Half-yearly Report
BlackRock Latin American Investment Trust plc
Half Yearly Financial Results Announcement For Period Ended 30 June 2014
Performance Record
Financial Highlights
Attributable to ordinary shareholders
As at As at
30 June 31 December
2014 2013 Change
(unaudited) (audited) %
US dollar
Net assets (US$'000) 338,019 315,345 +7.2
Net asset value per ordinary share 858.58c 800.99c +7.2
- with income reinvested +9.3
Ordinary share price (mid-market)†776.34c 719.25c +7.9
- with income reinvested +10.4
------- ------- ------
Sterling
Net assets (£'000)†197,672 190,391 +3.8
Net asset value per ordinary share†502.09p 483.60p +3.8
- with income reinvested +5.8
Ordinary share price (mid-market)†454.00p 434.25p +4.5
- with income reinvested +6.9
======= ======= =====
For For
the the
six six
months months
ended ended
30 30
June June
2014 2013 Change
(unaudited) (unaudited) %
Revenue
Net revenue after taxation (US$'000) 6,254 5,638 +10.9
Revenue return per ordinary share 15.89c 13.95c +13.9
------ ------ ------
Dividend
Interim dividend per ordinary share 15.00c 15.00c -
====== ====== ======
Source: BlackRock.
†Based on an exchange rate of 1.7100 at 30 June 2014 (31 December 2013: 1.6563).
Chairman's statement
for the six months ended 30 June 2014
Overview and Performance
In a period when most global equity markets failed to generate attractive
returns, it is encouraging that Latin American equities managed to make
reasonable progress during the first half of the year. After an uncertain
start, when concerns about regional growth and the outlook for China had
unsettled sentiment, the mood improved significantly in March. This shift
stemmed largely from opinion polls which suggested that the prospect of
political change following the presidential election in October had
increased.
Against this background, the MSCI EM Latin America Index ended the period up by
7.4% in US dollar terms (4.0% in sterling terms). By comparison the Company's
net asset value ("NAV") returned 9.3% in US dollar terms (5.8% in sterling
terms) outperforming the Index by 1.9% (1.8% in sterling terms) and the share
price returned 10.4% in US dollar terms (6.9% in sterling terms). (All
percentages calculated with income reinvested.)
Since 30 June 2014, the Company's NAV has increased by 6.5% in sterling
terms and by 4.2% in US dollar terms. The share price has increased by 2.9%
in sterling terms and by 0.6% in US dollar terms (all percentages calculated
with income reinvested).
Earnings and dividends
The revenue return per share for the period amounted to 15.89 cents (2013:
13.95 cents) and has benefited from an increase in both dividend and option
premium income.
The Board is pleased to declare an interim dividend of 15.00 cents per share
(2013: 15.00 cents per share), which will be paid on 3 October 2014 to
shareholders on the register as at 5 September 2014 (ex-dividend date is 3
September 2014).
Discount control
On 23 August 2013 the Board introduced a new discount control policy which in
their view is better suited to the longer term interests of the Company and its
shareholders. If the bi-annual continuation vote is approved by shareholders on
each occasion, and if (i) the Company has underperformed the benchmark index on
a US dollar total return basis by more than 1% per annum over the previous two
financial years and (ii) if the discount to the cum income NAV has on average
exceeded 5% over the same two year period, with effect from the Annual General
Meeting to take place in April 2016, the Board will implement a tender offer
for 24.99% of the ordinary shares in issue (excluding treasury shares) and the
tender price will be the cum income NAV (less 2% to cover the costs of the
tender offer).
The Directors continue to monitor the discount at which the ordinary shares
trade to their prevailing NAV and in the six months to 30 June 2014 the cum
income discount of the ordinary shares has averaged 9.8% and ranged from 6.6%
to 12.6%.
Alternative Investment Fund Managers' Directive
BlackRock Fund Managers Limited ("BFM") was authorised as an Alternative
Investment Fund Manager ("AIFM") by the Financial Conduct Authority ("FCA") on
1 May 2014 and was appointed by the Board as the Company's AIFM under a new
Investment Management Agreement on 2 July 2014. The management and performance
fees remain unchanged. The new agreement enables the Board to continue to act
independently of the AIFM and provides the appropriate balance between the
Board's control over the Company, its investment policies and compliance with
regulatory obligations.
