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UNITED STATES

FORM 10-K

Commission File Number 000-31181

AMERICA ONLINE LATIN AMERICA, INC.

6600 N. Andrews Avenue

Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(g) of the Act:

Class A common stock, par value $0.01 per share

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o.

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).      Yes o          No þ

      The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant (without admiting that any person whose shares are not included in such calculation is an affiliate) computed by reference to the price at which class A common stock was last sold as of the last business day of the registrant’s most recently computed second fiscal quarter, June 30, 2003, was $34,311,258.

      The number of shares of the registrant’s class A common stock outstanding as of March 17, 2004 was 135,286,703. No shares of the registrant’s class B common stock or class C common stock were outstanding as of March 17, 2004.

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PART I

      This Annual Report on Form 10-K contains forward-looking statements that are based on our current expectations. Actual results in future periods may differ materially from those expressed or implied by such forward-looking statements because of a number of risks and uncertainties. For a discussion of factors affecting our business and prospects, see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Factors.”

Overview

      America Online Latin America, Inc. (“we,” “us,” “AOLA” or the “company”) is a leading interactive service provider in Latin America. Our goal is to be a leader in the development of the global interactive medium that is changing the way people communicate, stay informed, are entertained, learn, shop and conduct business in Latin America. We derive our revenues principally from member subscriptions to our AOLA country services, the AOL-branded service in Puerto Rico and our web-based interactive services. We also generate additional revenues from advertising and other revenue sources. Other revenue sources include programming services provided to America Online for its Latino content area and revenue sharing agreements with certain local telecommunications providers.

      Our AOLA country services and web-based interactive services provide our members with easy and reliable access to online communities, content and localized versions of certain of America Online, Inc.’s (“America Online”) interactive products. Our services enable members to access and explore the Internet and encourage members to participate in interactive communities through tools such as Spanish and Portuguese versions of AOL Instant Messenger, Buddy Lists, e-mail, web logs, public bulletin boards, online meeting rooms, conversations, chat and auditorium events. Our AOLA country services require members to use a software client program on their computers, whereas our web-based services do not require this software. Members can personalize their online experience through a variety of features, including customized news and e-mail controls. Our interactive services also provide members with local and regional content organized into channels, making areas of interest easy to find, and our AOLA country services also provide access to the extensive global content of the AOL service.

      Our markets in Latin America are Brazil, Mexico, Argentina and Puerto Rico. We have no current plans to expand to other markets in Latin America. In the table below, with respect to each market, we provide the date on which we first launched our country service in each market and our market coverage as of February 2004.

      Under an agreement with America Online, we receive the economic benefit associated with subscribers to the AOL-branded service in Puerto Rico and include these subscribers in our member totals. Subscribers in Puerto Rico are provided with both English and Spanish language content through the AOL-branded service.

      We launched our new web-based content and connectivity services in Brazil, Argentina and Puerto Rico in September 2003, October 2003 and February 2004, respectively. Our web-based services are priced at lower rates than our country services. We expect these new services to better allow us to compete on the basis of price in all of our markets and, in Brazil, to allow consumers to choose the features they need. We believe our new web-based services in Brazil and Argentina will become our primary products in those countries, although at present the majority of our members in those countries are using the AOLA country service. We are no longer actively promoting the AOLA country service in Brazil and Argentina, although they are still available. We expect to experience migration of membership from our AOL Brazil and AOL

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      We offer our web-based service in Puerto Rico, which we market as “Conexis,” but we do not expect it to become our primary product offering. We expect to experience migration from the AOL-branded service in Puerto Rico to our web-based service. We began testing a web-based service in Mexico in September 2003, and our decision on whether or not to launch this service in Mexico will depend on these test results. We would not expect a web-based service in Mexico to become our primary product offering in that country.

      In June 2000, we entered into a ten-year strategic alliance with Banco Itaú, one of the largest banks in Latin America. Banco Itaú is obligated to market and promote a co-branded version of our interactive services in Brazil as the principal means of accessing Banco Itaú’s interactive financial services. We also market a version of our web-based interactive services in Banco Itaú branches containing the same co-branded features as our country service. Banco Itaú customers who become subscribers to the co-branded service are currently entitled to a 20% discount off the standard price for the unlimited, bundled service plan.

      In January 2003, we entered into an agreement with McDonald’s in Brazil to market our service via kiosks in hundreds of McDonald’s restaurants in Brazil. As part of the agreement, we paid McDonald’s an initial fee of approximately $2.1 million and are required to pay an annual fee over the five-year term of the agreement, which together with the initial fee will in the aggregate total as much as $7.0 million. In addition, we also are required to pay McDonald’s a fee for each new member who becomes a paying member of our AOLA country service in Brazil through this agreement. We launched the project in a limited number of restaurants in October 2003, but the implementation of this agreement has been subject to a number of delays and still has not been fully implemented.

