UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-6349
Name of Fund: Merrill Lynch Latin America Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, Merrill Lynch
Latin America Fund, Inc., 800 Scudders Mill Road, Plainsboro, NJ 08536.
Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 11/30/03
Date of reporting period: 12/01/02 - 05/31/03
Item 1 - Attach shareholder report
[LOGO] Merrill Lynch Investment Managers
Semi-Annual Report
May 31, 2003
Merrill Lynch
Latin America
Fund, Inc.
www.mlim.ml.com
MERRILL LYNCH LATIN AMERICA FUND, INC.
Asset Allocation
As a Percentage* of
Net Assets as of
May 31, 2003
A map illustrating the following percentages:
Mexico 41.9%
Venezuela 0.5%
Colombia 0.2%
Peru 1.8%
Brazil 45.4%
Argentina 2.6%
Chile 6.1%
* Total may not equal 100%.
Merrill Lynch Latin America Fund, Inc., May 31, 2003
DEAR SHAREHOLDER
Effective April 14, 2003, the share class names for the Merrill Lynch family of
mutual funds were changed to be consistent with the standard share classes of
most other mutual fund families. As of that date, all Class A Shares were
redesignated Class I Shares. At the same time, Class D Shares were redesignated
Class A Shares. There are no changes to the Class B or Class C share class
labels. Trading symbols have not changed nor have current eligibility rules or
pricing structures. This redesignation of share classes does not impact your
investment in any way.
Performance Review
For the six-month period ended May 31, 2003, total returns for Merrill Lynch
Latin America Fund, Inc.'s Class A, Class B, Class C and Class I Shares were
+21.63%, +21.13%, +21.15% and +21.80%, respectively. (Fund results shown do not
reflect sales charges and would be lower if sales charges were included.
Complete performance information can be found on pages 4 and 5 of this report to
shareholders.) The Fund's benchmark index, the unmanaged Morgan Stanley Capital
International Emerging Markets (MSCI EM) Latin America Free Index, returned
+23.95% for the same period, while its peer group of Lipper Latin American funds
posted an average return of +21.22%.
Over the course of the last six months, the Fund benefited from favorable stock
selection in Mexico, Argentina and Peru. It was penalized by its underweight
position in Chile and by stock selection in Brazil, where we were focused on
defensive names early in the year and exposed to small cap stocks, which have
tended to underperform during market rallies.
The period was marked by strong performance for virtually all Latin American
equity markets. Looking at the performance of each country in the MSCI EM Latin
America Free Index, Argentina was the top performer with a return of +52.33%. It
was followed by Venezuela with +45.48%, Brazil with +43.42%, Chile with +28.62%,
Colombia with +25.22%, Peru with +24.25% and Mexico at the bottom with a return
of +6.37%. Most markets in the region performed well as investors searched for
yield, which resulted in a narrowing of country bond spreads relative to U.S.
Treasury issues and strengthening currencies, all of which helped to drive
equity markets higher.
Portfolio Matters
Brazil remained our largest country allocation throughout the period. We closed
the six months with an overweight position in Brazil of approximately 400 basis
points (4%) relative to the benchmark. A new Brazilian government appears to
have been well received by investors. We remain encouraged by the orthodox
policies adopted by the new government and the positive impact that such
policies should have on fiscal accounts in the long run. During the period, we
changed our focus from exporters/dollar-earners to companies with a domestic
concentration, as well as companies that might benefit from Brazil's
strengthening currency. These included brewer Companhia de Bebidas das Americas
(AmBev), steel producers Usinas Siderurgicas de Minas Gerais SA (Usiminas) and
Gerdau SA, and wireline telecommunications operators Tele Norte Leste
Participacoes SA (Telemar) and Brasil Telecom SA.
Another focal point in the portfolio was Mexico, where we had an overweight
position of approximately 100 basis points at the close of the period. Mexico's
economic activity remains closely tied to the performance of the U.S. market.
Low interest rates, along with an expected pickup in global economic activity,
prompted us to increase our weighting of the Mexican market. While we had been
at a neutral position in Mexico for most of the past year, we increased our
overweight position in the homebuilding sector and added to our weighting in
leading retailer Wal-Mart de Mexico, SA de CV (Walmex) late in the period. In
May, we also increased our positions in both Telefonos de Mexico SA (Telmex) and
Cemex, SA de CV to bring them closer to a neutral position given their
attractive valuations and a forecast of better performance for Mexican equities
in the coming quarters.
In Chile, we believe the strong performance seen year-to-date has been overdone.
Chile remained the most expensive market in the region by far, with virtually
all of its growth tied to increased Chinese demand for natural resources.
Argentina and Venezuela showed the strongest performance during the period, but
both offered an uninviting combination of macro difficulties and few investable
companies. The rest of the Andean region also suffered from low liquidity,
making it an uninteresting area for investment.
Investment Outlook
We expect Latin American markets to continue to move higher for the remainder of
the Fund's fiscal year. In Brazil, President Luiz Inacio Lula da Silva's
government continues to advance with needed reforms -- including changes to
social security and fiscal and bankruptcy policies -- that should lead to
improved economic conditions in the future. In addition, the recent
strengthening of the real, the Brazilian currency, coupled with falling
inflation rates should allow the Brazilian central bank to enter an easing cycle
beginning in June or July. If this were to occur, the resulting lower interest
rates could translate into improving economic trends.
Although Mexico significantly underperformed the rest of the region during the
six-month period, we believe it should benefit from an anticipated rise in
global economic activity. Congressional elections in July could clear the way
for Mexico to begin implementing some needed reforms as well.
We do not expect to significantly change our positioning in the remaining Latin
American countries because of a combination of low liquidity, unattractive
valuations and/or a lack of short-term country-specific catalysts. While we
expect to see volatility throughout Latin American markets, we believe there are
real investment opportunities to be had. With that in mind, we will continue to
seek to achieve desirable performance results relative to our benchmark and our
peers over the long term through strict adherence to our disciplined,
value-oriented approach to stock selection.
In Conclusion
We thank you for your investment in Merrill Lynch Latin America Fund, Inc., and
we look forward to updating you again in our annual report to shareholders.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Josephine Ragni
Josephine Ragni
Vice President and Portfolio Manager
/s/ William M. Landers
William M. Landers
Vice President and Portfolio Manager
June 12, 2003
2 & 3
Merrill Lynch Latin America Fund, Inc., May 31, 2003
PERFORMANCE DATA
About Fund
Performance
Effective April 14, 2003, Class A Shares were redesignated Class I Shares and
Class D Shares were redesignated Class A Shares. Investors are able to purchase
shares of the Fund through multiple pricing alternatives:
o Class A Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
o Effective June 1, 2001, Class B Shares are subject to a maximum contingent
deferred sales charge of 4% declining to 0% after six years. All Class B
Shares purchased prior to June 1, 2001 will maintain the four-year
schedule. 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 A Shares after approximately eight years. (There is no
initial sales charge for automatic share conversions.)
o Class C Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class I Shares incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class
I Shares are available only to eligible investors, as detailed in the
Fund's prospectus.