The Board has also appointed BNY Mellon Trust & Depositary (UK) Limited (the
"Depositary") to act as the Company's Depositary (as required by the AIFMD) on
the terms and conditions of a depositary agreement between the Company, BFM and
the Depositary.
Facilitating retail investments
The Company currently conducts its affairs so that its shares can be
recommended by independent financial advisers to retail investors in accordance
with the FCA rules in relation to non-mainstream investment products and
intends to do so for the foreseeable future. The shares are excluded from the
FCA's restrictions which apply to non-mainstream products because they are
shares in an investment trust.
Outlook
It is too early to tell whether the rising tide of optimism about the prospect
of political and fiscal reform in Brazil, the largest country in the region and
where we have the greatest exposure, is well founded or whether the forthcoming
election in October will result in more of the same. Even if the electorate
vote for change, expectations about the speed at which real reform can be
effected may be overly optimistic, as proved to be the case in Mexico. Whoever
assumes the presidency in October will have the difficult task of addressing
the structure and level of existing energy subsidies and welfare payments,
tackling the pressing need for infrastructure investment and creating a
sustainable financial position for the government. Notwithstanding the
challenges ahead in Brazil, your Manager remains optimistic about the longer
term potential for the region, particularly as - despite the recent modest
upturn - emerging markets, including those in Latin America, have been out of
favour in recent years so that valuations remain undemanding and markets should
react favourably if good news emerges.
Peter Burnell
Chairman
19 August 2014
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;
Market (including Political Risk);
Liquidity;
Financial;
Operational; and
Regulatory.
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 2013. A detailed explanation can be found on page 9 of the Annual
Report and Financial Statements which are available on the website maintained
by BlackRock Investment Management (UK) Limited at 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.
Going concern
The Directors are satisfied that the Company has adequate resources to continue
in operational existence for the foreseeable future and is financially sound.
For this reason they continue to adopt the going concern basis in preparing the
financial statements. The Company has a portfolio of investments which are
considered to be readily realisable and is able to meet all of its liabilities
from its assets and income generated from these assets.
Related party disclosure and transactions with the Investment Manager
BlackRock Investment Management (UK) Limited ("BIM (UK)") is the investment
manager and is regarded as a related party under the Listing Rules. Details of
the management fees payable are set out in note 3 and note 9. BlackRock Fund
Managers Limited ("BFM") was appointed as the Company's AIFM with effect
from 2 July 2014. BIM (UK) continues to act as the Company's Investment
Manager under a delegation agrement with BFM. The related party transactions
with the Directors are set out in note 10.
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 FCA'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 19 August 2014
and the above responsibility statement was signed on its behalf by the
Chairman.
Peter Burnell
For and on behalf of the Board
19 August 2014
Investment manager's report
Market Overview
During the first six months of 2014, the Company provided a US Dollar NAV
return of 9.3% (10.4% in share price terms), (which was equivalent to 5.8% and
6.9% respectively in sterling terms). This compares favourably with the MSCI EM
Latin America Index which returned 7.4% (4.0% in sterling terms). (All figures
with income reinvested.)
During the period the Company's performance benefited from strong stock
selection in Mexico, a lower than index exposure to Chile and a higher than
index exposure to Brazil. The largest individual contributors to performance
included Brazil's Kroton Educacional and BB Seguridade. The portfolio benefited
from not owning Mexico's América Móvil which was a relatively weak performer.
Some of these positive factors were offset by our holdings in Peru and not
holding enough stocks in Colombia, which performed well in this period. The
largest individual detractors from performance included not holding Brazil's
Cielo, our exposure to mining giant Vale and to Peru's Grana y Montero.
The early part of 2014 saw a continuation of the correction in Latin America
equity markets that started in November 2013. In January the market was
negatively impacted by the devaluation in Argentina, fiscal concerns in Brazil
and lower commodity prices. Markets then moved sideways through mid-March when
Latin American equities started advancing as currency performance improved and
better than expected GDP numbers for 2013 were reported from Brazil and
Colombia. In addition, an increase in the opinion polls for the opposition in
Brazil's Presidential elections in October boosted sentiment. In the latter
part of the period, Latin American markets were mixed. During April,
performance was closely linked to the strong performance of financials in most
countries and by political news flow in Brazil. During May, Latin America
underperformed due largely to weak iron ore prices and disappointing first
quarter earnings data. The region's stock markets rebounded in June despite
divergent macro-economic performance: Brazil, Chile and Peru disappointed
whilst Colombia and Mexico surprised on the upside.
