Final Results

BlackRock Latin American Investment Trust plc Annual results announcement for the year ended 31 December 2012 Performance Record Financial Highlights Attributable to ordinary 31 31 shareholders December December Change 2012 2011 % Assets Net assets* (US$'000)+ 399,713 391,550 +2.1 Net asset value per ordinary share - debt at fair value* (US$ cents) 964.72 893.11 +8.0 - with income reinvested +11.3 Ordinary share price (mid-market) (US$ cents)^ 861.52 836.88 +2.9 - with income reinvested +6.2 Ordinary share price (mid-market) (pence) 530.00 538.50 -1.6 - with income reinvested +1.5 ======== ======== ======== * In accordance with accounting policy 2(k). + The change in net assets reflects market movements and the repurchase of 2,408,065 ordinary shares in the year. ^ Based on an exchange rate of 1.6255 (2011: 1.5541). For For the the year year ended ended 31 31 December December Change 2012 2011 % Revenue Net revenue after taxation (US$'000) 11,167 15,517 -28.0 Revenue return per ordinary share - debt at fair value* (US$ cents) 26.50 35.39 -25.1 First interim dividend per ordinary share (US$ cents) 5.00 5.00 - Second interim dividend per ordinary share (US$ cents) 25.00 25.00 - ======== ======== ======== * In accordance with accounting policy 2(k) Chairman's Statement Overview Global equity markets have remained volatile for the year under review. For the most part concerns have centred on the need to address the very high levels of government debt in much of the developed world. This in turn has contributed to subdued economic growth in the major developed economies, and to slowing activity in the developing world. In Brazil, lacklustre growth and rising inflation have increasingly concerned government policy makers. Although the significant reduction in interest rates should provide a positive fillip to the country's growth prospects, other policy initiatives aimed at tackling inflation have in many cases received a mixed response from investors. Happily the opposite has applied in Mexico where a number of encouraging reforms by the new government have been well received. Sentiment in all markets began to deteriorate in the spring of 2012 and worsened further in the summer. However, concerns began to ease following much needed support from policy makers in Europe, China and Japan as well as from the Federal Reserve. Latterly, once it became clearer that the US were likely to find some form of resolution to the fiscal cliff - the tax increases and spending cuts which had threatened to drag the economy back into recession-markets ended the year in a positive mood. Performance Against this challenging background, it is encouraging to report that the Company's net asset value ("NAV") with debt at fair value in accordance with accounting policy 2(k) increased by 11.3% in US Dollar terms (6.2% in Sterling terms) compared to a return in the benchmark of 8.9% (4.1% in Sterling terms). The share price increased by 6.2% in US Dollar terms (1.5% in Sterling terms) (All percentages calculated with income reinvested.) Further details of the factors affecting performance are given in the Investment Manager's Report. Since 31 December 2012, the Company's NAV has increased by 7.6% in Sterling terms and by 0.1% in US Dollar terms. The share price has increased by 7.1% in Sterling terms and decreased by 0.3% in US Dollar terms. Revenue return and dividends The revenue return for the year was 26.50 cents per share (2011: 35.39 cents per share). The decrease in the revenue return in the year was largely due to the reduced weighting in Brazil. The Board declared a first interim dividend of 5.00 cents per share which was paid on 27 September 2012 (2011: 5.00 cents per share). The Board is pleased to declare a second interim dividend of 25.00 cents per share (2011: 25.00 cents per share) which will be payable on 26 April 2013 to shareholders on the register as at 22 March 2013. This makes a total dividend of 30.00 cents per share (2011: 30.00 cents per share) for the year. In maintaining the dividend the Board will be drawing down on the Company's revenue reserves which have accumulated in prior years. The Board's policy is to at least maintain dividend distributions, using reserves when necessary, and to grow the dividend in the medium term. Your Board has reviewed the split between the two interim dividends historically paid by the Company and has concluded that a more equal split of the Company's dividend for the financial year ending 31 December 2013 is desirable. Accordingly, the Board intends to declare an interim dividend in August of approximately half the anticipated total amount payable for the financial year. Contribution to total return for the year ended 31 December 2012 Benchmark return 8.90% Management fees and operating costs -1.20% Taxation -0.21% Impact of share buybacks and tender offers 0.11% Impact of financing costs -0.70% Impact of gross gearing 1.41% Stock selection/asset allocation 2.24% Other -0.50% Fair value adjustment 1.25% Net asset value total return (1) 11.30% (1). Debt at fair value in accordance with accounting policy 2(k). Source: BlackRock. Calculated using the Factset daily transactions-based methodology. Factset is not of audit quality, but is considered useful management information. No performance fee was charged during the year. Convertible bonds On 15 September 2009 the Company issued US$80 million in nominal amount of 3.5% unsecured convertible bonds 2015. During the year and up to the date of this report, no bonds were converted into ordinary shares. However, towards the end of the year the Board took the opportunity to repurchase for cancellation 15,948 convertible bonds at US$9.80, a price below the level at which they will be repayable in 2015, if the bonds are not converted into ordinary shares in the interim. This step forms part of the Board's ongoing review of the appropriate balance of convertible bonds and equity outstanding. There are now US$64,000,000 convertible bonds in issue. Bondholders may subscribe for ordinary shares to which the convertible bonds relate at any time up to 1 September 2015, being 10 business days prior to 15 September 2015, at a price of US$9.83 per share. At the date of this report the Company's NAV (with debt at fair value in accordance with accounting policy 2(k)) was US$9.66 and the share price was US$8.59 compared with the current exercise price of US$9.83 per share. Discount control As part of the Company's ongoing discount control activity a further tender for up to 5% of the shares in issue was announced on 17 January 2013, with a calculation date of 2 April 2013. A circular containing details of the tender offer and the procedure for tendering shares will be sent to shareholders on 28 February 2013. No Board member will be tendering any of their shares under the tender offer. Gearing The maximum net gearing utilised during the year was 11.3% (net gearing is defined as redeemable shares, loans, overdrafts and the convertible bond at par value less cash and fixed interest stocks as a percentage of net assets). Under the AIC guidelines, Latin American fixed interest securities are not considered to be cash equivalents. Maximum gearing on this basis was 22.1%. The Retail Distribution Review The current financial year will see the implementation of important regulatory initiatives, which will have a significant impact on the Investment Trust sector. From 1 January 2013 the implementation of the Financial Services Authority's Retail Distribution Review ("RDR") means that advisers have to charge their clients for advice rather than receiving commissions from the funds in which their clients' invest. Investment trusts should now therefore be on a level playing field with their open ended counterparts such as unit trusts. This should further enhance the attraction of investment trusts which have the ability to gear to enhance overall returns and are quoted companies which can be readily traded in the stockmarket. In addition, as part of the FSA's platform review, which will be implemented in 2014, open-ended funds are likely to be placed on the same footing as investment trusts as it is proposed that payments from funds to platforms are to be prohibited. Furthermore, we anticipate that strongly performing investment trusts will see increased demand from retail platforms and online brokers. We are actively looking to increase our profile in this area. Outlook We are mindful that