UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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: 11/30/04
Date of reporting period: 12/01/03 - 05/31/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Merrill Lynch
Latin America Fund, Inc.
Semi-Annual Report
May 31, 2004
[LOGO] Merrill Lynch Investment Managers
Merrill Lynch Latin America Fund, Inc.
Portfolio Information as of May 31, 2004
Percent of
Ten Largest Holdings (Equity Investments) Net Assets
- --------------------------------------------------------------------------------
America Movil, SA de CV 'L' (ADR) ................................... 9.4%
Petroleo Brasileiro SA--Petrobras (ADR)* ............................ 8.9
Companhia Vale do Rio Doce (Sponsored ADR) .......................... 8.5
Telefonos de Mexico SA 'L' (ADR) .................................... 7.8
Cemex, SA de CV (ADR) ............................................... 4.8
Wal-Mart de Mexico, SA de CV 'V' .................................... 4.6
Banco Itau Holding Financeiro SA (ADR) .............................. 3.8
Companhia de Bebidas das Americas (ADR) ............................. 3.5
Weg SA .............................................................. 2.6
Fomento Economico Mexicano, SA de CV (ADR) .......................... 2.3
- --------------------------------------------------------------------------------
* Includes combined holdings.
Percent of
Five Largest Industries+ (Equity Investments) Net Assets
- --------------------------------------------------------------------------------
Integrated Telecommunication Services ............................... 14.8%
Metals & Mining ..................................................... 13.5
Wireless Telecommunication Services ................................. 13.2
Oil & Gas ........................................................... 8.9
Banks ............................................................... 5.8
- --------------------------------------------------------------------------------
+ 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.
Geographic Allocation as of May 31, 2004
Percent of
Country Net Assets*
- --------------------------------------------------------------------------------
Brazil .............................................................. 48.5%
Mexico .............................................................. 37.6
Chile ............................................................... 7.8
Argentina ........................................................... 1.6
Peru ................................................................ 1.2
Venezuela ........................................................... 0.5
Colombia ............................................................ 0.3
- --------------------------------------------------------------------------------
* Total may not equal 100%.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site http://www.icsdelivery.com/live and follow the instructions. When you visit
this site, you will obtain a personal identification number (PIN). You will need
this PIN should you wish to update your e-mail address, choose to discontinue
this service and/or make any other changes to the service. This service is not
available for certain retirement accounts at this time.
2 MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004
A Letter From the President
Dear Shareholder
Equity markets posted positive results for the most recent reporting periods.
The U.S. stock market, as measured by the Standard & Poor's 500 Index, had
respective returns of +6.79% and +18.33% for the six-month and 12-month periods
ended May 31, 2004. The Morgan Stanley Capital International (MSCI) Europe,
Australasia, Far East Index, which measures the performance of equity markets in
21 developed nations (excluding the United States and Canada), returned +10.32%
and +32.66% for the six-month and 12-month periods, respectively. Emerging
markets, as represented by the MSCI Emerging Markets Index, returned +5.75% and
+40.10% for the same periods.
The positive market returns have been supported by improving economies in
important areas around the globe. In particular, the U.S. economy has benefited
from fiscal and monetary stimulus in the form of low interest rates and tax
cuts. This has opened the door to consumer spending, capital spending, increases
in exports and long-awaited job growth. Since the United States represents 32%
of global gross domestic product (GDP), the acceleration of its economy has
provided encouragement to other areas of the world.
Elsewhere, China has recorded a remarkable rate of economic expansion. With real
GDP growth of 9.1% in 2003, the country has helped fuel growth in the economies
of its trading partners. Given efforts to preempt inflation, China's growth is
expected to ease somewhat in 2004, but still expand at a rate of 7% - 8%. Japan,
in the meantime, has begun to emerge from 13 years of sluggish growth. In
Europe, the European Union welcomed 10 new member nations in May, and the
enhanced integration may create further economic opportunities.
The events and efforts of the past year leave us with stronger global economies
today. Of course, markets will always fluctuate, and there are many
uncertainties -- including the possibility of geopolitical events -- that can
translate into negative market movements. Keeping this in mind, however, we
encourage you to revisit your portfolio and your asset allocation strategy to
ensure you are well positioned to take advantage of the opportunities that lie
ahead. Importantly, your financial advisor can help you develop a strategy most
suitable for your circumstances through all types of market and economic cycles.
We thank you for trusting Merrill Lynch Investment Managers with your investment
assets, and we look forward to serving you in the months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
The Fund outperformed its benchmark and its comparable Lipper category for
the period, benefiting most from successful stock selection in Brazil and
Mexico.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended May 31, 2004, Merrill Lynch Latin America Fund,
Inc.'s Class A, Class B, Class C and Class I Shares had total returns of +6.63%,
+6.26%, +6.19% and +6.79%, 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 6 and 7 of this report to
shareholders.) Fund returns compared favorably to the +5.70% return of the
benchmark, the Morgan Stanley Capital International Emerging Markets (MSCI EM)
Latin America Index, and the +5.83% return of the Lipper Latin American Funds
category for the same period. (Funds in this Lipper category invest primarily in
equity securities with primary trading markets or operations concentrated in the
Latin America region or in a single country within this region.)
The past six months were characterized by tremendous volatility in Latin
American markets. The prospect for rising interest rates in the United States
and global investors' reduced risk appetite caused a significant sell-off across
many emerging markets, including Latin America, during the latter part of the
period. In this environment, the bulk of the Fund's outperformance relative to
its benchmark was the result of strong stock selection across our two major
markets -- Brazil and Mexico.