Six months to 30 June 2014 performance figures
Local
MSCI currency Local
country (vs.USD) indices
% % %
Regions/indices change change change
Argentina 24.3 -19.8 17.3 (Merval)
Brazil 7.8 6.7 10.1 (Ibovespa)
Chile -1.6 -5.0 -1.5 (IGPA)
Colombia 10.7 2.8 10.7 (IGBC)
Mexico 0.9 0.5 0.6 (IPC)
Peru 12.1 -0.1 5.7 (IGBVL)
MSCI Latin America 5.3 CRB Index 8.8
MSCI Emerging Asia 5.6 Oil (WTI) 7.1
MSCI Emerging Markets 4.8 Gold 10.1
MSCI World 5.0 Copper -4.5
S&P 500 6.1 Corn 0.5
MSCI Europe 3.4 Soybeans 5.7
Sources: MSCI, Bloomberg, UBS and BlackRock (all figures are in US dollar terms
and on a capital only basis).
During the first half of 2014, Brazil's equity market was ranked among the best
performers in Latin America. Following a challenging start to the year as a
result of fiscal concerns, Brazil's market reacted positively to better than
expected GDP data for 2013 and political news flow. The Central Bank stopped
hiking interest rates in April when it had reached 11%. Interest rates appear
to be on hold for now but inflation continues to push higher, mostly due to
services pressure related to the 2014 FIFA World Cup.
Mexico's economy has been weaker than expected this year, mostly due to
increased taxes as a result of last year's fiscal reforms. While an economic
recovery has been slow to build, we are starting to see early signs that a
recovery is underway. Government spending has been increasing and the Central
Bank surprised the market with a 50 basis point cut in interest rates in an
attempt to stimulate growth.
In the Andean region, Peru posted the strongest returns, followed by Colombia.
Chile was the laggard and has been negatively impacted by concerns over
President Bachelet's fiscal package, disappointing economic growth data and
weak copper prices. Peru and Colombia continue to post the strongest economic
growth in the Andean region.
Performance and activity
We maintained over 61% of the Company's portfolio in Brazil. Our exposure was
tilted away from metals and mining, especially Vale, as well as credit card
acquirers and utilities. Our preferred sectors included banks and insurance,
education and fuel distribution. These are all areas that we believe should not
be materially affected by the forthcoming Presidential elections. During the
period we rotated some exposure out of Itaú Unibanco into Banco Bradesco. We
moved Petrobrás to a neutral position as we believe that the company would be
the largest beneficiary of a change in administration. We also purchased a
position in Banco do Brasil to increase our exposure to the companies that
could benefit from a potential opposition victory in October. We maintained an
underweight position in credit card acquirer Cielo given concerns over the
competitive landscape in Brazil's credit card acquiring sector. Vale was moved
to an underweight position during the first half given the fall in iron ore
prices and weak demand from China. Within the education sector we took profits
in Kroton Educacional ahead of the 3 July shareholder meeting where the merger
with Anhanguera was approved, making Kroton Educacional the largest publicly
traded education company in the world. We maintained an overweight position in
the company due to our expectation of continued growth in the sector for many
years to come.
In Mexico, our weighting remained at a little over 28% of the Company's
portfolio. We added to our holding in Wal-Mart de Mexico as an early play on
the expected recovery of the Mexican consumer. During the period we added a
holding in beverage company Arca, the second largest Coca-Cola bottler in Latin
America, Alsea, a franchisee for several global restaurant brands and
Kimberly-Clark de Mexico, as a way to play a recovery in the consumer sector.
We also added to the holding in Mexico's largest publicly traded REIT, Fibra
Uno. During the period we sold our holding in Banco Santander Mexico due to low
loan growth and in toll road operator Pinfra, due to strong stock performance.
We maintained an overweight position in Televisa, one of the better performing
stocks in Mexico during the period. We also continue to favour Cemex, the
global cement company with significant operations in the US, Mexico, Spain and
at least 15 other countries, which is a play on a recovery in both the US and
Mexico.
