MERRILL LYNCH
LATIN AMERICA
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
May 31, 1999
<PAGE>
MERRILL LYNCH LATIN AMERICA FUND, INC.
Asset Allocation As a Percentage* of Net Assets as of May 31, 1999
A map illustrating the following percentages:
MEXICO 34.3%
PANAMA 0.8%
VENEZUELA 2.6%
COLOMBIA 3.8%
PERU 3.6%
BRAZIL 41.8%
ARGENTINA 6.1%
CHILE 4.1%
* Total may not equal 100% and does not include short-term securities.
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1999
DEAR SHAREHOLDER
During the three-month period ended May 31, 1999, total returns for Merrill
Lynch Latin America Fund, Inc.'s Class A, Class B, Class C and Class D Shares
were +34.71%, +34.50%, +34.50% and +34.71%, respectively. The unmanaged Morgan
Stanley Capital International Latin America Free Index rose 33.36% and the J.P.
Morgan Latin Brady Bond Index rose 8.42% 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.) The
Fund's outperformance is attributable to its overweighted position in Brazil,
the best performer in the region, which rose 47.78% during the period. Also
beneficial to rela tive performance was our stock selection in Mexico and
fixed-income exposure. (Fund performance does 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.)
Investment Overview
The recovery in Latin American markets continued in the May quarter. Emerging
markets generally enjoyed a broad-based rally during this period, driven
primarily by the perception that these economies had seen their worst and were
on the road to recovery. This perception, which we partly share, was supported
by evidence such as rising industrial production in South Korea, a pickup in
consumer spending in Thailand, and the recovery in the price of some commodities
such as pulp and crude oil.
Bolstering the case for the emerging markets recovery were reflationary efforts
in the major economies of the United States, Japan and the European Union. This
was indicated by the neutral monetary stance of the US Federal Reserve Board
through most of the quarter, the fiscal stimulus and the possibility of
monetization in Japan, and the decline in interest rates in the European Union.
Investors regained confidence in the Latin American markets when Brazil
successfully raised $3 billion through an external bond offering. The more
positive outlook was also supported as certain commodity prices corrected from
their lows and as Mexico's economic performance improved (inflation moderated as
industrial production and consumer spending rose).
Portfolio Matters
In addition to the more positive macroeconomic view, various developments at the
corporate level attest to the proactive quality and resilience of management in
Latin America's leading companies. An example of one such company is Fund
holding Panamerican Beverages, Inc. (Panamco), which is based in Mexico. Panamco
is the largest Coca-Cola bottler in Latin America with a presence in seven
countries; the company derived 20% of its consolidated US-based EBITDA (earnings
before interest, taxation, depreciation and amortization) from Brazil in 1998.
To combat price-based competition during the economic downturn, Panamco recently
implemented an innovative price policy in its Sao Paulo franchise, which has
since been adopted by other Coke bottlers in Brazil. The new price policy
appears to have resulted in a dramatic, positive reversal in volume trends for
Panamco. Despite its anchor bottler status, geographic diversification and close
relation ship with The Coca-Cola Company, Panamco shares currently trade at a
25% average discount to other premium Coke bottlers in the region.
To add balance to this positive assessment of the markets we invest in, we note
that the evidence of recovery has so far been limited to relatively few
countries. In our view, the necessary structural reforms for those countries in
real economic crisis are still works in process, such as is the case with fiscal
reforms in Brazil. Developing economies and their emerging markets are indeed
recovering, but progress can easily be slowed by external events. These events
could include a curtailment of capital flows to the region if there is a sharp
rising trend in US interest rates or a prolonged decline in the US stock market.
Also, Latin America could be vulnerable to a collapse in commodity prices if the
European and Japanese economies fail to reflate. Nonetheless, the important
works in process continue, and we believe that the case for investing in these
countries with a long-term view is very much intact.
As of May 31, 1999, our equity and bond investments in Brazil comprised 42% of
the Fund's net assets. Despite the ongoing concerns created by pending fiscal
reforms, there are investments in Brazil that we believe can make a positive
contribution to the Fund's performance because of their defensive qualities as
well as attractive valuations. One example is the diversified mining company
Companhia Vale do Rio Doce (CVRD). CVRD benefits from the weaker Brazilian
currency, since its revenue stream is primarily US dollar-based, while the
majority of its costs are denominated in local currency. The stock currently
trades at a substantial discount to its net asset value and in comparison to its
global peer group. Catalysts that could close the valuation gap include changes
in the ownership structure and restructuring of assets. In addition, as the
world's largest producer of iron ore, the company stands to benefit from
improving conditions in the global steel market. We believe that compelling
values such as CVRD justify our long-term position in Brazil, notwithstanding
the near-term market volatility that we expect.
Although the Argentine market rose 34.95% during the quarter, it declined 3.98%
in May, more than the other major markets in Latin America. This appears to
reflect investors' attention to the country's growing fiscal deficit and its
heightened sensitivity to tighter US monetary policy. This sensitivity arises
from the country's currency policy, which requires that the Argentine peso
remains stable relative to the US dollar. During the May quarter, rumors arose
of a currency devaluation, but subsided as investors assessed its likelihood and
weighed its benefits against its costs.
In Conclusion
There has been value in Latin American investments for some time. Nevertheless,
Latin American stock markets declined sharply in 1998. In our view, Latin
America has been a victim of the Asian and Russian crises and the resulting
pressures on the global economy. In addition to compelling valuations, there are
several key factors that we believe will improve the performance of Latin
American stock markets. These include the improving outlook for corporate
earnings and economic growth, the scope for interest rate declines as perceived
risk subsides, and the bottoming out of the global economic cycle and commodity
prices.