The Brazilian economy is beginning to show signs of growth on the heels of
substantial interest rate cuts during the past year. For example, industrial
production increased 5.8% in the first quarter of 2004 and continued to be
strong in the second quarter. The Brazilian government remains fiscally prudent,
and exports continue to post strong performance. In Mexico, the economy has
begun to show signs of growth, with industrial production following the good
performance seen in the United States. Inflation remains under control and gross
domestic product growth in the first quarter, at 3.7%, was above the market
consensus of 2.9%.
What changes were made to the portfolio during the period?
During the past six months, we reduced our exposure to the Brazilian market
slightly, while increasing our exposure to the Mexican market. Overall, Brazil
remained the largest overweight in the portfolio, and Mexico moved to a slight
overweight. We continued to underweight the remaining markets, including Chile,
where valuations were unattractive on a relative basis, as well as Venezuela,
Peru, Colombia and Argentina.
In Brazil, we reduced our position in stocks with heavy balance sheet exposure
to U.S.-dollar-denominated debt -- namely, chemical producer Braskem SA and
water company Companhia de Saneamento Basico do Estado de Sao Paulo. We
increased our holdings in the banking sector in an effort to benefit from a
slower pace in interest rate cuts during 2004. We also increased our exposure to
domestic economy plays, such as brewer AmBev and cosmetics company Natura
Cosmeticos SA, a recent initial public offering. Finally, we focused investments
on voting shares when possible and where we believe there is the likelihood of a
strategic transaction in the future. Specifically, with regard to wireline
operator Telemar Norte Leste SA, we switched out of its American Depositary
Receipts, which represent non-voting shares, into the voting shares. Voting
shares generally carry tag-along rights in the case of an acquisition, while the
non-voting shares generally carry 10% higher dividends but no tag-along rights.
(Tag-along rights allow minority shareholders to protect their stake in a
company during a takeover.)
4 MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004
In Mexico, we increased our exposure to some of the larger-capitalization stocks
that we previously underweighted, including Telefonos de Mexico SA, Cemex, SA de
CV, Fomento Economico Mexicana, SA de CV and Grupo Televisa SA. We made this
move as the stock market benefited from its defensiveness on a global basis and
the Mexican economy started to show signs of growth. In addition, we took
profits in some Fund holdings that had outperformed, such as conglomerate Alfa,
SA and copper producer Grupo Mexico, SA de CV. We also reduced our exposure to
the banking sector following the buyout of Grupo Financiero BBVA Bancomer, SA de
CV by parent company Banco BBVA in Spain.
How would you characterize the portfolio's position at the close of the period?
The portfolio continues to be positioned to take advantage of a recovery in
economic activity in Brazil. While the Brazilian central bank has slowed the
pace of interest rate easing, the local economy is starting to benefit from the
greater than 10% cut in interest rates that took place since mid-2003. The
government has proved time after time that it is committed to a prudent fiscal
program, with a strong focus on low inflation and a gradual reduction of
government debt. Finally, equity valuation parameters remain attractive relative
to Brazil's historical measures as well as to other emerging markets. For all of
these reasons, Brazil remains our top country overweight.
In Mexico, we have moved to a slight overweight position. This is largely
attributed to bottom-up stock picking rather than a top-down country call. We
continue to favor the homebuilding sector as a high growth area, wireless
operator America Movil, SA de CV (a leader regionwide) and the retail sector due
to the expected economic recovery. Chile remains underweight as equity valuation
levels remain excessive, and the other markets offer few liquid investment
opportunities.
William M. Landers
Vice President and Portfolio Manager
June 15, 2004
MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004 5
[LOGO] Merrill Lynch Investment Managers
Performance Data
About Fund Performance
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 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. Current performance may be lower or higher than the performance
data quoted. Refer to www.mlim.ml.com to obtain more current performance
information. 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 gain distributions, if any, 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
6-Month 12-Month 10-Year/Since Inception
As of May 31, 2004 Total Return Total Return Total Return
==========================================================================================================
ML Latin America Fund, Inc. Class A Shares* +6.63% +36.08% +20.28%
- ----------------------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class B Shares* +6.26 +35.05 +11.04
- ----------------------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class C Shares* +6.19 +34.99 - 2.94
- ----------------------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class I Shares* +6.79 +36.43 + 7.41
- ----------------------------------------------------------------------------------------------------------
MSCI EM Latin America Index** +5.70 +36.34 +50.43/+27.37
- ----------------------------------------------------------------------------------------------------------
* 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 10-year/since inception returns
are 10 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.