Elsewhere in the region we sold our position in Panama's Copa Holdings due to
concerns over the company's cash position in Venezuela. We added to Peru via
the leading bank Credicorp and reintroduced to the portfolio gold producer
Buenaventura, later in the period. We also purchased a position in Argentina's
oil company YPF, due to its attractive valuation and what we believe is reduced
risk for the sector given changes in the regulatory framework in Argentina.
This is our first investment in Argentina for several years.
The Company has continued to write covered call options against a selected
number of equity and ADR positions to enhance income. Over the period under
review, volatility has remained relatively low in markets therefore the
opportunities to generate income through option writing have also been
correspondingly low. As at 30 June 2014 the Company have 41 open options with a
market value (a liability) of US$1,040,000.
One of the benefits of the Company's closed-end stature is its ability to
invest in smaller and lesser liquid companies in the region, including those
not in the official benchmark. At the period end, investments in small and
mid-size companies with less than US$10 billion in market capitalisation
accounted for over 31% of gross investments, with 12.5% of these investments
representing non-benchmark stocks. In our view this enhanced flexibility is an
important and helpful differentiator for the Company compared with its open
ended competitors.
Gross gearing decreased from 3.3% at the start of the period to 2.0% as at 30
June 2014.
Outlook
We enter the second half of 2014 with above index exposure to Brazil and Peru,
and to a lesser extent, in Mexico, and underweight positions in Chile and
Colombia.
Our overweight in Brazil stems from the market’s positive reaction to the
growing prospects of a potential opposition win in the October presidential
elections. We will continue to follow the campaign closely, which has recently
been impacted by the recent tragic death of one of the main candidates, Eduardo
Campos. As electioneering kicks into high gear in the second half of August,
we will make adjustments as necessary. We find the Brazil story to be a very binary
situation. If the opposition is able to mount a strong enough campaign to win
the election in October, we still see significant upside to the Brazilian market
from current levels. Regardless of the outcome, however, we expect 2015 to be
challenging for Brazil. What will matter for Brazilian equities is the nature
of the future roadmap the eventual winner presents to the market on victory
and how comfortable the market is with that roadmap for the next four years;
a similar scenario to the one we witnessed in Mexico last year.
Overall market valuations in Mexican equities continue to look challenging
especially given the disappointing economic performance in the first half of
the year. Despite the challenging valuations, we have started to add to Mexico
on the expectation of better economic performance during the second half of
2014. The gradual improvement in economic growth in Mexico as a result of the
2013 reforms leaves us positive on the eventual impact on the economy.
In the Andean region, we prefer Peru over Chile and Colombia. Uncertainties
around the proposed fiscal reforms in Chile keep the country as our largest
underweight position. In addition, changes in Chile's pension fund regulations
have given the local pension funds the flexibility to invest outside of Chile,
which has taken some of the premium away from domestically listed shares. Our
low exposure to Colombia reflects corporate governance concerns. We would need
to see improvements in minority shareholder protection and more attractive
valuations before considering making further investments in Colombia. Peru
remains our favoured Andean market for the second half of 2014. Most of our
position is through Credicorp, the leading bank in Peru. We believe the banking
sector is one of the best ways to participate in the strong growth in Peru.
Will Landers
BlackRock Investment Management (UK) Limited
19 August 2014
Geographical and sector analysis
as at 30 June 2014
GEOGRAPHICAL WEIGHTING VS MSCI EM LATIN AMERICA INDEX
Company MSCI EM Latin America Index
% %
Brazil 61.6 57.3
Mexico 28.2 27.0
Peru 6.1 2.3
Chile 2.0 8.0
Colombia 1.6 5.4
Argentina 0.5 -
Sources: BlackRock and MSCI.
SECTOR ALLOCATION
Company MSCI EM Latin America Index
% %
Financials 31.6 28.1
Consumer staples 20.3 17.8
Consumer discretionary 13.8 7.0
Materials 11.5 15.6
Energy 11.3 10.3
Industrials 7.8 6.2
Telecommunications 2.2 6.5
Utilities 1.5 5.6
Health care - 0.7
Information technology - 2.2
Sources: BlackRock and MSCI.
Ten largest investments
as at 30 June 2014
Itaú Unibanco - 8.2% (2013: 7.7%) is Brazil's largest private sector bank. The
bank continues to benefit from improvements in asset quality, resilient
employment, lower competition from public sector banks and a strong management
team.
