MERRILL LYNCH
MIDDLE EAST/
AFRICA FUND, INC.
FUND LOGO
Annual Report
November 30, 1998
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
Phillip Gillespie, 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
Middle East/Africa
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
Map Depicting the Fund's Asset Allocation As a Percentage* of
Net Assets as of November 30, 1998
GHANA 3.2%
MOROCCO 10.9%
SOUTH AFRICA 13.7%
BOTSWANA 2.9%
TURKEY 8.0%
ISRAEL 8.4%
LEBANON 7.7%
EGYPT 9.3%
ZIMBABWE 0.8%
[FN]
*Total may not equal 100%.
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1998
DEAR SHAREHOLDER
During the three-month period ended November 30, 1998, total returns
for Merrill Lynch Middle East/Africa Fund, Inc.'s Class A, Class B,
Class C and Class D Shares were 0.00%, -0.25%, -0.25% and -0.12%,
respectively. The unmanaged Morgan Stanley Capital International
(MSCI) Indexes for the largest equity markets in the region--Israel,
South Africa and Turkey--registered returns of -1.08%, +35.34% and
- -10.00%, respectively, 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 Emerging Markets Free Index, unless otherwise noted.) In
addition, the unmanaged J.P. Morgan Securities South African Bond
Index rose 38.33% in US dollars for the quarter ended November 30,
1998. The Fund's performance was most adversely affected by its
investments in Ghana and Zimbabwe, whose markets declined 31.01% and
19.41% in US dollars, respectively, during the quarter.
Fiscal Year in Review
For the 12-month period ended November 30, 1998, total returns for
Merrill Lynch Middle East/Africa Fund, Inc.'s Class A, Class B,
Class C and Class D Shares were -22.59%, -23.40%, -23.38% and
- -22.84%, respectively. The unmanaged MSCI Indexes for the largest
equity markets in the region--Israel, South Africa and Turkey--
registered returns of -7.25%, -22.48% and -42.19%, respectively, for
the same 12-month period. In addition, the J.P. Morgan Securities
South African Bond Index declined 9.21% in US dollars for the 12
months ended November 30, 1998. The only positive performer during
the last 12 months was Morocco, up 23.56%. The other equity markets
in the region all declined during the year, with Turkey falling
42.19%, followed by Egypt, South Africa, Jordan and Israel,
declining 29.04%, 22.48%, 17.57% and 7.25%, respectively. Beneficial
to the Fund's performance was its underweighted exposure to South
Africa and overweighted position in Morocco. Detrimental to
performance was the Fund's exposure to the Egyptian stock market,
which was down 29.04% for the 12-month period, and its overweighted
position in Turkey.
Investment Review and Activities
During the quarter ended November 30, 1998, the largest emerging
markets appreciated significantly, with the MSCI Emerging Markets
Free Index, a worldwide emerging markets benchmark, rising 27.32%.
We believe that these sharp recoveries were driven largely by
liquidity, as 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
was manifested 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. With presidential elections over and
its reserves expected to be bolstered, Brazil was expected to
proceed with fiscal reforms and avoid a funding/currency crisis. The
potential for a "virtuous cycle" to develop, that is, for liquidity
and investor confidence to aid and accelerate recovery, should not
be underestimated. However, in our opinion, these recent rallies
have discounted far more than is realistically justified by existing
fundamentals and their scope to improve.
Within the Middle East and African regions, only the South African
market rose during the November quarter. Investors were encouraged
by the stability of the rand, which enabled the Reserve Bank to
start cutting interest rates. South Africa is the largest market in
which the Fund is invested and accounted for 13.7% of net assets as
of November 30, 1998. Considering the size of the South African
market relative to its region, the Fund's allocation is relatively
small because we have been concerned about the country's large net
open forward position of approximately US $23.1 billion during
October; its weak reserve position of only $21.2 billion, which
represented less than three months' import coverage; and pressure on
inflation from trade union wage demands.
Our largest holding in South Africa is South African Breweries Ltd.
