Half-yearly Report
3 August 2010
BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC
Half yearly financial announcement of results in respect of the six months
ended 30 June 2010
Chairman's Statement
Performance
The six months ended 30 June 2010 have experienced a period of mixed fortunes
for global equity markets. The first few months were characterised by strong
market performances but this was followed by more unsettled conditions in late
April which worsened over the remainder of the period, May and June being
notably poor months for equities.
Latin American equities reacted negatively to the adverse market conditions,
sparking a nervous reaction from investors who began a period of de-risking.
The Company's net asset value ("NAV") ended the period at 880.80 cents per
share (equivalent to 588.73 pence per share), representing a total return of
-11.8% in US dollar terms and -4.8% in sterling terms. During the same period,
the benchmark index fell by 10.5% in US dollar terms and by 3.4% in sterling
terms. The share price fell to 616.00 pence per share, a fall of 10.0% in US
dollar terms and 2.9% in sterling terms (all percentages have been calculated
with income reinvested).
The underperformance against the benchmark is largely attributable to the
portfolio's overweight position in Brazil, its underweight positions in Chile
and Mexico and the impact of being geared in a falling market. These negative
factors were partly offset by positive contributions from stock selection,
particularly in Brazil and Mexico.
Further information on the Company's performance is included in the Investment
Manager's Report.
We are pleased to note a sharp rise in Latin American markets since the period
end with the Company's NAV increasing by 19.0% in US dollar terms and by
12.0% in sterling terms compared to an increase of 14.4% in US dollar terms
and 7.6% in sterling terms in the benchmark index. In the year to date the
Company's NAV has risen by 4.9% in US dollar terms and 6.6% in sterling
terms compared to increases of 2.4% and 4.0% respectively in the benchmark
index.
Dividends
The Company's revenue return per share amounted to 15.75 cents per share (2009:
5.14 cents per share). The increase in revenue is due partly to the income
generated from the proceeds of the convertible bond issue, including 2.6 cents
per share generated by the Company's holding in Brazilian bonds which are
currently yielding 10% in local currency terms. Higher yields over the period
on portfolio holdings, including a number of special dividends, have also
contributed to the enhanced return. The Board is pleased to declare an
increased interim dividend of 5.00 cents per share (2009: 2.50 cents per
share), which will be paid on 24 September 2010 to shareholders on the register
on 13 August 2010 and marked ex-dividend on 11 August 2010. The increase in the
level of interim dividend should not be interpreted as indicative of the level
of the second interim dividend.
Redenomination of bonds
The Directors announced on 12 May 2010 that following the bondholders' meeting
on 11 May 2010, the bond denomination was changed from US$100,000 per bond to
US$1,000 per bond with effect from the start of trading on 13 May 2010.
Discount control
As part of their discount control policy, the Directors of the Company have
discretion to make a semi-annual tender offer on 30 September 2010.
The Directors announced on 8 July 2010 that over the six month period ended 30
June 2010, the average discount to NAV had been 1.7% and had ranged from a
discount of 5.3% to a premium of 6.4%. Given this favourable background, the
Board concluded that it was not in the interests of shareholders as a whole to
implement a semi-annual tender offer in September 2010 at a discount to NAV.
The Board will continue to pay close attention to the rating of the shares in
the market and trading activity and where necessary will take appropriate
action to address any supply/demand imbalance.
Award
The Board is pleased to report that the Company recently won the What
Investment award (specialist sector or geographical mandate) for the investment
trust with the most consistent performance over the past 10 years.
Prospects
The combination of positive earnings growth and attractive valuations makes for
a favourable outlook for the Latin American region, particularly for the
domestic related sectors. Extraneous factors within the broader global
framework provide some uncertainty however, and markets look set to remain
volatile.
Peter Burnell
Chairman
3 August 2010
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 2009. 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 fee payable 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 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 3 August 2010 and
the above responsibility statement was signed on its behalf by the Chairman.