the macro-economic uncertainties that have dominated global financial markets since the credit crisis of 2008 could resurface from time to time in the year ahead and adversely impact sentiment. However, we remain optimistic that our investment portfolio is well positioned to benefit from a return in confidence and local consumer demand, as well as any further pick up in global economic activity. Our Investment Manager continues to find many companies in the region which have exciting growth prospects, and importantly, these are found in a range of different economic sectors and countries in the region. By taking active positions in these companies we expect our Investment Manager to achieve superior medium to long term returns to those which can be obtained simply by investing in the benchmark via a passively managed fund such as an Exchange Traded Fund ("ETF"). The Company remains the only UK listed investment trust which has a broad remit to invest across the Latin American region. The investment process of the Investment Manager in our view benefits from the closed end structure of the Company which permits greater exposure to mid and smaller capitalisation stocks, which are often less liquid companies. By contrast, large open ended vehicles often have liquidity constraints when choosing investments. We are convinced that this factor is a major differentiator for the Company, which, alongside the ability to use gearing, should enhance long term performance. Annual General Meeting The AGM will be held at 12.00 noon on Tuesday, 14 May 2013 at the offices of BlackRock at 12 Throgmorton Avenue, London EC2N 2DL. We hope that as many shareholders as possible will attend. Following the AGM there will be a presentation by Will Landers, the Portfolio Manager, on the outlook for the year ahead and an opportunity to meet Will and the Directors. Peter Burnell Chairman 27 February 2013 Principal risks The key risks faced by the Company are set out below. The Board regularly reviews and agrees policies for managing each risk, as summarised below. - Performance risk - The Board is responsible for deciding the investment strategy to fulfil the Company's objectives and monitoring the performance of the Investment Manager. An inappropriate strategy may lead to poor performance. To manage this risk the Investment Manager provides an explanation of significant stock selection decisions and the rationale for the composition of the investment portfolio. The Board monitors and maintains an adequate spread of investments in order to minimise the risks associated with particular countries or factors specific to individual companies and sectors, based on the diversification requirements inherent in the Company's investment policy. Past performance is not necessarily a guide to future performance and the value of your investment in the Company and the income from it can fluctuate as the value of the underlying investment fluctuates. - Income/dividend risk - The amount of dividends and future dividend growth will depend on the Company's underlying portfolio. Any change in the tax treatment of the dividends or interest received by the Company (including as a result of withholding taxes or exchange controls imposed by jurisdictions in which the Company invests) may reduce the level of dividends received by shareholders. The Board monitors this risk through the receipt of detailed income forecasts and considers the level of income at each meeting. - Regulatory risk - The Company operates as an investment trust in accordance with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from capital gains tax on the profits realised from the sale of its investments. The Investment Manager monitors the amount of retained income to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached. The Company must also comply with the provisions of the Companies Act 2006 and, as its shares are admitted to the Official List, the UKLA Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules. A breach of the Companies Act 2006 could result in the Company and/or the Directors being fined or the subject of criminal proceedings. A breach of the UKLA Listing Rules could result in the Company's shares being suspended from listing, which in turn would breach the requirements of Chapter 4 of Part 24 of the Corporation Tax Act 2010. The Board relies on the services of its professional advisers and its Company Secretary to ensure compliance with all relevant regulations. The Company Secretary has stringent compliance procedures in place and monitors regulatory developments and changes. - Operational risk - In common with most other investment trust companies, the Company has no employees. The Company therefore relies upon the services provided by third parties and is dependent on the control systems of the Investment Manager and the Company's other service providers. The security, for example, of the Company's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depends on the effective operation of these systems. These have been regularly tested and monitored and an internal controls report, which includes an assessment of risks together with procedures to mitigate such risks, is prepared by the Investment Manager and reviewed by the Audit Committee twice a year. The Custodian, Bank of New York Mellon (International) Limited ("BNYM") and the Investment Manager also produce quarterly and annual reports respectively, which are reported on by their respective reporting accountants and give assurance regarding the effective operation of controls. - Market risk - Market risk arises from volatility in the prices of the Company's investments. It represents the potential loss the Company might suffer through holding investments in the face of negative market movements. There may be exposure to significant economic, political and currency risks due to the location of the operation of the businesses in which the Company may invest. Shares in businesses in which the Company invests can prove volatile and this may be reflected in the Company's share price. The Board considers asset allocation, stock selection, unquoted investments, if any, and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager. The Board monitors the implementation and results of the investment process with the Investment Manager. - Liquidity risk - Investments in the Company's portfolio are subject to liquidity risk, particularly from any unquoted investments. The Company may also invest in smaller capitalisation companies or in the securities markets of developing countries which are not as large as the more established securities markets and have substantially less trading volume, which may result in a lack of liquidity and higher price volatility. - Financial risk - The Company's investment activities expose it to a variety of financial risks which include foreign currency risk, credit risk and interest rate risk. Further details are disclosed in note 19 on pages 50 to 56 of the annual report, together with a summary of the policies for managing these risks. As at the date of this report the continuing stability of the global economy remains unclear and as a consequence financial markets may have an adverse effect on the Company's performance. - Third party risk - The Company has no employees and the Directors have all been appointed on a non-executive basis. The Company must therefore rely upon the performance of third party service providers to perform its executive functions. In particular, the Investment Manager, the Administrator, the Registrar, the Custodian and their respective delegates, if any, will perform services that are integral to the Company's operations and financial performance. The Company, and where appropriate the Investment Manager, undertake extensive due diligence prior to the appointment of any third party service provider in order to mitigate this risk. Terms of appointment are agreed in advance and service level agreements are put in place with providers to ensure that a high level of service is provided. Failure by any service provider to carry out its obligations to the Company in accordance with the terms of its appointment, to exercise due care and skill, or to perform its obligations to the Company at all as a result of insolvency, bankruptcy or other causes could have a material adverse effect on the Company's performance and returns to holders of ordinary shares. The termination of the Company's relationship