UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-06349
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: Robert C. Doll, Jr., 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 - 11/30/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Merrill Lynch
Latin America Fund, Inc.
Annual Report
November 30, 2004
[LOGO] Merrill Lynch Investment Managers
Merrill Lynch Latin America Fund, Inc.
Portfolio Information as of November 30, 2004
Ten Largest Holdings Percent of
(Equity Investments) Net Assets
- --------------------------------------------------------------------------------
Petroleo Brasileiro SA--
Petrobras (ADR)* .......................................... 10.4%
Companhia Vale do Rio Doce
(Sponsored ADR) ........................................... 9.3
America Movil, SA de CV 'L' (ADR) ............................ 8.9
Telefonos de Mexico SA 'L' (ADR) ............................. 4.8
Banco Itau Holding Financeiro
SA (ADR) .................................................. 4.7
Wal-Mart de Mexico, SA de CV ................................. 3.4
Grupo Televisa, SA (ADR) ..................................... 3.3
Companhia de Bebidas das
Americas (ADR) ............................................ 2.8
Cemex, SA de CV (ADR) ........................................ 2.6
Tele Norte Leste Participacoes
SA (Telemar) .............................................. 2.4
- --------------------------------------------------------------------------------
* Includes combined holdings.
Five Largest Industries* Percent of
(Equity Investments) Net Assets
- --------------------------------------------------------------------------------
Metals & Mining ............................................. 15.3%
Wireless Telecommunication
Services ................................................. 10.5
Oil & Gas ................................................... 10.4
Banks ....................................................... 9.0
Integrated Telecommunication
Services .................................................. 6.4
- --------------------------------------------------------------------------------
+ For Fund compliance purposes, "Industries" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report, which may
combine such industry sub-classifications for reporting ease.
Percent of
Geographic Allocation Net Assets*
- --------------------------------------------------------------------------------
Brazil ................................................. 55.1%
Mexico ................................................. 31.7
Chile .................................................. 6.9
Argentina .............................................. 1.3
Peru ................................................... 0.8
Venezuela .............................................. 0.6
Colombia ............................................... 0.5
- --------------------------------------------------------------------------------
* Total may not equal 100%.
2 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
A Letter From the President
Dear Shareholder
For the year ended November 30, 2004, international stock markets provided
positive total returns. The Morgan Stanley Capital International Europe,
Australasia, Far East (MSCI EAFE) Index, which measures the performance of
equity markets in 21 developed nations (excluding the U.S. and Canada), returned
+24.19% for the 12-month period. Emerging markets also fared well. The MSCI
Emerging Markets (EM) Latin America Index, for example, recorded a 12-month
return of +43.31%. For the six-month period ended November 30, 2004, the MSCI
EAFE Index returned +12.58% and the MSCI EM Latin America Index returned
+35.58%.
In the second half of the past year, investors signaled some concern over global
interest rates, which entered a tightening cycle in certain areas; oil and
commodity prices, with oil exceeding $50 per barrel recently; and geopolitical
stress, including continued tensions in Iraq and the ever-present threat of
terrorism. For the most part, however, equity markets have continued to be
supported by improving economies in important areas around the globe.
In the United States, the Federal Reserve Board (the Fed) recently increased the
target interest rate from 1% to 2.25% in five separate moves through December
14. This represents a shift from a long-run accommodative monetary stance, and
an indication from the Fed that the U.S. economy is strengthening.
China has continued to record a remarkable rate of economic expansion, helping
to fuel growth in the economies of its trading partners. Given efforts to
preempt inflation, China's growth eased modestly, but still expanded at a rate
of 9.1% in the third quarter of 2004. Other Asian economies, such as that of
Korea, Malaysia, Singapore, Taiwan and Thailand, appear primed for growth in the
area of 5% - 6% in 2004. Many markets in Latin America also have benefited from
strong economic growth, in addition to fiscal stability in most countries and a
relatively benign interest rate environment. In Europe, the European Union
welcomed 10 new member nations in May, and the enhanced integration could
provide long-term economic benefits.
Our investment professionals are closely monitoring the world's markets and the
global economy in an effort to make well-informed decisions for the portfolios
they manage. We encourage you to remain focused on the disciplines of asset
allocation, diversification and rebalancing, and to work with your financial
advisor to ensure these time-tested techniques are incorporated into your
investment plan.
Finally, after 35 years in the asset management business, it is with great
satisfaction and some nostalgia that I embark on my retirement, effective
January 1, 2005. The industry has evolved significantly over the past three and
a half decades, and I am privileged to have been a part of it. I wish you
continued success as you pursue your investment goals and, as always, I thank
you for allowing Merrill Lynch Investment Managers to be a part of your
financial life.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
The Fund provided solid absolute and relative returns for the fiscal year,
outperforming both its benchmark index and the Lipper Latin American Funds
average.
How did the Fund perform during the fiscal year in light of the existing market
conditions?
For the 12-month period ended November 30, 2004, Merrill Lynch Latin America
Fund, Inc.'s Class A, Class B, Class C and Class I Shares had total returns of
+45.35%, +44.16%, +44.15% and +45.73%, 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 - 8 of this report to
shareholders.) Fund returns compared favorably to the +43.31% return of the
benchmark, the Morgan Stanley Capital International Emerging Markets (MSCI EM)
Latin America Index, for the same period.
In addition, the Fund outperformed the +40.38% average return of the Lipper
Latin American Funds category for the 12-month period. Notably, the Fund's four
share classes ranked first through fourth among 20 funds in the Lipper category
based on total return for the one-year period ended November 30, 2004, with
Class I Shares ranking first, Class A Shares second, Class B Shares third and
Class C Shares fourth.*
The bulk of the outperformance relative to both the benchmark and our Lipper
peers was the result of strong stock selection across our two major markets --
Brazil and Mexico. The Fund benefited from overweight positions in Brazilian
mid-cap stocks, such as leading toll road concessionaire Companhia de Concessoes
Rodoviarias and electrical motors manufacturer Weg SA, as well as leading
Mexican homebuilder Corporacion GEO, SA de CV and pan-regional wireless provider
America Movil, SA de CV.
Both Brazil and Mexico benefited from smooth democratic transitions to
opposition parties, a relatively benign global risk environment and attractive
growth levels relative to other regions of the world. Despite their strong
performance, Mexican and Brazilian stocks continue trading below historical
averages. We believe prospects for 2005 are positive, with continued economic
growth at attractive valuations. Overall, the performance of the Latin American
markets over the past two years represents the first time since 1996 - 1997 that
Latin equities have provided positive absolute returns in back-to-back years,
and we expect 2005 to continue the positive trajectory.
What changes were made to the portfolio during the year?
We maintained our largest overall position in Brazil, with a relative
overweighting that varied from roughly 5% to 7% above the benchmark allocation.
The Fund's second-largest position was in Mexico, where we remained close to the
benchmark weighting throughout the year, plus or minus 1%. The Fund's
third-largest position, although significantly smaller than our exposures to
Brazil and Mexico, was in Chile, where we were roughly 3% underweight relative
to the benchmark. On balance, we found few compelling investment opportunities
in the remaining Latin American nations.
In Brazil, we finished the year toward the high end of our overweight range at
approximately 7% above the benchmark. During the year, we focused on stocks
benefiting from the strong commodity cycle, such as iron ore giant Companhia
Vale do Rio Doce and Brazil's highly efficient steel producers. We have looked
to increase our exposure to the Brazilian consumer, as we expect the pickup in
economic activity seen during the second half of 2004 to continue in 2005. To
that end, we added positions in cosmetics leader Natura Cosmeticos SA and shoe
manufacturer Grendene SA to the portfolio. We also significantly increased the
Fund's weighting in Brazilian banks, with Banco Itau Holding Financeiro SA
representing the Fund's largest bank holding.
