MERRILL LYNCH
LATIN AMERICA
FUND, INC.
[FUND LOGO]
STRATEGIC
Performance
Annual Report
November 30, 1997
Investing in emerging market securities involves a number of risk
factors and special considerations, including restrictions on foreign
investments and on repatriation of capital invested in emerging
markets, currency fluctuations, and potential price volatility and
less liquidity of securities traded in emerging markets. In addition,
there may be less publicly available information about the issuers of
securities, and such issuers may not be subject to accounting,
auditing and financial reporting standards and requirements comparable
to those to which US companies are subject. Therefore, the Fund is
designed as a long-term investment for investors capable of assuming
the risks of investing in emerging markets. The Fund should be
considered as a vehicle for diversification and not as a complete
investment program. Please refer to the prospectus for details.
This report is not authorized for use as an offer of sale or 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 -- 11/97
[RECYCLE LOGO]
Printed on post-consumer recycled paper
MERRILL LYNCH LATIN AMERICA FUND, INC.
Asset Allocation
As a Percentage* of
Net Assets as of
November 30, 1997
[GRAPHIC OMITTED: MAP OF NORTH AND SOUTH AMERICA]
A map illustrating the following percentages:
Mexico 28.7%
Venezuela 7.0%
Colombia 2.0%
Peru 2.1%
Brazil 38.1%
Argentina 11.5%
Chile 4.1%
* Total may not equal 100% and does not include short-term securities.
Merrill Lynch Latin America Fund, Inc., November 30, 1997
DEAR SHAREHOLDER
During the three-month period ended November 30, 1997, total returns
for Merrill Lynch Latin America Fund, Inc.'s Class A, Class B, Class C
and Class D Shares were -10.07%, -10.39%, -10.35% and -10.17%,
respectively. (Investment results shown do not reflect sales charges,
and would be lower if sales charges were included. Complete
performance information, including average annual total returns, can
be found on pages 3 -- 7 of this report to shareholders.) The
unmanaged Morgan Stanley Capital International Latin America Free
Index declined 8.19% and the unmanaged J.P. Morgan Latin Brady Bond
Index declined 2.97% during the November quarter. Detrimental to the
Fund's performance were its overweighted position in Argentina, whose
market dropped 8.76%, and its underweighted position in Mexico, the
only positive performer in the region during the November quarter
(+2.78%).
Investment Overview
The volatility in the US and Asian markets quickly brought an end to
the strong market performance that the Latin American markets had
enjoyed during the earlier part of 1997. Brazil received the main
thrust of Latin American corrections. Investors who for most of the
year had been tolerant of the slow pace of fiscal reform in Brazil and
the growing current account deficit became impatient in late October
when the Hong Kong market took a sudden decline. Rumors of an imminent
devaluation in Brazil prompted panic selling, causing the market to
decline by 13% during the last three months. When the government
defended the currency by sharply raising interest rates, investors
pondered the implications of sustained high interest rates on the
Brazilian economy and began to sell again. Many international
investors chose to sit on the sidelines to see what further
developments would unfold.
During the early part of November, the Brazilian government announced
a detailed fiscal package aimed at increasing the primary surplus for
1998 and 1999 by close to $18 billion, or 2.5% of gross domestic
product (GDP). Nevertheless, we believed that market volatility in
Brazil would continue. In light of this, we took a more defensive
stance. We raised our cash position, while to a small degree taking
advantage of the attractive prices of certain blue chip companies. An
example of this was the purchase of shares in Uniao de Bancos
Brasileiros S.A. (Unibanco), the third-largest private sector bank in
Brazil. We believed that this bank, with the best asset quality of the
system and superior reserve coverage (over 400% of past-due loans),
was well positioned to be a major player in traditional commercial
banking, insurance and asset management.
Concern over the possible devaluation of the Brazilian real weighed
heavily on Argentina since Brazil is one of Argentina's major trading
partners. Argentine authorities were quick to assure the investment
community that its Convertibility Plan would remain intact.
Furthermore, many Argentine economists pointed out that while the
effects on Argentine trade of a Brazilian devaluation would be
negative for the Argentine economy, the impact had been overestimated.
The major impact on Argentina of a devaluation of the real would be
further increases in domestic interest rates and lower economic growth
for Argentina. In contrast to the speculation over this possible
negative impact, the actual data on the underlying Argentine economy
was quite strong, with industrial output reaching all-time highs. Even
though GDP estimates were revised downward, the Argentine economy is
projected to grow by approximately 4.5% -- 5.0% for 1998.
Although the Mexican stock market also suffered because of concerns
over Brazil, the view was that Mexico had already undergone its
"ordeal by fire" during 1994 -- 1995. While all of the other Latin
American markets declined for the November quarter, the Mexican market
actually appreciated by almost 3%. However, the Mexican domestic
economy continued to improve, with industrial production growing by
approximately 8.9% through August 1997. Both the construction and
retail sectors also saw sharp increases. Furthermore, unemployment
rates fell to the lowest level since the peso's collapse in December
1994. While the Mexican economy continued to sustain trade deficits,
these deficits were small and predictable. In Mexico, we participated
in the construction sector by increasing our holdings in Cementos
Mexicanos, S.A. de C.V. (Cemex), a major cement company. We also
established a position in Mexican fixed-income instruments.
The smaller markets were not spared the general decline. Despite
strong economic growth and subdued inflation, Chile's stock market
also declined sharply during the November quarter (-15.48%). To a
certain extent, the negative developments in Asia will have more of an
adverse impact on Chilean exports than on those of other countries,
but once again the market over- estimated this impact since the total
of Chilean exports sent to the four troubled "tiger" countries in Asia
(Thailand, Malaysia, Indonesia and the Philippines) amounted to only
2.8% of total shipments. Our largest holding in Chile remains Compania
de Telecomunicaciones de Chile S.A. (ADR), the bellwether
telecommunications stock. The Peruvian market had already declined
chiefly in response to concerns about El Nino and political tensions.