with any third party service provider or any delay in appointing a replacement for such service provider, could materially disrupt the business of the Company and could have a material adverse effect on the Company's performance and returns to holders of ordinary shares. Related party transactions The Investment Manager is regarded as a related party under the Listing Rules and details of the investment management fees payable are set out in note 4. The investment management fees for the year were US$3,632,000 (2011: US$4,144,000). No performance fee was payable in the year (2011: nil). At the end of the year an amount of US$1,787,000 (2011: US$910,000) was outstanding in respect of investment management and performance fees. The Board consists of six non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £41,000, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £31,500 and each other Director receives an annual fee of £27,500. With effect from 1 January 2013 the annual remuneration of the Chairman was increased to £42,000, the Chairman of the Audit and Management Engagement Committee/Senior Independent Director to £32,000 and the other Directors to £28,000. All members of the Board hold ordinary shares in the Company. Peter Burnell holds 3,000 ordinary shares and 100 convertible bonds, Antonio Monteiro de Castro holds 47,000 ordinary shares and 100 convertible bonds, The Earl St Aldwyn holds 1,470 ordinary shares and 100 convertible bonds, Laurence Whitehead holds 8,967 ordinary shares and 100 convertible bonds, Desmond O'Conor holds 12,247 ordinary shares and no convertible bonds and Mahrukh Doctor holds 589 ordinary shares and no convertible bonds. Statement of Directors' responsibilities In accordance with Disclosure and Transparency Rule 4.1.12, the Directors also confirm to the best of their knowledge and belief that: - the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and net return or loss of the Company; and - the annual report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. For and on behalf of the Board of Directors Peter Burnell 27 February 2013 Investment Manager's Report Overview Latin America lagged both the developed world and other emerging markets in 2012. Concerns regarding the financial crisis in the Eurozone, growth in China and the election and fiscal cliff in the United States weighed on investor risk appetite. Despite seeing a strong start to the year, investors seemed to be in risk-off mode for most of the year until late in the fourth quarter when risk assets started to perform better. During the year, Brazil's equity market and its currency, the Brazilian Real, ranked among the weakest performers in Latin America. Growth disappointments at the macro as well as at company levels, along with the previously mentioned decrease in investor risk appetite, were the main reasons for the weakness in Brazil's equity market. After cutting rates by 525 basis points, the Brazilian Central Bank finished their easing cycle at a record low of 7.25%. In addition, the Brazilian government continued to be active in certain sectors; most notably banks and utilities, in an effort to stimulate the economy. However, these efforts along with actions to depreciate the currency did not have a major impact on growth during 2012. Mexico was one of the region's best performers during 2012 with its equity market and currency being second only to Colombia. Strong growth in the domestic market, increasing market share in the US import market and the expectation of further progress with the reform agenda, helped drive Mexico's equity market. In the Andean region, Colombia posted the strongest returns, followed by Chile and Peru in terms of local indices as well as currencies. The Andean region continues to post strong economic growth due to infrastructure, energy and mining investments. Chile, which was impacted by the retreat of the copper price in the second quarter, benefited somewhat from copper moving higher in the second half of the year. In addition, strong levels of consumer and corporate confidence contributed to the strong performance of the Chilean economy. Year to 31 December 2012 performance figures MSCI Local country Currency Local Indices Region/indices % Change (% vs. USD) % Change Argentina -36.8 -14.3 3.0 (Merval) Brazil 0.5 -9.9 -2.0 (Ibovespa) Chile 8.4 7.8 13.7 (IGPA) Colombia 35.8 8.8 30.5 (IGBC) Mexico 29.1 7.8 29.0 (IPC) Peru 20.2 5.4 11.7 (IGBVL) MSCI Latin America 9.0 CRB Index 0.4 MSCI Emerging Asia 20.9 Oil (WTI) -7.1 MSCI Emerging Markets 18.5 Gold 7.1 MSCI World 16.6 Copper 6.3 S&P 500 16.0 Corn 8.0 MSCI Europe 20.0 Soybeans 15.2 Sources: MSCI, Bloomberg, UBS and BlackRock (all figures in US Dollar terms and on a capital only basis). 2012 Portfolio Review The Company's NAV returned 11.3% during 2012, outperforming the MSCI EM Latin America Index by 2.4%, which increased by 8.9% during the year (all percentages calculated in US Dollar terms with income reinvested). The outperformance stemmed primarily from our selection of shares, although we also added value through our choice of the countries in which the portfolio should be invested. The gearing from the convertible bonds was one of the largest individual contributors to the overall outperformance for the year. Stock selection in Brazil was the primary reason we outperformed the index, followed by an off benchmark position in Panama via airline operator Copa. In Brazil, the largest individual contributors to performance included Brazilian toll road operator CCR and our decision not to own the utility Eletrobras and to have a lower than market exposure to Petrobrás. Positive contributions relative to the index also came from Mexican names Femsa and Grupo Elektra, which we did not own. Weighing heavily on relative performance for the year was our decision not to have more exposure to Colombia. Although Brazil as a whole underperformed the wider benchmark, our holdings in this market including those mentioned above, generally did well. The exception, however, which weighed on performance here included Brazilian bank Itaú Unibanco, Brazilian exploration and production company OGX and Brazilian homebuilder PDG Realty. Itaú suffered from concerns regarding the change in competitive landscape as the government used the banks to reduce spreads on certain products as well as from company specific issues with regards to their consumer loan book. While we initially reduced exposure to Itaú in the second quarter, we increased exposure in the second half of the year given that we believed that their loan book had been improving and they should benefit from the domestic recovery which appears to be underway in Brazil as we move into 2013. OGX had disappointed earlier in the year when they delivered lower production than expected. Brazilian homebuilder PDG Realty suffered as the sector continued to struggle to match operational capabilities to the actual market size. One of the benefits of the Company's closed end structure is our ability to invest in smaller and less liquid companies in the region, including those not in the benchmark. At the year end, investments in small and mid-size companies with less than US$10 billion in market capitalisation accounted for over 30% of equity investments, with close to half of these investments representing non-benchmark stocks. Such positions accounted for close to 1.5% of the year's outperformance. Gearing was maintained throughout the year with the maximum net gearing level being 11%. Following the buyback of 15,948 convertible bonds, net gearing was 9%. Gearing continued to be maintained given our generally positive view on Latin American markets. 