(SAB), now the fourth-largest brewer in the world. From a dominant
position in the South African market, the company has leveraged its
knowledge of operating in an emerging market environment to
profitable international beer businesses in Eastern Europe, southern
Africa and China. Despite the poor economic environment in South
Africa, the company reported strong earnings growth for the six
months ended September 30, 1998, driven by strong volume growth. In
December, management confirmed that it will move its primary listing
of SAB shares to the London Stock Exchange. This action has been
welcomed by investors as it will permit the company to access
capital from a more diverse investor base, to further pursue its
successful international expansion strategy.
During the November quarter, the Turkish market depreciated by 10%.
While some of the countries in the region seemed to recover from the
crisis of investor confidence and collapse of markets caused by the
Russian debt default in August, Turkey was still struggling with its
after effects. Real interest rates remained extremely high in Turkey
as a consequence of the government's full treasury bill repayment
schedule. During the three-month period, investors on the Istanbul
exchange witnessed a political corruption scandal, which ultimately
brought down the government. An interim government has been
appointed, but the risk to the economy is still very high as
pressure on the currency is expected to increase.
During the quarter ended November 30, 1998, the Israeli market
declined by slightly over 1%. Adversely impacting the market were
investor concerns about rising inflation and the shekel, which
weakened during the quarter. One of our largest Israeli holdings is
Teva Pharmaceutical Industries Ltd. Teva is an Israeli-based, fully
integrated international pharmaceutical company and the third-
largest generic drug producer in the United States. Since June 1998,
Teva has received a number of US Food and Drug Administration
approvals. It has a proprietary product, Copaxone, which is used by
patients with multiple sclerosis.
In Conclusion
Throughout the November quarter, the volatility experienced by
emerging markets continued, and in the Middle East and Africa
regions, the markets still displayed a high degree of fragility and
nervousness. For this reason, we would remind our shareholders that
investing in these markets requires a long-term view and a tolerance
for volatility. 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,
(Arthur Zeikel)
Arthur Zeikel
President
(Grace Pineda)
Grace Pineda
Senior Vice President and
Portfolio Manager
January 8, 1999
Merrill Lynch Middle East/Africa 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:
* 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.
* 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.)
* 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.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
Any class of shares redeemed during the first 12 months after
purchase will be charged a redemption fee of 2.0%.
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.
Total Return Based on a $10,000 Investment--
Class A Shares and Class B Shares
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, the Morgan
Stanley Capital International Index--Turkey, and the Morgan Stanley
International Index--South Africa. Beginning and ending values are:
12/30/94** 11/98
ML Middle East/Africa Fund, Inc.++--
Class A Shares* $ 9,475 $ 9,173
Class B Shares $10,000 $ 9,208
Morgan Stanley Capital International
Index--Israel++++ $10,000 $13,987
Morgan Stanley Capital International
Index--Turkey++++ $10,000 $13,992
Morgan Stanley Capital International
Index--South Africa++++ $10,000 $ 7,160
Total Return Based on a $10,000 Investment--
Class C Shares and Class D Shares
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, the Morgan
Stanley Capital International Index--Turkey, and the Morgan Stanley
International Index--South Africa. Beginning and ending values are:
12/30/94** 11/98
ML Middle East/Africa Fund, Inc.++--
Class C Shares* $10,000 $ 9,317
Class D Shares $ 9,475 $ 9,069
Morgan Stanley Capital International
Index--Israel++++ $10,000 $13,987
Morgan Stanley Capital International
Index--Turkey++++ $10,000 $13,992
Morgan Stanley Capital International
Index--South Africa++++ $10,000 $ 7,160
[FN]
*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 9/30/98 -28.55% -33.59%
Inception (12/30/94)
through 9/30/98 - 1.25 - 2.66
[FN]
*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 9/30/98 -29.31% -33.36%
Inception (12/30/94)
through 9/30/98 - 2.31 - 2.53
[FN]
*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 9/30/98 -29.35% -31.39%
Inception (12/30/94)
through 9/30/98 - 2.22 - 2.22
[FN]
*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 9/30/98 -28.70% -33.74%
Inception (12/30/94)
through 9/30/98 - 1.52 - 2.92
[FN]
*Maximum sales charge is 5.25%. Maximum redemption fee is 2% and is
reduced to 0% after 1 year.