During the November quarter, the Peruvian market continued this
downward trend. Venezuela, which over the last 12 months had been the
second-strongest performer, also corrected sharply (-9.34%). Although
growth in the non-oil economy has been strong in Venezuela, the
country has not been able to meet its inflation targets. With
elections coming up in 1998, there is concern that economic reforms
will slow down.
Fiscal Year in Review
During the 12-month period ended November 30, 1997, total returns for
Merrill Lynch Latin America Fund, Inc.'s Class A, Class B, Class C and
Class D Shares were +21.79%, +20.51%, +20.52% and +21.40%,
respectively. The unmanaged Morgan Stanley Capital International Latin
America Free Index rose 27.08% during the year, and the unmanaged J.P.
Morgan Latin Brady Bond Index rose 13.25% during the same period.
Beneficial to the Fund's performance were its overweighted positions
in both Argentina and Brazil, whose markets rose 25.95% and 22.26%,
respectively. Detrimental to the Fund's performance was its
underweighted position in Mexico throughout most of the year. The
Mexican market climbed 46.0%.
In Conclusion
As demonstrated once again during the November quarter, in the case of
Latin America, fundamentals and market sentiment can diverge widely.
Argentina, despite showing strong economic growth, saw its stock
market decline by close to 9% during the quarter. Mexico fared better
with a 3% gain, but certainly did not reflect the good economic news
characterizing Mexico over the past few quarters.
We would once again remind shareholders of the volatility of these
markets and emphasize that investors in these markets should take a
long-term view. We appreciate your ongoing interest in Merrill Lynch
Latin America Fund, Inc., and we look forward to reviewing our outlook
and strategy with you in our next report to shareholders.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/GRACE PINEDA
Grace Pineda
Senior Vice President and
Portfolio Manager
January 6, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
[bullet] 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, which, in the case
of certain eligible investors, the shares were simultaneously
exchanged for Class A Shares.
[bullet] 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.)
[bullet] 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.
[bullet] Class D Shares incur a maximum initial sales charge of 5.25%
and an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of all
dividends and capital gains distributions at net asset value on the
ex-dividend date. Investment return and principal value of shares will
fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. Dividends paid to each class of shares will
vary because of the different levels of account maintenance,
distribution and transfer agency fees applicable to each class, which
are deducted from the income available to be paid to shareholders.
[GRAPHIC OMITTED: LINE CHART TOTAL RETURN BASED ON A $10,000
INVESTMENT]
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class
A and Class C Shares compared to growth of an investment in the
Emerging Markets Free Latin America Index. Beginning and ending values
are:
10/21/94** 11/97
ML Latin America Fund, Inc.+--
Class A Shares*+++ $9,475 $8,380
ML Latin America Fund, Inc.+--
Class C Shares* $10,000 $8,558
Emerging Markets Free Latin
America Index++ $10,000 $10,866
A line graph depicting the growth of an investment in the Fund's Class
B and Class D Shares compared to growth of an investment in the
Emerging Markets Free Latin America Index. Beginning and ending values
are:
9/27/91** 11/97
ML Latin America Fund, Inc.+--
Class B Shares* $10,000 $16,057
ML Latin America Fund, Inc.+--
Class D Shares*+++ $9,475 $15,968
Emerging Markets Free Latin
America Index++ $10,000 $26,692
* Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
** Commencement of operations.
+ ML Latin America Fund, Inc. invests primarily in Latin American
equity and debt securities.
++ This unmanaged market capitalization-weighted Index by Morgan
Stanley Capital International is comprised of a representative
sampling of stocks of large-, medium-, and small-capitalization
companies in Argentina, Brazil, Chile and Mexico which are freely
purchasable by foreign investors.
+++ As a result of the implementation of the Merrill Lynch
Select PricingSM System, Class A Shares of the Fund
outstanding prior to October 21, 1994 were redesignated
to Class D Shares.
Past performance is not predictive of future performance.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/97 +48.23% +40.45%
Inception (10/21/94) through
9/30/97 +2.67 + 0.80
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/97 +46.61% +42.61%
Five Years Ended 9/30/97 +15.38 +15.38
Inception (9/27/91) through
9/30/97 +11.91 +11.91
* 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 9/30/97 +46.59% +45.59%
Inception (10/21/94) through
9/30/97 + 1.59 + 1.59
* 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 9/30/97 +47.71% +39.95%
Five Years Ended 9/30/97 +16.28 +15.03
Inception (9/27/91) through
9/30/97 +12.78 +11.77
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Performance
Summary --
Class A Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $18.22 $13.67 $0.396 $0.118 -22.63%
1995 13.67 10.41 -- -- -23.85
1996 10.41 12.64 -- 0.435 +25.65
1/1/97 -- 11/30/97 12.64 15.10 -- -- +19.46
Total $0.396 Total $0.553
Cumulative total return as of 11/30/97: -11.56%**
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales charge was included.
</TABLE>
<TABLE>
<CAPTION>
Performance
Summary --
Class B Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
9/27/91 -- 12/31/91 $10.00 $10.32 -- $0.098 + 4.22%
1992 10.32 10.22 -- 0.227 + 1.34
1993 10.22 16.61 -- 0.048 +63.05
1994 16.61 13.55 $0.396 0.118 -15.86
1995 13.55 10.21 -- -- -24.65
1996 10.21 12.39 -- 0.297 +24.29
1/1/97 -- 11/30/97 12.39 14.66 -- -- +18.32
Total $0.396 Total $0.788
Cumulative total return as of 11/30/97: +60.57%**
* Figures may include short-term capital gains distributions.
** Figures do not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
<CAPTION>
Performance
Summary --
Class C Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $18.10 $13.55 $0.396 $0.118 -22.78%
1995 13.55 10.21 -- -- -24.65
1996 10.21 12.37 -- 0.316 +24.28
1/1/97 -- 11/30/97 12.37 14.64 -- -- +18.35
Total $0.396 Total $0.434
Cumulative total return as of 11/30/97: -14.42%**
* Figures may include short-term capital gains distributions.
