MERRILL LYNCH
LATIN AMERICA
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
May 31, 1998
<PAGE>
MERRILL LYNCH LATIN AMERICA FUND, INC.
Asset Allocation
As a Percentage* of
Net Assets as of
May 31, 1998
A map illustrating the following percentages:
MEXICO 31.8%
VENEZUELA 5.2%
COLOMBIA 2.3%
PERU 2.6%
BRAZIL 41.7%
ARGENTINA 10.7%
CHILE 4.6%
*Total may not equal 100% and does not include short-term securities.
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1998
DEAR SHAREHOLDER
During the three-month period ended May 31, 1998, total returns for Merrill
Lynch Latin America Fund, Inc.'s Class A, Class B, Class C and Class D Shares
were -8.26%, -8.46%, -8.48% and -8.31%, 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 4 and 5 of this report to
shareholders.) The unmanaged Morgan Stanley Capital International (MSCI) Latin
America Free Index declined 8.90%, and the unmanaged J.P. Morgan Latin Brady
Bond Index declined 0.61% during the same period. (References to securities
markets of all countries in this letter to shareholders correspond to those
countries' market weightings in the MSCI Latin America Free Index.) Beneficial
to Fund performance was our stock selection in Brazil, whose market fell 11.32%
during the May quarter. Detrimental to performance was the Fund's underweighted
position in Peru, the only positive performer for the period with an increase of
13.65%.
Investment Overview
In our February report to shareholders, we noted that the Asian financial crisis
that occurred during late 1997 had left its mark on Latin American stock markets
in terms of heightened volatil ity. Since then, most of these markets rallied
during March, only to reverse direction in April. As a result, all of the Latin
American markets, except for Peru, showed significant declines for the
three-month period ended May 31, 1998. For example, Argentina, Brazil, Mexico
and Venezuela declined 9.23%, 11.32%, 6.83% and 14.96%, respectively.
There were three driving forces behind these declines. These were external
developments in regions outside of Latin America; growing concerns about trade
deficits in certain key countries (Brazil, Argentina and Mexico); and a
continual outflow of assets from Latin American mutual funds. We should also
note that the US market became more volatile in April, and the Latin American
equity markets were not able to avoid the negative sentiment.
In general, bad news added to the sentiment surrounding Latin American markets.
What has been described as a "domino mentality" affected the Latin American
markets as upheavals in Indonesia, speculation about the ruble in Russia and
more bad news on Japan dominated the international financial press. Even
developments such as the testing of nuclear arms in India and Pakistan
contributed to the less than positive feeling surrounding emerging markets in
general, and eventually had an adverse impact on Latin American markets.
Brazil was impacted particularly hard. Concerns that the weakening of the yen
would lead to a currency devaluation in The People's Republic of China or Hong
Kong ultimately dealt a blow to the Brazilian market. Investors speculated that
Brazil would have to push interest rates up again in order to prevent massive
capital outflows. Likewise, developments in Russia also generated new anxiety
over Brazil largely because investors focused on the similarities of the two
countries (large size, dependence on commodity exports, growing trade deficits
and high levels of debt) but failed to recognize the differences (Brazil has a
longer tradition of capitalism and a larger reserve position). Investors were
particularly concerned that a sharp increase in Russian interest rates in
mid-May would force a similar increase in Brazilian interest rates in order to
prevent capital outflows. Especially worrisome for investors was the growing
size of the Brazilian fiscal deficit. The key to reducing the budget deficit was
perceived to be set back by the death of two prominent Brazilian politicians,
Sergio Motta, the Minister of Communications, and Luis Eduardo Magalhaes, the
government's leader in the Lower House. Motta, whose death had been expected
because of his poor health, was a key figure in the privati zation of the
telecommunications sector. With the death of Magalhaes, investors became
especially concerned that key reform proposals would be delayed in Congress.
On a positive note, the privatization of Telecomunicacoes Brasileiras
S.A.--Telebras, the Brazilian telecommunications holding company, moved forward
with the government announcing the terms of the auction to take place in late
July. It was announced that the holding company will be split up into 12
companies. Telebras has long been a major holding in the Fund. We believe there
are several positive factors that could support the share price. These include
what in our view is high liquidity (Telebras is one of the most liquid stocks on
the Brazilian exchange) and an attractive valuation, as well as the depth and
size of the home market in Brazil and scope for efficiency improvements.
In Argentina, a number of negative factors combined to make investors
uncomfortable with the equity market. First, there was the delicate balance
between not enough growth and too much growth. Initial concerns were for an
economic slowdown in Argentina. However, with gross domestic product (GDP)
growth estimated to be in the 7%-8% range for the first quarter of 1998, it
became clear that the economy was expanding rather than slowing down. As a
result, investors feared an overheated economy would lead to an even greater
current account deficit and inflationary pressures. Fortunately, data on
inflation indicated no upward pressure, probably because of the persistently
high unemployment rate. Second, data suggested that the current account deficit
will increase from 3% of GDP for 1997 to about 4.0%-4.3% in 1998. However, this
increase would be the result of a decline in commodity prices for Argentina's
exports and a decline in exports to neighboring Brazil, as well as the result of
an increase in imports for Argentina. Also causing uncertainty in the Argentine
market were rumors that surfaced in April that the International Monetary Fund
(IMF) was not pleased with the progress that Argentina was making under its IMF
agreement. At issue was the growing current account deficit and the slow pace of
labor reform in Argentina.
Mexico was another example of where the signals for the market were mixed.
Strong industrial production, an improvement in the unemployment rate and strong
consumption continued through March 1998. Some Mexican companies also reported
better-than-expected earnings for the first quarter. However, with oil prices
continuing to remain weak, investors looked beyond the current strengths of the
Mexican economy and focused on possible budget cuts and a growing current
account deficit because of lower oil export volumes and lower oil prices.
