Half-yearly Report

BlackRock Latin American Investment Trust plc Half Yearly Financial Report 30 June 2012 The Company's objective is to secure long term capital growth and an attractive total return primarily through investing in quoted securities in Latin America. Performance Record Financial Highlights 30 June 31 December 2012 2011 % Attributable to ordinary shareholders (unaudited) (audited) change Assets Net assets (US$'000) 356,034 391,550 -9.1* Net asset value per ordinary share - debt at fair value (US$ cents) 856.38 893.11 -4.1 - with income reinvested (debt at fair value) -1.8 Ordinary share price (mid-market) (US$ cents) 784.23 836.88 -6.3 - with income reinvested -3.9 Ordinary share price (mid-market) (pence)** 500.00 538.50 -7.1 -with income reinvested -4.8 * The change in net assets reflects the tender offer and share buy back implemented in the period and market movements. ** Based on exchange rate of 1.5685 (2011: 1.5541). Net asset values are calculated on a fair value basis. For the six For the six months months ended ended 30 June 30 June 2012 2011 % (unaudited) (unaudited) change Revenue Net revenue after taxation (US$'000) 6,604 7,772 -15.0 Revenue return per ordinary share - debt at fair value (US$ cents) 15.44 17.73 -12.9 First interim dividend per ordinary share (US$ cents) 5.00 5.00 - Source: BlackRock. Chairman's Statement for the six months ended 30 June 2012 Overview and Performance Latin American equity markets were volatile in the first six months and initial optimism was cut short as instability in the Eurozone returned. Although the year began well, buoyed by a focus on the region's positive domestic dynamics, sentiment deteriorated in the second quarter when concerns about government solvency in Greece and later Spain, tempered appetite for equity investment generally. The MSCI EM Latin America Index ended the period down by 0.3% in US Dollar terms (1.3% in Sterling terms). By comparison the Company's net asset value ("NAV") with debt at fair value fell by 1.8% in US Dollar terms (2.7% in Sterling terms) and the share price decreased by 3.9% in US Dollar terms (4.8% in Sterling terms). (All percentages calculated with income reinvested.) The Company's underperformance against the benchmark was due principally to country allocation and the impact of gearing. Further details of the factors affecting performance are given in the Investment Manager's Report. Since 30 June 2012, the Company's NAV (debt at fair value) has increased by 5.7% in Sterling terms and by 5.8% in US Dollar terms. The share price has increased by 2.5% in Sterling terms and by 2.6% in US Dollar terms. (All percentages calculated with income reinvested.) Dividends The Company's revenue return per share (debt at fair value) amounted to 15.44 cents per share (2011: 17.73 cents per share). The Board is pleased to declare an interim dividend of 5.00 cents per share (2011: 5.00 cents per share), which will be paid on 27 September 2012 to shareholders on the register as at 24 August 2012 (ex-dividend date of 22 August 2012). Convertible bonds On 15 September 2009 the Company issued US$80 million in nominal amount of 3.5% unsecured convertible bonds 2015. During the period and up to the date of this report, no bonds have been converted. As at the date of this report the Company had 79,948,000 convertible bonds in issue. Bondholders will have further opportunities to subscribe for ordinary shares to which the convertible bonds relate at any time up to 14 September 2012 inclusive, at a price of US$8.98 per share. Bondholders should note that the conversion price will then increase, and between 15 September 2012 and 1 September 2015 bonds will be convertible at a price of US$9.83 per share. At the date of this report the Company's NAV was US$9.06 and the share price was US$8.05 compared with the current exercise price of US$8.98 per share. If you are in any doubt about the action you should take, you are recommended immediately to seek your own personal financial advice from your independent financial adviser, stockbroker, solicitor, accountant, bank manager or from an appropriately qualified independent adviser authorised pursuant to the Financial Services and Markets Act 2000. Discount control As part of their discount control policy, the Directors of the Company have the discretion to make semi-annual tender offers. The Directors exercised their discretion to operate the half yearly tender offer on 31 March 2012 which was oversubscribed with 15,916,079 (36.3 per cent. of the ordinary shares in issue excluding treasury shares) being tendered. Shareholders who tendered had their basic entitlement (5 per cent. of their shares) satisfied in full and their election for further shares was scaled back pro rata with each shareholder receiving 7.01334 per cent of their election for further shares. All 2,192,065 shares tendered were transferred into treasury and will be cancelled after a period of 12 months if they have not been reissued. In addition to the tender offer, the Company bought back 75,000 ordinary shares at a total cost of £417,000 (US$675,000). All the shares purchased were transferred into treasury. The tender price calculated as at close of business on 31 March 2012 was 611.0594 cents per share which represented a discount of 2% to the cum income NAV at that date. The Directors announced that further to the last tender offer in March 2012 which was fully subscribed, they have decided not to implement a semi-annual tender offer in September 2012. In the six month period ended 30 June 2012 the Company's ordinary shares traded at an average discount to the cum income NAV of 5.9 per cent, which widened during July to an average of 8.7%. These figures compare with a 6.3 per cent discount for the six months ending 31 December 2011. The Board regards the level of discount in recent months as too high. However in current market circumstances and given the effects