**Assuming maximum sales charge.
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1998
PERFORMANCE DATA (concluded)
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
<S> <C> <C> <C>
ML Middle East/Africa Fund, Inc. Class A Shares -22.59% 0.00% -3.19%
ML Middle East/Africa Fund, Inc. Class B Shares -23.40 -0.25 -7.13
ML Middle East/Africa Fund, Inc. Class C Shares -23.38 -0.25 -6.83
ML Middle East/Africa Fund, Inc. Class D Shares -22.84 -0.12 -4.29
<FN>
*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 commenced operations on 12/30/94.
</TABLE>
PORTFOLIO INFORMATION
As of November 30, 1998
Percent of
Ten Largest Holdings (Equity Investments) Net Assets
Banque Marocaine du Commerce Exterieur 5.6%
Cimenterie de l'Oriental (CIOR) 5.3
Blue Square Chain Investments and Properties Ltd. 4.6
Banque Libanaise 4.0
South African Breweries Ltd. 3.9
Akcansa Cimento A.S. 3.7
Banque Audi (GDR) 3.7
Al-Ahram Beverages (GDR) 3.6
Guiness Ghana Limited 3.2
Sechaba Breweries Ltd. 2.9
Percent of
Ten Largest Industries Net Assets
Banking 20.8%
Beverages 7.5
Merchandising 5.4
Building Materials 5.3
Building Products 3.7
Retail 3.6
Beverages & Tobacco 3.5
Multi-Industry 2.9
Drugs 2.7
Insurance 2.7
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Held/ Value Percent of
AFRICA Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Botswana Multi-Industry 106,802 Sechaba Breweries Ltd. $ 85,845 $ 130,283 2.9%
Total Investments in Botswana 85,845 130,283 2.9
Ghana Beverages & Tobacco 432,827 Guiness Ghana Limited 70,100 147,068 3.2
Total Investments in Ghana 70,100 147,068 3.2
Morocco Banking 3,428 Banque Marocaine du Commerce
Exterieur 116,045 251,129 5.6
Building Materials 2,000 Cimenterie de l'Oriental (CIOR) 87,576 241,271 5.3
Total Investments in Morocco 203,621 492,400 10.9
South Africa Banking 3,137 ++Nedcor Ltd. (GDR)(b)(c) 59,955 64,284 1.4
1,318 Standard Bank Investment
Corporation Limited 3,650 3,277 0.1
---------- ---------- ------
63,605 67,561 1.5
Beverages 10,447 South African Breweries Ltd. 304,104 176,794 3.9
Insurance 40,801 FirstRand Limited 35,721 50,190 1.1
3,654 Liberty Life Association of
Africa Limited 94,623 62,479 1.4
7,620 ++Sanlam Limited 8,034 8,021 0.2
---------- ---------- ------
138,378 120,690 2.7
Merchandising 34,620 Pick'n Pay Stores Ltd. 39,456 38,328 0.8
1,543 Pick'n Pay Stores Ltd. (N Shares) 2,474 1,410 0.0
---------- ---------- ------
41,930 39,738 0.8
Metals--Non-Ferrous 21,896 Gencor Limited 54,273 39,440 0.9
22,571 Gencor Limited (ADR)(a) 55,535 40,659 0.9
---------- ---------- ------
109,808 80,099 1.8
Mining 2,127 ++Gold Fields Limited 15,756 13,830 0.3
1,370 Gold Fields of South Africa Limited 16,536 2,696 0.1
---------- ---------- ------
32,292 16,526 0.4
Retail 115,934 Metro Cash & Carry Ltd. 101,965 77,418 1.7
13,494 Pepkor Limited 63,714 40,312 0.9
---------- ---------- ------
165,679 117,730 2.6
Total Investments in South Africa 855,796 619,138 13.7
Zimbabwe Beverages & Tobacco 65,844 Delta Corporation 42,000 14,503 0.3
Entertainment & 190,974 Zimbabwe Sun Limited 73,405 10,323 0.2
Leisure
Real Estate 55,667 Hippo Valley Estates Ltd. 21,630 12,939 0.3
Total Investments in Zimbabwe 137,035 37,765 0.8
Total Investments in Africa 1,352,397 1,426,654 31.5
MIDDLE
EAST
Egypt Banking 6,643 Commercial International Bank 60,437 52,560 1.2
9,100 Commercial International
Bank (GDR)(b) 185,500 69,388 1.5
---------- ---------- ------
245,937 121,948 2.7
Beverages 5,618 ++Al-Ahram Beverages (GDR)(b)(c) 87,079 160,956 3.6
Finance 10,000 ++EFG--Hermes Holding, S.A.E.