None of the past results shown should be considered a representation of future
performance. Performance results do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
Figures shown in each of the following tables assume reinvestment of all
dividends and capital gains distributions at net asset value on the ex-dividend
date. Investment return and principal value of shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
Dividends paid to each class of shares will vary because of the different levels
of account maintenance, distribution and transfer agency fees applicable to each
class, which are deducted from the income available to be paid to shareholders.
Recent
Performance
Results
Ten-Year/
6-Month 12-Month Since Inception
As of May 31, 2003 Total Return Total Return Total Return
==================================================================================================
ML Latin America Fund, Inc. Class A Shares* +21.63% - 7.03% +33.58%
- --------------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class B Shares* +21.13 - 7.81 +23.30
- --------------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class C Shares* +21.15 - 7.81 -28.09
- --------------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class I Shares* +21.80 - 6.81 -21.27
- --------------------------------------------------------------------------------------------------
MSCI EM Latin America Free Index** +23.95 - 4.47 +71.52/- 6.58
==================================================================================================
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. The Fund's ten-year/since inception returns
are ten years for Class A & Class B Shares and 10/21/94 for Class C &
Class I Shares.
** This unmanaged market capitalization-weighted Index by Morgan Stanley
Capital International is comprised of a representative sampling of stocks
of large-, medium- and small-capitalization companies in Argentina,
Brazil, Chile and Mexico which are freely purchasable by foreign
investors. Ten-year/since inception total returns are for ten years and
from 10/31/94, respectively.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 5/31/03 - 7.03% - 11.91%
- --------------------------------------------------------------------------------
Five Years Ended 5/31/03 - 0.72 - 1.78
- --------------------------------------------------------------------------------
Ten Years Ended 5/31/03 + 2.94 + 2.38
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 5/31/03 - 7.81% - 11.49%
- --------------------------------------------------------------------------------
Five Years Ended 5/31/03 - 1.53 - 1.91
- --------------------------------------------------------------------------------
Ten Years Ended 5/31/03 + 2.12 + 2.12
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 5/31/03 - 7.81% - 8.73%
- --------------------------------------------------------------------------------
Five Years Ended 5/31/03 - 1.52 - 1.52
- --------------------------------------------------------------------------------
Inception (10/21/94) through 5/31/03 - 3.76 - 3.76
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class I Shares*
================================================================================
One Year Ended 5/31/03 - 6.81% - 11.70%
- --------------------------------------------------------------------------------
Five Years Ended 5/31/03 - 0.48 - 1.55
- --------------------------------------------------------------------------------
Inception (10/21/94) through 5/31/03 - 2.74 - 3.35
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
4 & 5
Merrill Lynch Latin America Fund, Inc., May 31, 2003
CONSOLIDATED SCHEDULE OF INVESTMENTS (in U.S. dollars)
Shares Percent of
COUNTRY Industry++ Held Common Stocks Value Net Assets
===================================================================================================================================
Argentina Apparel, Accessories & 347,622 +Grimoldi SA 'B' $ 194,134 0.2%
Luxury Goods
--------------------------------------------------------------------------------------------------------------------
Electric Utilities 379,500 +Central Costanera SA 'B' 406,654 0.5
--------------------------------------------------------------------------------------------------------------------
Oil 29,903 +Tenaris SA (ADR)* 696,740 0.8
--------------------------------------------------------------------------------------------------------------------
Real Estate 34,317 +IRSA Inversiones y Representaciones SA 'B' 30,185 0.0
Management & 52,576 +IRSA Inversiones y Representaciones SA (GDR)** 463,195 0.5
Development ---------- ----
493,380 0.5
--------------------------------------------------------------------------------------------------------------------
Steel 182,100 +Siderar S.A.I.C. 'A' 540,262 0.6
--------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Argentina 2,331,170 2.6
===================================================================================================================================
Brazil Apparel, Accessories & 6,872,866 Companhia de Tecidos Norte de Minas--Coteminas 470,157 0.5
Luxury Goods 12,284,085 +Empresa Nasional de Comercio SA 12,833 0.0
---------- ----
482,990 0.5
--------------------------------------------------------------------------------------------------------------------
Banks 127,600 Uniao de Bancos Brasileiros SA (Unibanco) (ADR)* 2,266,176 2.5
--------------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 209,600 Companhia de Bebidas das Americas (ADR)* 4,192,000 4.7
--------------------------------------------------------------------------------------------------------------------
Commercial Banks 75,697 Banco Itau Holding Financeira SA (ADR)* 2,603,977 2.9
--------------------------------------------------------------------------------------------------------------------
Electric Utilities 147,007 Companhia Energetica de Minas Gerais SA--CEMIG (ADR)* 1,499,471 1.6
125,100 +Companhia Paranaense de Energia--Copel (ADR)* 415,244 0.5
36,995 +Espirito Santo Centrais Eletricas SA--Escelsa 411,402 0.5
---------- ----
2,326,117 2.6
--------------------------------------------------------------------------------------------------------------------
Industrial Materials 465,830 Marcopolo SA 613,781 0.7
--------------------------------------------------------------------------------------------------------------------
Integrated 46,400 Brasil Telecom Participacoes SA (ADR)* 1,729,792 1.9
Telecommunication 2,717,732 Brasil Telecom SA 11,631 0.0
Services 385,853,873 Brasil Telecom SA 1,683,845 1.9
228,142 Tele Norte Leste Participacoes SA (ADR)* 2,730,860 3.1
---------- ----
6,156,128 6.9
--------------------------------------------------------------------------------------------------------------------
Machinery 1,744,651 Weg SA 1,869,584 2.1
--------------------------------------------------------------------------------------------------------------------
Metals & Mining 46,600 Companhia Siderurgica Nacional (ADR)* 887,730 1.0
206,617 Companhia Vale do Rio Doce (ADR)* 5,789,408 6.4
26,390 Gerdau SA (ADR)* 267,859 0.3
---------- ----
6,944,997 7.7
--------------------------------------------------------------------------------------------------------------------
Oil & Gas 293,300 Petroleo Brasileiro SA (ADR)* 5,198,860 5.8
221,211 Petroleo Brasileiro SA--Petrobras (ADR)* 4,236,191 4.7
---------- ----
9,435,051 10.5
--------------------------------------------------------------------------------------------------------------------
Paper Products 17,900 Aracruz Celulose SA (ADR)* 355,852 0.4
28,901 Votorantim Celulose e Papel SA (ADR)* 547,674 0.6
---------- ----
903,526 1.0
--------------------------------------------------------------------------------------------------------------------
Specialty Retailing 88,466 Globex Utilidades SA 199,738 0.2
64,924 +Globex Utilidades SA (Receipts) 109,392 0.1
---------- ----
309,130 0.3
--------------------------------------------------------------------------------------------------------------------
Specialty Stores 18,300 Companhia Brasileira de Distribuicao Grupo Pao de
Acucar (ADR)* 277,245 0.3
--------------------------------------------------------------------------------------------------------------------
Steel 277,957 Usinas Siderurgicas de Minas Gerais SA 'A' 1,020,034 1.1
--------------------------------------------------------------------------------------------------------------------
Wireless 139,492,927 Tele Celular Sul Participacoes SA 109,526 0.1
Telecommunication 107,603,246 Tele Centro Oeste Celular Participacoes SA 513,087 0.6
Services 81,000 Tele Centro Oeste Celular Participacoes SA (ADR)* 484,380 0.6
102,796,031 +Tele Leste Celular Participacoes SA 20,092 0.0
114,664,708 Tele Nordeste Celular Participacoes SA 94,668 0.1
72,760,206 Telemig Celular Participacoes SA 102,980 0.1
6,090,475 Telemig Celular SA 86,200 0.1
631,740 Telemig Celular SA 'C' 7,025 0.0
---------- ----
1,417,958 1.6