** Figures do not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
<CAPTION>
Performance
Summary --
Class D
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
9/27/91 -- 12/31/91 $10.00 $10.31 -- $0.125 + 4.40%
1992 10.31 10.19 -- 0.326 + 2.15
1993 10.19 16.62 -- 0.108 +64.27
1994 16.62 13.66 $0.396 0.118 -15.24
1995 13.66 10.38 -- -- -24.01
1996 10.38 12.61 -- 0.401 +25.39
1/1/97 -- 11/30/97 12.61 15.02 -- -- +19.11
Total $0.396 Total $1.078
Cumulative total return as of 11/30/97: +68.52%**
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales charge was included.
</TABLE>
<TABLE>
<CAPTION>
Recent
Performance
Results*
12 Month 3 Month
11/30/97 8/31/97 11/30/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $15.10 $16.79 $12.83 +17.69% -10.07%
Class B Shares 14.66 16.36 12.46 +17.66 -10.39
Class C Shares 14.64 16.33 12.46 +17.50 -10.35
Class D Shares 15.02 16.72 12.77 +17.62 -10.17
Class A Shares -- Total Return +21.79(1) -10.07
Class B Shares -- Total Return +20.51(2) -10.39
Class C Shares -- Total Return +20.52(3) -10.35
Class D Shares -- Total Return +21.40(4) -10.17
* Investment results shown do not reflect sales charges; results shown would be lower if a sales charge was included.
(1) Percent change includes reinvestment of $0.435 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.297 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.316 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.401 per share ordinary income dividends.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED SCHEDULE OF INVESTMENTS (in US dollars)
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 203,484 Banco de Galicia y Buenos Aires
S.A. (ADR)(1) $5,100,718 $4,718,285 0.6%
Beverages 120,800 Quilmes Industrial S.A. (ADR)(1) 1,648,400 1,570,400 0.2
Foreign US$ 16,850,000 Republic of Argentina, 9.75% due
Government 9/19/2027 15,232,132 15,518,850 2.0
Obligations
Merchandising 547,144 +Grimoldi S.A. (Class B) 3,174,556 1,423,144 0.2
Multi-Industry 1,766,755 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A. 8,928,824 12,584,329 1.7
Oil & Gas
Producers 948,054 Yacimientos Petroliferos Fiscales
S.A. (YPF)(ADR)(1) 26,194,297 31,819,062 4.1
Real Estate 1,166,915 Inversiones y Representaciones S.A.
(IRSA) 3,126,377 3,793,991 0.5
126,741 Inversiones y Representaciones S.A.
(IRSA)(GDR)(2) 3,522,249 3,873,522 0.5
------------- ------------- ------
6,648,626 7,667,513 1.0
Telecommunications 149,632 Telecom Argentina Stet -- France
Telecom S.A. (GDR)(2) 3,179,182 4,591,832 0.6
201,994 Telefonica de Argentina S.A.
(ADR)(1) 6,083,565 6,678,427 0.9
525,000 Telefonica de Argentina S.A.
(Class B) 1,497,352 1,738,445 0.2
------------- ------------- ------
10,760,099 13,008,704 1.7
------------- ------------- ------
Total Long-Term Investments in
Argentina 77,687,652 88,310,287 11.5
============= ============= ======
Brazil Banking 1,048,190,217 Banco Bradesco S.A. (Preferred) 6,517,353 7,739,522 1.0
26,158,357 Banco Itau S.A. (Preferred) 12,586,040 11,697,210 1.5
712,900 +Uniao de Bancos Brasileiros S.A.
(Unibanco) (GDR)(2) 20,708,075 20,495,875 2.7
15,000,000 +Uniao de Bancos Brasileiros S.A.
(Unibanco) (Units)(5) 1,113,955 930,400 0.1
------------- ------------- ------
40,925,423 40,863,007 5.3
Beverages & 33,493,982 Companhia Cervejaria Brahma S.A.
Tobacco PN (Preferred) 16,463,232 22,194,444 2.9
27,200 Companhia Cervejaria Brahma S.A.
PN (Preferred) (ADR)(1) 397,933 362,100 0.0
------------- ------------- ------
16,861,165 22,556,544 2.9
Diversified 969,200 Souza Cruz S.A. 7,243,874 7,470,844 1.0
Energy Sources 1,324,711 Companhia Paranaense de Energia
S.A. (Copel) (ADR)(1) 23,773,045 19,953,459 2.6
91,476,398 Petroleo Brasileiro S.A. (Preferred) 22,242,901 20,040,358 2.6
------------- ------------- ------
46,015,946 39,993,817 5.2
Food & 332,100 +Latas de Aluminio S.A. (GDR)(2) 5,325,182 1,785,038 0.2
Household
Products
Foreign US$ 26,620,000 Republic of Brazil, Global Bonds,
Government 10.125% due 5/15/2027 23,016,000 23,691,800 3.1
Obligations
Forest Products 186,500 Aracruz Celulose S.A. (ADR)(1) 3,082,364 2,680,938 0.4
288,086,000 Votorantim Celulose e Papel S.A.
(Preferred) 7,636,997 6,493,103 0.8
------------- ------------- ------
10,719,361 9,174,041 1.2
Machinery & 8,848,000 Weg Exportadora S.A. (Preferred) 5,385,285 5,424,306 0.7
Engineering
Metals & US$ 1,099,391 Companhia de Vale do Rio Doce S.A.,
Steel 0.0% due 12/31/2049** 0 0 0.0
493,295 Companhia de Vale do Rio Doce S.A.
(Preferred) 10,077,342 8,716,717 1.1
655,475,000 Companhia Siderurgica de Tubarao
S.A. 'B' (Preferred) 10,356,489 9,632,386 1.3
107,914,949 Companhia Siderurgica Nacional S.A.
-- CSN 2,764,579 2,918,724 0.4
1,022,339 Usinas Siderurgicas de Minas Gerais
S.A. -- Usiminas (Preferred) 11,857,391 6,507,134 0.8
------------- ------------- ------
35,055,801 27,774,961 3.6
Retail 125,100 Companhia Brasileira de
Distribuicao Grupo Pao de Acucar
S.A. (ADR)(1) 2,571,085 1,860,863 0.2
81,640,000 Lojas Arapua S.A. (Preferred) 1,482,172 327,532 0.0
------------- ------------- ------
4,053,257 2,188,395 0.2
Telecommunications 192,973 Telecomunicacoes Brasileiras S.A.