6 MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004
Performance Data (concluded)
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 5/31/04 +36.08% +28.94%
- --------------------------------------------------------------------------------
Five Years Ended 5/31/04 + 8.34 + 7.18
- --------------------------------------------------------------------------------
Ten Years Ended 5/31/04 + 1.86 + 1.32
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 5/31/04 +35.05% +31.05%
- --------------------------------------------------------------------------------
Five Years Ended 5/31/04 + 7.47 + 7.17
- --------------------------------------------------------------------------------
Ten Years Ended 5/31/04 + 1.05 + 1.05
- --------------------------------------------------------------------------------
* 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 5/31/04 +34.99% +33.99%
- --------------------------------------------------------------------------------
Five Years Ended 5/31/04 + 7.47 + 7.47
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 5/31/04 - 0.31 - 0.31
- --------------------------------------------------------------------------------
* 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 5/31/04 +36.43% +29.27%
- --------------------------------------------------------------------------------
Five Years Ended 5/31/04 + 8.61 + 7.45
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 5/31/04 + 0.75 + 0.18
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Officers and Directors
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, 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
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
MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004 7
[LOGO] Merrill Lynch Investment Managers
Consolidated Schedule of Investments (in U.S. dollars)
Percent of
Country Industry@ Shares Held Common Stocks Value Net Assets
===================================================================================================================================
Argentina Apparel, Accessories & 347,622 +Grimoldi SA 'B' $ 199,901 0.2%
Luxury Goods
----------------------------------------------------------------------------------------------------------------
Electric Utilities 379,500 +Central Costanera SA 'B' 510,921 0.5
----------------------------------------------------------------------------------------------------------------
Oil 15,800 Tenaris SA (ADR)* 522,980 0.5
----------------------------------------------------------------------------------------------------------------
Real Estate Management 658,317 +IRSA Inversiones y Representaciones
& Development SA 'B' 485,457 0.4
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Argentina 1,719,259 1.6
===================================================================================================================================
Brazil Apparel, Accessories & 12,284,085 +Empresa Nasional de Comercio SA 23,783 0.0
Luxury Goods
----------------------------------------------------------------------------------------------------------------
Banks 17,000 Banco Bradesco SA (ADR)* 730,150 0.7
99,900 Banco Itau Holding Financeiro SA
(ADR)* 4,220,775 3.8
30,700 Uniao de Bancos Brasileiros SA
(Unibanco) (GDR)** 592,510 0.5
-----------------------
5,543,435 5.0
----------------------------------------------------------------------------------------------------------------
Beverages & Tobacco 204,000 Companhia de Bebidas das Americas
(ADR)* 3,865,800 3.5
----------------------------------------------------------------------------------------------------------------
Cosmetics & Toiletries 59,100 +Natura Cosmeticos SA 825,760 0.7
----------------------------------------------------------------------------------------------------------------
Electric Utilities 49,463,900 Centrais Eletricas Basileiras
SA--Eletrobras 475,007 0.4
121,600 Companhia Energetica de Minas
Gerais SA--CEMIG (ADR)* 1,709,696 1.5
20,995 Espirito Santo Centrais Eletricas
SA--Escelsa 534,461 0.5
-----------------------
2,719,164 2.4
----------------------------------------------------------------------------------------------------------------
Foods 70,200 Perdigao SA 618,412 0.5
----------------------------------------------------------------------------------------------------------------
Industrial Materials 436,000 Marcopolo SA 744,253 0.7
----------------------------------------------------------------------------------------------------------------
Integrated 323,000,000 Brasil Telecom SA 1,087,089 1.0
Telecommunication Services 257,942,792 Tele Norte Leste Participacoes SA 2,535,314 2.3
90,500,000 Telemar Norte Leste SA 'A' 1,439,414 1.3
-----------------------
5,061,817 4.6
----------------------------------------------------------------------------------------------------------------
Machinery 1,235,000 Weg SA 2,829,461 2.6
----------------------------------------------------------------------------------------------------------------
Metals & Mining 1,217,000 +Caemi Mineracao e Metalurgica SA 498,738 0.5
41,000 Companhia Siderurgica Nacional
(ADR)* 1,911,010 1.7
218,000 Companhia Vale do Rio Doce
(Sponsored ADR)* 9,461,200 8.5
190,000 Usinas Siderurgicas de Minas Gerais
SA 'A' 1,830,719 1.6
-----------------------
13,701,667 12.3
----------------------------------------------------------------------------------------------------------------
Oil & Gas 104,000 Petroleo Brasileiro SA--Petrobras
(ADR)* 2,714,400 2.4
310,000 Petroleo Brasileiro SA--Petrobras
(Preference) (ADR)* 7,162,302 6.5
-----------------------
9,876,702 8.9
----------------------------------------------------------------------------------------------------------------
Paper Products 142,500 Companhia Suzano de Papel e
Celulose 588,577 0.5
480,000 Klabin SA 627,299 0.6
25,700 Votorantim Celulose e Papel SA
(ADR)* 803,382 0.7
-----------------------
2,019,258 1.8
----------------------------------------------------------------------------------------------------------------
Public Thoroughfares 144,400 Companhia de Concessoes Rodoviarias 1,227,796 1.1
----------------------------------------------------------------------------------------------------------------
Specialty Retailing 110,990 Globex Utilidades SA 290,100 0.3
----------------------------------------------------------------------------------------------------------------
Specialty Stores 22,000 Companhia Brasileira de
Distribuicao GrupoPao de Acucar
(ADR)* 330,000 0.3
----------------------------------------------------------------------------------------------------------------
Wireless 59,959 Celular CRT Participacoes SA 6,772 0.0
Telecommunication Services 3,066,000 Celular CRT Participacoes SA 'A' 486,761 0.4
19,340,000 TIM Sul SA 414,696 0.4
95,500,027 Tele Celular Sul Participacoes SA 101,386 0.1
54,400 Tele Centro Oeste Celular
Participacoes SA (ADR)* 464,032 0.4
8 MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004
Consolidated Schedule of Investments (continued) (in U.S. dollars)
Percent of
Country Industry@ Shares Held Common Stocks Value Net Assets
===================================================================================================================================
Brazil Wireless 77,500,000 Tele Nordeste Celular Participacoes
(concluded) Telecommunication Services SA $ 77,025 0.1%
(concluded) 8,228,684 Tele Sudeste Celular Participacoes
SA 11,497 0.0
299,259,200 Tele Sudeste Celular Participacoes
SA (Preference) 487,660 0.4
71,000,000 Telemig Celular Participacoes SA 187,867 0.2
21,700 Telemig Celular Participacoes SA
(ADR)* 624,092 0.6
600 Telemig Celular SA 125,847 0.1
62 Telemig Celular SA 'G' 9,003 0.0
169,200 +Telesp Celular Participacoes SA
(ADR)* 1,192,860 1.1
-----------------------
4,189,498 3.8
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Brazil 53,866,906 48.5
===================================================================================================================================
Chile Airlines 59,000 Linea Aerea Nacional Chile SA
(ADR)* 1,017,160 0.9
----------------------------------------------------------------------------------------------------------------
Beverages 20,000 Compania Cervecerias Unidas SA
(ADR)* 401,000 0.4
44,500 Embotelladora Andina SA 'B' (ADR)* 502,850 0.4
-----------------------
903,850 0.8
----------------------------------------------------------------------------------------------------------------