We thank you for your ongoing interest in Merrill Lynch Latin America Fund,
Inc., and we look forward to reviewing our strategy with you in our next report
to shareholders.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Grace Pineda
Grace Pineda
Senior Vice President and
Portfolio Manager
July 9, 1999
2 & 3
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1999
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:
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 "Recent Performance Results" and
"Average Annual Total Return" tables assume reinvestment of all dividends
and capital gains distributions at net asset value on the ex-dividend
date. Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the
different levels of account maintenance, distribution and transfer agency
fees appli cable 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 -11.89% +34.71% -28.94%
- -----------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class B Shares -12.79 +34.50 +27.13
- -----------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class C Shares -12.77 +34.50 -32.29
- -----------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class D Shares -12.06 +34.71 +34.98
===============================================================================================
</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 since inception periods are Class A & Class C
Shares, from 10/21/94 to 5/31/99 and Class B & Class D Shares, from 9/27/91 to
5/31/99.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 3/31/99 -31.42% -35.02%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/99 -9.35 -10.44
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 3/31/99 -32.13% -34.76%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/99 -7.39 -7.39
- --------------------------------------------------------------------------------
Inception (9/27/91) through 3/31/99 +1.98 +1.98
================================================================================
* 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 3/31/99 -32.14% -32.80%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/99 -10.29 -10.29
================================================================================
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Year Ended 3/31/99 -31.57% -35.17%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/99 -6.65 -7.65
- --------------------------------------------------------------------------------
Inception (9/27/91) through 3/31/99 +2.79 +2.05
================================================================================
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
4 & 5
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1999
CONSOLIDATED SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Percent
Shares Held/ Value of Net
COUNTRY Industries Face Amount Long-Term Investments Cost (Note 1a) Assets
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Argentina Beverages 400,749 Quilmes Industrial SA (Quinsa) (ADR)* $ 4,630,821 $ 4,533,473 1.9%
------------------------------------------------------------------------------------------------------------------------
Merchandising 557,659 +Grimoldi SA 'B' 3,188,753 697,611 0.3
------------------------------------------------------------------------------------------------------------------------
Oil & Gas Producers 112,703 YPF Sociedad Anonima (ADR)* 3,658,788 4,747,614 2.0
------------------------------------------------------------------------------------------------------------------------
Real Estate 197,329 IRSA Inversiones y Representaciones
SA 'B' 521,356 572,695 0.2
56,748 IRSA Inversiones y Representaciones SA
(GDR)** 1,139,491 1,638,599 0.7
------------ ----------- -----
1,660,847 2,211,294 0.9
-------------------------------------------------------------------------------------------------------------------------
Telecommunications 22,233 Telefonica de Argentina SA (ADR)* 681,725 719,793 0.3
525,000 Telefonica de Argentina SA 'B' 1,497,352 1,712,819 0.7
------------ ----------- -----
2,179,077 2,432,612 1.0
------------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Argentina 15,318,286 14,622,604 6.1
===================================================================================================================================
Brazil Banking 95,899,592 Banco Bradesco SA (Preferred) 711,586 508,810 0.2
2,980,655 Banco Itau SA (Preferred) 1,764,001 1,522,987 0.7
203,020 Uniao de Bancos Brasileiros SA (Unibanco)
(GDR)** 5,800,521 4,580,639 1.9
15,000,000 Uniao de Bancos Brasileiros SA (Unibanco)
(Units) (c) 1,198,257 666,090 0.3
------------ ----------- -----
9,474,365 7,278,526 3.1
------------------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 9,300,356 Companhia Cervejaria Brahma (Preferred) 6,269,632 4,698,450 2.0
-------------------------------------------------------------------------------------------------------------------------
Diversified 466,671 Souza Cruz SA 3,408,615 2,825,862 1.2
-------------------------------------------------------------------------------------------------------------------------
Energy Sources 309,034 Companhia Paranaense de Energia--Copel
(ADR)* 5,332,934 2,317,755 1.0
19,125,244 Petroleo Brasileiro SA--Petrobras
(Preferred) 4,582,102 2,702,240 1.1
------------ ----------- -----
9,915,036 5,019,995 2.1
------------------------------------------------------------------------------------------------------------------------
Foreign Government Republic of Brazil:
Obligations US$ 1,614,000 10.125% due 5/15/2027 1,398,127 1,176,202 0.5
US$ 11,606,169 'C', 6.94% due 4/15/2014 (a)(e)(f) 6,779,339 7,253,855 3.1
------------ ----------- -----
8,177,466 8,430,057 3.6
------------------------------------------------------------------------------------------------------------------------
Forest Products 233,248,558 Votorantim Celulose e Papel SA
(Preferred) 6,424,396 6,187,678 2.6
------------------------------------------------------------------------------------------------------------------------
Machinery & Engineering 9,058,000 Weg SA (Preferred) 5,426,464 3,447,682 1.5
------------------------------------------------------------------------------------------------------------------------
Metals & Steel 318,295,000 Companhia Siderurgica de Tubarao
(Preferred) 5,019,452 2,845,198 1.2
949 Companhia Siderurgica Nacional SA 23 18 0.0
BRL 1,099,391 Companhia Vale do Rio Doce, 0% due
12/31/2049 (d) 0 0 0.0
529,148 Companhia Vale do Rio Doce 'A'
(Preferred) 9,876,234 9,368,422 3.9
------------ ----------- -----
14,895,709 12,213,638 5.1
