MERRILL LYNCH
LATIN AMERICA
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
November 30, 1998
<PAGE>
MERRILL LYNCH LATIN AMERICA FUND, INC.
Asset Allocation As a Percentage* of Net Assets as of November 30, 1998
A map illustrating the following percentages:
Mexico 28.9%
Venezuela 1.3%
Colombia 3.9%
Peru 3.8%
Brazil 47.7%
Argentina 7.8%
Chile 4.8%
* Total may not equal 100% and does not include short-term securities.
<PAGE>
Merrill Lynch Latin America Fund, Inc., November 30, 1998
DEAR SHAREHOLDER
For the three-month period ended November 30, 1998, total returns for Merrill
Lynch Latin America Fund, Inc.'s Class A, Class B, Class C and Class D Shares
were +23.95%, +23.64%, +23.54% and +23.74%, respectively. (Investment results
shown do not reflect sales charges and would be lower if sales charges were
included. Complete performance information can be found on pages 4-6 of this
report to shareholders.) The unmanaged Morgan Stanley Capital International
(MSCI) Latin America Free Index rose 27.93% and the J.P. Morgan Latin Brady Bond
Index rose 21.42% for the same three-month period. (References to securities
markets of all countries in this letter to shareholders correspond to those
countries' market weightings in the MSCI Latin America Free Index.) Detrimental
to relative performance were the Fund's underweighted positions in Brazil and
Chile, whose markets rose 27.57% and 33.79%, respectively.
Investment Overview
During the November quarter, the markets in Latin America and in other emerging
countries appreciated strongly. The MSCI Latin America Free Index rose 27.93%
while the unmanaged MSCI Emerging Markets Free Index, a worldwide emerging
markets benchmark, rose 27.32%. We believe that the sharp recoveries were driven
largely by liquidity, since the US Federal Reserve Board clearly indicated an
easier monetary stance, and by improved investor confidence arising from
encouraging comments by policymakers in the United States, Japan and other
nations. Investor speculation in emerging markets manifested itself in various
ways. There was speculation that the problem economies in Asia, including Japan,
had seen their worst and were on their way to recovery. It was also speculated
that Brazil, with presidential elections over and its reserves to be bolstered
imminently, would proceed with fiscal reforms and avoid funding and currency
crises. Yet another speculation was that the economies in the United States and
in the European Union would be able to avoid recessions in 1999. It is possible
that a "virtuous cycle," where liquidity and investor confidence aid and
accelerate recovery, could develop. In our opinion, these recent rallies have
discounted far more than is realistically justified by existing fundamentals and
their scope to improve.
Among the Latin American markets, Brazil remained at the forefront of investor
attention. As the largest economy in the region, Brazil continues to receive the
brunt of both investor enthusiasm and anxiety. The Brazilian market appreciated
by 27.6% for the quarter ended November 30, 1998. August through mid-September
marked a period of renewed concerns as developments in global markets, notably
the default by Russia on its foreign debt obligations, rocked the Brazilian
markets as well. However, by the end of September a chain of events lasting
through November spurred investor enthusiasm. First, the US Federal Reserve
Board began a series of interest rate cuts. Brazilian President Cardoso's
re-election in October in the first round was also interpreted by investors as a
mandate to continue the reform process. Then the Brazilian government announced
a detailed fiscal package, with both President Cardoso and the Minister of the
Economy, Pedro Malan, making presentations to investors. Finally, in early
November, there was the announcement of the long-awaited International Monetary
Fund (IMF)-led multilateral rescue package of approximately US $42 billion. The
IMF package is not viewed as an ultimate solution to Brazil's troubles of a
growing fiscal deficit and an overvalued currency. However, it was hailed by
investors as a show of global support for the country and provides an
opportunity to proceed with economic reforms in an orderly fashion.
One of our favorite stocks is Tele Norte Leste, one of the three wire line
companies spun off from the Telebras break up that occurred last year. Not only
is it the largest fixed-line company in Latin America, it is also the least
expensive by a wide margin on a per line basis. Among other concerns, investors
cite the fact that the company is not controlled by a foreign telecom company
and that its concession area, the north and northeast of Brazil, is very poor.
Our analysis suggests that these issues are reflected in the current share
price. A look beneath the surface reveals that the operating characteristics are
not that different from those of other wire line companies in terms of revenues
per line and cash flow per line. The region is poor, but it is very
underpenetrated. Gross domestic product per capita with the company's entire
concession area is half of the Sao Paolo concession area. However, there is
potential for growth, and the company has a very strong balance sheet. Once cash
is netted out, the company has no debt. Furthermore, the company has American
depositary receipts that are very liquid and trade on the New York Stock
Exchange.
The Argentine stock market was the best-performing market in the region, up by
35% for the three-month period ended November 30, 1998. Despite a projected
economic slowdown in 1999, which is likely to result in gross domestic product
growth of less than half the robust 5.4% projected for 1998, the Argentine stock
market has received a vote of confidence from investors. First, any cut in US
interest rates is viewed positively for Argentina because of the Argentine
peso's peg to the US dollar. Second, global support for Brazil, Argentina's
major trading partner, has a positive spillover effect on Argentina.
Banco de Galicia y Buenos Aires S.A., a Fund holding, is the largest retail bank
in Argentina. Despite a high per capita income in Argentina, the country is
"underbanked." Thus Banco de Galicia decided early on to expand its branch
network. As a result, it has already established a presence in the key provinces
of the interior, and more recently has sought to bring basic banking services to
the Argentine masses by launching a series of mini-branches located in post
offices nationwide.
The Mexican market appreciated by 25.22% during the quarter ended November 30,
1998. For Mexico there can be no escaping the effects of depressed oil prices.
Through September 30, 1998, Mexican crude oil was selling at $10.52 per barrel
on average versus $16.75 in 1997. Since oil revenues account for about one-third
of total budgetary revenues, the decline in oil prices has a significant impact
on the Mexican economy.
Smaller markets in the region also performed well during the November quarter.
The Venezuelan market experienced a gain of 34.9% for the three-month period
ended November 30, 1998. This market rallied as presidential candidate Chavez
tempered his politics as the election neared, which in turn bolstered investor
confidence.