Commercial Banks 33,600 Banco Santander Chile SA (ADR)* 891,072 0.8
----------------------------------------------------------------------------------------------------------------
Electric Utilities 110,000 Empresa Nacional de Electricidad SA
(Endesa) (ADR)* 1,393,700 1.2
154,000 +Enersis SA (ADR)* 953,260 0.9
-----------------------
2,346,960 2.1
----------------------------------------------------------------------------------------------------------------
Integrated 116,000 Compania de Telecomunicaciones de
Telecommunication Services Chile SA (ADR)* 1,381,560 1.3
123,700 Empresa Nacional de
Telecomunicaciones SA 706,298 0.6
-----------------------
2,087,858 1.9
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Chile 7,246,900 6.5
===================================================================================================================================
Colombia Banks 52,400 Bancolombia SA (ADR)* 342,696 0.3
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Colombia 342,696 0.3
===================================================================================================================================
Mexico Airport Services 30,200 Grupo Aeroportuario del Sureste, SA
de CV (ADR)* 569,874 0.5
----------------------------------------------------------------------------------------------------------------
Banks 144,000 Grupo Financiero Banorte, SA de CV
'O' 503,492 0.5
----------------------------------------------------------------------------------------------------------------
Beverages 60,500 Fomento Economico Mexicano, SA de
CV (ADR)* 2,597,870 2.3
334,300 Grupo Modelo, SA de CV 'C' 829,049 0.8
-----------------------
3,426,919 3.1
----------------------------------------------------------------------------------------------------------------
Broadcasting & Cable Television 56,900 Grupo Televisa SA (ADR)* 2,404,594 2.2
----------------------------------------------------------------------------------------------------------------
Building 1,088,000 +Corporacion GEO, SA de CV 'B' 1,401,534 1.3
----------------------------------------------------------------------------------------------------------------
Construction Materials 183,000 Cemex, SA de CV (ADR)* 5,369,220 4.8
----------------------------------------------------------------------------------------------------------------
Consumer & Electronics Retail 42,000 Grupo Elektra, SA de CV 218,622 0.2
----------------------------------------------------------------------------------------------------------------
Food Products 303,700 Grupo Industrial Bimbo, SA de CV
'A' 656,023 0.6
----------------------------------------------------------------------------------------------------------------
Industrial Conglomerates 227,500 Alfa, SA 'A' 747,601 0.7
188,000 Grupo Carso, SA de CV 'A1' 724,883 0.6
-----------------------
1,472,484 1.3
----------------------------------------------------------------------------------------------------------------
Integrated 258,100 Telefonos de Mexico SA 'L' (ADR)* 8,682,484 7.8
Telecommunication Services
----------------------------------------------------------------------------------------------------------------
Multiline Retail 770,600 Controladora Comercial Mexicana, SA
de CV 904,880 0.8
13,400 Grupo Elektra, SA de CV (ADR)* 281,266 0.2
1,691,200 Wal-Mart de Mexico, SA de CV 'V' 5,053,667 4.6
-----------------------
6,239,813 5.6
----------------------------------------------------------------------------------------------------------------
Real Estate 127,500 +Urbi, Desarrollos Urbanos, SA de CV 387,701 0.3
----------------------------------------------------------------------------------------------------------------
Wireless 297,700 America Movil, SA de CV 'L' (ADR)* 10,434,385 9.4
Telecommunication Services
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Mexico 41,767,145 37.6
================================================================================================================
MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004 9
[LOGO] Merrill Lynch Investment Managers
Consolidated Schedule of Investments (continued) (in U.S. dollars)
Percent of
Country Industry@ Shares Held Common Stocks Value Net Assets
===================================================================================================================================
Peru Metals & Mining 55,000 Compania de Minas Buenaventura SA
(ADR)* $ 1,288,650 1.2%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Peru 1,288,650 1.2
===================================================================================================================================
Venezuela Construction Materials 643,105 +Sudamtex de Venezuela (ADR)* (c)(d) 6 0.0
----------------------------------------------------------------------------------------------------------------
Integrated 31,700 Compania Anonima Nacional Telefonos
Telecommunication Services de Venezuela (CANTV) (ADR)* 601,666 0.5
----------------------------------------------------------------------------------------------------------------
Metals & Mining 27,350 +International Briquettes Holding,
Inc. 0 0.0
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Venezuela 601,672 0.5
================================================================================================================
Total Investments in Common Stocks
(Cost--$105,345,244) 106,833,228 96.2
================================================================================================================
===================================================================================================================================
Mutual Funds
===================================================================================================================================
Chile Diversified Financial 27,000 Genesis Chile Fund 1,464,750 1.3
Services
----------------------------------------------------------------------------------------------------------------
Total Investments in Mutual Funds
(Cost--$812,313) 1,464,750 1.3
================================================================================================================
===================================================================================================================================
Rights
===================================================================================================================================
Brazil Wireless 1,950,340 Tele Celular Sul Participacoes (a) 120 0.0
Telecommunication Services
----------------------------------------------------------------------------------------------------------------
Total Investments in Rights
(Cost--$0) 120 0.0
================================================================================================================
===================================================================================================================================
Face
Amount Fixed Income Securities
===================================================================================================================================
Brazil Metals & Mining BRL 1,099,391 +Companhia Vale do Rio Doce (b) 0 0.0
----------------------------------------------------------------------------------------------------------------
Total Investments in Fixed Income
Securities (Cost--$0) 0 0.0
================================================================================================================
10 MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004
Consolidated Schedule of Investments (concluded) (in U.S. dollars)
Percent of
Beneficial Interest Short-Term Securities Value Net Assets
================================================================================================================
US$2,154,141 Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I (e) $ 2,154,141 1.9%
----------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term
Securities (Cost--$2,154,141) 2,154,141 1.9
================================================================================================================
Total Investments (Cost--$108,311,698) 110,452,239 99.4
Other Assets Less Liabilities 603,479 0.6
-----------------------
Net Assets $111,055,718 100.0%
=======================
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
+ 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.