on gearing they do not believe that another regular tender offer this September is in the interests of shareholders as a whole. The Board also note that the conversion price on the convertible bonds in issue is due to increase from US$8.98 per share to US$9.83 per share with effect from 15 September 2012. The Board monitors the share price, trading volume, gearing levels and prevailing discount/ premium on a regular basis and has resolved, subject to market conditions, to take such steps as are necessary from time to time to protect the Company's share rating. At the date of this report the Company has 41,574,247 ordinary shares in issue, excluding 2,267,065 shares in treasury. Outlook We are optimistic about the prospects for Latin America as the fundamentals continue to look supportive, but we are also mindful that uncertainty in global financial markets, particularly in the Eurozone, could continue to undermine sentiment. The outlook for the region will to a large extent also be determined by whether the steps taken to resuscitate growth in Brazil will be successful. Our Manager is optimistic on this front, and expects economic growth in the region to accelerate in the second half of the year. Peter Burnell Chairman 14 August 2012 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; - Liquidity; - Financial; and - Stability of the global economy. 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 2011. A detailed explanation can be found on pages 14 and 15 of the Annual Report and Financial Statements which are available on the website maintained by the Investment Manager, BlackRock Investment Management (UK) Limited, at www.blackrock.co.uk/brla. In the view of the Board, there have not been any changes to the fundamental nature of these risks since the previous report and these principal risks and uncertainties are equally applicable to the remaining six months of the financial year as they were to the six months under review. Furthermore the Board has determined that an additional uncertainty now exists alongside those outlined in the Annual Report and Financial Statements. Uncertainties about the stability of the global economy and as a consequence financial markets, may have an adverse effect onteh Company's performance. Related party transactions The Investment Manager is regarded as a related party and details of the management fees payable are set out in note 3 and note 9. The related party transactions with the Directors are set out in note 9. Directors' responsibility statement The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements. The Directors confirm to the best of their knowledge and belief that: - the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with the Accounting Standards Board's Statement `Half Yearly Financial Reports'; and - the interim management report, together with the Chairman's Statement and the Investment Manager's Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules. The half yearly financial report has not been audited or reviewed by the Company's auditor. The half yearly financial report was approved by the Board on 14 August 2012 and the above responsibility statement was signed on its behalf by the Chairman. Peter Burnell For and on behalf of the Board 14 August 2012 Investment Manager's Report Latin American Market Overview During the first six months of 2012, the Company posted a 1.8% fall in its NAV with debt at fair value and a 3.9% fall in its share price, in US Dollar terms (equivalent to 2.7% and 4.8%, respectively, in Sterling terms). Over the same period the MSCI Latin America Index posted a return of -0.3% (-1.3% in Sterling terms), placing Latin America among the most negatively impacted regions of the world during the period. (All percentages calculated with income reinvested.) Performance during the period was negatively affected by an overweight position in Brazil and underweight positions in Colombia and Chile. The largest individual detractors from performance included oil & gas producers OGX and Queiroz Galvao, Itaú Unibanco and homebuilder PDG Realty. Given negative absolute returns, gearing also weighed on performance in the first half of the year. Offsetting some of the negative results, the Company received positive contributions primarily from an off-benchmark position in Panama via Copa Airlines and stock selection in Mexico. The largest individual positive contributors to performance included overweight positions in Femsa and América Móvil as well as not owning Grupo Elektra. The first six months of the year was a tale of two halves. The better market performance experienced during the first quarter gave way to renewed concerns regarding the Eurozone's financial health and Chinese growth in the second quarter. As such, volatility and investor risk aversion increased, leading Latin American equities to underperform in the first half of the year. Despite the volatility and events in the global market, Latin America continues to compare favourably from a valuation perspective. Brazil continues to trade in the bottom half of the global valuations at around 9x 2013 (estimate) P/E. This multiple is at a discount to all other major Latin American markets, in line with the multiple for emerging markets overall and at a discount to the almost 11x multiple for global markets. Latin America in general, and Brazil specifically, stand to benefit from an improvement in market sentiment and investor risk appetite - both of which will most likely require greater confidence that the Eurozone financial crisis is moving towards a reasonable conclusion. Year-to-date performance figures Local MSCI currency Local country (vs. USD) indices Region/indices % change % change % change Argentina -47.3 -4.7 -9.5 (Merval) Brazil -9.5 -4.2 -11.0 (Ibovespa) Chile 5.5 4.7 8.6 (IGPA) Colombia 14.8 5.9 15.1 (IGBC) Mexico 13.2 8.4 13.1 (IPC) Peru 7.0 3.8 5.0 (IGBVL) MSCI Latin America -2.2 CRB Index -1.3 