MERRILL LYNCH
MIDDLE EAST/
AFRICA FUND, INC.
FUND LOGO
Annual Report
November 30, 1999
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.
Asset Allocation As a Percentage* of
Net Assets as of November 30, 1999
A map illustrating the following percentages:
Ghana 3.7%
Morocco 3.8%
South Africa 50.4%
Botswana 3.5%
Turkey 11.0%
Israel 14.6%
Egypt 10.3%
Zimbabwe 0.9%
[FN]
*Total may not equal 100%.
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1999
DEAR SHAREHOLDER
During the three-month period ended November 30, 1999, total returns
for Merrill Lynch Middle East/Africa Fund, Inc.'s Class A, Class B,
Class C and Class D Shares were +8.80%, +8.40%, +8.39% and +8.74%,
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 +21.26%, +11.08% and
+50.43%, respectively. (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
and are denominated in US dollars.) Detrimental to the Fund's
performance was its investments in most of the smaller markets--
Botswana, Egypt, Ghana, Morocco and Zimbabwe. The Fund's quarterly
performance was also hurt by its stock selection in South Africa.
Fiscal Year in Review
For the 12-month period ended November 30, 1999, total returns for
Merrill Lynch Middle East/Africa Fund, Inc.'s Class A, Class B,
Class C and Class D Shares were +23.96%, +22.56%, +22.54% and
+23.68%, respectively. The unmanaged MSCI Indexes for the largest
equity markets in the region--Israel, South Africa and Turkey--
registered returns of +37.59%, +26.32% and +101.46%, respectively,
for the same 12-month period. Detrimental to the Fund's performance
was its investments in the region's smaller markets--Botswana,
Egypt, Ghana, Morocco and Zimbabwe. The Fund's overall performance
benefited from stock selection in South Africa and its overweighted
position in Turkey.
Investment Overview
The strong gains exhibited by the Middle East and African markets
during the quarter ended November 30, 1999 more than offset any
declines in the previous quarter and resulted in 1999 returns that
were some of the strongest seen in years. We believe that the
rallies were largely based on favorable fundamental factors and only
moderately driven by inflows of foreign funds. One factor was the
improved perception of risk in emerging markets that allowed
interest rates to decline and stocks to rally. This contributed to
Turkey's market performance of +104.53% during 1999. In addition,
global economic growth is recovering and the clear beneficiaries are
exporters of commodity goods such as South Africa, which rose 38.32%
so far this year. There were also factors specific to each country,
such as stronger domestic economic and corporate earnings
performance in Israel (+34.33%) and South Africa. Speculative
drivers also contributed, including Turkey's possible receipt of
funds from the International Monetary Fund and the Egyptian market's
(+61.12%) inclusion in emerging market benchmark indexes.
To seek to participate in the potential upturn in the global
economic cycle and the potential rising prices of commodities, we
placed investments in a number of South African resource companies
such as Impala Platinum Holdings Limited, Gencor Limited and Anglo
American PLC. Our investments also included companies that may
participate in a potential increase in personal consumption. These
included retailers such as Metro Cash and Carry Limited and Pepkor
Limited, as well as the packaging company, Nampak Limited, which
is our largest Fund holding.
In addition, during the November quarter we added an important
position in Rembrandt Group Limited, a South African investment
holding company. A compelling feature of this company is that its
stock is being priced at a larger-than-usual discount to the value
of its component businesses. We believe that the realization of that
value may occur through restructuring. This will entail primarily
the sale, or unbundling, of its non-core businesses. The company has
a substantial cash position and cash flows that may be used to buy
back its own shares. We believe this could also enhance the value of
our holdings in Rembrandt. The caveat is its interests in tobacco
via a stake in British American Tobacco. While the perceived risk of
tobacco litigation has been a constraint to the stock's performance,
in our view, investors are anticipating a more adverse outcome than
is likely to occur.