Contributing to the uncertainty during the May quarter were a number of negative
issues concerning the banking sector. These included accusations of money
laundering, congressional inquiries into the Mexican equivalent of the
Resolution Trust Corporation, and the legality of banks charging interest on
interest.
Among one of the better-performing stocks for the May quarter was media
conglomerate Grupo Televisa, S.A. de C.V., a Fund holding. Grupo Televisa is one
of the largest Spanish-speaking media companies in the world. Although Televisa
has been a publicly listed company for some time, the company recently has been
undergoing the difficult transition from being family dominated to a more
professionally managed enterprise. The company recently hired outside management
at top levels (sales, production and administration), and has embarked on a
cost-cutting effort. The company reported strong operating results for first
quarter 1998, and thanks to the success of its debt reduction program of the
last few years, generated surplus cash for the first time since the 1994 Mexican
peso crisis.
The only market to show a gain during the three-month period ended May 31, 1998
was Peru, up 13.65%. The Peruvian market was buoyed by the strong per formance
of mining stocks, especially Compania de Minas Buenaventura S.A., the gold
mining conglomerate. Compania de Minas Buenaventura, with its partner Newmont
Mining Corp., was successful in its long court battle over ownership of the
Yanacocha gold mine. Yanacocha is the largest gold mine in Latin America and
among the lowest-cost producers of gold in the world.
In Conclusion
The May quarter has proven once again that Latin American equity markets remain
very vulnerable not only to developments in their own region, but also to
influences throughout the world. Despite the recent turmoil in these markets, we
find that the underlying fundamentals throughout the region are continually
improving. The reform process has made remarkable strides in many of the
countries, bringing economic growth with much lower inflation. The challenge
facing all of these countries is continuing the reform process, even in the face
of slowing economic expansion. In addition, many of the countries in the region
will undergo elections shortly, which places additional strains upon
policymakers to react appropriately to adverse shocks within the context of
their polit ical agendas. Nevertheless, we remain encouraged by the progress we
have seen and are optimistic about the long-term prospects for the region.
However, we would remind our shareholders that periods of sustained volatility
may occur.
We appreciate your ongoing interest in Merrill Lynch Latin America Fund, Inc.,
and we look forward to reviewing our strategy with you in our upcoming quarterly
report to shareholders.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Grace Pineda
Grace Pineda
Senior Vice President and
Portfolio Manager
June 29, 1998
2 & 3
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 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 main tenance 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 represen tation of
future performance. Figures shown in the "Average Annual Total Return"
tables assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date. Investment
return and principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Dividends
paid to each class of shares will vary because of the different levels of
account maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid to
shareholders.
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 -14.89% -8.26% -19.35%
- ----------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class B Shares -15.76 -8.46 +45.78
- ----------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class C Shares -15.79 -8.48 -22.37
- ----------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class D Shares -15.14 -8.31 +53.49
==============================================================================================
</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 and
Class C Shares, 10/21/94; and Class B and Class D Shares, 9/27/91.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 3/31/98 +10.12% + 4.34%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/98 - 1.69 - 3.22
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 3/31/98 + 9.02% + 5.02%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/98 + 9.18 + 9.18
- --------------------------------------------------------------------------------
Inception (9/27/91) through 3/31/98 + 8.57 + 8.57
- --------------------------------------------------------------------------------
* 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 3/31/98 + 8.96% + 7.96%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/98 - 2.72 - 2.72
- --------------------------------------------------------------------------------
* 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 3/31/98 + 9.81% + 4.04%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/98 +10.04 + 8.86
- --------------------------------------------------------------------------------
Inception (9/27/91) through 3/31/98 + 9.42 + 8.52
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
4 & 5
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1998
CONSOLIDATED SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Shares Held/ Value Percent of
COUNTRY Industries Face Amount Long-Term Investments Cost (Note 1a) Net Assets
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Argentina Banking 234,193 Banco de Galicia y Buenos Aires S.A.
(ADR) (1) $ 5,049,859 $ 4,800,956 0.9%
----------------------------------------------------------------------------------------------------------------------
Beverages 747,234 Quilmes Industrial S.A. (ADR) (1) 9,060,934 7,192,127 1.3
----------------------------------------------------------------------------------------------------------------------
Merchandising 547,144 +Grimoldi S.A. (Class B) 3,174,556 1,395,887 0.3
----------------------------------------------------------------------------------------------------------------------
Multi-Industry 1,220,645 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A. 6,624,131 6,728,984 1.2
----------------------------------------------------------------------------------------------------------------------
Oil & Gas Producers 674,098 Yacimientos Petroliferos Fiscales S.A.
(YPF) (ADR) (1) 18,856,357 20,939,169 3.9
----------------------------------------------------------------------------------------------------------------------
Real Estate 1,166,915 Inversiones y Representaciones S.A. (IRSA) 3,126,377 4,132,863 0.8
43,279 Inversiones y Representaciones S.A. (IRSA)
(GDR) (2) 1,325,615 1,530,995 0.3
------------ ------------ ----
4,451,992 5,663,858 1.1
---------------------------------------------------------------------------------------------------------------------
Telecommunications 149,632 Telecom Argentina Stet--France Telecom
S.A. (ADR) (1)(4) 3,179,182 4,638,592 0.9
140,392 Telefonica de Argentina S.A. (ADR) (1) 4,135,698 4,571,515 0.8
525,000 Telefonica de Argentina S.A. (Class B) 1,497,352 1,717,574 0.3
------------ ------------ ----
8,812,232 10,927,681 2.0
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Argentina 56,030,061 57,648,662 10.7
===================================================================================================================================
Brazil Banking 983,999,592 Banco Bradesco S.A. (Preferred) 6,222,047 8,042,427 1.5
23,204,365 Banco Itau S.A. (Preferred) 11,955,394 13,820,730 2.5
290,308 Uniao de Bancos Brasileiros S.A.
