Half-yearly Report
BlackRock Latin American Investment Trust plc
The Company's objective is to secure long term capital growth primarily through
investing in quoted securities in Latin America.
Performance Record
Financial Highlights
30 June 31 December
2011 2010 Change
Attributable to ordinary shareholders (unaudited) (audited) %
Assets
Net assets (US$'000) 494,803 524,501 -5.7
Net asset value per ordinary share (cents) 1,128.62 1,196.42 -5.7
- with income reinvested (debt at fair
value) -4.2
Net asset value per ordinary share (cents) 1,142.82 1,208.28 -5.4
- with income reinvested (debt converted) -3.9
Ordinary share price (mid-market) (cents) 1,075.65 1,200.07 -10.4
- with income reinvested -8.8
Ordinary share price (mid-market) (pence)* 670.00 766.50 -12.6
- with income reinvested -11.1
Convertible bond price (cents) 1,340.00 1,400.00 -4.3
Convertible bond price (pence)* 834.66 894.20 -6.7
* Based on an exchange rate of 1.60545 (2010: 1.56565).
For the six For the six
months ended months ended
30 June 30 June
2011 2010 Change
(unaudited) (unaudited) %
Revenue
Net revenue after taxation (US$'000) 7,772 6,905 +12.6
Revenue return per ordinary share (cents) 17.73 15.75 +12.6
First interim dividend per ordinary share
(cents) 5.00 5.00 -
Source: BlackRock.
Chairman's Statement
Performance
The Company's net asset value ("NAV") with debt converted ended the period at
1,142.82 cents per share (equivalent to 711.84 pence per share), representing a
decrease of 3.9% in US dollar terms (6.3% in sterling terms) over the six
months to 30 June 2011. During the same period, the MSCI Emerging Markets Latin
America Index fell by 1.6% in US dollar terms and 4.0% in sterling terms. The
share price ended the period down at 670.00 pence per share, a fall of 8.8% in US
dollar terms and 11.1% in sterling terms. (All percentages have been calculated
with income reinvested.)
The first half of 2011 has proven to be a challenging phase in Latin American
equity markets which performed disappointingly. The region's equity markets
weakened as investors began to de-risk due largely to the structural risks
which have persisted in the global economy. To put this into some perspective,
the MSCI Emerging Markets Latin America Index closed the period down by 1.6%
while the MSCI Emerging Markets Index was up by 0.8%.
The Company's underperformance against the benchmark was due principally to the
portfolio's overweight position in Brazil and the level of gearing. Further
information on the Company's performance is included in the Investment
Manager's Report.
The fundamentals of the region remain strong, however the equity markets have not
been immune to the wider sell-off witnessed in global markets. Since the period end,
the Company's NAV has decreased by 21.3% (in US dollar terms) and by 22.6% (in
sterling terms) compared to a decrease of 20.4% (in US dollar terms) and 21.7% (in
sterling terms) in the benchmark index.
Dividends
The Company's revenue return per share amounted to 17.73 cents per share (2010:
15.75 cents per share). The Board is pleased to declare an interim dividend of
5.00 cents per share (2010: 5.00 cents per share), which will be paid on 23
September 2011 to shareholders on the register on 19 August 2011 (ex-dividend
date of 17 August 2011).
Convertible bonds
During the period and up to the date of this report, the Company has issued
2,227 ordinary shares following the conversion of US$20,000 convertible bonds
into ordinary shares. As at 9 August 2011, the Company had 43,841,312 ordinary
shares and US$79,948,000 convertible bonds in issue.
Bondholders will have further opportunities to convert their bonds into
ordinary shares at any time up to 14 September 2012 at a price of US$8.98 per
share (equivalent to £5.59 based on an exchange rate of 1.60545) and between
15 September 2012 and 1 September 2015 at a price of US$9.83 per ordinary share
(equivalent to £6.12 based on an exchange rate of 1.60545).
Discount control
As part of their discount control policy, the Directors of the Company have the
discretion to make semi-annual tender offers. The Directors announced on 6 July
2011 that they have decided not to implement a semi-annual tender offer in
September 2011. In the six month period ended 30 June 2011 the Company's
ordinary shares traded at an average discount to NAV (allowing for the full
conversion of the bonds) of 1.3 per cent. The discount has widened in recent
months and in June averaged 4.4 per cent.
The Board monitors the share price, trading volume and prevailing discount/
premium on a regular basis and has resolved, subject to market conditions, to
take such steps as are necessary from time to time to protect the share rating.
Prospects
Although uncertainty remains a major problem over the short term, investors in
Latin American markets should take comfort from the attractive valuations and
the economic growth prospects which are expected to provide a strong foundation
for corporate profits.
Peter Burnell
Chairman
9 August 2011
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 2010. A detailed explanation can be found on pages 15 and 16 of
the Annual Report and Financial Statements which are available on the website
maintained by the Investment Manager, BlackRock Investment Management (UK)
Limited, at www.blackrock.co.uk/brla.