In Conclusion
We believe that the long-term potential of the Middle Eastern and
African markets is just starting to be realized, and that recent
years' weakness in their economies has set the stage for stronger
performance. 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,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Grace Pineda)
Grace Pineda
Senior Vice President and
Portfolio Manager
January 11, 2000
To reduce shareholder expenses, Merrill Lynch Middle East/Africa
Fund, Inc. will no longer be printing and mailing quarterly reports
to shareholders. We will continue to provide you with reports on a
semi-annual and annual basis.
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.
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1999
PERFORMANCE DATA (continued)
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* 11/99
ML Middle East/Africa Fund, Inc.++--
Class A Shares* $ 9,475 $11,371
ML Middle East/Africa Fund, Inc.++--
Class B Shares* $10,000 $11,383
Morgan Stanley Capital International
Index--Israel++++ $10,000 $19,251
Morgan Stanley Capital International
Index--Turkey++++ $10,000 $28,178
Morgan Stanley Capital International
Index--Africa++++ $10,000 $ 9,045
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* 11/99
ML Middle East/Africa Fund, Inc.++--
Class C Shares* $10,000 $11,417
ML Middle East/Africa Fund, Inc.++--
Class D Shares* $ 9,475 $11,216
Morgan Stanley Capital International
Index--Israel++++ $10,000 $19,251
Morgan Stanley Capital International
Index--Turkey++++ $10,000 $28,178
Morgan Stanley Capital International
Index--Africa++++ $10,000 $ 9,045
[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.
Past performance is not predictive of future performance.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/99 +19.11% +10.60%
Inception (12/30/94)
through 9/30/99 + 2.72 + 1.56
[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 9/30/99 +17.88% +11.52%
Inception (12/30/94)
through 9/30/99 + 1.63 + 1.63
[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 9/30/99 +17.85% +14.50%
Inception (12/30/94)
through 9/30/99 + 1.69 + 1.69
[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 9/30/99 +18.78% +10.29%
Inception (12/30/94)
through 9/30/99 + 2.44 + 1.29
[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, 1999
PERFORMANCE DATA (concluded)
<TABLE>
Recent
Performance
Results*
<CAPTION>
3 Month 12 Month Since Inception
As of November 30, 1999 Total Return Total Return Total Return
<S> <C> <C> <C>
ML Middle East/Africa Fund, Inc. Class A Shares +8.80% +23.96% +20.00%
ML Middle East/Africa Fund, Inc. Class B Shares +8.40 +22.56 +13.83
ML Middle East/Africa Fund, Inc. Class C Shares +8.39 +22.54 +14.17
ML Middle East/Africa Fund, Inc. Class D Shares +8.74 +23.68 +18.38
<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, 1999
Percent of
Ten Largest Holdings (Equity Investments) Net Assets
Nampak Limited 7.3%
Impala Platinum Holdings Limited 6.2
Yapi ve Kredi Bankasi AS 6.1
Nedcor Limited* 6.0
Commercial International Bank (GDR) 5.1
Gencor Limited* 5.1
Rembrandt Group Limited 5.1
Anglo American PLC 4.2
Metro Cash and Carry Limited 4.1
AngloGold Limited (ADR) 4.0
Percent of
Ten Largest Industries Net Assets
Banking 24.9%
Beverages & Tobacco 9.1
Retail 7.7
Forest Products 7.3
Holding Company 6.2
Metals--Non-Ferrous 5.1
Mining 4.7
Merchandising 4.2
Gold Mines 4.0
Multi-Industry 3.5
[FN]
*Includes combined holdings.