The Chilean market appreciated by 33.8% for the November quarter. During the
first half of the year, the Chilean peso had been victim to speculation prompted
by a growing current account deficit caused by the weakness of copper exports.
However, the central bank of Chile was successful in stabilizing the peso by
raising already high interest rates and widening the exchange rate bands, and
was thus able to begin easing interest rates in October and November. With its
parent Enersis S.A., Chilectra S.A. has established itself as one of the
strongest operators in Latin America. The company has a strong track record of
turning around previously state-owned electricity distribution companies.
Fiscal Year in Review
For the 12-month period ended November 30, 1998, total returns for Merrill Lynch
Latin America Fund, Inc.'s Class A, Class B, Class C and Class D Shares were
- -29.74%, -30.42%, -30.46% and -29.89%, respectively. All the main markets in
which our Fund invests declined sharply. The unmanaged MSCI Latin America Free
Index declined 25.00% and the unmanaged J.P. Morgan Latin Brady Bond Index
declined 2.66% during the same 12-month period. The Argentine market, the best
relative performer, declined 12.81%. Brazil dropped 19.67%; Mexico declined by
31.63%; and Venezuela dropped 58.86%. Particularly detrimental to the Fund's
performance relative to the unmanaged indexes were its investments in Brazil,
the market which comprised the largest portion of its assets, and Venezuela, the
market which declined the most sharply during the 12-month period.
In Conclusion
The past three months have seen a rally in Latin American stock markets. How
long this rally will last is open to question. Countering the potential for a
continued rally is the realization that Latin America is once again confronting
the dual challenges of a slowdown in global demand for the region's exports and
scarce availability of external financing. However, Latin American companies
have prior experience in coping with these challenges, and many have not only
survived but also have been strengthened by competing under such adverse
conditions. In addition, Latin American countries have made great strides in
recent years in broadening their economic base, creating a more
business-friendly environment, reducing debt and fostering greater political
stability and policy continuity. Critical to the region's long-term attraction
to investors is that foreign direct investments remain robust, although
investment in Latin American capital markets, which tends to have a shorter time
horizon, has declined.
We thank you for your continued support of Merrill Lynch Latin America Fund,
Inc., and we look forward to reviewing our outlook and strategy with you in our
upcoming quarterly report to shareholders.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Grace Pineda
Grace Pineda
Senior Vice President and
Portfolio Manager
January 6, 1999
2 & 3
<PAGE>
Merrill Lynch Latin America Fund, Inc., November 30, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill Lynch
Select Pricing(SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class
A Shares are available only to eligible investors, as detailed in the
Fund's prospectus. If you were a Class A shareholder prior to October 21,
1994, your Class A Shares were redesignated to Class D Shares on October
21, 1994. However, in the case of certain eligible investors, the shares
were simultaneously exchanged for Class A Shares.
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% if redeemed during the first year, decreasing 1% each year
thereafter to 0% after the fourth year. In addition, Class B Shares are
subject to a distribution fee of 0.75% and an account maintenance fee of
0.25%. These shares automatically convert to Class D Shares after
approximately 8 years. (There is no initial sales charge for automatic
share conversions.)
o Class C Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation of future
performance. Figures shown in the "Recent Performance Results" and "Average
Annual Total Return" tables assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date. Investment
return and principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Dividends paid to
each class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to each class,
which are deducted from the income available to be paid to shareholders.
Recent Performance Results*
<TABLE>
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
==================================================================================================
<S> <C> <C> <C>
ML Latin America Fund, Inc. Class A Shares -29.74% +23.95% -37.86%
- --------------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class B Shares -30.42 +23.64 +11.72
- --------------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class C Shares -30.46 +23.54 -40.49
- --------------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class D Shares -29.89 +23.74 +18.15
==================================================================================================
</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 11/30/98 and Class B & Class D
Shares, from 9/27/91 to 11/30/98.
Class A & Class C Shares
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** 11/98
ML Latin America Fund, Inc.+--
Class A Shares*+++ $ 9,475 $5,888
ML Latin America Fund, Inc.+--
Class C Shares* $10,000 $5,951
Emerging Markets Free Latin
America Index++ $10,000 $8,149
* 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. The starting date for the Index is 10/31/94.
+++ As a result of the implementation of the Merrill Lynch Select Pricing(SM)
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.
Class A & Class C Shares
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 9/30/98 -51.60% -54.14%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 9/30/98 -15.16 -16.31
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Year Ended 9/30/98 -52.06% -52.54%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 9/30/98 -16.03 -16.03
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1
year.
** Assuming payment of applicable contingent deferred sales charge.
4 & 5
<PAGE>
Merrill Lynch Latin America Fund, Inc., November 30, 1998
PERFORMANCE DATA (concluded)
Class B & Class D Shares
Total Return Based on a $10,000 Investment
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** 11/98
ML Latin America Fund, Inc.+--
Class B Shares* $10,000 $11,172
ML Latin America Fund, Inc.+--
Class D Shares*+++ $ 9,475 $11,195
Emerging Markets Free Latin
America Index++ $10,000 $20,019
* 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. The starting date for the Index is 9/30/91.
+++ As a result of the implementation of the Merrill Lynch Select Pricing(SM)
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.
Class B & Class D Shares
Average Annual Total Return
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 9/30/98 -52.09% -54.01%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/98 - 6.23 - 6.23
- --------------------------------------------------------------------------------
Inception (9/27/91) through 9/30/98 - 0.85 - 0.85
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after 4
years.
** Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Year Ended 9/30/98 -51.69% -54.22%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/98 - 5.49 - 6.50
- --------------------------------------------------------------------------------
Inception (9/27/91) through 9/30/98 - 0.07 - 0.83
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
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 Banking 124,342 Banco de Galicia y Buenos Aires S.A. (ADR)* $ 3,546,010 $ 2,657,810 0.9%
-----------------------------------------------------------------------------------------------------------------------
Beverages 525,586 Quilmes Industrial S.A. (ADR)* 6,119,796 4,960,218 1.8
-----------------------------------------------------------------------------------------------------------------------
Merchandising 547,144 +Grimoldi S.A. (Class B) 3,174,556 738,770 0.3
-----------------------------------------------------------------------------------------------------------------------
Oil & Gas Producers 241,669 YPF Sociedad Anonima (ADR)* 6,940,264 7,129,236 2.5
-----------------------------------------------------------------------------------------------------------------------
Real Estate 373,876 Inversiones y Representaciones S.A. (IRSA) 1,005,397 1,047,031 0.4
88,629 +Inversiones y Representaciones S.A. (IRSA)
(GDR)** 2,207,327 2,481,612 0.9
------------ ------------ ------
3,212,724 3,528,643 1.3
-----------------------------------------------------------------------------------------------------------------------
Telecommunications 30,766 Telefonica de Argentina S.A. (ADR)* 908,361 996,049 0.4
525,000 Telefonica de Argentina S.A. (Class B) 1,497,352 1,696,038 0.6
------------ ------------ ------
2,405,713 2,692,087 1.0
-----------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Argentina 25,399,063 21,706,764 7.8
====================================================================================================================================
Brazil Banking 102,599,592 Banco Bradesco S.A. (Preferred) 763,381 743,351 0.3
2,980,655 Banco Itau S.A. (Preferred) 1,764,001 1,663,090 0.6
235,676 Uniao de Bancos Brasileiros S.A. (Unibanco)
(GDR)** 6,777,915 4,919,737 1.7
15,000,000 Uniao de Bancos Brasileiros S.A. (Unibanco)
(Units) (c) 1,198,257 629,580 0.2
------------ ------------ ------
10,503,554 7,955,758 2.8
-----------------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 12,415,558 Companhia Cervejaria Brahma S.A. PN
(Preferred) 8,528,092 6,699,935 2.4
27,200 Companhia Cervejaria Brahma S.A. PN
(Preferred) (ADR)* 397,933 300,900 0.1
------------ ------------ ------
8,926,025 7,000,835 2.5
-----------------------------------------------------------------------------------------------------------------------
Diversified 641,452 Souza Cruz S.A. 4,703,988 4,166,660 1.5
-----------------------------------------------------------------------------------------------------------------------
Energy Sources 598,107 Companhia Paranaense de Energia S.A. (Copel)
(ADR)* 10,536,249 5,831,543 2.1
37,879,446 Petroleo Brasileiro S.A.--Petrobras
(Preferred) 10,069,150 5,394,225 1.9
------------ ------------ ------
20,605,399 11,225,768 4.0
-----------------------------------------------------------------------------------------------------------------------
Foreign Government Republic of Brazil:
Obligations US$43,630,821 Floating Rate Brady 'C' Bonds, 7.01%
due 4/15/2014 (a)(e) 25,174,058 28,659,996 10.3
US$ 1,884,000 Global Bonds, 10.125% due 5/15/2027 1,632,015 1,420,065 0.5
------------ ------------ ------
26,806,073 30,080,061 10.8
-----------------------------------------------------------------------------------------------------------------------
Forest Products 299,886,000 Votorantim Celulose e Papel S.A. (Preferred) 7,760,180 3,246,601 1.2
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
6 & 7
<PAGE>
Merrill Lynch Latin America Fund, Inc., November 30, 1998
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>
Brazil Machinery & 9,201,000 Weg S.A. (Preferred) $ 5,496,423 $ 4,444,187 1.6%
(concluded) Engineering
-----------------------------------------------------------------------------------------------------------------------
Metals & Steel 306,895,000 Companhia Siderurgica de Tubarao S.A.
(Preferred) 4,977,258 1,635,683 0.6
949 Companhia Siderurgica Nacional S.A.--CSN 23 19 0.0
BRL 1,099,391 Companhia Vale do Rio Doce S.A.,
0% due 12/31/2049 (d) 0 0 0.0
443,379 Companhia Vale do Rio Doce S.A. (Preferred) 8,929,532 6,461,636 2.3
------------ ------------ ------
13,906,813 8,097,338 2.9
-----------------------------------------------------------------------------------------------------------------------
Retail 258,900 Companhia Brasileira de Distribuicao Grupo
Pao de Acucar S.A. (ADR)* 4,322,646 5,194,181 1.9
-----------------------------------------------------------------------------------------------------------------------
Telecommunications 149,205,637 +Embratel Participacoes S.A. 2,353,235 1,615,318 0.6
149,205,637 +Tele Celular Sul Participacoes S.A. 294,154 205,021 0.1
149,205,637 +Tele Centro Oeste Celular Participacoes S.A. 126,486 149,106 0.0
178,700 +Tele Centro Oeste Celular Participacoes S.A.
(ADR)* 604,435 848,825 0.3
149,205,637 +Tele Centro Sul Participacoes S.A. 1,767,868 994,042 0.4
149,205,637 +Tele Leste Celular Participacoes S.A. 91,188 110,587 0.0
15,200 +Tele Leste Celular Participacoes S.A. (ADR)* 421,950 635,550 0.2
149,205,637 +Tele Nordeste Celular Participacoes S.A. 132,369 124,255 0.0
23,800 +Tele Nordeste Celular Participacoes S.A.
(ADR)* 421,629 623,262 0.2
149,205,637 +Tele Norte Celular Participacoes S.A. 73,539 77,038 0.0
33,400 +Tele Norte Celular Participacoes S.A.