(Unibanco) (GDR) (2) 8,374,783 9,090,269 1.7
15,000,000 Uniao de Bancos Brasileiros S.A.
(Unibanco) (Units) (3) 1,198,257 945,570 0.2
------------ ------------ ----
27,750,481 31,898,996 5.9
---------------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 32,070,982 Companhia Cervejaria Brahma S.A. PN
(Preferred) 16,155,272 18,683,487 3.4
27,200 Companhia Cervejaria Brahma S.A. PN
(Preferred) (ADR) (1) 397,933 314,500 0.1
------------ ------------ ----
16,553,205 18,997,987 3.5
---------------------------------------------------------------------------------------------------------------------
Diversified 899,600 Souza Cruz S.A. 6,694,423 6,179,324 1.2
---------------------------------------------------------------------------------------------------------------------
Energy Sources 1,096,257 Companhia Paranaense de Energia S.A.
(Copel) (ADR) (1) 19,599,682 10,894,054 2.0
78,219,932 +Petroleo Brasileiro S.A. (Preferred) 19,401,955 15,098,535 2.8
------------ ------------ ----
39,001,637 25,992,589 4.8
---------------------------------------------------------------------------------------------------------------------
Foreign Government US$ 1,884,000 Republic of Brazil, Global Bonds, 10.125%
Obligations due 5/15/2027 1,632,015 1,712,085 0.3
---------------------------------------------------------------------------------------------------------------------
Forest Products 288,086,000 +Votorantim Celulose e Papel S.A.
(Preferred) 7,636,997 4,310,895 0.8
---------------------------------------------------------------------------------------------------------------------
Machinery & 8,848,000 Weg Exportadora S.A. (Preferred) 5,385,285 6,539,257 1.2
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 8,968,558 1.7
643,475,000 Companhia Siderurgica de Tubarao S.A.
(Preferred) 10,113,878 10,037,337 1.9
949 Companhia Siderurgica Nacional S.A.--CSN 23 24 0.0
828,631 Usinas Siderurgicas de Minas Gerais
S.A.--Usiminas (Preferred) 9,548,540 4,546,267 0.8
------------ ------------ ----
28,426,136 23,552,186 4.4
---------------------------------------------------------------------------------------------------------------------
Retail 125,100 Companhia Brasileira de Distribuicao Grupo
Pao de Acucar S.A. (ADR) (1) 2,571,085 2,924,213 0.5
---------------------------------------------------------------------------------------------------------------------
Telecommunications 405,253 Telecomunicacoes Brasileiras S.A.
--Telebras (ADR) (1) 46,347,440 43,210,101 8.0
149,205,637 Telecomunicacoes Brasileiras S.A.
--Telebras (Ordinary) 9,932,085 12,584,077 2.3
9,845,775 +Telecomunicacoes de Minas Gerais S.A.--
TELEMIG (Ordinary) 837,551 470,844 0.1
9,845,775 +Telemig Celular S.A. 343,357 239,788 0.1
------------ ------------ ----
57,460,433 56,504,810 10.5
---------------------------------------------------------------------------------------------------------------------
Textiles & Apparel 21,231,686 +Companhia de Tecidos Norte de Minas S.A.--
Coteminas (Preferred) 8,827,208 3,599,842 0.7
21,491,685 Empresa Nasional de Comercio S.A. 6,971 81,288 0.0
------------ ------------ ----
8,834,179 3,681,130 0.7
---------------------------------------------------------------------------------------------------------------------
Utilities 221,887,350 +Centrais Eletricas Brasileiras S.A.
(Eletrobras) 11,583,472 7,389,171 1.4
1,122,012 Centrais Eletricas de Santa Catarina S.A.
(CELESC) 'B' (Preferred) 591,246 1,014,601 0.2
74,917 Centrais Eletricas de Santa Catarina S.A.
(CELESC) (GDR) (2)(4) 6,026,323 6,708,900 1.2
29,289 Companhia Energetica de Minas Gerais S.A.
(CEMIG) (ADR) (1) 536,560 962,876 0.2
69,302 Companhia Energetica de Minas Gerais S.A.
(CEMIG) (ADR) (1)(4) 1,321,702 2,268,525 0.4
368,732,914 Companhia Energetica de Minas Gerais S.A.
(CEMIG) (Preferred) 11,358,536 12,183,159 2.3
7,943,712 +Companhia Paulista de Forca e Luz S.A. 490,346 797,756 0.1
163,811 Companhia Paulista de Forca e Luz S.A.
(Rights) 14,058 11,395 0.0
288,000 Globex Utilidades S.A. (Preferred) 5,061,120 2,253,717 0.4
------------ ------------ ----
36,983,363 33,590,100 6.2
---------------------------------------------------------------------------------------------------------------------
Utilities--Electric 47,070,000 Companhia Energetica de Sao Paulo S.A.
(CESP) (Preferred) 2,475,423 1,534,758 0.3
1,143,900,000 Companhia Energetica do Ceara S.A.
(Preferred) 4,912,770 3,680,054 0.7
55,930 Espirito Santo Centrais Eletricas S.A.
(Escelsa) 10,012,656 3,890,444 0.7
------------ ------------ ----
17,400,849 9,105,256 1.7
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Brazil 256,330,088 224,988,828 41.7
==================================================================================================================================
Chile Telecommunications 539,478 Compania de Telecomunicaciones de Chile
S.A. (ADR) (1) 13,223,706 11,969,668 2.2
436,373 Quinenco S.A. (ADR) (1) 7,825,409 4,145,543 0.8
------------ ------------ ----
21,049,115 16,115,211 3.0
---------------------------------------------------------------------------------------------------------------------
Utilities 75,000 Chilectra S.A. (ADR) (1)(4) 1,263,750 1,826,572 0.3
3,724,465 Empresa Nacional de Electricidad S.A.