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Percent of
AFRICA Industries Shares Held Investments Value Net Assets
<S> <S> <C> <S> <C> <C>
Botswana Multi-Industry 106,802 Sechaba Breweries Limited $ 117,054 3.5%
Total Investments in Botswana 117,054 3.5
Ghana Beverages & 432,827 Guinness Ghana Limited 123,368 3.7
Tobacco
Total Investments in Ghana 123,368 3.7
Morocco Banking 969 Banque Marocaine du Commerce Exterieur 64,173 1.9
Building Materials 591 Cimenterie de l'Oriental (CIOR) 62,729 1.9
Total Investments in Morocco 126,902 3.8
South Africa Banking 10,730 Nedcor Limited 196,830 5.9
248 ++Nedcor Limited (GDR) (b)(c) 4,546 0.1
3,825 Standard Bank Investment Corporation Limited 13,388 0.4
---------- ------
214,764 6.4
Beverages 713 South African Breweries PLC 6,701 0.2
1,465 South African Breweries PLC (GBP) 13,432 0.4
---------- ------
20,133 0.6
Beverages & 21,700 Rembrandt Group Limited 169,844 5.1
Tobacco
Computers 8,979 ++Dimension Data Holdings Limited 46,560 1.4
Forest Products 88,794 Nampak Limited 244,612 7.3
Gold Mines 5,199 AngloGold Limited (ADR) (a) 133,549 4.0
Holding Company 5,717 Impala Platinum Holdings Limited 208,447 6.2
Insurance 60,668 FirstRand Limited 73,635 2.2
2,138 Liberty Life Association of Africa Limited 21,307 0.6
7,620 Sanlam Limited 8,928 0.3
---------- ------
103,870 3.1
Merchandising 37,256 Pick'n Pay Stores Limited 55,543 1.7
Metals-- 21,896 Gencor Limited 83,738 2.5
Non-Ferrous 22,571 Gencor Limited (ADR) (a) 86,264 2.6
---------- ------
170,002 5.1
Mining 2,416 Anglo American PLC 141,804 4.2
3,296 Gold Fields Limited 14,822 0.4
1,370 Gold Fields of South Africa Limited 3,219 0.1
---------- ------
159,845 4.7
Retail 820 Edgars Consolidated Stores Limited 9,169 0.3
144,947 Metro Cash and Carry Limited 136,703 4.1
3,291 Pepkor Limited 13,386 0.4
---------- ------
159,258 4.8
Total Investments in South Africa 1,686,427 50.4
Zimbabwe Beverages & 35,125 Delta Corporation Limited 11,048 0.3
Tobacco
Entertainment & 148,229 Zimbabwe Sun Limited 10,296 0.3
Leisure
Real Estate 35,293 Hippo Valley Estates Ltd. 9,899 0.3
Total Investments in Zimbabwe 31,243 0.9
Total Investments in Africa 2,084,994 62.3
</TABLE>
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
MIDDLE Shares Percent of
EAST Industries Held Investments Value Net Assets
<S> <S> <C> <S> <C> <C>
Egypt Banking 14,262 Commercial International Bank (GDR) (b) $ 171,857 5.1%
Beverages 4,522 ++Al-Ahram Beverages Company S.A.E.
(GDR) (b)(c) 71,448 2.1
Finance 6,510 EFG-Hermes Holding, S.A.E. (GDR) (b)(c) 76,493 2.3
Housing 2,540 Madinet Nasr for Housing & Development Company 26,163 0.8
Total Investments in Egypt 345,961 10.3
Israel Banking 22,282 Bank Hapoalim 58,835 1.8
29,239 Bank Leumi Le-Israel 53,891 1.6
---------- ------
112,726 3.4
Food Chain 31,654 Supersol Ltd. 95,116 2.9
Media & 4,300 RT--Set Limited 41,561 1.2
Communications
Merchandising 6,041 Blue Square Chain Investments and
Properties Ltd. 83,043 2.5
Software--Computer 520 ++Check Point Software Technologies Ltd. 73,645 2.2
Telecommunications 3,226 ECI Telecom Limited 80,650 2.4
Total Investments in Israel 486,741 14.6
Turkey Banking 6,276,631 ++Turkiye Garanti Bankasi AS 67,880 2.0
11,111,248 Yapi ve Kredi Bankasi AS 203,852 6.1
---------- ------
271,732 8.1
Retail 232,584 Migros Turk T.A.S. 95,448 2.9
Total Investments in Turkey 367,180 11.0
Total Investments in the Middle East 1,199,882 35.9
Total Investments (Cost--$2,779,345) 3,284,876 98.2
Other Assets Less Liabilities 59,872 1.8
---------- ------
Net Assets $3,344,748 100.0%
========== ======
<FN>
(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>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of November 30, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$2,779,345) $ 3,284,876
Cash 917
Foreign cash 72,676
Dividends receivable 558
Deferred organization expenses 4,991
Prepaid registration fees and other assets 140,825
------------
Total assets 3,504,843
------------
Liabilities: Payables:
Securities purchased $ 65,557
Capital shares redeemed 3,988
Distributor 2,235 71,780
------------
Accrued expenses and other liabilities 88,315
------------
Total liabilities 160,095
------------
