MERRILL LYNCH
MIDDLE EAST/
AFRICA FUND, INC.
[FUND LOGO]
STRATEGIC
Performance
Annual Report
November 30, 1997
Investing in emerging market securities involves a number of risk
factors and special considerations, including restrictions on foreign
investments and on repatriation of capital invested in emerging
markets, currency fluctuations, and potential price volatility and
less liquidity of securities traded in emerging markets. In addition,
there may be less publicly available information about the issuers of
securities, and such issuers may not be subject to accounting,
auditing and financial reporting standards and requirements comparable
to those to which US companies are subject. Therefore, the Fund is
designed as a long-term investment for investors capable of assuming
the risks of investing in emerging markets. The Fund should be
considered as a vehicle for diversification and not as a complete
investment program. Please refer to the prospectus for details.
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless accompanied
or preceded by the Fund's current prospectus. Past performance results
shown in this report should not be considered a representation of
future performance. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Statements and other information herein
are as dated and are subject to change.
Merrill Lynch
Middle East/Africa
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #18413 -- 11/97
[RECYCLE LOGO]
Printed on post-consumer recycled paper
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
[GRAPHIC OMITTED: LINE CHART OF ASSET ALLOCATION AS A PERCENTAGE* OF
NET ASSETS AS OF NOVEMBER 30, 1997]
Asset Allocation as
A Percentage* of
Net Assets as of
November 30, 1997
A map illustrating the following percentages:
GHANA 3.2%
MOROCCO 4.2%
SOUTH AFRICA 36.3%
BOTSWANA 1.3%
TURKEY 14.7%
ISRAEL 6.8%
LEBANON 4.8%
JORDAN 1.1%
EGYPT 13.0%
ZIMBABWE 2.7%
* Total may not equal 100%.
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1997
DEAR SHAREHOLDER
During the three-month period ended November 30, 1997, total returns
for Merrill Lynch Middle East/Africa Fund, Inc.'s Class A, Class B,
Class C and Class D Shares were - 4.03%, - 4.31%, - 4.31% and - 4.12%,
respectively. (Investment results shown do not reflect sales charges and
would be lower if sales charges were included. Complete performance
information, including average annual total returns, can be found on pages
3 -- 5 of this report to shareholders.) The unmanaged Morgan Stanley
Capital International Indexes for the largest equity markets in the
region -- Israel, South Africa and Turkey -- registered returns of
- - 2.44%, - 16.58% and +27.69%, respectively, for the three months
ended November 30, 1997. In addition, the unmanaged J.P. Morgan
Securities South African Bond Index was down 0.16% (in US dollars) for
the same three-month period.
Investment Review and Activities
As shown above, the performance of the major markets in this region
varied widely during the last three months. At November 30, 1997, the
Fund's largest weighting was in South African stocks. This market was
negatively affected by the turmoil in Asian markets, especially the
steep decline in the Hong Kong stock market in late October.
Furthermore, negative sentiment has been exacerbated by weak gold
prices. However, the underlying fundamentals of the South African
economy, in our view, remain sound. Inflation is slowing; the current
account deficit has decreased; and foreign exchange reserves are at
record highs. The outlook is for a continued decline in interest rates,
which should in turn stimulate growth in both private consumption and
investment. Despite the sharp decline in the stock market, the South
African rand remained relatively stable during the November quarter.
After declining by approximately 19% at the end of October, the market
recovered somewhat, with financial service companies and
large-capitalization industrial companies leading the recovery. Among
our holdings in these sectors were bank stocks Nedcor Ltd. and First
National Bank Holdings Ltd., and Johnnies Industrial Corp., Ltd., a
holding company that provides exposure to the South African consumer
market through its blue chip companies in the beverages and food
sectors. We also held a large position in fixed-income instruments,
most notably Republic of South Africa bonds.
In the Israeli market, the main factors affecting investor sentiment
were political. These included conflicts with the Palestinian
Authority resulting from the closure of the territories as well as the
tension along Israel's northern border. Other factors affecting the
trading climate were the expiration of Maof options, strikes in the
economy during September (the banks and the stock exchange were shut
down as part of the strike) and activity by foreign investors. On a
positive note, the International Financial Corporation's (IFC)
decision to include Israel in its index of emerging markets as of
November 3, 1997 could lead to an increase in activity by foreign
investors on the Tel Aviv Stock Exchange.
The Turkish market, which appreciated by almost 28%, was one of the
big winners during the November quarter as investors became more
comfortable with the new coalition government. The rally in the market
was based on the confidence generated by the current coalition and
1998 expectations, rather than any tangible economic improvements. The
outlook for lower inflation in 1998 is positive, but the exact
measures for achieving such a goal are not certain. Furthermore,
investors seem to believe that further privatization will continue in
an orderly manner.
Among the smaller markets where the Fund has significant holdings was
Egypt, which declined by 5.76% during the November quarter. Many
investors remained focused on such negative developments as the slow
progress of Middle Eastern negotiations and domestic violence within
Egypt, overlooking the progress that Egypt made during the November
quarter on decreasing its budget deficit and controlling inflation.