Petrobrás - 6.9% (2013: 4.7%) is Brazil's vertically integrated oil company.
The company continues to invest heavily to increase its production, utilising
free cash flow to meet its capital expenditure needs.
AmBev - 4.8% (2013: 3.0%) is Brazil's leading beverage 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 its operating cost discipline throughout its
operations, a perennial AmBev management strength.
Banco Bradesco - 4.6% (2013: 4.4%) is Brazil's second largest private sector
bank. 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.
BB Seguridade Participações - 4.5% (2013: 3.7%) is the insurance division of
Banco do Brasil and has the exclusive rights to sell insurance products
throughout the entire Banco do Brasil branch network, which is one of the
largest in Brazil.
Kroton Educacional - 4.3% (2013: 3.3%) is Brazil's leading provider of adult
college education. Shareholders recently approved the merger with Anhanguera
creating the largest publicly traded education company in the world.
Vale - 4.2% (2013: 8.2%) 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.
Grupo Televisa - 4.1% (2013: 4.0%) 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.
Credicorp - 3.6% (2013: 2.8%) is Peru's leading financial institution. They
offer a full range of financial services including commercial banking,
corporate finance, brokerage and asset management. They should continue to
benefit from being the leader in one of the fastest growing economies in the
region.
BRF - 3.5% (2013: 1.9%) is Brazil's largest food producer, with leadership
positions in poultry, pork, beef and processed meats. 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 2013. Together, the ten largest investments represents 48.6% of total
investments (ten largest investments at 31 December 2013: 46.9%).
Investments
30 June 2014
Market %
value of
Country of operation US$'000 investments
Brazil
Itaú Unibanco 28,453 } 8.2
Itaú Unibanco call option 19/07/14 15 (15)
Itaú Unibanco call option 19/07/14 15.45 (13)
Petrobrás 24,004 } 6.9
Petrobrás call option 11/07/14 16 (1)
Petrobrás call option 19/07/14 16 (4)
Petrobrás call option 25/07/14 16.5 (6)
AmBev 16,521 4.8
Banco Bradesco 15,846 } 4.6
Banco Bradesco call option 19/07/14 16 (2)
BB Seguridade Participaçóes 15,944 } 4.5
BB Seguridade Participaçóes OTC 02/07/14 call
option @ 28.81 (206)
BB Seguridade Participaçóes OTC 10/07/14 call
option @ 28.713 (217)
Kroton Educacional 14,758 } 4.3
Kroton Educacional OTC 02/07/14 call option @
56.24 (76)
Kroton Educacional OTC 10/07/14 call option @
57.9375 (58)
Kroton Educacional OTC 31/07/14 call option @
61.2415 (71)
Vale 14,591 4.2
BRF 12,155 } 3.5
BRF call option 19/07/14 25 (2)
BRF call option 16/08/14 25 (14)
CCR 7,958 } 2.3
CCR OTC 01/07/14 call option @ 17.9724 (3)
CCR OTC 31/07/14 call option @ 18.9281 (9)
CBD 6,980 } 2.0
CBD OTC 31/07/14 call option @ 110.618 (3)
Cosan 6,853 } 2.0
Cosan OTC 31/07/14 call option @ 41.4509 (6)
Ultrapar Participaçóes 6,531 } 1.9
Ultrapar Participaçóes OTC 01/07/14 call option @
54.68 -
Banco do Brasil 5,345 } 1.5
Banco do Brasil OTC 10/07/14 call option @
24.5568 (10)
Banco do Brasil OTC 31/07/14 call option @
26.9195 (10)
Klabin 2,361 } 1.3
Klabin 8% 08/01/19 convertible bond 1,985
Hypermarcas 3,337 } 1.2
Hypermarcas 3% fixed rate debenture 15/10/15 549
Hypermarcas 11.3% 15/10/18 convertible bond 326
Hypermarcas OTC 10/07/14 call option @ 18.564 (13)
Hypermarcas OTC 31/07/14 call option @ 19.1764 (11)