In Mexico, we ended the year approximately 1% underweight relative to the
benchmark. Throughout the 12 months, we added to our weighting in the
homebuilding sector, increasing our overweight position in Geo and adding
Desarrolladora Homex, SA de CV, the country's fastest-growing homebuilder, to
the portfolio. We reduced our exposure to some of the larger-cap Mexican stocks,
such as telecom operator Telefonos de Mexico SA and cement giant Cemex, SA de
CV, following better-than-expected performance during the year. Our largest
position in Mexico at period-end was America Movil, SA de CV.
We did not add any new Chilean names during the year, as valuations continued to
be excessive, in our view. Elsewhere, however, we added leading Colombia bank,
Bancolombia SA, to the portfolio and increased our stake in Venezuela's
telephone service provider CANTV. Both moves were made in recognition of
improvements in these countries' economies.
4 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
How would you characterize the Fund's position at the close of the period?
Brazil continues to represent our largest overweight position, as we believe the
country is poised to benefit from both a continuation of the strong commodity
cycle into 2005 and a continued pickup in domestic demand. Economic growth
appears to be shifting from export-oriented companies to the domestic market,
and we continue to look for ways to participate in this increase in consumer
demand. While the central bank raised interest rates 1.75% since August 2004 in
an effort to reduce inflation expectations for 2005, economic growth continued
to be strong in the second half of 2004. We expect gross domestic product growth
to top 3.5% in 2005. Valuations remain attractive in Brazil despite the strong
run by the market during the past two years. Overall, we believe 2005 will be
another strong year for exporters, with the country's trade balance topping $25
billion, along with the domestic economy continuing on the expansion mode
started in the second quarter of 2004.
Mexico's earnings growth was the surprise story of 2004, leading to strong
performance by the Mexican Bolsa (Mexico's stock market). We ended the period
with a slight underweight position in Mexico given what we believe to be
stretched valuations for many of the market's larger companies. Nevertheless, we
continue to have selective overweight positions in sectors where we see
attractive growth, such as in the homebuilding sector and in industrial giant
Alfa, SA and pan-regional wireless leader America Movil. We believe 2005 could
prove to be challenging in light of the expected political battle for position
ahead of the 2006 presidential elections. The one potential positive catalyst
would be better-than-expected growth in the economy of the United States, the
country's primary trading partner, which would result in strong growth for
Mexico.
In Chile, the continuation of the strong commodity cycle, especially related to
copper, is expected to be the key driver in 2005. Still, we find stock
valuations in Chile to be excessive, and we remain underweight in that market.
We also maintain an underweight position in the Argentine market given delays in
closing the country's debt restructuring and continued capital controls. We have
stock-specific investments in the Andean region, where liquidity continues to be
an issue.
We thank you for your continued investment in Merrill Lynch Latin America Fund.
William M. Landers, CFA
Vice President and Portfolio Manager
December 20, 2004
* All share classes of the Fund are invested in a common portfolio. Lipper
funds' average returns and rankings are according to Lipper, Inc. Lipper
Latin American Funds 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. Lipper Latin American Funds
rankings reflect the average total return performance of those funds that
make up the investment classification and do not take sales charges into
consideration. For the three-year period ended November 30, 2004, Merrill
Lynch Latin America Fund's Class A, Class B, Class C and Class I Shares
ranked 1, 2, 4 and 5 among 19 funds in the Lipper Latin American Funds
category. For the five-year period, the Fund's Class A, Class B, Class C
and Class I Shares ranked 1, 2, 4 and 5 among 13 funds in the category.
For the 10-year period, the Fund's Class A, Class B, Class C and Class I
Shares ranked 3, 4, 6 and 6 (tied) among 7 funds in the category.
MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 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 (front-end load) of
5.25% and an account maintenance fee of 0.25% per year (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% per year and an account
maintenance fee of 0.25% per year. These shares automatically convert to
Class A Shares after approximately eight years. (There is no initial sales
charge for automatic share conversions.) All returns for periods greater
than eight years reflect this conversion.
o Class C Shares are subject to a distribution fee of 0.75% per year and an
account maintenance fee of 0.25% per year. 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 performance data current to the
most recent month-end. Performance results do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. The Fund is subject to a 2% redemption fee for sales or exchanges of
shares within 30 days of purchase. Performance data does not reflect this
potential fee. 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
As of November 30, 2004 Total Return Total Return Total Return
============================================================================================
ML Latin America Fund, Inc. Class A Shares* +36.31% +45.35% +49.98%
- --------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class B Shares* +35.67 +44.16 +40.62
- --------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class C Shares* +35.75 +44.15 +38.33
- --------------------------------------------------------------------------------------------
ML Latin America Fund, Inc. Class I Shares* +36.47 +45.73 +53.75
- --------------------------------------------------------------------------------------------
MSCI EM Latin America Index** +35.58 +43.31 +77.75
- --------------------------------------------------------------------------------------------
* 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.
** 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.
6 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
Performance Data (continued)
ML Latin America Fund, Inc.'s Class A and Class B Shares--Total Return Based on
a $10,000 Investment
A line graph depicting the growth of an investment in the Portfolio's Class A
Shares and Class B Shares compared to growth of an investment in the MSCI EM
Free Latin America Index. Values are from November 1994 to November 2004:
11/94 11/95 11/96 11/97 11/98
ML Latin America
Fund, Inc.+--
Class A Shares* $ 9,475 $ 5,889 $ 7,183 $ 8,721 $ 6,114
ML Latin America
Fund, Inc.+--
Class B Shares* $10,000 $ 6,168 $ 7,455 $ 8,984 $ 6,251
MSCI EM Latin
America Index++ $10,000 $ 7,196 $ 8,801 $11,185 $ 8,389
11/99 11/00 11/01 11/02 11/03 11/04
ML Latin America
Fund, Inc.+--
Class A Shares* $ 7,855 $ 8,067 $ 7,173 $ 6,299 $ 9,777 $14,211
ML Latin America
Fund, Inc.+--
Class B Shares* $ 7,958 $ 8,112 $ 7,160 $ 6,233 $ 9,675 $14,062
MSCI EM Latin
America Index++ $10,626 $ 9,791 $ 9,194 $ 7,758 $12,403 $17,775
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
+ ML Latin America Fund, Inc. invests primarily in Latin American equity and
debt securities.
++ 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.
Past performance is not predictive of future results.