The government's privatization program is expected to get back on
track with the appointment of a new economic minister. Also, we expect
Egypt's recent inclusion in the IFC global investable index to raise
the country's investment profile. One of our new holdings in Egypt was
Paints & Chemicals Industries (PACHIN), the largest manufacturer of
paints and inks in Egypt. PACHIN, a recently privatized company,
dominates the decorative paints and industrial paints sectors with
estimated market shares of 37% and 14%, respectively. We believe that
the demand for paints and inks is likely to rise sharply as Egypt
continues to experience strong economic and industrial growth.
Fiscal Year in Review
During the 12-month period ended November 30, 1997, total returns for
Merrill Lynch Middle East/Africa Fund, Inc.'s Class A, Class B, Class
C and Class D Shares were +22.43%, +21.02%, +21.42% and +21.95%,
respectively. The unmanaged Morgan Stanley Capital International
Indexes for the largest equity markets in the region -- Israel, South
Africa and Turkey -- registered returns of +31.36%, - 8.35% and +79.90%,
respectively, for the same one-year period. In addition, the unmanaged
J.P. Morgan Securities South African Bond Index rose 17.52% (in US
dollar terms). Beneficial to the Fund's performance during the fiscal
year were the Fund's overweighted position in Egypt, its underweighted
position in South Africa and stock selection in Turkey throughout the
year.
In Conclusion
The quarter ended November 30, 1997 has been one of much volatility in
the markets in the Middle East and Africa. This in itself is not
unexpected. Nevertheless, our long-term outlook for the region remains
positive. However, we would caution our shareholders that the
volatility and sharp market declines we have witnessed during this
quarter may continue. With this in mind, we thank you for your
investment in Merrill Lynch Middle East/Africa Fund, Inc., and we look
forward to reviewing our outlook and strategy with you in our next
report to shareholders.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/GRACE PINEDA
Grace Pineda
Vice President and Portfolio Manager
January 8, 1998
PORTFOLIO INFORMATION
Percent of
Ten Largest Holdings (Equity Investments) Net Assets
Northern Electric Telekomunikasyon A.S. (NETAS) 5.1%
Akcansa Cimento A.S. 3.6
Torah Portland Cement Company, Egypt 3.4
Guiness Ghana Ltd. 3.2
Al-Ahram (Pyramids) Beverages 3.0
South African Breweries Ltd. 2.9
Paints & Chemicals Industries (PACHIN) (GDR) 2.8
Sasol Ltd. 2.7
Banque Libanaise 2.6
Johnnies Industrial Corp., Ltd. 2.4
Percent of
Ten Largest Industries Net Assets
Banking 19.1%
Diversified 6.8
Beverages & Tobacco 6.0
Beverages 5.9
Telecommunications & Equipment 5.1
Building Products 3.6
Engineering & Construction 3.4
Industrial -- Other 2.8
Merchandising 2.4
Building & Construction 2.3
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
[bullet] Class A Shares incur a maximum initial sales charge (front-
end load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
[bullet] Class B Shares are subject to a maximum contingent deferred
sales charge of 4% if redeemed during the first year, decreasing 1%
each year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to Class
D Shares after approximately 8 years. (There is no initial sales
charge for automatic share conversions.)
[bullet] Class C Shares are subject to a distribution fee of 0.75% and
an account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
[bullet] Class D Shares incur a maximum initial sales charge of 5.25%
and an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" tables assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date. Investment
return and principal value of shares will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
Dividends paid to each class of shares will vary because of the
different levels of account maintenance, distribution and transfer
agency fees applicable to each class, which are deducted from the
income available to be paid to shareholders.
[GRAPHIC OMITTED: LINE CHART OF TOTAL RETURN BASED ON A $10,000
INVESTMENT]
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class A
and Class B Shares compared to growth of an investment in the Morgan
Stanley Capital International Index-Israel, Morgan Stanley Capital
International Index-Turkey, Morgan Stanley Capital International
Index-South Africa Index. Beginning and ending values are:
12/30/94** 11/97
ML Middle East/Africa Fund, Inc.+--
Class A Shares* $9,475 $11,850
ML Middle East/Africa Fund, Inc.+--
Class B Shares* $10,000 $11,924
Morgan Stanley Capital International
Index-Israel++ $10,000 $9,236
Morgan Stanley Capital International
Index-Turkey++ $10,000 $15,086
Morgan Stanley Capital International
Index-South Africa++ $10,000 $24,196
A line graph depicting the growth of an investment in the Fund's Class C
and Class D Shares compared to growth of an investment in the Morgan
Stanley Capital International Index-Israel, Morgan Stanley Capital
International Index-Turkey, Morgan Stanley Capital International
Index-South Africa Index. Beginning and ending values are:
12/30/94** 11/97
ML Middle East/Africa Fund, Inc.+--
Class C Shares* $10,000 $12,161
ML Middle East/Africa Fund, Inc.+--
Class D Shares* $9,475 $11,753
Morgan Stanley Capital International
Index-Israel++ $10,000 $9,236
Morgan Stanley Capital International
Index-Turkey++ $10,000 $15,086
Morgan Stanley Capital International
Index-South Africa++ $10,000 $24,196
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ ML Middle East/Africa Fund, Inc. invests primarily in equity and debt
securities of corporate and governmental issuers in countries located
in the Middle East and Africa.