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 and note 8. The related party
transactions with the Directors are set out in note 8.
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 9 August 2011 and
the above responsibility statement was signed on its behalf by the Chairman.
Peter Burnell
For and on behalf of the Board
9 August 2011
Investment Manager's Report
Latin American Market Overview
Performance in the period has been disappointing as shown in the Chairman's
Statement. Following strong performance in absolute and in relative terms
during 2010, the portfolio entered 2011 positioned with an overweight of
approximately 4.0% in Brazil, and net gearing of approximately 12.0%, most of
which was deployed in Brazil, and underweight positions in Chile and Colombia.
The underperformance during the year to date stemmed primarily from stock
selection in Brazil and Mexico, an overweight position in Peru, an
off-benchmark position in Colombia, our underweight position in Colombia and
the gearing. The average month end gearing used during the period was 14.0% and
at 30 June 2011 the Company had net gearing of US$68,848,000, equivalent to
13.2% of net assets (net gearing is defined as redeemable shares, loans,
overdrafts and bonds at par value less cash and fixed interest stocks as a
percentage of net assets). The underperformance was somewhat offset by positive
stock selection in Chile and an overweight position in Panama. At the stock
level, positive attribution stemmed from our overweight positions in Brazilian
beverage company Ambev, Panamanian airline Copa Holdings, Mexican beverage
company Femsa, underweight positions in oil giant Petrobrás and not owning
Brazilian steel names Gerdau or CSN. The largest detractors from performance
were our overweight positions in the Canadian listed Colombian oil company
Pacific Rubiales, Brazilian homebuilder Cyrela and Brazilian oil & gas company
OGX, as well as not owning Brazilian wireless name Vivo.
It has been a challenging first half of 2011. Some of the volatility seen in
equity markets so far this year was due specifically to issues in Brazil,
whilst there were other concerns relating to the European debt crisis and the
global growth scare especially in China and the United States. These issues
have led to increasing investor risk aversion and a risk-off trade with respect
to Latin America. As a result, asset classes which are generally considered to
be higher risk, such as Emerging Markets equities in general and Latin America
specifically, underperformed in the period.
Despite the volatility and events in global markets, Latin American equity
valuations continue to compare favourably, trading at a discount to most global
markets. Brazil continues to trade in the bottom half of global valuations at
around 9x 2011(estimate) P/E with earnings growth expected to be approximately
15%. This multiple is still at a discount to all other major Latin American
markets and the 11x multiple for Emerging Markets overall. Once the market
settles down and the focus returns to fundamentals, we believe Latin America
will be in a position to benefit and once again lead the way.
Year-To-Date Performance Figures
Local
Regions/ MSCI Currency
Indices Country (vs. USD) Local Index
% change % change % change
Argentina -8.2 -5.1 -2.1 (Merval)
Brazil -1.7 -7.6 -10.0 (Ibovespa)
Chile 0.3 0.2 -1.5 (IGPA)
Colombia 6.1 -2.0 -8.4 (IGBC)
Mexico 0.1 -5.1 -4.4 (IPC)
Peru -26.7 -28.2 -19.2 (IGBVL)
MSCI Latin America -1.6 CRB Index 5.8
MSCI Emerging Asia -1.6 Oil (WTI) 1.3
MSCI Emerging Markets 0.8 Gold 5.6
MSCI World 5.6 Copper -2.8
S&P 500 6.0 Corn 10.4
MSCI Europe 1.4 Soybeans -6.3
Sources: MSCI, Bloomberg and BlackRock (all figures on a capital only basis).
Brazil ranked as one of the worst performing markets among the region's MSCI
indices and in terms of US dollar returns for the local market. The reasons for
the sell-off in Brazil were a combination of concerns surrounding the new
administration and its commitment to the economic plan in place since 1994 as
well as the structural risks that remain in the global economy. The Central
Bank of Brazil restarted the current hiking process early on, raising rates in
January as well as four more times during the first six months of the year,
totalling 150 basis points, and bringing Brazilian nominal rates back to
12.25%. A further hike in July has widened rates to 12.50%. The goal is to slow
Brazil's economy enough to get 2012 inflation expectations back to the centre
of the stated target at 4.5%. We believe they will succeed without derailing
the middle class growth story we have focused on for the past five years.
Mexico's economic growth surprised on the upside from late January through to
early May. However, it remains heavily dependent on the US economy, which
coupled with weakness in recent macro releases from the United States, ongoing
security issues and political gridlock leads us to be concerned about the
prospects for the Mexican equity market. From a valuation perspective, we do
not find Mexico to be as compelling as Brazil. In addition, the opposition
party PRI which took control of the lower house during the 2009 mid-term
elections, seems intent on positioning itself to take over the presidency next
year. Year to date, the Mexican Bolsa has given back most of what it gained
earlier in the year returning 0.8% in US dollar returns (loss of 5.1% in
sterling terms) during the period.
