Half-yearly Report
4 August 2009
BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC
Half yearly financial announcement of results in respect of the six months
ended 30 June 2009
The Chairman, Peter Burnell, comments:
Performance
The six months ended 30 June 2009 were rewarding for investors globally. Latin
American equities responded positively, recouping some of the losses suffered
in the preceding half year, as investors rewarded the region for dealing with
the global financial crisis relatively well. The Company's net asset value
(NAV) ended the period at 703.29 cents per share (equivalent to 427.04 pence
per share), representing a total return of 54.2% in US dollar terms and 34.6%
in sterling terms. During the same period, the benchmark index returned 45.4%
(in US dollar terms) and the share price rose to 410.00 pence per share, a rise
of 42.2% in sterling and 62.9% in US dollar terms on a total return basis.
Since the period end the Company's NAV has increased by 16.2% (in US dollar
terms) and by 13.1% (in sterling terms) compared to an increase of 13.5% (in
US dollar terms) and 10.4% (in sterling terms) in the benchmark index.
Further information on the Company's performance is included in the Investment
Manager's Report.
Dividends
The Company's revenue return per share amounted to 5.14 cents per share (2008:
7.26 cents per share). The Board is pleased to declare an interim dividend of
2.50 cents per share (2008: 2.50 cents per share), which will be paid on
25 September 2009 to shareholders on the register on 14 August 2009 and marked
ex-dividend on 12 August 2009.
Proposed Convertible Bond Issue
It was announced on 7 July 2009 that the Company was considering issuing up to
US$75 million of convertible bonds. The indicative terms are for these bonds to
be issued with a six year life having a 3.5% coupon payable semi-annually. The
conversion price will be based on the US dollar NAV (including income) on the
penultimate business day before the General Meeting to approve the issue plus a
5% premium for conversions between the issue date and the third anniversary of
the issue date and plus a 15% premium for conversions between the third
anniversary and the maturity date for the bonds. The proceeds of the bonds will
be invested in accordance with the Company's investment objective and policy.
The issue of the bonds will be conditional on shareholder approval at a General
Meeting to be held in early September. It is expected that a copy of the circular
seeking shareholder approval will be posted to shareholders with the half yearly
financial report. Assuming such approval is obtained, the bonds will be issued
shortly thereafter.
The Directors will make a further announcement regarding the bond issue in due
course.
Tender offer
The Directors exercised their discretion to operate the half yearly tender
offer on 31 March 2009. The offer was oversubscribed with 17,703,293 (37.4% of
the shares in issue excluding treasury shares) being tendered. Shareholders who
tendered had their basic entitlement (7.5% of their shares) satisfied in full
and their election for further shares was scaled back pro rata with each
shareholder receiving 10.67257% of their election for further shares. All
3,554,231 shares tendered were transferred to treasury.
The tender price calculated as at close of business on 31 March 2009 was 465.18
cents per share.
The Company announced on 7 July 2009 that the Company's shares had traded at an
average discount of 3.9% since the announcement on 29 January 2009 of the March
tender offer. Against this background, and given the current liquidity and rating
of the shares and the proposed convertible bond issue, the Board had decided not
to implement the next tender offer which would otherwise have taken place at the
end of September.
Prospects
Latin American companies have made positive advances following the set back in
2008 and the attractive valuations in the region should help to rebuild
confidence in equity markets.
Brazil continues to lead the way and should maintain the impetus for good
earnings growth and solid performance over the year ahead.
Interim Management Report and Responsibility Statement
The Chairman's Statement and the Investment Manager's Report give details of
the events which have occurred during the period and their impact on the
financial statements.
Principal risks and uncertainties
The principal risks faced by the Company can be divided into various areas as
follows:
- Performance;
- Income/dividend;
- Regulatory;
- Operational; and
- Financial.
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Financial Statements for the year ended 31
December 2008. A detailed explanation can be found on pages 15 and 16 of the
Annual Report and Financial Statements which is available on the website
maintained by the Investment Manager, BlackRock Investment Management (UK)
Limited, at www.blackrock.co.uk/its.
In the view of the Board, there have not been any changes to the fundamental
nature of these risks since the previous report and these principal risks and
uncertainties are equally applicable to the remaining six months of the
financial year as they were to the six months under review.
Related party transactions
The Investment Manager is regarded as a related party and details of the
management fees payable are set out in note 3.
Directors' responsibility statement
The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority
require the Directors to confirm their responsibilities in relation to the
preparation and publication of the Interim Management Report and Financial
Statements.