++ This unmanaged Index measures the total returns of countries within
the Middle East/Africa region.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/97 +30.14% +20.93%
Inception (12/30/94)
through 9/30/97 +11.06 + 8.91
* Maximum sales charge is 5.25%. Maximum redemption fee is 2% and is
reduced to 0% after 1 year.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/97 +28.68% +22.18%
Inception (12/30/94)
through 9/30/97 + 9.88 + 9.26
* Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years. Maximum redemption fee is 2% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/97 +29.06% +25.55%
Inception (12/30/94)
through 9/30/97 +10.03 +10.03
* Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year. Maximum redemption fee is 2% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 9/30/97 +29.65% +20.47%
Inception (12/30/94)
through 9/30/97 +10.74 + 8.59
* Maximum sales charge is 5.25%. Maximum redemption fee is 2% and is
reduced to 0% after 1 year.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Recent Performance Results*
12 Month 3 Month
11/30/97 8/31/97 11/30/96 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Middle East/Africa Fund, Inc. Class A Shares $10.96 $11.42 $9.40 +16.60% - 4.03%
ML Middle East/Africa Fund, Inc. Class B Shares 10.87 11.36 9.31 +16.76 - 4.31
ML Middle East/Africa Fund, Inc. Class C Shares 10.89 11.38 9.31 +16.97 - 4.31
ML Middle East/Africa Fund, Inc. Class D Shares 10.93 11.40 9.38 +16.52 - 4.12
ML Middle East/Africa Fund, Inc. Class A Shares -- Total Return +22.43(1) - 4.03
ML Middle East/Africa Fund, Inc. Class B Shares -- Total Return +21.02(2) - 4.31
ML Middle East/Africa Fund, Inc. Class C Shares -- Total Return +21.42(3) - 4.31
ML Middle East/Africa Fund, Inc. Class D Shares -- Total Return +21.95(4) - 4.12
* Investment results shown do not reflect sales charges; results shown would be lower if a sales charge was included.
(1) Percent change includes reinvestment of $0.436 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.319 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.332 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.406 per share ordinary income dividends.
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1997
SCHEDULE OF INVESTMENTS (in US dollars)
Shares Held/ Value Percent of
AFRICA Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C>
Botswana Multi-Industry 106,802 Sechaba Breweries Ltd. (e) $85,845 $112,356 1.3%
---------- ---------- ------
Total Investments in Botswana 85,845 112,356 1.3
========== ========== ======
Ghana Beverages & Tobacco 950,048 Guiness Ghana Ltd. 165,147 277,115 3.2
---------- ---------- ------
Total Investments in Ghana 165,147 277,115 3.2
========== ========== ======
Morocco Banking 3,428 Banque Marocaine du Commerce
Exterieure (GDR)(b) 116,045 208,474 2.4
Building Materials 2,000 Les Ciments de l'Oriental 87,576 160,502 1.8
---------- ---------- ------
Total Investments in Morocco 203,621 368,976 4.2
========== ========== ======
South Africa Banking 4,264 Nedcor Ltd. (GDR)(b)(d) 81,032 96,579 1.1
Beverages 10,231 South African Breweries Ltd. 298,069 250,770 2.9
Beverages & Tobacco 20,200 Rembrandt Group Ltd. 212,748 154,985 1.8
Broadcasting &
Publishing 14,600 Nasionale Pers Beperk 133,662 120,288 1.4
Diversified 26,300 Billiton PLC (c) 95,069 64,670 0.7
16,000 +Billiton PLC (ADR)(c) 58,450 39,200 0.4
19,596 Johnnies Industrial Corp., Ltd. 238,518 213,114 2.4
10,350 Rembrandt Controlling Investments
Ltd. 71,363 51,590 0.6
23,100 Sasol Ltd. 297,437 232,903 2.7
---------- ---------- ------
760,837 601,477 6.8
Entertainment 435 Sun International (Bophuthatswana)
Ltd. 552 179 0.0
Financial Services 13,050 First National Bank Holdings Ltd. 80,725 110,206 1.3
Foreign Government ZAL 6,950,000 South African Bond, 12% due
Obligations 2/28/2005 1,416,938 1,293,246 14.7
Merchandising 34,620 Pick'n Pay Stores Ltd. 39,456 54,907 0.6
433 Pick'n Pay Stores Ltd. (N Shares) 603 598 0.0
---------- ---------- ------
40,059 55,505 0.6
Metals -- Non-Ferrous 63,075 Gencor Limited 158,278 98,088 1.1
22,571 Gencor Limited (ADR)(a) 55,535 35,089 0.4
---------- ---------- ------
213,813 133,177 1.5
Mining 2,660 Anglo American Corp. of South
Africa, Ltd. (ADR)(a) 167,591 108,727 1.2
2,400 De Beers Centenary AG 77,488 50,422 0.6