MSCI Emerging Asia 3.6 Oil (WTI) -14.0 MSCI Emerging Markets 2.3 Gold 2.2 MSCI World 4.5 Copper 1.3 S&P 500 8.3 Corn 4.0 MSCI Europe 2.2 Soybeans 26.9 Sources: MSCI, Bloomberg, UBS and BlackRock (all figures on a capital only basis). During the first half of the year, both Brazil's equity market and the Real were ranked among the weakest performers in Latin America. Brazil's equity market suffered from the combination of global investor risk appetite as well as overall growth disappointment at both the macro as well as the company levels. The Brazilian government was active with what we would term micro prudential measures, looking to shore up growth in certain sectors and stimulate the banking system to increase lending to consumers. The Central Bank has so far cut interest rates by 450 basis points to a record low level of 8% for the SELIC rate, with more cuts expected in the second half of the year. In addition, the administration looked to depreciate the Brazilian Real as a way to increase local industry competitiveness. So far, all these measures have not had a notable positive impact on growth, which coupled with several company specific disappointments led to Brazil's markets underperforming during the period. Mexico's economy surprised on the upside during the first half of 2012, posting strong domestic growth and benefitting from its growing market share in the US import business. Mexico's labour costs have become competitive versus Chinese labour costs of the past five years, causing a strong recovery in its export activities to the US. In addition, the July 2012 presidential elections won by the PRI's Enrique Peña Nieto bring with them the expectation of the country finally addressing the need for energy and fiscal reform. Overall, Mexico's equity markets ranked among the better performing markets in the region. In the Andean region, Colombia posted the strongest returns, followed by Peru and Chile. The Andean region overall continues to post strong economic growth. Especially in Colombia and Peru, both countries continue to see good investments, with infrastructure related sectors seeing strong growth. In Chile, market performance, while positive, was somewhat affected by a retreat in copper prices during the second quarter. Portfolio In Brazil, we reduced our weighting to 67% of the portfolio, with underweight positions in Petrobras, steel and pulp & paper sectors financing overweight positions in more domestically oriented sectors such as retailers, homebuilders and banks. The overweight position in banks has been reduced given a tougher competitive environment in Brazil's banking sector. More specifically we have reduced exposure to the Itau/Itausa complex given the previously mentioned change as well as due to asset quality issues in the bank's consumer loan book. Within the context of financials, we also reduced exposure to Brazilian credit card acquirers on valuation grounds. The overweight position in homebuilders has also been reduced significantly as the sector struggles to deliver on economies of scale following fast growth over the past three years. During the first half of the year we added to Vale given expectations of improved sentiment towards China in the second half of the year and better capex management by the current administration. We also added to retailers as we expect lower rates to result in faster domestic growth during the second half of 2012 and into 2013, telecom operators due to attractive valuation and high dividend yields, and export oriented companies due to the depreciation of the Brazilian Real. In Mexico, we increased our weighting slightly to 22.2% of the portfolio. We added to América Móvil as well as to industrial and consumer sectors. We have added to Alfa and Alpek, two companies within the industrial sector that stand to benefit from the expected upcoming energy reform. We continue to maintain an overweight position in media via Televisa given its dominant position. During the period we closed our position in Genomma Labs given their hostile bid for consumer products name Prestige in the US earlier in the year - a move we did not find to be strategic sense. We also closed our position in Walmex following the revelation of an ongoing investigation into bribery. In Chile, we closed our position in utility name E-CL on valuation grounds and deployed funds into consumer names that also provide access to other markets in the Andean region. Our preferred name in Chile is Banco Santander, which is one of the most profitable banks in Latin America. Overall valuations in Chile remain expensive, leading to the significant underweight position. Elsewhere in the Andean region we added to construction and mining in Peru as well as financials and consumers in Colombia. Both economies are expected to post growth levels above the regional average over the next year, and we continue to look for investable companies at reasonable valuations that should benefit from such growth. Both Argentina and Venezuela remain outside of our investment radar given macro-economic policies that are not market friendly. Outlook Latin America's prospects continue to look positive - in the countries that the Company invests in, macro-economic policies are generally sound, financial systems are well capitalised, strong middle classes are in the process of being established, and corporate governance is comparable to any market in the world. Short term market direction will undoubtedly be guided by events in the Eurozone, and to a lesser extent China, but over time, region-specific fundamentals should once again be positive catalysts for the market. The Brazilian domestic economy has yet to start reflecting all the actions from the government, from the 450 basis points in interest rate easing so far by the Central Bank to all the other stimulative actions by the Finance Ministry. Unemployment has remained at close to record low levels and wage