Interim Results

F&C Latin American Inv Trust PLC 7 September 2000 F&C LATIN AMERICAN INVESTMENT TRUST PLC Unaudited Preliminary Statement for the half - year to 30 June 2000 Date: 6 September 2000 Contact: Emily McLaughlin Louise Dolan Foreign & Colonial Emerging Markets Financial Dynamics 020 7770 5261 020 7831 3113 F&C LATIN AMERICAN INVESTMENT TRUST PLC Unaudited Preliminary Statement for the half year to 30 June 2000 HIGHLIGHTS - The undiluted net asset value per share on 30 June was 298.78 cents, representing a fall during the first six months of the year of 3.42%. From 30 June to 31 August the net asset value has risen by 2.4% to 306.00 cents. - Over the period the share price has fallen by 10.3% from 217.5 cents to 195.0 cents, however between 30 June and 31 August, the share price has risen by 10% to 214.5 cents. - Effective gearing on the Company was 10.5% at 31 August 2000. Over the period this had ranged from 10.8% to 7.6% - The Board is optimistic that the background of steady, largely synchronised global growth coupled with very strong economic growth in Latin America provides a comfortable background against which Latin American markets can perform. - At 9 times 2000 earnings, the region's market multiple is undemanding both on an absolute and relative historical basis. SUMMARY OF RESULTS 30 June 2000 31 December 1999 % Change Net assets attributable to US$ 217.0 m US$ 224.7m -3.42% equity shareholders Net assets per 298.78 cents 309.37 cents -3.42% share Net Assets per share (diluted) 269.56 cents 276.17 cents -2.39% Share price 195.00 cents 217.50 cents -10.34% Warrant price 110.00 cents 136.00 cents -19.12% EXTRACTS FROM CHAIRMAN'S STATEMENT Dear Shareholder, Net Asset Value The undiluted net asset value per share on 30 June was 298.78 cents, representing a fall during the first six months of the year of 3.42%. This compares with a fall in the return on the IFC$ Latin American Total Return Index of 2.33%. From 30 June to 31 August the net asset value has risen by 2.4% to 306.00 cents, whilst the comparable index has risen only 1.6%. Over the period the share price has fallen by 10.3% from 217.5 cents to 195.0 cents, however between 30 June and 31 August, the share price rose by 10% to 214.5 cents. At the stock level, the biggest contribution to performance came from Brazilian and Mexican stock selection. In Brazil, the fund benefited from its positions in Telesp, Petrobras and Telesp Cellular. In Mexico, the fund benefited from its positions in Walmex (formerly Cifra), Televisa, and Banacci. Geographical Distribution of Assets Index Your Company Argentina 7.0 4.4 Brazil 36.1 41.7 Chile 13.6 6.9 Colombia 1.2 0.7 Mexico 38.7 44.3 Peru 2.3 0.9 Venezuela 1.1 0.7 Cash - 0.4 Over the period, the Company's effective gearing ranged from 10.8% to 7.6%. A further tranche of gearing was invested into the markets just before the period's end to take advantage of the likely Mexican rally after the presidential election. Effective gearing on the Company was 10.5% as at 31 August 2000. Market Reviews Of the large markets, Brazil led the region over the first half of the year, rising 2.4% as measured by the IFCG$ Brazilian total return index. The Brazilian economic expansion has continued to surpass expectations, driven by industry and manufacturing with many sectors of the economy beginning to enjoy the benefits of the 1999 devaluation. As interest rates have eased from their high levels of last year, the rate of GDP growth has accelerated this year to 4%, with 4-5% likely next year. The fiscal results achieved in the first half exceeded the IMF's target by over R$7bn. Foreign direct investment flows continue to flood into the Country and should reach $27bn to $28bn in 2000. Owing to the lower privatisation receipts this year, FDI flows are projected to be lower than the $30bn witnessed in 1999. There are increasing signs that demand from local investors could be a powerful stimulant to re-rating. The Mexican market was heavily overshadowed by the impending Presidential election that took place on 2 July. It fell 4.5% over the course of the six month period, but currently is considerably above its worst levels, as the market trended higher before and after the election. The incumbent PRI party had won every election since 1910, so the landslide victory for the PAN party in the form of Vincente Fox heralds a seismic shift in the political polarity and signals the strong support for a reformist agenda in the next administration. The Fox administration is likely to open the electricity generation and distribution industries to private investment, and this structural reform could result in an acceleration of FDI flows. The investment grade status awarded to Mexico by Moody's in the first quarter is a milestone on the pathway of convergence with the US economy, conferring the multiple benefits of a lower cost of capital, increased investment, and a larger pool of buyers of Mexican fixed income and equity. In the medium and longer term, this convergence with the US should nurture a much more buoyant domestic economy and enable domestic rates to continue to fall. The Chilean market drifted down 4% over the six months, having proven to be more resilient than either Brazil or Mexico during the early part of the period. After more than a decade of policy designed to temper hot capital flows surging into and out of the Country, the Chilean Government has initiated liberalisation of the capital account by eliminating capital controls in a belated recognition of the importance of fresh capital flows from international investors. The Argentine market slipped 7% over the period as investors judged the fragile economic rebound too sluggish to offset the effects of further Federal Reserve tightening. The main risk in slower than expected recovery lies in the Country missing its fiscal deficit targets and consequently losing its IMF stabilisation package, which could trigger a vicious cycle of rising rates. Although this has partly been discounted in the pricing of Argentine debt, the fear of medium term financing difficulties persists. Colombia fell 32% over the six months, dogged by the seemingly intractable political impasse which has become characteristic of the Pastrana Government. In trying to restore momentum to his flagging Government and counter accusations of corruption, Pastrana proposed a referendum to reform Congress which then itself became embroiled in corruption charges. Eventually a compromise was reached to allow for the passage of some watered down fiscal reforms, yet the fiscal situation remains on knife-edge. With the domestic economy paralysed by Guerrilla generated uncertainty, the export sector has been the only evident source of growth. The best performing market by far this year has been Venezuela with a return of over 23%. Despite the well known economic imbalances and over-valued currency, investors chose to focus on the strong oil revenues flowing into the Country which allows Chavez to promote his interventionist economic philosophy until the brutal commodity tide turns against him. The Peruvian market produced indifferent performance over the period, drifting down 7%. Fujimori squeaked through to his third term of office amidst allegations of electoral fraud. His slim margin of his victory and the high proportion of spoiled ballot papers undermine any claims of legitimacy, and this was seized upon by the US Government and observers from abroad who roundly denounced his victory. The economy however, continues to be driven by commodity exports, and inflation remains near to its 39 year low at 4%. Outlook The bulk of the tightening by the Federal Reserve appears to have taken place, and as such US rates could be close to peaking. Global growth prospects should exceed 4% both for this year and the next. The Board is optimistic that the background of steady, largely synchronised global growth coupled with very strong Economic growth in Latin America provides a comfortable background against which Latin American markets can perform. The Region's GDP growth prospects for this year should be 4.5% with next year's tapering to 4%; regional inflation is low and falling, and EPS growth should average 15-20% in dollar terms each year. At 9 times 2000 earnings, the region's market multiple is undemanding both on an absolute and relative historical basis. P C D Burnell September 2000 Statement of Total Return (incorporating the Revenue Account) for the half year ended 30 June 2000 Revenue Capital 30 June Revenue Capital 30 June US'000's US'000's 2000 US'000's US'000's 1999 Total Total US'000s US'000s Gains/(Losses) on Investments - (6,991) (6,991) - 47,526 47,526 Exchange gains and losses (35) 73 38 (1) (1,259) (1,260) Income 2,564 - 2,564 2,698 - 2,698 Management fee (1,807) - (1,807) (1,231) - (1,231) Other expenses and credits (461) (31) (492) (335) (22) (357) Net return before finance costs and taxation 261 (6,949) (6,688) 1,131 46,245 47,376 Interest payable and similar charges (792) - (792) (550) - (550) Return on ordinary activities before taxation (531) (6,949) (7,480) 581 46,245 46,826 Taxation on ordinary activities (313) 100 (213) (213) (375) (588) Return on ordinary activities after taxation (844) (6,849) (7,693) 368 45,870 46,238 Dividend on ordinary shares - - - - - - Amount transferred (from) / to reserves (844) (6,849) (7,693) 368 45,870 46,238 Return per ordinary share - cents (1.16) (9.43) (10.59) 0.49 60.12 60.61 Return per ordinary share - diluted - cents + + + 0.46 56.40 56.86 - The revenue column of this statement is the profit and loss account of the Company. - + Not applicable. - All revenue and capital items in the above statement derive from continuing operations. BALANCE SHEET 30 30 June June 2000 1999 31 Dec 1999 US$'000s US$'000s US$'000s Fixed assets Investments 240,321 179,960 242,402 Current assets Debtors 10,162 2,452 1,407 Cash at bank and short-term deposits 2,928 10,644 5,133 13,090 13,096 6,540 Current liabilities Creditors: amounts falling due within one year: US Dollar bank loans (24,000) - (7,500) Other (10,905) (2,105) (653) (34,905) (2,105) (8,153) Net current (liabilities)/assets (21,815) 10,991 (1,613) Total assets less current liabilities 218,506 190,951 240,789 Creditors: amounts falling due after more than one year: US Dollar bank loans - (14,500) (14,500) Provision for liabilities and charges (1,456) (1,388) (1,546) Net assets 217,050 175,063 224,743 Capital and reserves Called up share capital: including non equity share capital 7,288 7,481 7,288 Share premium 59,856 59,856 59,856 Capital redemption reserve 238 45 238 Warrant reserve 4,797 4,797 4,797 Capital reserve 147,586 104,019 154,435 Revenue reserve (2,715) (1,135) (1,871) Total shareholders' funds 217,050 175,063 224,743 Total shareholder' funds are attributable to: Equity shareholders 217,026 175,039 224,719 Non-equity shareholders 24 24 24 217,050 175,063 224,743 Net asset value per ordinary share(basic) - cents 298.78 234.75 309.37 Net asset value per ordinary share(diluted) - cents 269.56 215.29 276.17 Cash Flow Statement for the year half ended 30 June 2000 June 2000 June 1999 US$'000's US$'000's Net cash inflow from operating activities (493) 1,831 Servicing of Finance (804) (550) Tax paid (51) (336) Net Cash (outflow) / inflow from financial investment (2,930) 6,034 Net cash (outflow) / inflow before financing (4,278) 6,979 Management of liquid resources 2,986 674 Net cash inflow from financing 2,000 - Increase in cash 708 7,653 Notes No interim dividend will be paid on ordinary shares. The Interim Report will be posted to all shareholders on or around 15 September 2000 Copies may be obtained during normal business hours from the Company's Registered Office, Exchange House, Primrose Street, London EC2A 2NY. By order of the Board Foreign & Colonial Emerging Markets Limited, Secretary 6 September 2000

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