-- Telebras (ADR)(1) 23,478,135 20,141,557 2.6
149,205,637 Telecomunicacoes Brasileiras S.A.
-- Telebras (Ordinary) 9,932,085 13,989,710 1.8
3,265,379 Telecomunicacoes de Sao Paulo S.A.
-- TELESP 524,948 715,369 0.1
109,086 Telecomunicacoes de Sao Paulo S.A.
-- TELESP (Rights)(3) 0 2,065 0.0
------------- ------------- ------
33,935,168 34,848,701 4.5
Textiles & 19,091,093 Companhia de Tecidos Norte de Minas
Apparel S.A. -- Coteminas (Preferred) 8,349,721 6,884,635 0.9
19,351,093 Empresa Nasional de Comercio S.A. 0 15,004 0.0
------------- ------------- ------
8,349,721 6,899,639 0.9
Utilities 22,198,735 Centrais Eletricas Brasileiras S.A.
(Eletrobras) 11,591,204 10,366,881 1.3
74,917 Centrais Eletricas de Santa Catarina
S.A. (CELESC) (ADR)(1)(4) 6,026,323 7,833,891 1.0
1,122,012 Centrais Eletricas de Santa Catarina
S.A. (CELESC) 'B' (Preferred) 591,246 1,183,514 0.2
28,470 Companhia Energetica de Minas Gerais
S.A. (CEMIG) (ADR)(1) 638,750 1,405,706 0.2
50,573 Companhia Energetica de Minas Gerais
S.A. (CEMIG) (ADR)(1)(4) 1,086,614 2,461,792 0.3
390,409,000 Companhia Energetica de Minas Gerais
S.A. (CEMIG) (Preferred) 13,759,899 19,006,569 2.5
60,873,712 Companhia Paulista de Forca e Luz S.A. 3,586,717 7,463,780 1.0
39 Companhia Paulista de Forca e Luz S.A.
(Preferred) 3 4 0.0
288,000 Globex Utilidades S.A. (Preferred) 5,061,120 1,947,349 0.3
28,201,766 Light Participacoes S.A. 3,670,043 7,754,977 1.0
------------- ------------- ------
46,011,919 59,424,463 7.8
Utilities 1,143,900,000 Companhia Energetica do Ceara S.A.
-- Electric (Preferred) 4,912,770 3,908,566 0.5
55,000 Espirito Santo Centrais Eletricas
S.A. (Escelsa) 9,896,967 7,438,289 1.0
------------- ------------- ------
14,809,737 11,346,855 1.5
------------- ------------- ------
Total Long-Term Investments in
Brazil 297,707,839 293,442,411 38.1
============= ============= ======
Chile Telecommunications 611,551 Compania de Telecomunicaciones de
Chile S.A. (ADR)(1) 14,619,714 16,550,099 2.1
436,373 +Quinenco S.A. (ADR)(1) 7,825,408 5,181,929 0.7
------------- ------------- ------
22,445,122 21,732,028 2.8
Utilities 75,000 Distribuidora Chilectra
Metropolitana S.A. (ADR)(1)(4) 1,263,750 1,872,000 0.2
3,724,465 Empresa Nacional de Electricidad
S.A. (ENDESA) 2,032,168 2,227,000 0.3
2,057,425 Enersis S.A. 930,264 1,225,499 0.2
152,900 Enersis S.A. (ADR)(1) 3,878,773 4,567,887 0.6
------------- ------------- ------
8,104,955 9,892,386 1.3
------------- ------------- ------
Total Long-Term Investments in Chile 30,550,077 31,624,414 4.1
============= ============= ======
Colombia Banking 1,440,336 Banco de Bogota S.A. 7,126,517 7,158,728 0.9
83,600 Banco Ganadero S.A. (Preferred)
(ADR)(1) 2,026,555 1,682,450 0.2
------------- ------------- ------
9,153,072 8,841,178 1.1
Beverages & 488,354 La Compania Cervecera Bavaria S.A. 2,831,026 4,914,160 0.7
Tobacco
Merchandising 1,485,966 Gran Cadena de Almacenes Colombianos
S.A. (CADENALCO) 4,043,019 1,568,002 0.2
36,400 Gran Cadena de Almacenes Colombianos
S.A. (CADENALCO) (ADR)(1)(4) 611,250 296,318 0.0
------------- ------------- ------
4,654,269 1,864,320 0.2
------------- ------------- ------
Total Long-Term Investments in
Colombia 16,638,367 15,619,658 2.0
============= ============= ======
Mexico Banking 3,826,557 +Grupo Financiero Banamex -- Accival,
S.A. de C.V. 'B' (Banacci) 9,171,986 8,441,277 1.1
63,000 +Grupo Financiero Banamex -- Accival,
S.A. de C.V. 'L' (Banacci) 140,485 124,695 0.0
7,263,204 +Grupo Financiero Bancomer, S.A. de
C.V. 'B' (Ordinary) 1,987,808 4,133,963 0.5
------------- ------------- ------
11,300,279 12,699,935 1.6
Beverages 64,600 Coca-Cola Femsa S.A. de C.V.
(Series L) 3,071,254 3,322,862 0.4
237,487 Panamerican Beverages Inc. (Class A) 4,471,322 8,133,930 1.1
------------- ------------- ------
7,542,576 11,456,792 1.5
Beverages 345,960 Fomento Economico Mexicano, S.A. de
& Tobacco C.V. (Femsa) (ADR)(1)++ 1,060,276 2,865,241 0.4
649,625 Fomento Economico Mexicano, S.A. de
C.V. (Femsa) (Ordinary) 'B' 1,449,545 5,383,851 0.7
------------- ------------- ------
2,509,821 8,249,092 1.1
Broadcast 2,870,000 Grupo Radio Centro, S.A. de C.V. 4,647,848 4,617,185 0.6
-- Media 64,400 Grupo Radio Centro, S.A. de C.V.