Investment Manager's Report
Latin American Market Overview
During the first six months of 2010, the Company posted a 11.8% depreciation in
its NAV and a 10.0% decrease in the ordinary share price, in US dollar terms
(equivalent to falls of 4.8% and 2.9%, respectively, in sterling terms). Over
the same period the MSCI Latin America Index posted a decrease of 10.5%
(equivalent to a fall of 3.4% in sterling terms); placing Latin America among
the most negatively impacted regions of the world during the period (all
percentages have been calculated with income reinvested).
Following strong performance, both in absolute as well as relative terms during
the second half of 2009, the portfolio entered 2010 positioned with a large
overweight position of approximately 12.5% in Brazil, gearing of about 20%,
most of which was deployed in Brazil and underweight positions in Chile and
Mexico. The year to date underperformance was mainly due to our overweight
position in Brazil, our underweight positions in Chile and Colombia and the use
of gearing. The underperformance was somewhat offset by positive stock
selection from Brazil and Mexico. At the stock level, positive attribution came
via our overweight positions in Mexican consumer goods Genomma Labs, the
Republic of Brazil bonds, Peru's bank Credicorp, Mexico's wireless giant
América Móvil and Brazil's consumer goods Hypermarcas, industrial Iochpe-Maxion
and utility CPFL Energia. The largest detractor from performance was our
overweight position in Brazil's largest bank, Banco Itaú.
Latin America failed to attract global investors in the first half of the year
as volatility and investor risk aversion increased. As equity markets retreated
from their highs in the fourth quarter of 2009, Latin America ranked among the
worst performing markets. Performance was particularly soft during May when
concerns regarding the potential worsening of the Eurozone financial crisis and
the strength of China emerged. 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 the global market, Latin America continues
to compare favourably from a valuation perspective, trading at a discount to
most global markets. Brazil continues to trade in the bottom half of the global
valuations at approximately 11x 2010 estimated P/E, with earnings growth
expected to be over 40%. This multiple is still at a discount to all other
major Latin American markets and the 12.5x 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 again lead the way
for markets.
YTD Performance Figures
Local
MSCI Currency
Country (vs. USD) Local Index
Regions/Indices % change % change % change
Argentina -3.8 -0.5 -5.8 (Merval)
Brazil -16.5 -13.8 -11.2 (Ibovespa)
Chile 1.5 9.5 13.3 (IGPA)
Colombia 13.3 5.8 7.3 (IGBC)
Mexico -2.5 -4.1 -3.0 (IPC)
Peru 2.9 0.7 -1.3 (IGBVL)
MSCI Latin America -10.5 CRB Index -0.5
MSCI Emerging Asia -4.1 Oil (WTI) -8.4
MSCI Emerging Markets -6.0 Gold 13.3
MSCI World -9.8 Copper -12.6
S&P 500 -6.7 Corn -15.3
MSCI Europe -16.7 Soybeans 0.9
Source: MSCI, Bloomberg, UBS and BlackRock (all figures on a capital only
basis).
Brazil ranked as the worst performing market 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 due mainly to activities outside the region and have
little to do with the country's economic performance. The Central Bank of
Brazil began increasing rates in April and has increased rates twice during the
first six months of the year, totalling 150 basis points, and bringing
Brazilian nominal rates back above 10.0% to 10.25%. We believe that Brazil's
growing middle class, the unmet pent-up demand in the areas of credit and
housing, as well as the continued availability and affordability of credit
should continue to fuel the already strong domestic economy.
Mexico's economy surprised on the upside during the early part of 2010, however
it remains heavily dependent on the US economy, which coupled with continued
weakness in remittances (money from Mexican-Americans working in the US that is
sent to their families in Mexico) leads us to expect a deceleration in that
economy in the second half of the year. The country's growth rate should be
significantly lower than Brazil's with the defining factor being the strength
of the US economic recovery, which we expect to be muted. 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 in last
summer's mid-term elections now seems intent on positioning itself to take over
the presidency in 2012. Over the year-to-date, the Mexican bolsa has given back
all it gained earlier in the year returning a decrease of 1.4% in US dollar
returns during the period.