------------------------------------------------------------------------------------------------------------------------
Retail 320,490 Companhia Brasileira de Distribuicao
Grupo Pao de Acucar SA (ADR)* 4,700,328 5,808,881 2.4
------------------------------------------------------------------------------------------------------------------------
Telecommunications 152,005,637 Embratel Participacoes SA 2,372,234 1,126,455 0.5
149,205,637 Tele Celular Sul Participacoes SA 294,154 193,606 0.1
149,205,637 Tele Centro Oeste Celular Participacoes
SA 126,486 139,396 0.1
178,700 Tele Centro Oeste Celular Participacoes
SA (ADR)* 604,435 625,450 0.3
21,689,563 Tele Centro Oeste (Rights) (g) 0 4,128 0.0
149,205,637 +Tele Centro Sul Participacoes SA 1,767,868 825,192 0.3
149,205,637 Tele Leste Celular Participacoes SA 91,188 73,140 0.0
15,200 Tele Leste Celular Participacoes SA
(ADR)* 421,950 456,000 0.2
149,205,637 Tele Nordeste Celular Participacoes SA 132,369 167,792 0.1
23,800 Tele Nordeste Celular Participacoes SA
(ADR)* 421,629 719,950 0.3
149,205,637 Tele Norte Celular Participacoes SA 73,539 90,349 0.0
33,400 Tele Norte Celular Participacoes SA
(ADR)* 620,722 1,041,662 0.4
314,091,637 Tele Norte Leste Participacoes SA 3,557,202 2,861,965 1.2
313,289 Tele Norte Leste Participacoes SA (ADR)* 4,465,713 5,130,107 2.2
149,205,637 Tele Sudeste Celular Participacoes SA 588,309 407,863 0.2
92,560,000 Telecomunicacoes Brasileiras SA--Telebras 5,109,650 4,403,806 1.9
241,765,637 +Telecomunicacoes Brasileiras SA--Telebras 44,136 9,760 0.0
47,995 +Telecomunicacoes Brasileiras SA--Telebras
(ADR)* 3,000 3,000 0.0
47,995 Telecomunicacoes Brasileiras SA--Telebras
(Preferred Block) (ADR)* 3,790,525 4,007,583 1.7
9,845,775 +Telecomunicacoes de Minas Gerais--Telemig 837,551 169,774 0.1
735,140 Telecomunicacoes de Minas Gerais--Telemig 'B'
(Preferred) 51,070 20,986 0.0
149,205,637 Telemig Celular Participacoes SA 294,154 189,304 0.1
3,200 Telemig Celular Participacoes SA (ADR)* 83,992 98,800 0.0
9,845,775 +Telemig Celular SA 343,357 69,613 0.0
24,395,000 Telerj Celular SA 'B' (Preferred) 420,727 763,926 0.3
149,205,637 Telesp Celular Participacoes SA 1,176,618 752,912 0.3
152,005,637 Telesp Participacoes SA 3,997,614 1,883,853 0.8
------------ ----------- -----
31,690,192 26,236,372 11.1
------------------------------------------------------------------------------------------------------------------------
Textiles & Apparel 20,831,686 Companhia de Tecidos Norte de Minas--
Coteminas (Preferred) 8,433,359 1,417,612 0.6
21,491,685 Empresa Nasional de Comercio SA 6,971 12,394 0.0
------------ ----------- -----
8,440,330 1,430,006 0.6
------------------------------------------------------------------------------------------------------------------------
Utilities 1,122,012 Centrais Eletricas de Santa Catarina
SA--CELESC 'B' (Preferred) 591,246 427,063 0.2
74,899 Centrais Eletricas de Santa Catarina
SA--CELESC (GDR)** (b) 5,986,518 2,805,979 1.2
27,891 Companhia Energetica de Minas Gerais
SA--CEMIG (ADR)* 510,849 585,142 0.2
72,502 Companhia Energetica de Minas Gerais
SA--CEMIG (ADR)* (b) 1,416,102 1,521,063 0.6
213,720,264 Companhia Energetica de Minas Gerais
SA--CEMIG (Preferred) 7,894,751 4,498,725 1.9
163,811 Companhia Paulista de Forca e Luz--CPFL
(Preferred) 14,058 10,959 0.0
289,800 Globex Utilidades SA (Preferred) 4,975,624 1,403,875 0.6
------------ ----------- -----
21,389,148 11,252,806 4.7
------------------------------------------------------------------------------------------------------------------------
Utilities-Electric 1,196,500,000 Companhia Energetica do Ceara-Coelce 'A'
(Preferred) 4,959,310 2,622,088 1.1
57,400 Espirito Santo Centrais Eletricas
SA--Escelsa 10,006,434 1,754,441 0.7
------------ ----------- -----
14,965,744 4,376,529 1.8
------------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Brazil 145,177,425 99,206,482 41.8
===================================================================================================================================
</TABLE>
6 & 7
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1999
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
Percent
Shares Held/ Value of Net
COUNTRY Industries Face Amount Long-Term Investments Cost (Note 1a) Assets
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Chile Telecommunications 298,615 Compania de Telecomunicaciones de Chile
SA (ADR)* $7,633,546 $ 6,494,876 2.7%
------------------------------------------------------------------------------------------------------------------------
Utilities 75,000 Chilectra SA (ADR)* (b) 1,263,750 1,708,035 0.7
1,649,656 Empresa Nacional de Electricidad SA
(Endesa) 1,264,057 595,375 0.3
1,014,657 Enersis SA 467,990 395,000 0.2
25,055 Enersis SA (ADR)* 610,035 491,704 0.2
------------ ----------- -----
3,605,832 3,190,114 1.4
------------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Chile 11,239,378 9,684,990 4.1
===================================================================================================================================
Colombia Banking 1,028,297 Banco de Bogota 4,753,531 3,451,701 1.5
83,802 Banco Ganadero SA (Preferred) (ADR)* 1,884,467 733,267 0.3
------------ ----------- -----
6,637,998 4,184,968 1.8
------------------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 488,354 Bavaria SA 1,797,411 2,547,170 1.1
------------------------------------------------------------------------------------------------------------------------
Financial Services 488,354 Valores Bavaria SA 1,033,615 714,379 0.3
------------------------------------------------------------------------------------------------------------------------
Merchandising 540,808 Almacenes Exito SA 4,043,019 1,589,029 0.6
------------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Colombia 13,512,043 9,035,546 3.8
===================================================================================================================================
Mexico Banking 63,000 +Grupo Financiero Banamex Accival, SA de CV
(Banacci) 'L' 140,485 121,253 0.1
1,595,873 +Grupo Financiero Banamex Accival, SA de CV
(Banacci) 'O' 3,668,848 3,172,245 1.3
------------ ----------- -----
3,809,333 3,293,498 1.4
------------------------------------------------------------------------------------------------------------------------
Beverages 202,601 Panamerican Beverages, Inc. 'A'
(US Registered Shares) 4,354,104 4,697,811 2.0
------------------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 165,078 Fomento Economico Mexicano, SA de CV (ADR)* 2,979,440 5,509,478 2.3