1,370 Gold Fields of South Africa Ltd. 35,013 20,317 0.2
36 JCI Company Limited 367 133 0.0
---------- ---------- ------
280,459 179,599 2.0
Retail 113,690 Metro Cash & Carry Ltd. 99,977 106,548 1.2
13,494 Pepkor Ltd. (Ordinary) 63,714 83,382 1.0
---------- ---------- ------
163,691 189,930 2.2
---------- ---------- ------
Total Investments in South Africa 3,682,585 3,185,941 36.3
========== ========== ======
Zimbabwe Beverages & Tobacco 80,656 +Delta Corporation 49,265 84,842 1.0
Entertainment & Leisure 183,782 Zimbabwe Sun International 72,119 55,961 0.6
Real Estate 125,869 Hippo Valley Estates 47,302 100,173 1.1
---------- ---------- ------
Total Investments in Zimbabwe 168,686 240,976 2.7
========== ========== ======
Total Investments in Africa 4,305,884 4,185,364 47.7
========== ========== ======
MIDDLE
EAST
Egypt Banking 5,110 Commercial International Bank
(Egypt) S.A.E. (CIB) 60,437 103,917 1.2
7,000 Commercial International Bank
(Egypt) S.A.E. (CIB) (GDR)(b) 185,500 142,625 1.6
---------- ---------- ------
245,937 246,542 2.8
Beverages 8,989 +Al-Ahram (Pyramids) Beverages
(GDR)(b)(d) 139,329 267,423 3.0
Engineering & Construction 11,810 Torah Portland Cement Company,
Egypt 215,720 299,688 3.4
Housing 1,270 Nasr City Company for Housing &
Reconstruction 27,807 86,089 1.0
Industrial -- Other 24,300 +Paints & Chemicals Industries
(PACHIN) (GDR)(b) 285,525 243,000 2.8
---------- ---------- ------
Total Investments in Egypt 914,318 1,142,742 13.0
========== ========== ======
Israel Banking 86,852 Bank Hapoalim Ltd. 139,943 212,350 2.4
102,072 Bank Leumi Le-Israel 143,402 163,197 1.9
---------- ---------- ------
283,345 375,547 4.3
Food Chain 20,607 Supersol Ltd. 55,496 58,022 0.7
Merchandising 17,458 +Blue Square Chain Stores Properties
and Investments Ltd. 95,151 159,571 1.8
---------- ---------- ------
Total Investments in Israel 433,992 593,140 6.8
========== ========== ======
Jordan Transportation Services 6,406 +Aramex International Limited
(ADR)(a) 48,286 93,688 1.1
---------- ---------- ------
Total Investments in Jordan 48,286 93,688 1.1
========== ========== ======
Lebanon Banking 6,300 Banque Audi (GDR)(b) 179,550 189,787 2.2
12,000 +Banque Libanaise (GDR)(b)(d) 145,500 231,000 2.6
---------- ---------- ------
Total Investments in Lebanon 325,050 420,787 4.8
========== ========== ======
Turkey Banking 2,959,000 Akbank T.A.S. (Ordinary) 188,496 192,959 2.2
4,290,000 Yapi ve Kredi Bankasi A.S. 103,740 133,843 1.5
---------- ---------- ------
292,236 326,802 3.7
Building & Construction 2,335,701 Adana Cimento Sanayii (Class A) 71,880 203,084 2.3
Building Products 1,823,053 Akcansa Cimento A.S. 274,573 317,020 3.6
Telecommunications 1,133,695 +Northern Electric Telekomunikasyon
& Equipment A.S. (NETAS) 427,433 446,474 5.1
---------- ---------- ------
Total Investments in Turkey 1,066,122 1,293,380 14.7
========== ========== ======
Total Investments in the Middle
East 2,787,768 3,543,737 40.4
========== ========== ======
<CAPTION>
Short-Term Face
Securities Amount
<S> <C> <C> <C> <C> <C> <C>
US Government US$ 815,000 Federal Home Loan Mortgage Corp.,
Agency Obligations* 5.63% due 12/01/1997 814,745 814,745 9.3
---------- ---------- ------
Total Investments in Short-Term
Securities 814,745 814,745 9.3
========== ========== ======
Total Investments $7,908,397 8,543,846 97.4
==========
Other Assets Less 223,654 2.6
Liabilities ---------- ------
Net Assets $8,767,500 100.0%
========== ======
* Certain US Government Agency Obligations are traded on a discount
basis; the interest rate shown is the discount rate paid at the time of
purchase by the Fund.
(a) American Depositary Receipts (ADR).
(b) Global Depositary Receipts (GDR).
(c) Consistent with the general policy of the Securities and Exchange
Commission, the nationality or domicile of an issuer for determination
of foreign issuer status may be (i) the country under whose laws the
issue is organized, (ii) the country in which the issuer's securities
are principally traded, or (iii) the country in which the issuer derives
a significant proportion (at least 50%) of its revenue or profits from
goods produced or sold, investments made, or services performed in the
country, or in which at least 50% of the assets of the issuer are situated.