Chile's equity market was ranked first among the region's local markets versus
the US dollar and second to Colombia in respect of the MSCI indices during the
first half of 2011, largely due to the continued infrastructure investments
being made after the devastation caused by last year's earthquake. In addition,
we have also seen positive macro policies from President Piñera's
administration; both of these factors have contributed to the rebound in
Chilean GDP growth. Despite consumer confidence in Chile indicating a belief in
the new administration, equity valuation levels remain expensive in our
opinion.
The Peruvian market has been the worst performing market in the region. We are
cautious on the prospects for the Peruvian economy given the recent election of
Ollanta Humala, which will put into question the continuity of successful fiscal
and monetary policies from the last two administrations.
Colombia's equity market was the region's best performing market among the MSCI
indices during the period. We expect Colombia to continue to benefit from
President Juan Manuel Santos giving continuity to former President Uribe's
successful policies; however, liquidity and market depth continue to be the
major issues for investing in the country.
Portfolio
During the first half of 2011, absolute weights saw the Brazilian weighting
increase by over 440 basis points. Both Mexico and Peru decreased in absolute
terms while Chile increased. On a relative basis the overweight to Brazil,
was increased by approximately 400 basis points and the underweight position
to Mexico was increased.
In Brazil, we maintained over 75% of gross assets in the country, with
underweight positions in Petrobrás and zero weighting in the steel sector
financing overweight positions in financials, retailers, consumer staples and
iron ore. We remain overweight in homebuilders but have reduced exposure
overall and rotated some of our exposure to the industry. In addition, we
increased exposure to malls & property and oil & gas and reduced exposure to
utilities during the period.
In Mexico, we moved from a neutral weight, largely due to gearing to an
underweight position during the period reducing metals & mining exposure
through Grupo Mexico, while adding to financials through Banorte. Mexico
remains unattractive from a valuation standpoint relative to other
opportunities in the region, especially Brazil.
In Chile, we deployed funds in the banking sector, the telecommunications
sector and the utilities sector from the proceeds generated from the sale of
retailers during the period. Valuations overall in Chile continue to look
expensive.
In Peru, we reduced our exposure by 240 basis points, with the majority
coming from the mining sector. We also reduced exposure to the banking sector
during the period. We began reducing our exposure to Peru in the first quarter
ahead of the presidential election and continued this reduction following the
election results. As mentioned previously, we do not find the prospects for
Peru that attractive with a Humala led administration. We reduced exposure to
an off-benchmark position in Colombia due to less attractive valuation levels.
Venezuela remained at zero, as did domestic Argentina.
Outlook
Despite the current sell-off and investor risk aversion seen so far this year,
and heightened in the last few trading sessions, Latin America's fundamentals
remain strong. Valuations, especially in Brazil, are once again at a discount
to most markets in the world. Risks to our positive views in the short term
continue to come mostly from outside the region, especially the aforementioned
issues in Europe, China and the United States. We continue to monitor the interest
rate tightening cycle in Brazil, believed necessary to bring inflation back to
target, and the implications of the recent Presidential election in Peru and the
forthcoming October Presidential election in Argentina. Overall, we continue to
be positive on the prospects for Latin America and expect Latin America's equity
markets to be among the first to recover once the recent sharp sell-off subsides.
William Landers
BlackRock Investment Management (UK) Limited
9 August 2011
Geographical and Sector Analysis
30 June 2011
Geographical weightings
Portfolio Weightings Benchmark Weightings
Brazil 75.9% 67.7%
Mexico 16.0% 19.2%
Chile 4.0% 7.4%
Panama 1.4% 0.0%
Colombia 1.1% 3.7%
Peru 1.1% 2.0%
Argentina 0.5% 0.0%
------ ------
100.0% 100.0%
------ ------
Sources: BlackRock and MSCI.
Sector weightings
Sector Weightings Benchmark Weightings
Consumer 24.1% 17.6%
Financials 23.1% 22.5%
Materials 15.5% 21.6%
Energy 15.5% 15.2%
Telecommunications 8.3% 8.7%
Industrials 7.8% 7.4%
Utilities 5.7% 7.0%
------ ------
100.0% 100.0%
------ ------
Sources: BlackRock and MSCI.
Ten Largest Investments
30 June 2011
Set out below is a brief description by the Investment Manager of the Company's
largest investments.
Vale - 12.7% (2010: 12.1%) is the world's largest producer of iron ore, with
operations in several other commodities, including nickel, copper and alumina.
The company is the lowest cash cost producer of iron ore and is positioned to
benefit from a tight iron ore market and continued growth in demand from
Chinese steel makers.