(ENDESA) 2,032,168 1,916,281 0.4
2,057,425 Enersis S.A. 930,264 1,026,903 0.2
157,400 Enersis S.A. (ADR) (1) 3,985,648 3,994,025 0.7
------------ ------------ ----
8,211,830 8,763,781 1.6
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Chile 29,260,945 24,878,992 4.6
==================================================================================================================================
</TABLE>
6 & 7
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1998
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
Shares Held/ Value Percent of
COUNTRY Industries Face Amount Long-Term Investments Cost (Note 1a) Net Assets
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Colombia Banking 1,503,009 Banco de Bogota S.A. $ 7,261,871 $ 5,610,603 1.0%
79,971 Banco Ganadero S.A. (Preferred) (ADR) (1) 1,833,706 1,489,460 0.3
------------ ------------ ----
9,095,577 7,100,063 1.3
---------------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 488,354 Bavaria S.A. 1,797,411 2,795,987 0.5
Financial Services 488,354 Valores Bavaria S.A. 1,033,615 1,013,545 0.2
Merchandising 1,485,966 +Gran Cadena de Almacenes Colombianos S.A.
(CADENALCO) 4,043,018 1,329,319 0.3
36,400 +Gran Cadena de Almacenes Columbianos S.A.
(CADENALCO) (ADR) (1)(4) 611,250 227,500 0.0
------------ ------------ ----
4,654,268 1,556,819 0.3
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Colombia 16,580,871 12,466,414 2.3
==================================================================================================================================
Mexico Banking 3,377,957 +Grupo Financiero Banamex--Accival,
S.A. de C.V. 'B' (Banacci) 8,069,401 8,432,435 1.6
63,000 +Grupo Financiero Banamex--Accival,
S.A. de C.V. 'L' (Banacci) 140,485 139,396 0.0
6,291,796 Grupo Financiero Bancomer, S.A. de C.V.
'B' (Ordinary) 1,720,364 3,141,257 0.6
------------ ------------ ----
9,930,250 11,713,088 2.2
---------------------------------------------------------------------------------------------------------------------
Beverages 193,800 Coca-Cola Femsa, S.A. de C.V. (Series L)
(ADR) (1) 3,071,254 3,294,600 0.6
245,862 Panamerican Beverages Inc. (Class A) 4,897,677 8,313,209 1.5
------------ ------------ ----
7,968,931 11,607,809 2.1
---------------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 199,117 +Fomento Economico Mexicano, S.A. de C.V.
(Femsa) (ADR) (1)(4) 2,509,821 6,570,861 1.2
---------------------------------------------------------------------------------------------------------------------
Broadcast--Media 2,870,000 Grupo Radio Centro, S.A. de C.V. 4,647,848 4,077,204 0.8
64,400 Grupo Radio Centro, S.A. de C.V. (ADR) (1) 905,464 829,150 0.1
------------ ------------ ----
5,553,312 4,906,354 0.9
---------------------------------------------------------------------------------------------------------------------
Building Materials 949,700 Cemex, S.A. de C.V. 'B' 4,691,100 4,666,063 0.9
1,244,830 Cemex, S.A. de C.V. 'B' (ADR) (1) 11,548,586 12,114,935 2.2
------------ ------------ ----
16,239,686 16,780,998 3.1
---------------------------------------------------------------------------------------------------------------------
Chemicals 180,118 +Desc, S.A. de C.V. (ADR) (1) 3,843,752 4,075,170 0.8
---------------------------------------------------------------------------------------------------------------------
Construction 713,200 +Grupo Tribasa, S.A. de C.V. 'A1' (ADR) (1) 4,501,297 4,056,325 0.8
---------------------------------------------------------------------------------------------------------------------
Diversified 766,268 Alfa, S.A. de C.V. (Class A) 6,379,316 3,651,793 0.7
---------------------------------------------------------------------------------------------------------------------
Financial Services 63,052 Grupo Financiero Bancomer, S.A. de C.V.
(Series L) 22,760 21,463 0.0
---------------------------------------------------------------------------------------------------------------------
Foreign Government US$15,540,000 United Mexican States, Global Bonds,
Obligations 11.50% due 5/15/2026 17,797,888 18,104,100 3.3
---------------------------------------------------------------------------------------------------------------------
Health & Personal 1,487,280 Kimberly-Clark de Mexico, S.A. de C.V. 'A' 3,935,904 6,125,980 1.1
Care
---------------------------------------------------------------------------------------------------------------------
Merchandising 5,912,739 Cifra, S.A. de C.V. 'C' 6,997,454 8,332,715 1.6
892,988 Cifra, S.A. de C.V. 'V' 1,834,981 1,299,002 0.2
------------ ------------ ----
8,832,435 9,631,717 1.8
---------------------------------------------------------------------------------------------------------------------
Multi-Industry 3,558,479 Grupo Carso, S.A. de C.V. 'A1' 21,146,125 18,129,548 3.3
30,833 Grupo Carso, S.A. de C.V. (ADR) (1) 346,980 305,555 0.1
------------ ------------ ----
21,493,105 18,435,103 3.4
---------------------------------------------------------------------------------------------------------------------
Steel 1,488,000 Hylsamex, S.A. de C.V. 6,905,138 5,250,970 1.0
---------------------------------------------------------------------------------------------------------------------
Telecommunications 596,606 +Grupo Televisa, S.A. de C.V. (GDR) (2) 17,293,528 23,304,922 4.3
577,085 Telefonos de Mexico, S.A. de C.V. (ADR) (1) 28,614,373 27,375,470 5.1
------------ ------------ ----
45,907,901 50,680,392 9.4
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Mexico 161,821,496 171,612,123 31.8
==================================================================================================================================
Peru Financial Services 202,792 Credicorp Ltd. S.A. 3,147,988 3,219,323 0.6
---------------------------------------------------------------------------------------------------------------------
Food & Household 6,996,837 Consorcio Alimentos Fabril Pacifico S.A. 5,483,960 1,833,553 0.3
Products
---------------------------------------------------------------------------------------------------------------------
Metals--Non-Ferrous 408,900 Compania de Minas Buenaventura S.A.