(GDR)(b)(c) 117,500 100,000 2.2
Housing 1,270 Madinet NASR for Housing &
Development 27,807 38,217 0.8
Total Investments in Egypt 478,323 421,121 9.3
</TABLE>
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
MIDDLE EAST Shares Value Percent of
(concluded) Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Israel Drugs 2,857 Teva Pharmaceutical Industries
Ltd. (ADR)(a) $ 105,201 $ 124,280 2.7%
Food Chain 20,607 Supersol Limited 55,496 47,797 1.1
Merchandising 17,458 ++Blue Square Chain Investments
and Properties Ltd. 95,151 206,641 4.6
Total Investments in Israel 255,848 378,718 8.4
Lebanon Banking 6,300 Banque Audi (GDR)(b) 182,700 165,375 3.7
10,262 ++Banque Libanaise (c) 124,123 183,177 4.0
Total Investments in Lebanon 306,823 348,552 7.7
Turkey Banking 4,786,190 Turkiye Garanti Bankasi A.S. 168,912 97,855 2.2
3,389,100 Yapi ve Kredi Bankasi A.S. 53,369 41,351 0.9
813,384 Yapi ve Kredi Bankasi A.S. Receipts 0 9,924 0.2
---------- ---------- ------
222,281 149,130 3.3
Building Products 9,115,265 Akcansa Cimento A.S. 274,573 168,328 3.7
Retail 46,642 Migros Turk T.A.S. 37,132 46,142 1.0
Total Investments in Turkey 533,986 363,600 8.0
Total Investments in the
Middle East 1,574,980 1,511,991 33.4
SHORT-TERM Face
SECURITIES Amount
US Government US$ 505,000 Federal Home Loan Bank, 5.15%
Agency due 12/01/1998 505,000 505,000 11.2
Obligations* 1,000,000 Federal National Mortgage
Association, 5.02% due 12/18/1998 997,629 997,629 22.0
Total Investments in
Short-Term Securities 1,502,629 1,502,629 33.2
Total Investments $4,430,006 4,441,274 98.1
==========
Other Assets Less Liabilities 84,604 1.9
---------- ------
Net Assets $4,525,878 100.0%
========== ======
<FN>
*Certain US Government Agency Obligations are traded on a discount
basis; the interest rates shown reflect the discount rate paid at
the time of purchase by the Fund.
(a)American Depositary Receipts (ADR).
(b)Global Depositary Receipts (GDR).
(c)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
As of November 30, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$4,430,006) (Note 1a) $ 4,441,274
Cash 948
Dividends receivable 9,589
Deferred organization expenses (Note 1f) 64,882
Prepaid registration fees and other assets (Note 1f) 100,709
------------
Total assets 4,617,402
------------
Liabilities: Payables:
Capital shares redeemed $ 26,389
Securities purchased 8,035
Distributor (Note 2) 3,049 37,473
------------
Accrued expenses and other liabilities 54,051
------------
Total liabilities 91,524
------------
Net Assets: Net assets $ 4,525,878
============
Net Assets Class A Shares of Common Stock, $0.10 par value,
Consist of: 100,000,000 shares authorized $ 6,885
Class B Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 38,188
Class C Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 3,905
Class D Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 6,744
Paid-in capital in excess of par 6,011,747
Accumulated realized capital losses on investments and foreign
currency transactions--net (Note 5) (1,553,048)
Unrealized appreciation on investments and foreign
currency transactions--net 11,457
------------
Net assets $ 4,525,878
============
Net Asset Class A--Based on net assets of $563,112 and 68,847
Value: shares outstanding $ 8.18
============
Class B--Based on net assets of $3,095,940 and 381,876
shares outstanding $ 8.11
============
Class C--Based on net assets of $316,932 and 39,050
shares outstanding $ 8.12
============
Class D--Based on net assets of $549,894 and 67,438
shares outstanding $ 8.15
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1998
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended November 30, 1998
<S> <S> <C> <C>
Investment Dividends (net of $3,567 foreign withholding tax) $ 173,234
Income Interest and discount earned 138,882
(Notes 1d & 1e): ------------
Total income 312,116
------------
Expenses: Accounting services (Note 2) $ 73,144
Investment advisory fees (Note 2) 70,739
Professional fees 61,386
Registration fees (Note 1f) 60,578
Amortization of organization expenses (Note 1f) 59,891
Account maintenance and distribution fees--Class B (Note 2) 47,619
Directors' fees and expenses 37,771
Custodian fees 35,851
Printing and shareholders reports 33,772
Transfer agent fees--Class B (Note 2) 11,859
Account maintenance and distribution fees--Class C (Note 2) 5,607
Pricing fees 4,655
Account maintenance fees--Class D (Note 2) 2,269
Transfer agent fees--Class D (Note 2) 1,865
Transfer agent fees--Class A (Note 2) 1,755
Transfer agent fees--Class C (Note 2) 1,482