The Chilean equity market ranked second in the region behind Colombia in US
dollar returns for the local market and third among MSCI indices during the
first half of 2010 stemming mostly from infrastructure investments being made
following the devastation caused by an earthquake early in the year. The main
focus for President Piñera's administration so far has been on rebuilding the
affected areas, which would leave any reforms for later in his presidency. So
far, consumer confidence in Chile is indicating a belief in the new
administration, while equity valuation levels have begun to look interesting
for the first time in a long time.
The Peruvian market has been flat in US dollar returns for the local market and
in the year to date has ranked second among the MSCI indices. We expect the
Peruvian economy to rebound strongly this year. The country has started to see
lots of infrastructure investment happening. Colombia's market was the best
performer in US dollar terms. We expect Colombia to benefit from the recent
election of Juan Manuel Santos which should ensure the continuation of former
President Uribe's successful policies; however, liquidity and market depth
continue to be the major issues for investing in the country. For the time
being, in our opinion Argentina continues to rank as a market to be avoided,
despite settlement of some defaulted bonds.
Portfolio
During the first half of 2010, absolute weights saw Brazil fall by
approximately 570 basis points with Peru, Mexico, Chile and Colombia increasing
in absolute terms. The overweight position in Brazil was reduced by
approximately 240 basis points relative to the benchmark and the underweight to
Mexico was decreased.
In Brazil, we maintained close to 73% of assets in the country (including
Republic of Brazil bonds), with underweight positions in Petrobras and the
steel sector financing overweight positions in financials, retailers, staples,
and homebuilders. In addition, we exited airlines and reduced exposure to pulp
& paper and oil during the period.
In Mexico, we reduced our underweight position in the country late in the
period, adding to América Móvil, while maintaining an overweight position in
media. During the period we closed our position in Cemex, exited the Mexican
housing industry and added to beverages. The outperformance in the first half
of the year has decreased Mexico's attractiveness from a valuation standpoint.
In Chile, we deployed funds into airlines due to expected better performance
during the year. We have recently begun adding to Chile given valuations which
are no longer expensive.
In Peru, we increased our exposure to financials and mining as an indirect way
to play the global recovery, given our expectations of domestic growth focus in
the Peruvian economy. Venezuela remained at zero, as did domestic Argentina -
we reduced off-benchmark investments in the materials sector that we classify
as Argentine investments given their Buenos Aires headquarters.
We raised gearing last year via the convertible bonds issue as a way to have
structural gearing given our positive views on the market. Our view has not
changed and of the 19.1% gearing, we have 3.8% in Brazilian bonds and the
balance invested across the portfolio.
Outlook
The Company continues to be positioned to benefit from an improving global
macro economic scenario. The fundamentals remain strong and valuations
attractive for the region despite increased volatility and investor risk
aversion over the first half of the year and especially in the second quarter.
Brazil's domestic demand story remains intact posting strong growth,
unemployment figures that are at record low levels and banks continue to look
for ways to grow their loan book at an accelerated pace. We do not feel that
the current interest rate tightening cycle will derail the strong domestic
economy. The Central Bank has shown that it will do whatever it takes in order
to keep inflation under control. We do not think rates need to go much higher
than their current level. The portfolio continues to have an overweight
position in Brazil, with the major focus continuing to be on domestic sectors,
especially banks, homebuilders and retailers. These sectors continue to benefit
from the growing middle class (today, over 2â„3 of Brazil's population is `C'
class or better), greater credit availability and affordability, record low
unemployment, and increasing purchasing power. Commodity stocks remain an
important part of the Brazilian investment story, although for the time being,
we maintain underweight positions in steel as well as energy. In addition, we
are not anticipating any major economic policy changes, as a result of the
presidential elections in October from either of the leading candidates.
Overall, we expect Latin American equity markets to post positive returns
during the second half of 2010, given positive earnings growth and attractive
valuation levels compared with other regions in the world.
Risks to our positive views on Latin America stem mostly from outside
activities - a deepening of the Eurozone debt crisis, double-dip in the US
economy, China overplaying its efforts to slow down its economy - any of which
would most likely result in falling investor risk appetite and lower demand for
Latin American equities. High local interest rates and strong economic growth
have been supportive of regional currencies, however in relation to Sterling
they would be vulnerable in a period of global risk aversion. Locally, we are
confident regarding most Central Banks' commitments with inflation targeting,
we do not expect the current election cycle to shift the direction of the main
economies we are investing in, but need to keep a close eye on both as a change
in direction would impact our positive views regarding the region's domestic
economies.