Itaú Unibanco - 11.1% (2010: 10.8%) is Brazil's largest private sector bank
that has maintained superior profitability levels while participating in the
overall growth in the Brazilian financial system. The bank continues to benefit
from Brazil's growing demand for credit, especially from individuals and small
and medium size enterprises.
Petrobrás - 10.2% (2010: 8.8%) is Brazil's vertically integrated oil company.
The company continues to invest heavily in increasing its production, utilising
free cash flow to guarantee future production growth. Oil finds in the pre-salt
region could transform the company (and Brazil) into one of the world's major
oil producers. The company's share price was adversely impacted by a US$70 billion
equity offering, which netted the company 5 billion barrels of additional reserves.
América Móvil - 7.2% (2010: 7.7%) is Latin America's leading provider of
wireless telecommunications services. In addition, it holds a 60% stake in
Telmex, Mexico's leading wireline provider, and 100% of Telmex International
and its significant backbone network throughout Latin America.
Banco Bradesco - 5.9% (2010: 5.4%) being 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 participate fully in Brazil's growing middle class and
its overall financial services needs.
AmBev - 4.2% (2010: 4.0%) 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. The company is showing good growth in Brazil and in many other
countries in the region while maintaining operating cost discipline throughout
its operations.
OGX - 2.9% (2010: 2.3%) is Brazil's largest private sector oil & gas company in
terms of offshore exploratory acreage. The company is moving ahead with its
exploratory campaign and is potentially looking to farm out part of its Campos
Basin.
Fomento Economico Mexicano - 2.6% (2010: 2.5%) - is a Mexican holding company
controlling Coca-Cola's largest independent bottler - Coca-Cola Femsa with
operations throughout Latin America and Mexico's fastest growing retailing
chain with over 6,300 Oxxo convenience stores throughout Mexico. In addition,
the company exchanged its wholly owned beer subsidiary for a 20% economic
interest in Heineken Group in April of last year.
Grupo Televisa - 2.3% (2010: 2.0%) is Mexico's leading television broadcasting
operator and leading provider of satellite and cable television. The latter has
allowed the company to become a leading provider of broadband internet access
and internet protocol telephony. In October 2010 the company acquired a
significant position in Univision, the leading Hispanic broadcaster in the
United States.
Lojas Renner - 2.0% (2010: 1.7%) is Brazil's largest department store. The
company is seeing growth from the domestic sector, growth in lending and in the
number of shopping malls.
All percentages reflect the value of the holding as a percentage of total
investments. Percentages in brackets represent the value of the holding as at
31 December 2010.
Investments
30 June 2011
Market
value % of
Country of operation US$'000 investments
Brazil
Vale 75,689 12.7
Itaú Unibanco } 66,035 11.1
Itaú Unibanco warrants* }
Petrobrás } 60,912 10.2
Petrobrás warrants* }
Banco Bradesco 34,935 5.9
AmBev 25,290 4.2
OGX } 17,393 2.9
OGX warrants* }
Lojas Renner } 12,073 2.0
Lojas Renner warrants* }
CCR 10,903 1.8
PDG Realty 10,116 1.7
Banco do Brasil 10,025 1.7
Natura } 9,798 1.6
Natura warrants* }
BM&F Bovespa 9,579 1.6
Cyrela Brazil Realty } 9,138 1.5
Cyrela Brazil Realty warrants* }
Hypermarcas } 7,550 1.3
Hypermarcas warrants* }
Anhanguera Educacional 6,379 1.1
BR Malls 6,249 1.0
Localiza Rent a Car 6,001 1.0
Queiroz Galvao Participacões 5,703 1.0
Magazine Luiza 5,461 0.9
Iochpe-Maxion 4,369 0.7
Tractebel Energia 4,297 0.7
T4F Entretenimento 4,033 0.7
Multiplus 4,005 0.7
BR Properties 3,831 0.6
Totvs 3,635 0.6
Braskem 3,565 0.6
Cemig 3,301 0.6
Saraiva Livreiros 3,223 0.5
Autometal 3,102 0.5
Klabin 3,042 0.5
LPS Brasil 3,041 0.5
Aes Tiete } 2,949 0.5
Aes Tiete warrants* }
CTEEP 2,910 0.5
DASA 2,688 0.5
Profarma Distribuidora 2,617 0.4
Rossi Residencial } 2,439 0.4
Rossi Residencial warrants* }
Marisa Lojas 2,133 0.4
Metalfrio Solutions 1,728 0.3
Iguatemi Empresa de Shopping Centers 1,572 0.3
Lupatech 1,023 0.2
------- -----
452,732 75.9
------- -----
Mexico
América Móvil 43,088 7.2
Fomento Economico Mexicano 15,295 2.6
Grupo Televisa 13,525 2.3
Genomma Lab Internacional 7,106 1.2
Walmart de México 5,171 0.9
Grupo Financiero Banorte 4,981 0.8
Grupo Mexico 2,637 0.4
Compartamos 2,513 0.4
Empresas ICA 1,372 0.2
------- -----
95,688 16.0
------- -----
Chile
Banco Santander-Chile 8,056 1.4
Empresa Nacional de Telecom 6,433 1.1
E-CL 5,592 0.9
Empresa Nacional de Electricidad 3,517 0.6
------- -----
23,598 4.0
------- -----
Panama
Copa 8,345 1.4
------- -----
8,345 1.4
------- -----
Colombia
Pacific Rubiales Energy 6,691 1.1
------- -----
6,691 1.1
------- -----
Peru
Southern Copper 2,860 0.5
Minas Buenaventura 2,277 0.4
Credicorp 1,120 0.2
------- -----
6,257 1.1
------- -----
Argentina
Ternium 2,807 0.5
------- -----
2,807 0.5
------- -----
Total investments 596,118 100.0
------- -----
* 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 30 June 2011 was 59 (30 June 2010: 60).