(ADR) (1) 7,052,139 6,414,619 1.2
1,125,917 Minsur S.A. (T Shares) 2,575,220 2,380,083 0.5
------------ ------------ ----
9,627,359 8,794,702 1.7
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Peru 18,259,307 13,847,578 2.6
==================================================================================================================================
Venezuela Building Materials 359,137 Corporacion Venezolana de Cementos I,
S.A.C.A. 307,742 462,692 0.1
771,285 Corporacion Venezolana de Cementos II,
S.A.C.A. 559,240 1,010,887 0.2
------------ ------------ ----
866,982 1,473,579 0.3
---------------------------------------------------------------------------------------------------------------------
Food & Household 28,061,157 +Mavesa S.A. 1,748,791 1,865,005 0.3
Products
---------------------------------------------------------------------------------------------------------------------
Metal Processing 46,750 +International Briquettes Holding, Inc. 610,672 286,344 0.1
---------------------------------------------------------------------------------------------------------------------
Telecommunications 437,109 Compania Anonima Nacional Telefonos de
Venezuela (CANTV) (ADR) (1) 19,358,475 13,468,421 2.5
---------------------------------------------------------------------------------------------------------------------
Textiles 757,927 Sudamtex de Venezuela S.A.C.A. (ADR)
(1)(4) 10,150,880 2,392,700 0.4
---------------------------------------------------------------------------------------------------------------------
Utilities 13,725,290 C.A. La Electricidad de Caracas
S.A.I.C.A.--S.A.C.A. 11,999,590 8,828,686 1.6
---------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Venezuela 44,735,390 28,314,735 5.2
==================================================================================================================================
Total Long-Term Investments in Latin
America 583,018,158 533,757,332 98.9
==================================================================================================================================
</TABLE>
8 & 9
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1998
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
Value Percent of
COUNTRY Face Amount Short-Term Investments Cost (Note 1a) Net Assets
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
United Commercial Paper* US $ 623,000 General Motors Acceptance Corp., 5.69%
States due 6/01/1998 $ 622,803 $ 622,803 0.1%
----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments 622,803 622,803 0.1
===================================================================================================================================
Total Investments $583,640,961 534,380,135 99.0
============
Other Assets Less Liabilities 5,319,407 1.0
------------ ------
Net Assets $539,699,542 100.0%
============ ======
===================================================================================================================================
</TABLE>
* 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.
** Received through a bonus issue from Companhia de Vale do Rio Doce
S.A. As of May 31, 1998, the bonds have not commenced trading and
the coupon rate has 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.
(4) The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
+ Non-income producing security.
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of May 31, 1998
==================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$583,640,961) (Note 1a) .................. $ 534,380,135
Cash ............................................................................. 352,793
Foreign cash (Note 1b) ........................................................... 2,631,003
Receivables:
Securities sold ................................................................ $ 6,806,388
Dividends ...................................................................... 2,484,931
Capital shares sold ............................................................ 479,760
Interest ....................................................................... 80,619 9,851,698
---------------
Prepaid registration fees and other assets (Note 1f) ............................. 44,535
---------------
Total assets ..................................................................... 547,260,164
---------------
==================================================================================================================================
Liabilities: Payables:
Capital shares redeemed ........................................................ 5,708,465
Investment adviser (Note 2) .................................................... 490,335
Distributor (Note 2) ........................................................... 377,452 6,576,252
---------------
Accrued expenses and other liabilities ........................................... 984,370
---------------
Total liabilities ................................................................ 7,560,622
---------------
==================================================================================================================================
Net Assets: Net assets ....................................................................... $ 539,699,542
===============
==================================================================================================================================
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares authorized ............. $ 414,711
Consist of: Class B Common Stock, $0.10 par value, 100,000,000 shares authorized ............. 2,755,087
Class C Common Stock, $0.10 par value, 100,000,000 shares authorized ............. 193,535
Class D Common Stock, $0.10 par value, 100,000,000 shares authorized ............. 660,051
Paid-in capital in excess of par ................................................. 655,639,805
Undistributed investment income--net ............................................. 8,426,636
Accumulated realized capital losses on investments and foreign currency
transactions--net (Note 5) ..................................................... (78,666,678)
Unrealized depreciation on investments and foreign currency transactions--net .... (49,723,605)
---------------
Net assets ....................................................................... $ 539,699,542
===============
==================================================================================================================================
Net Asset Class A--Based on net assets of $57,103,076 and 4,147,114 shares outstanding ..... $ 13.77
Value: ===============
Class B--Based on net assets of $366,565,313 and 27,550,868 shares outstanding ... $ 13.31
===============
Class C--Based on net assets of $25,705,832 and 1,935,345 shares outstanding ..... $ 13.28
===============
Class D--Based on net assets of $90,325,321 and 6,600,505 shares outstanding ..... $ 13.68
===============
==================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
10 & 11
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1998
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended May 31, 1998
===================================================================================================================================
<S> <C> <C> <C>
Investment Dividends (net of $964,125 foreign withholding tax) .............................. $ 14,037,568
Income (Notes Interest and discount earned ..................................................... 2,668,671
1d & 1e): ---------------
Total income ..................................................................... 16,706,239
---------------
===================================================================================================================================
Expenses: Investment advisory fees (Note 2) ................................................ $ 3,508,552
Account maintenance and distribution fees--Class B (Note 2) ...................... 2,388,686
Transfer agent fees--Class B (Note 2) ............................................ 651,621
Custodian fees ................................................................... 547,475
Account maintenance and distribution fees--Class C (Note 2) ...................... 168,703
Account maintenance fees--Class D (Note 2) ....................................... 146,710
Transfer agent fees--Class D (Note 2) ............................................ 136,708
Printing and shareholder reports ................................................. 93,636
Transfer agent fees--Class A (Note 2) ............................................ 84,771
Accounting services (Note 2) ..................................................... 82,898