Net Assets: Net assets $ 3,344,748
============
Net Assets Class A Shares of Common Stock, $.10 par value,
Consist of: 100,000,000 shares authorized $ 5,357
Class B Shares of Common Stock, $.10 par value,
100,000,000 shares authorized 22,201
Class C Shares of Common Stock, $.10 par value,
100,000,000 shares authorized 2,158
Class D Shares of Common Stock, $.10 par value,
100,000,000 shares authorized 3,772
Paid-in capital in excess of par 3,786,925
Undistributed investment income--net 376,674
Accumulated realized capital losses on investments and
foreign currency transactions--net (1,356,274)
Unrealized appreciation on investments and foreign
currency transactions--net 503,935
------------
Net assets $ 3,344,748
============
Net Asset Class A--Based on net assets of $542,947 and 53,567
Value: shares outstanding $ 10.14
============
Class B--Based on net assets of $2,206,954 and 222,014
shares outstanding $ 9.94
============
Class C--Based on net assets of $214,681 and 21,578
shares outstanding $ 9.95
============
Class D--Based on net assets of $380,166 and 37,722
shares outstanding $ 10.08
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1999
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended November 30, 1999
<S> <S> <C> <C>
Investment Dividends (net of $5,618 foreign withholding tax) $ 134,291
Income: Interest and discount earned 12,896
------------
Total income 147,187
------------
Expenses: Professional fees $ 79,460
Accounting services 77,575
Amortization of organization expenses 59,891
Registration fees 56,515
Directors' fees and expenses 45,087
Printing and shareholders reports 44,292
Investment advisory fees 36,873
Custodian fees 30,398
Account maintenance and distribution fees--Class B 25,207
Transfer agent fees--Class B 7,302
Account maintenance and distribution fees--Class C 2,516
Pricing fees 2,202
Transfer agent fees--Class A 1,273
Account maintenance fees--Class D 979
Transfer agent fees--Class D 941
Transfer agent fees--Class C 821
Other 3,814
------------
Total expenses before reimbursement 475,146
Reimbursement of expenses (428,007)
------------
Total expenses after reimbursement 47,139
------------
Investment income--net 100,048
------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 196,773
(Loss) on Foreign currency transactions--net (20,704) 176,069
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net: Investments--net 494,263
Foreign currency transactions--net (1,785) 492,478
------------ -----------
Net realized and unrealized gain on investments and
foreign currency transactions 668,547
------------
Net Increase in Net Assets Resulting from Operations $ 768,595
============
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: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 100,048 $ 221,252
Realized gain (loss) on investments and foreign
currency transactions--net 176,069 (1,233,675)
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net 492,478 (621,631)
------------ ------------
Net increase (decrease) in net assets resulting from operations 768,595 (1,634,054)
------------ ------------
Dividends to Investment income--net:
Shareholders: Class A -- (34,496)
Class B -- (147,378)
Class C -- (18,526)
Class D -- (35,943)
------------ ------------
Net decrease in net assets resulting from dividends
to shareholders -- (236,343)
------------ ------------
Capital Share Net decrease in net assets derived from capital
Transactions: share transactions (1,949,725) (2,371,225)
------------ ------------
Net Assets: Total decreasein net assets (1,181,130) (4,241,622)
Beginning of year 4,525,878 8,767,500
------------ ------------
End of year* $ 3,344,748 $ 4,525,878
============ ============
<FN>
*Undistributed investment income--net $ 376,674 $ --
============ ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1999
<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: 1999++ 1998++ 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.18 $ 10.96 $ 9.40 $ 10.66 $ 10.00
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .32 .40 .48 .42 .57
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net 1.64 (2.80) 1.52 (.80) .09
------- ------- ------- ------- -------