(ADR)* 620,722 1,367,313 0.5
149,205,637 +Tele Norte Leste Participacoes S.A. 2,059,081 1,317,105 0.5
149,205,637 +Tele Sudeste Celular Participacoes S.A. 588,309 447,319 0.2
149,205,637 Telecomunicacoes Brasileiras S.A.--Telebras
(Ordinary) 29,415 17,396 0.0
94,512 +Telecomunicacoes Brasileiras S.A.--Telebras
(Preferred Block) (ADR)* 7,470,228 8,960,919 3.2
93,810,000 +Telecomunicacoes Brasileiras S.A.--Telebras
(Receipts) 5,193,085 5,351,420 1.9
9,845,775 Telecomunicacoes de Minas Gerais S.A.--
TELEMIG (Ordinary) 837,551 213,183 0.1
149,205,637 +Telemig Celular Participacoes S.A. 294,155 173,957 0.1
3,200 +Telemig Celular Participacoes S.A. (ADR)* 83,992 98,800 0.0
9,845,775 +Telemig Celular S.A. 343,357 155,788 0.1
149,205,637 +Telesp Celular Participacoes S.A. 1,176,618 894,637 0.3
149,205,637 +Telesp Participacoes S.A. 3,971,085 2,733,614 1.0
------------ ------------ ------
28,954,451 27,114,455 9.7
-----------------------------------------------------------------------------------------------------------------------
Textiles & Apparel 21,051,686 Companhia de Tecidos Norte de Minas S.A.--
Coteminas (Preferred) 8,532,545 2,805,021 1.0
21,491,685 Empresa Nasional de Comercio S.A. 6,971 32,216 0.0
------------ ------------ ------
8,539,516 2,837,237 1.0
-----------------------------------------------------------------------------------------------------------------------
Utilities 1,122,012 Centrais Eletricas de Santa Catarina S.A.
(CELESC) 'B' (Preferred) 591,246 710,134 0.2
75,928 Centrais Eletricas de Santa Catarina S.A.
(CELESC) (GDR)** (b) 6,069,291 4,804,929 1.7
29,288 Companhia Energetica de Minas Gerais S.A.
(CEMIG) (ADR)* 536,560 741,370 0.3
72,502 Companhia Energetica de Minas Gerais S.A.
(CEMIG) (ADR)* (b) 1,416,102 1,835,250 0.7
217,120,264 Companhia Energetica de Minas Gerais S.A.
(CEMIG) (Preferred) 7,971,058 5,496,716 2.0
163,811 Companhia Paulista de Forca e Luz S.A.
(Rights) 14,058 9,551 0.0
295,600 Globex Utilidades S.A. (Preferred) 5,080,471 1,230,846 0.4
------------ ------------ ------
21,678,786 14,828,796 5.3
-----------------------------------------------------------------------------------------------------------------------
Utilities--Electric 47,070,000 Companhia Energetica de Sao Paulo S.A.
(CESP) (Preferred) 2,475,423 1,239,860 0.5
1,213,600,000 Companhia Energetica do Ceara--Coelce
(Preferred) 5,030,127 3,688,907 1.3
58,030 Espirito Santo Centrais Eletricas S.A.
(Escelsa) 10,119,799 1,933,045 0.7
------------ ------------ ------
17,625,349 6,861,812 2.5
-----------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Brazil 179,829,203 133,053,689 47.7
====================================================================================================================================
Chile Telecommunications 303,346 Compania de Telecomunicaciones de Chile S.A.
(ADR)* 7,758,610 7,033,835 2.5
-----------------------------------------------------------------------------------------------------------------------
Utilities 75,000 Chilectra S.A. (ADR)* (b) 1,263,750 1,679,670 0.6
3,724,465 Empresa Nacional de Electricidad S.A.
(ENDESA) 2,032,168 1,321,636 0.5
2,057,425 Enersis S.A. 930,264 963,181 0.4
98,000 Enersis S.A. (ADR)* 2,451,109 2,290,750 0.8
------------ ------------ ------
6,677,291 6,255,237 2.3
-----------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Chile 14,435,901 13,289,072 4.8
====================================================================================================================================
Colombia Banking 1,664,348 Banco de Bogota S.A. 7,431,931 6,250,060 2.2
83,802 Banco Ganadero S.A. (Preferred) (ADR)* 1,884,467 764,693 0.3
------------ ------------ ------
9,316,398 7,014,753 2.5
-----------------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 488,354 Bavaria S.A. 1,797,411 2,308,180 0.8
-----------------------------------------------------------------------------------------------------------------------
Financial Services 488,354 Valores Bavaria S.A. 1,033,615 505,902 0.2
-----------------------------------------------------------------------------------------------------------------------
Merchandising 1,485,966 Gran Cadena de Almacenes Columbianos S.A.
(CADENALCO) 4,043,019 1,058,312 0.4
36,400 Gran Cadena de Almacenes Columbianos S.A.
(CADENALCO) (ADR)* (b) 611,250 54,600 0.0
------------ ------------ ------
4,654,269 1,112,912 0.4
-----------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Colombia 16,801,693 10,941,747 3.9
====================================================================================================================================
Mexico Banking 3,454,757 +Grupo Financiero Banamex--Accival, S.A. de
C.V. 'B' (Banacci) 8,174,679 4,073,355 1.5
63,000 +Grupo Financiero Banamex--Accival, S.A. de
C.V. 'L' (Banacci) 140,485 70,504 0.0
------------ ------------ ------
8,315,164 4,143,859 1.5
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
8 & 9
<PAGE>
Merrill Lynch Latin America Fund, Inc., November 30, 1998
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) (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>
Mexico Beverages 361,726 Panamerican Beverages, Inc. (Class A)
(concluded) (US Registered Shares) $ 7,061,212 $ 8,342,306 3.0%
-----------------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 204,165 Fomento Economico Mexicano, S.A. de C.V.