------------------------------------------------------------------------------------------------------------------------
Broadcasting 269,966 +Grupo Televisa, SA de CV (GDR)** 6,825,203 11,287,953 4.8
& Publishing
------------------------------------------------------------------------------------------------------------------------
Building Materials 29,019 Cemex, SA de CV (ADR)* 223,537 255,356 0.1
113,337 Cemex, SA de CV 'B' 599,155 503,784 0.2
483,238 Cemex, SA de CV 'B' (ADR)* 4,812,883 4,286,708 1.8
28,491 Cemex, SA de CV--CPO 106,996 124,757 0.1
------------ ----------- -----
5,742,571 5,170,605 2.2
------------------------------------------------------------------------------------------------------------------------
Chemicals 178,719 Desc, SA de CV (ADR)* 3,807,085 3,998,838 1.7
------------------------------------------------------------------------------------------------------------------------
Diversified 766,268 Alfa, SA de CV 'A' 6,379,317 2,688,181 1.1
------------------------------------------------------------------------------------------------------------------------
Foods 1,082,558 Grupo Industrial Bimbo, SA de CV 'A' 2,351,842 2,072,514 0.9
------------------------------------------------------------------------------------------------------------------------
Foreign Government US$ 2,862,000 United Mexican States, 11.50% due 5/15/2026 3,191,771 3,144,622 1.3
Obligations
------------------------------------------------------------------------------------------------------------------------
Health & Personal Care 957,412 Kimberly-Clark de Mexico, SA de CV 'A' 2,812,265 3,105,252 1.3
------------------------------------------------------------------------------------------------------------------------
Merchandising 2,996,446 +Cifra, SA de CV 'C' 3,717,634 4,845,577 2.0
------------------------------------------------------------------------------------------------------------------------
Multi-Industry 2,051,554 Grupo Carso, SA de CV 'A1' 9,666,065 8,356,635 3.5
38,557 Grupo Carso, SA de CV (ADR)* 369,232 310,654 0.1
------------ ----------- -----
10,035,297 8,667,289 3.6
------------------------------------------------------------------------------------------------------------------------
Telecommunications 172,000 Carso Global Telecom (ADR)* 1,134,134 1,875,729 0.8
253,026 Telefonos de Mexico, SA de CV (ADR)* 14,185,614 20,226,266 8.5
------------ ----------- -----
15,319,748 22,101,995 9.3
------------------------------------------------------------------------------------------------------------------------
Television 178,300 +TV Azteca, SA de CV (ADR)* 984,083 902,644 0.4
------------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Mexico 72,309,693 81,486,257 34.3
===================================================================================================================================
Panama Banking 70,876 Banco Latinoamericano de Exportaciones,
SA 'E' 1,209,098 2,015,536 0.8
------------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Panama 1,209,098 2,015,536 0.8
===================================================================================================================================
Peru Financial Services 202,842 Credicorp Limited 3,133,272 2,231,262 0.9
------------------------------------------------------------------------------------------------------------------------
Food & Household 6,996,882 +Alicorp SA 5,483,960 1,408,204 0.6
Products
------------------------------------------------------------------------------------------------------------------------
Metals--Non-Ferrous 176,685 Compania de Minas Buenaventura SA (ADR)* 3,269,570 2,506,718 1.1
1,173,499 +Minsur SA 2,575,220 2,379,429 1.0
------------ ----------- -----
5,844,790 4,886,147 2.1
------------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Peru 14,462,022 8,525,613 3.6
===================================================================================================================================
Venezuela Building Materials 1,156,927 Corporacion Venezolana de Cementos I, SACA 505,161 580,486 0.2
764,789 Corporacion Venezolana de Cementos II, SACA 361,820 383,731 0.2
------------ ----------- -----
866,981 964,217 0.4
------------------------------------------------------------------------------------------------------------------------
Food & Household 28,061,157 Mavesa SA 1,748,791 1,736,487 0.7
Products
------------------------------------------------------------------------------------------------------------------------
Metal Processing 46,750 International Briquettes Holding, Inc. 610,672 187,000 0.1
------------------------------------------------------------------------------------------------------------------------
Telecommunications 101,000 Compania Anonima Nacional Telefonos
de Venezuela (CANTV) (ADR)* 2,441,756 2,354,562 1.0
------------------------------------------------------------------------------------------------------------------------
Textiles 765,505 Sudamtex de Venezuela (ADR)* (b) 10,150,880 857,136 0.4
------------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Venezuela 15,819,080 6,099,402 2.6
===================================================================================================================================
Total Long-Term Investments 289,047,025 230,676,430 97.1
===================================================================================================================================
</TABLE>
8 & 9
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1999
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
Percent
Value of Net
COUNTRY Face Amount Short-Term Investments Cost (Note 1a) Assets
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
United Commercial US$ 5,870,000 Block Financial Corporation, 4.83%
States Paper*** due 6/24/1999 $ 5,849,523 $ 5,849,523 2.5%
------------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments 5,849,523 5,849,523 2.5
===================================================================================================================================
Total Investments $294,896,548 236,525,953 99.6
============
Other Assets Less Liabilities 991,140 0.4
------------ -----
Net Assets $237,517,093 100.0%
============ =====
===================================================================================================================================
</TABLE>
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
*** Commercial Paper is traded on a discount basis; the interest rate
shown reflects the discount rate paid at the time of purchase by the
Fund.