The Directors confirm to the best of their knowledge and belief that:
- the condensed set of financial statements contained within the half yearly
financial report has been prepared in accordance with the Accounting Standards
Board's Statement `Half Yearly Financial Reports'; and
- the interim management report, together with the Chairman's Statement and the
Investment Manager's Report, include a fair review of the information required
by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules.
The half yearly financial report has not been audited or reviewed by the
Company's auditors.
The half yearly financial report was approved by the Board on 4 August 2009 and
the above responsibility statement was signed on its behalf by the Chairman.
Commenting upon performance and the outlook for the Company, Will Landers of
BlackRock Investment Management (UK) Limited, the Investment Manager, notes:
Latin American Market Overview
During the first six months of 2009, the Company posted a 54.2% appreciation in
its NAV and a 62.9% appreciation in its share price, in US dollar terms
(equivalent to 34.6% and 42.2%, respectively, in sterling terms). Over the same
period the MSCI Latin America Index posted a return of 45.4% (27.0% in sterling
terms), once again placing Latin America among the best performing regions of
the world. Following a very difficult second half of 2008, the portfolio
entered 2009 positioned to benefit from a more constructive market environment
- we started the year with approximately 6% gearing, almost all of which was
deployed in Brazil, increasing our overweight position in the country to over
13% at the beginning of the year. The outperformance in the year to date has
been fairly evenly divided between our overweight position in Brazil, our
underweight position in Mexico and positive stock selection from both
countries. At the stock level, positive attribution stemmed from our overweight
positions in Brazilian steelmaker Usiminas, Brazilian banks Bradesco and Itaú,
and cable provider Net Serviços, as well as being zero-weighted in Mexican
wireline operator Telmex, its holding company Carso Global and international
subsidiary Telmex International and being underweight Mexican cement giant
Cemex. The largest detractor from performance stemmed from our regulatory
mandated underweight position in oil giant Petrobras in Brazil.
Latin America was once again a focus for global investors. As equity markets
recovered from their lows in the fourth quarter of 2008, Latin America ranked
among the best performing markets. Performance was particularly strong during
the March to May period, a three month period that saw the VIX Index (a broadly
accepted measure of risk) fall by almost 50%, returning to levels not seen in
over a year. As a result, asset classes which are generally considered to be
higher risk, such as Emerging Markets equities in general and Latin America
specifically, performed well in the period.
Latin American markets outperformed during the period given their resilience to
the global financial crisis. The fact that none of the local major economies
suffered any significant liquidity crisis, and instead were able to utilise
monetary tools as well as fiscal stimulus to aid in a quicker recovery, was a
large differentiator versus the developed world as well as the performance of
Latin American economies during previous crises. Currencies performed strongly
once global investors' demand for the "safety" of the US dollar diminished -
all major currencies strengthened against the dollar given strong inflows into
the domestic market and, in many cases, surprisingly resilient FDI and trade
related flows.
YTD Performance Figures
%
% Local
MSCI Currency %
Country (vs. USD) Local Index
Argentina 16.4 -9.0 38.9 (Merval)
Brazil 55.8 18.6 27.9 (Ibovespa)
Chile 49.8 19.6 26.6 (IPSA)
Colombia 34.4 4.9 28.8 (IGBC)
Mexico 15.7 3.7 4.9 (IPC)
Peru 17.2 4.3 78.2 (IGBVL)
MSCI Latin America 43.2 CRB Index 8.9
MSCI Emerging Asia 36.0 Oil (WTI) 56.7
MSCI Emerging Markets 34.3 Gold 5.1
MSCI World 4.8 Copper 62.7
S&P 500 1.8 Corn -19.1
MSCI Europe 4.3 Soybeans -2.6
Source: UBS Pactual Latam Monthly Review of 3 July 2009 (all figures on a
capital only basis).
Brazil ranked as the best performing market among the region's MSCI indices and
second best in terms of USD returns for the local market. Brazil benefited from
investors returning to markets with superior fundamentals. The Brazilian
economy was one of the last economies around the globe to be impacted by the
global recession and one of the first to show signs of recovery. The Central
Bank of Brazil cut rates four times during the first six months of the year,
totaling 450 basis points, and bringing Brazilian nominal rates below 10% to
9.25% for the first time in decades. We believe record-low nominal interest
rates, with benign inflation expectations for the remainder of 2009 and 2010,
should enable credit availability to continue expanding, at more affordable
levels. Last, but certainly not least, the government's announced low income
housing program has the potential to revolutionise homebuilding and
homeownership in Brazil, providing a further boost to Brazil's domestic
economy.