Total from investment operations 1.96 (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 $ 10.14 $ 8.18 $ 10.96 $ 9.40 $ 10.66
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 23.96% (22.59%) 22.43% (4.17%) 6.60%+++
Return:** ======= ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement .46% .47% .47% .47% .00%*
Net Assets: ======= ======= ======= ======= =======
Expenses 12.21% 6.51% 6.36% 4.84% 4.63%*
======= ======= ======= ======= =======
Investment income--net 3.55% 3.93% 4.35% 4.24% 8.43%*
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 543 $ 563 $ 989 $ 399 $ 648
Data: ======= ======= ======= ======= =======
Portfolio turnover 83.78% 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: 1999++ 1998++ 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.11 $ 10.87 $ 9.31 $10.56 $ 10.00
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .22 .29 .37 .32 .79
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net 1.61 (2.78) 1.51 (.80) (.23)
------- ------- ------- ------- -------
Total from investment operations 1.83 (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 $9.94 $ 8.11 $ 10.87 $ 9.31 $ 10.56
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 22.56% (23.40%) 21.02% (5.14%) 5.60%+++
Return:** ======= ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement 1.51% 1.51% 1.51% 1.50% 1.01%*
Net Assets: ======= ======= ======= ======= =======
Expenses 13.09% 7.51% 7.46% 5.90% 5.68%*
======= ======= ======= ======= =======
Investment income--net 2.48% 2.91% 3.40% 3.15% 8.33%*
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 2,207 $ 3,096 $ 5,947 $ 5,699 $ 7,701
Data: ======= ======= ======= ======= =======
Portfolio turnover 83.78% 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: 1999++ 1998++ 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.12 $ 10.89 $ 9.31 $10.56 $ 10.00
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .22 .30 .36 .31 .83
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net 1.61 (2.79) 1.55 (.79) (.27)
------- ------- ------- ------- -------
Total from investment operations 1.83 (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 $ 9.95 $ 8.12 $ 10.89 $ 9.31 $ 10.56
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 22.54% (23.38%) 21.42% (5.16%) 5.60%+++
Return:** ======= ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement 1.55% 1.53% 1.52% 1.50% 1.01%*
Net Assets: ======= ======= ======= ======= =======
Expenses 13.13% 7.45% 7.47% 5.91% 5.67%*
======= ======= ======= ======= =======
Investment income--net 2.47% 2.90% 3.33% 3.14% 8.45%*
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 215 $ 317 $ 723 $ 692 $ 1,012
Data: ======= ======= ======= ======= =======
Portfolio turnover 83.78% 17.03% 78.12% 46.36% 40.97%
======= ======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales charges;
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, 1999
<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: 1999++ 1998++ 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.15 $ 10.93 $ 9.38 $10.63 $ 10.00
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .29 .37 .46 .40 .77
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.64 (2.79) 1.50 (.80) (.14)
------- ------- ------- ------- -------
Total from investment operations 1.93 (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 $ 10.08 $ 8.15 $ 10.93 $ 9.38 $ 10.63
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 23.68% (22.84%) 21.95% (4.31%) 6.30%+++
Return:** ======= ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement .71% .72% .72% .72% .25%*
Net Assets: ======= ======= ======= ======= =======
Expenses 12.33% 6.70% 6.67% 5.08% 4.89%*
======= ======= ======= ======= =======
Investment income--net 3.23% 3.69% 4.18% 4.01% 9.07%*
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 380 $ 550 $ 1,109 $ 969 $ 1,569
Data: ======= ======= ======= ======= =======
Portfolio turnover 83.78% 17.03% 78.12% 46.36% 40.97%
======= ======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales charges;
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 that 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 that 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.