--------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Brazil 40,818,694 45.4
===================================================================================================================================
Chile Beverages 30,400 Embotelladora Andina SA 'B' (ADR)* 252,320 0.3
--------------------------------------------------------------------------------------------------------------------
Commercial Banks 20,081 Banco Santander Chile SA (ADR)* 438,368 0.5
--------------------------------------------------------------------------------------------------------------------
Distillers & Vintners 15,200 Compania Cervecerias Unidas SA (ADR)* 252,928 0.3
3,465 Vina Concha Y Toro SA (ADR)* 148,822 0.1
---------- ----
401,750 0.4
--------------------------------------------------------------------------------------------------------------------
Diversified Financial 34,015 Genesis Chile Fund 1,163,313 1.3
Services
--------------------------------------------------------------------------------------------------------------------
Electric Utilities 108,905 +Empresa Nacional de Electricidad SA (Endesa) (ADR)* 1,001,926 1.1
--------------------------------------------------------------------------------------------------------------------
Integrated 192,532 +Compania de Telecomunicaciones de Chile SA (ADR)* 2,252,624 2.5
Telecommunication
Services
--------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Chile 5,510,301 6.1
===================================================================================================================================
Colombia Diversified Financial 331,243 +Valores Bavaria SA 15,651 0.0
Services
--------------------------------------------------------------------------------------------------------------------
General Merchandise 120,375 Almacenes Exito SA 143,248 0.2
Stores
--------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Colombia 158,899 0.2
===================================================================================================================================
Mexico Airport Services 21,300 Grupo Aeroportuario del Sureste, SA de CV (ADR)* 291,384 0.3
--------------------------------------------------------------------------------------------------------------------
Banks 16,316 +Banco Latinoamericano de Exportaciones, SA 'E' 126,123 0.1
--------------------------------------------------------------------------------------------------------------------
Beverages 68,825 +Coca-Cola Femsa SA (ADR)* 1,543,057 1.7
51,987 Fomento Economico Mexicano, SA de CV (ADR)* 2,074,281 2.3
381,300 Grupo Modelo, SA de CV 'C' 859,299 1.0
---------- ----
4,476,637 5.0
--------------------------------------------------------------------------------------------------------------------
Broadcasting & Cable TV 102,975 +Grupo Televisa SA (ADR)* 3,176,779 3.5
57,000 TV Azteca, SA de CV (ADR)* 314,469 0.4
---------- ----
3,491,248 3.9
--------------------------------------------------------------------------------------------------------------------
6 & 7
Merrill Lynch Latin America Fund, Inc., May 31, 2003
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) (in U.S. dollars)
Shares Percent of
COUNTRY Industry++ Held Common Stocks Value Net Assets
===================================================================================================================================
Mexico Building 340,000 +Corporacion GEO, SA de CV 'B' $ 986,556 1.1%
(concluded) --------------------------------------------------------------------------------------------------------------------
Commercial Banks 3,110,275 +Grupo Financiero BBVA Bancomer, SA de CV 'B' 2,704,456 3.0
309,900 Grupo Financiero Banorte, SA de CV 'O' 899,516 1.0
---------- ----
3,603,972 4.0
--------------------------------------------------------------------------------------------------------------------
Construction Materials 176,284 Cemex, SA de CV (ADR)* 3,909,979 4.4
--------------------------------------------------------------------------------------------------------------------
General Merchandise 1,982,322 Wal-Mart de Mexico, SA de CV 'C' 5,061,737 5.6
Stores
--------------------------------------------------------------------------------------------------------------------
Household Products 231,366 Kimberly-Clark de Mexico, SA de CV 'A' 581,380 0.6
--------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates 428,500 Alfa, SA 'A' 741,866 0.8
--------------------------------------------------------------------------------------------------------------------
Industrials 22,230 Grupo IMSA, SA de CV (ADR)* 280,098 0.3
--------------------------------------------------------------------------------------------------------------------
Integrated 262,393 Telefonos de Mexico SA (ADR)* 7,950,508 8.8
Telecommunication
Services
--------------------------------------------------------------------------------------------------------------------
Metals & Mining 35,000 Industrias Penoles SA 62,627 0.1
--------------------------------------------------------------------------------------------------------------------
Real Estate 226,400 +Consorcio ARA, SA de CV 431,384 0.5
Management &
Development
--------------------------------------------------------------------------------------------------------------------
Wireless 314,409 America Movil, SA de CV 'L' (ADR)* 5,741,108 6.4
Telecommunication
Services
--------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Mexico 37,736,607 41.9
===================================================================================================================================
Peru Metals & Mining 44,607 Compania de Minas Buenaventura SA (ADR)* 1,313,676 1.5
--------------------------------------------------------------------------------------------------------------------
Packaged Foods & 1,543,169 +Alicorp SA 282,531 0.3
Meals
--------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Peru 1,596,207 1.8
===================================================================================================================================
Venezuela Construction Materials 643,105 +Sudamtex de Venezuela (ADR)* (c)(d) 6 0.0
--------------------------------------------------------------------------------------------------------------------
Integrated 35,234 Compania Anonima Nacional Telefonos de Venezuela
Telecommunication (CANTV) (ADR)* 448,529 0.5
Services
--------------------------------------------------------------------------------------------------------------------
Metals & Mining 27,350 +International Briquettes Holding, Inc. 0 0.0
--------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Venezuela 448,535 0.5
===================================================================================================================================
Total Investments in Common Stocks (Cost--$99,045,371) 88,600,413 98.5
===================================================================================================================================
Warrants (a)
===================================================================================================================================
Construction Materials 5,800 Cemex, SA de CV 1,683 0.0
13,298 Cemex, SA de CV (ADR)* 15,958 0.0
--------------------------------------------------------------------------------------------------------------------
Total Investments in Warrants (Cost--$30,480) 17,641 0.0
===================================================================================================================================
Face
Amount Fixed Income Securities
===================================================================================================================================
Metals & Mining BRL 1,099,391 Companhia Vale do Rio Doce, 0% due 12/31/2049 (b) 0 0.0
--------------------------------------------------------------------------------------------------------------------
Total Investments in Fixed Income Securities (Cost--$0) 0 0.0
===================================================================================================================================
Shares Held/
Beneficial Interest Short-Term Securities
===================================================================================================================================
US$ 592,994 Merrill Lynch Liquidity Series, LLC Money Market
Series (e)(f) 592,994 0.7
319,306 Merrill Lynch Premier Institutional Fund (e)(f) 319,306 0.3
--------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term Securities
(Cost--$912,300) 912,300 1.0
===================================================================================================================================
Total Investments (Cost--$99,988,151) 89,530,354 99.5
Other Assets Less Liabilities 423,061 0.5
----------- -----
Net Assets $89,953,415 100.0%
=========== =====
===================================================================================================================================
+ Non-income producing security.