(a) Represents a pay-in-kind security which may pay interest in
additional face.
(b) The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(c) Each unit represents one preferred share of Uniao de Bancos
Brasileiros SA (Unibanco) and one preferred 'B' share of Unibanco
Holdings SA.
(d) Received through a bonus issue from Companhia Vale do Rio Doce. As
of May 31, 1999, the bonds have not commenced trading and the coupon
rate has not been determined.
(e) Represents a Brady Bond. Brady Bonds are securities which have been
issued to refinance commercial bank loans and other debt. The risk
associated with these instruments is the amount of any
uncollateralized principal or interest payments since there is a
high default rate of commercial bank loans by countries issuing
these securities.
(f) Floating Rate Note.
(g) The rights may be exercised until 6/23/1999.
+ Non-income producing security.
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of May 31, 1999
================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$294,896,548) (Note 1a) ............. $ 236,525,953
Cash ........................................................................ 578
Foreign cash (Note 1b) ...................................................... 2,218,101
Receivables:
Dividends ................................................................. $ 1,530,162
Capital shares sold ....................................................... 203,315
Interest .................................................................. 117,394 1,850,871
-------------
Prepaid registration fees and other assets (Note 1f) ........................ 46,225
-------------
Total assets ................................................................ 240,641,728
-------------
================================================================================================================================
Liabilities: Payables:
Securities purchased ...................................................... 1,156,181
Capital shares redeemed ................................................... 713,194
Investment adviser (Note 2) ............................................... 200,137
Distributor (Note 2) ...................................................... 147,589 2,217,101
-------------
Accrued expenses and other liabilities ...................................... 907,534
-------------
Total liabilities ........................................................... 3,124,635
-------------
================================================================================================================================
Net Assets: Net assets .................................................................. $ 237,517,093
=============
================================================================================================================================
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares authorized ........ $ 256,771
Consist of: Class B Common Stock, $0.10 par value, 100,000,000 shares authorized ........ 1,368,915
Class C Common Stock, $0.10 par value, 100,000,000 shares authorized ........ 97,448
Class D Common Stock, $0.10 par value, 100,000,000 shares authorized ........ 385,843
Paid-in capital in excess of par ............................................ 459,377,202
Undistributed investment income--net ........................................ 2,517,554
Accumulated realized capital losses on investments and
foreign currency transactions--net (Note 5) ............................... (167,962,780)
Unrealized depreciation on investments and foreign currency transactions--net (58,523,860)
-------------
Net assets .................................................................. $ 237,517,093
=============
================================================================================================================================
Net Asset Class A--Based on net assets of $29,412,679 and 2,567,706 shares outstanding . $ 11.45
Value: =============
Class B--Based on net assets of $153,160,444 and 13,689,147 shares outstanding $ 11.19
=============
Class C--Based on net assets of $10,906,145 and 974,482 shares outstanding ... $ 11.19
=============
Class D--Based on net assets of $44,037,825 and 3,858,431 shares outstanding . $ 11.41
=============
================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
10 & 11
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1999
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended May 31, 1999
==============================================================================================================================
<S> <C> <C> <C>
Investment Income Dividends (net of $377,750 foreign withholding tax) ................. $ 4,704,636
(Notes 1d & 1e): Interest and discount earned ........................................ 1,151,482
-------------
Total income ........................................................ 5,856,118
-------------
==============================================================================================================================
Expenses: Investment advisory fees (Note 2) ................................... $ 1,106,050
Account maintenance and distribution fees--Class B (Note 2) ......... 735,821
Custodian fees ...................................................... 390,324
Transfer agent fees--Class B (Note 2) ............................... 294,723
Foreign capital gains tax ........................................... 107,229
Transfer agent fees--Class D (Note 2) ............................... 67,291
Accounting services (Note 2) ........................................ 67,170
Printing and shareholder reports .................................... 66,029
Account maintenance fees--Class D (Note 2) .......................... 50,470
Account maintenance and distribution fees--Class C (Note 2) ......... 47,599
Professional fees ................................................... 46,874
Transfer agent fees--Class A (Note 2) ............................... 39,852
Registration fees (Note 1f) ......................................... 37,382
Directors' fees and expenses ........................................ 24,417
Transfer agent fees--Class C (Note 2) ............................... 19,098
Pricing fees ........................................................ 3,656
Other ............................................................... 19,803
-------------
Total expenses ...................................................... 3,123,788
-------------
Investment income--net .............................................. 2,732,330
-------------
==============================================================================================================================
Realized & Realized loss from:
Unrealized Gain Investments--net .................................................. (18,976,209)
(Loss) on Foreign currency transactions--net ................................ (1,440,396) (20,416,605)
Investments & -------------
Foreign Currency Change in unrealized depreciation on:
Transactions--Net Investments--net .................................................. 39,392,473
(Notes 1b, 1c, Foreign currency transactions--net ................................ 398,606 39,791,079
1e & 3): ------------- -------------
Net realized and unrealized gain on investments and foreign
currency transactions ............................................. 19,374,474
-------------
Net Increase in Net Assets Resulting from Operations ................ $ 22,106,804
=============
==============================================================================================================================
</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, November 30,