All investments are in equity shares unless otherwise stated.
Income Statement
for the six months ended 30 June 2011
Revenue Capital Total
US$'000 US$'000 US$'000
Six months ended Year ended Six months ended Year ended Six months ended Year ended
30.06.11 30.06.10 31.12.10 30.06.11 30.06.10 31.12.10 30.06.11 30.06.10 31.12.10
Notes (unaudited)(unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
(Losses)/
gains on
investments
held at
fair value
through
profit or
loss - - - (31,436) (60,254) 95,606 (31,436) (60,254) 95,606
Changes in
the
value of
convertible
bonds
held
at
fair
value
through
profit
or
loss - - - 4,805 4,800 (9,587) 4,805 4,800 (9,587)
Exchange
losses - - - (87) (464) (347) (87) (464) (347)
Income from
investments
held
at
fair
value
through
profit
or
loss 2 10,179 8,977 16,823 - - - 10,179 8,977 16,823
Other
income 2 2 1 1 - - - 2 1 1
Investment
management
and
performance
fees 3 (597) (493) (1,097) (1,790) (1,477) (6,198) (2,387) (1,970) (7,295)
Other
operating
expenses 4 (487) (563) (1,119) (515) (507) (743) (1,002) (1,070) (1,862)
----- ----- ------ ------ ------ ------ ------ ------ ------
Net return
before
finance
costs
and
taxation 9,097 7,922 14,608 (29,023) (57,902) 78,731 (19,926) (49,980) 93,339
Finance
costs (350) (357) (697) (1,050) (1,073) (2,091) (1,400) (1,430) (2,788)
----- ----- ------ ------ ------ ------ ------ ------ ------
Net return
on ordinary
activities
before
taxation 8,747 7,565 13,911 (30,073) (58,975) 76,640 (21,326) (51,410) 90,551
Taxation on
ordinary
activities (975) (660) (1,367) 978 243 (454) 3 (417) (1,821)
----- ----- ------ ------ ------ ------ ------ ------ ------
Net return
on ordinary
activities
after
taxation 7,772 6,905 12,544 (29,095) (58,732) 76,186 (21,323) (51,827) 88,730
----- ----- ------ ------ ------ ------ ------ ------ ------
Undiluted
return per
ordinary
share
(cents) 7 17.73 15.75 28.62 (66.37) (133.98) 173.79 (48.64) (118.23) 202.41
====== ====== ====== ====== ====== ====== ====== ====== ======
Diluted
return per
ordinary
share
(cents)* 7 17.73 15.75 24.74 (66.37) (133.98) 165.49 (48.64) (118.23) 190.23
====== ====== ====== ====== ====== ====== ====== ====== ======
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 ("AIC"). The
Company had no recognised gains and losses other than those disclosed in the
Income Statement. All items in the above statement derive from continuing
operations and no operations were acquired or discontinued during the period.
All income is attributable to the equity holders of BlackRock Latin American
Trust plc.
*The basis of calculating diluted return per ordinary share has been revised
and comparatives restated. Refer to note 7 for further details.
Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 June 2011
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 2011
(unaudited)
At 31 December 2010 4,384 11,687 4,602 4,356 481,637 17,835 524,501
Return for the period - - - - (29,095) 7,772 (21,323)
Share issue costs - (66) - - - - (66)
Shares issued on
conversion of
convertible bonds - 20 - - - - 20
Dividends paid 1 - - - - - (8,329) (8,329)
----- ------ ----- ----- ------- ------ -------
At 30 June 2011 4,384 11,641 4,602 4,356 452,542 17,278 494,803
----- ------ ----- ----- ------- ------ -------
for the six months
ended 30 June 2010
(unaudited)
At 31 December 2009 4,739 11,655 4,247 4,356 405,451 12,962 443,410
Return for the period - - - - (58,732) 6,905 (51,827)
Shares cancelled (355) - 355 - - - -
Dividends paid 2 - - - - - (5,479) (5,479)
----- ------ ----- ----- ------- ------ -------
At 30 June 2010 4,384 11,655 4,602 4,356 346,719 14,388 386,104
----- ------ ----- ----- ------- ------ -------
for the year ended
31 December 2010
(audited)
At 31 December 2009 4,739 11,655 4,247 4,356 405,451 12,962 443,410
Return for the year - - - - 76,186 12,544 88,730
Shares issued on
conversion of
convertible bonds - 32 - - - - 32
Share cancelled from
treasury (355) - 355 - - - -
Dividends paid 3 - - - - - (7,671) (7,671)
----- ------ ----- ----- ------- ------ -------
At 31 December 2010 4,384 11,687 4,602 4,356 481,637 17,835 524,501
----- ------ ----- ----- ------- ------ -------
1. Second interim dividend in respect of the year ended 31 December 2010 of
19.00 cents per share declared on 17 February 2011 and paid on 13 April 2011.
2. Second interim dividend in respect of the year ended 31 December 2009 of
12.50 cents per share declared on 17 February 2010 and paid on 14 April 2010.
3. Second interim dividend paid in respect of the year ended 31 December 2009
of 12.50 cents per share declared on 17 February 2010 and paid on 14 April 2010
and the first interim dividend for the year ended 31 December 2010 of 5.00
cents per share declared on 3 August 2010 and paid on 24 September 2010.
During the period the Company incurred purchase transaction costs of US$97,000,
(six months ended 30 June 2010: US$180,000; year ended 31 December 2010:
US$314,000) and sales transaction costs of US$125,000 (six months ended 30 June
2010: US$197,000; year ended 31 December 2010: US$343,000). All transaction
costs have been included within the capital column of the Income Statement.
Balance Sheet
as at 30 June 2011
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
Notes (unaudited) (unaudited) (audited)
Fixed assets
Investments held at fair value
through profit or loss 596,118 478,246 641,050
-------- ------- ---------
Current assets
Debtors 3,413 3,692 3,960
Cash 11,124 4,813 5
-------- ------- ---------
14,537 8,505 3,965
Creditors - amounts falling due
within one year
Bank overdrafts - - (232)
Other creditors (8,698) (3,023) (8,303)
-------- ------- ---------
(8,698) (3,023) (8,535)
-------- ------- ---------
Net current assets/(liabilities) 5,839 5,482 (4,570)
-------- ------- ---------
Total assets less current
liabilities 601,957 483,728 636,480
Creditors - amounts falling due
after more than one year
Non equity redeemable shares (24) (24) (24)
Convertible bonds held at fair
value through profit or loss (107,130) (97,600) (111,955)
-------- ------- ---------
Net assets 494,803 386,104 524,501
-------- ------- ---------
Capital and reserves
Share capital 6 4,384 4,384 4,384
Share premium account 11,641 11,655 11,687
Capital redemption reserve 4,602 4,602 4,602
Non distributable reserve 4,356 4,356 4,356
Capital reserves 452,542 346,719 481,637
Revenue reserve 17,278 14,388 17,835
-------- ------- ---------
Total equity shareholders'
funds 494,803 386,104 524,501
-------- ------- ---------
Net asset value per ordinary
share (cents) - debt at fair value 7 1,128.62 880.80 1,196.42
-------- ------- ---------
Net asset value per ordinary
share (cents) - debt converted 7 1,142.82 918.67 1,208.28
-------- ------- ---------
Cash Flow Statement
for the six months ended 30 June 2011
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Net cash inflow from operating
activities 9,606 5,446 9,344
Servicing of finance
Finance costs (1,400) (1,641) (3,002)
Taxation paid (496) (417) (863)
------ ------- -------
Capital expenditure and financial
investment
Purchase of investments (92,361) (214,359) (362,368)
Proceeds from sale of investments 105,006 217,050 359,952
Capital expenses (522) (740) (685)
------ ------- -------
Net cash inflow/(outflow) from capital
expenditure and financial investment 12,123 1,951 (3,101)
------ ------- -------
Equity dividends paid (8,329) (5,479) (7,671)
------ ------- -------
Net cash inflow/(outflow) before
financing 11,504 (140) (5,293)
------ ------- -------
Financing
Share issue expenses paid (66) - -
------ ------- -------
Net cash outflow from financing (66) - -
------ ------- -------
Increase/(decrease) in cash in the
period 11,438 (140) (5,293)
------ ------- -------
Reconciliation of Net Return before Finance Costs and Taxation to Net Cash Flow
from Operating Activities
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Net return before finance costs and
taxation (19,926) (49,980) 93,339
Losses/(gains) on investments held at
fair value through profit or loss 31,436 60,254 (95,606)
Fair value adjustment for the
convertible bonds (4,805) (4,800) 9,587
Exchange losses of a capital nature 87 464 347
Non-operating expenses of a capital
nature 515 507 743
(Increase)/decrease in accrued income (8) 182 (954)
Increase/(decrease) in creditors 2,307 (1,181) 1,888
------- ------ ------
Net cash inflow from operating
activities 9,606 5,446 9,344
------- ------ ------
Notes to the Financial Statements
for the six months ended 30 June 2011
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 sub-sections 1158-1165 of the Corporation Tax Act