growth has been strong - all of which should translate into faster economic growth during the second half of 2012. At the stock level, we have moved to a barbell approach, with part of the Brazilian portfolio positioned to benefit from the expected increase in domestic consumption, while the other part is generally formed by exporters that stand to benefit from a weaker currency. In Mexico, with the presidential elections out of the way, the focus now shifts to the incoming administration's ability to move Mexico's reform agenda forward. The narrower than expected legislative victory means negotiation with the opposition will be necessary, but we remain confident that some success will be achieved. Given Mexico's rich valuation relative to other emerging markets countries (currently trading at 15x 2013 (estimate) P/E) and a lack of listed companies that would benefit directly from energy reform, much of the good news seems to be priced in, which keeps us from having a larger weighting in the market. The Andean region remains at a large underweight position due to a combination of low liquidity and challenging valuation levels. We maintain a general positive attitude towards Chile, Peru and Colombia and continue to use our ability to invest in less liquid names and in companies that should continue to benefit from attractive levels of growth in the region. Overall, we continue to expect Latin America to be one of the first markets to recover once market and company specific fundamentals begin to drive markets again. Risks to our positive views on Latin America stem mostly from outside forces, especially with regards to concerns about the global economy. However, any event that results in falling investor risk appetite could possibly lead to lower demand for Latin American equities. At the country level, in Brazil risks include the economy continuing not to react to all the stimulative policies and inflation unexpectedly spiking, forcing the Central Bank to increase rates. In Mexico, failure to show progress with the reform agenda would potentially cause a derating of Mexican equities. William Landers BlackRock Investment Management (UK) Limited 14 August 2012 Geographical and Sector Analysis 30 June 2012 Geographical weightings Portfolio Weightings Benchmark Weightings Brazil 67.0% 59.4% Mexico 22.2% 22.6% Chile 4.0% 9.0% Colombia 2.4% 5.8% Peru 2.3% 3.2% Panama 1.4% 0.0% Argentina 0.7% 0.0% ------ ------ 100.0% 100.0% Sources: BlackRock and MSCI. Sector weightings Sector Weightings Benchmark Weightings Financials 25.1% 21.2% Consumer 22.0% 20.7% Materials 15.5% 20.7% Telecommunications 11.7% 9.4% Energy 10.5% 12.3% Industrials 7.3% 5.3% Utilities 7.0% 7.6% Information Technology 0.6% 2.2% Health Care 0.3% 0.6% ------ ------ 100.0% 100.0% Sources: BlackRock and MSCI. Ten Largest Investments 30 June 2012 Set out below is a brief description by the Investment Manager of the Company's largest investments. Vale - 10.9% (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 continued growth in demand from Chinese steel makers. América Móvil - 8.9% (2011: 6.9%) is Latin America's leading provider of wireless telecommunications services. In addition, it holds a 60% stake in Telmex, Mexico's leading wireline provider, and 100% of Telmex International and its significant backbone network throughout Latin America. Petrobrás - 7.2% (2011: 7.7%) 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. Oil finds in the pre-salt region could transform the company (and Brazil) into one of the world's major oil producers. The company was hurt in 2010 by a US$70 billion equity offering, which netted the company 5 billion barrels of additional reserves. Fomento Economico Mexicano ("Femsa") - 5.0% (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 6,300 convenience stores throughout Mexico; and a 20% economic interest in global brewer Heineken. Banco Bradesco - 4.9% (2011: 6.1%) is Brazil's second largest private sector bank which has an advantageous position to benefit from the strong demand for credit in Brazil. Bradesco has one of the largest branch networks in the country, allowing it to participate fully in Brazil's growing middle class and its overall financial services needs. Itaú Unibanco - 3.3% (2011: 8.9%) is Brazil's largest private sector bank and has maintained superior profitability levels while participating in the overall growth in the Brazilian financial system. The bank continues to benefit from Brazil's growing demand for credit, especially from individuals and small and medium size enterprises. CCR - 3.0% (2011: 2.3%) - is Brazil's leading toll road operator. The company has invested in other concession projects such as subways and is a major shareholder in Brazil's leading electronic payment company for tolls and parking lots. Recently, CCR received shareholder approval to participate in upcoming airport concession auctions in Brazil, acquiring a participation in four airports 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 in the region while maintaining operating cost discipline throughout its operations. Grupo Televisa - 2.4% (2011: 2.5%) is Mexico's leading television broadcasting operator and leading provider of satellite and cable television. The latter has allowed the company to become a leading provider of broadband internet access and internet protocol telephony. In October 2010 the company acquired a significant position in Univision, the leading Hispanic broadcaster in the United States. Natura Cosméticos - 2.1% (2011: 1.0%) is Brazil's leading manufacturer and seller of cosmetics, skin care and personal hygiene products. They stand to benefit from the growing middle class and a strong domestic economy. In addition, they have one of the largest direct sales forces in the world. 