(Femsa) (ADR)* 2,643,519 4,848,919 1.7
-----------------------------------------------------------------------------------------------------------------------
Broadcast--Media 2,870,000 Grupo Radio Centro, S.A. de C.V. 4,647,848 1,462,530 0.5
64,400 Grupo Radio Centro, S.A. de C.V. (ADR)* 905,464 313,950 0.1
------------ ------------ ------
5,553,312 1,776,480 0.6
-----------------------------------------------------------------------------------------------------------------------
Building Materials 28,491 Cemex, S.A. de C.V 106,996 68,893 0.0
29,019 Cemex, S.A. de C.V. (ADR)* 223,537 139,738 0.1
410,030 Cemex, S.A. de C.V. 'B' 2,090,049 1,188,136 0.4
983,282 Cemex, S.A. de C.V. 'B' (ADR)* 9,152,775 5,795,857 2.1
------------ ------------ ------
11,573,357 7,192,624 2.6
-----------------------------------------------------------------------------------------------------------------------
Chemicals 181,590 Desc, S.A. de C.V. (ADR)* 3,867,304 3,427,511 1.2
-----------------------------------------------------------------------------------------------------------------------
Construction 223,600 +Grupo Tribasa, S.A. de C.V. 'A1' (ADR)* 1,477,673 447,200 0.2
-----------------------------------------------------------------------------------------------------------------------
Diversified 766,268 Alfa, S.A. de C.V. (Class A) 6,379,317 1,914,139 0.7
-----------------------------------------------------------------------------------------------------------------------
Foreign Government US$11,250,000 United Mexican States, Global Bonds,
Obligations 11.50% due 5/15/2026 12,760,417 12,093,750 4.3
-----------------------------------------------------------------------------------------------------------------------
Health & Personal Care 1,282,580 Kimberly-Clark de Mexico, S.A. de C.V. 'A' 3,555,004 3,447,382 1.2
-----------------------------------------------------------------------------------------------------------------------
Merchandising 5,040,930 +Cifra, S.A. de C.V. 'C' 5,948,765 6,124,871 2.2
-----------------------------------------------------------------------------------------------------------------------
Multi-Industry 2,078,374 Grupo Carso, S.A. de C.V. 'A1' 9,768,402 6,520,878 2.3
41,728 Grupo Carso, S.A. de C.V. (ADR)* 404,518 262,469 0.1
------------ ------------ ------
10,172,920 6,783,347 2.4
-----------------------------------------------------------------------------------------------------------------------
Steel 1,530,440 Hylsamex, S.A. de C.V. 6,957,378 2,342,760 0.9
-----------------------------------------------------------------------------------------------------------------------
Telecommunications 188,197 +Grupo Televisa, S.A. de C.V. (GDR)** 4,034,603 4,787,261 1.7
280,934 Telefonos de Mexico, S.A. de C.V. (ADR)* 13,764,733 13,080,989 4.7
------------ ------------ ------
17,799,336 17,868,250 6.4
-----------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Mexico 104,064,678 80,753,398 28.9
====================================================================================================================================
Peru Financial Services 205,372 Credicorp Ltd. S.A. 3,172,175 2,259,092 0.8
-----------------------------------------------------------------------------------------------------------------------
Food & Household 6,996,882 Consorcio Alimentos Fabril Pacifico S.A. 5,483,960 1,456,750 0.5
Products
-----------------------------------------------------------------------------------------------------------------------
Metals--Non-Ferrous 392,200 Compania de Minas Buenaventura S.A. (ADR)* 6,771,689 4,976,038 1.8
1,173,498 Minsur S.A. 2,575,220 1,954,577 0.7
------------ ------------ ------
9,346,909 6,930,615 2.5
-----------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Peru 18,003,044 10,646,457 3.8
====================================================================================================================================
Venezuela Building Materials 1,156,927 Corporacion Venezolana de Cementos I,
S.A.C.A. 505,161 505,871 0.2
764,789 Corporacion Venezolana de Cementos II,
S.A.C.A. 361,820 314,343 0.1
------------ ------------ ------
866,981 820,214 0.3
-----------------------------------------------------------------------------------------------------------------------
Food & Household 28,061,157 Mavesa S.A. 1,748,791 1,830,662 0.6
Products
-----------------------------------------------------------------------------------------------------------------------
Metal Processing 46,750 International Briquettes Holding, Inc. 610,672 169,469 0.1
-----------------------------------------------------------------------------------------------------------------------
Textiles 765,505 Sudamtex de Venezuela S.A.C.A. (ADR)* (b) 10,150,880 936,366 0.3
-----------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments in Venezuela 13,377,324 3,756,711 1.3
====================================================================================================================================
Total Investments $371,910,906 274,147,838 98.2
============
Other Assets Less Liabilities 5,060,499 1.8
------------ -----
Net Assets $279,208,337 100.0%
============ =====
====================================================================================================================================
</TABLE>
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
(a) Represents a pay-in-kind security which may pay interest/dividends
in additional face amount/shares.
(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 S.A. (Unibanco) and one preferred 'B' share of Unibanco
Holdings S.A.
(d) Received through a bonus issue from Companhia Vale do Rio Doce S.A.
As of November 30, 1998, the bonds have not commenced trading and
the coupon rate had 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.
+ Non-income producing security.
See Notes to Consolidated Financial Statements.