++ For Fund compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report, which may
combine such industry sub-classifications for reporting ease.
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
(a) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(b) Received through a bonus issue from Companhia Vale do Rio Doce. As of May
31, 2003, the bonds have not commenced trading and the coupon rate has not
been determined.
(c) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(d) Investments in companies 5% or more of whose outstanding securities are
held by the Fund (such companies are defined as "Affiliated Companies" in
section 2 (a)(3) of the Investment Company Act of 1940) are as follows:
- --------------------------------------------------------------------------------
Net Share Purchase Sales Realized Dividend
Affiliate Activity Cost Cost Gain Income
- --------------------------------------------------------------------------------
Sudamtex
de Venezuela (ADR) -- -- -- -- +
- --------------------------------------------------------------------------------
+ Non-income producing security.
(e) Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) are as follows:
- --------------------------------------------------------------------------------
Dividend/
Net Interest
Affiliate Activity Income
- --------------------------------------------------------------------------------
Merrill Lynch Liquidity Series,
LLC Money Market Series $592,994 $ 683
Merrill Lynch Premier Institutional Fund 319,306 $ 249
- --------------------------------------------------------------------------------
(f) Security was purchased with the cash proceeds from securities loans.
See Notes to Consolidated Financial Statements.
8 & 9
Merrill Lynch Latin America Fund, Inc., May 31, 2003
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
As of May 31, 2003
============================================================================================================================
Assets: Investments, at value (including securities loaned of $859,280)
(identified cost--$99,988,151) ............................................. $ 89,530,354
Foreign cash (cost--$557,323) .............................................. 519,244
Receivables:
Securities sold .......................................................... $ 846,399
Dividends ................................................................ 636,069
Capital shares sold ...................................................... 171,034
Securities lending--net .................................................. 653
Interest ................................................................. 553 1,654,708
------------
Prepaid expenses ........................................................... 29,406
-------------
Total assets ............................................................... 91,733,712
-------------
============================================================================================================================
Liabilities: Collateral on securities loaned, at value .................................. 912,300
Payables:
Securities purchased ..................................................... 440,872
Custodian bank ........................................................... 169,718
Capital shares redeemed .................................................. 88,606
Other affiliates ......................................................... 73,534
Investment adviser ....................................................... 68,836
Distributor .............................................................. 25,881 867,447
------------
Accrued expenses ........................................................... 550
-------------
Total liabilities .......................................................... 1,780,297
-------------
============================================================================================================================
Net Assets: Net assets ................................................................. $ 89,953,415
=============
============================================================================================================================
Net Assets Class A Common Stock, $.10 par value, 100,000,000 shares authorized ........ $ 411,082
Consist of: Class B Common Stock, $.10 par value, 100,000,000 shares authorized ........ 129,319
Class C Common Stock, $.10 par value, 100,000,000 shares authorized ........ 28,719
Class I Common Stock, $.10 par value, 100,000,000 shares authorized ........ 166,967
Paid-in capital in excess of par ........................................... 284,084,159
Accumulated distributions in excess of investment income--net .............. $ (102,001)
Accumulated realized capital losses on investments and foreign
currency transactions--net ................................................. (184,277,556)
Unrealized depreciation on investments and foreign currency
transactions--net .......................................................... (10,487,274)
------------
Total accumulated losses--net .............................................. (194,866,831)
-------------
Net assets ................................................................. $ 89,953,415
=============
============================================================================================================================
Net Asset Class A--Based on net assets of $50,604,998 and 4,110,819 shares outstanding $ 12.31
Value: =============
Class B--Based on net assets of $15,272,879 and 1,293,188 shares outstanding $ 11.81
=============
Class C--Based on net assets of $3,388,509 and 287,186 shares outstanding .. $ 11.80
=============
Class I--Based on net assets of $20,687,029 and 1,669,666 shares outstanding $ 12.39
=============
============================================================================================================================
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 2003
==============================================================================================================
Investment Income: Dividends (net of $141,263 foreign withholding tax) . $ 1,782,583
Interest ............................................ 1,784
Securities lending--net ............................. 1,169
-----------
Total income ........................................ 1,785,536
-----------
==============================================================================================================
Expenses: Investment advisory fees ............................ $ 401,678
Account maintenance and distribution fees--Class B .. 80,222
Transfer agent fees--Class A ........................ 77,074
Account maintenance fees--Class A ................... 54,520
Custodian fees ...................................... 50,753
Accounting services ................................. 39,861
Transfer agent fees--Class B ........................ 33,946
Transfer agent fees--Class I ........................ 31,139
Professional fees ................................... 30,770
Directors' fees and expenses ........................ 28,564
Printing and shareholder reports .................... 24,977
Registration fees ................................... 22,408
Account maintenance and distribution fees--Class C .. 15,235
Transfer agent fees--Class C ........................ 6,434
Pricing fees ........................................ 1,185
Other ............................................... 33,224
------------
Total expenses ...................................... 931,990
-----------
Investment income--net .............................. 853,546
-----------
==============================================================================================================
Realized & Realized loss from:
Unrealized Investments--net .................................. (10,391,916)
Gain (Loss) on Foreign currency transactions--net ................ (23,371) (10,415,287)
Investments & ------------
Foreign Currency Change in unrealized depreciation on:
Transactions--Net: Investments--net .................................. 25,598,807
Foreign currency transactions--net ................ 41,709 25,640,516
------------ -----------
Total realized and unrealized gain on investments and
foreign currency transactions--net .................. 15,225,229
-----------
Net Increase in Net Assets Resulting from Operations 16,078,775
===========
==============================================================================================================
See Notes to Consolidated Financial Statements.
10 & 11
Merrill Lynch Latin America Fund, Inc., May 31, 2003
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
May 31, November 30,
Increase (Decrease) in Net Assets: 2003 2002
==========================================================================================================================
Operations: Investment income--net ............................................ $ 853,546 $ 1,226,171
Realized loss on investments and foreign currency transactions--net (10,415,287) (21,956,352)
Change in unrealized depreciation on investments and foreign
currency transactions--net ........................................ 25,640,516 9,824,896
------------- -------------
Net increase (decrease) in net assets resulting from operations ... 16,078,775 (10,905,285)
------------- -------------
==========================================================================================================================
Dividends to Investment income--net:
Shareholders: Class A ......................................................... (124,592) --
Class I ......................................................... (97,673) (61,439)
------------- -------------
Net decrease in net assets resulting from dividends to shareholders (222,265) (61,439)
------------- -------------
==========================================================================================================================
Capital Share Net decrease in net assets derived from capital share transactions (6,326,372) (24,661,855)
Transactions: ------------- -------------
==========================================================================================================================
Net Assets: Total increase (decrease) in net assets ........................... 9,530,138 (35,628,579)
Beginning of period ............................................... 80,423,277 116,051,856
------------- -------------
End of the period* ................................................ $ 89,953,415 $ 80,423,277
============= =============
==========================================================================================================================
* Accumulated distributions in excess of investment
income--net/Accumulated investment loss--net ...................... $ (102,001) $ (733,282)
============= =============
==========================================================================================================================
See Notes to Consolidated Financial Statements.
CONSOLIDATED FINANCIAL HIGHLIGHTS
Class A++
The following per share data and ratios have been -------------------------------------------------------
derived from information provided in the financial For the Six
statements. Months Ended For the Year Ended November 30,
May 31, -------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
==================================================================================================================================
Per Share Net asset value, beginning of period ................. $ 10.15 $ 11.56 $ 13.00 $ 12.83 $ 10.53
Operating -------- -------- -------- -------- --------
Performance: Investment income--net+ .............................. .12 .16 .09 .03 .18
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net ................... 2.07 (1.57) (1.53) .34 2.62
-------- -------- -------- -------- --------
Total from investment operations ..................... 2.19 (1.41) (1.44) .37 2.80
-------- -------- -------- -------- --------
Less dividends:
Investment income--net ............................. (.03) -- -- (.16) (.50)
In excess of investment income--net ................ -- -- -- (.04) --
-------- -------- -------- -------- --------
Total dividends ...................................... (.03) -- -- (.20) (.50)
-------- -------- -------- -------- --------
Net asset value, end of period ....................... $ 12.31 $ 10.15 $ 11.56 $ 13.00 $ 12.83
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on net asset value per share ................... 21.63%@ (12.20%) (11.08%) 2.71% 28.47%
Return:** ======== ======== ======== ======== ========
==================================================================================================================================
Ratios to Average Expenses ............................................. 2.18%* 2.10% 1.98% 1.73% 2.04%
Net Assets: ======== ======== ======== ======== ========
Investment income--net ............................... 2.28%* 1.37% .69% .20% 1.73%
======== ======== ======== ======== ========
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) ............. $ 50,605 $ 42,062 $ 39,508 $ 46,514 $ 47,691
Data: ======== ======== ======== ======== ========
Portfolio turnover ................................... 25.82% 45.85% 43.74% 41.70% 29.91%
======== ======== ======== ======== ========
==================================================================================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
@ Aggregate total investment return.
See Notes to Consolidated Financial Statements.
12 & 13
Merrill Lynch Latin America Fund, Inc., May 31, 2003
CONSOLIDATED FINANCIAL HIGHLIGHTS (concluded)
Class B
The following per share data and ratios have been ---------------------------------------------------------
derived from information provided in the financial For the Six
statements. Months Ended For the Year Ended November 30,
May 31, --------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
=================================================================================================================================
Per Share Net asset value, beginning of period ............. $ 9.75 $ 11.20 $ 12.69 $ 12.52 $ 10.20
Operating ------- ------- ------- ------- --------
Performance: Investment income (loss)--net+ ................... .07 .07 --+++ (.07) .10
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ........... 1.99 (1.52) (1.49) .32 2.56
------- ------- ------- ------- --------
Total from investment operations ................. 2.06 (1.45) (1.49) .25 2.66
------- ------- ------- ------- --------
Less dividends:
Investment income--net ......................... -- -- -- (.06) (.34)
In excess of investment income--net ............ -- -- -- (.02) --
------- ------- ------- ------- --------
Total dividends .................................. -- -- -- (.08) (.34)
------- ------- ------- ------- --------
Net asset value, end of period ................... $ 11.81 $ 9.75 $ 11.20 $ 12.69 $ 12.52
======= ======= ======= ======= ========
=================================================================================================================================
Total Investment Based on net asset value per share ............... 21.13%@ (12.95%) (11.74%) 1.94% 27.32%
Return:** ======= ======= ======= ======= ========
=================================================================================================================================
Ratios to Average Expenses ......................................... 3.00%* 2.91% 2.78% 2.51% 2.87%
Net Assets: ======= ======= ======= ======= ========
Investment income (loss)--net .................... 1.37%* .62% (.04%) (.44%) .98%
======= ======= ======= ======= ========
=================================================================================================================================
Supplemental Net assets, end of period (in thousands) ......... $15,273 $18,259 $49,253 $87,317 $135,883
Data: ======= ======= ======= ======= ========
Portfolio turnover ............................... 25.82% 45.85% 43.74% 41.70% 29.91%
======= ======= ======= ======= ========
=================================================================================================================================
Class C
The following per share data and ratios have been ---------------------------------------------------------
derived from information provided in the financial For the Six
statements. Months Ended For the Year Ended November 30,
May 31, --------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
=================================================================================================================================
Per Share Net asset value, beginning of period ............. $ 9.74 $ 11.19 $ 12.68 $ 12.53 $ 10.18
Operating ------- ------- ------- ------- --------
Performance: Investment income (loss)--net+ ................... .07 .07 (.01) (.07) .09
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ........... 1.99 (1.52) (1.48) .32 2.58
------- ------- ------- ------- --------
Total from investment operations ................. 2.06 (1.45) (1.49) .25 2.67
------- ------- ------- ------- --------
Less dividends:
Investment income--net ......................... -- -- -- (.08) (.32)
In excess of investment income--net ............ -- -- -- (.02) --
------- ------- ------- ------- --------