      We recently modified our agreement with McDonald’s under which, among other things, McDonald’s is required to hire, train and deploy in the restaurant kiosks, for a period of one year, at its cost, 300 promoters who will be exclusively dedicated to the project. We also have the right for AOL Brazil to be promoted in two of McDonald’s national advertising campaigns in 2004 and two additional such campaigns in 2005. As part of the restructured agreement, we are no longer required to pay a maintenance fee to McDonald’s related to the first year of the contract (estimated to have been $0.9 million), and McDonald’s is no longer required to pay us penalties for their failure in the first year of the contract to establish kiosks on a timely basis according to the implementation schedule included in the initial contract (estimated to have been up to $0.8 million). As part of the restructured agreement, McDonald’s is required to establish, by August 31, 2004, functioning kiosks in 550 of its restaurants. To the extent that McDonald’s does not meet this target date, they will be obligated to refund to us a portion of our $2.1 million initial investment. The initiative is presently operating in only a limited number of restaurants and we hope to achieve full implementation by the first quarter of 2005. Failure to successfully implement this agreement would negatively impact our future membership levels. Please see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview,” for additional discussion regarding our relationship with McDonald’s.

      We consider countries in which we have launched our AOLA country services or web-based interactive services as operational segments and internally report our operations on a country-by-country basis. Although amounts for Argentina are not currently material and are not expected to be material in future reporting periods, we have decided not to consolidate Argentina with our corporate and other segment in order to facilitate historical segment comparisons. Each of our operating segments, except for Puerto Rico, derives its subscription revenues through the provision of interactive services and also from advertising and other revenue sources. In Puerto Rico, we derive our subscription revenue from our arrangement with America Online whereby America Online transfers it net economic interests from members to the AOL-branded service in Puerto Rico to us. Our Puerto Rico segment also derives revenue from advertising and other revenue. Please see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Segment Results of Operations.”

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      Our founders and principal stockholders are America Online, a subsidiary of Time Warner Inc. (“Time Warner”), and the Cisneros Group of Companies (“Cisneros Group”). The Cisneros Group is a name used to describe a group of investments, joint ventures, strategic alliances and companies that are associated with two of our directors, Ricardo and Gustavo Cisneros, and trusts established by them principally for the benefit of themselves and their families.

      Our principal executive offices are located at 6600 N. Andrews Ave., Suite 400, Ft. Lauderdale, FL 33309, and our telephone number is (954) 689-3000. We were incorporated in Delaware on November 22, 1999. Before August 7, 2000, our business was conducted by affiliates of AOL Latin America, S.L., a limited liability company incorporated under the laws of Spain in December 1998. AOL Latin America, S.L. was formed by America Online and the Cisneros Group as a joint venture. On August 7, 2000, we reorganized our corporate structure. For a further discussion of this reorganization, see note 1 to our audited consolidated financial statements.

Available Information

      We make available free of charge on or through our Internet website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our Internet address is http://www.aola.com/investors/.

Our Services

      Our AOLA country services and web-based interactive services offer the following features:

      Access to the Internet. We provide our members with access to and use of the Internet. A simple tool bar allows members to move between the features and content on our online service and the Internet.

      Online Community Features. We believe that our services promote interactive online communities through features such as e-mail, web logs, Buddy Lists, AOL Instant Messenger and online community centers.

      Channel Line-Up. Our services feature channels for news, finance, entertainment, Internet and computing, sports, local, lifestyles and shopping.

      Personalization and Control Features. Members to our AOLA country services and web-based interactive services are able to personalize their interactive experience in varying degrees through a number of features and tools, and which may include:

	•	Multiple screen names, or e-mail accounts, per membership for certain subscription plans, allowing up to seven members of a household to use the service at no additional charge.
	•	Parental controls to help parents guide their children’s online experience, including tools that limit access to particular areas or features on the AOLA country services and the Internet.
	•	Mail controls that allow members to limit who may send them e-mail and to block specific types of e-mail.
	•	Favorite places, which allow members to mark particular Internet sites or areas on our online services to facilitate subsequent visits to those sites or areas.
	•	Marketing preferences that enable members to elect not to receive selected marketing offers.
	•	A Web security browser that will encrypt confidential information, providing more secure online shopping.