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 11/30/04 +45.35% +37.71%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/04 +12.59 +11.38
- --------------------------------------------------------------------------------
Ten Years Ended 11/30/04 + 4.14 + 3.58
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 11/30/04 +44.16% +40.16%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/04 +11.69 +11.43
- --------------------------------------------------------------------------------
Ten Years Ended 11/30/04 + 3.47 + 3.47
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004 7
[LOGO] Merrill Lynch Investment Managers
Performance Data (concluded)
ML Latin America Fund, Inc.'s Class C and Class I Shares--Total Return Based on
a $10,000 Investment
A line graph depicting the growth of an investment in the Portfolio's Class C
Shares and Class I Shares compared to growth of an investment in the MSCI EM
Latin America Free Index. Values are from November 1994 to November 2004:
11/94 11/95 11/96 11/97 11/98 11/99
ML Latin America
Fund, Inc.+--
Class C Shares* $10,000 $ 6,168 $ 7,455 $ 8,985 $ 6,248 $ 7,961
ML Latin America
Fund, Inc.+--
Class I Shares* $10,000 $ 7,196 $ 7,217 $ 8,789 $ 6,176 $ 7,951
11/00 11/01 11/02 11/03 11/04
ML Latin America
Fund, Inc.+--
Class C Shares* $ 8,112 $ 7,159 $ 6,231 $ 9,597 $13,833
ML Latin America
Fund, Inc.+--
Class I Shares* $ 8,193 $ 7,303 $ 6,424 $ 9,997 $14,568
11/94 11/95 11/96 11/97 11/98 11/99
MSCI EM Latin
America Index++ $10,000 $ 7,196 $ 8,801 $11,185 $ 8,389 $10,626
11/00 11/01 11/02 11/03 11/04
MSCI EM Latin
America Index++ $ 9,791 $ 9,194 $ 7,758 $12,403 $17,775
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
+ ML Latin America Fund, Inc. invests primarily in Latin American equity and
debt securities.
++ 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.
Past performance is not predictive of future results.
Average Annual Total Return
Return Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 11/30/04 +44.15% +43.15%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/04 +11.69 +11.69
- --------------------------------------------------------------------------------
Ten Years Ended 11/30/04 + 3.30 + 3.30
- --------------------------------------------------------------------------------
* 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 11/30/04 +45.73% +38.08%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/04 +12.88 +11.66
- --------------------------------------------------------------------------------
Ten Years Ended 11/30/04 + 4.40 + 3.83
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
8 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses related
to transactions, including sales charges, redemption fees and exchange fees; and
(b) operating expenses including advisory fees, distribution fees including
12(b)-1 fees, and other Fund expenses. The following example (which is based on
a hypothetical investment of $1,000 invested on June 1, 2004 and held through
November 30, 2004) is intended to assist shareholders both in calculating
expenses based on an investment in the Fund and in comparing these expenses with
similar costs of investing in other mutual funds:
The first table below provides information about actual account values and
actual expenses. In order to estimate the expenses a shareholder paid during the
period covered by this report, shareholders can divide their account value by
$1,000 and then multiply the result by the number in the first line under the
heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in this Fund and
other funds, compare the 5% hypothetical example with the 5% hypothetical
examples that appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders ongoing
costs only and do not reflect any transactional expenses, such as sales charges,
redemption fees or exchange fees. Therefore, the second table is useful in
comparing ongoing expenses only, and will not help shareholders determine the
relative total expenses of owning different funds. If these transactional
expenses were included, shareholder expenses would have been higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value June 1, 2004 to
June 1, 2004 November 30, 2004 November 30, 2004
============================================================================================================
Actual
============================================================================================================
Class A $1,000 $1,363.10 $11.20
- ------------------------------------------------------------------------------------------------------------
Class B $1,000 $1,356.70 $15.97
- ------------------------------------------------------------------------------------------------------------
Class C $1,000 $1,357.50 $15.86
- ------------------------------------------------------------------------------------------------------------
Class I $1,000 $1,364.70 $ 9.70
============================================================================================================
Hypothetical (5% annual return before expenses)**
============================================================================================================
Class A $1,000 $1,016.00 $ 9.55
- ------------------------------------------------------------------------------------------------------------
Class B $1,000 $1,011.92 $13.64
- ------------------------------------------------------------------------------------------------------------
Class C $1,000 $1,012.03 $13.53
- ------------------------------------------------------------------------------------------------------------
Class I $1,000 $1,017.28 $ 8.28
- ------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (1.86% for Class A, 2.66% for Class B, 2.64% for Class
C and 1.61% for Class I), multiplied by the average account value over the
period, multiplied by 186/365 (to reflect the one-half year period shown).
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half-year divided by 365.
MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004 9
[LOGO] Merrill Lynch Investment Managers
Consolidated Schedule of Investments (in U.S. dollars)
Country Industry@ Shares Held Common Stocks Value
===================================================================================================================================
Argentina--1.3% Apparel, Accessories & 38,023 +Grimoldi SA 'B' $ 18,037
Luxury Goods--0.0%
-----------------------------------------------------------------------------------------------------------------
Electric Utilities--0.3% 300,498 +Central Costanera SA 'B' 399,137
-----------------------------------------------------------------------------------------------------------------
Oil--1.0% 29,000 Tenaris SA (ADR)* 1,463,340
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Argentina 1,880,514
===================================================================================================================================
Brazil--55.1% Apparel, Accessories & 12,284,085 +Empresa Nasional de Comercio SA 51,485
Luxury Goods--0.0%
-----------------------------------------------------------------------------------------------------------------
Banks--8.0% 53,000 +Banco Bradesco SA (ADR)* 3,451,360
107,500 Banco Itau Holding Financeiro SA (ADR)* 6,929,450
50,100 Uniao de Bancos Brasileiros SA (Unibanco)
(GDR)** 1,401,297
------------
11,782,107
-----------------------------------------------------------------------------------------------------------------
Beverages & Tobacco--2.8% 161,000 Companhia de Bebidas das Americas (ADR)* 4,147,360
-----------------------------------------------------------------------------------------------------------------
Chemicals--0.4% 32,800,000 Ultrapar Participacoes SA 604,750
-----------------------------------------------------------------------------------------------------------------
Cosmetics & Toiletries--0.9% 51,400 Natura Cosmeticos SA 1,266,103
-----------------------------------------------------------------------------------------------------------------
Diagnostics--0.3% 16,800 +Diagnosticos da America (Sponsored ADR)* 422,218
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 238,400,000 Brasil Telecom SA 1,160,447
Services--4.6% 229,500 Tele Norte Leste Participacoes SA (Telemar) 3,585,937
86,000 Telemar Norte Leste SA 2,009,618
------------
6,756,002
-----------------------------------------------------------------------------------------------------------------
Electric Utilities--2.9% 37,500 +CPFL Energia SA (ADR)* 673,125
42,600,000 Centrais Eletricas Brasileiras SA--Eletrobras 689,118
49,000,000 Centrais Eletricas Brasileiras SA--Eletrobras
(Preference) 782,739
73,000 Companhia Energetica de Minas Gerais SA--CEMIG
(ADR)* 1,689,220
18,210 Espirito Santo Centrais Eletricas SA--Escelsa 569,062
------------
4,403,264
-----------------------------------------------------------------------------------------------------------------
Foods--0.5% 45,000 Perdigao SA 794,614
-----------------------------------------------------------------------------------------------------------------
Footwear--0.5% 61,000 +Grendene SA 740,074
-----------------------------------------------------------------------------------------------------------------
Industrial Materials--0.6% 413,000 Marcopolo SA 962,654
-----------------------------------------------------------------------------------------------------------------
Insurance--0.9% 194,400 +Porto Seguro SA 1,340,074
-----------------------------------------------------------------------------------------------------------------
Machinery--0.9% 496,000 Weg SA 1,285,588
-----------------------------------------------------------------------------------------------------------------
Metals & Mining--14.5% 1,158,000 +Caemi Mineracao e Metalurgica SA 838,699
182,000 Companhia Siderurgica Nacional (ADR)* 3,419,780
665,000 +Companhia Vale do Rio Doce (Sponsored ADR)* 13,792,100
165,678 Usinas Siderurgicas de Minas Gerais SA 'A' 3,347,061
------------
21,397,640
-----------------------------------------------------------------------------------------------------------------
Oil & Gas--10.4% 82,000 Petroleo Brasileiro SA--Petrobras (ADR)* 3,129,120
356,000 Petroleo Brasileiro SA--Petrobras (Preference)
(ADR)* 12,274,880
------------
15,404,000