Total dividends .................................. -- -- -- (.10) (.32)
------- ------- ------- ------- --------
Net asset value, end of period ................... $ 11.80 $ 9.74 $ 11.19 $ 12.68 $ 12.53
======= ======= ======= ======= ========
=================================================================================================================================
Total Investment Based on net asset value per share ............... 21.15%@ (12.96%) (11.75%) 1.90% 27.42%
Return:** ======= ======= ======= ======= ========
=================================================================================================================================
Ratios to Average Expenses ......................................... 3.00%* 2.91% 2.78% 2.51% 2.85%
Net Assets: ======= ======= ======= ======= ========
Investment income (loss)--net .................... 1.43%* .59% (.06%) (.48%) .89%
======= ======= ======= ======= ========
=================================================================================================================================
Supplemental Net assets, end of period (in thousands) ......... $ 3,388 $ 3,084 $ 4,538 $ 7,000 $ 10,638
Data: ======= ======= ======= ======= ========
Portfolio turnover ............................... 25.82% 45.85% 43.74% 41.70% 29.91%
======= ======= ======= ======= ========
=================================================================================================================================
Class I++
The following per share data and ratios have been ---------------------------------------------------------
derived from information provided in the financial For the Six
statements. Months Ended For the Year Ended November 30,
May 31, --------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
=================================================================================================================================
Per Share Net asset value, beginning of period ............. $ 10.23 $ 11.66 $ 13.08 $ 12.89 $ 10.61
Operating ------- ------- ------- ------- --------
Performance: Investment income--net+ .......................... .14 .19 .13 .07 .20
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ........... 2.08 (1.59) (1.55) .35 2.63
------- ------- ------- ------- --------
Total from investment operations ................. 2.22 (1.40) (1.42) .42 2.83
------- ------- ------- ------- --------
Less dividends:
Investment income--net ......................... (.06) (.03) -- (.18) (.55)
In excess of investment income--net ............ -- -- -- (.05) --
------- ------- ------- ------- --------
Total dividends .................................. (.06) (.03) -- (.23) (.55)
------- ------- ------- ------- --------
Net asset value, end of period ................... $ 12.39 $ 10.23 $ 11.66 $ 13.08 $ 12.89
======= ======= ======= ======= ========
=================================================================================================================================
Total Investment Based on net asset value per share ............... 21.80%@ (12.04%) (10.86%) 3.04% 28.74%
Return:** ======= ======= ======= ======= ========
=================================================================================================================================
Ratios to Average Expenses ......................................... 1.93%* 1.85% 1.73% 1.48% 1.77%
Net Assets: ======= ======= ======= ======= ========
Investment income--net ........................... 2.54%* 1.63% .97% .48% 1.84%
======= ======= ======= ======= ========
=================================================================================================================================
Supplemental Net assets, end of period (in thousands) ......... $20,687 $17,018 $22,753 $30,466 $ 32,023
Data: ======= ======= ======= ======= ========
Portfolio turnover ............................... 25.82% 45.85% 43.74% 41.70% 29.91%
======= ======= ======= ======= ========
=================================================================================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
+++ Amount is less than $.01 per share.
@ Aggregate total investment return.
See Notes to Consolidated Financial Statements.
14 & 15
Merrill Lynch Latin America Fund, Inc., May 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Latin America Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. The Fund's financial statements are prepared in
conformity with accounting principles generally accepted in the United States of
America, which may require the use of management accruals and estimates. These
unaudited financial statements reflect all adjustments, which are, in the
opinion of management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal, recurring
nature. The Fund offers multiple classes of shares. Effective April 14, 2003,
Class A Shares were redesignated Class I Shares and Class D Shares were
redesignated Class A Shares. The Fund's financial statements and financial
highlights contained within this report reflect the new share class
redesignation. Shares of Class A and Class I 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 A, Class B
and Class C 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. Income, expenses (other than expenses attributable to a specific
class) and realized and unrealized gains and losses on investments and foreign
currency transactions are allocated daily to each class based on its relative
net assets. The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments -- Portfolio securities that are traded on stock
exchanges or Nasdaq National are valued at the last sale price or official
closing 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 for long positions, and at the last
available ask price for short positions. 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 quotations are not available are valued at fair value as determined in
good faith by or under the direction of the Fund's Board of Directors.
Occasionally, events affecting the values of securities and other assets may
occur between the times at which valuations of such securities are determined
(that is, close of the market on which such securities trade) and the close of
business on the NYSE. If events (for example, company announcement, natural
disasters, market volatility) occur during such periods that are expected to
materially affect the value for such securities, those securities may be valued
at their fair market value as determined in good faith by the Fund's Board of
Directors or by the investment adviser using a pricing service and/or procedures
approved by the Board of Directors of the Fund.
(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 U.S. 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
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movement and movements in the securities
markets. Losses may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
o Options -- The Fund is authorized to write and purchase call and put options.
When the Fund writes an option, an amount equal to the premium received by the
Fund is reflected as an asset and an equivalent liability. The amount of the
liability is subsequently marked to market to reflect the current market value
of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
o Forward foreign exchange contracts -- The Fund is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. The contract is marked-to-market daily and
the change in market value is recorded by the Fund as an unrealized gain or
loss. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the value at the time it was opened and the
value at the time it was closed.
o Foreign currency options and futures -- The Fund may also purchase or sell
listed or over-the-counter foreign currency options, foreign currency futures
and related options on foreign currency futures as a short or long hedge against
possible variations in foreign exchange rates. Such transactions may be effected
with respect to hedges on non-U.S. dollar denominated securities owned by the
Fund, sold by the Fund but not yet delivered, or committed or anticipated to be
purchased by the Fund.
o Financial futures contracts -- The Fund may purchase or sell financial futures
contracts and options on such futures contracts. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at a specific
price or yield. Upon entering into a contract, the Fund deposits and maintains
as collateral such initial margin as required by the exchange on which the
transac-tion 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.
16 & 17
Merrill Lynch Latin America Fund, Inc., May 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(e) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. 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 is recognized on the accrual basis.