Other 4,773
------------
Total expenses before reimbursement 515,016
Reimbursement of expenses (Note 2) (424,152)
------------
Total expenses after reimbursement 90,864
------------
Investment income--net 221,252
------------
Realized & Realized loss from:
Unrealized Investments--net (715,276)
Gain (Loss) on Foreign currency transactions--net (518,399) (1,233,675)
Investments & ------------ ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (624,181)
(Notes 1b, 1c, Foreign currency transactions--net 2,550 (621,631)
1e & 3): ------------ ------------
Net realized and unrealized loss on investments and
foreign currency transactions (1,855,306)
------------
Net Decrease in Net Assets Resulting from Operations $ (1,634,054)
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended
November 30,
Increase (Decrease) in Net Assets: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 221,252 $ 307,359
Realized gain (loss) on investments and foreign
currency transactions--net (1,233,675) 102,705
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net (621,631) 992,514
------------ ------------
Net increase (decrease) in net assets resulting from operations (1,634,054) 1,402,578
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (34,496) (18,402)
(Note 1g): Class B (147,378) (194,967)
Class C (18,526) (26,076)
Class D (35,943) (41,949)
------------ ------------
Net decrease in net assets resulting from
dividends to shareholders (236,343) (281,394)
------------ ------------
Capital Share Net decrease in net assets derived from capital
Transactions share transactions (2,371,225) (112,890)
(Note 4): ------------ ------------
Net Assets: Total increase (decrease)in net assets (4,241,622) 1,008,294
Beginning of year 8,767,500 7,759,206
------------ ------------
End of year* $ 4,525,878 $ 8,767,500
============ ============
<FN>
*Undistributed investment income--net (Note 1h) $ -- $ 236,136
============ ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1998
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
For the
Period
The following per share data and ratios have been derived For the Dec. 30,
from information provided in the financial statements. Year Ended 1994++++ to
November 30, Nov. 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.96 $ 9.40 $ 10.66 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .40 .48 .42 .57
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net (2.80) 1.52 (.80) .09
------- ------- ------- -------
Total from investment operations (2.40) 2.00 (.38) .66
------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.38) (.44) (.85) --
Realized gain on investments--net -- -- (.03) --
------- ------- ------- -------
Total dividends and distributions (.38) (.44) (.88) --
------- ------- ------- -------
Net asset value, end of period $ 8.18 $ 10.96 $ 9.40 $ 10.66
======= ======= ======= =======
Total Investment Based on net asset value per share (22.59%) 22.43% (4.17%) 6.60%+++
Return:** ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement .47% .47% .47% .00%*
Net Assets: ======= ======= ======= =======
Expenses 6.51% 6.36% 4.84% 4.63%*
======= ======= ======= =======
Investment income--net 3.93% 4.35% 4.24% 8.43%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 563 $ 989 $ 399 $ 648
Data: ======= ======= ======= =======
Portfolio turnover 17.03% 78.12% 46.36% 40.97%
======= ======= ======= =======
<CAPTION>
Class B
For the
Period
The following per share data and ratios have been derived For the Dec. 30,
from information provided in the financial statements. Year Ended 1994++++ to
November 30, Nov. 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.87 $ 9.31 $ 10.56 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .29 .37 .32 .79
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net (2.78) 1.51 (.80) (.23)
------- ------- ------- -------
Total from investment operations (2.49) 1.88 (.48) .56
------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.27) (.32) (.74) --
Realized gain on investments--net -- -- (.03) --
------- ------- ------- -------
Total dividends and distributions (.27) (.32) (.77) --
------- ------- ------- -------
Net asset value, end of period $ 8.11 $ 10.87 $ 9.31 $ 10.56
======= ======= ======= =======
Total Investment Based on net asset value per share (23.40%) 21.02% (5.14%) 5.60%+++
Return:** ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement 1.51% 1.51% 1.50% 1.01%*
Net Assets: ======= ======= ======= =======
Expenses 7.51% 7.46% 5.90% 5.68%*