(ADR)(1) 905,464 957,950 0.1
------------- ------------- ------
5,553,312 5,575,135 0.7
Building 769,700 Cementos Mexicanos, S.A. de C.V.
Materials 'B' (Cemex) 3,739,531 3,799,250 0.5
1,175,782 Cementos Mexicanos, S.A. de C.V.
'B' (Cemex) (ADR)(1) 10,624,404 10,875,983 1.4
------------- ------------- ------
14,363,935 14,675,233 1.9
Chemicals 190,737 Desc, S.A. de C.V. (ADR)(1) 4,023,170 7,164,559 0.9
Construction 769,200 +Grupo Tribasa, S.A. de C.V. 'A1'
(ADR)(1) 4,828,690 4,759,425 0.6
Construction/ 307,830 +Bufete Industrial, S.A. de C.V.
Housing (ADR)(1) 5,788,091 2,924,385 0.4
Diversified 766,268 Alfa, S.A. de C.V. (Class A) 6,379,316 5,771,525 0.8
Financial Services 63,052 +Grupo Financiero Bancomer, S.A.
de C.V. (Series L) 22,760 24,591 0.0
Foreign US$ 33,440,000 United Mexican States, 11.50% due
Government 5/15/2026 38,135,123 38,706,800 5.0
Obligations
Health & 1,515,980 Kimberly-Clark de Mexico, S.A. de
Personal Care C.V. 'A' 3,994,088 6,780,800 0.9
Merchandising 7,668,387 Cifra, S.A. de C.V. 'C' 9,058,845 14,804,052 1.9
Multi-Industry 3,645,179 Grupo Carso, S.A. de C.V. 'A1' 22,183,832 23,768,078 3.1
31,179 Grupo Carso, S.A. de C.V. (ADR)(1) 347,491 385,840 0.1
------------- ------------- ------
22,531,323 24,153,918 3.2
Telecommunications 772,171 +Grupo Televisa, S.A. de C.V. (GDR)
(2) 21,731,549 28,570,327 3.7
691,375 Telefonos de Mexico, S.A. de C.V.
(ADR)(1) 35,579,610 34,223,062 4.5
------------- ------------- ------
57,311,159 62,793,389 8.2
------------- ------------- ------
Total Long-Term Investments in
Mexico 193,342,488 220,539,631 28.7
============= ============= ======
Peru Financial Services 293,920 Credicorp Ltd. S.A. 4,748,674 5,364,040 0.7
Food & Household 2,885,636 Consorcio Alimentos Fabril Pacifico
Products S.A. 5,303,100 2,206,663 0.3
Metals -- 408,900 Compania de Minas Buenaventura S.A.
Non-Ferrous (ADR)(1) 7,052,139 6,593,512 0.8
910,102 Minsur S.A. (T Shares) 2,575,220 2,271,909 0.3
------------- ------------- ------
9,627,359 8,865,421 1.1
------------- ------------- ------
Total Long-Term Investments in Peru 19,679,133 16,436,124 2.1
============= ============= ======
Venezuela Building Materials 359,137 Corporacion Venezolana de Cementos
I, S.A.C.A. 307,742 631,324 0.1
771,285 Corporacion Venezolana de Cementos
II, S.A.C.A. 559,240 1,388,190 0.2
------------- ------------- ------
866,982 2,019,514 0.3
Food & 22,907,438 Mavesa S.A. 2,037,878 3,784,349 0.4
Household
Products
Telecommunications 713,227 Compania Anonima Nacional Telefonos
de Venezuela (CANTV) (ADR)(1) 27,488,320 28,172,466 3.7
Textiles 634,430 Sudamtex de Venezuela S.A.C.A.
(ADR)(1)(4) 10,150,880 6,264,996 0.8
Utilities 11,602,535 C.A. La Electricidad de Caracas
S.A.I.C.A. -- S.A.C.A. 11,864,060 13,767,291 1.8
------------- ------------- ------
Total Long-Term Investments in
Venezuela 52,408,120 54,008,616 7.0
============= ============= ======
Total Long-Term Investments in
Latin America 688,013,676 719,981,141 93.5
============= ============= ======
<CAPTION>
Face
Amount Short-Term Investments
<S> <C> <C> <C> <C> <C> <C>
United States Commercial US$ 10,000,000 AIG Funding Inc., 5.54% due
Paper* 12/02/1997 9,995,383 9,995,383 1.3
9,243,000 Allomon Funding Corp., 5.62% due
12/10/1997 9,227,128 9,227,128 1.2
20,000,000 Associates Corp. of North America,
5.54% due 12/04/1997 19,984,611 19,984,611 2.6
32,019,000 General Motors Acceptance Corp.,
5.75% due 12/01/1997 32,008,772 32,008,772 4.2
6,000,000 International Securitization
Corporation, 5.60% due 12/01/1997 5,998,133 5,998,133 0.8
11,575,000 Lexington Parker Capital Company LLC,
5.59% due 12/08/1997 11,558,824 11,558,824 1.5
------------- ------------- ------
88,772,851 88,772,851 11.6
US Government 15,000,000 Federal Home Loan Mortgage Corp.,
Agency 5.47% due 12/01/1997 14,995,442 14,995,442 1.9
Obligations* ------------- ------------- ------
Total Short-Term Investments 103,768,293 103,768,293 13.5
============= ============= ======
Total Investments $791,781,969 823,749,434 107.0
=============
Liabilities in Excess of Other Assets (53,683,841) (7.0)
------------- ------
Net Assets $770,065,593 100.0%
============= ======
* Commercial Paper and certain US Government Agency Obligations
are traded on a discount basis; the interest rates shown are the discount
rates 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 November 30, 1997, 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) The rights may be exercised until 12/19/1997.
(4) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(5) Each unit represents one preferred share of Uniao de Bancos Brasileiros
S.A. (Unibanco) and one preferred "B" share of Unibanco Holdings S.A.
+ Non-income producing security.
++ Restricted security as to resale. The value of the Fund's investment in
restricted securities was approximately $2,865,000, representing 0.4% of
net assets.