-----------------------------------------------------------------------------------------------------------------
Paper--1.5% 635,000 Klabin SA 1,120,588
251,000 Suzano Bahia Sul Papel e Celulose SA 1,130,423
------------
2,251,011
-----------------------------------------------------------------------------------------------------------------
Petrochemicals--1.7% 57,100,000 +Braskem SA 2,485,529
-----------------------------------------------------------------------------------------------------------------
Public Thoroughfares--0.9% 76,000 Companhia de Concessoes Rodoviarias 1,377,779
-----------------------------------------------------------------------------------------------------------------
Specialty Stores--0.5% 30,500 Companhia Brasileira de Distribuicao Grupo Pao
de Acucar (ADR)* 741,760
-----------------------------------------------------------------------------------------------------------------
Transportation--Road & Rail--0.7% 41,000 +All America Latina Logistica (ALL) 1,040,074
-----------------------------------------------------------------------------------------------------------------
10 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
Consolidated Schedule of Investments (continued) (in U.S. dollars)
Country Industry@ Shares Held Common Stocks Value
===================================================================================================================================
Brazil Wireless Telecommunication 21,722 Celular CRT Participacoes SA $ 3,091
(concluded) Services--1.6% 1,287,934 Celular CRT Participacoes SA 'A' 250,953
18,500,000 TIM Sul SA 554,320
61,996 Tele Centro Oeste Celular Participacoes SA
(ADR)* 619,960
103,871,481 Tele Sudeste Celular Participacoes SA 232,947
71,000,000 Telemig Celular Participacoes SA 221,875
599 Telemig Celular SA 259,849
62 Telemig Celular SA 'G' 10,029
169,223,116 Tim Participacoes SA 235,170
------------
2,388,194
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Brazil 81,642,280
===================================================================================================================================
Chile--5.7% Airlines--1.0% 56,000 Lan Airlines SA (ADR)* 1,529,360
-----------------------------------------------------------------------------------------------------------------
Beverages--0.4% 41,500 Embotelladora Andina SA 'B' (ADR)* 515,430
-----------------------------------------------------------------------------------------------------------------
Commercial Banks--0.9% 44,000 Banco Santander Chile SA (ADR)* 1,309,000
-----------------------------------------------------------------------------------------------------------------
Electric Utilities--2.4% 125,000 Empresa Nacional de Electricidad SA (Endesa)
(ADR)* 2,048,750
201,000 Enersis SA (ADR)* 1,501,470
------------
3,550,220
-----------------------------------------------------------------------------------------------------------------
Integrated Telecommunication 92,000 Compania de Telecomunicaciones de Chile SA
Services--1.0% (ADR)* 975,200
73,000 Empresa Nacional de Telecomunicaciones SA 533,617
------------
1,508,817
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Chile 8,412,827
===================================================================================================================================
Colombia--0.5% Banks--0.5% 60,000 Bancolombia SA (ADR)* 719,400
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Colombia 719,400
===================================================================================================================================
Mexico--31.7% Airport Services--0.8% 42,000 Grupo Aeroportuario del Sureste, SA de CV (ADR)* 1,164,240
-----------------------------------------------------------------------------------------------------------------
Banks--0.5% 144,000 Grupo Financiero Banorte, SA de CV 'O' 808,070
-----------------------------------------------------------------------------------------------------------------
Beverages--2.0% 44,000 Fomento Economico Mexicano, SA de CV (ADR)* 2,102,320
301,000 Grupo Modelo, SA de CV 'C' 789,047
------------
2,891,367
-----------------------------------------------------------------------------------------------------------------
Broadcasting & Cable 79,000 Grupo Televisa, SA (ADR)* 4,919,330
Television--3.3%
-----------------------------------------------------------------------------------------------------------------
Building--2.2% 1,157,000 +Corporacion GEO, SA de CV 'B' 2,164,206
53,000 +Desarrolladora Homex, SA de CV (ADR)* 1,054,700
------------
3,218,906
-----------------------------------------------------------------------------------------------------------------
Construction & Engineering--0.3% 1,333,300 +Empresas ICA Sociedad Controladora, SA de CV 477,894
-----------------------------------------------------------------------------------------------------------------
Construction Materials--2.6% 121,000 Cemex, SA de CV (ADR)* 3,897,410
-----------------------------------------------------------------------------------------------------------------
Food Products--0.5% 278,000 Grupo Industrial Bimbo, SA de CV 'A' 668,829
-----------------------------------------------------------------------------------------------------------------
Industrial Conglomerates--1.9% 561,000 Alfa, SA 'A' 2,778,329
-----------------------------------------------------------------------------------------------------------------
Integrated Telecommunication 202,000 Telefonos de Mexico SA 'L' (ADR)* 7,072,020
Services--4.8%
-----------------------------------------------------------------------------------------------------------------
Multiline Retail--3.9% 40,000 Grupo Elektra, SA de CV 376,601
12,000 Grupo Elektra, SA de CV (ADR)* 453,720
1,458,000 Wal-Mart de Mexico, SA de CV 4,999,933
------------
5,830,254
-----------------------------------------------------------------------------------------------------------------
Wireless Telecommunication 282,000 America Movil, SA de CV 'L' (ADR)* 13,172,220
Services--8.9%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Mexico 46,898,869
===================================================================================================================================
MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004 11
[LOGO] Merrill Lynch Investment Managers
Consolidated Schedule of Investments (continued) (in U.S. dollars)
Country Industry@ Shares Held Common Stocks Value
===================================================================================================================================
Peru--0.8% Metals & Mining--0.8% 52,000 Compania de Minas Buenaventura SA (ADR)* $ 1,222,000
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Peru 1,222,000
===================================================================================================================================
Venezuela--0.6% Construction Materials--0.0% 643,105 +Sudamtex de Venezuela (ADR)* (a)(c) 6
-----------------------------------------------------------------------------------------------------------------
Integrated Telecommunication 43,000 Compania Anonima Nacional Telefonos de Venezuela 973,520
Services--0.6% (CANTV) (ADR)*
-----------------------------------------------------------------------------------------------------------------
Metals & Mining--0.0% 27,350 +International Briquettes Holding, Inc. 0
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Venezuela 973,526
=================================================================================================================
Total Investments in Common Stocks
(Cost--$108,962,289)--95.7% 141,749,416
=================================================================================================================
Mutual Funds
===================================================================================================================================
Chile--1.2% Diversified Financial 25,500 Genesis Chile Fund 1,740,375
Services--1.2%
-----------------------------------------------------------------------------------------------------------------
Total Investments in Mutual Funds
(Cost--$768,438)--1.2% 1,740,375
=================================================================================================================
Face
Amount Fixed Income Securities
===================================================================================================================================
Brazil--0.0% Metals & Mining--0.0% BRL 1,099,391 Companhia Vale do Rio Doce (b) 0
-----------------------------------------------------------------------------------------------------------------
Total Investments in Fixed Income
Securities (Cost--$0)--0.0% 0
=================================================================================================================
12 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
Consolidated Schedule of Investments (concluded) (in U.S. dollars)
Beneficial Interest Short-Term Securities Value
=================================================================================================================
US$ 2,050,819 Merrill Lynch Liquidity Series, LLC Cash Sweep
Series I (d) $ 2,050,819
-----------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term Securities
(Cost--$2,050,819)--1.4% 2,050,819
=================================================================================================================
Total Investments (Cost--$111,781,546***)--98.3% 145,540,610
Other Assets Less Liabilities--1.7% 2,500,843
------------
Net Assets--100.0% $148,041,453
============
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
*** The cost and unrealized appreciation/depreciation of investments as of
November 30, 2004, as computed for federal income tax purposes, were as
follows:
-------------------------------------------------------------------------
Aggregate cost ........................................... $113,222,047
============
Gross unrealized appreciation ............................ $ 45,966,458
Gross unrealized depreciation ............................ (13,647,895)
------------
Net unrealized appreciation .............................. $ 32,318,563
============
+ 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. These
industry classifications are unaudited.