(a) The rights may be exercised until 6/01/2004.
(b) Received through a bonus issue from Companhia Vale do Rio Doce. As of May
31, 2004, the bonds have not commenced trading and the coupon rate has not
been determined. This security is a perpetual bond and has no definite
maturity date.
(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 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:
--------------------------------------------------------------------------
Interest/
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $1,769,480 $2,717
Merrill Lynch Liquidity Series, LLC
Money Market Series $ (450,000) $ 105
Merrill Lynch Premier Institutional Fund (150,000) $ 34
--------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004 11
[LOGO] Merrill Lynch Investment Managers
Consolidated Statement of Assets and Liabilities
As of May 31, 2004
======================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value
(identified cost--$106,157,557) .............................. $ 108,298,098
Investments in affiliated securities, at value
(identified cost--$2,154,141) ................................ 2,154,141
Foreign cash (cost--$409,896) ................................. 409,799
Receivables:
Dividends .................................................. $ 1,037,844
Capital shares sold ........................................ 95,933
Interest from affiliates ................................... 684 1,134,461
-------------
Prepaid expenses and other assets ............................. 50,988
-------------
Total assets .................................................. 112,047,487
-------------
======================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------------
Payables:
Securities purchased ....................................... 563,177
Custodian bank ............................................. 218,599
Capital shares redeemed .................................... 81,743
Investment adviser ......................................... 81,632
Distributor ................................................ 23,822
Other affiliates ........................................... 22,796
-------------
Total liabilities ............................................. 991,769
-------------
======================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------
Net assets .................................................... $ 111,055,718
=============
======================================================================================================================
Net Assets Consist of
- ----------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ............................................ $ 382,640
Class B Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ............................................ 73,678
Class C Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ............................................ 28,171
Class I Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ............................................ 192,514
Paid-in capital in excess of par .............................. 275,882,405
Accumulated distributions in excess of investment income--net . $ (111,019)
Accumulated realized capital losses on investments and foreign
currency transactions--net ................................... (167,507,281)
Unrealized appreciation on investments and foreign currency
transactions--net ............................................ 2,114,610
-------------
Total accumulated losses--net ................................. (165,503,690)
-------------
Net Assets .................................................... $ 111,055,718
=============
======================================================================================================================
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $63,031,803 and 3,826,397
shares outstanding ........................................... $ 16.47
=============
Class B--Based on net assets of $11,646,434 and 736,781
shares outstanding ........................................... $ 15.81
=============
Class C--Based on net assets of $4,437,936 and 281,711
shares outstanding ........................................... $ 15.75
=============
Class I--Based on net assets of $31,939,545 and 1,925,142
shares outstanding ........................................... $ 16.59
=============
See Notes to Consolidated Financial Statements.
12 MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004
Consolidated Statement of Operations
For the Six Months Ended May 31, 2004
======================================================================================================================
Investment Income
- ----------------------------------------------------------------------------------------------------------------------
Dividends (net of $217,592 foreign withholding tax) ........... $ 2,521,192
Interest from affiliates ...................................... 2,717
Securities lending--net ....................................... 139
-------------
Total income .................................................. 2,524,048
-------------
======================================================================================================================
Expenses
- ----------------------------------------------------------------------------------------------------------------------
Investment advisory fees ...................................... $ 605,621
Account maintenance fees--Class A ............................. 85,668
Account maintenance and distribution fees--Class B ............ 72,669
Transfer agent fees--Class A .................................. 70,728
Custodian fees ................................................ 54,376
Accounting services ........................................... 48,002
Professional fees ............................................. 38,436
Transfer agent fees--Class I .................................. 34,325
Printing and shareholder reports .............................. 24,642
Account maintenance and distribution fees--Class C ............ 24,033
Registration fees ............................................. 22,496
Directors' fees and expenses .................................. 21,136
Transfer agent fees--Class B .................................. 18,126
Transfer agent fees--Class C .................................. 5,881
Pricing fees .................................................. 1,357
Other ......................................................... 20,732
-------------
Total expenses ................................................ 1,148,228
-------------
Investment income--net ........................................ 1,375,820
-------------
======================================================================================================================
Realized & Unrealized Gain (Loss) on Investments & Foreign Currency Transactions--Net
- ----------------------------------------------------------------------------------------------------------------------
Realized gain (loss) from:
Investments--net ........................................... 11,734,728
Foreign currency transactions--net ......................... (61,621) 11,673,107
-------------
Change in unrealized appreciation/depreciation on:
Investments--net ........................................... (5,848,610)
Foreign currency transactions--net ......................... (24,094) (5,872,704)
------------------------------
Total realized and unrealized gain on investments and
foreign currency transactions--net ........................... 5,800,403
-------------
Net Increase in Net Assets Resulting from Operations .......... $ 7,176,223
=============
See Notes to Consolidated Financial Statements.
MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004 13
[LOGO] Merrill Lynch Investment Managers
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: 2004 2003
======================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................ $ 1,375,820 $ 1,260,645
Realized gain (loss) on investments and foreign currency
transactions--net ............................................ 11,673,107 (5,293,061)
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net ....................... (5,872,704) 44,115,104
------------------------------
Net increase in net assets resulting from operations .......... 7,176,223 40,082,688
------------------------------
======================================================================================================================
Dividends to Shareholders
- ----------------------------------------------------------------------------------------------------------------------
Investment income--net:
Class A .................................................... (1,086,038) (124,593)
Class B .................................................... (131,947) --
Class C .................................................... (47,405) --
Class I .................................................... (551,604) (97,673)
------------------------------
Net decrease in net assets resulting from dividends to
shareholders ................................................. (1,816,994) (222,266)
------------------------------
======================================================================================================================
Capital Share Transactions
- ----------------------------------------------------------------------------------------------------------------------
Net decrease in net assets derived from capital share
transactions ................................................. (3,462,037) (11,125,173)
------------------------------
======================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets .................................. 1,897,192 28,735,249
Beginning of period ........................................... 109,158,526 80,423,277
------------------------------
End of the period* ............................................ $ 111,055,718 $ 109,158,526
==============================
* Undistributed (accumulated distributions in excess
of) investment income--net .............................. $ (111,019) $ 330,155
==============================
See Notes to Consolidated Financial Statements.
14 MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004
Consolidated Financial Highlights
Class A
---------------------------------------------------------------------
The following per share data and ratios have been derived For the Six For the
from information provided in the financial statements. Months Ended Year Ended November 30,+
May 31, ----------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.71 $ 10.15 $ 11.56 $ 13.00 $ 12.83
--------------------------------------------------------------------
Investment income--net*** .......... .20 .19 .16 .09 .03
Realized and unrealized gain (loss)
on investments and foreign
currency transactions--net ........ .83 5.40 (1.57) (1.53) .34
--------------------------------------------------------------------
Total from investment operations ... 1.03 5.59 (1.41) (1.44) .37
--------------------------------------------------------------------
Less dividends:
Investment income--net .......... (.27) (.03) -- -- (.16)
In excess of investment
income--net .................... -- -- -- -- (.04)
--------------------------------------------------------------------
Total dividends .................... (.27) (.03) -- -- (.20)
--------------------------------------------------------------------
Net asset value, end of period ..... $ 16.47 $ 15.71 $ 10.15 $ 11.56 $ 13.00
====================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share . 6.63%@ 55.23% (12.20%) (11.08%) 2.71%
====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ........................... 1.83%* 2.07% 2.10% 1.98% 1.73%
====================================================================
Investment income--net ............. 2.33%* 1.52% 1.37% .69% .20%
====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .................... $63,032 $62,145 $42,062 $39,508 $46,514
====================================================================
Portfolio turnover ................. 28.96% 57.86% 45.85% 43.74% 41.70%
====================================================================
* Annualized.
** Total investment returns exclude the effect 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.
MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004 15
[LOGO] Merrill Lynch Investment Managers
Consolidated Financial Highlights (continued)
Class B
---------------------------------------------------------------------
The following per share data and ratios have been derived For the Six For the
from information provided in the financial statements. Months Ended Year Ended November 30,
May 31, ----------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.01 $ 9.75 $ 11.20 $ 12.69 $ 12.52
--------------------------------------------------------------------
Investment income (loss)--net*** ... .12 .08 .07 --+ (.07)
Realized and unrealized gain (loss)
on investments and foreign
currency transactions--net ........ .82 5.18 (1.52) (1.49) .32
--------------------------------------------------------------------
Total from investment operations ... .94 5.26 (1.45) (1.49) .25
--------------------------------------------------------------------
Less dividends:
Investment income--net .......... (.14) -- -- -- (.06)
In excess of investment
income--net .................... -- -- -- -- (.02)
--------------------------------------------------------------------
Total dividends .................... (.14) -- -- -- (.08)
--------------------------------------------------------------------
Net asset value, end of period ..... $ 15.81 $ 15.01 $ 9.75 $ 11.20 $ 12.69
====================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share . 6.26%@ 53.95% (12.95%) (11.74%) 1.94%
====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ........................... 2.62%* 2.89% 2.91% 2.78% 2.51%
====================================================================
Investment income (loss)--net ...... 1.44%* .75% .62% (.04%) (.44%)
====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .................... $11,646 $15,129 $18,259 $49,253 $87,317
====================================================================
Portfolio turnover ................. 28.96% 57.86% 45.85% 43.74% 41.70%
====================================================================
* Annualized.
** Total investment returns exclude the effect of sales charges.
*** Based on average shares outstanding.
+ Amount is less than $(.01) per share.
@ Aggregate total investment return.
See Notes to Consolidated Financial Statements.