Acquisition Value
Issue Dates Cost (Note 1a)
Fomento Economico Mexicano, 8/22/1996 -
S.A. de C.V. (Femsa)(ADR) 9/04/1996 $1,060,276 $2,865,241
---------- ----------
Total $1,060,276 $2,865,241
========== ==========
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
As of November 30, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $791,781,969) (Note 1a) $823,749,434
Foreign cash (Note 1b) 30,803,704
Receivables:
Dividends $987,975
Securities sold 727,143
Interest 585,555
Capital shares sold 445,224 2,745,897
------------
Prepaid registration fees and other assets (Note 1f) 44,535
------------
Total assets 857,343,570
------------
Liabilities: Payables:
Securities purchased 81,539,797
Capital shares redeemed 3,500,534
Investment adviser (Note 2) 581,697
Distributor (Note 2) 451,968 86,073,996
------------
Accrued expenses and other liabilities 1,203,981
------------
Total liabilities 87,277,977
------------
Net Assets: Net assets $770,065,593
============
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares authorized $510,641
Consist of: Class B Common Stock, $0.10 par value, 100,000,000 shares authorized 3,597,714
Class C Common Stock, $0.10 par value, 100,000,000 shares authorized 252,957
Class D Common Stock, $0.10 par value, 100,000,000 shares authorized 854,998
Paid-in capital in excess of par 830,109,013
Accumulated investment loss -- net (237,280)
Accumulated realized capital losses on investments and foreign
currency transactions -- net (Note 6) (96,549,936)
Unrealized appreciation on investments and foreign currency
transactions -- net 31,527,486
------------
Net assets $770,065,593
============
Net Asset Class A -- Based on net assets of $77,085,775 and 5,106,408 shares
Value: outstanding $15.10
============
Class B -- Based on net assets of $527,520,345 and 35,977,136 shares
outstanding $14.66
============
Class C -- Based on net assets of $37,026,502 and 2,529,568 shares
outstanding $14.64
============
Class D -- Based on net assets of $128,432,971 and 8,549,978 shares
outstanding $15.02
============
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended November 30, 1997
<S> <C> <C> <C>
Investment Income Dividends (net of $794,133 foreign withholding tax) $19,610,476
(Notes 1d & 1e): Interest and discount earned 1,503,658
------------
Total income 21,114,134
------------
Expenses: Investment advisory fees (Note 2) 8,578,935
Account maintenance and distribution fees -- Class B (Note 2) 6,085,100
Custodian fees 1,744,824
Transfer agent fees -- Class B (Note 2) 1,326,810
Account maintenance and distribution fees -- Class C (Note 2) 358,455
Account maintenance fees -- Class D (Note 2) 341,038
Transfer agent fees -- Class D (Note 2) 246,372
Printing and shareholder reports 188,147
Accounting services (Note 2) 174,010
Transfer agent fees -- Class A (Note 2) 138,826
Registration fees (Note 1f) 103,287
Professional fees 82,152
Transfer agent fees -- Class C (Note 2) 79,515
Directors' fees and expenses 37,437
Pricing fees 9,037
Other 65,928
------------
Total expenses 19,559,873
------------
Investment income -- net 1,554,261
------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments -- net $167,921,307
(Loss) on Foreign currency transactions -- net (2,431,153) 165,490,154
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions -- Net Investments -- net (26,246,803)
(Notes 1b, 1c, Foreign currency transactions -- net (318,437) (26,565,240)
1e & 3): ------------ ------------
Net realized and unrealized gain on investments and foreign currency
transactions 138,924,914
------------
Net Increase in Net Assets Resulting from Operations $140,479,175
============
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended November 30,
Increase (Decrease) in Net Assets: 1997 1996
<S> <C> <C> <C>
Operations: Investment income -- net $1,554,261 $20,415,852
Realized gain (loss) on investments and foreign currency
transactions -- net 165,490,154 (77,935,512)
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions -- net (26,565,240) 189,511,752
------------ ------------
Net increase in net assets resulting from operations 140,479,175 131,992,092
------------ ------------
Dividends to Investment income -- net:
Shareholders Class A (1,603,289) --
(Note 1g): Class B (12,117,748) --
Class C (579,869) --
Class D (3,322,519) --
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (17,623,425) --
------------ ------------
Capital Share Net decrease in net assets derived from capital share transactions (54,040,066) (82,303,224)
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase in net assets 68,815,684 49,688,868
Beginning of year 701,249,909 651,561,041
------------ ------------
End of year* $770,065,593 $701,249,909
============ ============
* Undistributed (accumulated) investment income (loss) -- net (Note 1i) $(237,280) $17,612,088
============ ============
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL HIGHLIGHTS
Class A++
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year 1994+ to
Ended November 30, Nov. 30,
1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $12.83 $10.50 $17.37 $18.22
Operating ---------- ---------- ---------- ----------
Performance: Investment income -- net .17 .46 .16 --
Realized and unrealized gain (loss) on
investments and foreign currency transactions
-- net 2.54 1.87 (6.52) (.85)
---------- ---------- ---------- ----------
Total from investment operations 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 $15.10 $12.83 $10.50 $17.37
========== ========== ========== ==========
Total Investment Based on net asset value per share 21.79% 22.19% (37.66%) (4.67%)++++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses 1.46% 1.48% 1.66% 1.85%*
Net Assets: ========== ========== ========== ==========
Investment income (loss) -- net 1.03% 3.74% 1.40% (.20%)*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $77,086 $46,369 $26,034 $10,350
Data: ========== ========== ========== ==========
Portfolio turnover 84.91% 66.14% 54.86% 30.15%
========== ========== ========== ==========
Average commission rate paid+++ $.0007 $.0001 -- --
========== ========== ========== ==========
* 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.
++++ Aggregate total investment return.