2013 Outlook and Positioning We enter 2013 with a portfolio that is positioned to benefit from the improving environment in Latin America, especially in Brazil. Brazil continues to be our largest individual country position, both in absolute terms and relative to the benchmark, and we now have an exposure to Mexico larger than that of the benchmark with the prospects of both markets posting positive returns we expect a virtuous competition for performance during 2013. We continue to favour domestic-related sectors, especially retail and infrastructure stocks. Within materials we prefer iron ore miners and pulp & paper producers over copper miners and steel producers, and have an underweight position in oil & gas. With a domestic recovery underway, Brazilian equities seem poised to recover in 2013. Record low interest rates for Brazil are just starting to have an impact on economic activity. Employment remains at record high levels, with wages growing in real terms and the minimum wage increasing by 9% from 1 January 2013; commodity prices, key to Brazil's export economy, are forecast to be stable during 2013, with a growth bias should China post faster than expected growth rates; and many infrastructure projects are becoming realities. The construction boom for the World Cup in 2014 and the Olympics in 2016 are in full swing as well as dozens of infrastructure and logistics projects that will improve Brazil's competitiveness. Last, but certainly not least, Brazil continues to rank among the cheapest equity markets around the globe - a fact that should change if and when the country begins to deliver on growth once again. All of this together should be supportive of the domestic economy in Brazil in the coming year and may allow the country to deliver a growth rate above 3.5%. Looking at Mexico, the country's equity market has benefitted from its proximity to the US economy and its status as a relative "safe haven" during periods of stress around global markets. In addition, and more importantly looking into 2013, Mexico has been able to surpass the market's expectations for growth in the past couple of years despite lacklustre growth in the US. Mexico has been regaining competitiveness in the US market and this is likely to be a continuing improvement. The election of President Enrique Peña Nieto last summer and his inauguration on 1 December 2012 have caused increased excitement around the Mexican story and the potential for faster growth stemming from expected energy and fiscal reforms. These reforms have been stalled in Mexico's Congress for over twelve years. The successful passage of labour reform during the autumn of 2012 increased expectations that Mexico will finally undertake meaningful energy reform, which would allow for increased private sector participation in its energy sector and boost the country's potential growth rate from the current 3% - 4%. Time will tell, but positive movement on the reform front will be critical for Mexican equities to continue to perform well in 2013 given that we enter the year with the Mexican market trading close to the top of global markets. Chile continues to be one of the most stable countries from a top down perspective with low debt levels, a balanced budget and low gearing levels. President Piñera's popularity and approval levels, which plummeted in 2011 due to pressure around education spending, remained low throughout 2012 despite strong GDP and employment figures. Elsewhere in the region, President Humala in Peru has had a difficult time dealing with activists who are against many of the new mining projects under development. Peru is a market that has a strong domestic economy as well as heavy exposure to the mining industry. While we like the domestic side of the equation in Peru, there is a lack of investable names that are domestically oriented in the stockmarket. In Colombia, we continue to find valuations expensive, and we would like to see some improvement in minority shareholder protection before taking a positive view on Colombian equities. Overall, Latin America continues to offer one of the most attractive equity investment opportunities given the solid top-down story as well as the attractive and diversified array of companies looking at the market from a bottom-up perspective. While there are interesting stories in the region's other markets, such as infrastructure investments in Peru, growing energy and mining investments in Colombia, and Chile's stable economy we believe that 2013 returns will be determined by Brazil's ability to grow again and Mexico's ability to move forward with its reform programme. Will Landers BlackRock Investment Management (UK) Limited 27 February 2013 Ten Largest Equity Investments 31 December 2012 Vale - 10.8% (2011: 8.9%) 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 growth in demand from Chinese steel makers. Banco Bradesco - 5.7% (2011: 6.1%) is Brazil's second largest private sector bank. The company is in an advantageous position to benefit from the strong demand for credit in Brazil. Bradesco has one of the largest branch networks in the country, allowing it to fully participate in Brazil's growing middle class and its overall financial services needs. América Móvil - 5.6% (2011: 6.9%) is Latin America's leading provider of integrated telecommunications services, with a leading presence in wireless telephony throughout the region as well as in wireline in Mexico and Brazil. Petrobrás - 4.9% (2011: 7.7%) 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. Femsa - 3.8% (2011: 3.5%) is a Mexican holding company controlling Coca-Cola's largest independent bottler - Coca-Cola Femsa, with operations throughout Latin America; Mexico's fastest growing retailing chain - Oxxo with over 10,000 convenience stores throughout Mexico; and a 20% economic interest in global brewer Heineken. Grupo Televisa - 3.8% (2011: 2.5%) is Mexico's leading television broadcasting operator and leading provider of satellite and cable television (giving the company leadership in high speed internet access). Televisa is also a significant shareholder and main content provider to Univisión, the leading Spanish-language broadcaster in the United States. Itaú Unibanco - 3.6% (2011: 8.9%) is Brazil's largest private sector bank. The bank continues to benefit from Brazil's growing demand for credit, especially from individuals and small and medium size enterprises. CCR - 3.2% (2011: 2.3%) is Brazil's leading toll road operator. The company has invested in other concession projects such as subways and is the leading shareholder in Brazil's leading electronic payment company for tolls and parking lots. CCR also participates in four airport concessions throughout Latin America. AmBev - 3.0% (2011: 4.2%) 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 within the region while maintaining operating cost discipline throughout its operations. Brasil Foods - 2.7% (2011: nil) is Brazil's largest producer of chicken and processed meat products. The company is well positioned to benefit from its leadership in the domestic processed foods market as well as in the export market for both in natura as well as processed products. 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 2011. Together, the ten largest investments represents 47.1% of total investments (ten largest investments as at 2011: 53.7%). Sector and geographical allocations Sector and geographical allocation 2012 2011 Brazil Mexico Chile Colombia Peru Other Argentina Total(1) Total(1) % % % % % % % % % Consumer discretionary 3.9 3.8 1.3 - - - - 9.0 10.1 Consumer staples 9.5 6.7 - 0.6 - - - 16.8 9.6 Energy 7.5 - - 1.1 - - 0.8 9.4 13.3 Financials 17.5 4.4 0.8 - 0.8 - - 23.5 24.8 Health 0.6 - - - - - - 0.6 1.5 Industrials 5.4 1.7 - - 0.4 1.3 - 8.8 6.7 Information technology 0.4 - - - - - - 0.4 0.8 Materials 13.7 1.4 1.0 0.3 0.6 - - 17.0 11.9 Telecommunications - 5.6 0.8 - - - - 6.4 8.4 Utilities 2.5 - 0.6 - - - - 3.1 7.8 Fixed income 2.6 2.4 - - - - - 5.0 5.1 ---- ---- ----- ----- ----- ----- ----- ----- ----- Total investments 63.6 26.0 4.5 2.0 1.8 1.3 0.8 100.0 ==== ==== ===== ===== ===== ===== ===== ===== ===== 2011 totals 71.2 19.7 4.5 1.2 1.9 1.5 - - 100.0 ---- ---- ----- ----- ----- ----- ----- ----- ----- 1. Expressed as a percentage of investments. Source: BlackRock. Geographical weighting vs MSCI EM Latin America Index Country Company MSCI EM Latin America Index Brazil 63.6 58.8 Mexico 26.0 24.1 Chile 4.5 8.3 Colombia 2.0 6.0 Peru 1.8 2.0 Other 1.3 0.8 Argentina 0.8 0.0 Source: BlackRock. Investments 31 December 2012 Country of operation Market % value of US$'000 investments Brazil Vale 49,623 10.8 Banco Bradesco 26,055 5.7 Petrobrás 22,354 4.9 Itaú Unibanco 16,411 3.6 CCR 14,457 3.2 AmBev 13,644 3.0 Brasil Foods 12,247 2.7 Brazil (Fed Rep of) 6% 17/01/17 11,800 2.6 Natura Cosméticos } 9,467 2.1 Natura Cosméticos warrants* } BM&F Bovespa 9,163 2.0 Lojas Renner } 7,685 1.7 Lojas Renner warrants* } Cosan 7,226 1.6 BR Malls 6,918 1.5 Banco do Brasil 6,889 1.5 Gerdau 5,729 1.2 Arezzo Industria e Comercio 5,273 1.1 Klabin 4,896 1.1 CBD 4,419 1.0 Localiza Rent a Car 4,359 1.0 Embraer 4,278 0.9 BR Properties 4,077 0.9 Cetip 4,053 0.9 Banco BTG Pactual } 3,484 0.7 Banco BTG Pactual warrants* } LPS