10 & 11
<PAGE>
Merrill Lynch Latin America Fund, Inc., November 30, 1998
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of November 30, 1998
==================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$371,910,906) (Note 1a) ................. $ 274,147,838
Foreign cash (Note 1b) .......................................................... 4,691,956
Receivables:
Dividends ..................................................................... $ 1,050,673
Securities sold ............................................................... 718,623
Interest ...................................................................... 456,030
Capital shares sold ........................................................... 431,208 2,656,534
------------
Prepaid registration fees and other assets (Note 1f) ............................ 46,225
-------------
Total assets .................................................................... 281,542,553
-------------
==================================================================================================================================
Liabilities: Payables:
Capital shares redeemed ....................................................... 1,192,537
Investment adviser (Note 2) ................................................... 238,372
Distributor (Note 2) .......................................................... 183,681 1,614,590
------------
Accrued expenses and other liabilities .......................................... 719,626
-------------
Total liabilities ............................................................... 2,334,216
-------------
==================================================================================================================================
Net Assets: Net assets ...................................................................... $ 279,208,337
=============
==================================================================================================================================
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares authorized ............ $ 247,327
Consist of: Class B Common Stock, $0.10 par value, 100,000,000 shares authorized ............ 1,869,332
Class C Common Stock, $0.10 par value, 100,000,000 shares authorized ............ 119,781
Class D Common Stock, $0.10 par value, 100,000,000 shares authorized ............ 475,506
Paid-in capital in excess of par ................................................ 512,589,359
Undistributed investment income--net ............................................ 9,768,146
Accumulated realized capital losses on investments and foreign
currency transactions--net (Note 6) ............................................. (147,546,175)
Unrealized depreciation on investments and foreign currency
transactions--net ............................................................... (98,314,939)
-------------
Net assets ...................................................................... $ 279,208,337
=============
==================================================================================================================================
Net Asset Class A--Based on net assets of $26,249,064 and 2,473,271 shares outstanding .... $ 10.61
Value: =============
Class B--Based on net assets of $190,670,116 and 18,693,317 shares outstanding .. $ 10.20
=============
Class C--Based on net assets of $12,196,478 and 1,197,805 shares outstanding .... $ 10.18
=============
Class D--Based on net assets of $50,092,679 and 4,755,061 shares outstanding .... $ 10.53
=============
==================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended November 30, 1998
==================================================================================================================================
<S> <C> <C> <C>
Investment Income Dividends (net of $1,439,049 foreign withholding tax) ........................... $ 18,483,670
(Notes 1d & 1e): Interest and discount earned .................................................... 4,594,090
-------------
Total income .................................................................... 23,077,760
-------------
==================================================================================================================================
Expenses: Investment advisory fees (Note 2) ............................................... $ 5,326,441
Account maintenance and distribution fees--Class B (Note 2) ..................... 3,621,027
Custodian fees .................................................................. 982,008
Transfer agent fees--Class B (Note 2) ........................................... 935,286
Account maintenance and distribution fees--Class C (Note 2) ..................... 250,447
Account maintenance fees--Class D (Note 2) ...................................... 226,121
Transfer agent fees--Class D (Note 2) ........................................... 192,745
Accounting services (Note 2) .................................................... 140,598
Printing and shareholder reports ................................................ 122,192
Transfer agent fees--Class A (Note 2) ........................................... 117,564
Professional fees ............................................................... 80,360
Registration fees (Note 1f) ..................................................... 70,459
Transfer agent fees--Class C (Note 2) ........................................... 65,964
Directors' fees and expenses .................................................... 37,971
Pricing fees .................................................................... 6,619
Other ........................................................................... 223,126
------------
Total expenses .................................................................. 12,398,928
-------------
Investment income--net .......................................................... 10,678,832
-------------
==================================================================================================================================
Realized & Realized loss from:
Unrealized Loss on Investments--net .............................................................. (50,996,238)
Investments & Foreign currency transactions--net ............................................ (673,407) (51,669,645)
Foreign Currency ------------
Transactions--Net Change in unrealized appreciation/depreciation on:
(Notes 1b, 1c, Investments--net .............................................................. (129,730,533)
1e & 3): Foreign currency transactions--net ............................................ (111,892) (129,842,425)
------------ -------------
Net realized and unrealized loss on investments and foreign
currency transactions ........................................................... (181,512,070)
-------------
Net Decrease in Net Assets Resulting from Operations ............................ $(170,833,238)
=============
==================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
12 & 13
<PAGE>
Merrill Lynch Latin America Fund, Inc., November 30, 1998
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended November 30,
-------------------------------
Increase (Decrease) in Net Assets: 1998 1997
==================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ......................................................... $ 10,678,832 $ 1,554,261
Realized gain (loss) on investments and foreign currency transactions--net ..... (51,669,645) 165,490,154
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net ..................................................... (129,842,425) (26,565,240)
------------ -------------
Net increase (decrease) in net assets resulting from operations ................ (170,833,238) 140,479,175
------------ -------------
==================================================================================================================================
Dividends to Investment income--net:
Shareholders Class A ...................................................................... -- (1,603,289)
(Note 1g): Class B ...................................................................... -- (12,117,748)
Class C ...................................................................... -- (579,869)
Class D ...................................................................... -- (3,322,519)
------------ -------------
Net decrease in net assets resulting from dividends to shareholders ............ -- (17,623,425)
------------ -------------
==================================================================================================================================
Capital Share Net decrease in net assets derived from capital share transactions ............. (320,024,018) (54,040,066)
Transactions ------------ -------------
(Note 4):
==================================================================================================================================
Net Assets: Total increase (decrease) in net assets ........................................ (490,857,256) 68,815,684
Beginning of year .............................................................. 770,065,593 701,249,909
------------ -------------
End of year* ................................................................... $279,208,337 $ 770,065,593
============ =============
==================================================================================================================================
*Undistributed (accumulated) investment income (loss)--net (Note 1i) ............ $ 9,768,146 $ (237,280)
============ =============
==================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
CONSOLIDATED FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A++
-----------------------------------------------------
For the
The following per share data and ratios have Period
been derived from information provided in the Oct. 21,
financial statements. For the Year Ended November 30, 1994+ to
------------------------------------------ Nov. 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ................ $ 15.10 $ 12.83 $ 10.50 $ 17.37 $ 18.22
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .............................. .38 .17 .46 .16 --
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net .............. (4.87) 2.54 1.87 (6.52) (.85)
-------- -------- -------- -------- --------
Total from investment operations .................... (4.49) 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 ...................... $ 10.61 $ 15.10 $ 12.83 $ 10.50 $ 17.37
======== ======== ======== ======== ========
===============================================================================================================================
Total Investment Based on net asset value per share .................. (29.74%) 21.79% 22.19% (37.66%) (4.67%)+++
Return:** ======== ======== ======== ======== ========
===============================================================================================================================
Ratios to Average Expenses ............................................ 1.53% 1.46% 1.48% 1.66% 1.85%*
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net ....................... 2.12% 1.03% 3.74% 1.40% (.20%)*
======== ======== ======== ======== ========
===============================================================================================================================
Supplemental Net assets, end of period (in thousands) ............ $ 26,249 $ 77,086 $ 46,369 $ 26,034 $ 10,350
Data: ======== ======== ======== ======== ========
Portfolio turnover .................................. 31.92% 84.91% 66.14% 54.86% 30.15%
======== ======== ======== ======== ========
===============================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Aggregate total investment return.
See Notes to Consolidated Financial Statements.