See Notes to Consolidated Financial Statements
<CAPTION>
Class B
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended November 30,
1997++ 1996++ 1995++ 1994++ 1993
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $12.46 $10.31 $17.24 $14.39 $9.83
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income (loss) -- net --++++ .32 .05 (.09) .10
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net 2.50 1.83 (6.47) 2.99 4.68
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.50 2.15 (6.42) 2.90 4.78
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income -- net (.30) -- -- (.05) (.13)
Realized gain on investments -- net -- -- (.50) -- (.09)
In excess of realized gain on investments --
net -- -- (.01) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.30) -- (.51) (.05) (.22)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $14.66 $12.46 $10.31 $17.24 $14.39
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 20.51% 20.85% (38.32%) 20.19% 49.80%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 2.50% 2.54% 2.71% 2.51% 2.59%
Net Assets: ========== ========== ========== ========== ==========
Investment income (loss) -- net (.03%) 2.69% .43% (.54%) 1.09%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in thousands) $527,520 $518,865 $505,038 $937,221 $305,301
Data: ========== ========== ========== ========== ==========
Portfolio turnover 84.91% 66.14% 54.86% 30.15% 24.74%
========== ========== ========== ========== ==========
Average commission rate paid+++ $.0007 $.0001 -- -- --
========== ========== ========== ========== ==========
<CAPTION>
Class C++
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year 1994+ to
Ended November 30, Nov. 30,
1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $12.46 $10.31 $17.24 $18.10
Operating ---------- ---------- ---------- ----------
Performance: Investment income (loss) -- net (.02) .32 .03 (.02)
Realized and unrealized gain (loss) on
investments and foreign currency transactions
-- net 2.52 1.83 (6.45) (.84)
---------- ---------- ---------- ----------
Total from investment operations 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 $14.64 $12.46 $10.31 $17.24
========== ========== ========== ==========
Total Investment Based on net asset value per share 20.52% 20.85% (38.32%) (4.75%)++++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses 2.50% 2.54% 2.72% 2.93%*
Net Assets: ========== ========== ========== ==========
Investment income (loss) -- net (.11%) 2.68% .30% (1.22%)*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $37,027 $23,183 $14,659 $5,069
Data: ========== ========== ========== ==========
Portfolio turnover 84.91% 66.14% 54.86% 30.15%
========== ========== ========== ==========
Average commission rate paid+++ $.0007 $.0001 -- --
========== ========== ========== ==========
<CAPTION>
Class D
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended November 30,
1997++ 1996++ 1995++ 1994++ 1993
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $12.77 $10.47 $17.37 $14.45 $9.90
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income -- net .11 .42 .14 .03 .18
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net 2.54 1.88 (6.53) 3.00 4.69
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.65 2.30 (6.39) 3.03 4.87
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income -- net (.40) -- -- (.11) (.23)
Realized gain on investments -- net -- -- (.50) -- (.09)
In excess of realized gain on investments --
net -- -- (.01) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.40) -- (.51) (.11) (.32)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $15.02 $12.77 $10.47 $17.37 $14.45
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 21.40% 21.97% (37.84%) 21.07% 50.86%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.71% 1.74% 1.91% 1.73% 1.83%
Net Assets: ========== ========== ========== ========== ==========
Investment income -- net .72% 3.47% 1.18% .23% 1.83%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in thousands) $128,433 $112,833 $105,830 $204,907 $75,085
Data: ========== ========== ========== ========== ==========
Portfolio turnover 84.91% 66.14% 54.86% 30.15% 24.74%
========== ========== ========== ========== ==========
Average commission rate paid+++ $.0007 $.0001 -- -- --
========== ========== ========== ========== ==========
* 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.
++++ Amount is less than $.01 per share.
+++++ Aggregate total investment return.
See Notes to Consolidated Financial Statements.
</TABLE>
Merrill Lynch Latin America Fund, Inc., November 30, 1997
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. 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.
[bullet] 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.
[bullet] 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.
[bullet] 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.
[bullet] Financial futures contracts -- The Fund may purchase or sell
interest rate futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin and
are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was
opened and the value at the time it was closed.
(d) Income taxes -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends, and capital
gains at various rates.
(e) Security transactions and investment income -- Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-dividend
dates. Dividends from foreign securities where the ex-dividend date
may have passed are subsequently recorded when the Fund has determined
the ex-dividend date. Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified cost
basis.
(f) Prepaid registration fees -- Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions -- Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates. Distributions in
excess of realized capital gains are due primarily to differing tax
treatments for post-October losses.
(h) Basis of consolidation -- The accompanying consolidated financial
statements include the accounts of Merrill Lynch Latin America Fund
Chile Ltd., a wholly-owned subsidiary, which primarily invests in
Chilean securities. Intercompany accounts and transactions have been
eliminated.
(i) Reclassification -- Generally accepted accounting principles
require that certain components of net assets be adjusted to
reflect permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$2,266,679 have been reclassified between accumulated net realized
capital losses and accumulated net investment loss and differences of
$486,475 have been reclassified between paid-in capital in excess of
par and accumulated net investment loss. These reclassifications have
no effect on net assets or net asset values per share.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner of
MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which
is the limited partner. The Fund has entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds Distributor,
Inc. ("MLFD" or "Distributor"), a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee of 1.0%, on an annual basis, of
the average daily value of the Fund's net assets.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
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 year ended November 30, 1997, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer concessions
on sales of the Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $163 $2,090
Class D $23,410 $328,404
For the year ended November 30, 1997, MLPF&S received contingent
deferred sales charges of $1,742,901 and $31,593 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $75,219 in commissions on the execution
of portfolio security transactions for the Fund for the year ended
November 30, 1997.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended November 30, 1997 were $677,314,526 and
$777,148,781, respectively.