(d) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(e) Formerly known as Sechaba Investment Trust.
+ Non-income producing securities.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
As of November 30, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $7,908,397) (Note 1a) $8,543,846
Cash 261
Foreign cash (Note 1b) 17,159
Receivables:
Interest $42,708
Securities sold 31,993
Dividends 23,557
Capital shares sold 5,683 103,941
----------
Deferred organization expenses (Note 1f) 124,774
Prepaid registration fees and other assets (Note 1f) 99,624
----------
Total assets 8,889,605
----------
Liabilities: Payables:
Capital shares redeemed 26,692
Distributor (Note 2) 5,434 32,126
----------
Accrued expenses and other liabilities 89,979
----------
Total liabilities 122,105
----------
Net Assets: Net assets $8,767,500
==========
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000 shares
Consist of: authorized $9,026
Class B Shares of Common Stock, $0.10 par value, 100,000,000 shares
authorized 54,716
Class C Shares of Common Stock, $0.10 par value, 100,000,000 shares
authorized 6,632
Class D Shares of Common Stock, $0.10 par value, 100,000,000 shares
authorized 10,147
Paid-in capital in excess of par 8,358,173
Undistributed investment income -- net 236,136
Accumulated realized capital losses on investments and foreign currency
transactions -- net (Note 6) (540,418)
Unrealized appreciation on investments and foreign currency transactions
-- net 633,088
----------
Net assets $8,767,500
==========
Net Asset Class A -- Based on net assets of $988,906 and 90,262 shares outstanding $10.96
Value: ==========
Class B -- Based on net assets of $5,947,031 and 547,159 shares outstanding $10.87
==========
Class C -- Based on net assets of $722,374 and 66,318 shares outstanding $10.89
==========
Class D -- Based on net assets of $1,109,189 and 101,468 shares outstanding $10.93
==========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Year Ended November 30, 1997
<S> <C> <C> <C>
Investment Interest and discount earned $241,400
Income Dividends (net of $7,960 foreign withholding tax) 178,710
(Notes 1d & 1e): ----------
Total income 420,110
----------
Expenses: Registration fees (Note 1f) $89,995
Investment advisory fees (Note 2) 85,890
Professional fees 73,600
Accounting services (Note 2) 66,132
Printing and shareholders reports 65,219
Account maintenance and distribution fees -- Class B (Note 2) 60,469
Amortization of organization expenses (Note 1f) 59,892
Custodian fees 49,741
Directors' fees and expenses 37,437
Transfer agent fees -- Class B (Note 2) 12,582
Account maintenance and distribution fees -- Class C (Note 2) 6,751
Pricing fees 3,862
Account maintenance fees -- Class D (Note 2) 2,614
Transfer agent fees -- Class D (Note 2) 1,782
Transfer agent fees -- Class C (Note 2) 1,478
Transfer agent fees -- Class A (Note 2) 1,384
Other 4,811
----------
Total expenses before reimbursement 623,639
Reimbursement of expenses (Note 2) (510,888)
----------
Total expenses after reimbursement 112,751
----------
Investment income -- net 307,359
----------
Realized & Realized gain (loss) from:
Unrealized Gain (Loss) Investments -- net 139,643
On Investments & Foreign currency transactions -- net (36,938) 102,705
Foreign Currency ----------
Transactions -- Net Change in unrealized appreciation/depreciation on:
(Notes 1b, 1c, Investments -- net 990,420
1e & 3): Foreign currency transactions -- net 2,094 992,514
---------- ----------
Net realized and unrealized gain on investments and foreign currency
transactions 1,095,219
----------
Net Increase in Net Assets Resulting from Operations $1,402,578
==========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended
November 30,
Increase (Decrease) in Net Assets: 1997 1996
<S> <C> <C> <C>
Operations: Investment income -- net $307,359 $324,969
Realized gain (loss) on investments and foreign currency transactions -- net 102,705 (723,989)
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions -- net 992,514 (34,017)
----------- -----------
Net increase (decrease) in net assets resulting from operations 1,402,578 (433,037)
----------- -----------
Dividends & Investment income -- net:
Distributions to Class A (18,402) (51,662)
Shareholders Class B (194,967) (541,025)
(Note 1g): Class C (26,076) (71,137)
Class D (41,949) (121,684)
Realized gain on investments -- net:
Class A -- (1,581)
Class B -- (18,968)
Class C -- (2,502)
Class D -- (3,830)
----------- -----------
Net decrease in net assets resulting from dividends and distributions to
shareholders (281,394) (812,389)
----------- -----------
Capital Share Net decrease in net assets derived from capital share transactions (112,890) (1,925,740)
Transactions (Note 4): ----------- -----------
Net Assets: Total increase (decrease) in net assets 1,008,294 (3,171,166)
Beginning of year 7,759,206 10,930,372
----------- -----------
End of year* $8,767,500 $7,759,206
=========== ===========
*Undistributed investment income -- net (Note 1h) $236,136 $247,109
=========== ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Class A Class B
For the For the
Period Period
The following per share data Dec. 30, Dec. 30,
and ratios have been derived For the Year 1994++ to For the Year 1994++ to
from information provided in Ended Nov. 30, Nov. 30, Ended Nov. 30, Nov. 30,
the financial statements. 1997+ 1996+ 1995 1997+ 1996+ 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Net asset value, beginning of period $9.40 $10.66 $10.00 $9.31 $10.56 $10.00
