $414,241,096 232,834,207 86.9
============
Other Assets Less Liabilities 34,953,651 13.1
------------ ------
Net Assets $267,787,858 100.0%
============ ======
====================================================================================================================================
Net Asset Value: Class A--Based on net assets of $28,352,330 and 3,310,823
shares outstanding $ 8.56
============
Class B--Based on net assets of $180,125,636 and
21,828,826 shares outstanding $ 8.25
============
Class C--Based on net assets of $11,716,034 and 1,422,258
shares outstanding $ 8.24
============
Class D--Based on net assets of $47,593,858 and 5,595,974
shares outstanding $ 8.51
============
====================================================================================================================================
</TABLE>
* Commercial Paper is traded on a discount basis; the interest rate
shown reflects the discount rate paid at the time of purchase by the
Fund.
** Received through a bonus issue from Companhia de Vale do Rio Doce
S.A. As of August 31, 1998, the bonds had not commenced trading and
the coupon rate had not been determined.
(1) American Depositary Receipts (ADR).
(2) Global Depositary Receipts (GDR).
(3) Each unit represents one preferred share of Uniao de Bancos
Brasileiros S.A. (Unibanco) and one preferred 'B' share of Unibanco
Holdings S.A.
PORTFOLIO INFORMATION
As of August 31, 1998
Percent of
Ten Largest Holdings (Equity Investments) Net Assets
Telecomunicacoes Brasileiras S.A.--Telebras* ...................... 10.0%
Telefonos de Mexico, S.A. de C.V. (ADR) ........................... 7.3
Companhia Cervejaria Brahma S.A. PN (Preferred)* .................. 3.1
Cemex, S.A. de C.V.* .............................................. 2.3
Companhia Paranaense de Energia S.A. (Copel) (ADR) ................ 2.2
Companhia Energetica de Minas Gerais S.A. (CEMIG)* ................ 2.2
Companhia de Vale do Rio Doce S.A. (Preferred) .................... 2.1
Weg Exportadora S.A. (Preferred) .................................. 2.1
Cifra, S.A. de C.V. 'C' ........................................... 2.1
Banco Bradesco S.A. (Preferred) ................................... 2.0
Telecommunications ................................................ 21.5
Banking ........................................................... 8.9
Utilities ......................................................... 6.3
Beverages & Tobacco ............................................... 5.1
Energy Sources .................................................... 3.6
Metals & Steel .................................................... 3.5
Merchandising ..................................................... 2.9
Beverages ......................................................... 2.8
Building Materials ................................................ 2.5
Utilities--Electric ............................................... 2.2
* Includes combined holdings.
EQUITY PORTFOLIO CHANGES
For the Quarter Ended August 31, 1998
Additions
Cemex, S.A. de C.V.
Cemex, S.A. de C.V. (ADR)
*Centrais Geradoras do Sul do Brasil S.A.
*Companhia de Vale do Rio Doce S.A.
Deletions
Centrais Eletricas Brasileiras S.A. (Eletrobras)
*Centrais Geradoras do Sul do Brasil S.A.
Cifra, S.A. de C.V. 'V'
Coca-Cola Femsa, S.A. de C.V. (Series L) (ADR)
*Companhia de Vale do Rio Doce S.A.
Companhia Paulista de Forca e Luz S.A.
Compania Anonima Nacional Telefonos de Venezuela (CANTV) (ADR)
Compania Naviera Perez Companc S.A.C.F.I.M.F.A.
Grupo Financiero Bancomer, S.A. de C.V. 'B' (Ordinary)
Grupo Financiero Bancomer, S.A. de C.V. (Series L)
Quinenco S.A. (ADR)
Telecom Argentina Stet--France Telecom S.A. (ADR)
Usinas Siderurgicas de Minas Gerais S.A.--Usiminas (Preferred)
* Added and deleted in the same quarter.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Grace Pineda, Senior Vice President and Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Barbara G. Fraser, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
10 & 11
<PAGE>
Investing in emerging market securities involves a number of risk factors and
special considerations, including restrictions on foreign investments and on
repatriation of capital invested in emerging markets, currency fluctuations, and
potential price volatility and less liquidity of securities traded in emerging
markets. In addition, there may be less publicly available information about the
issuers of securities, and such issuers may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to those
to which US companies are subject. Therefore, the Fund is designed as a
long-term investment for investors capable of assuming the risks of investing in
emerging markets. The Fund should be considered as a vehicle for diversification
and not as a complete investment program. Please refer to the prospectus for
details.
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch
Latin America
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #16140--8/98
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