Mexico's economy surprised on the upside during much of 2008, but its
dependency on the US economy (over 80% of exports - autos and oil being the
largest products) along with a significant decline in remittances from Mexican
Americans working in the US and sending money to their families in Mexico
resulted in a significant slowdown in the Mexican economy. While Brazil has
started to show signs of recovery, production and employment figures in Mexico
continued to deteriorate into June. Finally, mid-term congressional elections
were a blow to President Calderon's last three years in office as the
opposition party PRI gained control over the lower house, putting in doubt the
country's commitment to continue passing much needed fiscal and oil reforms. As
a result, the Mexican bolsa was a large underperformer among global equity
markets during the period.
The Chilean equity market ranked second to Brazil during the first half of
2009, with the Chilean peso posting the best performance among Latin American
currencies. The two main reasons for such a solid performance were the strong
rebound in copper prices, the country's main export product and revenue
generator for the federal government, and the federal stimulus program (among
the highest in the world at over 2% of GDP) fully financed by the country's
stabilisation fund created with copper sales profits in the past four years.
The Peruvian market also ranked among the region's best given that a majority
of the local exchange is represented by mining stocks, as well as the country's
solid fiscal positions and the potential for a Chilean-style stimulus program
focused on infrastructure financing. Colombia's market performed slightly below
the region overall, with relatively low liquidity. Argentina continues to rank
among the uninvestable local markets, finally being shifted to the Frontier
Markets Index by MSCI during May.
Overall, this was the first time in recent history when most countries in the
region were not forced to increase interest rates significantly as a response
to a global financial crisis in order to control inflation and remain
attractive to foreign investors seeking yield. Most countries in the region are
actually facing the enviable combination of record low interest rates without
inflationary pressure, which along with their recently augmented middle classes
should translate into attractive domestic growth for many quarters to come.
Portfolio
During the first half of 2009, absolute positions at the country level did not
change very much, but given Brazil's outperformance versus Mexico and its
subsequent growth within the benchmark, relative weights shifted with the
Brazilian overweight being reduced and the Mexican underweight also being
reduced, while gearing was reduced to zero during mid-April as the market
performed strongly.
In Brazil, we maintained close to 75% of assets in the country, with the
regulatory mandated underweight in Petrobras and an underweight position in
mining, financing overweight positions in financials, retailers, staples,
homebuilders, and domestic steel producers.
In Mexico, we reduced our underweight position in the country late in the
period, adding to domestic bellwethers Walmex and American Movil, while
maintaining small overweight positions in financials and homebuilders. The
underperformance has increased Mexico's attractiveness from a valuation
standpoint.
In Chile, we took profits in our off-benchmark position in copper producer
Antofagasta as well as reducing exposure in the retail sector given weak
economic performance and reduced investments in Peru and Colombia (higher
growth areas). While we increased our underweight position in Chile, we did
redeploy some of the Chilean funds back into the market increasing our exposure
to financials on the expectation of faster credit growth in the second half of
the year.
In Peru, we increased our position in financials given our expectations of a
quicker recovery in the Peruvian economy than in most other regional economies.
Colombia and Venezuela remained at zero, as did domestic Argentina - we kept
two off-benchmark investments in the materials sector that we classify as
Argentine investments given their Buenos Aires headquarters.
As mentioned earlier, gearing was taken off in the middle of April as the
market was in the middle of its recovery and it has remained at zero for the
last two months of the period.
Outlook
The Company continues to be positioned to benefit from an upward trending Latin
American equity market. The region in general, and Brazil specifically, showed
strong resilience during the worst periods (we hope) of this financial crisis
and many areas of the economy are showing signs of recovery. The domestic
growth story remains intact, and the fact that Brazil is enjoying historic low
interest rates, with room for rates to fall further, strengthens our positive
view of the Brazilian equity market further. We expect interest rates to
continue falling in Brazil, increasing the affordability of credit and
providing a strong engine for growth for Brazil's domestic economy. Commodity
stocks remain an important part of Brazilian investment story, although for the
time being we maintain underweight positions in both mining as well as energy.
Mexico's economic situation is not as positive as Brazil's in the
short-to-medium term, made by recent results in the country's mid-term
elections which reduced President Calderon's ability to continue to move
forward his government's reform program. However, some stocks in the country
look very attractive on a valuation basis, and the economy seems poised to
recover some in the next 12-18 months - we have therefore reduced our
underweight in Mexico recently, while maintaining it as an underweight. Peru is
close to neutral weighting at over 2% of assets as the country looks poised to
be one of the first to return to mid-single digits GDP growth as early as the
second half of 2009, while valuations in Chile keep us with a large underweight
in this market.