Performance: -------- -------- -------- -------- -------- --------
Investment income -- net .48 .42 .57 .37 .32 .79
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net 1.52 (.80) .09 1.51 (.80) (.23)
-------- -------- -------- -------- -------- --------
Total from investment operations 2.00 (.38) .66 1.88 (.48) .56
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income -- net (.44) (.85) -- (.32) (.74) --
Realized gain on investments -- net -- (.03) -- -- (.03) --
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.44) (.88) -- (.32) (.77) --
-------- -------- -------- -------- -------- --------
Net asset value, end of period $10.96 $9.40 $10.66 $10.87 $9.31 $10.56
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value per share 22.43% (4.17%) 6.60%+++++ 21.02% (5.14%) 5.60%+++++
Return:** ======== ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .47% .47% .00%* 1.51% 1.50% 1.01%*
Net Assets: ======== ======== ======== ======== ======== ========
Expenses 6.36% 4.84% 4.63%* 7.46% 5.90% 5.68%*
======== ======== ======== ======== ======== ========
Investment income -- net 4.35% 4.24% 8.43%* 3.40% 3.15% 8.33%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $989 $399 $648 $5,947 $5,699 $7,701
Data: ======== ======== ======== ======== ======== ========
Portfolio turnover 78.12% 46.36% 40.97% 78.12% 46.36% 40.97%
======== ======== ======== ======== ======== ========
Average commission rate paid++ $.0012 $.0022 -- $.0012 $.0022 --
======== ======== ======== ======== ======== ========
<CAPTION>
Class C Class D
For the For the
Period Period
The following per share data Dec. 30, Dec. 30,
and ratios have been derived For the Year 1994++ to For the Year 1994++ to
from information provided in Ended Nov. 30, Nov. 30, Ended Nov. 30, Nov. 30,
the financial statements. 1997+ 1996+ 1995 1997+ 1996+ 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Net asset value, beginning of period $9.31 $10.56 $10.00 $9.38 $10.63 $10.00
Performance: -------- -------- -------- -------- -------- --------
Investment income -- net .36 .31 .83 .46 .40 .77
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net 1.55 (.79) (.27) 1.50 (.80) (.14)
-------- -------- -------- -------- -------- --------
Total from investment operations 1.91 (.48) .56 1.96 (.40) .63
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income -- net (.33) (.74) -- (.41) (.82) --
Realized gain on investments -- net -- (.03) -- -- (.03) --
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.33) (.77) -- (.41) (.85) --
-------- -------- -------- -------- -------- --------
Net asset value, end of period $10.89 $9.31 $10.56 $10.93 $9.38 $10.63
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value per share 21.42% (5.16%) 5.60%+++++ 21.95% (4.31%) 6.30%+++++
Return:** ======== ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.52% 1.50% 1.01%* .72% .72% .25%*
Net Assets: ======== ======== ======== ======== ======== ========
Expenses 7.47% 5.91% 5.67%* 6.67% 5.08% 4.89%*
======== ======== ======== ======== ======== ========
Investment income -- net 3.33% 3.14% 8.45%* 4.18% 4.01% 9.07%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $723 $692 $1,012 $1,109 $969 $1,569
Data: ======== ======== ======== ======== ======== ========
Portfolio turnover 78.12% 46.36% 40.97% 78.12% 46.36% 40.97%
======== ======== ======== ======== ======== ========
Average commission rate paid++ $.0012 $.0022 -- $.0012 $.0022 --
======== ======== ======== ======== ======== ========
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Based on average outstanding shares.
++ For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average
commission rate per share for purchases and sales of equity securities. The "Average Commission Rate
Paid" includes commissions paid in foreign currencies, which have been converted into US dollars using
the prevailing exchange rate on the date of the transaction. Such conversions may significantly affect
the rate shown.
++++ Commencement of operations.
+++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1997
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Middle East/Africa Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a non-diversified, open-end
management investment company. The Fund offers four classes of shares
under the Merrill Lynch Select Pricingsm System. Shares of Class A and
Class D are sold with a front-end sales charge. Shares of Class B and
Class C may be subject to a contingent deferred sales charge. All
classes of shares have identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that Class B, Class C
and Class D Shares bear certain expenses related to the account
maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each class
has exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of securities -- Portfolio securities which are traded on
stock exchanges are valued at the last sale price on the exchange on
which such securities are traded, as of the close of business on the
day the securities are being valued or, lacking any sales, at the last
available bid price. Securities traded in the over-the-counter market
are valued at the last available bid price prior to the time of
valuation. In cases where securities are traded on more than one
exchange, the securities are valued on the exchange designated by or
under the authority of the Board of Directors as the primary market.