Transfer agent fees--Class C (Note 2) ............................................ 46,940
Professional fees ................................................................ 44,198
Registration fees (Note 1f) ...................................................... 42,605
Directors' fees and expenses ..................................................... 19,881
Pricing fees ..................................................................... 4,978
Other ............................................................................ 73,961
---------------
Total expenses ................................................................... 8,042,323
---------------
Investment income--net ........................................................... 8,663,916
---------------
===================================================================================================================================
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net ............................................................... $ 18,341,084
(Loss) on Foreign currency transactions--net ............................................. (457,826) 17,883,258
Investments & ---------------
Foreign Change in unrealized appreciation/depreciation on:
Currency Investments--net ............................................................... (81,228,291)
Transactions- Foreign currency transactions--net ............................................... (22,800) (81,251,091)
Net (Notes 1b --------------- ---------------
1c, 1e & 3): Net realized and unrealized loss on investments and foreign currency
transactions ................................................................... (63,367,833)
---------------
Net Decrease in Net Assets Resulting from Operations ............................. $ (54,703,917)
===============
===================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
May 31, Nov. 30,
Increase (Decrease) in Net Assets: 1998 1997
===================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ........................................................... $ 8,663,916 $ 1,554,261
Realized gain on investments and foreign currency transactions--net .............. 17,883,258 165,490,154
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net ............................................. (81,251,091) (26,565,240)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations .................. (54,703,917) 140,479,175
--------------- ---------------
===================================================================================================================================
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 ............... (175,662,134) (54,040,066)
Transactions
(Note 4):
===================================================================================================================================
Net Assets: Total increase (decrease) in net assets .......................................... (230,366,051) 68,815,684
Beginning of period .............................................................. 770,065,593 701,249,909
--------------- ---------------
End of period* ................................................................... $ 539,699,542 $ 770,065,593
=============== ===============
===================================================================================================================================
*Undistributed (accumulated) investment income (loss)--net ....................... $ 8,426,636 $ (237,280)
=============== ===============
===================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
12 & 13
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1998
CONSOLIDATED FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A++
-----------------------------------------------------------
For the For the
The following per share data and ratios Six Period
have been derived from information provided Months For the Year Oct. 21,
in the financial statements. Ended Ended November 30, 1994+ to
May 31, -------------------------------- Nov. 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ......... $ 15.10 $ 12.83 $ 10.50 $ 17.37 $ 18.22
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ....................... .25 .17 .46 .16 --
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ............................ (1.58) 2.54 1.87 (6.52) (.85)
-------- -------- -------- -------- --------
Total from investment operations ............. (1.33) 2.71 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 ............... $ 13.77 $ 15.10 $ 12.83 $ 10.50 $ 17.37
======== ======== ======== ======== ========
==============================================================================================================================
Total Investment Based on net asset value per share ........... (8.81%)(a) 21.79% 22.19% (37.66%) (4.67%)(a)
Return:** ======== ======== ======== ======== ========
==============================================================================================================================
Ratios to Average Expenses ..................................... 1.49%* 1.46% 1.48% 1.66% 1.85%*
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net ................ 3.26%* 1.03% 3.74% 1.40% (.20%)*
======== ======== ======== ======== ========
==============================================================================================================================
Supplemental Net assets, end of period (in thousands) ..... $ 57,103 $ 77,086 $ 46,369 $ 26,034 $ 10,350
Data: ======== ======== ======== ======== ========
Portfolio turnover ........................... 17.03% 84.91% 66.14% 54.86% 30.15%
======== ======== ======== ======== ========
Average commission rate paid+++ .............. $ .0008 $ .0007 $ .0001 -- --
======== ======== ======== ======== ========
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B++
-----------------------------------------------------------
For the
The following per share data and ratios Six
have been derived from information provided Months
in the financial statements. Ended For the Year Ended November 30,
May 31, ---------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ......... $ 14.66 $ 12.46 $ 10.31 $ 17.24 $ 14.39
-------- -------- -------- -------- --------
Operating -- -- -- -- --
Performance: Investment income (loss)--net ................ .16 --(b) .32 .05 (.09)
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ............................ (1.51) 2.50 1.83 (6.47) 2.99
-------- -------- -------- -------- --------
Total from investment operations ............. (1.35) 2.50 2.15 (6.42) 2.90
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ..................... -- (.30) -- -- (.05)
Realized gain on investments--net .......... -- -- -- (.50) --
In excess of realized gain on
investments--net ........................... -- -- -- (.01) --
-------- -------- -------- -------- --------
Total dividends and distributions ............ -- (.30) -- (.51) (.05)
Net asset value, end of period ............... $ 13.31 $ 14.66 $ 12.46 $ 10.31 $ 17.24
======== ======== ======== ======== ========
==============================================================================================================================
Total Investment Based on net asset value per share ........... (9.21%)(a) 20.51% 20.85% (38.32%) 20.19%
Return:** ======== ======== ======== ======== ========
==============================================================================================================================
Ratios to Average Expenses ..................................... 2.53%* 2.50% 2.54% 2.71% 2.51%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net 2.23%* (.03%) 2.69% .43% (.54%)
======== ======== ======== ======== ========
==============================================================================================================================
Supplemental Net assets, end of period (in thousands) ..... $366,565 $527,520 $518,865 $505,038 $937,221
Data: ======== ======== ======== ======== ========
Portfolio turnover 17.03% 84.91% 66.14% 54.86% 30.15%
======== ======== ======== ======== ========
Average commission rate paid+++ $ .0008 $ .0007 $ .0001 -- --
======== ======== ======== ======== ========
==============================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ For fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose its average commission rate per share for
purchases and sales of equity securities. The "Average Commission
Rate Paid" includes commissions paid in foreign currencies, which
have been converted into US dollars using the prevailing exchange
rate on the date of the transaction. Such conversions may
significantly affect the rate shown.