(f) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(g) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(h) Securities lending -- The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. The market value of
the loaned securities is determined at the close of business of the Fund and any
additional required collateral is delivered to the Fund on the next business
day. Where the Fund receives securities as collateral for the loaned securities,
it collects a fee from the borrower. The Fund typically receives the income on
the loaned securities but does not receive the income on the collateral. Where
the Fund receives cash collateral, it may invest such collateral and retain the
amount earned on such investment, net of any amount rebated to the borrower.
Loans of securities are terminable at any time and the borrower, after notice,
is required to return borrowed securities within five business days. The Fund
may pay reasonable finder's, lending agent, administrative and custodial fees in
connection with its loans. In the event that the borrower defaults on its
obligation to return borrowed securities because of insolvency or for any other
reason, the Fund could experience delays and costs in gaining access to the
collateral. The Fund also could suffer a loss where the value of the collateral
falls below the market value of the borrowed securities, in the event of
borrower default or in the event of losses on investments made with cash
collateral.
(i) Basis of consolidation -- The accompanying consolidated financial statements
include the accounts of Merrill Lynch Latin America Fund Chile Ltd., a
wholly-owned subsidiary, which primarily invests in Chilean securities.
Intercompany accounts and transactions have been eliminated.
(j) Custodian bank -- The Fund recorded an amount payable to the custodian bank
reflecting an overnight overdraft, which resulted from a failed trade that
settled the next day.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Investment Managers, L.P. ("MLIM"). The general partner of MLIM is Princeton
Services, Inc. ("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Fund has entered into
a Distribution Agreement and Distribution Plans with FAM Distributors, Inc.
("FAMD" or the "Distributor"), which is a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
MLIM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee of
1.0%, on an annual basis, of the average daily value of the Fund's net assets.
MLIM has entered into a Sub-Advisory Agreement with Merrill Lynch Asset
Management U.K. Limited ("MLAM U.K."), an affiliate of MLIM, pursuant to which
MLAM U.K. provides investment advisory services to MLIM with respect to the
Fund. There is no increase in the aggregate fees paid by the Fund for these
services.
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 A ................................ .25% --
Class B ................................ .25% .75%
Class C ................................ .25% .75%
- --------------------------------------------------------------------------------
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 A, Class B and Class C shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the six months ended May 31, 2003, FAMD earned underwriting discounts and
direct commissions and MLPF&S earned dealer concessions on sales of the Fund's
Class A Shares as follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S
- --------------------------------------------------------------------------------
Class A ................................ $111 $387
- --------------------------------------------------------------------------------
For the six months ended May 31, 2003, MLPF&S received contingent deferred sales
charges of $7,875 and $169 relating to transactions in Class B and Class C
Shares, respectively.
The Fund has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to MLPF&S or its
affiliates. Pursuant to that order, the Fund also has retained Merrill Lynch
Investment Managers, LLC ("MLIM, LLC"), an affiliate of MLIM, as the securities
lending agent for a fee based on a share of the returns on investment of cash
collateral. MLIM, LLC may, on behalf of the Fund, invest cash collateral
received by the Fund for such loans, among other things, in a private investment
company managed by MLIM, LLC or in registered money market funds advised by MLIM
or its affiliates. For the six months ended May 31, 2003, MLIM, LLC received
$510 in securities lending agent fees.
In addition, MLPF&S received $8,574 in commissions on the execution of portfolio
security transactions for the Fund for the six months ended May 31, 2003.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
For the six months ended May 31, 2003, the Fund reimbursed MLIM $821 for certain
accounting services.
Certain officers and/or directors of the Fund are officers and/or directors of
MLIM, PSI, MLAM U.K., FDS, FAMD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended May 31, 2003 were $20,514,181 and $26,232,821, respectively.
Net realized losses for the six months ended May 31, 2003 and net unrealized
losses as of May 31, 2003 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Losses Losses
- --------------------------------------------------------------------------------
Long-term investments .................. $(10,391,916) $(10,457,797)
Foreign currency transactions .......... (23,371) (29,477)
------------ ------------
Total .................................. $(10,415,287) $(10,487,274)
============ ============
- --------------------------------------------------------------------------------
18 & 19
Merrill Lynch Latin America Fund, Inc., May 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded)
As of May 31, 2003, net unrealized depreciation for Federal income tax purposes
aggregated $13,335,165, of which $12,695,297 related to appreciated securities
and $26,030,462 related to depreciated securities. At May 31, 2003, the
aggregate cost of investments for Federal income tax purposes was $102,865,519.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$6,326,372 and $24,661,855 for the six months ended May 31, 2003 and the year
ended November 30, 2002, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended May 31, 2003+ Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 26,238 $ 296,319
Automatic conversion of shares ........... 352,621 3,775,282
Shares issued to shareholders in
reinvestment of dividends ................ 9,844 102,183
----------- -----------
Total issued ............................. 388,703 4,173,784
Shares redeemed .......................... (420,377) (4,442,470)
----------- -----------
Net decrease ............................. (31,674) $ (268,686)
=========== ===========
- --------------------------------------------------------------------------------
+ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended November 30, 2002+ Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 90,392 $ 1,226,845
Automatic conversion of shares ......... 1,673,634 20,124,673
------------ ------------
Total issued ........................... 1,764,026 21,351,518
Shares redeemed ........................ (1,038,127) (12,330,010)
------------ ------------
Net increase ........................... 725,899 $ 9,021,508
============ ============
- --------------------------------------------------------------------------------
+ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended May 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 66,667 $ 762,079
Automatic conversion of shares ......... (366,922) (3,775,282)
Shares redeemed ........................ (278,760) (2,908,041)
----------- -----------
Net decrease ........................... (579,015) $(5,921,244)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended November 30, 2002 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 45,566 $ 541,833
Automatic conversion of shares ......... (1,733,997) (20,124,673)
Shares redeemed ........................ (837,966) (9,820,192)
------------ ------------
Net decrease ........................... (2,526,397) $(29,403,032)
============ ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended May 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 3,921 $ 42,266
Shares redeemed .................... (33,215) (335,246)
--------- ---------
Net decrease ....................... (29,294) $(292,980)
========= =========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended November 30, 2002 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ...................... 14,184 $ 169,142
Shares redeemed .................. (103,336) (1,180,869)
----------- -----------
Net decrease ..................... (89,152) $(1,011,727)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class I Shares for the Six Months Dollar
Ended May 31, 2003+ Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 246,330 $ 2,751,569
Shares issued to shareholders in
reinvestment of dividends ................ 9,012 93,995
----------- -----------
Total issued ............................. 255,342 2,845,564
Shares redeemed .......................... (248,507) (2,689,026)
----------- -----------
Net increase ............................. 6,835 $ 156,538
=========== ===========
- --------------------------------------------------------------------------------
+ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
- --------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended November 30, 2002+ Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 402,629 $ 5,146,138
Shares issued to shareholders in
reinvestment of dividends ................ 4,764 58,841
----------- -----------
Total issued ............................. 407,393 5,204,979
Shares redeemed .......................... (696,443) (8,473,583)
----------- -----------
Net decrease ............................. (289,050) $(3,268,604)
=========== ===========
- --------------------------------------------------------------------------------
+ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
5. Short-Term Borrowings:
The Fund, along with certain other funds managed by MLIM and its affiliates, is
a party to a $500,000,000 credit agreement with Bank One, N.A. and certain other
lenders. The Fund may borrow under the credit agreement to fund shareholder
redemptions and for other lawful purposes other than for leverage. The Fund may
borrow up to the maximum amount allowable under the Fund's current prospectus
and statement of additional information, subject to various other legal,
regulatory or contractual limits. The Fund pays a commitment fee of .09% per
annum based on the Fund's pro rata share of the unused portion of the credit
agreement. Amounts borrowed under the credit agreement bear interest at a rate
equal to, at each fund's election, the Federal Funds rate plus .50% or a base
rate as determined by Bank One, N.A. On November 29, 2002, the credit agreement
was renewed for one year under the same terms, except that the commitment was
reduced from $1,000,000,000 to $500,000,000. The Fund did not borrow under the
credit agreement during the six months ended May 31, 2003.