Increase (Decrease) in Net Assets: 1999 1998
=============================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net .............................................. $ 2,732,330 $ 10,678,832
Realized loss on investments and foreign currency transactions--net.. (20,416,605) (51,669,645)
Change in unrealized appreciation/depreciation on investments and ------------- -------------
foreign currency transactions--net ................................ 39,791,079 (129,842,425)
------------- -------------
Net increase (decrease) in net assets resulting from operations ..... 22,106,804 (170,833,238)
------------- -------------
=============================================================================================================================
Dividends to Investment income--net:
Shareholders Class A ........................................................... (1,332,021) --
(Note 1g): Class B ........................................................... (6,005,561) --
Class C ........................................................... (362,386) --
------------- -------------
Class D ........................................................... (2,282,954) --
------------- -------------
Net decrease in net assets resulting from dividends to shareholders.. (9,982,922) --
------------- -------------
=============================================================================================================================
Capital Share Net decrease in net assets derived from capital share transactions... (53,815,126) (320,024,018)
Transactions ------------- -------------
(Note 4):
=============================================================================================================================
Net Assets: Total decrease in net assets ........................................ (41,691,244) (490,857,256)
Beginning of period ................................................. 279,208,337 770,065,593
------------- -------------
End of period* ...................................................... $ 237,517,093 $ 279,208,337
============= =============
=============================================================================================================================
*Undistributed investment income--net ............................... $ 2,517,554 $ 9,768,146
============= =============
=============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
12 & 13
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1999
CONSOLIDATED FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A+
The following per share data and ratios have ---------------------------------------------------------------
been derived from information provided in For the Six
the financial statements. Months Ended For the Year Ended November 30,
May 31, ---------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ............. $ 10.61 $ 15.10 $ 12.83 $ 10.50 $ 17.37
Operating -------- -------- -------- --------- --------
Performance: Investment income--net ........................... .15 .38 .17 .46 .16
Realized and unrealized gain (loss) on
investments and foreign currency transactions--net 1.24 (4.87) 2.54 1.87 (6.52)
-------- -------- -------- --------- --------
Total from investment operations ................. 1.39 (4.49) 2.71 2.33 (6.36)
-------- -------- -------- --------- --------
Less dividends and distributions:
Investment income--net ......................... (.55) -- (.44) -- --
Realized gain on investments--net .............. -- -- -- -- (.50)
In excess of realized gain on investments--net . -- -- -- -- (.01)
-------- -------- -------- --------- --------
Total dividends and distributions ................ (.55) -- (.44) -- (.51)
-------- -------- -------- --------- --------
Net asset value, end of period ................... $ 11.45 $ 10.61 $ 15.10 $ 12.83 $ 10.50
======== ======== ======== ========= ========
====================================================================================================================================
Total Investment Based on net asset value per share ............... 14.36%++ (29.74%) 21.79% 22.19% (37.66%)
Return:** ======== ======== ======== ========= ========
====================================================================================================================================
Ratios to Average Expenses ......................................... 2.01%* 1.53% 1.46% 1.48% 1.66%
Net Assets: ======== ======== ======== ========= ========
Investment income--net ........................... 3.17%* 2.12% 1.03% 3.74% 1.40%
======== ======== ======== ========= ========
====================================================================================================================================
Supplemental Net assets, end of period (in thousands) ......... $ 29,413 $ 26,249 $ 77,086 $ 46,369 $ 26,034
Data: ======== ======== ======== ========= ========
Portfolio turnover ............................... 17.54% 31.92% 84.91% 66.14% 54.86%
======== ======== ======== ========= ========
====================================================================================================================================
<CAPTION>
Class B+
The following per share data and ratios have ---------------------------------------------------------------
been derived from information provided in For the Six
the financial statements. Months Ended For the Year Ended November 30,
May 31, ---------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ............. $ 10.20 $ 14.66 $ 12.46 $ 10.31 $ 17.24
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net .................... .10 .23 --++++ .32 .05
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ........... 1.23 (4.69) 2.50 1.83 (6.47)
-------- -------- -------- -------- --------
Total from investment operations ................. 1.33 (4.46) 2.50 2.15 (6.42)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ......................... (.34) -- (.30) -- --
Realized gain on investments--net .............. -- -- -- -- (.50)
In excess of realized gain on investments--net . -- -- -- -- (.01)
-------- -------- -------- -------- --------
Total dividends and distributions ................ (.34) -- (.30) -- (.51)
-------- -------- -------- -------- --------
Net asset value, end of period ................... $ 11.19 $ 10.20 $ 14.66 $ 12.46 $ 10.31
======== ======== ======== ========= ========
====================================================================================================================================
Total Investment Based on net asset value per share ............... 13.80%++ (30.42%) 20.51% 20.85% (38.32%)
Return:** ======== ======== ======== ========= ========
====================================================================================================================================
Ratios to Average Expenses ......................................... 3.09%* 2.57% 2.50% 2.54% 2.71%
Net Assets: ======== ======== ======== ========= ========
Investment income (loss)--net .................... 2.23%* 1.76% (.03%) 2.69% .43%
======== ======== ======== ========= ========
====================================================================================================================================
Supplemental Net assets, end of period (in thousands) ......... $153,160 $190,670 $527,520 $518,865 $505,038
Data: ======== ======== ======== ========= ========
Portfolio turnover ............................... 17.54% 31.92% 84.91% 66.14% 54.86%
======== ======== ======== ========= ========
====================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Based on average shares outstanding.
++ Aggregate total investment return.
++++ Amount is less than $.01 per share.
See Notes to Consolidated Financial Statements.