Will Landers
BlackRock Investment Management (UK) Limited
3 August 2010
Geographical and sector analysis
Geographical Weightings
Country Portfolio Benchmark
Weighting % Weighting %
Brazil 72.9 67.6
Mexico 17.6 19.3
Peru 4.7 2.8
Chile 3.0 6.8
Panama 1.2 0.0
Argentina 0.6 0.0
Colombia 0.0 3.5
Total 100.0 100.0
Sources: BlackRock and MSCI
Sector Weightings
Sector Portfolio Benchmark
Weighting % Weighting %
Consumer 22.3 15.3
Energy 11.9 15.3
Financials 20.2 21.5
Industrials 9.3 9.8
Materials 16.1 22.0
Telecommunications 10.1 9.4
Utilities 6.3 6.7
Fixed income 3.8 0.0
Total 100.0 100.0
Sources: BlackRock and MSCI
Ten Largest Equity Investments
Vale - 11.5% (2009: 10.5%) 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.
Banco Itaú - 9.5% (2009: 7.3%) became Brazil's largest private sector bank
after the merger with Unibanco in 2009. Itaú has maintained superior
profitability levels while participating in the overall growth in the Brazil's
financial system and the combined entity should be able to generate significant
gains from synergies.
Petrobrás - 9.4% (2009: 11.9%) 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. Recent new oil finds in
the pre-salt region could transform the company (and Brazil) into one of the
world's major oil producers.
América Móvil - 9.4% (2009: 5.2%) is Latin America's leading provider of
wireless communications. The company recently acquired Carso Global Telecom
(giving it a 60% stake in Telmex) and Telmex International - these acquisitions
allow the company to offer better bundled products as well as better manage its
backbone.
Banco Bradesco - 5.1% (2009: 3.4%) is Brazil's second largest private sector
bank and 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 Bradesco's leading branch network positions the bank to
offer such products.
Cyrela Brazil Realty - 2.8% (2009: 2.3%) is Brazil's largest homebuilder.
Traditionally the leader in the upper end of Brazil's market, the company has
quickly become a leading operator for the low income segment through its wholly
owned subsidiary Living.
Fomento Economico Mexicano - 2.7% (2009: 1.6%) is Mexico's leading beverages
company. The company has three main subsidiaries - Cerveza (Mexico's second
largest beer producer), Coke Femsa (Coca-Cola's leading bottler in Latin
America), and Oxxo (Mexico's leading convenience stores chain). Oxxo has been
the main driver for growth recently, while the beverages divisions continue to
act as defensive staples producers.
Lojas Renner - 2.2% (2009: 1.3%) is Brazil's largest department store. The
company has benefitted from growth in the domestic sector, growth in lending
and in the number of shopping malls.
Grupo Televisa - 2.2% (2009: 2.4%) is Mexico's leading TV broadcast 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.
OGXPetroleoegas Participações - 2.0% (2009: 1.8%) is Brazil's largest private
sector oil and gas company in terms of offshore exploratory acreage. The
company is moving ahead with its exploratory campaign with 27 oil wells
forecast to be drilled in 2010.
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 2009.