14 & 15
<PAGE>
Merrill Lynch Latin America Fund, Inc., November 30, 1998
CONSOLIDATED FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
The following per share data and ratios have Class B++
been derived from information provided in the ---------------------------------------------------------
financial statements. For the Year Ended November 30,
---------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ............... $ 14.66 $ 12.46 $ 10.31 $ 17.24 $ 14.39
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net .................... .23 --++++ .32 .05 (.09)
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ........... (4.69) 2.50 1.83 (6.47) 2.99
-------- -------- -------- -------- --------
Total from investment operations ................. (4.46) 2.50 2.15 (6.42) 2.90
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ......................... -- (.30) -- -- (.05)
Realized gain on investments--net .............. -- -- -- (.50) --
In excess of realized gain on investments--net.. -- -- -- (.01) --
-------- -------- -------- -------- --------
Total dividends and distributions ................ -- (.30) -- (.51) (.05)
-------- -------- -------- -------- --------
Net asset value, end of year ..................... $ 10.20 $ 14.66 $ 12.46 $ 10.31 $ 17.24
======== ======== ======== ======== ========
================================================================================================================================
Total Investment Based on net asset value per share ............... (30.42%) 20.51% 20.85% (38.32%) 20.19%
Return:** ======== ======== ======== ======== ========
================================================================================================================================
Ratios to Average Expenses ......................................... 2.57% 2.50% 2.54% 2.71% 2.51%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net .................... 1.76% (.03%) 2.69% .43% (.54%)
======== ======== ======== ======== ========
================================================================================================================================
Supplemental Net assets, end of year (in thousands) ........... $190,670 $527,520 $518,865 $505,038 $937,221
Data: ======== ======== ======== ======== ========
Portfolio turnover ............................... 31.92% 84.91% 66.14% 54.86% 30.15%
======== ======== ======== ======== ========
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class C++
---------------------------------------------------------
For the
The following per share data and ratios have Period
been derived from information provided in the Oct. 21,
financial statements. For the Year Ended November 30, 1994+ to
--------------------------------------------- Nov. 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ............ $ 14.64 $ 12.46 $ 10.31 $ 17.24 $ 18.10
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net ................... .23 (.02) .32 .03 (.02)
Realized and unrealized gain (loss) on
investments and foreign currency transactions--
net ............................................. (4.69) 2.52 1.83 (6.45) (.84)
-------- -------- -------- -------- --------
Total from investment operations ................ (4.46) 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 .................. $ 10.18 $ 14.64 $ 12.46 $ 10.31 $ 17.24
======== ======== ======== ======== ========
===============================================================================================================================
Total Investment Based on net asset value per share .............. (30.46%) 20.52% 20.85% (38.32%) (4.75%)+++
Return:** ======== ======== ======== ======== ========
===============================================================================================================================
Ratios to Average Expenses ........................................ 2.57% 2.50% 2.54% 2.72% 2.93%*
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net ................... 1.77% (.11%) 2.68% .30% (1.22%)*
======== ======== ======== ======== ========
===============================================================================================================================
Supplemental Net assets, end of period (in thousands) ........ $ 12,196 $ 37,027 $ 23,183 $ 14,659 $ 5,069
Data: ======== ======== ======== ======== ========
Portfolio turnover .............................. 31.92% 84.91% 66.14% 54.86% 30.15%
======== ======== ======== ======== ========
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
The following per share data and ratios have Class D++
been derived from information provided in the ---------------------------------------------------------
financial statements. For the Year Ended November 30,
---------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ............... $ 15.02 $ 12.77 $ 10.47 $ 17.37 $ 14.45
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ........................... .34 .11 .42 .14 .03
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ........... (4.83) 2.54 1.88 (6.53) 3.00
-------- -------- -------- -------- --------
Total from investment operations ................. (4.49) 2.65 2.30 (6.39) 3.03
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ......................... -- (.40) -- -- (.11)
Realized gain on investments--net .............. -- -- -- (.50) --
In excess of realized gain on investments--net.. -- -- -- (.01) --
-------- -------- -------- -------- --------
Total dividends and distributions ................ -- (.40) -- (.51) (.11)
-------- -------- -------- -------- --------
Net asset value, end of year ..................... $ 10.53 $ 15.02 $ 12.77 $ 10.47 $ 17.37
======== ======== ======== ======== ========
================================================================================================================================
Total Investment Based on net asset value per share ............... (29.89%) 21.40% 21.97% (37.84%) 21.07%
Return:** ======== ======== ======== ======== ========
================================================================================================================================
Ratios to Average Expenses ......................................... 1.78% 1.71% 1.74% 1.91% 1.73%
Net Assets: ======== ======== ======== ======== ========
Investment income--net ........................... 2.54% .72% 3.47% 1.18% .23%
======== ======== ======== ======== ========
================================================================================================================================
Supplemental Net assets, end of year (in thousands) ........... $ 50,093 $128,433 $112,833 $105,830 $204,907
Data: ======== ======== ======== ======== ========
Portfolio turnover ............................... 31.92% 84.91% 66.14% 54.86% 30.15%
======== ======== ======== ======== ========
================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Aggregate total investment return.
++++ Amount is less than $.01 per share.
See Notes to Consolidated Financial Statements.
16 & 17
<PAGE>
Merrill Lynch Latin America Fund, Inc., November 30, 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Latin America Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, open-end management
investment company. The Fund's financial statements are prepared in accordance
with generally accepted accounting principles which may require the use of
management accruals and estimates. The Fund offers four classes of shares under
the Merrill Lynch Select Pricing(SM) System. Shares of Class A and Class D are
sold with a front-end sales charge. Shares of Class B and Class C may be subject
to a contingent deferred sales charge. All classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and Class B and
Class C Shares also bear certain expenses related to the distribution of such
shares. Each class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities which are traded on stock
exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. Securities
traded in the over-the-counter market are valued at the last available bid price
prior to the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated by or
under the authority of the Board of Directors as the primary market. Securities
which are traded both in the over-the-counter market and on a stock exchange are
valued according to the broadest and most representative market. Options written
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. Premium or discount is amortized over the life
of the contracts.
o Foreign currency options and futures--The Fund may also purchase or sell
listed or over-the-counter foreign currency options, foreign currency futures
and related options on foreign currency futures as a short or long hedge against
possible variations in foreign exchange rates. Such transactions may be effected
with respect to hedges on non-US dollar denominated securities owned by the
Fund, sold by the Fund but not yet delivered, or committed or anticipated to be
purchased by the Fund.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
(d) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends, and
capital gains at various rates.
(e) Security transactions and investment income--Security transactions are
recorded on the dates the 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.
(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 $673,406 have been reclassified between accumulated net
realized capital losses and undistributed net investment income. 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 ("MLFD" or "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is 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.
18 & 19
<PAGE>
Merrill Lynch Latin America Fund, Inc., November 30, 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded)
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class B .................................. 0.25% 0.75%
Class C .................................. 0.25% 0.75%
Class D .................................. 0.25% --%
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith 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 year ended November 30, 1998, MLFD earned underwriting discounts and
direct commissions and MLPF&S earned dealer concessions on sales of the Fund's
Class A and Class D Shares as follows:
- --------------------------------------------------------------------------------
MLFD MLPF&S
- --------------------------------------------------------------------------------
Class A .................................. $ 27 $ 326
Class D .................................. $ 1,955 $ 28,130
- --------------------------------------------------------------------------------
For the year ended November 30, 1998, MLPF&S received contingent deferred sales
charges of $1,037,666 and $24,434 relating to transactions in Class B and Class
C Shares, respectively.
In addition, MLPF&S received $112,018 in commissions on the execution of
portfolio security transactions for the Fund for the year ended November 30,
1998.
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
year ended November 30, 1998 were $163,941,614 and $431,486,565, respectively.
Net realized losses for the year ended November 30, 1998 and net unrealized
losses as of November 30, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Losses Losses
- --------------------------------------------------------------------------------
Long-term investments .................... $(50,995,067) $(97,763,068)
Short-term investments ................... (1,171) --
Foreign currency transactions ............ (673,407) (551,871)
------------ ------------
Total .................................... $(51,669,645) $(98,314,939)
============ ============
- --------------------------------------------------------------------------------
As of November 30, 1998, net unrealized depreciation for Federal income tax
purposes aggregated $100,207,392, of which $13,150,008 related to appreciated
securities and $113,357,400 related to depreciated securities. At November 30,
1998, the aggregate cost of investments for Federal income tax purposes was
$374,355,230.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$320,024,018 and $54,040,066 for the years ended November 30, 1998 and November
30, 1997, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
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 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 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 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 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 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 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)
============ ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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)
============ ============
- --------------------------------------------------------------------------------
5. Commitments:
At November 30, 1998, the Fund had entered into a foreign exchange contract
under which it had agreed to sell foreign currency with an approximate value of
$107,000.
6. 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.
7. Subsequent Event:
On December 18, 1998, the Board of Directors declared an ordinary income
dividend in the amount of $.553057 per share for Class A, $.339205 per share for
Class B, $.320334 per share for Class C and $.503125 per share for Class D
payable on December 29, 1998 to shareholders of record as of December 18, 1998.
20 & 21
<PAGE>
Merrill Lynch Latin America Fund, Inc., November 30, 1998
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
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, 1998, 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 each of the years in the five-year
period then ended. These consolidated financial statements and the consolidated
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, 1998, by correspondence with the custodian. 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, 1998, 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, 1999
EQUITY PORTFOLIO CHANGES (unaudited)
For the Quarter Ended November 30, 1998
Additions
Embratel Participacoes S.A.
Tele Celular Sul Participacoes S.A.
Tele Centro Oeste Celular Participacoes S.A.
Tele Centro Oeste Celular Participacoes S.A. (ADR)
Tele Centro Sul Participacoes S.A.
Tele Leste Celular Participacoes S.A.
Tele Leste Celular Participacoes S.A. (ADR)
Tele Nordeste Celular Participacoes S.A.
Tele Nordeste Celular Participacoes S.A. (ADR)
Tele Norte Celular Participacoes S.A.
Tele Norte Celular Participacoes S.A. (ADR)
Tele Norte Leste Participacoes S.A.
Tele Sudeste Celular Participacoes S.A.
Telecomunicacoes Brasileiras S.A.--Telebras (Preferred Block) (ADR)
Telecomunicacoes Brasileiras S.A.--Telebras (Receipts)
Telemig Celular Participacoes S.A.
Telemig Celular Participacoes S.A. (ADR)
Telesp Celular Participacoes S.A.
Telesp Participacoes S.A.
Deletions
C.A. La Electricidad de Caracas S.A.I.C.A.--S.A.C.A.
Telecomunicacoes Brasileiras S.A.--Telebras (ADR)
PORTFOLIO INFORMATION (unaudited)
As of November 30, 1998
Percent of
Ten Largest Holdings (Equity Investments) Net Assets
Telecomunicacoes Brasileiras S.A.--Telebras* .................... 5.1%
Telefonos de Mexico, S.A. de C.V.(ADR) .......................... 4.7
Panamerican Beverages, Inc. (Class A) (US Registered Shares) .... 3.0
Companhia Energetica de Minas Gerais S.A. (CEMIG)* .............. 3.0
Cemex, S.A. de C.V.* ............................................ 2.6
YPF Sociedad Anonima (ADR) ...................................... 2.5
Compania de Telecomunicaciones de Chile S.A. (ADR) .............. 2.5
Companhia Cervejaria Brahma S.A. PN (Preferred)* ................ 2.5
Grupo Carso, S.A. de C.V.* ...................................... 2.4
Companhia Vale do Rio Doce S.A. (Preferred) ..................... 2.3
* Includes combined holdings.
Percent of
Ten Largest Industries (Equity Investments) Net Assets
Telecommunications .............................................. 19.6%
Banking ......................................................... 7.7
Utilities ....................................................... 7.6
Beverages & Tobacco ............................................. 5.0
Beverages ....................................................... 4.8
Energy Sources .................................................. 4.0
Metals & Steel .................................................. 2.9
Building Materials .............................................. 2.9
Merchandising ................................................... 2.9
Oil & Gas Producers ............................................. 2.5
22 & 23
<PAGE>
Officers and Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Roland M. Machold, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Grace Pineda, Senior Vice President and Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Barbara G. Fraser, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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--11/98
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