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1999
CONSOLIDATED FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
Class C+
The following per share data and ratios have ---------------------------------------------------------------
been derived from information provided in For the Six
the financial statements. Months Ended For the Year Ended November 30,
May 31, ---------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ............. $ 10.18 $ 14.64 $ 12.46 $ 10.31 $ 17.24
Operating ------- ------- -------- -------- --------
Performance: Investment income (loss)--net .................... .10 .23 (.02) .32 .03
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ........... 1.23 (4.69) 2.52 1.83 (6.45)
------- ------- -------- -------- --------
Total from investment operations ................. 1.33 (4.46) 2.50 2.15 (6.42)
------- ------- -------- -------- --------
Less dividends and distributions:
Investment income--net ......................... (.32) -- (.32) -- --
Realized gain on investments--net .............. -- -- -- -- (.50)
In excess of realized gain on investments--net . -- -- -- -- (.01)
------- ------- -------- -------- --------
Total dividends and distributions ................ (.32) -- (.32) -- (.51)
------- ------- -------- -------- --------
Net asset value, end of period ................... $ 11.19 $ 10.18 $ 14.64 $ 12.46 $ 10.31
======= ======= ======== ======== ========
==================================================================================================================================
Total Investment Based on net asset value per share ............... 13.79%++ (30.46%) 20.52% 20.85% (38.32%)
Return:** ======= ======= ======== ======== ========
==================================================================================================================================
Ratios to Average Expenses ......................................... 3.09%* 2.57% 2.50% 2.54% 2.72%
Net Assets: ======= ======= ======== ======== ========
Investment income (loss)--net .................... 2.20%* 1.77% (.11%) 2.68% .30%
======= ======= ======== ======== ========
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) ......... $10,906 $12,196 $ 37,027 $ 23,183 $ 14,659
Data: ======= ======= ======== ======== ========
Portfolio turnover ............................... 17.54% 31.92% 84.91% 66.14% 54.86%
======= ======= ======== ======== ========
==================================================================================================================================
<CAPTION>
Class D+
The following per share data and ratios have ---------------------------------------------------------------
been derived from information provided in For the Six
the financial statements. Months Ended For the Year Ended November 30,
May 31, ---------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ............. $ 10.53 $ 15.02 $ 12.77 $ 10.47 $ 17.37
Operating ------- ------- -------- -------- --------
Performance: Investment income--net ........................... .14 .34 .11 .42 .14
Realized and unrealized gain (loss) on
investments and foreign currency transactions--net 1.24 (4.83) 2.54 1.88 (6.53)
------- ------- -------- -------- --------
Total from investment operations ................. 1.38 (4.49) 2.65 2.30 (6.39)
------- ------- -------- -------- --------
Less dividends and distributions:
Investment income--net ......................... (.50) -- (.40) -- --
Realized gain on investments--net .............. -- -- -- -- (.50)
In excess of realized gain on investments--net . -- -- -- -- (.01)
------- ------- -------- -------- --------
Total dividends and distributions ................ (.50) -- (.40) -- (.51)
------- ------- -------- -------- --------
Net asset value, end of period ................... $ 11.41 $ 10.53 $ 15.02 $ 12.77 $ 10.47
======= ======= ======== ======== ========
==================================================================================================================================
Total Investment Based on net asset value per share ............... 14.25%++ (29.89%) 21.40% 21.97% (37.84%)
Return:** ======= ======= ======== ======== ========
==================================================================================================================================
Ratios to Average Expenses ......................................... 2.27%* 1.78% 1.71% 1.74% 1.91%
Net Assets: ======= ======= ======== ======== ========
Investment income--net ........................... 3.00%* 2.54% .72% 3.47% 1.18%
======= ======= ======== ======== ========
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) ......... $44,038 $50,093 $128,433 $112,833 $105,830
Data: ======= ======= ======== ======== ========
Portfolio turnover ............................... 17.54% 31.92% 84.91% 66.14% 54.86%
======= ======= ======== ======== ========
==================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Consolidated Financial Statements.
16 & 17
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1999
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's financial statements are prepared in accordance
with generally accepted accounting principles which may require the use of
management accruals and estimates. 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
or purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). 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.
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 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.
(h) Basis of consolidation--The accompanying consolidated financial statements
include the accounts of Merrill Lynch Latin America Fund Chile Ltd., a
wholly-owned subsidiary, which primarily invests in Chilean securities.
Intercompany accounts and transactions have been eliminated.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Fund has entered into
a Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or the "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of Merrill Lynch
Group, Inc.
18 & 19
<PAGE>
Merrill Lynch Latin America Fund, Inc., May 31, 1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded)
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 Incorporated ("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, 1999, 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 ........................................ $ -- $ 1
Class D ........................................ $1,281 $17,031
- --------------------------------------------------------------------------------
For the six months ended May 31, 1999, MLPF&S received contingent deferred sales
charges of $213,694 and $1,814 relating to transactions in Class B and Class C
Shares, respectively.
In addition, MLPF&S received $10,324 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended May 31,
1999.
Financial Data Services, Inc. ("FDS"), 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, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended May 31, 1999 were $39,210,078 and $103,162,482, respectively.