======= ======= ======= =======
Investment income--net 2.91% 3.40% 3.15% 8.33%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 3,096 $ 5,947 $ 5,699 $ 7,701
Data: ======= ======= ======= =======
Portfolio turnover 17.03% 78.12% 46.36% 40.97%
======= ======= ======= =======
<CAPTION>
Class C
For the
Period
The following per share data and ratios have been derived For the Dec. 30,
from information provided in the financial statements. Year Ended 1994++++ to
November 30, Nov. 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.89 $ 9.31 $ 10.56 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .30 .36 .31 .83
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net (2.79) 1.55 (.79) (.27)
------- ------- ------- -------
Total from investment operations (2.49) 1.91 (.48) .56
------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.28) (.33) (.74) --
Realized gain on investments--net -- -- (.03) --
------- ------- ------- -------
Total dividends and distributions (.28) (.33) (.77) --
------- ------- ------- -------
Net asset value, end of period $ 8.12 $ 10.89 $ 9.31 $ 10.56
======= ======= ======= =======
Total Investment Based on net asset value per share (23.38%) 21.42% (5.16%) 5.60%+++
Return:** ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement 1.53% 1.52% 1.50% 1.01%*
Net Assets: ======= ======= ======= =======
Expenses 7.45% 7.47% 5.91% 5.67%*
======= ======= ======= =======
Investment income--net 2.90% 3.33% 3.14% 8.45%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 317 $ 723 $ 692 $ 1,012
Data: ======= ======= ======= =======
Portfolio turnover 17.03% 78.12% 46.36% 40.97%
======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads;
results would be lower if sales charges were included.
++Based on average shares outstanding.
++++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1998
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class D
For the
Period
The following per share data and ratios have been derived For the Dec. 30,
from information provided in the financial statements. Year Ended 1994++++ to
November 30, Nov. 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.93 $ 9.38 $ 10.63 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .37 .46 .40 .77
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net (2.79) 1.50 (.80) (.14)
------- ------- ------- -------
Total from investment operations (2.42) 1.96 (.40) .63
------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.36) (.41) (.82) --
Realized gain on investments--net -- -- (.03) --
------- ------- ------- -------
Total dividends and distributions (.36) (.41) (.85) --
------- ------- ------- -------
Net asset value, end of period $ 8.15 $ 10.93 $ 9.38 $ 10.63
======= ======= ======= =======
Total Investment Based on net asset value per share (22.84%) 21.95% (4.31%) 6.30%+++
Return:** ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement .72% .72% .72% .25%*
Net Assets: ======= ======= ======= =======
Expenses 6.70% 6.67% 5.08% 4.89%*
======= ======= ======= =======
Investment income--net 3.69% 4.18% 4.01% 9.07%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 550 $ 1,109 $ 969 $ 1,569
Data: ======= ======= ======= =======
Portfolio turnover 17.03% 78.12% 46.36% 40.97%
======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads;
results would be lower if sales charges were included.
++Based on average shares outstanding.
++++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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'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 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 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 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.
* 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.
* 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.
* 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.
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1998
NOTES TO FINANCIAL STATEMENTS (continued)
* Financial futures contracts--The Fund may purchase or sell
financial 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 period not exceeding five years. 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
$221,045 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 ("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. 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, 1998, MLAM
earned fees of $70,739, all of which was voluntarily waived. MLAM
also reimbursed the Fund for additional expenses of $353,413.