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. Investments 30 June 2012 Market value % of Country of operation US$'000 investments Brazil Vale 45,505 10.9 Petrobrás 30,148 7.2 Banco Bradesco 20,612 4.9 Itaú Unibanco 13,910 3.3 CCR 12,595 3.0 AmBev 12,451 3.0 Brazil (Fed Rep of) 6% 17/01/17 11,775 2.8 Natura Cosméticos } 8,701 2.1 Natura Cosméticos warrants*} Cemig 8,063 1.9 Banco do Brasil 7,834 1.9 BM&F Bovespa 6,752 1.6 Embraer 6,155 1.5 BR Malls 5,994 1.4 Tim Participações 4,725 1.1 Coposa 4,701 1.1 Brasil Foods 4,311 1.0 Ultrapar Participações 4,185 1.0 Lojas Renner } 4,105 1.0 Lojas Renner warrants* } Arezzo Industria e Comercio 4,003 1.0 Hypermarcas } 3,856 0.9 Hypermarcas warrants* BR Properties 3,834 0.9 Telefonica Brasil 3,640 0.9 Localiza Rent a Car 3,579 0.9 Klabin 3,468 0.8 Banco BTG Pactual } 0.8 Banco BTG Pactual warrants*} 3,363 T4F Entretenimento 3,282 0.8 LPS Brasil 2,971 0.7 CTEEP 2,756 0.7 Cosan 2,692 0.6 Totvs 2,683 0.6 Aes Tiete } 2,436 0.6 Aes Tiete warrants* } Cetip 2,385 0.6 Autometal 2,317 0.6 Copel Paranaense de Energia 2,165 0.5 Qualicorp 2,134 0.5 Cielo 1,961 0.5 Qgep Participações 1,870 0.5 Energias do Brasil 1,836 0.5 Cyrela Brazil Realty 1,811 0.4 PDG Realty 1,739 0.4 Profarma Distribuidora 1,392 0.3 Rossi Residencial } 1,375 0.3 Rossi Residencial warrants*} DASA 1,189 0.3 Even 915 0.2 Lupatech 793 0.2 Gerdau 655 0.2 Metalfrio Solutions 434 0.1 ------- ----- 280,056 67.0 ------- ----- Mexico América Móvil 37,292 8.9 Femsa 20,962 5.0 Grupo Televisa 9,988 2.4 United Mexican States 6.625% 03/03/15 5,650 1.4 Petroleos Mexicanos 4.875% 15/03/15 5,381 1.3 Grupo Financiero Banorte 4,353 1.0 Alfa 3,570 0.9 Alpek 3,324 0.8 Grupo Mexico 2,150 0.5 Kimberly-Clark de Mexico 51 0.0 ------- ----- 92,721 22.2 ------- ----- Chile Banco Santander-Chile 7,662 1.8 Empresa Nacional de Telecomunicaciones 3,222 0.8 Empresa Nacional de Elcetricidad 2,998 0.7 S.A.C.I. Falabella 2,889 0.7 ------- ----- 16,771 4.0 ------- ----- Colombia Pacific Rubiales Energy 6,243 1.5 Grupo Nutresa 2,140 0.5 Bancolombia 1,855 0.4 ------- ----- 10,238 2.4 ------- ----- Peru Credicorp 3,145 0.8 Southern Copper 2,363 0.6 Minas Buenaventura 2,239 0.5 Grana y Montero 1,653 0.4 ------- ----- 9,400 2.3 ------- ----- Panama Copa Airlines 5,935 1.4 ------- ----- 5,935 1.4 ------- ----- Argentina Tenaris 3,078 0.7 ------- ----- 3,078 0.7 ------- ----- Total investments 418,199 100.0 ------- ----- * Outperformance warrants held are linked to underlying listed securities which have available quoted prices, however the warrants are not listed in their own right. The valuation of outperformance warrants has been derived from the quoted prices of underlying securities. The total number of investments held at 30 June 2012 was 70 (31 December 2011:63). All investments are in equity shares unless otherwise stated. Income Statement for the six months ended 30 June 2012 Revenue US$'000 Capital US$'000 Total US$'000 Six months ended Year ended Six months ended Year ended Six months ended Year ended 30.06.12 30.06.11 31.12.11 30.06.12 30.06.11 31.12.11 30.06.12 30.06.11 31.12.11 Notes (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited)(unaudited) (audited) Losses on investments held at fair value through profit or loss - - - (8,460) (31,436) (159,796) (8,460) (31,436) (159,796) Changes in the value of convertible bonds held at fair value through profit or loss - - - 1,998 4,805 27,990 1,998 4,805 27,990 Exchange losses - - - (104) (87) (1,337) (104) (87) (1,337) Income from investments held at fair value through profit or loss 2 8,588 10,179 19,961 - - - 8,588 10,179 19,961 Other income 2 1 2 6 - - - 1 2 6 Investment management and performance fees 3 (461) (597) (1,036) (1,384) (1,790) (3,108) (1,845) (2,387) (4,144) Other operating expenses 4 (344) (487) (824) (23) (515) (863) (367) (1,002) (1,687) ----- ------ ------ ----- ------ ------- ------ ------ ------- Net return/ (loss) before finance costs and taxation 7,784 9,097 18,107 (7,973) (29,023) (137,114) (189) (19,926) (119,007) Finance costs (350) (350) (696) (1,050) (1,050) (2,088) (1,400) (1,400) (2,784) ----- ------ ------ ----- ------ ------- ------ ------ ------- Net return/ (loss) on ordinary activities before taxation 7,434 8,747 17,411 (9,023) (30,073) (139,202) (1,589) (21,326) (121,791) Taxation on ordinary activities (830) (975) (1,894) 225 978 1,285 (605) 3 (609) ----- ------ ------ ----- ------ ------- ------ ------ ------- Net return/ (loss) on ordinary activities after taxation 6,604 7,772 15,517 (8,798) (29,095) (137,917) (2,194) (21,323) (122,400) ===== ===== ====== ===== ====== ======= ====== ====== ======= Return/(loss) per ordinary share - basic (US$ cents) 8 15.44 17.73 35.39 (20.57) (66.37) (314.58) (5.13) (48.64) (279.19) ===== ===== ===== ===== ===== ====== ====== ====== ====== Return/(loss) per ordinary share - diluted (US$ cents) 8 13.29 17.73 30.39 (19.36) (66.37) (311.64) (6.07) (48.64) (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 Association of Investment Companies ("AIC"). The Company had no recognised gains and losses other than those disclosed in the Income Statement. All items in the above statement derive from continuing operations and no operations were acquired or discontinued during the period. All income is attributable to the equity holders of BlackRock Latin American Investment Trust plc. Reconciliation of Movements in Shareholders' Funds for the six months ended 30 June 2012 Called-up Share Capital Non- share premium redemption distributable Capital Revenue capital account reserve reserve reserves reserve Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 for the six months ended 30 June 2012 (unaudited) At 31 December 2011 4,384 11,641 4,602 4,356 343,736 22,831 391,550 (Loss)/return for the period - - - - (8,798) 6,604 (2,194) Shares purchased and held in treasury - - - - (22,126) - (22,126) Share purchase costs - - - - (236) - (236) Dividends paid(1) - - - - - (10,960) (10,960) ----- ------ ----- ----- ------- ------ ------- At 30 June 2012 4,384 11,641 4,602 4,356 312,576 18,475 356,034 ===== ====== ===== ===== ======= ====== ======= for