(a) Aggregate total investment return.
(b) Amount is less than $.01 per share.
See Notes to Consolidated Financial Statements.
14 & 15
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1998
CONSOLIDATED FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
Class C++
-----------------------------------------------------------
For the For the
The following per share data and ratios Six Period
have been derived from information provided Months For the Year Oct. 21,
in the financial statements. Ended Ended November 30, 1994+ to
May 31, -------------------------------- Nov. 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ......... $ 14.64 $ 12.46 $ 10.31 $ 17.24 $ 18.10
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ....................... .16 (.02) .32 .03 (.02)
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ............................ (1.52) 2.52 1.83 (6.45) (.84)
-------- -------- -------- -------- --------
Total from investment operations ............. (1.36) 2.50 2.15 (6.42) (.86)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ..................... -- (.32) -- -- --
Realized gain on investments--net .......... -- -- -- (.50) --
In excess of realized gain on
investments--net ........................... -- -- -- (.01) --
-------- -------- -------- -------- --------
Total dividends and distributions ............ -- (.32) -- (.51) --
-------- -------- -------- -------- --------
Net asset value, end of period ............... $ 13.28 $ 14.64 $ 12.46 $ 10.31 $ 17.24
======== ======== ======== ======== ========
==============================================================================================================================
Total Investment Based on net asset value per share ........... (9.29%)(a) 20.52% 20.85% (38.32%) (4.75%)(a)
Return:** ======== ======== ======== ======== ========
==============================================================================================================================
Ratios to Average Expenses ..................................... 2.54%* 2.50% 2.54% 2.72% 2.93%*
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net ................ 2.22%* (.11%) 2.68% .30% (1.22%)*
======== ======== ======== ======== ========
==============================================================================================================================
Supplemental Net assets, end of period (in thousands) ..... $ 25,706 $ 37,027 $ 23,183 $ 14,659 $ 5,069
Data: ======== ======== ======== ======== ========
Portfolio turnover ........................... 17.03% 84.91% 66.14% 54.86% 30.15%
======== ======== ======== ======== ========
Average commission rate paid+++ .............. $ .0008 $ .0007 $ .0001 -- --
======== ======== ======== ======== ========
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class D++
-----------------------------------------------------------
For the
The following per share data and ratios Six
have been derived from information provided Months
in the financial statements. Ended For the Year Ended November 30,
May 31, ---------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ......... $ 15.02 $ 12.77 $ 10.47 $ 17.37 $ 14.45
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net ................ .23 .11 .42 .14 .03
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ............................ (1.57) 2.54 1.88 (6.53) 3.00
-------- -------- -------- -------- --------
Total from investment operations ............. (1.34) 2.65 2.30 (6.39) 3.03
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ..................... -- (.40) -- -- (.11)
Realized gain on investments--net .......... -- -- -- (.50) --
In excess of realized gain on
investments--net ........................... -- -- -- (.01) --
-------- -------- -------- -------- --------
Total dividends and distributions ............ -- (.40) -- (.51) (.11)
-------- -------- -------- -------- --------
Net asset value, end of period ............... $ 13.68 $ 15.02 $ 12.77 $ 10.47 $ 17.37
======== ======== ======== ======== ========
==============================================================================================================================
Total Investment Based on net asset value per share ........... (8.92%)(a) 21.40% 21.97% (37.84%) 21.07%
Return:** ======== ======== ======== ======== ========
==============================================================================================================================
Ratios to Average Expenses ..................................... 1.74%* 1.71% 1.74% 1.91% 1.73%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net 3.01%* .72% 3.47% 1.18% .23%
======== ======== ======== ======== ========
==============================================================================================================================
Supplemental Net assets, end of period (in thousands) ..... $ 90,326 $128,433 $112,833 $105,830 $204,907
Data: ======== ======== ======== ======== ========
Portfolio turnover 17.03% 84.91% 66.14% 54.86% 30.15%
======== ======== ======== ======== ========
Average commission rate paid+++ $ .0008 $ .0007 $ .0001 -- --
======== ======== ======== ======== ========
==============================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ For fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose its average commission rate per share for
purchases and sales of equity securities. The "Average Commission
Rate Paid" includes commissions paid in foreign currencies, which
have been converted into US dollars using the prevailing exchange
rate on the date of the transaction. Such conversions may
significantly affect the rate shown.
(a) Aggregate total investment return.
See Notes to Consolidated Financial Statements.
16 & 17
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1998
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 PricingSM 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.
(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.
o 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.
o 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.
o 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.
o Financial futures contracts--The Fund may purchase or sell financial 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 trans actions 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 distribu tions paid by the Fund
are recorded on the ex-dividend dates.
(h) Basis of consolidation--The accompanying consoli dated 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 Distri-bution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned subsidiary of
Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's port folio 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.
18 & 19
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded)
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class B ........................ 0.25% 0.75%
Class C ........................ 0.25% 0.75%
Class D ........................ 0.25% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the six months ended May 31, 1998, 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 ........................ $ 27 $ 326
Class D ........................ $1,235 $18,254
- --------------------------------------------------------------------------------
For the six months ended May 31, 1998, MLPF&S received contingent deferred sales
charges of $638,384 and $18,807 relating to transactions in Class B and Class C
Shares, respectively.
In addition, MLPF&S received $48,167 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended May 31,
1998.
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, 1998 were $114,445,593 and $239,813,061, respectively.