Net realized and unrealized gains (losses) as of November 30, 1997
were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $167,921,307 $31,967,465
Foreign currency transactions (2,431,153) (439,979)
-------------- --------------
Total $165,490,154 $31,527,486
============== ==============
As of November 30, 1997, net unrealized appreciation for Federal
income tax purposes aggregated $23,746,148, of which $86,104,025
related to appreciated securities and $62,357,877 related to
depreciated securities. At November 30, 1997, the aggregate cost of
investments for Federal income tax purposes was $800,003,286.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$54,040,066 and $82,303,224 for the years ended November 30, 1997 and
November 30, 1996, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year 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 A Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 2,334,477 $27,998,108
Shares redeemed (1,199,157) (14,535,235)
-------------- --------------
Net increase 1,135,320 $13,462,873
============== ==============
Class B Shares for the Year 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 B Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 10,055,825 $115,213,232
Automatic conversion of shares (137,908) (1,581,919)
Shares redeemed (17,283,572) (199,308,905)
-------------- --------------
Net decrease (7,365,655) $(85,677,592)
============== ==============
Class C Shares for the Year 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 C Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 1,248,519 $14,588,140
Shares redeemed (810,190) (9,591,529)
-------------- --------------
Net increase 438,329 $4,996,611
============== ==============
Class D Shares for the Year 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)
============== ==============
Class D Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 5,255,871 $59,496,466
Automatic conversion of shares 135,283 1,581,919
-------------- --------------
Total issued 5,391,154 61,078,385
Shares redeemed (6,658,036) (76,163,501)
-------------- --------------
Net decrease (1,266,882) $(15,085,116)
============== ==============
5. Commitments:
At November 30, 1997, the Fund had entered into foreign exchange
contracts under which it had agreed to purchase foreign currencies
with an approximate value of $1,885,000.
6. 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.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
Merrill Lynch Latin America Fund, Inc.:
We have audited the accompanying consolidated statement of assets and
liabilities, including the consolidated schedule of investments, of
Merrill Lynch Latin America Fund, Inc. and its subsidiary as of
November 30, 1997, the related consolidated statements of operations
for the year then ended and changes in net assets for each of the
years in the two-year period then ended, and the consolidated
financial highlights for the five-year period then ended. These
financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned at November 30, 1997, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements and
consolidated financial highlights present fairly, in all material
respects, the financial position of Merrill Lynch Latin America Fund,
Inc. and its subsidiary as of November 30, 1997, the results of their
operations, the changes in their net assets, and the consolidated
financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
January 8, 1998
EQUITY PORTFOLIO CHANGES (unaudited)
For the Quarter Ended November 30, 1997
Additions
Aracruz Celulose S.A. (ADR)
* Banco Rio de la Plata S.A. (ADR)
Coca-Cola Femsa S.A. de C.V. (Series L)
Grupo Radio Centro, S.A. de C.V.
Grupo Radio Centro, S.A. de C.V. (ADR)
Grupo Tribasa, S.A. de C.V. (ADR)
* Light-Servicios de Electricidade S.A.
Quilmes Industrial S.A. (ADR)
Sudamtex de Venezuela S.A.C.A. (ADR)
* Tubos de Acero de Mexico, S.A. de C.V. (ADR)
Uniao de Bancos Brasileiros S.A.
(Unibanco) (GDR)
Uniao de Bancos Brasileiros S.A.
(Unibanco) (Preferred)
Deletions
Apasco, S.A. de C.V. 'A'
Banco Frances del Rio de la Plata S.A.
(ADR)
* Banco Rio de la Plata S.A. (ADR)
Bansud S.A. (Class B)
Cifra, S.A. de C.V. 'A'
Cifra, S.A. de C.V. 'B' (ADR)
* Light-Servicios de Electricidade S.A.
Multicanal Participacoes S.A. (ADR)
Nortel Inversora S.A. (ADR)
Siderurgica Venezolana Sivensa,
S.A.I.C.A. -- S.A.C.A.
Telecomunicacoes de Minas Gerais S.A. --
TELEMIG (Class B) (Preferred)
* Tubos de Acero de Mexico, S.A. de C.V. (ADR)
PORTFOLIO INFORMATION (unaudited)
As of November 30, 1997
Percent of
Ten Largest Holdings (Equity Investments) Net Assets
Telefonos de Mexico, S.A. de C.V. (ADR) 4.5%
Telecomunicacoes Brasileiras S.A. -- Telebras* 4.4
Yacimientos Petroliferos Fiscales S.A. (YPF) (ADR) 4.1
Grupo Televisa, S.A. de C.V. (GDR) 3.7
Compania Anonima Nacional Telefonos de Venezuela
(CANTV)(ADR) 3.7
Grupo Carso, S.A. de C.V.* 3.2
Companhia Energetica de Minas Gerais S.A. (CEMIG)* 3.0
Companhia Cervejaria Brahma S.A. PN (Preferred)* 2.9
Uniao de Bancos Brasileiros S.A. (Unibanco)* 2.8
Petroleo Brasileiro S.A. (Preferred) 2.6
Percent of
Ten Largest Industries (Equity Investments) Net Assets
Telecommunications 20.9%
Utilities 10.9
Banking 8.6
Energy Sources 5.2
Multi-Industry 4.9
Beverages & Tobacco 4.7
Oil & Gas Producers 4.1
Metals & Steel 3.6
Merchandising 2.3
Building Materials 2.2
* Includes combined holdings.
<TABLE>
<CAPTION>
IMPORTANT TAX INFORMATION (unaudited)
The following information summarizes all per share distributions paid by Merrill Lynch Latin
America Fund, Inc. during its taxable year ended November 30, 1997:
Domestic Foreign Total Foreign Taxes
Record Payable Non-Qualifying Source Ordinary Paid or
Date Date Ordinary Income Income Income Withheld
<S> <C> <C> <C> <C> <C> <C>
Class A Shares 12/19/96 12/30/96 $.024336 $.411139 $.435475 $.034121
Class B Shares 12/19/96 12/30/96 $.016618 $.280754 $.297372 $.034121
Class C Shares 12/19/96 12/30/96 $.017646 $.298115 $.315761 $.034121
Class D Shares 12/19/96 12/30/96 $.022425 $.378859 $.401284 $.034121
The foreign taxes paid or withheld represent taxes incurred by the Fund on dividends received by the
Fund from foreign sources. Foreign taxes paid or withheld should be included as foreign source income
with an offsetting deduction from gross income or as a credit for taxes paid to foreign governments.
You should consult your tax adviser regarding the appropriate treatment of foreign taxes paid.
Please retain this information for your records.
</TABLE>
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