Brasil 3,305 0.7 Cemig 3,255 0.7 Transmissora 3,117 0.7 Ultrapar Participações 2,874 0.6 Fibria Celulose 2,799 0.6 Cia Saneamento Basico 2,766 0.6 Qualicorp 2,590 0.6 Energis do Brasil 2,451 0.5 Minerva 2,314 0.5 Autometal 2,264 0.5 Qgep Participações 2,239 0.4 Totvs 1,735 0.4 T4F Entretenimento 1,518 0.3 Even 1,230 0.3 Hypermarcas } 478 0.1 Hypermarcas 3% 15/10/2015 } 536 0.1 Lupatech 832 0.2 Metalfrio Solutions 427 0.1 ------- ----- 291,237 63.6 ------- ----- Mexico América Móvil 25,639 5.6 Femsa 17,621 3.8 Grupo Televisa 17,277 3.8 Walmart de México 10,229 2.2 Grupo Financiero Banorte 7,514 1.6 United Mexican States 6.625% 03/03/15 5,575 1.2 Petroleos Mexicanos 4.875% 15/03/15 5,388 1.2 Alfa 4,837 1.1 Bolsa Mexicana de Valores 4,527 1.0 Mexichem 4,485 1.0 Grupo Financiero Santander Mexicano 4,047 0.9 Kimberly-Clark de Mexico 3,186 0.7 Promotora Y Operadora 2,649 0.6 Fibra Macquarie 2,434 0.5 Alpek 1,874 0.4 Concentradora Fibra Hotelera 1,710 0.4 ------- ----- 118,992 26.0 ------- ----- Chile S.A.C.I. Falabella 5,768 1.3 Sociedad Quimica Y Minera de Chile 4,668 1.0 Banco Santander-Chile 3,764 0.8 Empresa Nacional de Telecomunicaciones 3,598 0.8 Empresa Nacional de Electricidad 2,894 0.6 ------- ----- 20,692 4.5 ------- ----- Colombia Pacific Rubiales Energy 5,211 1.1 Grupo Nutresa 2,748 0.6 Cemex Latam 1,531 0.3 ------- ----- 9,490 2.0 ------- ----- Peru Credicorp 3,661 0.8 Southern Copper 2,840 0.6 Grana Y Montero 2,029 0.4 ------- ----- 8,530 1.8 ------- ----- Panama Copa 5,965 1.3 ------- ----- 5,965 1.3 ------- ----- Argentina Tenaris 3,688 0.8 ------- ----- 3,688 0.8 ------- ----- Total Investments 458,594 100.0 ======= ===== * 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 (excluding outperformance warrants) at 31 December 2012 was 69 (31 December 2011: 63). All investments are in equity shares unless otherwise stated. Income Statement for the year ended 31 December 2012 Revenue Revenue Capital Capital Total Total 2012 2011 2012 2011 2012 2011 Notes US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Gains/(losses) on investments held at fair value through profit or loss - - 34,325 (159,796) 34,325 (159,796) Change in value of convertible bonds held at fair value through profit or loss - - 3,997 27,990 3,997 27,990 Gain on repurchase of convertible bond - - 288 - 288 - Exchange losses - - (378) (1,337) (378) (1,337) Income from investments held at fair value through profit or loss 3 14,725 19,961 - - 14,725 19,961 Other income 3 1 6 - - 1 6 Investment management and performance fees 4 (908) (1,036) (2,724) (3,108) (3,632) (4,144) Operating expenses 5 (804) (824) (40) (863) (844) (1,687) ------ ------ ------ ------- ------ ------- Net return/(loss) before finance costs and taxation 13,014 18,107 35,468 (137,114) 48,482 (119,007) Finance costs (694) (696) (2,080) (2,088) (2,774) (2,784) ------ ------ ------ ------- ------ ------- Net return/(loss) on ordinary activities before taxation 12,320 17,411 33,388 (139,202) 45,708 (121,791) Taxation on ordinary activities (1,153) (1,894) 183 1,285 (970) (609) ------ ------ ------ ------- ------ ------- Return/(loss) on ordinary activities after taxation 11,167 15,517 33,571 (137,917) 44,738 (122,400) ====== ====== ====== ======= ====== ======= Return/(loss) per ordinary share - basic (US$ cents) 7 26.50 35.39 79.65 (314.58) 106.15 (279.19) ====== ====== ====== ======= ====== ======= Return/(loss) per ordinary share - diluted (US$ cents) 7 24.03 30.39 80.43 (311.64) 104.46 (281.25) ====== ====== ====== ======= ====== ======= 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 AIC. The Company had no recognised gains or losses other than those disclosed in the Income Statement. All items in the statement derive from continuing operations and no operations were acquired or discontinued during the year. All income is attributable to the equity holders of BlackRock Latin American Investment Trust plc. Reconciliation of Movements in Shareholders' Funds for the year ended 31 December 2012 Called up Share Capital Non share premium redemption distributable Capital Revenue capital account reserve reserve reserves reserve Total Note US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 For the year ended 31 December 2012 At 31 December 2011 4,384 11,641 4,602 4,356 343,736 22,831 391,550 Return for the year - - - - 33,571 11,167 44,738 Share buy backs - - - - (23,535) - (23,535) Dividends paid (1) 6 - - - - - (13,040) (13,040) ----- ------ ----- ----- ------- ------ ------- At 31 December 2012 4,384 11,641 4,602 4,356 353,772 20,958 399,713 ----- ------ ----- ----- ------- ------ ------- For the year ended 31 December 2011 At 31 December 2010 4,384 11,687 4,602 4,356 481,637 17,835 524,501 (Loss)/return for the - - - - (137,917) 15,517 (122,400) year Share issue costs - (66) - - - - (66) Write back of prior - - - - 16 - 16 year tender costs Shares issued on - 20 - - - - 20 conversion of convertible bonds Dividends paid (2) 6 - - - - - (10,521) (10,521) ----- ------ ----- ----- ------- ------ ------- At 31 December 2011 4,384 11,641 4,602 4,356 343,736 22,831 391,550 ----- ------ ----- ----- ------- ------ ------- 1. Second interim dividend paid in respect of the year ended 31 December 2011 of 25.00 cents per share declared on 7 March 2012 and paid on 20 April 2012 and the first interim dividend for the year ended 31 December 2012 of 5.00 cents per share declared on 14 August 2012 and paid on 27 September 2012. 2. Second interim dividend paid in respect of the year ended 31 December 2010 of 19.00 cents per share declared on 17 February 2011 and paid on 13 April 2011 and the first interim dividend for the year ended 31 December 2011 of 5.00 cents per share declared on 9 August 2011 and paid on 23 September 2011. Balance Sheet as at 31 December 2012 Notes 2012 2011 US$'000 US$'000 Fixed assets Investments held at fair value through profit or loss 458,594 454,778 -------- -------- Current assets Debtors 3,045 3,481 Cash at bank and in hand 5,829 20,185 -------- -------- 8,874 23,666 -------- -------- Creditors - amounts falling due within one year Bank overdraft (126) - Other creditors (3,605) (2,925) -------- -------- Net current assets 5,143 20,741 -------- -------- Total assets less current liabilities 463,737 475,519 Creditors - amounts falling due after more than one year Convertible bonds held at fair value through profit or loss (64,000) (83,945) Non-equity redeemable shares (24) (24) -------- -------- (64,024) (83,969) -------- -------- Net assets 399,713 391,550 ======== ======== Capital and reserves Called up share capital 11 4,384 4,384 Share premium account 12 11,641 11,641 Capital redemption reserve 12 4,602 4,602 Non distributable reserve 12 4,356 4,356 Capital reserves 12 353,772 343,736 Revenue reserve 20,958 22,831 -------- -------- Total equity shareholders' funds 399,713 391,550 ======== ======== Net asset value per ordinary share (US$ cents) - debt at fair value (see note 2(k) 7 964.72 893.11 ======== ======== Cash Flow Statement for year ended 31 December 2012 Note 2012 2011 US$'000 US$'000 Net cash inflow from operating activities 5 11,776 11,185 Servicing of finance Finance costs (2,942) (2,818) Taxation paid (987) (1,105) ------- ------- Capital expenditure and financial investment Purchase of investments (240,065) (210,981) Proceeds from sale of investments 270,378 236,991 Capital expenses (45) (898) ------- ------- Net cash inflow from capital expenditure and financial investment 30,268 25,112 ------- ------- Equity dividends paid (13,040) (10,521) ------- ------- Net cash inflow before financing 25,075 21,853 ------- ------- Financing Repurchase of convertible bonds (15,660) - Share buy backs (23,519) - Issue expenses paid - (104) ------- ------- Net cash outflow from financing (39,179) (104) ------- ------- (Decrease)/increase in cash in the year (14,104) 21,749 ======= ======= Notes to the Financial Statements 1. Principal activity The principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010. 2. Accounting policies (a) Basis of preparation The Company's financial statements have been prepared on a going concern basis and on the historical cost basis of accounting, modified to include the revaluation of fixed asset investments and convertible bonds in accordance with the Companies Act 2006, UK Generally Accepted Accounting Practice ("UK GAAP") and with the Statement of Recommended Practice `Financial Statements of investment trust companies and venture capital trusts' ("SORP"), revised in January 2009. The principal accounting policies adopted by the Company are set out below. The policies have been applied consistently throughout the year and are consistent with those applied in the preceding year. All of the Company's operations are of a continuing nature. The Company's financial statements are presented in US Dollars, which is the functional and presentational currency of the Company. The US Dollar is the functional currency because it is the currency most related to the primary economic environment in which the Company operates. All values are rounded to the nearest thousand dollars (US$'000) except where otherwise indicated. (b) Presentation of the Income Statement In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the Association of Investment Companies, supplementary information which analyses the Income Statement between items of a revenue and a capital nature has been presented alongside the Income Statement. In accordance with the Company's status as a UK investment company under section 833 of the Companies Act 2006, net capital returns may not be distributed by way of dividend. (c) Segmental reporting The Directors are of the opinion that the Company is engaged in a single segment of business being investment business. (d) Income Dividends receivable on equity shares are treated as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. Provisions are made for dividends not expected to be received. Fixed returns on non equity securities are recognised on a time apportionment basis. Special dividends are treated as a capital receipt or a revenue receipt depending on the facts or circumstances of each particular case. Interest income is accounted for on an accruals basis. Dividends are accounted for in accordance with Financial Reporting Standard 16 `Current Taxation' (FRS 16) on the basis of income actually receivable, without adjustment for the tax credit attaching to the dividends. Dividends from overseas companies continue to be shown gross of withholding tax. Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend foregone is recognised in capital reserve. (e) Expenses All expenses are accounted for on an accruals basis. Expenses have been charged wholly to the revenue column of the Income Statement, except as follows: - expenses which are incidental to the acquisition or disposal of investments are included within the cost of the investments or deducted from the disposal proceeds of investment and are thus charged to the capital column of the Income Statement. Details of transaction costs on purchases and sales of investments are disclosed in note 11 on page 47 of the annual report; - the investment management fee has been allocated 75% to the capital column and 25% to the revenue column of the Income Statement in line with the Board's expected long term split of returns, in the form of capital gains and income respectively, from the investment portfolio; - performance fees have been allocated wholly to the capital column of the Income Statement, as the performance fee has been predominantly generated through capital returns of the investment portfolio. (f) Finance costs Finance costs are accounted for on an accruals basis. Finance costs are allocated, insofar as they relate to the financing of the Company's investments, 75% to the capital column and 25% to the revenue column of the Income Statement, in line with the Board's expected long term split of returns, in the form of capital gains and income respectively, from the investment portfolio. (g) Taxation The tax effect of different items of expenditure is allocated between capital and revenue on the marginal basis using the Company's effective rate of corporation taxation for the accounting period. Deferred tax is recognised in respect of all temporary differences at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. (h) Investments held at fair value through profit or loss The Company's investments are classified as held at fair value through profit or loss in accordance with FRS 26 - `Financial Instruments: Recognition and Measurement' and are managed and evaluated on a fair value basis in accordance with its investment strategy. All investments are designated upon initial recognition as held at fair value through profit or loss. These sales of assets are recognised at the trade date of the disposal. Proceeds will be measured at fair value which will be regarded as the proceeds of sale less any transaction costs. The fair value of the financial instruments is based on their quoted bid price at the balance sheet date on the exchange on which the investment is quoted, without deduction for the estimated future selling costs. Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Income Statement as "gains or losses on investments held at fair value through profit or loss". Also included within this heading are transaction costs in relation to the purchase or sale of investments. In order to improve the disclosure of how companies measure the fair value of their financial investments, the disclosure requirements in FRS 29 have been extended to include a fair value hierarchy. The fair value hierarchy consists of the following three levels: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability Level 3 - inputs for the asset or liability that are not based on observable market data Unquoted investments are valued by the Directors at fair value using International Private Equity and Venture Capital Valuation Guidelines. This policy applies to unquoted fixed asset investments held by the Company. (i) Dividends payable Under FRS 21 final dividends should not be accrued in the financial statements unless they have been approved by shareholders before the balance sheet date. Dividends payable to equity shareholders are recognised in the Reconciliation of Movement in Shareholders' Funds when they have been approved by shareholders and become a liability of the Company. Interim dividends are only recognised in the financial statements in the period in which they are paid. (j) Foreign currency translation All transactions in foreign currencies are translated into US Dollars at the rate of exchange ruling on the dates of such transactions. Foreign currency monetary assets and liabilities at the balance sheet date are translated into US Dollars at the exchange rates ruling at that date. Exchange differences arising on the revaluation of investments held as fixed assets are taken to capital reserves. Exchange differences arising on the translation of foreign currency assets and liabilities are taken to capital reserves. (k) Convertible bonds On 15 September 2009, the Company issued US$80 million worth of 3.5% unsecured convertible bonds ("bonds") redeemable at par on 15 September 2015 (additional information is given in note 15 of the Annual Report). The bonds have been accounted for in accordance with FRS 26 - `Financial Instruments: Recognition and Measurement', and held at fair value on the Company's Balance Sheet. On initial recognition, fair value was deemed to be the issue proceeds received of US$80 million, and issue costs of US$1.1 million which had been debited to the Income Statement and allocated 25% to the revenue column and 75% to the capital column in line with the Board's policy on allocation of finance costs as set out in note 2(f). Subsequent to initial recognition, the bonds have been fair valued by reference to their offer prices subject to a minimum floor price. Movements arising from an increase or decrease in this price and are credited or debited to the capital column of the Income Statement. In the event that the fair value of the bonds falls below the nominal value of the bonds, the fair value adjustment will not decrease the bond valuation below this nominal value. This is due to the requirement that the convertible bonds will be redeemed at their nominal value if they are not converted into equity shares prior to 1 September 2015. Interest costs arising on the bonds are allocated 25% to the revenue column and 75% to the capital column of the Income Statement in line with the Board's policy on finance costs. The bonds in issue at the date of this report may be converted at any time before 15 September 2015 at US$9.83 per share but on or before the tenth business day (inclusive) prior to 15 September 2015. The value of any bonds converted will be debited to long term liabilities. The nominal value of ordinary shares issued