the six months ended 30 June 2011(unaudited) At 31 December 2010 4,384 11,687 4,602 4,356 481,637 17,835 524,501 (Loss)/return for the period - - - - (29,095) 7,772 (21,323) Share issue costs - (66) - - - - (66) Shares issued on conversion of convertible bonds - 20 - - - - 20 Dividends paid(2) - - - - - (8,329) (8,329) ----- ------ ----- ----- ------- ------ ------- At 30 June 2011 4,384 11,641 4,602 4,356 452,542 17,278 494,803 ===== ====== ===== ===== ======= ====== ======= for the year ended 31 December 2011 (audited) At 31 December 2010 4,384 11,687 4,602 4,356 481,637 17,835 524,501 (Loss)/return for the year - - - - (137,917) 15,517 (122,400) Share issue costs - (66) - - - - (66) Write back of prior year tender costs - - - - 16 - 16 Shares issued on conversion of convertible bonds - 20 - - - - 20 Dividends paid(3) - - - - - (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 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. 2. Second interim dividend in respect of the year ended 31 December 2010 of 19.00 cents per share declared on 17 February 2011 and paid on 13 April 2011. 3. 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. During the period the Company incurred purchase transaction costs of US$183,000, (six months ended 30 June 2011: US$97,000; year ended 31 December 2011: US$262,000) and sales transaction costs of US$263,000 (six months ended 30 June 2011: US$125,000; year ended 31 December 2011: US$325,000). All transaction costs have been included within the capital column of the Income Statement. Balance Sheet as at 30 June 2012 30 June 30 June 31 December 2012 2011 2011 (unaudited) (unaudited) (audited) Notes US$'000 US$'000 US$'000 Fixed assets Investments held at fair value through profit or loss 418,199 596,118 454,778 ------- -------- ------- Current assets Debtors 8,539 3,413 3,481 Cash 16,721 11,124 20,185 ------- -------- ------- 25,260 14,537 23,666 Creditors - amounts falling due within one year Other creditors (5,454) (8,698) (2,925) ------- -------- ------- Net current assets 19,806 5,839 20,741 ------- -------- ------- Total assets less current liabilities 438,005 601,957 475,519 Creditors - amounts falling due after more than one year Non equity redeemable shares 6 (24) (24) (24) Convertible bonds held at fair value through profit or loss 6 (81,947) (107,130) (83,945) ------- -------- ------- Net assets 356,034 494,803 391,550 ======= ======= ======= Capital and reserves Called-up share capital 7 4,384 4,384 4,384 Share premium account 11,641 11,641 11,641 Capital redemption reserve 4,602 4,602 4,602 Non distributable reserve 4,356 4,356 4,356 Capital reserves 312,576 452,542 343,736 Revenue reserve 18,475 17,278 22,831 ------- -------- ------- Total equity shareholders' funds 356,034 494,803 391,550 ======= ======== ======= Net asset value per ordinary share (US$ cents) - debt at fair value 8 856.38 1,128.62 893.11 ======= ======== ======= Cash Flow Statement for the six months ended 30 June 2012 Six months Six months Year ended ended ended 30 June 30 June 31 December 2012 2011 2011 (unaudited) (unaudited) (audited) US$'000 US$'000 US$'000 Net cash inflow from operating activities 8,264 9,606 11,185 Servicing of finance Finance costs (1,400) (1,400) (2,818) Taxation paid (619) (496) (1,105) --------- --------- --------- Capital expenditure and financial investment Purchase of investments (133,282) (92,361) (210,981) Proceeds from sale of investments 156,894 105,006 236,991 Capital expenses (22) (522) (898) --------- --------- --------- Net cash inflow from capital expenditure and financial investment 23,590 12,123 25,112 --------- --------- --------- Equity dividends paid (10,960) (8,329) (10,521) --------- --------- --------- Net cash inflow before financing 18,875 11,504 21,853 --------- --------- --------- Financing Issue expenses paid - (66) (104) Purchase of ordinary shares (22,126) - - Share purchase costs (109) - - --------- --------- --------- Net cash outflow from financing (22,235) (66) (104) --------- --------- --------- (Decrease)/increase in cash in the period (3,360) 11,438 21,749 ========= ========= ========= Reconciliation of Net Return before Finance Costs and Taxation to Net Cash Flow from Operating Activities Six months Six months Year ended ended ended 30 June 30 June 31 December 2012 2011 2011 (unaudited) (unaudited) (audited) US$'000 US$'000 US$'000 Net loss before finance costs and taxation (189) (19,926) (119,007) Losses on investments held at fair value through profit or loss 8,460 31,436 159,796 Fair value adjustment for the convertible bonds (1,998) (4,805) (27,990) Exchange losses of a capital nature 104 87 1,337 Non-operating expenses of a capital nature 23 515 863 Decrease/(increase) in accrued income 773 (8) (456) Increase in other debtors - - (5) Increase/(decrease) in creditors 1,091 2,307 (3,353) ----- ------ ------ Net cash inflow from operating activities 8,264 9,606 11,185 ===== ====== ====== Notes to the Financial Statements for the six months ended 30 June 2012 1. Principal activity and basis of preparation The Company conducts its business so as to qualify as an investment trust company within the meaning of sub-sections 1158-1165 of the Corporation Tax Act 2010. The half yearly financial statements have been prepared on the same basis as the accounting policies set out in the Company's financial statements as at 31 December 2011, unless otherwise stated. Under FRS26 "Financial instruments: Measurements" the Company has designated its assets and liablities as being measured as "fair value through profit or loss". The fair value of fixed asset investments is deemed to be the bid market value at the close of business on the balance sheet date. The taxation charge has been calculated by applying an estimate of the annual effective tax rate to any profit for the period. The Company's financial statements have been prepared in accordance with UK Generally Accepted Accounting Practice ("UK GAAP") and with the Statement of Recommended Practice "Financial Statement of Investment Companies" ("SORP") revised in January 2009. 