Securities which are traded both in the over-the-counter market and on a
stock exchange are valued according to the broadest and most
representative market. Options written are valued at the last sale
price in the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last asked price. Options
purchased are valued at the last sale price in the case of
exchange-traded options or, in the case of options traded in the
over-the-counter market, the last bid price. Short-term securities are
valued at amortized cost, which approximates market value. Other
investments, including futures contracts and related options, are
stated at market value. Securities and assets for which market value
quotations are not available are valued at their fair value as
determined in good faith by or under the direction of the Fund's Board
of Directors.
(b) Foreign currency transactions -- Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or valuing
(unrealized) assets or liabilities expressed in foreign currencies
into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(c) Derivative financial instruments -- The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in equity, debt and currency
markets. Losses may arise due to changes in the value of the contract
or if the counterparty does not perform under the contract.
[bullet] Options -- The Fund is authorized to write and purchase call
and put options. When the Fund writes an option, an amount equal to
the premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written.
When a security is purchased or sold through an exercise of an option,
the related premium paid (or received) is added to (or deducted from)
the basis of the security acquired or deducted from (or added to) the
proceeds of the security sold. When an option expires (or the Fund
enters into a closing transaction), the Fund realizes a gain or loss
on the option to the extent of the premiums received or paid (or gain
or loss to the extent the cost of the closing transaction exceeds the
premium paid or received).
Written and purchased options are non-income producing investments.
[bullet] Forward foreign exchange contracts -- The Fund is authorized
to enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. Such contracts
are not entered on the Fund's records. However, the effect on operations
is recorded from the date the Fund enters into such contracts. Premium
or discount is amortized over the life of the contracts.
[bullet] Foreign currency options and futures -- The Fund may also
purchase or sell listed or over-the-counter foreign currency options,
foreign currency futures and related options on foreign currency
futures as a short or long hedge against possible variations in
foreign exchange rates. Such transactions may be effected with respect
to hedges on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated to
be purchased by the Fund.
[bullet] Financial futures contracts -- The Fund may purchase or sell
stock index futures contracts and options on such futures contracts.
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) Deferred organization expenses and prepaid registration fees --
Deferred organization expenses are charged to expense on a
straight-line basis over a five-year period. 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) 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 $36,938
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 and Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds Distributor,
Inc. ("MLFD" or "Distributor"), a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. As compensation
for its services to the Fund, MLAM receives monthly compensation at the
annual rate of 1.00% of the average daily net assets of the Fund. For
the year ended November 30, 1997, MLAM earned fees of $85,890, all of
which was voluntarily waived. MLAM also reimbursed the Fund for
additional expenses of $424,998.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund pays
the Distributor ongoing account maintenance and distribution fees. The
fees are accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce,
Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides
account maintenance and distribution services to the Fund. The ongoing
account maintenance fee compensates the Distributor and MLPF&S for
providing account maintenance services to Class B, Class C and Class D
shareholders. The ongoing distribution fee compensates the Distributor
and MLPF&S for providing shareholder and distribution-related services
to Class B and Class C shareholders.
For the year ended November 30, 1997, MLFD earned underwriting discounts
and direct commissions and MLPF&S earned dealer concessions on sales of
the Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class D $637 $5,659
For the year ended November 30, 1997, MLPF&S received contingent
deferred sales charges of $45,331 and $1,686 relating to transactions in
Class B and Class C Shares, respectively.
In addition, MLPF&S received $2,930 in commissions on the execution of
portfolio security transactions for the Fund for the year ended November
30, 1997.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for year ended November 30, 1997 were $6,432,529 and $5,970,231,
respectively.
Net realized and unrealized gains (losses) as of November 30, 1997
were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $139,643 $635,449
Foreign currency transactions (36,938) (2,361)
------------ ------------
Total $102,705 $633,088
============ ============
As of November 30, 1997, net unrealized appreciation for Federal
income tax purposes aggregated $635,449, of which $1,320,368 related
to appreciated securities and $684,919 related to depreciated
securities. The aggregate cost of investments at November 30, 1997
for Federal income tax purposes was $7,908,397.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$112,890 and $1,925,740 for the years ended November 30, 1997 and
November 30, 1996, respectively.