(a) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(b) Received through a bonus issue from Companhia Vale do Rio Doce. As of
November 30, 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) 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) were as follows:
--------------------------------------------------------------------------
Net Purchase Sales Realized Dividend
Affiliate Activity Cost Cost Gain Income
--------------------------------------------------------------------------
Sudamtex de
Venezuela (ADR) -- -- -- -- +
--------------------------------------------------------------------------
+ Non-income producing security.
(d) 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) were as follows:
--------------------------------------------------------------------------
Interest/
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $1,666,158 $12,103
Merrill Lynch Liquidity Series, LLC
Money Market Series $ (450,000) $ 110
Merrill Lynch Premier Institutional Fund (150,000) $ 36
--------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004 13
[LOGO] Merrill Lynch Investment Managers
Consolidated Statement of Assets and Liabilities
As of November 30, 2004
================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value
(identified cost--$109,730,727) ..................... $ 143,489,791
Investments in affiliated securities, at value
(identified cost--$2,050,819) ....................... 2,050,819
Foreign cash (cost--$1,567,331) ...................... 1,583,525
Cash ................................................. 328,570
Receivables:
Securities sold ................................... $ 1,524,814
Dividends ......................................... 692,686
Capital shares sold ............................... 526,583
Interest from affiliates .......................... 2,474 2,746,557
-------------
Prepaid expenses ..................................... 35,176
-------------
Total assets ......................................... 150,234,438
-------------
================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------
Payables:
Securities purchased .............................. 1,810,238
Capital shares redeemed ........................... 231,064
Other affiliates .................................. 40,665
Distributor ....................................... 32,208
Investment adviser ................................ 15,958 2,130,133
-------------
Accrued expenses ..................................... 62,852
-------------
Total liabilities .................................... 2,192,985
-------------
================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------
Net assets ........................................... $ 148,041,453
=============
================================================================================================================
Net Assets Consist of
- ----------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value,
100,000,000 shares authorized ....................... $ 365,183
Class B Shares of Common Stock, $.10 par value,
100,000,000 shares authorized ....................... 53,593
Class C Shares of Common Stock, $.10 par value,
100,000,000 shares authorized ....................... 31,124
Class I Shares of Common Stock, $.10 par value,
100,000,000 shares authorized ....................... 211,706
Paid-in capital in excess of par ..................... 238,535,846
Undistributed investment income ...................... $ 478,534
Accumulated realized capital losses--net ............. (125,423,088)
Unrealized appreciation--net ......................... 33,788,555
-------------
Total accumulated losses--net ........................ (91,155,999)
-------------
Net Assets ........................................... $ 148,041,453
=============
================================================================================================================
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $81,968,989 and
3,651,833 shares outstanding ........................ $ 22.45
=============
Class B--Based on net assets of $11,497,147 and
535,934 shares outstanding .......................... $ 21.45
=============
Class C--Based on net assets of $6,654,786 and
311,240 shares outstanding .......................... $ 21.38
=============
Class I--Based on net assets of $47,920,531 and
2,117,062 shares outstanding ........................ $ 22.64
=============
See Notes to Consolidated Financial Statements.
14 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
Consolidated Statement of Operations
For the Year Ended November 30, 2004
================================================================================================================
Investment Income
- ----------------------------------------------------------------------------------------------------------------
Dividends (net of $471,583 foreign withholding tax) .. $ 4,209,018
Interest from affiliates ............................. 12,103
Securities lending ................................... 146
-------------
Total income ......................................... 4,221,267
-------------
================================================================================================================
Expenses
- ----------------------------------------------------------------------------------------------------------------
Investment advisory fees ............................. $ 1,224,534
Account maintenance fees--Class A .................... 174,771
Transfer agent fees--Class A ......................... 144,627
Account maintenance and distribution fees--Class B ... 127,484
Custodian fees ....................................... 113,835
Accounting services .................................. 96,760
Professional fees .................................... 79,777
Transfer agent fees--Class I ......................... 71,843
Account maintenance and distribution fees--Class C ... 49,999
Printing and shareholder reports ..................... 49,406
Directors' fees and expenses ......................... 45,550
Registration fees .................................... 40,030
Transfer agent fees--Class B ......................... 31,959
Transfer agent fees--Class C ......................... 12,164
Pricing fees ......................................... 3,102
Other ................................................ 56,580
-------------
Total expenses ....................................... 2,322,421
-------------
Investment income--net ............................... 1,898,846
-------------
================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- ----------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net .................................. 18,286,080
Foreign currency transactions--net ................ (7,391) 18,278,689
-------------
Change in unrealized appreciation/depreciation on:
Investments--net .................................. 25,769,913
Foreign currency transactions--net ................ 31,328 25,801,241
-------------------------------
Total realized and unrealized gain--net .............. 44,079,930
-------------
Net Increase in Net Assets Resulting from Operations . $ 45,978,776
=============
See Notes to Consolidated Financial Statements.
MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004 15
[LOGO] Merrill Lynch Investment Managers
Consolidated Statements of Changes in Net Assets
For the Year Ended
November 30,
-------------------------------
Increase (Decrease) in Net Assets: 2004 2003
================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------
Investment income--net ............................... $ 1,898,846 $ 1,260,645
Realized gain (loss)--net ............................ 18,278,689 (5,293,061)
Change in unrealized appreciation/depreciation--net .. 25,801,241 44,115,104
-------------------------------
Net increase in net assets resulting from operations . 45,978,776 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 ........................................ (5,279,918) (11,125,173)
-------------------------------
================================================================================================================
Redemption Fees
- ----------------------------------------------------------------------------------------------------------------
Redemption fees ...................................... 1,063 --
-------------------------------
================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------
Total increase in net assets ......................... 38,882,927 28,735,249
Beginning of year .................................... 109,158,526 80,423,277
-------------------------------
End of the year* ..................................... $ 148,041,453 $ 109,158,526
===============================
* Undistributed investment income--net ............ $ 478,534 $ 330,155
===============================
See Notes to Consolidated Financial Statements.
16 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
Consolidated Financial Highlights
Class A
The following per share data and ratios have been derived ----------------------------------------------------------------------
from information provided in the financial statements. For the Year Ended November 30,
----------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning
of year ................... $ 15.71 $ 10.15 $ 11.56 $ 13.00 $ 12.83
----------------------------------------------------------------------
Investment income--net** ... .29 .19 .16 .09 .03
Realized and unrealized gain
(loss)--net ............... 6.72 5.40 (1.57) (1.53) .34
----------------------------------------------------------------------
Total from investment
operations ................ 7.01 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 year $ 22.45 $ 15.71 $ 10.15 $ 11.56 $ 13.00
======================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per
share ..................... 45.35% 55.23% (12.20%) (11.08%) 2.71%
======================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ................... 1.85% 2.07% 2.10% 1.98% 1.73%
======================================================================
Investment income--net ..... 1.60% 1.52% 1.37% .69% .20%
======================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in
thousands) ................ $ 81,969 $ 62,145 $ 42,062 $ 39,508 $ 46,514
======================================================================
Portfolio turnover ......... 56.80% 57.86% 45.85% 43.74% 41.70%
======================================================================
* Total investment returns exclude the effect of sales charges.