2. Income Six months Six months Year ended ended ended 30 June 30 June 31 December 2012 2011 2011 (unaudited) (unaudited) (audited) US$'000 US$'000 US$'000 Overseas dividends 8,272 10,041 19,675 Interest income 316 138 286 ----- ------ ------ 8,588 10,179 19,961 Interest receivable and other income: Deposit interest 1 2 6 ----- ------ ------ Total 8,589 10,181 19,967 ===== ====== ====== 3. Investment management and performance fees The investment management fee has been calculated at 0.85% per annum on the NAV plus 0.34% on the US$79,948,000 convertible bonds. The Investment Manager is also entitled to a performance fee equal to 10% of any outperformance of the NAV per share against the benchmark, the MSCI Emerging Markets Latin America Index (in US Dollar terms on a total return basis) plus a hurdle of 1%. The performance fee is capped at 1% of NAV. No performance fee was payable in respect of the period ended 30 June 2012, six months ended 30 June 2011 and the year ended 31 December 2011. 4. Operating expenses Six months Six months Year ended ended ended 30 June 30 June 31 December 2012 2011 2011 (unaudited) (unaudited) (audited) US$'000 US$'000 US$'000 Custody fee 65 91 98 Directors' emoluments 140 158 285 Other administration costs 139 238 441 --- --- --- 344 487 824 === === === 5. Dividends The Board has declared a first interim dividend of 5.00 cents (2011: 5.00 cents) payable on 27 September 2012 to shareholders on the register as at 24 August 2012. The total cost of this dividend, based on 41,574,247 ordinary shares in issue at 14 August 2012 is US$2,079,000 (30 June 2011: 43,841,312 shares and total cost of US$2,192,000). 6. Creditors - amounts falling due after more than one year Six months Six months Year ended ended ended 30 June 30 June 31 December 2012 2011 2011 (unaudited) (unaudited) (audited) US$'000 US$'000 US$'000 Convertible bonds at par 79,948 79,948 79,948 Fair value adjustment in respect of convertible bonds 1,999 27,182 3,997 ------ ------- ------ 81,947 107,130 83,945 ------ ------- ------ Non equity redeemable shares 24 24 24 ------ ------- ------ 81,971 107,154 83,969 ====== ======= ====== The 3.5% convertible bonds were issued on 15 September 2009 and all bonds which have not been previously redeemed, purchased or converted will be redeemed at par on 15 September 2015. The fair value of the bond is based on the price quoted on the exchange on which the bond is traded. Interest is paid half yearly at a rate of 3.5% per annum on 15 March and 15 September. Bondholders will have further opportunities to subscribe for ordinary shares to which the convertible bonds relate at any time up to 14 September 2012, inclusive at US$8.98 and between 15 September 2012 and 1 September 2015 at US$9.83 per ordinary share. On 11 May 2010 the convertible bond denomination was changed from US$100,000 to US$1,000 per bond. The convertible bonds do not carry any voting rights or the right to receive dividends. Further details of the convertible bonds are given in note 2(k) on page 35 of the Company's financial statements as at 31 December 2011. The redeemable shares of £1 each carry the right to receive a fixed dividend at the rate of 0.1% per annum on the nominal amount thereof. They are capable of being redeemed by the Company at any time and confer no rights to receive notice of, attend or vote at general meetings except where the rights of holders are to be varied or abrogated. On a winding up, the capital paid up on such shares ranks pari passu with, and in proportion to, any amounts of capital paid to the holders of ordinary shares, but does not confer any further right to participate in the surplus assets of the Company. 7. Called-up share capital Number of Number of Total Nominal shares in treasury shares in value issue shares in issue issue US$'000 Allotted, called-up and fully paid share capital comprised: Ordinary shares of 10 cents each At 31 December 2011 43,841,312 - 43,841,312 4,384 Shares transferred into treasury pursuant to the tender offer (2,192,065) 2,192,065 - - Shares bought back and transferred to treasury (75,000) 75,000 - - ---------- ---------- ---------- ---------- At 30 June 2012 41,574,247 2,267,065 43,841,312 4,384 ========== ========== ========== ========== During the period 2,192,065 ordinary shares were repurchased via the tender offer and held in treasury for a total consideration of US$21,687,000. A further 75,000 shares were repurchased and held in treasury for a total consideration of US$675,000. At 30 June 2012, the Company had 43,841,312 shares in issue of which 2,267,065 were held in treasury. 8. Returns and net asset value per ordinary share 30 June 30 June 31 December 2012 2011 2011 (unaudited) (unaudited) (audited) Net revenue return attributable to ordinary shareholders (US$'000) 6,604 7,772 15,517 Net capital loss attributable to ordinary shareholders (US$'000) (8,798) (29,095) (137,917) ---------- ---------- ---------- Total loss attributable to ordinary shareholders (US$'000) (2,194) (21,323) (122,400) ========== ========== ========== Equity shareholders' funds (US$'000) 356,034 494,803 391,550 ========== ========== ========== The weighted average number of ordinary shares in issue during the period on which the return per ordinary share was calculated was: 42,768,731 43,840,192 43,840,769 ---------- ---------- ---------- The weighted average number of ordinary shares in issue during the period on which the diluted return per ordinary share was calculated was: 51,671,626 52,744,207 52,744,207 ---------- ---------- ---------- The actual number of ordinary shares in issue at the end of each period on which the undiluted net asset value was calculated was: 41,574,247 43,841,312 43,841,312 ---------- ---------- ---------- The number of ordinary