Investments
Market
value % of
Country of operation US$'000 investments
Brazil
Vale 54,758 11.5
Banco Itaú 45,084 9.5
Petrobràs 45,063 9.4
Banco Bradesco 24,583 5.1
Republic of Brazil 0% 01/07/10 18,291 3.8
Cyrela Brazil Realty }
Cyrela Brazil warrants } 13,422 2.8
Lojas Renner }
Lojas Renner warrants } 10,602 2.2
OGX Petroleoegas Participações }
OGX Petroleoegas Participações warrants } 9,647 2.0
AmBev 9,091 1.9
BM&F Bovespa 8,663 1.8
CBD 8,343 1.7
Hypermarcas }
Hypermarcas warrants } 7,706 1.6
PDG Realty }
PDG Realty warrants } 7,555 1.6
CPFL Energia 5,903 1.2
Localiza Rent a Car 5,761 1.2
Anhanguera Educacional 4,940 1.0
CESP 4,436 0.9
lochpe-Maxion 4,125 0.9
Telenorte Leste 4,028 0.8
DASA 3,750 0.8
Odontoprev 3,467 0.7
Saraiva Livreiros 3,277 0.7
Multiplus 3,212 0.7
CCR 3,111 0.7
Tractebel Energia 2,850 0.6
Totvs 2,713 0.6
Profarma Distribuidora 2,500 0.5
BR Malls 2,477 0.5
BR Properties 2,449 0.5
EDP - Energias do Brasil 2,400 0.5
Cemig 2,346 0.5
CTEEP 2,325 0.5
Rossi Residencial }
Rossi Residencial warrants } 2,165 0.5
Aes Tiete 2,058 0.4
Banco do Brasil }
Banco do Brasil warrants } 2,051 0.4
Banco BIC 1,937 0.4
Natura Cosmeticos 1,864 0.4
Lupatech 1,770 0.4
WEG 1,733 0.4
Suzano Papel E Celulose 1,551 0.3
Banco ABC Brasil 1,417 0.3
Metalfrio Solutions 1,232 0.3
Light 1,166 0.2
Iguatemi Empresa de Shopping Centers 1,134 0.2
------- -----
348,956 72.9
------- -----
Mexico
América Móvil 45,049 9.4
Fomento Economico Mexicano 12,945 2.7
Grupo Televisa 10,440 2.2
Walmart de México 4,892 1.0
Grupo México 4,689 1.0
Genomma Lab Internacional 4,668 1.0
Empresas ICA 1,422 0.3
------- -----
84,105 17.6
------- -----
Peru
Credicorp 9,089 1.9
Minas Buenaventura 8,629 1.8
Southern Copper 4,645 1.0
------- -----
22,363 4.7
------- -----
Chile
Banco Santander - Chile 4,696 1.0
Lan Airlines 3,723 0.8
Falabella 2,892 0.6
Empresa Nacional de Electricidad 2,858 0.6
------- -----
14,169 3.0
------- -----
Panama
Copa 5,526 1.2
------- -----
5,526 1.2
------- -----
Argentina
Ternium 3,127 0.6
------- -----
3,127 0.6
------- -----
Total investments 478,246 100.0
------- -----
The total number of investments held at 30 June 2010 was 60 (31 December 2009:
74). All investments are in equity shares unless otherwise stated.
INCOME STATEMENT
for the six months ended 30 June 2010
Revenue US$'000 Capital US$'000 Total US$'000
Six Six Six Six Year Six Six
months months Year months months ended months months Year
ended ended ended ended ended ended ended ended ended
30.06.10 30.06.09 31.12.09 30.06.10 30.06.09 31.12.09 30.06.10 30.06.09 31.12.09
Notes (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
(Losses)/
gains on
investments
held at
fair value
through
profit or
loss - - - (60,254) 107,150 262,094 (60,254) 107,150 262,094
Gains/
(losses) on
fair value
of
convertible
bonds - - - 4,800 - (22,400) 4,800 - (22,400)
Exchange
(losses)/
gains - - - (464) 682 567 (464) 682 567
Income from
investments
held at
fair value
through
profit or
loss 2 8,977 4,142 11,986 - - - 8,977 4,142 11,986
Other
income 2 1 1 1 - - - 1 1 1
Investment
management
fee 3 (493) (279) (761) (1,477) (835) (2,283) (1,970) (1,114) (3,044)
Other
operating
expenses 4 (563) (554) (1,103) (507) (18) (187) (1,070) (572) (1,290)
-------- -------- -------- --------- --------- --------- --------- --------- ---------
Net return/
(loss)
before
finance
costs and
taxation 7,922 3,310 10,123 (57,902) 106,979 237,791 (49,980) 110,289 247,914
Finance
costs (357) (33) (520) (1,073) (99) (1,560) (1,430) (132) (2,080)
-------- -------- -------- --------- --------- --------- --------- --------- ---------
Net return/
(loss) on
ordinary
activities
before
taxation 7,565 3,277 9,603 (58,975) 106,880 236,231 (51,410) 110,157 245,834
Taxation
(charges)/
credit (660) (931) (1,302) 243 262 1,154 (417) (669) (148)
-------- -------- -------- --------- --------- --------- --------- --------- ---------
Net return/
(loss) on
ordinary
activities
after
taxation 6,905 2,346 8,301 (58,732) 107,142 237,385 (51,827) 109,488 245,686
-------- -------- -------- --------- --------- --------- --------- --------- ---------
Undiluted
return /
(loss) per
ordinary
share -
(cents) 7 15.75 5.14 18.57 (133.98) 234.95 530.92 (118.23) 240.09 549.49
====== ====== ====== ====== ====== ====== ====== ====== ======
Diluted
return /
(loss) per
ordinary
share -
(cents) 7 13.76 5.14 17.98 (133.98) 234.95 502.69 (120.22) 240.09 520.67
====== ====== ====== ====== ====== ====== ====== ====== ======
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 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 reserves reserves reserve Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
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(a) - - - - - (5,479) (5,479)
----- ------ ----- ----- ------- ------ -------
At 30 June 2010 4,384 11,655 4,602 4,356 346,719 14,388 386,104
----- ------ ----- ----- ------- ------ -------
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
Return for the period - - - - 107,142 2,346 109,488
Shares repurchased
and held in treasury - - - - (16,534) - (16,534)
Share purchase costs - - - - (223) - (223)
Dividends paid(b) - - - - - (4,502) (4,502)
----- ------ ----- ----- ------- ------ -------
At 30 June 2009 4,779 11,655 4,207 4,356 275,193 8,103 308,293
----- ------ ----- ----- ------- ------ -------
For the year ended 31
December 2009
(audited)
At 31 December 2008 4,779 11,655 4,207 4,356 184,808 10,259 220,064
Return for the year - - - - 237,385 8,301 245,686
Shares repurchased
and held in treasury - - - - (16,534) - (16,534)
Share purchase costs - - - - (208) - (208)
Shares cancelled (40) - 40 - - - -
Dividends paid(c) - - - - - (5,598) (5,598)
----- ------ ----- ----- ------- ------ -------
At 31 December 2009 4,739 11,655 4,247 4,356 405,451 12,962 443,410
----- ------ ----- ----- ------- ------ -------
a. 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.
b. 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.
c. Second interim dividend paid 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
and the first interim dividend for the year ended 31 December 2009 of 2.50
cents per share declared on 14 August 2009 and paid on 25 September 2009.
During the period the Company incurred purchase transaction costs of
US$180,000, (six months ended 30 June 2009: US$109,000, year ended 31 December
2009: US$262,000) and sales transaction costs of US$197,000 (six months ended
30 June 2009: US$155,000; year ended 31 December 2009: US$337,000). All
transaction costs have been included within the capital reserves.
BALANCE SHEET
as at 30 June 2010
31
Notes 30 June 30 June December
2010 2009 2009
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Fixed assets
Investments held at fair value through
profit or loss 478,246 308,395 542,523
------- ------- -------
Current assets
Debtors 3,692 1,342 2,691
Cash at bank 4,813 4,224 5,413
------- ------- -------
8,505 5,566 8,104
Creditors - amounts falling due within
one year (3,023) (5,644) (4,793)
------- ------- -------
Net current assets/(liabilities) 5,482 (78) 3,311
------- ------- -------
Total assets less current liabilities 483,728 308,317 545,834
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 (97,600) - (102,400)
------- ------- -------
(97,624) (24) (102,424)
------- ------- -------
Net assets 386,104 308,293 443,410
======= ======= =======
Capital and reserves
Share capital 6 4,384 4,779 4,739
Share premium account 11,655 11,655 11,655
Capital redemption reserve 4,602 4,207 4,247
Non distributable reserve 4,356 4,356 4,356
Capital reserves 346,719 275,193 405,451
Revenue reserve 14,388 8,103 12,962
------- ------- -------
Total equity shareholders' funds 386,104 308,293 443,410
======= ======= =======
Net asset value per ordinary share
(US$ cents) - basic 7 880.80 703.29 1,011.53
======= ======= =======
Net asset value per ordinary share
(US$ cents) - diluted 7 918.67 703.29 1,036.42
======= ======= =======
CASH FLOW STATEMENT
for the six months ended 30 June 2010
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2010 2009 2009
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Net cash inflow from operating activities 5,446 3,065 9,199
Servicing of finance
Finance costs (1,641) (461) (1,330)
Taxation paid (417) (812) (1,426)
------- ------ -------
Capital expenditure and financial
investment
Purchase of investments (214,359) (60,448) (248,684)
Proceeds from the sale of investments 217,050 93,202 199,422
Capital expenses (740) (22) (185)
------- ------ -------
Net cash inflow/(outflow) from capital
expenditure and financial Investment 1,951 32,732 (49,447)
------- ------ -------
Equity dividends paid (5,479) (4,502) (5,598)
------- ------ -------
Net cash (outflow)/inflow before (140) 30,022 (48,602)
financing
------- ------ -------
Financing
Repayment of US Dollar loan - (12,500) (12,500)
Repurchase of ordinary shares - (16,616) (16,688)
Convertible bond issue proceeds - - 80,000
------- ------ -------
Net cash (outflow)/inflow from financing - (29,116) 50,812
------- ------ -------
(Decrease)/increase in cash in the period (140) 906 2,210
===== ===== =====
RECONCILIATION OF NET RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH FLOW
FROM OPERATING ACTIVITIES
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2010 2009 2009
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Net return before finance costs and
taxation (49,980) 110,289 247,914
Add loss/(gains) on investments held at
fair value through profit or loss 60,254 (107,150) (262,094)
Fair value adjustment for the convertible
bonds (4,800) - 22,400
Exchange losses/(gains) 464 (682) (567)
Non-operating expenses of a capital
nature 507 18 187
Decrease/(increase) in accrued income 182 530 (214)
Decrease in other debtors - 60 20
(Decrease)/increase in creditors (1,181) - 1,553
----- ----- -----
Net cash inflow from operating activities 5,446 3,065 9,199
----- ----- -----
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 sub-sections 1158 - 1165 of the Corporation Tax
Act 2010 (formerly 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 2009.
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")
revised in January 2009).
2. Income
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2010 2009 2009
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Investment income:
Overseas dividends 7,849 4,142 11,130
Interest income 1,128 - 856
----- ----- ------
8,977 4,142 11,986
Other income:
Deposit interest 1 1 1
----- ----- ------
Total 8,978 4,143 11,987
----- ----- ------
3. Investment management fee
The investment management fee has been calculated at 0.85% per annum on the NAV
plus 0.34% on the US$80,000,000 convertible bonds. The Investment Manager is
also entitled to a performance fee equal to 10% of any outperformance of the
NAV per share against the benchmark the MSCI EM Latin America Index (in US
dollar terms on a total return basis) plus a hurdle of 1%. The performance fee
is capped at 1% of NAV.
No performance fee is payable in respect of the period ended 30 June 2010 (no
performance fees were payable for the six months ended 30 June 2009 or the year
ended 31 December 2009).
4. Operating expenses
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2010 2009 2009
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Custody fee 146 114 385
Directors' fees 144 135 280
Other administration costs 273 305 438
--- --- -----
563 554 1,103
--- --- -----
5. Dividend
The Board has declared a first interim dividend of 5.0 cents per share
(2009: 2.5 cents) payable on 24 September 2010 to shareholders on the register
as at 13 August 2010. The total cost of this dividend, based on 43,835,522 ordinary
shares in issue at 3 August 2010 is US$2,192,000 (30 June 2009: 43,835,522 shares and
cost of US$1,096,000).
6. Share capital
Number of
treasury Nominal
Number of shares Total shares Value
shares in issue in issue in issue US$'000
At 31 December 2009 43,835,522 3,554,231 47,389,753 4,739
Shares cancelled from
treasury on 31 March 2010 - (3,554,231) (3,554,231) (355)
---------- --------- ---------- -----
At 30 June 2010 43,835,522 - 43,835,522 4,384
---------- --------- ---------- -----
At 30 June 2010, the Company had 43,835,522 shares in issue. No shares are 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
2010 2009 2009
(unaudited) (unaudited) (audited)
Net revenue return attributable to
ordinary shareholders (US$'000) 6,905 2,346 8,301
Net capital return attributable to
ordinary shareholders (US$'000) (58,732) 107,142 237,385
------ ------- -------
Net total return attributable to
ordinary shareholders (US$'000) (51,827) 109,488 245,686
------ ------- -------
Equity shareholders' funds (US$'000) 386,104 308,293 443,410
------ ------- -------
Net revenue return on which the diluted
return per share has been calculated
(with interest costs of US$350,000 (31
December 2009: US$210,000) in respect of
convertible bonds added back: 7,255 2,346 8,511
Net capital return on which the diluted
return per share has been calculated
(with interest costs of US$1,050,000 (31
December 2009: US$630,000) in respect of
convertible bonds added back: (57,682) 107,142 238,015
The weighted average number of ordinary
shares in issue during the period, on
which the return per ordinary shares was
calculated, was: 43,835,522 45,602,820 44,711,908
The weighted average number of ordinary
shares in issue during the period, on
which the diluted return per ordinary
shares was calculated, was: 52,744,207 45,602,820 47,347,903
The actual number of ordinary shares in
issue at the end of each period, on
which the return and net asset value was
calculated, was: 43,835,522 43,835,522 43,835,522
The number of ordinary shares on which
the diluted net asset value was
calculated, was: 52,744,207 43,835,522 52,744,207
Undiluted return per share
Revenue return per share - (cents) 15.75 5.14 18.57
Capital return per share - (cents) (133.98) 234.95 530.92
---------- ---------- ----------
Total return per share - (cents) (118.23) 240.09 549.49
---------- ---------- ----------
Diluted return per share
Revenue return per share - (cents) 13.76 5.14 17.98
Capital return per share - (cents) (133.98) 234.95 502.69
---------- ---------- ----------
Total return per share - (cents) (120.22) 240.09 520.67
---------- ---------- ----------
Net asset value per share - undiluted
(cents) 880.80 703.29 1,011.53
Share price* (cents) 921.60 675.21 1,037.54
---------- ---------- ----------
Diluted net asset value per share
Net assets with convertible bonds at
fair value per balance sheet (US$'000) 386,104 308,293 443,410
Add back convertible bonds at fair value
(US$'000) 97,600 - 102,400
Accrued interest on convertible bonds at
balance sheet date (US$'000) 840 - 840
---------- ---------- ----------
Adjusted net assets following conversion
of the convertible bonds (US$'000) 484,544 308,293 546,650
---------- ---------- ----------
Number of ordinary shares for NAV 43,835,522 43,835,522 43,835,522
Number of shares arising on conversion
of convertible bonds (US$80,000,000 at
US$8.98) 8,908,685 - 8,908,685
---------- ---------- ----------
Number of ordinary shares for diluted
NAV (b) 52,744,207 43,835,522 52,744,207
---------- ---------- ----------
Diluted NAV per share (cents) (a/b) 918.67 703.29 1,036.42
---------- ---------- ----------
* The Company's share price is quoted in sterling and the above represents the
US dollar equivalent.
8. Related party disclosure
The related party transaction with BlackRock is set out in note 3. The fee due
to the Investment Manager for the six months ended 30 June 2010 amounted to
US$1,970,000 (six months ended 30 June 2009: US$1,114,000 and the year ended 31
December 2009: US$3,044,000). At the period end US$1,351,000 was outstanding in
respect of management fees (six months ended 30 June 2009: US$1,133,000 and
year ended 31 December 2009: US$2,586,000).
9. 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 2010 and 30
June 2009 has not been audited.
The information for the year ended 31 December 2009 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. Annual Results
The Board expects to announce the annual results for the year ending 31
December 2010 in February 2011. Copies of the annual results announcement can
be obtained from the Secretary on 020 7743 3000. The annual report should be
available at the beginning of March 2011, with the Annual General Meeting being
held in May 2011.
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.
3 August 2010
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
Henrietta Guthrie - 020 7294 3612
Lansons Communications
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