** Based on average shares outstanding.
See Notes to Consolidated Financial Statements.
MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004 17
[LOGO] Merrill Lynch Investment Managers
Consolidated Financial Highlights (continued)
Class B
The following per share data and ratios have been derived ----------------------------------------------------------------------
from information provided in the financial statements. For the Year Ended November 30,
----------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning
of year ................... $ 15.01 $ 9.75 $ 11.20 $ 12.69 $ 12.52
----------------------------------------------------------------------
Investment income
(loss)--net** ............. .15 .08 .07 --+ (.07)
Realized and unrealized gain
(loss)--net ............... 6.43 5.18 (1.52) (1.49) .32
----------------------------------------------------------------------
Total from investment
operations ................ 6.58 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 year $ 21.45 $ 15.01 $ 9.75 $ 11.20 $ 12.69
======================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per
share ..................... 44.16% 53.95% (12.95%) (11.74%) 1.94%
======================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ................... 2.64% 2.89% 2.91% 2.78% 2.51%
======================================================================
Investment income
(loss)--net ............... .86% .75% .62% (.04%) (.44%)
======================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(in thousands) ............ $ 11,497 $ 15,129 $ 18,259 $ 49,253 $ 87,317
======================================================================
Portfolio turnover ......... 56.80% 57.86% 45.85% 43.74% 41.70%
======================================================================
* Total investment returns exclude the effects of sales charges.
** Based on average shares outstanding.
+ Amount is less than $(.01) per share.
See Notes to Consolidated Financial Statements.
18 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
Consolidated Financial Highlights (continued)
Class C
The following per share data and ratios have been derived ----------------------------------------------------------------------
from information provided in the financial statements. For the Year Ended November 30,
----------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning
of year ................... $ 15.00 $ 9.74 $ 11.19 $ 12.68 $ 12.53
----------------------------------------------------------------------
Investment income
(loss)--net** ............. .14 .08 .07 (.01) (.07)
Realized and unrealized gain
(loss)--net ............... 6.41 5.18 (1.52) (1.48) .32
----------------------------------------------------------------------
Total from investment
operations ................ 6.55 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 year $ 21.38 $ 15.00 $ 9.74 $ 11.19 $ 12.68
======================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per
share ..................... 44.15% 54.00% (12.96%) (11.75%) 1.90%
======================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ................... 2.63% 2.88% 2.91% 2.78% 2.51%
======================================================================
Investment income
(loss)--net ............... .80% .71% .59% (.06%) (.48%)
======================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in
thousands) ................ $ 6,655 $ 4,074 $ 3,084 $ 4,538 $ 7,000
======================================================================
Portfolio turnover ......... 56.80% 57.86% 45.85% 43.74% 41.70%
======================================================================
* Total investment returns exclude the effects of sales charges.
** Based on average shares outstanding.
See Notes to Consolidated Financial Statements.
MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004 19
[LOGO] Merrill Lynch Investment Managers
Consolidated Financial Highlights (concluded)
Class I
The following per share data and ratios have been derived ----------------------------------------------------------------------
from information provided in the financial statements. For the Year Ended November 30,
----------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning
of year ................... $ 15.83 $ 10.23 $ 11.66 $ 13.08 $ 12.89
----------------------------------------------------------------------
Investment income--net** ... .33 .22 .19 .13 .07
Realized and unrealized gain
(loss)--net ............... 6.79 5.44 (1.59) (1.55) .35
----------------------------------------------------------------------
Total from investment
operations ................ 7.12 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 year $ 22.64 $ 15.83 $ 10.23 $ 11.66 $ 13.08
======================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per
share ..................... 45.73% 55.61% (12.04%) (10.86%) 3.04%
======================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ................... 1.60% 1.81% 1.85% 1.73% 1.48%
======================================================================
Investment income--net ..... 1.81% 1.78% 1.63% .97% .48%
======================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in
thousands) ................ $ 47,921 $ 27,811 $ 17,018 $ 22,753 $ 30,466
======================================================================
Portfolio turnover ......... 56.80% 57.86% 45.85% 43.74% 41.70%
======================================================================
* Total investment returns exclude the effects of sales charges.
** Based on average shares outstanding.
See Notes to Consolidated Financial Statements.
20 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 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. 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 (except that Class B
shareholders may vote on certain changes to the Class A distribution plan).
Income, expenses (other than expenses attributable to a specific class) and
realized and unrealized gains and losses 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 the
counterparty. 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. NOVEMBER 30, 2004 21
[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.
(f) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
22 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
Notes to Consolidated Financial Statements (continued)
(g) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(h) Securities lending -- The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. The market value of
the loaned securities is determined at the close of business of the Fund and any
additional required collateral is delivered to the Fund on the next business
day. Where the Fund receives securities as collateral for the loaned securities,
it collects a fee from the borrower. The Fund typically receives the income on
the loaned securities but does not receive the income on the collateral. Where
the Fund receives cash collateral, it may invest such collateral and retain the
amount earned on such investment, net of any amount rebated to the borrower.
Loans of securities are terminable at any time and the borrower, after notice,
is required to return borrowed securities within five business days. The Fund
may pay reasonable finder's, lending agent, administrative and custodial fees in
connection with its loans. In the event that the borrower defaults on its
obligation to return borrowed securities because of insolvency or for any other
reason, the Fund could experience delays and costs in gaining access to the
collateral. The Fund also could suffer a loss where the value of the collateral
falls below the market value of the borrowed securities, in the event of
borrower default or in the event of losses on investments made with cash
collateral.
(i) Basis of consolidation -- The accompanying consolidated financial statements
include the accounts of Merrill Lynch Latin America Fund Chile Ltd., a
wholly-owned subsidiary, which primarily invests in Chilean securities.
Intercompany accounts and transactions have been eliminated.
(j) Reclassifications -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year, $35,545,138 has been reclassified between paid-in capital in excess of par
and accumulated realized capital losses and $66,527 has been reclassified
between accumulated realized capital losses and undistributed net investment
income as a result of permanent differences attributable to the expiration of
capital loss carryforwards, passive foreign investment companies and foreign
currency transactions. These reclassifications had no effect on net assets or
net asset values per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
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. NOVEMBER 30, 2004 23
[LOGO] Merrill Lynch Investment Managers
Notes to Consolidated Financial Statements (continued)
For the year ended November 30, 2004, FAMD earned underwriting discounts and
direct commissions and MLPF&S earned dealer concessions on sales of the Fund's
Class A and Class I Shares as follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S
- --------------------------------------------------------------------------------
Class A .............................. $ 7,254 $18,553
Class I .............................. $ 6 $ 127
- --------------------------------------------------------------------------------
For the year ended November 30, 2004, MLPF&S received contingent deferred sales
charges of $6,680 and $1,509 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 year ended November 30, 2004, MLIM, LLC received $65
in securities lending agent fees.