on the conversion of bonds will be credited to share capital and the balance representing the excess of conversion proceeds over the nominal value of the ordinary shares will be credited to the share premium account. If the bonds have not been converted into ordinary shares before the tenth business day (inclusive) prior to 15 September 2015, they will be redeemed at their nominal value. Any valuation differences between the carrying value of the debt and the nominal value at this time will be debited or credited to the capital column of the Income Statement. (l) Cash and cash equivalents Cash comprises cash in hand and on demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. (m) Capital redemption reserve The nominal value of ordinary shares repurchased for cancellation is transferred out of share capital and into the capital redemption reserve. The full costs of ordinary shares repurchased and held in treasury are charged to capital reserves. Where treasury shares are subsequently reissued, any surplus is taken to the share premium account. (n) Capital reserves The following transactions are accounted for in capital reserves: - gains and losses on the disposal of fixed asset investments; - realised exchange differences of a capital nature; - cost of professional advice, including irrecoverable VAT, relating to the capital structure of the Company; - other capital charges and credits charged or credited to this reserve in accordance with the above policies; - cost of purchases of own ordinary shares and warrants; - increases and decreases in the valuation of investments held at the year end and the change in fair value of the convertible bond; and - unrealised exchange differences of a capital nature. (o) Going concern The Company's Articles of Association require that an ordinary resolution be put to the Company's shareholders to approve the continuation of the Company. The Directors are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and therefore consider the going concern assumption to the be appropriate. The last resolution was put to shareholders at the 2012 AGM and the next such resolution will be put to shareholders at the AGM in 2014. (See page 19 of the annual report for further details). 3. Income 2012 2011 US$'000 US$'000 Investment income: Overseas dividends 14,097 19,675 Interest income 628 286 ------ ------ 14,725 19,961 Other income: Deposit interest 1 6 ------ ------ 14,726 19,967 ====== ====== 4. Investment management and performance fees 2012 2011 Revenue Capital Total Revenue Capital Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Investment management fee 908 2,724 3,632 1,036 3,108 4,144 Performance fee - - - - - - --- ----- ----- ----- ----- ----- 908 2,724 3,632 1,036 3,108 4,144 === ===== ===== ===== ===== ===== The terms of the investment management agreement with BlackRock provide for the Manager to receive an annual management fee of 0.85% of net asset value (excluding any adjustments to reflect the fair value of the convertible bonds ("the bonds")). The value of any investment in BlackRock managed funds is excluded when calculating the management fee. In addition, BlackRock is entitled to a performance fee equal to 10.0% of any outperformance of the NAV per share (on a US Dollar total return basis, excluding any adjustments to reflect the fair value of the bonds) over the MSCI EM Latin America Index (on a US Dollar total return basis) plus a hurdle of 1.0%. The amount of performance fee payable in any one year will be capped at 1.0% of NAV. However, any performance fee will only be paid to the extent that the cumulative performance since 1 July 2007 is ahead of the MSCI EM Latin America Index (on a US Dollar total return basis). Performance fees are allocated wholly to the capital column of the Income Statement as performance is predominantly generated through capital returns from the investment portfolio. As at 31 December 2012, there was no performance fee payable to the Investment Manager (2011: nil). In order to compensate the Investment Manager for managing the additional capital from the bonds, the Company has agreed to pay a management fee of 0.34% per annum to the Investment Manager in respect of the principal amount of the bonds outstanding at any time. The total fee payable to the Investment Manager in any twelve month period will be limited to 4.99% of NAV, however, as the Investment Manager is only entitled to a basic fee of 0.85% of NAV, a performance fee capped at 1.0% of NAV and the fee payable in respect of the bonds, as described above, the amount payable to the Investment Manager by the Company in respect of fees in any twelve month period is expected to be substantially lower than 4.99% of NAV and, in any event, following the repurchase of US$15,948,000 convertible bonds, the incremental fee payable in respect of the bonds will not exceed US$218,000 per annum. The net asset value and share price performance with income reinvested which have been disclosed in the financial highlights at the start of this announcement include fair value adjustments in respect of the convertible bonds. These fair value adjustments have been excluded from the net asset value used to determine any performance fee payable. In addition, adjustment for amortised issue costs and performance fee accruals has been made to the net asset value used in the performance computation. After making these adjustments and including the impact of the reinvestment of dividends paid in the period, the cum-income, total return NAV used to calculate the performance fee amounted to 1116.71 cents, resulting in an outperformance of 1.1% against the benchmark index prior to applying the 1% hurdle. However, because the cumulative performance since 1 July 2007 is below the MSCI EM Latin America Index, no fee is payable. 5. Operating expenses 2012 2011 US$'000 US$'000 (a) Other operating expenses AIC subscriptions 45 62 Auditor's remuneration - audit services 51 47 Custody fee 119 98 Directors' and Officers' liability insurance 17 18 Directors' emoluments - fees for services to the Company 293 285 Printing and postage 44 37 Registrar's fees 48 50 Other administrative costs 187 227 --- --- 804 824 === === Ongoing charges calculated as a percentage of average shareholders' funds and using expenses, excluding interest costs were: 1.2% 1.3% ==== ==== There were no fees payable in the year in respect of non-audit services (2011: nil). The underlying audit fee is invoiced in Sterling and is therefore susceptible to exchange rate fluctuations. The fee has not changed materially from year to year. 2012 2011 US$'000 US$'000 (b) Reconciliation of net return/(loss) before finance costs and taxation to net cash flow from operating activities Net return/(loss) before finance costs and taxation 48,482 (119,007) (Gains)/losses on investments held at fair value through profit or loss (34,325) 159,796 Fair value adjustment for the convertible bonds (3,997) (27,990) Gain on repurchase of convertible bond (288) - Exchange losses of a capital nature 378 1,337 Non-operating expenses of a capital nature 40 863 Decrease/(increase) in accrued income 763 (456) Decrease/(increase) in other debtors 9 (5) Increase/(decrease) in creditors 714 (3,353) ------ ------ Net cash inflow from operating activities 11,776 11,185 ====== ====== Expenses of US$40,000 (2011: US$863,000) charged to the capital column of the Income Statement relate to transaction costs charged by the custodian on the purchases and sales of investments and charges on Brazilian foreign exchange transactions. 6. Dividends Dividend on ordinary Register Payment 2012 2011 shares date date US$'000 US$'000 2010 Second interim of 19.00 cents 4 March 2011 13 April 2011 - 8,329 2011 First interim of 5.00 cents 19 August 2011 23 September 2011 - 2,192 2011 Second interim of 25.00 cents 16 March 2012 20 April 2012 10,960 - 2012 First interim of 5.00 cents 24 August 2012 27 September 2012 2,080 - ------ ------ 13,040 10,521 ====== ====== The Directors propose to pay a second interim dividend in respect of the year ended 31 December 2012 of 25.00 cents per share (2011: 25.00 cents per share) on 26 April 2013 to shareholders on the Company's register as at 22 March 2013. The proposed second interim dividend has not been included as a liability in these financial statements as interim dividends are only recognised in the financial statements in the period in which they are paid. The dividends disclosed in the note below have been considered in view of the requirements of section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies Act 2006, and the amounts proposed meet the relevant requirements as set out in this legislation. 