16 MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004
Consolidated Financial Highlights (continued)
Class C
---------------------------------------------------------------------
The following per share data and ratios have been derived For the Six For the
from information provided in the financial statements. Months Ended Year Ended November 30,
May 31, ----------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.00 $ 9.74 $ 11.19 $ 12.68 $ 12.53
--------------------------------------------------------------------
Investment income (loss)--net*** ... .13 .08 .07 (.01) (.07)
Realized and unrealized gain (loss)
on investments and foreign
currency transactions--net ........ .79 5.18 (1.52) (1.48) .32
--------------------------------------------------------------------
Total from investment operations ... .92 5.26 (1.45) (1.49) .25
--------------------------------------------------------------------
Less dividends:
Investment income--net .......... (.17) -- -- -- (.08)
In excess of investment
income--net .................... -- -- -- -- (.02)
--------------------------------------------------------------------
Total dividends .................... (.17) -- -- -- (.10)
--------------------------------------------------------------------
Net asset value, end of period ..... $ 15.75 $ 15.00 $ 9.74 $ 11.19 $ 12.68
====================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share . 6.19%@ 54.00% (12.96%) (11.75%) 1.90%
====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ........................... 2.62%* 2.88% 2.91% 2.78% 2.51%
====================================================================
Investment income (loss)--net ...... 1.54%* .71% .59% (.06%) (.48%)
====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .................... $ 4,438 $ 4,074 $ 3,084 $ 4,538 $ 7,000
====================================================================
Portfolio turnover ................. 28.96% 57.86% 45.85% 43.74% 41.70%
====================================================================
* Annualized.
** Total investment returns exclude the effect of sales charges.
*** Based on average shares outstanding.
@ Aggregate total investment return.
See Notes to Consolidated Financial Statements.
MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004 17
[LOGO] Merrill Lynch Investment Managers
Consolidated Financial Highlights (concluded)
Class I
---------------------------------------------------------------------
The following per share data and ratios have been derived For the Six For the
from information provided in the financial statements. Months Ended Year Ended November 30,+
May 31, ----------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.83 $ 10.23 $ 11.66 $ 13.08 $ 12.89
--------------------------------------------------------------------
Investment income--net*** .......... .23 .22 .19 .13 .07
Realized and unrealized gain (loss)
on investments and foreign
currency transactions--net ........ .84 5.44 (1.59) (1.55) .35
--------------------------------------------------------------------
Total from investment operations ... 1.07 5.66 (1.40) (1.42) .42
--------------------------------------------------------------------
Less dividends:
Investment income--net .......... (.31) (.06) (.03) -- (.18)
In excess of investment
income--net .................... -- -- -- -- (.05)
--------------------------------------------------------------------
Total dividends .................... (.31) (.06) (.03) -- (.23)
--------------------------------------------------------------------
Net asset value, end of period ..... $ 16.59 $ 15.83 $ 10.23 $ 11.66 $ 13.08
====================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share . 6.79%@ 55.61% (12.04%) (10.86%) 3.04%
====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ........................... 1.58%* 1.81% 1.85% 1.73% 1.48%
====================================================================
Investment income--net ............. 2.60%* 1.78% 1.63% .97% .48%
====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .................... $31,940 $27,811 $17,018 $22,753 $30,466
====================================================================
Portfolio turnover ................. 28.96% 57.86% 45.85% 43.74% 41.70%
====================================================================
* Annualized.
** Total investment returns exclude the effect of sales charges.
*** Based on average shares outstanding.
+ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
@ Aggregate total investment return.
See Notes to Consolidated Financial Statements.
18 MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004
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 U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these 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. 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 -- Equity securities that are held by the Fund that
are traded on stock exchanges or the Nasdaq National Market are valued at the
last sale price or official close price on the exchange, 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. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Directors of the Fund.
Long positions traded in the over-the-counter ("OTC") market, Nasdaq Small Cap
or Bulletin Board are valued at the last available bid price or yield equivalent
obtained from one or more dealers or pricing services approved by the Board of
Directors of the Fund. Short positions traded in the OTC market are valued at
the last available ask price. Portfolio securities that are traded both in the
OTC market and on a stock exchange are valued according to the broadest and most
representative market.
Options written are valued at the last sale price in the case of exchange-traded
options or, in the case of options traded in the OTC market, the last ask price.
Options purchased are valued at their last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC market, the
last bid price. Swap agreements are valued daily based upon quotations from
market makers. Financial futures contracts and options thereon, which are traded
on exchanges, are valued at their last sale price as of the close of such
exchanges. Obligations with remaining maturities of 60 days or less are valued
at amortized cost unless the Investment Adviser believes that this method no
longer produces fair valuations.
Repurchase agreements are valued at cost plus accrued interest. The Fund employs
pricing services to provide certain securities prices for the Fund. Securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Directors of the Fund, including valuations furnished by the pricing services
retained by the Fund, which may use a matrix system for valuations. The
procedures of a pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Fund's Board of Directors. Such
valuations and procedures will be reviewed periodically by the Board of
Directors of the Fund.
Generally, trading in foreign securities, as well as U.S. government securities
and money market instruments, is substantially completed each day at various
times prior to the close of business on the New York Stock Exchange ("NYSE").
The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange rates
also are generally determined prior to the close of business on the NYSE.
Occasionally, events affecting the values of such securities and such exchange
rates may occur between the times at which they are determined and the close of
business on the NYSE that may not be reflected in the computation of the Fund's
net asset value. If events (for example, a company announcement, market
volatility or a natural disaster) occur during such periods that are expected to
materially affect the value of such securities, those securities may be valued
at their fair 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 Fund's Board of Directors.
MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004 19
[LOGO] Merrill Lynch Investment Managers
Notes to Consolidated Financial Statements (continued)
(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 movements 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 may 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 may 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 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).
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.
20 MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004
Notes to Consolidated Financial Statements (continued)
(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 three 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
resulting from a timing difference of security transaction settlements.