In addition, MLPF&S received $47,186 in commissions on the execution of
portfolio security transactions for the Fund for the year ended November 30,
2004.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
For the year ended November 30, 2004, the Fund reimbursed MLIM $2,468 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
year ended November 30, 2004 were $68,369,829 and $77,308,531, respectively.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$5,279,918 and $11,125,173 for the years ended November 30, 2004 and November
30, 2003, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended November 30, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 238,048 $ 4,381,885
Automatic conversion of shares ........... 328,350 5,758,766
Shares issued to shareholders in
reinvestment of dividends ............. 54,762 879,468
----------------------------
Total issued ............................. 621,160 11,020,119
Shares redeemed .......................... (924,723) (16,642,917)
----------------------------
Net decrease ............................. (303,563) $ (5,622,798)
============================
- --------------------------------------------------------------------------------
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)
============================
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended November 30, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 39,609 $ 707,486
Shares issued to shareholders in
reinvestment of dividends ............. 7,013 108,484
----------------------------
Total issued ............................. 46,622 815,970
Automatic conversion of shares ........... (342,243) (5,758,766)
Shares redeemed .......................... (176,172) (3,029,226)
----------------------------
Net decrease ............................. (471,793) $ (7,972,022)
============================
- --------------------------------------------------------------------------------
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 Year Dollar
Ended November 30, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 119,223 $ 2,160,655
Shares issued to shareholders in
reinvestment of dividends ............. 2,431 37,462
----------------------------
Total issued ............................. 121,654 2,198,117
Shares redeemed .......................... (82,043) (1,383,354)
----------------------------
Net increase ............................. 39,611 $ 814,763
============================
24 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
Notes to Consolidated Financial Statements (concluded)
- --------------------------------------------------------------------------------
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 Year Dollar
Ended November 30, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 1,051,400 $ 20,042,093
Shares issued to shareholders in
reinvestment of dividends ............. 31,287 505,596
----------------------------
Total issued ............................. 1,082,687 20,547,689
Shares redeemed .......................... (722,213) (13,047,550)
----------------------------
Net increase ............................. 360,474 $ 7,500,139
============================
- --------------------------------------------------------------------------------
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
============================
Effective June 30, 2004, the Fund charges a 2% redemption fee on the proceeds
(calculated at market value) of a redemption (either by sale or exchange) of
Fund shares made within 30 days of purchase. The redemption fee is paid to the
Fund and is intended to offset the trading costs, market impact and other costs
associated with short-term trading into and out of the Fund. For the year ended
November 30, 2004, the Fund charged redemption fees of $1,063.
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 a group of 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 .07% 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 portfolio's election,
the federal funds rate plus .50% or a base rate as defined in the credit
agreement. The Fund did not borrow under the credit agreement during the year
ended November 30, 2004. On November 26, 2004, the credit agreement was renewed
for one year under substantially the same terms.
6. Commitments:
At November 30, 2004, the Fund had entered into a foreign exchange contract
under which it had agreed to sell foreign currency with an approximate value of
$7,600.
7. Distributions to Shareholders:
The Fund paid an ordinary income dividend in the amount of $.366873 per Class A
Share, $.162705 per Class B Share, $.252838 per Class C Share and $.414970 per
Class I Share on December 23, 2004 to shareholders of record on December 17,
2004.
The tax character of distributions paid during the fiscal years ended November
30, 2004 and November 30, 2003 was as follows:
- --------------------------------------------------------------------------------
11/30/2004 11/30/2003
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income ....................... $1,816,994 $ 222,266
-----------------------------
Total taxable distributions .............. $1,816,994 $ 222,266
=============================
As of November 30, 2004, the components of accumulated losses on a tax basis
were as follows:
- -----------------------------------------------------------------------------
Undistributed ordinary income--net ...................... $ 2,431,729
Undistributed long-term capital gains--net .............. --
-------------
Total undistributed earnings--net ....................... 2,431,729
Capital loss carryforward ............................... (124,954,523)*
Unrealized gains--net ................................... 31,366,795**
-------------
Total accumulated losses--net ........................... $ (91,155,999)
=============
* On November 30, 2004, the Fund had a net capital loss carryforward of
$124,954,523, of which $52,461,806 expires in 2006, $26,681,113 expires in
2008, $4,233,519 expires in 2009, $30,609,327 expires in 2010 and
$10,968,758 expires in 2011. This amount will be available to offset like
amounts of any future taxable gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales, the
realization for tax purposes of unrealized gains (losses) on certain
foreign currency contracts, the realization for tax purposes of unrealized
gains on investments in passive foreign investment companies and other
book/tax temporary differences.
MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004 25
[LOGO] Merrill Lynch Investment Managers
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
Merrill Lynch Latin America Fund, Inc.:
We have audited the accompanying consolidated statement of assets and
liabilities, including the consolidated schedule of investments, of Merrill
Lynch Latin America Fund, Inc. and its subsidiary as of November 30, 2004, and
the related consolidated statement of operations for the year then ended, the
consolidated statements of changes in net assets for each of the two years in
the period then ended, and the consolidated financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 2004, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements and consolidated financial
highlights referred to above present fairly, in all material respects, the
financial position of Merrill Lynch Latin America Fund, Inc. and its subsidiary
as of November 30, 2004, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and their financial highlights for each of the five years in the
period then ended, in conformity with U.S. generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
January 7, 2005
Important Tax Information (unaudited)
The following information is provided with respect to the ordinary income
distribution paid by Merrill Lynch Latin America Fund, Inc. to shareholders of
record on December 16, 2003:
- --------------------------------------------------------------------------------
Qualified Dividend Income for Individuals ................. 100%
Foreign Source Income ..................................... 86.72%
Foreign Taxes Paid Per Share .............................. $ .045126
- --------------------------------------------------------------------------------
The foreign taxes paid represent taxes incurred by the Fund on income received
by the Fund from foreign sources. Foreign taxes paid may be included in taxable
income with an offsetting deduction from gross income or may be taken as a
credit for taxes paid to foreign governments. You should consult your tax
adviser regarding the appropriate treatment of foreign taxes paid.
Please retain this information for your records.
26 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
Officers and Directors
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Interested Director
- ------------------------------------------------------------------------------------------------------------------------------------
Terry K. P.O. Box 9011 President 1999 to President and Chairman of the Merrill Lynch 124 Funds None
Glenn* Princeton, NJ and present Investment Managers, L.P. ("MLIM")/Fund Asset 157 Portfolios
08543-9011 Director Management, L.P. ("FAM")-advised funds since
Age: 64 1999; Chairman (Americas Region) of MLIM from
2000 to 2002; Executive Vice President of MLIM
and FAM (which terms as used herein include
their corporate predecessors) from 1983 to 2002;
President of FAM Distributors, Inc. ("FAMD") from
1986 to 2002 and Director thereof from 1991 to
2002; Executive Vice President and Director of
Princeton Services, Inc. ("Princeton Services")
from 1993 to 2002; President of Princeton
Administrators, L.P. from 1989 to 2002; Director
of Financial Data Services, Inc. since 1985.
------------------------------------------------------------------------------------------------------------------------
* Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which MLIM
or FAM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment Company Act, of
the Fund based on his present and former positions with MLIM, FAM, FAMD, Princeton Services and Princeton
Administrators, L.P. The Director's term is unlimited. Directors serve until their resignation, removal or death, or
until December 31 of the year in which they turn 72. As Fund President, Mr. Glenn serves at the pleasure of the Board
of Directors.
====================================================================================================================================
Independent Directors*
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald W. P.O. Box 9095 Director 2000 to Professor Emeritus of Finance, School of Business, 48 Funds None
Forbes Princeton, NJ present State University of New York at Albany since 2000 48 Portfolios
08543-9095 and Professor thereof from 1989 to 2000;
Age: 64 International Consultant, Urban Institute,
Washington, DC from 1995 to 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
Cynthia A. P.O. Box 9095 Director 2000 to Professor, Harvard Business School since 1989; 48 Funds Newell
Montgomery Princeton, NJ present Associate Professor, J.L. Kellogg Graduate School 48 Portfolios Rubbermaid,
08543-9095 of Management, Northwestern University from Inc.