6. Capital Loss Carryforward:
On November 30, 2002, the Fund had a net capital loss carryforward of
$167,459,845, of which $53,474,080 expires in 2004, $52,461,806 expires in 2006,
$26,681,113 expires in 2007, $4,233,519 expires in 2009 and $30,609,327 expires
in 2010. This amount will be available to offset like amounts of any future
taxable gains.
20 & 21
Merrill Lynch Latin America Fund, Inc., May 31, 2003
PORTFOLIO INFORMATION
As of May 31, 2003
Percent of
Ten Largest Holdings (Equity Investments) Net Assets
Petroleo Brasileiro SA (ADR)* ................................... 10.5%
Telefonos de Mexico SA (ADR) .................................... 8.8
Companhia Vale do Rio Doce (ADR) ................................ 6.4
America Movil, SA de CV 'L' (ADR) ............................... 6.4
Wal-Mart de Mexico, SA de CV 'C' ................................ 5.6
Companhia de Bebidas das
Americas (Preferred) (ADR) .................................... 4.7
Cemex, SA de CV (ADR) ........................................... 4.4
Grupo Televisa SA (ADR) ......................................... 3.5
Tele Norte Leste Participacoes SA (ADR) ......................... 3.0
Grupo Financiero BBVA Bancomer, SA de CV 'B' .................... 3.0
* Includes combined holdings.
Percent of
Five Largest Industries (Equity Investments)+ Net Assets
Integrated Telecommunication Services ......................... 18.7%
Oil & Gas ..................................................... 10.5
Metals & Mining ............................................... 9.3
Wireless Telecommunication Services ........................... 8.0
Commercial Banks .............................................. 7.4
+ For Fund compliance purposes, "Industries" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report, which may
combine such industry sub-classifications for reporting ease.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Roscoe S. Suddarth, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Robert C. Doll, Jr., Senior Vice President
William M. Landers, Vice President and Portfolio Manager
Josephine Ragni, Vice President and Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Phillip S. Gillespie, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
22 & 23
[LOGO] Merrill Lynch Investment Managers
- --------------------------------------------------------------
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 U.S. 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.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
website at http://www.sec. gov.
Merrill Lynch Latin America Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
[RECYCLED LOGO] Printed on post-consumer recycled paper #16140--5/03
Item 2 - Did registrant adopt a code of ethics, as of the end of the period
covered by this report, that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party? If not, why not? Briefly describe any amendments or
waivers that occurred during the period. State here if code of
ethics/amendments/waivers are on website and give website address-.
State here if fund will send code of ethics to shareholders without
charge upon request-- N/A (annual requirement only and not required to
be answered until the registrant's fiscal year-end on or after July 15,
2003)
Item 3 - Did the registrant's board of directors determine that the registrant
either: (i) has at least one audit committee financial expert serving
on its audit committee; or (ii) does not have an audit committee
financial expert serving on its audit committee? If yes, disclose name
of financial expert and whether he/she is "independent," (fund may, but
is not required, to disclose name/independence of more than one
financial expert) If no, explain why not. -N/A (annual requirement only
and not required to be answered until the registrant's fiscal year-end
on or after July 15, 2003)
Item 4 - Disclose annually only (not answered until December 15, 2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by
the principal accountant for the audit of the
registrant's annual financial statements or services
that are normally provided by the accountant in
connection with statutory and regulatory filings or
engagements for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the
last two fiscal years for assurance and
related services by the principal accountant
that are reasonably related to the performance
of the audit of the registrant's financial
statements and are not reported under
paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising
the fees disclosed under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and
tax planning. Registrants shall describe the nature of
the services comprising the fees disclosed under this
category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the last
two fiscal years for products and services
provided by the principal accountant, other than
the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the
nature of the services comprising the fees
disclosed under this category. N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by
the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended on
the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant for each
of the last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Item 5 - If the registrant is a listed issuer as defined in Rule 10A-3 under the
Exchange Act, state whether or not the registrant has a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state. N/A
If applicable, provide the disclosure required by Rule 10A-3(d) under
the Exchange Act regarding an exemption from the listing standards for
audit committees. N/A
(Listed issuers must be in compliance with the new listing rules by the
earlier of their first annual shareholders meeting after January 2004,
or October 31, 2004 (annual requirement))
Item 6 - Reserved
Item 7 - For closed-end funds that contain voting securities in their portfolio,
describe the policies and procedures that it uses to determine how to
vote proxies relating to those portfolio securities. N/A
Item 8 -- Reserved
Item 9(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
Item 9(b) -- There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request
without charge. N/A.
10(b) - Attach certifications pursuant to Section 302 of the Sarbanes-Oxley Act.
Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Merrill Lynch Latin America Fund, Inc.
By: /s/ Terry K. Glenn
------------------
Terry K. Glenn,
President of
Merrill Lynch Latin America Fund, Inc.
Date: July 23, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By: /s/ Terry K. Glenn
------------------
Terry K. Glenn,
President of
Merrill Lynch Latin America Fund, Inc.
Date: July 23, 2003
By: /s/ Donald C. Burke
-------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Latin America Fund, Inc.
Date: July 23, 2003
Attached hereto as a furnished exhibit are the certifications pursuant
to Section 906 of the Sarbanes-Oxley Act.