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 under-
writing discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Fund's Class D Shares as follows:
MLFD MLPF&S
Class D $129 $1,348
For the year ended November 30, 1998, MLPF&S received contingent
deferred sales charges of $35,620 and $831 relating to transactions
in Class B and Class C Shares, respectively. Furthermore, MLPF&S
received contingent deferred sales charges of $5,604 and $730
relating to transactions subject to front-end sales charges waivers
in Class A and Class D Shares, respectively.
In addition, MLPF&S received $91 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 $1,036,570 and $3,991,618,
respectively.
Net realized losses for the year ended November 30, 1998 and net
unrealized gains as of November 30, 1998 were as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (715,276) $ 11,268
Foreign currency transactions (518,399) 189
----------- --------
Total $(1,233,675) $ 11,457
=========== ========
As of November 30, 1998, net unrealized depreciation for Federal
income tax purposes aggregated $11,883, of which $712,816 related to
appreciated securities and $724,699 related to depreciated
securities. The aggregate cost of investments at November 30, 1998
for Federal income tax purposes was $4,453,157.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $2,371,225 and $112,890 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 20,494 $ 232,983
Shares issued to shareholders in
reinvestment of dividends 1,545 15,853
-------- -----------
Total issued 22,039 248,836
Shares redeemed (43,454) (442,125)
-------- -----------
Net decrease (21,415) $ (193,289)
======== ===========
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 B Shares for the Year Dollar
Ended November 30, 1998 Shares Amount
Shares sold 39,585 $ 433,589
Shares issued to shareholders in
reinvestment of dividends 5,885 60,441
-------- -----------
Total issued 45,470 494,030
Shares redeemed (210,753) (2,095,553)
-------- -----------
Net decrease (165,283) $(1,601,523)
======== ===========
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)
======== ===========
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
Class C Shares for the Year Dollar
Ended November 30, 1998 Shares Amount
Shares sold 4,777 $ 50,253
Shares issued to shareholders in
reinvestment of dividends 1,244 12,801
-------- -----------
Total issued 6,021 63,054
Shares redeemed (33,289) (325,267)
-------- -----------
Net decrease (27,268) $ (262,213)
======== ===========
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 D Shares for the Year Dollar
Ended November 30, 1998 Shares Amount
Shares sold 4,163 $ 47,771
Shares issued to shareholders in
reinvestment of dividends 1,638 16,807
-------- -----------
Total issued 5,801 64,578
Shares redeemed (39,831) (378,778)
-------- -----------
Net decrease (34,030) $ (314,200)
======== ===========
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
======== ===========
The total redemption fees for Merrill Lynch Middle East/Africa Fund,
Inc. amounted to $14,014 for the year ended November 30, 1998.
5. Capital Loss Carryforward:
At November 30, 1998, the Fund had a net capital loss carryforward
of approximately $1,233,000, of which $541,000 expires in 2004 and
$692,000 expires in 2006. This amount will be available to offset
like amounts of any future taxable gains.
<AUDIT-REPORT>
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, 1998, 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 three-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, 1998, by correspondence with the custodian and broker. 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, 1998, 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 19, 1999
</AUDIT-REPORT>
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, 1998.
Foreign Total Foreign Taxes
Record Payable Source Ordinary Paid or
Date Date Income Income Withheld
Class A Shares 12/18/97 12/29/97 $.381436 $.381436 $.008646
Class B Shares 12/18/97 12/29/97 $.274264 $.274264 $.008646
Class C Shares 12/18/97 12/29/97 $.283183 $.283183 $.008646
Class D Shares 12/18/97 12/29/97 $.357533 $.357533 $.008646
The foreign taxes paid or withheld represent taxes incurred by the
Fund on dividends received by the Fund from foreign sources. Foreign
taxes paid or withheld should be included as foreign source income
with an offsetting deduction from gross income or as a credit for
taxes paid to foreign governments. You should consult your tax
adviser regarding the appropriate treatment of foreign taxes paid.
Please retain this information for your records.
EQUITY PORTFOLIO CHANGES (unaudited)
For the Quarter Ended November 30, 1998
Additions
Gold Fields Limited
Sanlam Limited
Standard Bank Investment Corporation Limited
Deletions
Adana Cimento Sanayii (Class A)
Akbank T.A.S. (Ordinary)