Age: 52 1985 to 1989; Associate Professor, Graduate
School of Business Administration, University of
Michigan from 1979 to 1985.
- ------------------------------------------------------------------------------------------------------------------------------------
Jean Margo P.O. Box 9095 Director 2004 to Self-employed consultant since 2001; Counsel of 48 Funds None
Reid Princeton, NJ present Alliance Capital Management (investment 48 Portfolios
08543-9095 adviser) in 2000; General Counsel, Director and
Age: 59 Secretary of Sanford C. Bernstein & Co., Inc.
(investment adviser/broker-dealer) from 1997 to
2000; Secretary, Sanford C. Bernstein Fund, Inc.
from 1994 to 2000; Director and Secretary of
SCB, Inc. since 1998; Director and Secretary of SCB
Partners, Inc. since 2000; Director of Covenant
House from 2001 to 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Kevin A. P.O. Box 9095 Director 1992 to Founder and currently Director Emeritus of 48 Funds None
Ryan Princeton, NJ present Boston University Center for the Advancement of 48 Portfolios
08543-9095 Ethics and Character and Director thereof from 1989
Age: 72 to 1999; Professor from 1982 to 1999 and currently
Professor Emeritus of Education of Boston University;
formerly taught on the faculties of The University of
Chicago, Stanford University and Ohio State
University.
- ------------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004 27
[LOGO] Merrill Lynch Investment Managers
Officers and Directors (continued)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Independent Directors* (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Roscoe S. P.O. Box 9095 Director 2000 to President, Middle East Institute from 1995 to 2001; 48 Funds None
Suddarth Princeton, NJ present Foreign Service Officer, United States Foreign 48 Portfolios
08543-9095 Service, from 1961 to 1995; Career Minister,
Age: 69 from 1989 to 1995; Deputy Inspector General, U.S.
Department of State, from 1991 to 1994; U.S.
Ambassador to The Hashemite Kingdom of Jordan from
1987 to 1990.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard R. P.O. Box 9095 Director 1991 to Professor of Finance from 1984 to 1995, Dean from 48 Funds Bowne & Co.,
West Princeton, NJ present 1984 to 1993 and currently Dean Emeritus of New 48 Portfolios Inc.; Vornado
08543-9095 York University Leonard N. Stern School of Business Realty Trust;
Age: 66 Administration, New York University from 1995 Vornado Oper-
to present. ating Company
and Alex-
ander's, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Edward D. P.O. Box 9095 Director 1994 to Self-employed financial consultant since 1994; 48 Funds None
Zinbarg Princeton, NJ present Executive Vice President of The Prudential Insurance 48 Portfolios
08543-9095 Company of America from 1988 to 1994; former
Age: 70 Director of Prudential Reinsurance Company and
former Trustee of the Prudential Foundation.
------------------------------------------------------------------------------------------------------------------------
* The Director's term is unlimited. Directors serve until their resignation, removal or death, or until December 31 of
the year in which they turn 72.
- ------------------------------------------------------------------------------------------------------------------------------------
28 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
Officers and Directors (concluded)
Position(s) Length of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1993 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999;
Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999 and Director
08543-9011 and and since 2004; Vice President of FAMD since 1999; Vice President of MLIM and FAM from
Age: 44 Treasurer 1999 to 1990 to 1997; Director of MLIM Taxation since 1990.
present
- ------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 Senior Vice 1999 to President of MLIM and member of the Executive Management Committee of ML & Co.,
Doll, Jr. Princeton, NJ President present Inc. since 2001; Global Chief Investment Officer and Senior Portfolio Manager of
08543-9011 MLIM since 1999; Chief Investment Officer of Equities at Oppenheimer Funds, Inc.
Age: 50 from 1990 to 1999 and Chief Investment Officer thereof from 1998 to 1999; Executive
Vice President of Oppenheimer Funds, Inc. from 1991 to 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
William P.O. Box 9011 Vice 2002 to Director of MLIM since 2004 and Vice President thereof from 2002 to 2004; Latin
Landers Princeton, NJ President present American research analyst at Credit Suisse First Boston from 1999 to 2001.
08543-9011
Age: 35
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O. Box 9011 Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President and
Hiller Princeton, NJ Compliance present Chief Compliance Officer of MLIM since 2004; Global Director of Compliance at
08543-9011 Officer Morgan Stanley Investment Management from 2002 to 2004; Managing Director and
Age: 53 Global Director of Compliance at Citigroup Asset Management from 2000 to 2002;
Chief Compliance Officer at Soros Fund Management in 2000; Chief Compliance Officer
at Prudential Financial from 1995 to 2000.
- ------------------------------------------------------------------------------------------------------------------------------------
Alice A. P.O. Box 9011 Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from 1999 to
Pellegrino Princeton, NJ present 2002; Attorney associated with MLIM since 1997.
08543-9011
Age: 44
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Directors.
- ------------------------------------------------------------------------------------------------------------------------------------
Further information about the Fund's Officers and Directors is available in the Fund's Statement of Additional
Information, which can be obtained without charge by calling 1-800-MER-FUND.
- ------------------------------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Effective January 1, 2005, Terry K. Glenn, President and Director and Kevin A.
Ryan, Director of Merrill Lynch Latin America Fund, Inc. will retire. The Fund's
Board of Directors wishes Messrs. Glenn and Ryan well in their retirements.
Effective January 1, 2005, Robert C. Doll, Jr. will become President and
Director of the Fund.
- --------------------------------------------------------------------------------
MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004 29
[LOGO] Merrill Lynch Investment Managers
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
30 MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004
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 at 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.
MERRILL LYNCH LATIN AMERICA FUND, INC. NOVEMBER 30, 2004 31
[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. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
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 -- 11/04
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of the
end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial officer
and principal accounting officer, or persons performing similar
functions. A copy of the code of ethics is available without charge
upon request by calling toll-free 1-800-MER-FUND (1-800-637-3863).
Item 3 - Audit Committee Financial Expert - The registrant's board of directors
has determined that (i) the registrant has the following audit
committee financial experts serving on its audit committee and (ii)
each audit committee financial expert is independent: (1) Ronald W.
Forbes, (2) Richard R. West, and (3) Edward D. Zinbarg.
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending November 30, 2004 - $33,000
Fiscal Year Ending November 30, 2003 - $35,000
(b) Audit-Related Fees - Fiscal Year Ending November 30, 2004 - $0
Fiscal Year Ending November 30, 2003 - $0
(c) Tax Fees - Fiscal Year Ending November 30, 2004 - $7,300
Fiscal Year Ending November 30, 2003 - $7,100
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ending November 30, 2004 - $0
Fiscal Year Ending November 30, 2003 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of
these non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and recurring
services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a
specific case-by-case basis ("general pre-approval"). However, such
services will only be deemed pre-approved provided that any individual
project does not exceed $5,000 attributable to the registrant or
$50,000 for all of the registrants the Committee oversees. Any proposed
services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject
to general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending November 30, 2004 - $12,448,225
Fiscal Year Ending November 30, 2003 - $18,947,106
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $945,000, 0%
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 second 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 - See Item 2
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/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
President of
Merrill Lynch Latin America Fund, Inc.
Date: January 13, 2005
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/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
President of
Merrill Lynch Latin America Fund, Inc.
Date: January 13, 2005
By: /s/ Donald C. Burke
---------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Latin America Fund, Inc.
Date: January 13, 2005