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      Online and Offline “Help.” We offer our members both online “help” and offline customer support services. Our AOLA country services’ and web-based interactive services’ “help” feature assists members with their inquiries online. Offline, we have call centers providing live customer service to members, currently 24 hours a day, seven days a week. The cost of such member services support is free to members subscribing to bundled pricing plans, although members may incur the cost of domestic telephone calls. Members subscribing to unbundled plans incur per call charges and/or charges proportional to the amount of time required to service the call, in addition to any costs for domestic telephone calls.

      Our Web-based and Broadband Services. Our web-based Internet connectivity service in Brazil is segmented to address four broad categories:

	(1) AOL Total, which provides content and email services (seven addresses) similar to our current AOL country services;
	(2) AOL Executive, which focuses on news and sports relevant to adults and provides three email addresses;
	(3) AOL Youth, which provides content and services of interest to the youth segment and provides three email addresses; and
	(4) AOL Lite, which provides basic Internet connectivity, one email address, and minimal content.

      Unlike Brazil, in Puerto Rico and Argentina, we offer only one web-based product. “Conexis” is the name of the web-based service we offer in Puerto Rico, which provides basic Internet connectivity, one email address, and minimal content. In Argentina, our web-based product offering is full-featured and similar to AOL Total in Brazil.

      We launched our broadband service in Brazil, AOL MAXX, nationally in August 2003. Our new broadband service is a full-featured product offering subscribers faster Internet access through DSL and cable and unique content designed for delivery through high-speed channels. The pricing of our broadband service in Brazil varies depending upon our telecommunications partner. The gross margin contribution on our broadband product offerings is expected to be similar to that of our AOLA Brazil country service as the business becomes established. We are also testing broadband products in Mexico and Argentina, although at present we do not have plans to launch nationally in these countries. A decision on whether or not to launch our broadband service in Mexico and Argentina will depend on the test results.

      Service Plans, Pricing and Collection Mechanisms. Service plans are priced according to usage and the level of member services support selected by the member. In general, members are able to select from one of several service plan combinations, including those that follow.

	•	unlimited use plans inclusive of live member services support (unlimited bundled plans), which offer unlimited online access and unlimited live member services support for a fixed monthly fee;
	•	limited use plans, inclusive of live member services support (limited bundled plan), which offer a combination of a fixed monthly fee for a specified number of hours of online access with the option to spend additional time online, billed at an hourly rate, plus access to unlimited live member services support; and
	•	unlimited access plans, exclusive of live member services support (unbundled plans), which offer unlimited online access at a lower price than unlimited bundled plans. Member services support, if requested by the member, is billed at a flat rate per service call or based on the duration of the call to the call center.

      Most new members are selecting unbundled plans, which do not provide free call center support.

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      The following table sets forth the service plans and pricing that we offer in our markets as of March 10, 2004. All references to the equivalent pricing in U.S. dollars reflect exchange rates for the applicable local currencies as of March 10, 2004.

Service Price Plans by Country

      The Brazil service plans described above are also offered at discounts to monthly billing rates for members who prepay their AOL service. Prepayment plans are offered for six and twelve month periods. Additional discounts are offered for payments via credit cards. The price of all Brazil service plans includes an amount equivalent to the 5.0% ICMS (Imposto sobre Circulação de Mercadorias e Serviços) tax levied on telecommunications services in Brazil and paid to local tax authorities. To date, the majority of our subscribers in Brazil have chosen unlimited service price plans.

      The Argentina service plans described above are also offered at discounts to monthly billing rates for members who prepay their AOL service. Prepayment plans are offered for six and twelve-month periods. Additional discounts are offered for payments via credit cards.

      The Mexico plans described above are offered at discounts to monthly billing rates for members who prepay their AOLA country service. Prepayment plans are offered for three, six and twelve-month periods. Additionally, discounts are offered for payments via credit cards for any price plan. In Puerto Rico, pricing for our AOL-branded service is based on service plans offered by America Online in the United States. All service plans offered are bundled, and therefore include unlimited call center support. We also offer “Bring your own access,” which refers to usage of the AOL-branded service through a third-party Internet provider. Prepaid plans offering additional discounts are also available in Puerto Rico.

      We make our interactive services accessible to a broader audience of potential subscribers by offering multiple mechanisms through which our members can pay us, including credit cards, direct debits from bank accounts and cash payment methods (including “boletos”). Cash payment methods historically have accounted for a substantial majority of all new member registrations in Brazil, Mexico and Argentina. Cash payment methods are not available in Puerto Rico. However, the percentage of new registrations selecting cash payment alternatives has been declining in line with our efforts to improve the quality of our

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Subscribers Selecting Cash Payment Mechanisms(%)

      Although we have not experienced any significant difficulties collecting subscription fees from members using credit cards and direct debit mechanisms, collection rates from members opting for the cash payment mechanisms historically have been lower and less timely. As a result, we continue to encourage conversion of these subscribers to non-cash payment options and terminate members who do not pay on a timely basis. In Mexico we have encouraged the sale of long-term prepaid plans, which now account for 38% of current AOL Mexico members, and eliminated free trial periods for members choosing the cash payment options. In Brazil and Argentina, we either offer discounts or apply surcharges to subscribers to our AOLA country and web-based interactive services who choose cash payment options.