Geographical and sector analysis
Geographical Weightings
Portfolio Benchmark
Country Weighting % Weighting %
Brazil 74.4 67.6
Mexico 19.0 20.0
Chile 2.6 7.1
Peru 2.2 2.5
Argentina 1.3 0.0
Panama 0.5 0.0
Colombia 0.0 2.8
Total 100.0 100.0
Source: BlackRock
Sector Weightings
Portfolio Benchmark
Sector Weighting % Weighting %
Financials 21.4 19.2
Consumer 18.0 11.8
Materials 17.2 22.7
Energy 14.8 21.2
Telecommunications 10.3 11.7
Industrials 9.7 6.0
Utilities 8.1 7.4
Cash 0.5 0.0
Total 100.0 100.0
Source: BlackRock
Ten Largest Investments
Petrobrás - 13.2% (2008: 13.0%), 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. Recent oil finds in the
pre-salt region could transform the company (and Brazil) into one of the
world's major oil producers.
Vale-9.4% (2008: 11.6%), is the world's largest producer of iron ore, with
operations in several other commodities, including nickel, copper and alumina,
among others. Vale is the lowest cash cost producer of iron ore and has a
strong balance sheet following its equity offering in mid-2008.
América Móvil - 8.5% (2008: 9.1%), is Latin America's leading provider of
wireless communications. We expect the company to continue to post strong
double digit subscriber growth in 2009 whilst improving overall operating
margins, given economies of scale from its large existing subscriber base and
the monetisation of its 3G network.
Banco Itaú - 8.2% (2008: 3.0%), is Brazil's largest private sector bank. The
bank is in the process of consolidation operations following the merger with
Unibanco (at the time Brazil's third largest private sector bank and now the
combined operation represents the largest). Itaú has maintained superior
profitability levels while participating in the overall growth in the Brazilian
financial system and the combined entity should be able to generate significant
gains from synergies.
Banco Bradesco - 5.3% (2008: 6.9%), Brazil's second largest private sector bank
is in an advantageous position to benefit from the strong demand for credit in
Brazil. Brazil's growing middle class continues to demand more financial
products, and the Bradesco's leading branch network positions the bank to offer
such products.
AmBev - 3.9% (2008: 3.8%), is Brazil's leading beverages company with
operations throughout the Americas. The company is well positioned to continue
to benefit from its defensive position as the region's largest staples
producer, while maintaining a strong focus on cost containment, a perennial
AmBev management strength.
Usiminas - 3.8% (2008: 4.3%), is Brazil's largest steel producer. The company
has been able to maintain positive operating and EBITDA margins despite cutting
production significantly during the first half of 2009. We expect a strong
rebound in the second half of the year and into 2010 given that the company's
client base is predominantly Brazilian domestic companies.
Grupo Televisa - 2.5% (2008: 1.4%), is Mexico's leading TV broadcaster, cable
and satellite operator, and magazine publisher. The company's broadcast
business has proven to be very defensive during the economic downturn, while
its cable operation offers the country's highest quality (and fast growing)
internet broadband connectivity.
Walmart de México - 2.3% (2008: 2.2%), is Mexico's leading retailer. The
company is well positioned to benefit from weakened competition as it continues
to expand its retail network utilising its own free cash flow generation.
WalMex has zero debt and, given its size, significant advantage with suppliers.
Redecard - 1.6% (2008: 1.4%), is a leading Brazilian acquirer and processor of
credit cards and debit cards, a high growth segment given the growth in
Brazil's middle class and growth in credit availability.
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 2008.