Net realized losses for the six months ended May 31, 1999 and net unrealized
losses as of May 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Losses Losses
- --------------------------------------------------------------------------------
Long-term investments .................. $(18,976,113) $(58,370,595)
Short-term investments ................. (96) --
Foreign currency transactions .......... (1,440,396) (153,265)
------------ ------------
Total ................................. $(20,416,605) $(58,523,860)
============ ============
- --------------------------------------------------------------------------------
As of May 31, 1999, net unrealized depreciation for Federal income tax purposes
aggregated $58,370,595, of which $23,622,334 related to appreciated securities
and $81,992,929 related to depreciated securities. At May 31, 1999, the
aggregate cost of investments for Federal income tax purposes was $294,896,548.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$53,815,126 and $320,024,018 for the six months ended May 31, 1999 and the year
ended November 30, 1998, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended May 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 836,978 $ 8,589,759
Shares issued to shareholders in
reinvestment of dividends ................... 105,419 977,240
-------- -----------
Total issued ................................ 942,397 9,566,999
Shares redeemed ............................. (847,962) (8,223,947)
-------- -----------
Net increase ................................ 94,435 $ 1,343,052
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended November 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 1,577,185 $ 22,145,415
Shares redeemed .................... (4,210,322) (55,944,438)
---------- ------------
Net decrease ....................... (2,633,137) $(33,799,023)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended May 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 823,462 $ 8,549,732
Shares issued to shareholders in
reinvestment of dividends ................ 547,876 4,985,678
---------- ------------
Total issued ............................. 1,371,338 13,535,410
Automatic conversion of shares ........... (131,476) (1,313,947)
Shares redeemed .......................... (6,244,032) (57,519,767)
---------- ------------
Net decrease ............................. (5,004,170) $(45,298,304)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended November 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 1,556,359 $ 19,875,348
Automatic conversion of shares ......... (293,075) (3,687,837)
Shares redeemed ........................ (18,547,103) (236,009,202)
----------- -------------
Net decrease ........................... (17,283,819) $(219,821,691)
=========== =============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended May 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 216,389 $ 2,444,856
Shares issued to shareholders in
reinvestment of dividends ................... 33,177 301,912
-------- -----------
Total issued ................................ 249,566 2,746,768
Shares redeemed ............................. (472,889) (4,382,571)
-------- -----------
Net decrease ................................ (223,323) $(1,635,803)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended November 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 895,290 $ 12,279,809
Shares redeemed .................... (2,227,053) (29,118,637)
---------- ------------
Net decrease ....................... (1,331,763) $(16,838,828)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended May 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 239,727 $ 2,530,176
Automatic conversion of shares ........... 128,939 1,313,947
Shares issued to shareholders in
reinvestment of dividends ................ 204,441 1,891,084
---------- ------------
Total issued ............................. 573,107 5,735,207
Shares redeemed .......................... (1,469,737) (13,959,278)
---------- ------------
Net decrease ............................. (896,630) $ (8,224,071)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended November 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................. 4,311,892 $ 63,507,567
Automatic conversion of shares .......... 285,021 3,687,837
---------- -------------
Total issued ............................ 4,596,913 67,195,404
Shares redeemed ......................... (8,391,830) (116,759,880)
---------- -------------
Net decrease ............................ (3,794,917) $ (49,564,476)
========== =============
- --------------------------------------------------------------------------------
5. Capital Loss Carryforward:
At November 30, 1998, the Fund had a net capital loss carryforward of
approximately $140,790,000, of which $88,328,000 expires in 2004 and $52,462,000
expires in 2006. 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, 1999
PORTFOLIO INFORMATION
As of May 31, 1999
================================================================================
Percent of
Ten Largest Holdings (Equity Investments) Net Assets
Telefonos de Mexico, SA de CV (ADR) .............................. 8.5%
Grupo Televisa, SA de CV (GDR) ................................... 4.8
Companhia Vale do Rio Doce 'A' (Preferred) ....................... 3.9
Grupo Carso, SA de CV* ........................................... 3.6
Telecomunicacoes Brasileiras SA--Telebras* ....................... 3.6
Tele Norte Leste Participacoes SA* ............................... 3.4
Companhia Energetica de Minas Gerais
SA--CEMIG* ..................................................... 2.7
Compania de Telecomunicaciones de Chile SA (ADR) ................. 2.7
Votorantim Celulose e Papel SA (Preferred) ....................... 2.6
Companhia Brasileira de Distribuicao Grupo Pao
de Acucar SA (ADR) ............................................. 2.4
* Includes combined holdings.
Percent of
Ten Largest Industries (Equity Investments) Net Assets
Telecommunications ............................................... 25.1%
Banking .......................................................... 7.1
Utilities ........................................................ 6.1
Beverages & Tobacco .............................................. 5.4
Metals & Steel ................................................... 5.1
Beverages ........................................................ 3.9
Multi-Industry ................................................... 3.6
Merchandising .................................................... 2.9
Forest Products .................................................. 2.6
Building Materials ............................................... 2.6
EQUITY PORTFOLIO CHANGES
For the Quarter Ended May 31, 1999
================================================================================
Additions
Companhia Paulista de Forca e Luz--CPFL (Preferred)
Compania Anonima Nacional Telefonos de Venezuela (CANTV) (ADR)
Grupo Financiero Banamex Accival, SA de CV (Banacci) 'O'
*Grupo Finorciero Boncome
Grupo Industrial Bimbo, SA de CV 'A'
TV Azteca, SA de CV (ADR)
Telecomunicacoes Brasileiras SA--Telebras (ADR)
Telecomunicacoes de Minas Gerais--Telemig 'B' (Preferred)
Telerj Celular SA 'B' (Preferred)
================================================================================
Deletions
Banco de Galicia y Buenos Aires SA (ADR)
Cadenalco SA (ADR)
Grupo Financiero Banamex Accival, SA de CV (Banacci) 'B'
*Grupo Finorciero Boncome
Grupo Tribasa, SA de CV (ADR)
Hylsamex SA
Telecomunicacoes Brasileiras SA--Telebras (Receipts)
================================================================================
*Added and deleted in the same quarter.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Donald Cecil, Director
Roland M. Machold, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, Director
Grace Pineda, Senior Vice President and Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Barbara G. Fraser, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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 #16140-5/99
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