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, 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.
MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004 21
[LOGO] Merrill Lynch Investment Managers
Notes to Consolidated Financial Statements (continued)
For the six months ended May 31, 2004, 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 .............................. $ 6,921 $13,486
- --------------------------------------------------------------------------------
For the six months ended May 31, 2004, MLPF&S received contingent deferred sales
charges of $4,324 and $1,242 relating to transactions in Class B and Class C
Shares, respectively. Furthermore, MLPF&S received contingent deferred sales
charges of $206 relating to transactions subject to front-end sales charge
waivers in Class A Shares.
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, 2004, MLIM, LLC received $57
in securities lending agent fees.
In addition, MLPF&S received $26,653 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended May 31,
2004.
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, 2004, the Fund reimbursed MLIM $1,259 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, 2004 were $34,095,778 and $40,053,624, respectively.
Net realized gains (losses) for the six months ended May 31, 2004 and net
unrealized appreciation/depreciation as of May 31, 2004 were as follows:
- --------------------------------------------------------------------------------
Unrealized
Realized Appreciation/
Gains (Losses) Depreciation
- --------------------------------------------------------------------------------
Long-term investments .................. $ 11,734,728 $ 2,140,541
Foreign currency transactions .......... (61,621) (25,931)
--------------------------------
Total .................................. $ 11,673,107 $ 2,114,610
================================
As of May 31, 2004, net unrealized appreciation for Federal income tax purposes
aggregated $878,243, of which $21,524,743 related to appreciated securities and
$20,646,500 related to depreciated securities. At May 31, 2004, the aggregate
cost of investments for Federal income tax purposes was $109,573,996.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$3,462,037 and $11,125,173 for the six months ended May 31, 2004 and the year
ended November 30, 2003, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended May 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 144,152 $ 2,578,977
Automatic conversion of shares ......... 190,412 3,347,660
Shares issued to shareholders in
reinvestment of dividends ............. 54,761 879,468
--------------------------------
Total issued ........................... 389,325 6,806,105
Shares redeemed ........................ (518,324) (8,998,825)
--------------------------------
Net decrease ........................... (128,999) $ (2,192,720)
================================
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended November 30, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 142,406 $ 1,869,487
Automatic conversion of shares ......... 531,872 6,212,632
Shares issued to shareholders in
reinvestment of dividends ............. 9,844 103,051
--------------------------------
Total issued ........................... 684,122 8,185,170
Shares redeemed ........................ (871,219) (10,760,689)
--------------------------------
Net decrease ........................... (187,097) $ (2,575,519)
================================
22 MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004
Notes to Consolidated Financial Statements (concluded)
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended May 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 25,165 $ 432,739
Shares issued to shareholders in
reinvestment of dividends ............. 7,013 108,484
--------------------------------
Total issued ........................... 32,178 541,223
Automatic conversion of shares ......... (198,298) (3,347,660)
Shares redeemed ........................ (104,826) (1,765,780)
--------------------------------
Net decrease ........................... (270,946) $ (4,572,217)
================================
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended November 30, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 102,934 $ 1,246,376
Automatic conversion of shares ......... (554,067) (6,212,632)
Shares redeemed ........................ (413,343) (4,674,809)
--------------------------------
Net decrease ........................... (864,476) $ (9,641,065)
================================
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended May 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 62,847 $ 1,101,774
Shares issued to shareholders in
reinvestment of dividends ............. 2,431 37,462
--------------------------------
Total issued ........................... 65,278 1,139,236
Shares redeemed ........................ (55,196) (915,710)
--------------------------------
Net increase ........................... 10,082 $ 223,526
================================
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended November 30, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 18,067 $ 237,085
Shares redeemed ........................ (62,918) (733,053)
--------------------------------
Net decrease ........................... (44,851) $ (495,968)
================================
- --------------------------------------------------------------------------------
Class I Shares for the Six Months Dollar
Ended May 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 566,978 $ 10,171,782
Shares issued to shareholders in
reinvestment of dividends ............. 31,287 505,597
--------------------------------
Total issued ........................... 598,265 10,677,379
Shares redeemed ........................ (429,711) (7,598,005)
--------------------------------
Net increase ........................... 168,554 $ 3,079,374
================================
- --------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended November 30, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 672,066 $ 8,912,717
Shares issued to shareholders in
reinvestment of dividends ............. 9,012 93,995
--------------------------------
Total issued ........................... 681,078 9,006,712
Shares redeemed ........................ (587,321) (7,419,333)
--------------------------------
Net increase ........................... 93,757 $ 1,587,379
================================
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 28, 2003, the credit agreement
was renewed for one year under the same terms. The Fund did not borrow under the
credit agreement during the six months ended May 31, 2004.
6. Commitments:
At May 31, 2004, the Fund entered into foreign exchange contracts under which it
had agreed to purchase foreign currency with an approximate value of $562,000.
7. Capital Loss Carryforward:
On November 30, 2003, the Fund had a net capital loss carryforward of
$178,438,949, 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, $30,609,327 expires in
2010 and $10,979,104 expires in 2011. This amount will be available to offset
like amounts of any future taxable gains.
MERRILL LYNCH LATIN AMERICA FUND, INC. MAY 31, 2004 23
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
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)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
Merrill Lynch Latin America Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
#16140 -- 5/04
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 9 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 10 - Controls and Procedures
10(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.
10(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(b) - Certifications - 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 19, 2004
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 19, 2004
By: /s/ Donald C. Burke
----------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Latin America Fund, Inc.
Date: July 19, 2004