* 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, 1999
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
$297,331 have been reclassified between paid-in capital in excess of
par and undistributed net investment income and $20,705 has been
reclassified between accumulated net realized capital losses and
undistributed net investment income. These relassifications 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 the "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 1.0% of the average daily net
assets of the Fund. For the year ended November 30, 1999, MLAM
earned fees of $36,873, all of which was voluntarily waived. MLAM
also reimbursed the Fund for additional expenses of $391,134.
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 .25% .75%
Class C .25% .75%
Class D .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, 1999, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class D Shares as follows:
MLFD MLPF&S
Class D -- $7
For the year ended November 30, 1999, MLPF&S received contingent
deferred sales charges of $10,506 and $12 relating to transactions
in Class B and Class C Shares, respectively. Furthermore, MLPF&S
received contingent deferred sales charges of $5,670 and $749
relating to transactions subject to front-end sales charges waivers
in Class A and Class D Shares, respectively.
In addition, MLPF&S received $3,088 in commissions on the execution
of portfolio security transactions for the year ended November 30,
1999.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended November 30, 1999, were $2,764,731 and
$3,097,300, respectively.
Net realized gains (losses) for the year ended November 30, 1999 and
net unrealized gains (losses) as of November 30, 1999 were as
follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 196,764 $505,531
Short-term investments 9 --
Foreign currency transactions (20,704) (1,596)
---------- --------
Total $ 176,069 $503,935
========== ========
As of November 30, 1999, net unrealized appreciation for Federal
income tax purposes aggregated $504,204, of which $743,280 related
to appreciated securities and $239,076 related to depreciated
securities. The aggregate cost of investments at November 30, 1999
for Federal income tax purposes was $2,780,672.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $1,949,725 and $2,371,225 for the years ended November 30, 1999
and November 30, 1998, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended November 30, 1999 Shares Amount
Shares sold 1,954 $ 15,952
Shares redeemed (17,234) (147,205)
---------- -----------
Net decrease (15,280) $ (131,253)
========== ===========
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 B Shares for the Year Dollar
Ended November 30, 1999 Shares Amount
Shares sold 21,211 $ 174,157
Shares redeemed (181,073) (1,589,557)
---------- -----------
Net decrease (159,862) $(1,415,400)
========== ===========
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)
========== ===========
Merrill Lynch Middle East/Africa Fund, Inc., November 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
Class C Shares for the Year Dollar
Ended November 30, 1999 Shares Amount
Shares sold 871 $ 7,498
Shares redeemed (18,343) (161,370)
---------- -----------
Net decrease (17,472) $ (153,872)
========== ===========
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 D Shares for the Year Dollar
Ended November 30, 1999 Shares Amount
Shares redeemed (29,716) $ (249,200)
---------- -----------
Net decrease (29,716) $ (249,200)
========== ===========
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)
========== ===========
The total redemption fees for Merrill Lynch Middle East/Africa Fund,
Inc. amounted to $469 for the year ended November 30, 1999.
5. Capital Loss Carryforward:
At November 30, 1999, the Fund had a net capital loss carryforward
of approximately $1,058,000, of which $366,000 expires in 2004 and
$692,000 expires in 2006. This amount will be available to offset
like amounts of any future taxable gains.
6. Subsequent Event:
On December 17, 1999, the Fund's Board of Directors declared an
ordinary income dividend in the amount of $.340681 per Class A
Share, $.219896 per Class B Share, $.199163 per Class C Share and
$.314559 per Class D Share, payable on December 23, 1999 to
shareholders of record as of December 17, 1999.
<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, 1999, 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 four-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, 1999, 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, 1999, 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, 2000
</AUDIT-REPORT>
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Charles C. Reilly, Director
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, Director
Robert C. Doll, Senior Vice President
Grace Pineda, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Susan B. Baker, Secretary
Donald Cecil and Edward H. Meyer, Directors of Merrill Lynch Middle
East/Africa, Inc. have recently retired. The Fund's Board of
Directors wishes Mr. Cecil and Mr. Meyer well in their retirements.
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