Investments
Market
value % of
Country of operation US$'000 investments
Brazil
Petrobràs 40,658 13.2
Vale 28,939 9.4
Banco Itaú 25,232 8.2
Banco Bradesco 16,247 5.3
AmBev 11,964 3.9
Usiminas 11,565 3.8
Redecard }
Redecard Warrants } 4,988 1.6
Cyrela Brazil Realty }
Morgan Stanley Warrants (Cyrela) } 4,925 1.6
ALL 4,827 1.6
OGX 3,565 1.2
Net Serviços 3,393 1.1
CPFL Energia 3,069 1.0
Hypermarcas 2,927 0.9
TAM 2,904 0.9
CSN 2,807 0.9
Totvs 2,558 0.8
GVT Holdings 2,412 0.8
PDG Realty 2,394 0.8
BM&F Bovespa 2,390 0.8
Telenorte Leste 2,378 0.8
CCR 2,369 0.8
Tractebel Energia 2,239 0.7
CESP 2,233 0.7
VisaNet 2,201 0.7
Porto Seguro 2,193 0.7
CTEEP 2,189 0.7
Saraiva Livreiros 2,141 0.7
Anhanguera Educacional 2,060 0.7
DASA 2,004 0.6
Amil 1,808 0.6
Lojas Renner 1,787 0.6
MRV 1,784 0.6
Eletropaulo Metropolitana 1,766 0.6
Satipel Industrial 1,713 0.6
Energias do Brasil 1,668 0.5
Terna 1,549 0.5
Profarma Distribuidora 1,520 0.5
Grupo Pão de Açúcar 1,497 0.4
Copel 1,395 0.4
Cemig 1,344 0.4
WEG 1,317 0.4
Equatorial Energia 1,205 0.4
Lupatech 1,198 0.4
Banco Industrial e Comercial 1,186 0.4
Duratex 1,108 0.4
Rodobens 1,107 0.4
B2W - Companhia Global de Varejo }
B2W - Companhia Global de Varejo Warrants 07/06/10 } 1,025 0.4
Tele Celular Sul 992 0.3
Copasa 965 0.3
Banco ABC Brasil 789 0.2
Metalfrio Solutions 443 0.1
Agra 426 0.1
------- -----
229,363 74.4
------- -----
Mexico
América Móvil 26,238 8.5
Grupo Televisa 7,896 2.5
Walmart de México 7,107 2.3
Grupo México 4,209 1.4
FEMSA 3,224 1.0
Grupo Financiero Banorte 3,020 1.0
Cemex 2,989 1.0
Desarrolladora Homex 2,789 0.9
Genomma Lab Internacional 1,245 0.4
------- -----
58,717 19.0
------- -----
Chile
Banco Santander - Chile 3,494 1.1
Endesa Chile 3,081 1.0
Cencosud 1,439 0.5
------- -----
8,014 2.6
------- -----
Peru
Credicorp 4,817 1.6
Minas Buenaventura 2,041 0.6
------- -----
6,858 2.2
------- -----
Argentina
Tenaris 2,294 0.7
Ternium 1,722 0.6
------- -----
4,016 1.3
------- -----
Panama
Copa Holdings 1,427 0.5
------- -----
1,427 0.5
------- -----
Total investments 308,395 100.0
------- -----
The total number of investments held at 30 June 2009 was 69 (31 December 2008:
66). All investments are in equity shares unless otherwise stated.
INCOME STATEMENT
for the six months ended 30 June 2009
Revenue US$'000 Capital US$'000 Total US$'000
Six Six Six Six Six Six
months months Year months months Year months months Year
ended ended ended ended ended ended ended ended ended
30.06.09 30.06.08 31.12.08 30.06.09 30.06.08 31.12.08 30.06.09 30.06.08 31.12.08
Notes (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Gains/
(losses) on
investments
held at
fair value
through
profit or
loss - - - 107,150 42,879 (309,886) 107,150 42,879 (309,886)
Exchange
gains/
(losses) - - - 682 (285) 72 682 (285) 72
Income from
investments
held at
fair value
through
profit or
loss 2 4,142 6,082 12,006 - - - 4,142 6,082 12,006
Other
income 2 1 15 151 - - - 1 15 151
Management
fees 3 (279) (575) (882) (835) (1,726) (2,647) (1,114) (2,301) (3,529)
Write-back
of prior
years' VAT 3&4 - - 174 - - - - - 174
Other
operating
expenses 4 (554) (667) (1,052) (18) (30) (45) (572) (697) (1,097)
----- ----- ----- ------- ------ ------- ------- ------ -------
Net return
before
finance
costs and
taxation 3,310 4,855 10,397 106,979 40,838 (312,506) 110,289 45,693 (302,109)
Finance
costs (33) (18) (149) (99) (52) (448) (132) (70) (597)
----- ----- ----- ------- ------ ------- ------- ------ -------
Net return
on ordinary
activities
before
taxation 3,277 4,837 10,248 106,880 40,786 (312,954) 110,157 45,623 (302,706)
Taxation
(charges)/
credit (931) (1,368) (2,956) 262 507 882 (669) (861) (2,074)
----- ----- ----- ------- ------ ------- ------- ------ -------
Net return
on ordinary
activities
after
taxation 2,346 3,469 7,292 107,142 41,293 (312,072) 109,488 44,762 (304,780)
----- ----- ----- ------- ------ ------- ------- ------ -------
Net return
per
ordinary
share -
(cents) 7 5.14 7.26 15.31 234.95 86.41 (654.99) 240.09 93.67 (639.68)
==== ==== ===== ====== ===== ====== ====== ===== ======
The total column of this statement represents the Income Statement of the
Company. The supplementary revenue and capital columns are both prepared under
guidance published by the Association of Investment Companies. The Company has
no recognised gains and losses other than those disclosed in the Income
Statement and the Reconciliation of Movements in Shareholders' Funds. All items
in the above statement derive from continuing operations. No operations were
acquired or discontinued during the period.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Share Capital Non-
Share premium redemption distributable Capital Revenue
capital account reserve reserve reserves reserve Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
For the six months
ended 30 June 2009
(unaudited)
At 31 December 2008 4,779 11,655 4,207 4,356 184,808 10,259 220,064
Net return for the
period - - - - 107,142 2,346 109,488
Shares repurchased
and held in treasury - - - - (16,757) - (16,757)
Dividends paid(a) - - - - - (4,502) (4,502)
-------- --------- -------- -------- ----------- -------- -----------
At 30 June 2009 4,779 11,655 4,207 4,356 275,193 8,103 308,293
-------- --------- -------- -------- ----------- -------- -----------
For the six months
ended 30 June 2008
(unaudited)
At 31 December 2007 4,779 11,655 4,207 4,356 500,777 7,507 533,281
Net return for the
year - - - - 41,293 3,469 44,762
Costs paid re prior
year tender offer - - - - (106) - (106)
Dividends paid(b) - - - - - (3,345) (3,345)
-------- --------- -------- -------- ---------- -------- ----------
At 30 June 2008 4,779 11,655 4,207 4,356 541,964 7,631 574,592
-------- --------- -------- -------- ---------- -------- ----------
For the year ended 31
December 2008 (audited)
At 31 December 2007 4,779 11,655 4,207 4,356 500,777 7,507 533,281
Net return for the
year - - - - (312,072) 7,292 (304,780)
Shares repurchased
and held in treasury - - - - (3,799) - (3,799)
Share repurchase
expense - - - - (98) - (98)
Dividends paid(c) - - - - - (4,540) (4,540)
-------- --------- -------- -------- ----------- -------- ----------
At 31 December 2008 4,779 11,655 4,207 4,356 184,808 10,259 220,064
-------- --------- -------- -------- ----------- -------- ----------
a) Second interim dividend in respect of the year ended 31 December 2008 of
9.50 cents per share declared on 18 February 2009 and paid on 15 April 2009.
b) Second interim dividend in respect of the year ended 31 December 2007 of
7.00 cents per share declared on 19 February 2008 and paid on 16 April 2008.
c) Second interim dividend paid in respect of the year ended 31 December 2007
of 7.00 cents per share declared on 19 February 2008 and paid on 16 April 2008
and the first interim dividend for the year ended 31 December 2008 of 2.5 cents
per share declared on 5 August 2008 and paid on 26 September 2008.
During the period the Company incurred purchase transaction costs of US$109,000
(six months ended 30 June 2008: US$165,000, year ended 31 December 2008:
US$341,000) and sales transaction costs of US$155,000 (six months ended 30 June
2008: US$202,000; year ended 31 December 2008: US$375,000). All transaction
costs have been included within the capital reserves.
BALANCE SHEET
as at 30 June 2009
Notes 30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Fixed assets
Investments held at fair value
through profit or loss 308,395 576,840 231,189
------- ------- -------
Current assets
Debtors 1,342 5,010 2,363
Cash at bank 4,224 698 2,636
------- ------- -------
5,566 5,708 4,999
Creditors - amounts falling due
within one year
Bank loan - - (12,500)
Other creditors (5,644) (7,932) (3,600)
------- ------- -------
(5,644) (7,932) (16,100)
------- ------- -------
Net current liabilities (78) (2,224) (11,101)
------- ------- -------
Total assets less current
liabilities 308,317 574,616 220,088
Provisions for liabilities and
charges (24) (24) (24)
------- ------- -------
Net assets 308,293 574,592 220,064
======= ======= =======
Capital and reserves
Share capital 6 4,779 4,779 4,779
Share premium account 11,655 11,655 11,655
Capital redemption reserve 4,207 4,207 4,207
Non distributable reserve 4,356 4,356 4,356
Capital reserves 275,193 541,964 184,808
Revenue reserve 8 8,103 7,631 10,259
------- ------- -------
Total equity shareholders' funds 308,293 574,592 220,064
======= ======= =======
Net asset value per ordinary share
- (cents) 7 703.29 1,202.33 464.37
====== ======== ======
CASH FLOW STATEMENT
for the six months ended 30 June 2009
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Net cash inflow from operating activities 3,065 2,273 7,178
Servicing of finance (461) (89) (284)
Tax paid (812) (942) (1,773)
Capital expenditure and financial
investment
Purchase of investments (60,448) (152,842) (267,423)
Proceeds from the sale of investments 93,202 157,953 262,736
Capital expenses (22) (28) (42)
------ ------- -------
Net cash inflow/(outflow) from capital
expenditure and financial Investment 32,732 5,083 (4,729)
------ ------- -------
Equity dividends paid (4,502) (3,345) (4,540)
------ ------- -------
Net cash inflow/(outflow) before
financing 30,022 2,980 (4,148)
------ ------- -------
Financing
(Repayment)/drawdown of US Dollar loan (12,500) - 12,500
Repurchase of ordinary shares (16,534) - (3,799)
Share repurchase expenses paid (82) (106) (98)
------ ------- -------
Net cash (outflow)/inflow from financing (29,116) (106) 8,603
------ ------- -------
Increase in cash in the period 906 2,874 4,455
====== ======= =======
RECONCILIATION OF NET RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH FLOW
FROM OPERATING ACTIVITIES
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Net return before finance costs and
taxation 110,289 45,693 (302,109)
(Gains)/losses on investments held at
fair value through profit or loss (107,150) (42,879) 309,886
Exchange (gains)/losses (682) 285 (72)
Non-operating expenses 18 30 45
Decrease/(increase) in debtors 530 (681) (293)
Increase/(decrease) in creditors 60 (113) (216)
Scrip dividends - (62) (63)
----- ----- -----
Net cash inflow from operating activities 3,065 2,273 7,178
----- ----- -----
Notes to the Half Yearly Financial Report
1. Principal activity and basis of preparation
The Company conducts its business so as to qualify as an investment trust
company within the meaning of section 842 of the Income and Corporation Taxes
Act 1988. The half yearly financial statements have been prepared on the basis
of the accounting policies set out in the Company's financial statements at 31
December 2008.
Under FRS26 "Financial instruments-Measurements" the Company has designated its
assets and liabilities as being measured as "fair value through profit or
loss". The fair value of fixed asset investments is deemed to be bid market
value at the close of business on the balance sheet date. The taxation charge
has been calculated by applying an estimate of the annual effective tax rate to
any profit for the period.
The Company's financial statements have been prepared in accordance with UK
Generally Accepted Accounting Practice ("UK GAAP") and with the statement of
Recommended Practice "Financial Statement of Investment Companies" ("SORP")
dated January 2005 and revised in December 2005 and January 2009).
2. Income
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Income from investments:
Overseas dividends 4,142 6,020 11,943
Scrip dividends - 62 63
----- ----- ------
4,142 6,082 12,006
Other income:
Interest on cash and short term deposits 1 15 41
Interest relating to prior years' VAT - - 110
----- ----- ------
Total 4,143 6,097 12,157
----- ----- ------
3. Investment management fees
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Revenue:
Investment management fees 279 575 882
----- ----- -----
279 575 882
----- ----- -----
Capital:
Investment management fees: 835 1,726 2,647
----- ----- -----
835 1,726 2,647
----- ----- -----
1,114 2,301 3,529
Write-back of prior years' VAT relating
to management fees - - (160)
----- ----- -----
Total 1,114 2,301 3,369
----- ----- -----
The investment management fee has been calculated at 0.85% per annum on the
NAV. The Investment Manager is also entitled to a performance fee equal to 10%
of any outperformance of the NAV per share against the benchmark, the MSCI EM
Latin America Index (in US dollar terms on a total return basis) plus a hurdle
of 1%. The performance fee is capped at 1% of NAV.
No performance fee is payable in respect of the period ended 30 June 2009 (no
performance fees were payable for the six months ended 30 June 2008 or the year
ended 31 December 2008).
4. Operating expenses
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Custody fee 114 280 426
Directors' fees 135 155 239
Other administration costs 305 232 387
Write-back of prior years' VAT relating
to operating expenses - - (14)
--- --- -----
554 667 1,038
--- --- -----
5. Dividend
The Board has declared a first interim dividend of 2.50 cents (2008: 2.50 cents)
payable on 25 September 2009 to shareholders on the register as at 14 August
2009. The total cost of this dividend, based on 43,835,522 ordinary shares in
issue at 4 August 2009 is US$1,096,000 (30 June 2008: 47,789,753 shares and cost of
US$1,195,000).