Class A Shares for the Year Dollar
Ended November 30, 1997 Shares Amount
Shares sold 70,183 $762,817
Shares issued to shareholders in
reinvestment of dividends 770 6,712
------------ ------------
Total issued 70,953 769,529
Shares redeemed (23,107) (254,547)
------------ ------------
Net increase 47,846 $514,982
============ ============
Class A Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 15,446 $161,605
Shares issued to shareholders in
reinvestment of dividends and
distributions 2,358 26,229
------------ ------------
Total issued 17,804 187,834
Shares redeemed (36,243) (366,373)
------------ ------------
Net decrease (18,439) $(178,539)
============ ============
Class B Shares for the Year Dollar
Ended November 30, 1997 Shares Amount
Shares sold 139,528 $1,537,142
Shares issued to shareholders in
reinvestment of dividends 5,639 49,231
------------ ------------
Total issued 145,167 1,586,373
Shares redeemed (210,113) (2,174,324)
------------ ------------
Net decrease (64,946) $(587,951)
============ ============
Class B Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 82,351 $854,084
Shares issued to shareholders in
reinvestment of dividends and
distributions 6,020 63,443
------------ ------------
Total issued 88,371 917,527
Shares redeemed (205,679) (2,013,667)
------------ ------------
Net decrease (117,308) $(1,096,140)
============ ============
Class C Shares for the Year Dollar
Ended November 30, 1997 Shares Amount
Shares sold 40,916 $447,258
Shares issued to shareholders in
reinvestment of dividends 1,129 9,847
------------ ------------
Total issued 42,045 457,105
Shares redeemed (49,974) (503,688)
------------ ------------
Net decrease (7,929) $(46,583)
============ ============
Class C Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 20,835 $211,576
Shares issued to shareholders in
reinvestment of dividends and
distributions 704 8,084
------------ ------------
Total issued 21,539 219,660
Shares redeemed (43,114) (431,908)
------------ ------------
Net decrease (21,575) $(212,248)
============ ============
Class D Shares for the Year Dollar
Ended November 30, 1997 Shares Amount
Shares sold 30,184 $334,924
Shares issued to shareholders in
reinvestment of dividends 1,282 11,183
------------ ------------
Total issued 31,466 346,107
Shares redeemed (33,347) (339,445)
------------ ------------
Net increase (decrease) (1,881) $6,662
============ ============
Class D Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 10,891 $112,953
Shares issued to shareholders in
reinvestment of dividends and
distributions 2,310 25,977
------------ ------------
Total issued 13,201 138,930
Shares redeemed (57,396) (577,743)
------------ ------------
Net decrease (44,195) $(438,813)
============ ============
The total redemption fees for Merrill Lynch Middle East/Africa Fund,
Inc., amounted to $9,687 for the year ended November 30, 1997.
5. Commitments:
At November 30, 1997, the Fund had entered into foreign exchange
contracts under which it had agreed to sell various foreign currencies
with approximate values of $17,000.
6. Capital Loss Carryforward:
At November 30, 1997, the Fund had a net capital loss carryforward of
approximately $540,000, all of which expires in 2004. This amount will
be available to offset like amounts of any future taxable gains.
7. Subsequent Event:
On December 1, 1997, the Board of Directors of the Fund declared an
ordinary income dividend in the amount of $.381436 per Class A Share,
$.274264 per Class B Share, $.283183 per Class C Share, and $.357533
per Class D Share, payable on December 29, 1997 to shareholders of
record as of December 18, 1997.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Middle East/Africa Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Merrill Lynch
Middle East/Africa Fund, Inc. as of November 30, 1997, the related
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 financial highlights for each of the years in the two-year period
then ended and the period December 30, 1994 (commencement of
operations) to November 30, 1995. These financial statements and the
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned at November 30, 1997, by
correspondence with the custodians. 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, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Merrill Lynch Middle East/Africa Fund, Inc. as
of November 30, 1997, the results of its operations, the changes
in its net assets, and the financial highlights for the respective
stated periods in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
January 14, 1998
<TABLE>
<CAPTION>
IMPORTANT TAX INFORMATION (unaudited)
The following information summarizes all per share distributions paid by Merrill Lynch Middle East/Africa Fund, Inc.
during its fiscal year ended November 30, 1997.
Non-Qualifying Foreign Total Foreign Taxes
Record Payable Domestic Source Ordinary Paid or
Date Date Ordinary Income Income Income Withheld
<S> <C> <C> <C> <C> <C> <C>
Class A Shares 12/13/96 12/23/96 $.004080 $.431975 $.436055 $.015770
Class B Shares 12/13/96 12/23/96 $.002985 $.316049 $.319034 $.015770
Class C Shares 12/13/96 12/23/96 $.003103 $.328489 $.331592 $.015770
Class D Shares 12/13/96 12/23/96 $.003798 $.402097 $.405895 $.015770
All of the foreign taxes paid or withheld represent taxes incurred
by the Fund on dividends received by the Fund from foreign sources.
Foreign taxes paid or withheld should be included in taxable income
with an offsetting deduction from gross income or as a credit for
taxes paid to foreign governments. You should consult your tax adviser
regarding the appropriate treatment of foreign taxes paid.
Please retain this information for your records.
</TABLE>
EQUITY PORTFOLIO CHANGES (unaudited)
For the Quarter Ended November 30, 1997
Additions
Banque Audi (GDR)
Northern Electric Telekomunikasyon A.S. (NETAS)
Paints & Chemicals Industries (PACHIN) (GDR)
Yapi ve Kredi Bankasi A.S.
Deletions
Barlow Rand Ltd.
Gencor Limited (Unsponsored) (ADR)
Ingwe Coal Corp., Ltd.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Grace Pineda, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
James W. Harshaw, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800)637-3863