shares in issue at the end of each period on which the diluted net asset value was calculated was: 50,477,142 52,744,207 52,744,207 ---------- ---------- ---------- 30 June 30 June 31 December 2012 2011 2011 (unaudited) (unaudited) (audited) Cents Cents Cents Undiluted return per share Revenue return per share 15.44 17.73 35.39 Capital return per share (20.57) (66.37) (314.58) ------ -------- ------ Total loss per share (5.13) (48.64) (279.19) ------ -------- ------ Net asset value per share - debt at fair value 856.38 1,128.62 893.11 Ordinary share price (mid-market)* 784.23 1,075.65 836.88 ------ -------- ------ Diluted return per share** Revenue return per share 13.29 17.73 30.39 Capital loss per share (19.36) (66.37) (311.64) ------ -------- ------ Total loss per share (6.07) (48.64) (281.25) ------ -------- ------ * The Company's share price is quoted in Sterling and the above represents the US Dollar equivalent. ** For the period ended 30 June 2011 there was no dilution. Where dilution occurs, the net returns are adjusted for items relating to the convertible bonds. Total earnings for the period are tested for dilution. Once dilution has been determined individual revenue and capital earnings are adjusted. Bond finance costs for the period, net of tax, are reversed together with the fair value adjustment on the convertible bonds. 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$8.98 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 30 June 2012 the cum income (debt at fair value) NAV was US$8.56 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$8.98 per share. This information is presented to provide useful additional relevant information for readers of the financial statements. 30 June 30 June 31 December 2012 2011 2011 (unaudited) (unaudited) (audited) US$'000 US$'000 US$'000 Net asset value per share - debt converted Net assets with convertible bonds at fair value per balance sheet 356,034 494,803 391,550 Add back convertible bonds at fair value 81,947 107,130 83,945 Accrued interest on convertible bonds at balance sheet date 840 840 840 ------- ------- ------- Adjusted net assets following conversion of the convertible bonds (a) 438,821 602,773 476,335 ======= ======= ======= Number of ordinary shares for NAV 41,574,247 43,841,312 43,841,312 Number of ordinary shares arising on conversion of convertible bonds (US$79,948,000 @ US$8.98) (30 June 2011 and 31 December 2011: US$79,968,000 @ US$8.98) 8,902,895 8,902,895 8,902,895 ---------- ---------- ---------- Number of ordinary shares following conversion of convertible bonds (b) 50,477,142 52,744,207 52,744,207 ====== ======== ====== Net asset value per share - debt converted (cents) (a/b) 869.35 1,142.82 903.10 ====== ======== ====== 9. Related party disclosure BlackRock Investment Management (UK) Limited ("BlackRock") provides management and administration services to the Company under a contract which is terminable on six months' notice. Details of the fees receivable by BlackRock in relation to these services are set out in note 3. The investment management fee for the six months ended 30 June 2012 amounted to US$1,845,000 (six months ended 30 June 2011: US$2,387,000; year ended 31 December 2011: US$4,144,000). No performance fee was payable for the six months ended 30 June 2012, six months ended 30 June 2011 and the year ended 31 December 2011. At the period end, an amount US$1,845,000 was outstanding in respect of these fees (six months ended 30 June 2011: US$6,545,000; year ended 31 December 2011: US$910,000). The Board consists of six non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. With effect from 1 January 2012, the Chairman receives an annual fee of £41,000 (US$64,309), the Chairman of the Audit Committee/Senior Independent Director receives an annual fee of £31,500 (US$49,407) and each of the other Directors receives an annual fee of £27,500 (US$43,134). At the period end members of the Board held ordinary shares and convertible bonds in the Company as set out below: Ordinary Convertible shares bonds Peter Burnell (Chairman) 3,000 100 Mahrukh Doctor 587 - Antonio Monteiro de Castro 47,000 100 Desmond O'Conor 12,222 - The Earl St Aldwyn 1,470 100 Laurence Whitehead 8,967 100 10. Contingent liabilities There were no contingent liabilities at 30 June 2012 (2011: nil). 11. 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 2012 and 30 June 2011 has not been audited. The information for the year ended 31 December 2011 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies, unless otherwise stated. The report of the auditor on those accounts contained no qualification or statement under sections 498(2) or (3) of the Companies Act 2006. 12. Annual results The Board expects to announce the annual results for the year ending 31 December 2012 as prepared under UK GAAP in mid February 2013. Copies of the results announcement can be obtained from the Secretary on 020 7743 3000. The annual report should be available by the beginning of March 2013, with the Annual General Meeting being held in May 2013. For further information, please contact: Jonathan Ruck Keene, Chairman, Specialist Client Group, BlackRock Investment Management (UK) Limited Tel: 020 7743 2178 Peter Burnell - Chairman Tel: 01434 632292 Emma Phillips, Media & Communication, BlackRock Investment Management (UK) Limited Tel: 020 7743 2922 Henrietta Guthrie, Lansons Communications Tel: 020 7294 3612 14 August 2012 12 Throgmorton Avenue London EC2N 2DL END The Half Yearly Financial Report will also be available on the BlackRock Investment Management website at http://www.blackrock.co.uk/content/groups/uksite/documents/literature/blk047183.pdf. Neither the contents of the Manager's website nor the contents of any website accessible from hyperlinks on the Manager's website (or any other website) is incorporated into, or forms part of, this announcement.

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