2012 2011 US$'000 US$'000 Dividend payable on equity shares: First interim paid 5.00 cents (2011: 5.00 cents) 2,080 2,192 Second interim payable 25.00 cents (2011: 25.00 cents) 10,358 10,960 ------ ------ 12,438 13,152 ====== ====== 7. Return/(loss) and net asset value per ordinary share Revenue and capital returns per share are shown below and have been calculated using the following: 2012 2011 Net revenue return attributable to ordinary shareholders 11,167 15,517 (US$'000) Net capital return/(loss) attributable to ordinary 33,571 (137,917) shareholders (US$'000) ---------- ---------- Total return/(loss) (US$'000) 44,738 (122,400) ========== ========== Equity shareholders' funds (US$'000) 399,713 391,550 ---------- ---------- Net revenue return on which the diluted return per share has been calculated 11,691 16,029 Net capital return/(loss) on which the diluted return per share has been calculated 39,137 (164,373) ---------- ---------- The weighted average number of ordinary shares in issue during the year on which the undiluted return per ordinary share was calculated was: 42,145,043 43,840,769 ---------- ---------- The weighted average number of ordinary shares in issue during the year on which the diluted return per ordinary share was calculated was: 48,655,724 52,744,207 ---------- ---------- The actual number of ordinary shares in issue at the end of each year on which the net asset value with debt at fair value in accordance with accounting policy 2(k) was calculated was: 41,433,247 43,841,312 ========== ========== The notional number of ordinary shares in issue at the end of each year on which the net asset value with debt converted was calculated was: 47,943,928 52,744,207 ========== ========== 2012 2011 Revenue Capital Total Revenue Capital Total cents cents cents cents cents cents Return per share - basic Calculated on the weighted average number of shares 26.50 79.65 106.15 35.39 (314.58) (279.19) Calculated on the actual number of shares 26.95 81.03 107.98 35.39 (314.58) (279.19) Return per share - diluted Calculated on the weighted average number of shares 24.03 80.43 104.46 30.39 (311.64) (281.25) -------- -------- Net asset value per share - debt at fair value in accordance with accounting policy 2(k) 964.72 893.11 ======== ======== Net asset value per share - debt converted In accordance with the Company's understanding of the current methodology adopted by the AIC, convertible bond instruments are deemed to be in `the money' if the Cum income (debt at fair value) net asset value ("NAV") exceeds the conversion price of US$9.83 per share (2011: US$8.98 per share). In such circumstances a net asset value is produced and disclosed assuming the convertible debt is fully converted. At 31 December 2012 the (debt at fair value) NAV was US$9.65 per share and thus the convertible bonds are not in `the money'. There is no dilutive effect on the NAV per share. However, for information purposes the table below sets out the NAV per share with debt fully converted at the conversion price of US$9.83 per share (2011: US$8.98). This information is presented to provide useful additional relevant information for readers of the financial statements. 2012 2011 US$'000 US$'000 Net assets with convertible bonds at fair value in accordance with accounting policy 2(k) 399,713 391,550 Add back convertible bonds at fair value in accordance with accounting policy 2(k) 64,000 83,945 Accrued interest on convertible bonds at 31 December 672 840 ---------- -------- Adjusted net assets following conversion of the convertible bonds (a) 464,385 476,335 ========== ========== Number of ordinary shares at 31 December 41,433,247 43,841,312 Number of shares arising on conversion of the convertible bonds (US$64,000,000 @ US$9.83 (2011: US$79,948,000 @ US$8.98)) 6,510,681 8,902,895 ---------- ---------- Adjusted shares following conversion of the convertible bonds (b) 47,943,928 52,744,207 ========== ========== Net asset value per share - debt converted (US$ cents (a/b)) 968.60 903.10 ========== ========== 11. Called up share capital Ordinary Treasury shares shares Total Nominal number number shares US$'000 Allotted, called up and fully paid share capital comprised: Ordinary shares of 10 cents each At 1 January 2012 43,841,312 - 43,841,312 4,384 Shares repurchased held in treasury in respect of shares tendered on 30 March 2012 (2,192,065) 2,192,065 - - Shares repurchased held in treasury in respect of the buy back policy (216,000) 216,000 - - ---------- --------- ---------- ----- At 31 December 2012 41,433,247 2,408,065 43,841,312 4,384 ========== ========= ========== ===== During the year no ordinary shares were issued following the conversion of convertible bonds (2011: 2,227 ordinary shares issued following the conversion of US$20,000 convertible bonds). During the year, 2,408,065 ordinary shares were repurchased and transferred into treasury at a total cost of US$23,535,000 (2011: nil), 2,192,065 by way of a tender offer and 216,000 by way of buy backs. The number of ordinary shares in issue at the year end was 41,433,247 excluding 2,408,065 shares held in treasury (2011: 43,841,312). The ordinary shares (excluding any shares held in treasury) carry the right to receive any dividends and have one voting right per ordinary share. There are no restrictions on the voting rights of the shares or on transfer of the shares. 12. Reserves Capital Capital reserve reserve Share (arising (arising premium Capital Non on on account redemption distribution investments investments account reserve reserve sold) held) US$'000 US$'000 US$'000 US$'000 US$'000 At 1 January 2012 11,641 4,602 4,356 301,231 42,505 Movement during the year: Share buy backs - - - (23,535) - Gains on realisation of - - - 7,173 - investments Fair value adjustment in - - - - 3,997 respect of convertible bonds Gains on repurchase of convertible bonds - - - 288 - Change in investment holding gains - - - - 27,152 Loss on foreign currency transactions - - - (378) - Interest and expenses charged to capital after taxation - - - (4,678) 17 ------ ------ ------ ------- ------ At 31 December 2012 11,641 4,602 4,356 280,101 73,671 ====== ====== ====== ======= ====== 13. Publication of non statutory accounts The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The 2012 annual report and financial statements will be filed with the Registrar of Companies shortly. The report of the Auditor for the year ended 31 December 2012 contains no qualification or statement under section 498(2) or (3) of the Companies Act 2006. The comparative figures are extracts from the audited financial statements of BlackRock Latin American Investment Trust plc for the year ended 31 December 2011, which have been filed with the Registrar of Companies, unless otherwise stated. The report of the Auditor on those accounts contained no qualification or statement under section 498 of the Companies Act. This announcement was approved by the Board of Directors on 27 February 2013. 14. Annual Report Copies of the annual report will be sent to members shortly and will also be available from the registered office, c/o The Company Secretary, BlackRock Latin American Investment Trust plc, 12 Throgmorton Avenue, London EC2N 2DL. 15. Annual General Meeting The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Tuesday, 14 May 2013 at 12 noon. ENDS The Annual Report will also be available on the BlackRock Investment Management website at http://www.blackrock.co.uk/literature/annual-report/ blackrock-latin-american-investment-trust-plc-annual-report.pdf. Neither the contents of the Investment Manager's website nor the contents of any website accessible from hyperlinks on the Investment Manager's website (or any other website) is incorporated into, or forms part of, this announcement. For further information, please contact: Simon White, Managing Director, Investment Trusts, BlackRock Investment Management (UK) Limited Tel: 020 7743 5284 Peter Burnell - Chairman Tel: 01434 632292 Emma Phillips, Media & Communication, BlackRock Investment Management (UK) Limited Tel: 020 7743 2922 Henrietta Guthrie, Lansons Communications Tel: 020 7294 3612 27 February 2013 12 Throgmorton Avenue London EC2N 2DL

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