Net realized gains (losses) for the six months ended May 31, 1998 and net
unrealized losses as of May 31, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Losses
- --------------------------------------------------------------------------------
Long-term investments .......... $18,342,914 $(49,260,826)
Short-term investments ......... (1,830) --
Foreign currency transactions .. (457,826) (462,779)
----------- ------------
Total .......................... $17,883,258 $(49,723,605)
=========== ============
- --------------------------------------------------------------------------------
As of May 31, 1998, net unrealized depreciation for Federal income tax purposes
aggregated $49,260,826, of which $43,158,956 related to appreciated securities
and $92,419,782 related to depreciated securities. At May 31, 1998, the
aggregate cost of investments for Federal income tax purposes was $583,640,961.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share trans actions was
$175,662,134 and $54,040,066 for the six months ended May 31, 1998 and for the
year ended November 30, 1997, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended May 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................... 1,160,089 $ 17,478,958
Shares redeemed ................ (2,119,383) (32,218,999)
----------- ------------
Net decrease ................. (959,294) $(14,740,041)
=========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended November 30, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................... 5,567,495 $85,878,766
Shares issued to shareholders
in reinvestment of dividends ... 108,885 1,362,155
----------- ------------
Total issued ................... 5,676,380 87,240,921
Shares redeemed ................ (4,184,228) (65,174,117)
----------- ------------
Net increase ................... 1,492,152 $22,066,804
=========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended May 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................... 898,059 $13,184,201
Automatic conversion of shares . (140,668) (2,035,577)
Shares redeemed ................ (9,183,659) (134,002,413)
----------- ------------
Net decrease ................. (8,426,268) $(122,853,789)
=========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended November 30, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................... 8,877,378 $138,784,719
Shares issued to shareholders
in reinvestment of dividends ... 862,151 10,578,592
----------- ------------
Total issued ................... 9,739,529 149,363,311
Automatic conversion of shares . (199,127) (3,137,064)
Shares redeemed ................ (15,196,792) (231,729,252)
----------- ------------
Net decrease ................... (5,656,390) $(85,503,005)
=========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended May 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................... 757,215 $10,869,529
Shares redeemed ................ (1,351,438) (19,505,839)
----------- ------------
Net decrease ................... (594,223) $(8,636,310)
=========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended November 30, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................... 2,398,269 $38,016,628
Shares issued to shareholders
in reinvestment of dividends ... 41,877 512,997
----------- ------------
Total issued ................... 2,440,146 38,529,625
Shares redeemed ................ (1,771,078) (27,673,620)
----------- ------------
Net increase ................... 669,068 $10,856,005
=========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended May 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................... 4,123,399 $61,367,169
Automatic conversion of shares . 137,085 2,035,577
----------- ------------
Total issued ................... 4,260,484 63,402,746
Shares redeemed ................ (6,209,957) (92,834,740)
----------- ------------
Net decrease ................... (1,949,473) $(29,431,994)
=========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended November 30, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................... 7,096,389 $114,563,804
Automatic conversion of shares . 195,055 3,137,064
Shares issued to shareholders
in reinvestment of dividends ... 224,831 2,803,638
----------- ------------
Total issued ................... 7,516,275 120,504,506
Shares redeemed ................ (7,805,127) (121,964,376)
----------- ------------
Net decrease ................... (288,852) $(1,459,870)
=========== ============
- --------------------------------------------------------------------------------
5. Capital Loss Carryforward:
At November 30, 1997, the Fund had a net capital loss carryforward of
approximately $88,329,000, all of which expires in 2004. This amount will be
available to offset like amounts of any future taxable gains.
20 & 21
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1998
PORTFOLIO INFORMATION
As of May 31, 1998
================================================================================
Percent of
Ten Largest Holdings (Equity Investments) Net Assets
Telecomunicacoes Brasileiras S.A.--Telebras* .................... 10.3%
Telefonos de Mexico, S.A. de C.V. (ADR) ......................... 5.1
Grupo Televisa, S.A. de C.V. (GDR) .............................. 4.3
Yacimientos Petroliferos Fiscales S.A. (YPF)(ADR) ............... 3.9
Companhia Cervejaria Brahma S.A. PN(Preferred)* ................. 3.5
Grupo Carso, S.A. de C.V.* ...................................... 3.4
Cemex, S.A. de C.V. 'B'* ........................................ 3.1
Companhia Energetica de Minas Gerais S.A. (CEMIG)* .............. 2.9
Petroleo Brasileiro S.A. (Preferred) ............................ 2.8
Banco Itau S.A. (Preferred) ..................................... 2.5
* Includes combined holdings.
Percent of
Ten Largest Industries (Equity Investments) Net Assets
Telecommunications .............................................. 27.4%
Banking ......................................................... 10.3
Utilities ....................................................... 9.4
Beverages & Tobacco ............................................. 5.2
Energy Sources .................................................. 4.8
Multi-Industry .................................................. 4.6
Metals & Steel .................................................. 4.4
Oil & Gas Producers ............................................. 3.9
Beverages ....................................................... 3.4
Building Materials .............................................. 3.4
EQUITY PORTFOLIO CHANGES
For the Quarter Ended May 31, 1998
================================================================================
Additions
Hylsamex, S.A. de C.V.
Telemig Celular S.A.
================================================================================
Deletions
Aracruz Celulose S.A. (ADR)
Companhia Paulista de Forca e Luz S.A. (Preferred)
Fomento Economico Mexicano, S.A. de C.V. (Femsa) (Ordinary) 'B'
Light Participacoes S.A.
Lojas Arapua S.A. (Preferred)
Mirgor S.A.C.I.F.I.A. (ADR)
Telecomunicacoes de Sao Paulo S.A.-- TELESP
Telecomunicacoes de Sao Paulo S.A.-- TELESP (Preferred)
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
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
22 & 23
<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--5/98
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