6. Share capital
Number of
Number of treasury Total Nominal
shares in shares in shares in value
issue issue issue US$'000
Authorised share capital
comprised:
Ordinary shares of 10 cents each 110,000,000 - 110,000,000 11,000
----------- --------- ----------- ------
At 31 December 2008 47,389,753 400,000 47,789,753 4,779
Shares transferred into treasury
pursuant to the tender offer (3,554,231) 3,554,231 - -
----------- --------- ----------- ------
At 30 June 2009 43,835,522 3,954,231 47,789,753 4,779
----------- --------- ----------- ------
At 30 June 2009, the Company had 47,789,753 shares in issue, of which 3,954,231
shares were held in treasury.
7. Returns and net asset value per ordinary share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
Net revenue return attributable to
ordinary shareholders (US$'000) 2,346 3,469 7,292
Net capital return attributable to
ordinary shareholders (US$'000) 107,142 41,293 (312,072)
---------- ---------- ----------
Net total return attributable to ordinary
shareholders (US$'000) 109,488 44,762 (304,780)
---------- ---------- ----------
Equity shareholders' funds (US$'000) 308,293 574,592 220,064
---------- ---------- ----------
The weighted number of ordinary shares in 45,602,820 47,789,753 47,645,490
issue during the period, on which the
return and net asset value was
calculated, was:
The actual number of ordinary shares in
issue during the period, on which the
return and net asset value was
calculated, was: 43,835,522 47,789,753 47,389,753
Revenue return per share - (cents) 5.14 7.26 15.31
Capital return per share - (cents) 234.95 86.41 (654.99)
---------- ---------- ----------
Total return per share - (cents) 240.09 93.67 (639.68)
---------- ---------- ----------
Net asset value per share - (cents) 703.29 1,202.33 464.37
Share price * 675.21 1,164.18 424.14
---------- ---------- ----------
* The Company's share price is quoted in sterling and the above price
represents the US dollar equivalent.
8. Distributable status of capital reserve
Under the terms do the Company's Articles of Association, sums standing on the
credit of the capital reserve are distributable by way of redemption or
purchase any of the Company's own shares so long as the Company carries on
business as an investment company. Company law states that investment companies
may only distribute by way of dividend accumulated revenue profits.
The Institute of Chartered Accountants in England and Wales in its technical
guidance (TECH 01/08), states that profits arising out of a change in fair
value of assets, recognised in accordance with accounting standards, may be
distributed, provided the change can be converted into cash. Securities listed
on a recognised stock exchange are generally regarded as being readily
convertible into cash and hence any unrealised profits in respect of such
securities, currently included within "Capital reserves" may be treated as
distributable under company law.
This technical interpretation of the meaning of distributable reserve would as,
a consequence, give rise at 30 June 2009 to capital reserves available for
distribution of approximately US$275,193,000 including net unrealised capital
profits of US$52,359,000.
9. Publication of non-statutory accounts
The financial information contained in this half yearly report does not
constitute statutory accounts, as defined in the Companies Act 2006. The
financial information for the six months ended 30 June 2009 and 30 June 2008
has not been audited as reviewed by the Company's auditors.
The information for the year ended 31 December 2008 has been extracted from the
latest published audited financial statements, which have been filed with the
Registrar of Companies. The report of the auditors on those accounts contained
no qualification or statement under sections 498(2) or (3) of the Companies Act
2006.
10. Results
The Board expects to announce the annual results for the year ended 31 December
2009 in February 2010. Copies of the preliminary announcement can be obtained
from the Secretary on 020 7743 3000. The annual report should be available in
March 2010.
Copies of the half yearly financial report will be posted to shareholders as
soon as practicable. Copies will also be available to the public from the
Company's registered office at 33 King William Street, London EC4R 9AS, and on
BlackRock Investment Management's website at www.blackrock.co.uk/its.
4 August 2009
33 King William Street
London EC4R 9AS
For further information please contact:
Peter Burnell, Chairman - 01434 632292
Jonathan Ruck Keene, Managing Director Investment Companies - 020 7743 2178
Emma Phillips, Media & Communications - 020 7743 5938
BlackRock Investment Management (UK) Limited
or
William Clutterbuck - 020 7379 5151
The Maitland Consultancy
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