      Free Trial. We generally make our AOLA country services, the AOL-branded service in Puerto Rico and our web-based interactive services available for free to new subscribers for a limited period of time so they can experience our service offerings. We currently offer new subscribers to our AOLA country services, including subscribers to the Banco Itaú co-branded service, a 30-day free trial period from the date they register for the service. Subscribers to our web-based interactive services who select cash payment options do not typically receive free trial periods. In Mexico, we eliminated free trial periods entirely for members who choose cash payment options.

Strategic Alliance with Banco Itaú

      In June 2000, we entered into a ten-year strategic alliance with Banco Itaú, one of the largest banks in Latin America. Banco Itaú is obligated to market and promote a co-branded version of our AOLA country service in Brazil as the principal means of accessing Banco Itaú’s interactive financial services. We also market a version of our web-based interactive services in Banco Itaú branches containing the same co-branded features as the country service. Our relationship with Banco Itaú is central to our marketing efforts in Brazil.

      On December 14, 2002, we amended our strategic marketing alliance with Banco Itaú. Under the terms of the revised agreement, we now oversee, in large part, the marketing activities for the co-branded service. Banco Itaú is obligated to establish kiosks and point-of-sale displays in hundreds of its bank branches for the promotion of the co-branded services, which are staffed by promoters trained by AOL Brazil. Potential subscribers are able to sample the co-branded services and register in the bank branches. The number of promoters varies depending on the success of the marketing efforts, which are reviewed every three months. If the marketing efforts do not meet specified goals, the number of promoters will be decreased, subject to a floor on the number of promoters. Conversely, if the marketing efforts exceed specified levels, the number of promoters will be increased, subject to a maximum number of promoters. Banco Itaú is also required to distribute, at our direction, CDs containing the software for the co-branded AOLA country service via in-branch promotions and direct mail. Banco Itaú must also produce and broadcast a certain number of television commercials promoting the co-branded services and provide exclusive online banking benefits to subscribers to the co-branded services. Banco Itaú is responsible for the cost of these marketing efforts.

      The modified marketing arrangements will remain in effect through March 2006, although the ten-year term of the agreement did not change. Banco Itaú is obligated to make cash payments to us if minimum annual revenue targets and marketing commitments are not met through March 2006. The maximum aggregate amount that Banco Itaú will be required to pay us if these targets are not met, which

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      Beginning in the second half of 2003, as a result of lower than expected productivity, we reduced the number of promoters. Because of this reduction and our cancellation of certain CD distributions, Banco Itaú made payments of $4.5 million to us during 2003 in lieu of marketing activities it was obligated to make under our revised marketing agreement. We expect these payments to continue in the future but the amounts to gradually decrease over time as per the terms of the revised marketing agreement. We have the right to redeploy or reinstate some of the promoters in the branches in the future, in which case we would forego such payments from Banco Itaú. Such payments from Banco Itaú are accounted for as funds from financing activities in our statement of cash flows and will reduce future marketing expense by lowering the amortization expense associated with the shares issued to Banco Itaú. Payments we receive from Banco Itaú in lieu of marketing activities it is obligated to make result in a reduction of amounts owed to us as reference payments, since such amounts are considered revenues for purposes of calculating Banco Itaú’s performance under revenue targets.

      Banco Itaú’s customers who register for the co-branded services currently are entitled to a one-month free trial period, the length of which may be changed in the future and, if they subscribe to the co-branded AOL country service on a monthly, bundled unlimited-use plan, are entitled to a 20% discount. Banco Itaú, at its option, may subsidize hours for certain customers who were subscribers to the co-branded service prior to December 14, 2002. For the quarter ended December 31, 2003, the amount of subsidies paid by Banco Itaú for its members was not material. For the year ended December 31, 2003, we received $0.9 million in subsidies for its members from Banco Itaú.

      Termination. In general, if we or Banco Itaú commit a material breach of our agreement and fail to cure the breach, then the non-breaching party will have the right to terminate the agreement after an arbiter reviews the matter and confirms the uncured material breach. If the breach relates to an exclusivity provision, the non-breaching party may elect to continue the agreement with the option to be relieved of the exclusivity provisions of the agreement applicable to it. Banco Itaú may also terminate the agreement upon a change in control of AOLA. A material breach of the agreement by us includes: