Final Results

BlackRock Latin American Investment Trust plc Annual results announcement for the year ended 31 December 2013 Overview Performance record Financial Highlights Attributable to ordinary shareholders As at As at 31 December 31 December Change 2013 2012 % Assets Net assets (US$'000)â€ 315,345 399,713 -21.1 Net asset value per ordinary share - (US$ cents) 800.99 964.72 -17.0 -with income reinvested -13.1 Ordinary share price (mid-market) (US$ cents)â€¡ 719.25 861.52 -16.5 -with income reinvested -12.2 Ordinary share price (mid-market) (pence) 434.25 530.00 -18.1 -with income reinvested -13.9 â€ The change in net assets reflects market movements and the repurchase of 2,071,662 ordinary shares via a tender offer in the year. â€¡ Based on an exchange rate of 1.6563 (2012: 1.6255). Year ended Year ended 31 December 31 December Change 2013 2012 % Revenue Net revenue after taxation (US$'000) 9,905 11,167 -11.3 Revenue return per ordinary share - (US$ cents) 24.83 26.50 -6.3 Dividends Interim dividend per ordinary share (US$ cents) 15.00 5.00 +200.0 Final dividend per ordinary share (US$ cents) 15.00 25.00 -40.0 ----- ----- ----- Total dividends per ordinary share 30.00 30.00 - ===== ===== ===== Overview Ten year record Year Ended Net asset 31 December value per ordinary Total Net assets share Return Dividends expense attributable - per per ratio to ordinary debt at fair Ordinary Premium/ ordinary ordinary Effective /ongoing shareholders value* share price (discount) share share gearing# charges~ US$'000 cents cents % cents cents % % 2004 302,288** 433.3 335.5 (14.0)** 5.80 5.00 0.8 1.8 2005 403,252 544.0 484.0 (11.0) 10.98 9.00 (1.1) 1.6 2006 374,206 783.0 758.4 (3.1) 8.81 9.00 0.6 1.5 2007 533,281 1,115.9 1,082.9 (3.0) 12.47 9.50 0.4 1.2 2008 220,064 464.4 424.1 (8.7) 15.31 12.0 4.5 1.0 2009 443,410 1,011.5 1,037.5 2.6 18.57 15.0 8.5 1.4 2010 524,501 1,196.4 1,200.1 0.3 28.62 24.0 11.8 1.2 2011 391,550 893.1 836.9 (6.3) 35.39 30.0 9.4 1.3 2012 399,713 964.7 861.5 (10.7) 26.50 30.0 8.8 1.2 2013 315,345 801.0^ 719.3 (10.2) 24.83 30.0 2.0^ 1.1 * In accordance with accounting policy 2(k). ** Restated for changes in accounting policies. # Effective gearing is redeemable shares, loans, convertible bonds at par value (from 15 September 2009 to 16 October 2013), overdrafts less cash and fixed interest stocks as a percentage of net assets. ~ Based on average net assets for the year. Effective from 2011, the ongoing charges ratio is calculated in accordance with the AIC recommended methodology. ^ Convertible bonds were redeemed or converted in full during the year. Chairman's statement Overview In marked contrast to equities listed in the developed world, the major Latin America indices saw disappointing returns in 2013, battered by both internal and external factors. Fears that the US Federal Reserve would start to 'taper' its bond buying programme (and the associated strength in the US Dollar) weighed heavily on sentiment, as did the lacklustre economic growth in Brazil and Mexico. Rising inflation and interest rates in Brazil, and falling commodity prices, following the slow-down in Chinese growth, were also negative influences. Brazil ranked amongst the weakest performers in terms of both local currency and equity market performance, with the Ibovespa closing the year down 26.5%. Despite this challenging economic background, many Brazilian companies were able to record earnings growth in line with or above market expectations. Performance For the year ended 31 December 2013 the Company's net asset value ("NAV") returned -13.1% in US Dollar terms (-14.8% in Sterling terms) compared to a return from the benchmark of -13.2% (-14.8% in Sterling terms). The share price returned -12.2% in US Dollar terms (-13.9% in Sterling terms). (All percentages calculated with income reinvested). Details of the factors affecting performance are set out in the Investment Manager's Report. Since 31 December 2013, the Company's NAV has decreased by 6.4% in Sterling terms and by 6.0% in US Dollar terms. The share price has decreased by 7.0% in Sterling terms and decreased by 6.6% in US Dollar terms. CONTRIBUTION TO TOTAL RETURN FOR THE YEAR ENDED 31 DECEMBER 2013 Benchmark return -13.2% Management fees & operating costs -1.1% Taxation -0.2% Impact of share buybacks and tender +0.2% offers Impact of financing costs -0.5% Impact of gross gearing -0.4% Stock selection/asset allocation +1.6% Other +0.7% Fair value adjustment +0.1% Impact of redemption of loan stock -0.1% NAV total return -13.1% Source: BlackRock. Calculated using the Factset daily transactions-based methodology. Factset is not of audit quality, but is considered useful management information. No performance fee was earned during the year. Revenue return and dividends The revenue return for the year was 24.83â€ˆcents per share (2012: 26.50 cents per share). As indicated in the last Annual Report and Financial Statements the Board's policy is to at least maintain dividend distributions, using reserves when necessary, and to grow the dividend over the medium term. The Board has also reviewed the split between the two dividends historically paid by the Company and resolved that a more equal split of the Company's dividends for the year under review was desirable. As a result, the Board declared an interim dividend of 15.00 cents per share which was paid to shareholders on 4 October 2013 (2012: 5.00 cents per share). The Board is pleased to recommend a final dividend of 15.00 cents per share (2012: second interim dividend of 25.00 cents per share) which will be payable on 2 May 2014 to shareholders on the register as at 28 March 2014. This makes a total dividend of 30.00 cents per share (2012: 30.00 cents per share) for the year. Convertible bonds and gearing During the year the Company repurchased, repaid or compulsorily converted into ordinary shares, the entire outstanding issue of its convertible bonds, which in total represented borrowings with a nominal value of US$64 million. As the coupon on the convertible bonds represented relatively expensive borrowing when compared with the rates available on our overdraft facility, and the likelihood of conversion into shares appeared remote, your Board concluded it was in shareholders' best interests to replace the convertible securities with more conventional borrowings. Further details are given in the Strategic Report. The Company is now geared via its overdraft facility for up to US$40 million and as at the year end net gearing amounted to 2.0%. Discount control The Directors recognise the importance to shareholders that the Company's shares should not trade at a significant discount to their underlying NAV. Therefore, after communications and meetings with our larger shareholders during the year, the Board announced on 23 August 2013 that it had resolved to discontinue its policy of discretionary semi-annual tender offers and to introduce a new discount control policy which in the Board's view is better suited to the longer term interests of the Company and shareholders as a whole. Further details on the new discount control mechanism previously reported at the interim stage, are set out in the Strategic Report. Alternative Investment Fund Managers' Directive The Alternative Investment Fund Managers' Directive ("the Directive") is a European directive which seeks to reduce potential systemic risk by regulating alternative investment fund managers ("AIFMs"). AIFMs are responsible for investment products that fall within the category of Alternative Investment Funds ("AIFs") and investment trusts are included in this category. The Directive was implemented on 22 July 2013 although it has been confirmed that the Financial Conduct Authority ("FCA") will permit a transitional period of one year within which UK AIFMs must seek authorisation. The Board is taking independent advice on the consequences for the Company and has decided in principle that BlackRock Fund Managers Limited will be appointed as its AIFM in advance of the end of the transitional period on 22 July 2014. Directorate In line with the policy of regularly refreshing the composition of the Board, Desmond O'Conor will be retiring at the forthcoming AGM. Desmond has served as a Director since 1998 and I would like to thank Desmond on behalf of the Board and shareholders for his outstanding contribution and wise counsel during his long service to the Company. As indicated previously it is not our current intention to appoint a new Director to replace Desmond and going forward the Board will normally consist of five Directors. However, it is my intention to retire from the Board no later than the AGM in 2017 and a new Director will be appointed in advance of my retirement. New reporting requirements For companies with a financial year ending on, or after, 30 September 2013 there have been a number of changes to the framework for reporting to shareholders. These changes are intended to increase the quality and structure of reporting and include the introduction of a Strategic Report which replaces the Business Review, previously part of the Directors' Report. There have also been separate changes to the regime for reporting on Directors' remuneration which require the Directors' Remuneration Report to be prepared in two parts; an annual report on remuneration which will be subject to an advisory shareholder vote and a Directors' remuneration policy which will be the subject of a binding shareholder vote. Further information in respect of the resolutions to be proposed at the Annual General Meeting is provided in the Directors' Report in the Annual Report and Financial Statements. A separate report has been included relating to the work and responsibilities of the Company's Audit Committee, whilst the Independent Auditors' Report from PricewaterhouseCoopers LLP has also changed. The audit report now includes an overview of the scope of the audit and describes the risks that had the greatest effect on the overall audit strategy and the allocation of resources during the audit. Annual General Meeting The AGM will be held at 12.00 noon on Wednesday, 30 April 2014 at the offices of BlackRock Investment Management (UK) Limited ("BlackRock") at 12 Throgmorton Avenue, London EC2N 2DL. We hope that as many shareholders as possible will attend. Following the AGM there will be a presentation by Will Landers, the portfolio manager, on the outlook for the year ahead and an opportunity to meet Will and the Directors. Continuation vote An ordinary resolution for the continuation of the Company as an investment trust is proposed biennially at the AGM. The last such resolution was put to shareholders at the 2012 AGM. The Board unanimously recommends that shareholders vote in favour of the continuation of the Company in its current form. New Articles of Association At the Annual General Meeting, shareholders will also be asked to approve new Articles of Association in substitution for the current Articles. The Board is proposing to include amendments in response to the advent of the AIFMD regulations and to enable the Company to pay dividends out of capital reserves. Further details of the proposed amendments are given in the Directors' Report in the Annual Report and Financial Statements. Outlook Whilst it is undeniable that in the past year much of the gloss has come off emerging markets in general, and Latin American markets in particular, the dramatic shift in sentiment has owed as much to investor perceptions about the future path of US monetary policy as to any shortcomings in Latin American companies themselves. Thus, whilst in most of the developed world (with the exception of Japan) the strong equity returns achieved were largely the result of multiple expansion (shares becoming more expensive) rather than growth in earnings - in Latin America's largest market, Brazil, the opposite applied - equities became cheaper as earnings (for the most part) continued to rise, and share prices fell. Although our portfolio manager is optimistic about future economic growth and the positive impact of politically directed reform, particularly in Mexico, it is the current low ratings levels that provide your Board with most comfort about the likelihood of positive returns from current levels. Peter Burnell Chairman 25 February 2014 Performance Strategic report The Directors present the Strategic Report of the Company for the year ended 31 December 2013. The aim of the Strategic Report is to provide shareholders with the ability to assess how the Directors have performed their duty to promote the success of the Company. Objective The Company's objective is to secure long term capital growth and an attractive total return primarily through investing in quoted securities in Latin America. Business model and investment policy As an actively managed fund our aim is to outperform comparable funds and the benchmark index over the medium to long term and so our portfolio and performance will diverge from the returns obtained simply by investing in the index. The portfolio will be chosen from a spread of companies which are listed in, or whose main activities are in, Latin America. As a closed-end Company we are able to adopt a longer term investment horizon, and therefore may when appropriate have a higher proportion of less liquid mid and smaller capitalisation companies than comparable open ended funds. The portfolio is subject to a number of geographical restrictions relative to the benchmark index but the Investment Manager is not constrained from investing outside the index. For Brazil, Mexico, Chile, Argentina, Peru, Colombia and Venezuela, the portfolio weighting is limited to plus or minus 20 percentage points of the index weighting for each of those countries. For all other Latin American countries the limit is plus or minus 10 percentage points of the index weighting. Additionally, the Company may invest in the securities of quoted companies whose main activities are in Latin America but which are not established or incorporated in the region or quoted on a local exchange. The Company's policy is that up to 10% of the gross assets of the portfolio may be invested in unquoted securities. The Company will not hold more than 15% of the market capitalisation of any one company and no more than 15% of the Company's investments will be held in any one company as at the date any such investment is made. No more than 15% of the gross assets of the portfolio shall be invested in other UK listed investment companies (including other investment trusts). The Company may deal in derivatives (including options, futures and forward currency transactions) for the purposes of efficient portfolio management (i.e. for the purpose of reducing, transferring or eliminating investment risk in the underlying investments of a collective investment undertaking, including any technique or instrument used to provide protection against exchange and credit risks). Call options are also used for income generation purposes, no more than 20% of the Company's portfolio by value may be under option at any given time. The Company may underwrite or sub-underwrite any issue or offer for sale of investments. No such commitment will be entered into if, at that time, the aggregate of such investments would exceed 10% of the net asset value of the Company or any such individual investment would exceed 3% of the net asset value of the Company. The Company may, from time to time, use borrowings to gear its investment portfolio or in order to fund the market purchase of its own ordinary shares. Under the Company's Articles of Association, the net borrowings of the Company may not exceed 100% of the Company's adjusted capital and reserves. However, net borrowings are not expected to exceed 25% of net assets under normal circumstances. The Investment Manager may also hold cash or cash-equivalent securities when it considers it to be advantageous to do so. The Company's financial statements will be maintained in US Dollars. Although many investments are likely to be denominated and quoted in currencies other than in US Dollars, the Company does not currently employ a hedging policy against fluctuations in exchange rates. No material change will be made to the Company's investment policy without shareholder approval. Discount control mechanism The Directors recognise that it is in the long term interests of shareholders that shares do not trade at a significant discount to their prevailing NAV. In the year to 31 December 2013 the cum-income discount of the ordinary shares has averaged 10.0% and ranged from a discount of 6.6% to 13.7%. Special resolutions were passed at the AGM of the Company held on 14â€ˆMay 2013, granting the Directors authority to implement two half-yearly tender offers with calculation dates of 30 September 2013 and 31 March 2014 (or subsequent business day), to repurchase up to 20% of its issued ordinary shares. The Directors exercised their discretion to operate the half yearly tender offer on 2 April 2013 being the first business day following 31 March 2013 and the Company offered to repurchase up to 5 per cent of its issued ordinary shares (excluding treasury shares). The tender offer was oversubscribed with 13,163,209 ordinary shares (31.8 per cent of the issued ordinary shares excluding shares held in treasury) being tendered. Shareholders who tendered had their basic entitlement (5 per cent of their shares) satisfied in full and their election for further shares was scaled-back pro rata with each shareholder receiving 7.30063 per cent of their election for further shares. The tender price calculated as at close of business on 2 April 2013, being the first business day following the 31 March 2013, the calculation date, was 607.4530p per share. 2,071,662 ordinary shares with a nominal value of US$207,166.20 were bought back at a cost of Â£12,584,000. The Directors announced on 9 July 2013 that they would not be implementing a semi-annual tender offer in September 2013. It was announced on 23 August 2013 that the Board had resolved to discontinue its policy of reviewing tenders semi-annually and to introduce a new discount control policy which in their view is better suited to the longer term interests of the Company and its shareholders. As a result, the Board had concluded that, subject to the biennial continuation vote being approved by shareholders and commencing at the AGM in April 2016, it will implement a tender for 25% of the shares in issue (excluding treasury shares) at the cum income NAV (less 2% to cover costs) if the Company has underperformed the benchmark on a US Dollar total return basis by more than 1% per annum over the previous two financial years and if the discount to the cum income NAV has on average exceeded 5% over the period. Convertible bonds Following the Board's decision to offer to repurchase by way of a tender offer all of the outstanding US$64 million convertible bonds, bonds with a nominal amount of US$47,003,000 were tendered and subsequently cancelled. The purchase price was US$998.78 per US$1,000 in nominal amount of Bonds. Following cancellation, the nominal amount of the Bonds outstanding was US$16,997,000 which was less than 25% in nominal amount of the Bonds originally issued. This enabled the Company, on giving not less than 15 nor more than 45 days' notice in writing (an Optional Conversion Notice) to the Trustee and all Bondholders, to convert, on the date (Optional Conversion Date) specified in the Optional Conversion Notice, the whole (but not part only) of the Bonds into ordinary shares at the conversion price applicable on the Optional Conversion Date. However each Bondholder had the right, by giving written notice to the Company within 15 days after the service of the Optional Conversion Notice, to irrevocably require the Company, in lieu of converting, to repay the whole or such part of their bonds as may be specified in such notice, at their nominal amount on the Optional Conversion Date together with interest accrued up to but excluding the Optional Conversion Date. The Company announced on 10 October 2013 that the Board had received repayment requests in respect of 16,918 convertible bonds with a nominal value of US$16,918,000 which were repaid on 16 October 2013. The remaining 79 bonds with a nominal value of US$79,000 were converted into 8,035 ordinary shares at the conversion price of US$9.83 on 16 October 2013. Performance In the year to 31 December 2013, the Company's NAV returned -13.1% in US Dollar terms compared with a return of -13.2% from the MSCI EM Latin America Index. The Company's ordinary share price returned -12.2% in US Dollar terms and -13.9% in Sterling terms (all percentages calculated with income reinvested). The Investment Manager's Report forms part of this Strategic Report and includes a review of the main developments during the year, together with information on investment activity within the Company's portfolio. Portfolio analysis A detailed analysis of the portfolio has been provided on pages 15 to 18 of the annual report and financial statements. Results and dividends The results for the Company are set out in the Income Statement. The total loss for the year, after taxation, was US$48,978,000 (2012: a profit of US$44,738,000) of which the revenue return amounted to US$9,905,000 (2012: US$11,167,000), and the capital loss amounted to US$58,883,000 (2012: profit of US$33,571,000). The Company's revenue return amounted to 24.83â€ˆcents per share (2012: 26.50 cents). The Directors recommend the payment of a final dividend of 15.00 cents (2012: interim dividend of 25.00 cents) per share which will be paid on 2 May 2014 to shareholders on the register of members at the close of business on 28 March 2014. This together with the interim dividend of 15.00 cents (2012: 5.00 cents) per share paid on 4 October 2013 to shareholders on the register at 6 September 2013 amounts to 30.00 cents per share (2012: 30.00 cents). Key performance indicators At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives. The key performance indicators ("KPIs") used to measure the progress and performance of the Company over time are comparable to those reported by other investment trusts and are set out below. 2013 2012 Net asset value* -13.1% +11.3% Share price* -12.2% +6.2% Benchmark index* -13.2% +8.9% Discount to net asset value^ 10.2% 10.7% Revenue return per share - basic (cents) 24.83 26.50 Ongoing charges ratio~ 1.1% 1.2% * Calculated in US Dollar terms with income reinvested. ^ Net asset value as at 31 December 2013 did not include convertible bonds. ~ Calculated as a percentage of average shareholders' funds and using expenses, excluding finance costs. The Board regularly reviews a number of indices and ratios to understand the impact on the Company's relative performance of the various components such as asset allocation and stock selection. The Board also reviews the performance and ongoing charges of the Company against a peer group of Latin American open and closed-end funds. As detailed in the Strategic Report, the Directors recognise that it is in the long term interests of shareholders that shares do not trade at a significant discount to their prevailing NAV. Principal risks The key risks faced by the Company are set out below. The Board regularly reviews and agrees policies for managing each risk, as summarised below. - Performance risk - The Board is responsible for deciding the investment strategy to fulfil the Company's objectives and monitoring the performance of the Investment Manager. An inappropriate strategy may lead to poor performance. To manage this risk the Investment Manager provides an explanation of significant stock selection decisions and the rationale for the composition of the investment portfolio. The Board monitors and maintains an adequate spread of investments in order to minimise the risks associated with particular countries or factors specific to individual companies and sectors, based on the diversification requirements inherent in the Company's investment policy. Past performance is not necessarily a guide to future performance and the value of your investment in the Company and the income from it can fluctuate as the value of the underlying investments fluctuate. - Income risk - The amount of income and future income growth will depend on the Company's underlying portfolio. Any change in the tax treatment of the income received by the Company (including as a result of withholding taxes or exchange controls imposed by jurisdictions in which the Company invests) may reduce the level of dividends received by shareholders. The Board monitors this risk through the receipt of detailed income forecasts and considers the level of income at each meeting. - Market risk - Market risk arises from volatility in the prices of the Company's investments. It represents the potential loss the Company might suffer through holding investments in the face of negative market movements. There may be exposure to significant economic, political and currency risks due to the location of the operation of the businesses in which the Company may invest. Shares in businesses in which the Company invests can prove volatile and this may be reflected in the Company's share price. The Board considers asset allocation, stock selection, unquoted investments, if any, and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager. The Board monitors the implementation and results of the investment process with the Investment Manager. - Liquidity risk - Investments in the Company's portfolio are subject to liquidity risk, particularly from any unquoted investments. The Company may also invest in smaller capitalisation companies or in the securities markets of developing countries which are not as large as the more established securities markets and have substantially less trading volume, which may result in a lack of liquidity and higher price volatility. - Financial risk - The Company's investment activities expose it to a variety of financial risks which include foreign currency risk, credit risk and interest rate risk. Further details are disclosed in note 18 on pages 56 to 61 of the annual report and financial statements, together with a summary of the policies for managing these risks. - Operational risk - In common with most other investment trust companies, the Company has no employees. The Company therefore relies upon the services provided by third parties and is dependent on the control systems of the Investment Manager and the Company's other service providers. The security, for example, of the Company's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depends on the effective operation of these systems. These have been regularly tested and monitored and an internal controls report, which includes an assessment of risks together with procedures to mitigate such risks, is prepared by the Investment Manager and reviewed by the Audit Committee twice a year. The Custodian, the Bank of New York Mellon (International) Limited ("BNYM") and the Investment Manager also produce quarterly and annual reports respectively, which are reported on by their respective reporting accountants and give assurance regarding the effective operation of controls. - Regulatory risk - The Company operates as an investment trust in accordance with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from capital gains tax on the profits realised from the sale of its investments. The Investment Manager monitors the amount of retained income to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached and the results are reported to the Board at each meeting. Following authorisation under the AIFM, (the `Directive') the Company and its appointed AIFM will be subject to the risk that the requirements of this Directive are not correctly complied with. The Board and Investment Manager also monitor changes in government policy and legislation which may have an impact on the Company. Future prospects The Board's main focus is the achievement of capital growth and an attractive total return. The future of the Company is dependent upon the success of the investment strategy. The outlook for the Company is discussed in both the Chairman's Statement and the Investment Manager's Report. In the context of the implementation of Retail Distribution Review ("RDR") and the growing popularity of investment trusts on platforms it is worth noting that the Company's shares are designed for private investors in the UK including retail investors, professionally-advised private clients and institutional investors who seek long term capital growth and an attractive total return from quoted securities in Latin America and who understand and are willing to accept the risks of exposure to equities. When assessing the suitability of the shares, private investors should also consider consulting an independent financial adviser who specialises in advising on the acquisition of shares and other securities before acquiring shares. Naturally, investors should also be capable of evaluating the risks and merits of an investment in the Company and should always have sufficient resources to bear any loss that may result. Social, community and human rights issues As an investment trust, the Company has no direct social or community responsibilities. However, the Company believes that it is in shareholders' interests to consider human rights issues, environmental, social and governance factors when selecting and retaining investments. Details of the Company's policy on socially responsible investment are set out on pages 32 and 33 of the annual report and financial statements. Directors and employees and gender representation The Directors of the Company on 31 December 2013, all of whom held office throughout the year, are set out in the Directors' biographies on page 19 of the annual report and financial statements. The Board consists of four male Directors and one female Director. The Company does not have any employees.The information set out on pages 11 to 18 of the annual report and financial statements, including the Investment Manager's Report, forms part of the Strategic Report. The Strategic Report was approved by the Board at its meeting on 25 February 2014. By order of the Board BlackRock Investment Management (UK) Limited Company Secretary 25 February 2014 Related party transactions The Investment Manager is regarded as a related party under the Listing Rules and details of the investment management fees payable are set out in note 4. The investment management fees for the year were US$3,035,000 (2012: US$3,632,000). No performance fee was payable in the year (2012: nil). At the end of the year an amount of US$1,414,000 (2012: US$1,787,000) was outstanding in respect of investment management. In addition to the above services, with effect from 1 November 2013, BlackRock has provided the Company with marketing services. The total fees paid or payable for these services for the year ended 31 December 2013 amounted to US$38,462 excluding VAT (2012: nil) of which US$38,462 excluding VAT (2012: nil) was outstanding at 31 December 2013. The Board consists of six non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of Â£42,000, the Chairman of the Audit Committee receives an annual fee of Â£32,000 and each other Director receives an annual fee of Â£28,000. With effect from 1 January 2014 the annual remuneration of the Chairman was increased to Â£43,500, the Chairman of the Audit Committee/Senior Independent Director to Â£33,000 and the other Directors to Â£29,000. This excludes expenses paid to each of the Directors which are set out in the Directors' Remuneration Report in the Annual Report and Financial Statements. All members of the Board hold ordinary shares in the Company. Peter Burnell holds 3,000 ordinary shares, Antonio Monteiro de Castro holds 47,000 ordinary shares, The Earl St Aldwyn holds 1,470 ordinary shares, Laurence Whitehead holds 12,967 ordinary shares, Desmond O'Conor holds 12,604 ordinary shares and Mahrukh Doctor holds 616 ordinary shares. Statement of directors' responsibilities The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the net return/(loss) of the Company for that period. In preparing these financial statements, the Directors are required to: - select suitable accounting policies and then apply them consistently; - make judgements and accounting estimates that are reasonable and prudent; - state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements respectively; and - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy. Each of the Directors, whose names and functions are listed on page 19 of the annual report and financial statements confirm that, to the best of their knowledge: - the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and net loss of the Company; and - the Directors' report contained in the Annual Report and Financial Statements includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. For and on behalf of the Board of directors Peter Burnell Chairman 25 February 2014 Performance Investment manager's report Overview 2013 was another difficult year for Latin American markets as they lagged both the developed world and other emerging markets. Concerns about tapering in the US, growth in China, US Dollar strength weakening Latin American currencies, low GDP growth in most countries in the region and lower commodity prices were the main factors at play in the region in 2013. Latin America started to rally over the summer but this came to an end in November on the back of currency weakness, especially in Brazil. During the year, Brazil's equity market and its currency, the Brazilian Real, ranked among the weakest performers in Latin America as measured by local indices. Despite low economic growth, Brazilian companies were generally able to deliver good earnings growth even after the negative impact of the weaker currency. Average earnings growth in Brazil for 2013 was close to 15% in US Dollar terms, in line with expectations at the beginning of the year, marking the first time in 3 years that Brazilian companies have delivered on earnings expectations. The Brazilian Central Bank raised interest rates by a total of 275 basis points during the year, taking rates back into double digits for the first time since March 2012, a move which helped the Central Bank to regain its credibility in its commitment to an inflation target. Despite this, inflation finished 2013 at 5.9%, near the top of the range of 2.5% to 6.5% and a little higher than inflation in 2012. Mexico was one of the region's best performers during 2013. Mexico's equity market was second only to Argentina and its currency was the best performer in the region. Interestingly, Mexico's GDP and earnings growth were significantly below expectations. The new PeÃ±a Nieto administration was initially slow in stepping up government expenditure, causing GDP growth to rank among the lowest in the region. Higher government spending in the second half of the year was not enough to impact GDP growth materially for the full year. For the most part, the equity market was not focused on growth rates in 2013, but instead was focused on the highly effective passage of seven major reforms during the year, culminating in the passage of energy reform in December with the positive votes on constitutional amendments. While fiscal reform was not as wide reaching as had been expected, the energy reform has the possibility of being transformational for Mexico over the next few years, possibly adding over 100 basis points to the potential GDP growth rate. In the Andean region, Peru posted the weakest returns, followed by Chile and Colombia, primarily due to their exposure to commodities: Peru and Chile have significant exposure to copper, while Colombia is more exposed to oil. In terms of local currencies all three countries fell by approximately the same amount. YEAR TO 31 DECEMBER 2013 Performance figures (USD) MSCI Indices Currency Local Indices % Change (% vs. USD) % Changes in USD Argentina +64.1 -24.6 +42.4 (Merval) Brazil -18.7 -13.1 -26.5 (Ibovespa) Chile -23.2 -8.8 -21.1 (IGPA) Colombia -23.7 -8.4 -18.6 (IGBC) Mexico -1.3 -1.4 -3.4 (IPC) Peru -31.1 -8.8 -30.9 (IGBVL) MSCI Latin America -15.6 CRB Index -5.0 MSCI Emerging Asia -0.2 Oil (WTI) +7.2 MSCI Emerging Markets -5.1 Gold -28.0 MSCI World +23.7 Copper -6.7 S&P 500 +29.1 Corn -39.3 MSCI Europe +21.7 Soybeans -6.3 Sources: MSCI, Bloomberg, UBS and BlackRock, (all figures in US Dollar terms and on a capital only basis). 2013 Portfolio Review The Company returned a -13.1% decline in its NAV during the year, which was broadly in line with its benchmark, the MSCI Latin America EM Index. (All performance figures are in US Dollar terms with income reinvested). Positive contributions to performance stemmed primarily from stock selection, although this was offset somewhat by the country allocation effect. Stock selection in Mexico was the primary contributor to performance followed by an above-benchmark exposure to Panama via the airline operator Copa Holdings. In Mexico, the largest individual contributors to relative performance included the holdings in toll-road operator Pinfra and broadcaster Grupo Televisa. Underweight positions in Peru, Chile and Colombia contributed positively to performance. The largest individual contributors included overweight positions in Brazilian insurer BB Seguridade and Brazilian adult education provider Kroton Educacional. BB Seguridade posted strong results in the middle of the year and continued to execute well on its strategy. The company stands to benefit from increased penetration of insurance products in the Banco do Brasil branch network. Kroton did well on the back of strong third quarter results, improving margins thanks to the positive impact of higher student retention and from growing participation in subsidised government student loans and overall increases in enrolments. Weighing on performance for the year was an overweight position and stock selection in Brazil and an off-benchmark position in Pacific Rubiales which engages in the exploration, development and production of oil in Latin American although it is headquartered in Canada. Individual names weighing on performance included Brazilian iron ore miner Vale, BM&F Bovespa and not owning Cielo. Vale suffered at various times throughout the year from uncertainties around the mining code in Brazil, tax and environmental issues, and from headline risk from China. We remain positive about Vale and we returned to an overweight position in the company during the fourth quarter as we expect iron ore prices to be resilient, results to benefit from a weaker currency and a final resolution of environmental approvals for the company's mining expansion in CarajÃ¡s. BM&F Bovespa suffered due to weaker volumes traded in both equities and derivatives as well as the potential for competition to enter the market. Cielo is not held by the Company due to concerns about the competitive landscape in Brazil's credit card acquiring sector as well as decreased financial information disclosure. The Company has been increasing its use of OTC options against a greater number of equity positions in their respective local markets in addition to selective ADR positions. Overall, volatility remained rather benign in the last quarter of 2013, therefore opportunities to generate income through options were limited. As at 31 December 2013 the Company had 18 operations with a market value of US$281,000 (2012: nil). One of the benefits of the Company's closed-end stature is our ability to invest in smaller and lesser liquid companies in the region, including those not in the official benchmark. At the year end, investments in small and mid-size companies with less than US$10 billion in market capitalisation accounted for over 30% of gross investments, with close to 40% of these investments representing non-benchmark stocks. Effective gearing decreased from 8.8% at the beginning of the year to 2.0% at the end of the year. 2014 Outlook and Positioning We enter 2014 positioned to benefit from a market that should reward stock picking over global themes. As a result of bottom-up stock picking, we have maintained our overweight position in Brazil, retained a small overweight position in Mexico, have increased our overweight position in Peru and maintained large underweight positions in Chile and Colombia. In Brazil, cheap valuations, the end of the interest rate tightening cycle, recent successes in infrastructure auctions and a market with low expectations regarding growth, lead us to expect a better year in 2014. Brazil also has the World Cup and Presidential elections in 2014, which should have small positive impacts on domestic economic activity. In addition, economic policies to be announced by the winner of the Presidential election will be critical for the performance of the Brazilian market in the fourth quarter of 2014 and into 2015. Mexico had a successful year on the reform front during 2013, but growth was significantly below expectations and a pick-up in activity has been slow to develop. We have been adjusting the portfolio to increase exposure to companies which we believe will benefit from the eventual recovery in the Mexican economy. While increased government spending and the longer term impact of energy reform will ultimately be positive for GDP growth in Mexico, the expensive valuations cause us to limit our exposure to the country. In the Andean region, as always, we continue to search for interesting ideas with attractive valuations and adequate liquidity - which is not an easy combination to find in that part of the market. Despite being one of the most stable countries from a top down perspective, Chile will have some potential headwinds from fiscal reform as President Bachelet introduces tax reform. In Peru, we have added to banks, mining and infrastructure plays as we see these areas being the most attractive for the coming year. In Colombia, concerns regarding minority shareholder protection and expensive valuations lead us to maintain our underweight position. We also consider that the political and economic environment in both Argentina and Venezuela continues to render investment in these countries unattractive. Will Landers BlackRock Investment Management (UK) Limited 25 February 2014 Performance Ten largest investments 31 December 2013 Vale - 8.2% (2012: 10.8%) is the world's largest producer of iron ore, with operations in several other commodities, including nickel, copper and alumina, among others. The company is the lowest cash cost producer of iron ore and is positioned to benefit from a tight iron ore market and growth in demand from Chinese steel makers. ItaÃº Unibanco - 7.7% (2012: 3.6%) is Brazil's largest private sector bank. The bank continues to benefit from Brazil's growing demand for credit, especially from individuals and small and medium size enterprises as well as from improvements in asset quality and lower non-performing loans numbers. PetrobrÃ¡s - 4.7% (2012: 4.9%) is Brazil's vertically integrated oil company. The company continues to invest heavily on increasing its production, utilising free cash flow to guarantee future production growth. Banco Bradesco - 4.4% (2012: 5.7%) Brazil's second largest private sector bank, is in an advantageous position to benefit from the strong demand for credit in Brazil. Bradesco has one of the largest branch networks in the country, allowing it to fully participate in Brazil's growing middle class and its overall financial services needs. Cemex - 4.0% (2012: nil) is a Mexican-based global cement company that stands to benefit from improving business trends across the world, especially in the United States. The company has successfully remodelled its debt profile and is focused on improving operating efficiencies across its plants. Grupo Televisa - 4.0% (2012: 3.8%) is Mexico's leading television broadcasting operator and leading provider of satellite and cable television (giving the company leadership in high speed internet access). Televisa is also a significant shareholder and main content provider to UnivisiÃ³n, the leading Spanish-language broadcaster in the United States. BB Seguridade ParticipaÃ§Ãµes - 3.7% (2012: nil) is the insurance division of Banco do Brasil and has the exclusive rights to sell insurance products throughout the entire Banco do Brasil branch network, which is one of the largest in Brazil. AmÃ©rica MÃ³vil - 3.5% (2012: 5.6%) is Latin America's leading provider of integrated telecommunications services, with a leading presence in wireless telephony throughout the region as well as in wireline in Mexico and Brazil. Femsa - 3.4% (2012: 3.8%) a Mexican holding company controlling Coca-Cola's largest independent bottler - Coca-Cola Femsa with operations throughout Latin America; Mexico's fastest growing retailing chain - Oxxo with over 10,000 convenience stores throughout Mexico; and a 20% economic interest in global brewer Heineken. Kroton Educacional - 3.3% (2012: nil) is Brazil's leading provider of adult college education. Their intended merger with Anhanguera, pending anti-trust approval, will create the largest publicly traded education company in the world. In addition, we expect strong intake to continue and for industry growth to remain strong for many years. All percentages reflect the value of the holding as a percentage of total investments. Percentages in brackets represent the value of the holding at 31 December 2012. Together, the ten largest investments represents 46.9% of total investments (ten largest investments at 31 December 2012: 47.1%). Performance Investments as at 31 December 2013 Market value % of Country of operation US$'000 investments Brazil Vale 25,219 8.2 Vale 0% perpetual index linked bond 1,367 ItaÃº Unibanco 25,048 7.7 PetrobrÃ¡s 15,464 4.7 PetrobrÃ¡s call option 18/1/14 (2) - Banco Bradesco 14,410 4.4 BB Seguridade ParticipaÃ§Ãµes 11,948 3.7 BB Seguridade ParticipaÃ§Ãµes call option 13/2/14 (35) - Kroton Educacional 6,657 3.3 Kroton Educacional warrants* 4,158 - AmBev 9,726 3.0 Ultrapar ParticipaÃ§Ãµes 7,693 2.4 Ultrapar Participacoes call option 15/1/14 - - CCR 7,294 2.2 BRF 6,255 1.9 CBD 6,003 1.8 CBD call option 15/1/14 (1) - BM&F Bovespa 5,147 1.6 Cosan 2,199 1.5 Cosan warrants* 2,549 Hypermarcas 3,553 1.3 Hypermarcas 3% Fixed Rate Debenture 15/10/15 492 Hypermarcas 11.3% 15/10/18 convertible bond 346 BR Properties 3,942 1.2 Usiminas 3,825 1.2 Usiminas call option 13/2/14 (14) - Usiminas call option 22/1/14 (17) - Klabin 3,649 1.1 Localiza Rent a Car 2,821 1.1 Localiza Rent a Car warrants* 705 Arezzo Industria e Comercio 101 1.0 Arezzo Industria e Comercio warrants* 3,151 Lojas Renner 594 1.0 Lojas Renner warrants* 2,636 Suzano Papel e Celulo 2,833 0.9 Suzano Papel e Celulo call option 15/1/14 (4) - Ser Educacional 2,349 0.7 TAESA 1,188 0.7 TAESA warrants* 964 Lps Brasil 716 0.6 Lps Brasil warrants* 1,224 Minerva 1,919 0.6 Mills 1,815 0.6 Even Constructora e Incorporadora 1,516 0.5 Fibria Celulose 935 0.5 Fibria Celulose warrants* 530 Iguatemi Empresa 1,457 0.4 Qgep ParticipaÃ§Ãµes 1,343 0.4 Anhanguera 1,288 0.4 Autometal 1,069 0.3 Lupatech 6.5% 15/04/18 convertible bond 8 0.0 ------- ----- 198,033 60.9 ======= ===== Mexico Cemex SAB 13,002 4.0 Cemex SAB call option 18/1/14 (12) - Cemex SAB call option 22/2/14 (27) - Grupo Televisa 12,861 4.0 Grupo Televisa call option 18/1/14 (5) - Grupo Televisa call option 22/2/14 (32) - America Movil 11,334 3.4 America Movil call option 18/1/14 (24) - America Movil call option 22/2/14 (31) - America Movil call option 22/2/14 (39) - Femsa 11,057 3.4 Grupo Financiero Banorte 7,667 2.3 Alfa 5,698 1.7 Grupo Financiero Santander Mexicano 3,953 1.2 Bolsa Mexicana de Valores 3,658 1.1 TF Administradora Industrial 3,171 1.0 Corporacion Inmobiliaria Vesta 3,146 1.0 Wal-Mart de Mexico 3,129 1.0 Promotora y Operadora Infraestructura 2,897 0.9 Concentradora Fibra Hotelera 2,671 0.8 Fibra Uno 2,570 0.8 Grupo Sanborns 1,772 0.5 Genomma 1,517 0.5 Genomma call option 13/2/14 (3) - Genomma call option 15/1/14 (3) - Alpek 1,397 0.4 Infraestructura Energetica 1,195 0.4 ------- ----- 92,519 28.4 ======= ===== Peru Credicorp 9,285 2.8 Grana Y Montero 4,161 1.3 Southern Copper 3,875 1.2 ------- ----- 17,321 5.3 ======= ===== Chile S.A.C.I. Falabella 5,994 1.9 Banco Santander-Chile 2,708 0.8 ------- ----- 8,702 2.7 ======= ===== Colombia Grupo Nutresa 3,310 1.0 Cemex Latam 1,569 0.5 ------- ----- 4,879 1.5 ======= ===== Panama Copa 4,000 1.2 Copa call option 18/1/14 (5) - Copa call option 22/2/14 (27) - ------- ----- 3,968 1.2 ======= ===== Total Investments 325,422 100.0 ======= ===== Represented as follows: Investments held at fair value through profit or loss 325,703 100.1 Derivative financial instruments - written call options (281) (0.1) ------- ----- Total 325,422 100.0 ======= ===== *Outperformance warrants held are linked to underlying listed securities which have available quoted prices, however the warrants are not listed in their own right. The valuation of outperformance warrants has been derived from the quoted prices of underlying securities. The total number of investments held at 31 December 2013 was 59 (31 December 2012: 70). All investments are in equity shares unless otherwise stated. Performance Sector and geographical allocations 2013 2012 Brazil Mexico Peru Chile Colombia Other Argentina Total Total % % % % % % % % % Consumer Discretionary 6.4 4.6 - 1.9 - - - 12.9 9.0 Consumer Staples 8.4 4.4 - - 1.0 - - 13.8 16.8 Energy 8.4 - - - - - - 8.4 9.4 Financials 20.1 8.1 2.8 0.8 - - - 31.8 23.5 Health - 0.5 - - - - - 0.5 0.6 Industrials 4.2 2.6 1.3 - - 1.2 - 9.3 8.8 Information Technology - - - - - - - - 0.4 Materials 11.4 4.4 1.2 - 0.5 - - 17.5 17.0 Telecommunication Services - 3.4 - - - - - 3.4 6.4 Utilities 0.7 0.4 - - - - - 1.1 3.1 Fixed Income 1.3 - - - - - - 1.3 5.0 ---- ---- --- --- --- --- --- ---- ----- 2013 total investments 60.9 28.4 5.3 2.7 1.5 1.2 - 100.0 ==== ==== === === === === === ===== ===== 2012 total investments 63.6 26.0 1.8 4.5 2.0 1.3 0.8 100.0 ---- ---- --- --- --- --- --- ---- ----- GEOGRAPHICAL WEIGHTING VS MSCI EM LATIN AMERICA INDEX MSCI EM Latin Company America Index Other 1.2 0.0 Colombia 1.5 5.4 Chile 2.7 8.2 Peru 5.3 2.2 Mexico 28.4 28.2 Brazil 60.9 56.0 Source: Bloomberg. Financial statements Income statement for the year ended 31 December 2013 Revenue Revenue Capital Capital Total Total 2013 2012 2013 2012 2013 2012 Notes US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 (Losses)/ gains on investments held at fair value through profit or loss - - (54,496) 34,325 (54,496) 34,325 Change in value of convertible bonds held at fair value through profit or loss - - - 3,997 - 3,997 Gain on repurchase of convertible bond - - - 288 - 288 Exchange losses - - (1,380) (378) (1,380) (378) Income from investments held at fair value through profit or loss 3 11,175 14,725 - - 11,175 14,725 Other income 3 2,362 1 - - 2,362 1 Investment management and performance fees 4 (759) (908) (2,276) (2,724) (3,035) (3,632) Operating expenses 5 (1,015) (804) (83) (40) (1,098) (844) ------ ------ ------ ------ ------ ------ Net (loss)/ return before finance costs and taxation 11,763 13,014 (58,235) 35,468 (46,472) 48,482 Finance costs 6 (427) (694) (1,280) (2,080) (1,707) (2,774) ------ ------ ------ ------ ------ ------ Net (loss)/ return on ordinary activities before taxation 11,336 12,320 (59,515) 33,388 (48,179) 45,708 Taxation on ordinary activities 7 (1,431) (1,153) 632 183 (799) (970) ------ ------ ------ ------ ------ ------ (Loss)/ return on ordinary activities after taxation 9,905 11,167 (58,883) 33,571 (48,978) 44,738 ===== ====== ====== ====== ====== ====== (Loss)/ return per ordinary share - basic (US$ cents) 9 24.83 26.50 (147.61) 79.65 (122.78) 106.15 ===== ====== ====== ====== ====== ====== (Loss)/ return per ordinary share - diluted (US$ cents) 9 24.83 24.03 (147.61) 80.43 (122.78) 104.46 ===== ====== ====== ====== ====== ====== The total column of this statement represents the Profit and Loss Account of the Company. The supplementary revenue and capital columns are both prepared under guidance published by the AIC. The Company had no recognised gains or losses other than those disclosed in the Income Statement. All items in the statement derive from continuing operations and no operations were acquired or discontinued during the year. All income is attributable to the equity holders of BlackRock Latin American Investment Trust plc. There is no material difference between the return/(loss) on ordinary activities before taxation and the return/(loss) for the financial year stated above and their historical cost equivalents. Reconciliation of movements in shareholders' funds for the year ended 31 December 2013 Called up Share Capital Non share premium redemption distributable Capital Revenue capital account reserve reserve reserves reserve Total Notes US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 For the year ended 31 December 2013 At 31 December 2012 4,384 11,641 4,602 4,356 353,772 20,958 399,713 (Loss)/ return for the year - - - - (58,883) 9,905 (48,978) Share buy backs - - - - (19,206) - (19,206) Cancellation of treasury shares (241) - 241 - - - - Conversion of bond 1 78 - - - - 79 Dividends paid (1) 6 - - - - - (16,263) (16,263) ----- ------ ----- ----- ------- ------ ------- At 31 December 2013 4,144 11,719 4,843 4,356 275,683 14,600 315,345 ----- ------ ----- ----- ------- ------ ------- For the year ended 31 December 2012 At 31 December 2011 4,384 11,641 4,602 4,356 343,736 22,831 391,550 Return for the year - - - - 33,571 11,167 44,738 Share buy backs - - - - (23,535) - (23,535) Dividends paid (2) 6 - - - - - (13,040) (13,040) ----- ------ ----- ----- ------- ------ ------- At 31 December 2012 4,384 11,641 4,602 4,356 353,772 20,958 399,713 ----- ------ ----- ----- ------- ------ ------- 1. Second interim dividend paid in respect of the year ended 31 December 2012 of 25.00 cents per share declared on 27 February 2013 and paid on 26 April 2013 and the interim dividend for the year ended 31 December 2013 of 15.00 cents per share declared on 23 August 2013 and paid on 4 October 2013. 2. Second interim dividend paid in respect of the year ended 31 December 2011 of 25.00 cents per share declared on 7 March 2012 and paid on 20 April 2012 and the first interim dividend for the year ended 31 December 2012 of 5.00 cents per share declared on 14 August 2012 and paid on 27 September 2012. Balance sheet as at 31 December 2013 2013 2012 Notes US$'000 US$'000 Fixed assets Investments held at fair value through profit or loss 325,703 458,594 ------- ------- Current assets Debtors 2,472 3,045 Cash at bank and in hand 1,963 5,829 ------- ------- 4,435 8,874 ------- ------- Creditors - amounts falling due within one year Bank overdraft (10,377) (126) Deferred taxation (298) (257) Derivative instruments - written call options (281) - Other creditors and accruals (3,813) (3,348) ------- ------- (14,769) (3,731) ------- ------- Net current (liabilities)/assets (10,334) 5,143 ------- ------- Total assets less current liabilities 315,369 463,737 Creditors - amounts falling due after more than one year Convertible bonds held at fair value through profit or loss - (64,000) Non-equity redeemable shares (24) (24) ------- ------- (24) (64,024) ------- ------- Net assets 315,345 399,713 ======= ======= Capital and reserves Called up share capital 8 4,144 4,384 Share premium account 9 11,719 11,641 Capital redemption reserve 9 4,843 4,602 Non distributable reserve 9 4,356 4,356 Capital reserves 9 275,683 353,772 Revenue reserve 9 14,600 20,958 ------- ------- Total shareholders' funds 315,345 399,713 ======= ======= Net asset value per ordinary share - basic and diluted (US$ cents) - (2012: debt at fair value (see note 2(k)) 7 800.99 964.72 ======= ======= Cash flow statement for year ended 31 December 2013 2013 2012 Note US$'000 US$'000 Net cash inflow from operating activities 5b 11,043 11,776 Servicing of finance Finance costs (2,379) (2,942) Taxation paid (758) (987) ------ ------ Capital expenditure and financial investment Purchase of investments (263,202) (240,065) Proceeds from sale of investments 341,875 270,378 Capital expenses (61) (45) ------ ------ Net cash inflow from capital expenditure and financial investment 78,612 30,268 ------ ------ Equity dividends paid (16,263) (13,040) ------ ------ Net cash inflow before financing 70,255 25,075 ------ ------ Financing Repurchase of convertible bonds (63,921) (15,660) Share buy backs (19,071) (23,519) ------ ------ Net cash outflow from financing (82,992) (39,179) ------ ------ Decrease in cash in the year (12,737) (14,104) ====== ====== Notes to the financial statements 1. Principal activity The principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010. 2. Accounting policies (a) Basis of preparation The Company's financial statements have been prepared on a going concern basis and on the historical cost basis of accounting, modified to include the revaluation of fixed asset investments and convertible bonds in accordance with the Companies Act 2006 and with applicable accounting standards in the United Kingdom, UK Generally Accepted Accounting Practice ("UK GAAP") and with the Statement of Recommended Practice 'Financial Statements of investment trust companies and venture capital trusts' ("SORP"), revised in January 2009. The principal accounting policies adopted by the Company are set out below. The policies have been applied consistently throughout the year and are consistent with those applied in the preceding year. All of the Company's operations are of a continuing nature. The Company's financial statements are presented in US Dollars, which is the functional and presentation currency of the Company. The US Dollar is the functional currency because it is the currency most related to the primary economic environment in which the Company operates. All values are rounded to the nearest thousand dollars (US$'000) except where otherwise indicated. (b) Presentation of the Income Statement In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the Association of Investment Companies, supplementary information which analyses the Income Statement between items of a revenue and a capital nature has been presented alongside the Income Statement. (c) Segmental reporting The Directors are of the opinion that the Company is engaged in a single segment of business being investment business. (d) Income Dividends receivable on equity shares are treated as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. Provisions are made for dividends not expected to be received. Fixed returns on non equity securities are recognised on a time apportionment basis. Special dividends are treated as a capital receipt or a revenue receipt depending on the facts or circumstances of each particular case. Interest income is accounted for on an accruals basis. Dividends are accounted for in accordance with Financial Reporting Standard 16 'Current Taxation' (FRS 16) on the basis of income actually receivable, without adjustment for the tax credit attaching to the dividends. Dividends from overseas companies continue to be shown gross of withholding tax. Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend foregone is recognised in capital reserve. Options may be written over securities held in the portfolio for generating or protecting capital returns, or for generating or maintaining revenue returns. Where the purpose of the option is the generation of income, the premium is treated as a revenue item. Where the purpose of the option is the maintenance of capital, the premium is treated as a capital item. The value of the option is subsequently marked to market to reflect the fair value of the option based on traded prices. Option premium income is recognised as revenue evenly over the life of the option contract and included in the revenue column of the Income Statement unless the option has been written for the maintenance and enhancement of the Company's investment portfolio and represents an incidental part of a larger capital transaction, in which case any premia arising are allocated to the capital column of the Income Statement. Where the premium is taken to revenue, an appropriate amount is shown as capital return such that the total return reflects the overall change in the fair value of the option. When an option is closed out or exercised the gain or loss is accounted for as capital. (e) Expenses All expenses are accounted for on an accruals basis. Expenses have been charged wholly to the revenue column of the Income Statement, except as follows: - expenses which are incidental to the acquisition or disposal of investments are included within the cost of the investments or deducted from the disposal proceeds of investment and are thus charged to the capital column of the Income Statement. Details of transaction costs on purchases and sales of investments are disclosed in note 10 on page 53 of the Annual Report and Financial Statements; - the investment management fee has been allocated 75% to the capital column and 25% to the revenue column of the Income Statement in line with the Board's expected long term split of returns, in the form of capital gains and income respectively, from the investment portfolio; - performance fees have been allocated wholly to the capital column of the Income Statement, as the performance fee has been predominantly generated through capital returns of the investment portfolio. (f) Finance costs Finance costs are accounted for on an accruals basis. Finance costs are allocated, insofar as they relate to the financing of the Company's investments, 75% to the capital column and 25% to the revenue column of the Income Statement, in line with the Board's expected long term split of returns, in the form of capital gains and income respectively, from the investment portfolio. (g) Taxation The tax effect of different items of expenditure is allocated between capital and revenue on the marginal basis using the Company's effective rate of corporation taxation for the accounting period. Deferred tax is recognised in respect of all temporary differences at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discount basis. (h) Investments held at fair value through profit or loss The Company's investments are classified as held at fair value through profit or loss in accordance with FRS 26 - 'Financial Instruments: Recognition and Measurement' and are managed and evaluated on a fair value basis in accordance with its investment strategy. All investments are designated upon initial recognition as held at fair value through profit or loss. These sales of assets are recognised at the trade date of the disposal. Proceeds will be measured at fair value which will be regarded as the proceeds of sale less any transaction costs. The fair value of the financial instruments is based on their quoted bid price at the balance sheet date on the exchange on which the investment is quoted, without deduction for the estimated future selling costs. Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Income Statement as "gains or losses on investments held at fair value through profit or loss". Also included within this heading are transaction costs in relation to the purchase or sale of investments. In order to improve the disclosure of how companies measure the fair value of their financial investments, the disclosure requirements in FRS 29 have been extended to include a fair value hierarchy. The fair value hierarchy consists of the following three levels: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability Level 3 - inputs for the asset or liability that are not based on observable market data Unquoted investments are valued by the Directors at fair value using International Private Equity and Venture Capital Valuation Guidelines. This policy applies to unquoted fixed asset investments held by the Company. (i) Dividends payable Under FRS 21 final dividends should not be accrued in the financial statements unless they have been approved by shareholders before the balance sheet date. Dividends payable to equity shareholders are recognised in the Reconciliation of Movement in Shareholders' Funds when they have been approved by shareholders and become a liability of the Company. Interim dividends are only recognised in the financial statements in the period in which they are paid. (j) Foreign currency translation All transactions in foreign currencies are translated into US Dollars at the rate of exchange ruling on the dates of such transactions. Foreign currency monetary assets and liabilities at the balance sheet date are translated into US Dollars at the exchange rates ruling at that date. Exchange differences arising on the revaluation of investments held as fixed assets are taken to capital reserves. Exchange differences arising on the translation of foreign currency assets and liabilities are taken to capital reserves. (k) Convertible bonds On 15 September 2009, the Company issued US$80 million worth of 3.5% unsecured convertible bonds ("bonds") redeemable at par on 15â€ˆSeptember 2015 (additional information is given in note 14 of the Annual Report and Financial Statements). All the outstanding bonds were repurchased, redeemed or converted in the year ended 31 December 2013. In previous accounting periods bonds have been accounted for in accordance with FRS 26 - 'Financial Instruments: Recognition and Measurement', and held at fair value on the Company's Balance Sheet. On initial recognition, fair value was deemed to be the issue proceeds received of US$80 million, and issue costs of US$1.1 million which had been debited to the Income Statement and allocated 25% to the revenue column and 75% to the capital column in line with the Board's policy on allocation of finance costs as set out in note 2(f). Subsequent to initial recognition, and up to the date of redemption or conversion, the bonds have been fair valued by reference to their offer prices subject to a minimum floor price. Movements arising from an increase or decrease in this price are credited or debited to the capital column of the Income Statement. In the event that the fair value of the bonds fell below the nominal value of the bonds, the fair value adjustment did not decrease the bond valuation below this nominal value. This was due to the requirement that the convertible bonds would be redeemed at their nominal value if they had not been converted into equity shares prior to 1 September 2015. Interest costs arising on the bonds were allocated 25% to the revenue column and 75% to the capital column of the Income Statement in line with the Board's policy on finance costs. (l) Cash and cash equivalents Cash comprises cash in hand and on demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. (m) Capital redemption reserve The nominal value of ordinary shares repurchased for cancellation is transferred out of share capital and into the capital redemption reserve. The full cost of ordinary shares repurchased and held in treasury is charged to capital reserves. Where treasury shares are subsequently reissued, any surplus is taken to the share premium account. (n) Capital reserves The following transactions are accounted for in capital reserves: - gains and losses on the disposal of fixed asset investments; - realised exchange differences of a capital nature; - cost of professional advice, including irrecoverable VAT, relating to the capital structure of the Company; - other capital charges and credits charged or credited to this reserve in accordance with the above policies; - cost of purchases of own ordinary shares and warrants; - increases and decreases in the valuation of investments held at the year end and the change in fair value of the convertible bond; and - unrealised exchange differences of a capital nature. (o) Going concern The Company's Articles of Association require that an ordinary resolution be put to the Company's shareholders to approve the continuation of the Company on a bi-annual basis. The Directors are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and therefore consider the going concern assumption to be appropriate. The last resolution was put to shareholders at the 2012 AGM and the next such resolution will be put to shareholders at the AGM in 2014. (See page 20 of the Annual Report and Financial Statements for further details). The Directors have no reason to believe that this resolution will not be passed. (p) Debtors Debtors are sales for future settlement, other debtors and accrued income in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Debtors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method. (q) Creditors Creditors are purchases for future settlements, interest payable, share buyback cost and accruals in the ordinary course of business. Creditors are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method. 3. Income 2013 2012 US$'000 US$'000 Investment income: Overseas dividends 10,096 13,349 Outperformance warrants 644 748 Interest income 435 628 ------ ------ 11,175 14,725 Other income: Traded option premiums 2,359 - Deposit interest 3 1 ------ ------ 13,537 14,726 ====== ====== The Company participated in outperformance warrant contracts in 8 securities during the year (2012: 10) which generated income of US$644,000 (2012: US$748,000). In addition, the Company received premiums totalling US$2,532,000 in respect of covered call options of which US$2,359,000 was recognised as income. At 31 December 2013, there were 16 (2012: nil) open positions with an associated liability of US$281,000 (2012: nil) in respect of the notional cost of repurchasing the contracts at market prices at the year end. 4. Investment management and performance fees 2013 2012 Revenue Capital Total Revenue Capital Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Investment management fee 759 2,276 3,035 908 2,724 3,632 The terms of the investment management agreement with BlackRock are set out in the Directors' Report on page 20 of the Annual Report and Financial Statements. Performance fees are allocated wholly to the capital column of the Income Statement as performance is predominantly generated through capital returns from the Investment Portfolio. As at 31 December 2013, there was no performance fee payable to BlackRock (2012: nil). The total fee currently payable to BlackRock in any twelve month period is limited to 4.99% of NAV. However, as BlackRock is only entitled to a basic fee of 0.85% of NAV and the performance fee is capped at 1.0% of NAV, the amount paid to BlackRock by the Company in respect of fees in any twelve month period is expected to be substantially lower than 4.99% of NAV. 5. Operating expenses 2013 2012 US$'000 US$'000 (a) Other operating expenses AIC subscriptions 42 45 Auditors' remuneration - audit services 47 51 Custody fee 121 119 Directors' and Officers' liability insurance 17 17 Directors' emoluments - fees for services to the Company 363 347 Printing and postage 45 44 Registrar's fees 46 48 Other administrative costs 334 133 ----- --- 1,015 804 ===== === Ongoing charges calculated as a percentage of average shareholders' funds and using expenses, excluding interest costs were: 1.1% 1.2% ==== ==== There were no fees payable in the year in respect of non-audit services (2012: nil). The underlying audit fee is invoiced in Sterling and is therefore susceptible to exchange rate fluctuations. The fee has not changed materially from year to year. 2013 2012 US$'000 US$'000 (b) Reconciliation of net (loss)/return before finance costs and taxation to net cash flow from operating activities Net (loss)/return before finance costs and taxation (46,472) 48,482 Losses/(gains) on investments held at fair value through profit or loss 54,496 (34,325) Fair value adjustment for the convertible bonds - (3,997) Gain on repurchase of convertible bond - (288) Exchange losses of a capital nature 1,380 378 Non-operating expenses of a capital nature 83 40 Decrease in accrued income 1,178 763 Decrease in other debtors 7 9 Increase in creditors 372 714 ------ ------ Net cash inflow from operating activities 11,043 11,776 ====== ====== Expenses of US$83,000 (2012: US$40,000) charged to the capital column of the Income Statement relate to transaction costs charged by the custodian on the purchases and sales of investments and charges on Brazilian foreign exchange transactions. 6. Dividends 2013 2012 Dividend on ordinary shares Register date Payment date US$'000 US$'000 2011 Second interim of 25.00 cents 16 March 2012 20 April 2012 - 10,960 2012 First interim of 5.00 cents 24 August 2012 27 September 2012 - 2,080 2012 Second interim of 25.00 cents 22 March 2013 26 April 2013 10,358 - 2013 Interim of 15.00 cents 6 September 2013 4 October 2013 5,905 - ------ ------ 16,263 13,040 ====== ====== The Directors are recommending the payment of a final dividend in respect of the year ended 31 December 2013 of 15.00 cents per share (2012: second interim dividend of 25.00 cents per share) on 2 May 2014 to shareholders on the Company's register as at 28 March 2014. The recommended final dividend has not been included as a liability in these financial statements as final dividends are only recognised in the financial statements once they have been approved by shareholders. The dividends disclosed in the note below have been considered in view of the requirements of section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies Act 2006, and the amounts proposed meet the relevant requirements as set out in this legislation. 2013 2012 US$'000 US$'000 Dividend payable on equity shares: Interim dividend paid 15.00 cents (2012: 5.00 cents) 5,905 2,080 Final dividend payable 15.00 cents (2012: 25.00 cents)* 5,905 10,358 ------ ------ 11,810 12,438 ====== ====== * Based on 39,369,620 ordinary shares in issue. 7. (Loss)/return and net asset value per ordinary share Revenue and capital returns per share are shown below and have been calculated using the following: 2013 2012 Net revenue return attributable to ordinary shareholders (US$'000) 9,905 11,167 Net capital (loss)/return attributable to ordinary shareholders (US$'000) (58,883) 33,571 ------- ------- Total (loss)/return (US$'000) (48,978) 44,738 ======= ======= Equity shareholders' funds (US$'000) 315,345 399,713 ------- ------- Net revenue return on which the diluted return per share has been calculated 9,905 11,691 Net capital (loss)/return on which the diluted return per share has been calculated (58,883) 39,137 ------- ------- The weighted average number of ordinary shares in issue during the year on which the basic return per ordinary share was calculated was: 39,891,106 42,145,043 ---------- ---------- The weighted average number of ordinary shares in issue during the year on which the diluted return per ordinary share was calculated was: 39,891,106 48,655,724 ---------- ---------- The actual number of ordinary shares in issue at the end of each year on which the net asset value with debt at fair value in accordance with accounting policy 2(k) was calculated was: 39,369,620 41,433,247 ========== ========== The notional number of ordinary shares in issue at the end of each year on which the net asset value with debt converted was calculated was: n/a 47,943,928 ========== ========== 2013 2012 Revenue Capital Total Revenue Capital Total cents cents cents cents cents cents Return per share - basic Calculated on the weighted average number of shares 24.83 (147.61) (122.78) 26.50 79.65 106.15 Calculated on the actual number of shares 25.16 (149.57) (124.41) 26.95 81.03 107.98 Return per share - diluted Calculated on the weighted average number of shares 24.83 (147.61) (122.78) 24.03 80.43 104.46 ------ ------ Net asset value per share - (2012 debt at fair value in accordance with accounting policy 2 (k)) 800.99 964.72 ====== ====== Net asset value per share - debt converted During the year, the Company redeemed US$63,921,000 convertible bonds and U$$79,000 convertible bonds converted into ordinary shares. Therefore, as at 31 December 2013, the Company does not have any dilutive securities in issue. At 31 December 2012 the (debt at fair value) NAV was US$9.65 per share and thus the convertible bonds were not 'in the money'. There was no dilutive effect on the NAV per share. However, for information purposes the table below sets out the NAV per share at 31 December 2012 with debt fully converted at the conversion price of US$9.83 per share. 2013 2012 US$'000 US$'000 Net assets with convertible bonds at fair value in accordance with accounting policy 2(k) n/a 399,713 Add back convertible bonds at fair value in accordance with accounting policy 2(k) n/a 64,000 Accrued interest on convertible bonds at 31 December n/a 672 ---- ---------- Adjusted net assets following conversion of the convertible bonds (a) n/a 464,385 ==== ========== Number of ordinary shares at 31 December n/a 41,433,247 Number of shares arising on conversion of the convertible bonds (2012: US$64,000,000 @ US$9.83)) n/a 6,510,681 ---- ---------- Adjusted shares following conversion of the convertible bonds (b) n/a 47,943,928 ==== ========== Net asset value per share - debt converted (US$ cents (a/b)) n/a 968.60 ==== ========== 8. Called up share capital Ordinary Treasury shares shares Total Nominal number number shares US$'000 Allotted, called up and fully paid share capital comprised: Ordinary shares of 10 cents each ---------- --------- ---------- ----- At 1 January 2013 41,433,247 2,408,065 43,841,312 4,384 Shares repurchased held in treasury in respect of shares tendered on 3 April 2013 (2,071,662) 2,071,662 - - Shares issued on conversion of bonds 8,035 - 8,035 1 Shares cancelled from treasury - (2,408,065) (2,408,065) (241) ---------- --------- ---------- ----- At 31 December 2013 39,369,620 2,071,662 41,441,282 4,144 ========== ========= ========== ===== During the year, 8,035 ordinary shares were issued following the conversion of US$79,000 in nominal value of convertible bonds (2012: nil). During the year, 2,071,662 ordinary shares were repurchased, via the March 2013 tender offer, for cancellation at a total cost of US$19,206,000,000 (2012: 2,408,065 ordinary shares repurchased and transferred into treasury at a total cost of US$23,535,000; 2,192,065 by way of a tender offer and 216,000 by way of buy backs). The Company cancelled 2,408,065 (2012: nil) ordinary shares in treasury during the year. The number of ordinary shares in issue at the year end was 39,369,620 (2012: 41,433,247) excluding 2,071,662 (2012: 2,408,065) shares held in treasury. The ordinary shares (excluding any shares held in treasury) carry the right to receive any dividends and have one voting right per ordinary share. There are no restrictions on the voting rights of the shares or on transfer of the shares. 9. Reserves Capital Capital reserve reserve Share Capital Non (arising on (arising on premium redemption distributable investments investments account reserve reserve sold) held) US$'000 US$'000 US$'000 US$'000 US$'000 At 1 January 2013 11,641 4,602 4,356 280,101 73,671 Movement during the year: Share buybacks - - - (19,206) - Cancellation of treasury shares - 241 - - - Conversion of convertible bonds 78 - - - - Losses on realisation of investments - - - (522) - Change in investment holding gains - - - - (53,974) Loss on foreign currency transactions - - - (1,380) - Interest and expenses charged to capital after taxation - - - (3,007) - ------ ----- ----- ------- ------ At 31 December 2013 11,719 4,843 4,356 255,986 19,697 ====== ===== ===== ======= ====== 10. Publication of non statutory accounts The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The 2013 annual report and financial statements will be filed with the Registrar of Companies shortly. The report of the Auditors for the year ended 31 December 2013 contains no qualification or statement under section 498(2) or (3) of the Companies Act 2006. The comparative figures are extracts from the audited financial statements of BlackRock Latin American Investment Trust plc for the year ended 31 December 2012, which have been filed with the Registrar of Companies, unless otherwise stated. The report of the Auditor on those financial statements contained no qualification or statement under section 498 of the Companies Act. This announcement was approved by the Board of Directors on 25 February 2014. 11. Annual Report Copies of the annual report will be sent to members shortly and will also be available from the registered office, c/o The Company Secretary, BlackRock Latin American Investment Trust plc, 12 Throgmorton Avenue, London EC2N 2DL. 12. Annual General Meeting The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Wednesday, 30 April 2014 at 12 noon. ENDS The Annual Report will also be available on the BlackRock Investment Management website at http://www.blackrock.co.uk/literature/annual-report/ blackrock-latin-american-investment-trust-plc-annual-report-2013.pdf. Neither the contents of the Investment Manager's website nor the contents of any website accessible from hyperlinks on the Investment Manager's website (or any other website) is incorporated into, or forms part of, this announcement. For further information, please contact: Simon White, Managing Director, Investment Trusts, BlackRock Investment Management (UK) Limited Tel: 020 7743 5284 Peter Burnell - Chairman Tel: 01434 632292 Henrietta Guthrie, Lansons Communications Tel: 020 7294 3612 25 February 2014 12 Throgmorton Avenue London EC2N 2DL END

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