2010. The half yearly financial statements have been prepared on the same basis
as the accounting policies set out in the Company's financial statements as at
31 December 2010, unless otherwise stated.
Under FRS26 "Financial instruments: Measurements" the Company has designated
its assets and liablities as being measured as "fair value through profit or
loss". The fair value of fixed asset investments is deemed to be the 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")
revised in January 2009.
2. Income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Overseas dividends 10,041 7,849 14,735
Interest income 138 1,128 2,088
------ ----- ------
10,179 8,977 16,823
Interest receivable and other income:
Deposit interest 2 1 1
------ ----- ------
Total 10,181 8,978 16,824
====== ===== ======
3. Investment management and performance fees
The investment management fee has been calculated at 0.85% per annum on the NAV
plus 0.34% on the US$79,948,000 convertible bonds. 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 Emerging Markets 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 was payable in respect on the period ended 30 June 2011 (six
months ended 30 June 2010: nil; year ended 31 December 2010: US$2,907,000).
4. Operating expenses
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Custody fee 91 146 267
Directors' emoluments 158 144 267
Other administration costs 238 273 585
--- --- -----
487 563 1,119
=== === =====
5. Dividends
The Board has declared a first interim dividend of 5.00 cents (2010: 5.00 cents)
payable on 23 September 2011 to shareholders on the register as at 19 August 2011.
The total cost of this dividend, based on 43,841,312 ordinary shares in issue at
9 August 2011 is US$2,192,000 (30 June 2010: 43,835,522 shares and cost US$2,192,000).
6. Share capital
Number of Nominal
shares in value
issue US$'000
Allotted, called-up and fully paid share capital
comprised:
Ordinary shares of 10 cents each
At 31 December 2010 43,839,085 4,384
Conversion of bonds into ordinary shares 2,227 -
---------- -----
At 30 June 2011 43,841,312 4,384
========== =====
No ordinary shares were repurchased during the period or in respect of the six
months ended 30 June 2010 or the year ended 31 December 2010. 2,227 ordinary
shares were issued following the conversion of US$20,000 convertible bonds.
At 30 June 2011, the Company had 43,841,312 shares in issue. There were no
shares held in treasury.
7. Returns and net asset value per ordinary share
30 June 30 June 31 December
2011 2010 2010
(unaudited) (unaudited) (audited)
Net revenue return attributable
to ordinary shareholders
(US$'000) 7,772 6,905 12,544
Net capital return attributable
to ordinary shareholders
(US$'000) (29,095) (58,732) 76,186
---------- ---------- ----------
Total return attributable to
ordinary shareholders (US$'000) (21,323) (51,827) 88,730
========== ========== ==========
Equity shareholders' funds
(US$'000) 494,803 386,104 524,501
========== ========== ==========
Net revenue return on which the
diluted earnings per share has
been calculated 7,772 6,905 13,048
Net capital return on which the
diluted earnings per share has
been calculated (29,095) (58,732) 87,285
---------- ---------- ----------
Net total return attributable to
ordinary shareholders (US$'000)* (21,323) (51,827) 100,333
---------- ---------- ----------
The weighted average number of
ordinary shares in issue during
the period, on which the return
per ordinary share was
calculated, was: 43,840,192 43,835,522 43,836,049
---------- ---------- ----------
The weighted average number of
ordinary shares in issue during
the period, on which the diluted
return per ordinary share was
calculated, was: 43,840,192 43,835,522 52,744,207
---------- ---------- ----------
*Where dilution occurs, the net returns are adjusted for items relating to the convertible
bonds. The basis of calculating diluted returns has been revised and comparative information
restated. Total earnings for the period are tested for dilution. Once dilution has been
determined individual revenue and capital earnings are adjusted. Bond finance costs for the
period, net of tax, are reversed together with the fair value adjustment on the convertible
bonds.
The actual number of ordinary
shares in issue at the end of
each period, on which the
undiluted net asset value was
calculated, was: 43,841,312 43,835,522 43,839,085
---------- ---------- ----------
The number of ordinary shares in
issue at the end of each period,
on which the diluted net asset
value was calculated, was: 52,744,207 52,744,207 52,744,207
---------- ---------- ----------
Undiluted return per share Cents Cents Cents
Revenue return per share 17.73 15.75 28.62
Capital return per share (66.37) (133.98) 173.79
---------- ---------- ----------
Total return per share (48.64) (118.23) 202.41
========== ========== ==========
Net asset value per share - debt
at fair value 1,128.62 880.80 1,196.42
Ordinary share price
(mid-market)* 1,075.65 921.60 1,200.07
========== ========== ==========
Diluted return per share**
Revenue return per share 17.73 15.75 24.74
Capital return per share (66.37) (133.98) 165.49
---------- ---------- ----------
Total return per share (48.64) (118.23) 190.23
========== ========== ==========
Net asset value per share - debt US$'000 US$'000 US$'000
converted
Net assets with convertible
bonds at fair value per balance
sheet 494,803 386,104 524,501
Add back convertible bonds at
fair value 107,130 97,600 111,955
Accrued interest on convertible
bonds at balance sheet date 840 840 840
---------- ---------- ----------
Adjusted net assets following
conversion of the convertible
bonds (a) 602,773 484,544 637,296
========== ========== ==========
Number of ordinary shares for
NAV 43,841,312 43,835,522 43,839,085
Number of ordinary shares
arising on conversion of
convertible bonds (US$79,948,000
@ US$8.98) (30 June 2010 and
31 December 2010: US$79,968,000
@ US$8.98) 8,902,895 8,908,685 8,905,122
---------- ---------- ----------
Number of ordinary shares
following conversion of
convertible bonds NAV (b) 52,744,207 52,744,207 52,744,207
========== ========== ==========
Net asset value per share - debt
converted (cents) (a/b) 1,142.82 918.67 1,208.28
========== ========== ==========
* The Company's share price is quoted in sterling and the above represents the
US dollar equivalent.
** ** For the periods ending 30 June 2011 and 30 June 2010 there was no dilution.
Comparative information has been restated.
8. Related party disclosure
BlackRock Investment Management (UK) Limited ("BlackRock") provides management
and administration services to the Company under a contract which is terminable
on six months' notice. Details of the fees receivable by BlackRock in relation
to these services are set out in note 3.
The investment management fee for the six months ended 30 June 2011 amounted to
US$2,387,000 (six months ended 30 June 2010: US$1,970,000; year ended 31
December 2010: US$4,388,000). No performance fee was payable for the six months
ended 30 June 2011 (six months ended 30 June 2010: nil; year ended 31 December
2010: US$2,907,000).
At the period end, an amount US$6,545,000 was outstanding in respect of these
fees (six months ended 30 June 2010: US$1,351,000; year ended 31 December 2010:
US$4,159,000).
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. With effect from 1 January 2011, the Chairman receives an
annual fee of £39,000 (US$61,000), the Chairman of the Audit Committee/Senior
Independent Director receives an annual fee of £30,000 (US$47,000) and each of
the other Directors receives an annual fee of £26,000 (US$41,000).
At the period end members of the Board held ordinary shares and convertible
bonds in the Company as set out below:
Ordinary Convertible
shares bonds
P C D Burnell (Chairman) 3,000 100
The Earl St Aldwyn 1,470 100
Dr M Doctor - -
A Monteiro de Castro 47,000 100
D R O'Conor 12,007 -
L A Whitehead 6,037 100
9. Contingent liabilities
There were no contingent liabilities at 30 June 2011 (2010: nil).
10. Publication of non statutory accounts
The financial information contained in this half yearly report does not
constitute statutory accounts as defined in section 435 of the Companies Act
2006. The financial information for the six months ended 30 June 2011 and
30 June 2010 has not been audited.
The information for the year ended 31 December 2010 has been extracted from the
latest published audited financial statements, which have been filed with the
Registrar of Companies, unless otherwise stated. The report of the auditors on
those accounts contained no qualification or statement under sections 498(2)
or (3) of the Companies Act 2006.
11. Annual results
The Board expects to announce the annual results for the year ending
31 December 2011 as prepared under UK GAAP in mid February 2012. Copies of the
results announcement can be obtained from the Secretary on 020 7743 3000. The
annual report should be available by the beginning of March 2012, with the
Annual General Meeting being held in May 2012.
For further information, please contact:
Jonathan Ruck Keene, Managing Director, Investment Companies, BlackRock
Investment Management (UK) Limited
Tel: 020 7743 2178
Peter Burnell - Chairman
Tel: 01434 632292
Emma Phillips, Media & Communication, BlackRock Investment Management (UK)
Limited
Tel: 020 7743 2922
Henrietta Guthrie, Lansons Communications
Tel: 020 7294 3612
9 August 2011
12 Throgmorton Avenue
London EC2N 2DL
The Half Yearly Financial Report will also be available on the BlackRock
Investment Management website at
http://www.blackrock.co.uk/content/groups/uksite/documents/literature/blk047183.pdf.
Neither the contents of the Manager's website nor the contents of any website
accessible from hyperlinks onthe Manager's website (or any other website) is
incorporated into, or forms part of, this announcement.
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