Arezzo Industria e Comercio 1,546 } 1.1
Arezzo Industria e Comercio warrants* 2,148
Localiza Rent a Car 1,240 } 0.9
Localiza Rent a Car warrants* 1,984
BR Properties 3,019 } 0.9
BR Properties OTC 31/07/14 call option @ 13.8544 (4)
Ser Educacional 2,783 } 0.8
Ser Educacional OTC 31/07/14 call option @
24.6904 (16)
TAESA 2,516 0.7
Marcopolo 2,092 0.6
Minerva 2,003 0.6
Mills 1,941 0.6
Raia Drogasil 1,655 0.5
Iguatemi Empresa 1,565 0.5
Even Constructora E Incorporadora 1,300 0.4
Fibria Celulose 777 } 0.3
Fibria Celulose warrants* 437
Autometal 1,171 0.3
Lojas Renner 739 } 0.2
Lojas Renner OTC 31/07/14 call option @ 71.356 (10)
Lupatech 6.5% 15/04/18 convertible bond 46 -
------- -----
212,679 61.6
------- -----
Mexico
Grupo Televisa 14,283 } 4.1
Grupo Televisa call option 19/07/14 35 (9)
Grupo Televisa OTC 24/07/14 call option @ 34.5 (75)
Cemex SAB 11,262 } 3.2
Cemex SAB call option 19/07/14 13 (33)
Cemex SAB OTC 11/08/14 call option @ 13.5 (23)
Wal-Mart de Mexico 9,752 } 2.8
Wal-Mart de Mexico OTC 09/07/14 call option @
32.6932 (32)
Wal-Mart de Mexico OTC 31/07/14 call option @
35.598 (8)
Femsa 9,365 2.7
América Móvil 7,787 } 2.3
América Móvil call option 19/07/14 21 (7)
Alfa 7,181 } 2.1
Alfa OTC 09/07/14 call option @ 37.4332 -
Alfa OTC 31/07/14 call option @ 38.0916 (2)
Grupo Financiero Banorte 6,437 } 1.9
Grupo Financiero Banorte OTC 31/07/14 call option
@ 96.492 (5)
Fibra Uno 5,507 1.6
TF Administradora Industrial 3,964 1.1
Corporacion Inmobiliaria Vesta 3,774 } 1.1
Corporacion Inmobiliaria Vesta OTC 31/07/14 call
option @ 27.4889 (6)
Bolsa Mexicana de Valores 3,390 1.0
Concentradora Fibra Hotelera 3,026 0.9
Infraestructura Energetica 2,774 0.8
Kimberly-Clark de Mexico 2,525 0.7
Grupo Sansborns 1,547 0.4
Alsea 1,320 0.4
Arca Continental 1,250 0.4
Alpek 1,108 0.3
Grupo Aeroportuario del Pacifico 1,006 } 0.3
Grupo Aeroportuario del Pacifico OTC 31/07/14
call option @ 87.0978 (2)
Compartamos 480 0.1
------- -----
97,536 28.2
------- -----
Peru
Credicorp 12,309 } 3.6
Credicorp call option 19/07/14 160 (7)
Credicorp call option 16/08/14 160 (24)
Southern Copper 4,100 } 1.2
Southern Copper call option 19/07/14 30 (15)
Grana y Montero 3,472 1.0
Minas Buenaventura 1,004 0.3
------- -----
20,839 6.1
------- -----
Chile
S.A.C.I. Falabella 6,090 1.8
Banco Santander-Chile 722 0.2
------- -----
6,812 2.0
------- -----
Colombia
Grupo Nutresa 3,587 1.0
Cemex Latam 2,104 0.6
------- -----
5,691 1.6
------- -----
Argentina
YPF 1,798 } 0.5
YPF call option 19/07/14 35 (12)
------- -----
1,786 0.5
------- -----
Total Investments 345,343 100.0
======= =====
*Outperformance warrants held are linked to the 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.
All investments are in equity shares unless otherwise stated. The total number of equity investments
held at 30 June 2014 was 58 (31 December 2013: 59). Outperformance warrants, together with the
underlying listed security, are considered as a single line of investment.
The negative valuations of US$1,040,000 (31 December 2013: US$281,000) in respect of options held
represent the notional cost of repurchasing the contracts at market prices as at 30 June 2014.
Income statement
for the six months ended 30 June 2014
Revenue Capital Total
US$'000 US$'000 US$'000
Six Six Six Six Six Six
months months Year months months Year months months Year
ended ended ended ended ended ended ended ended ended
Notes 30.06.14 30.06.13 31.12.13 30.06.14 30.06.13 31.12.13 30.06.14 30.06.13 31.12.13
(unaudited)(unaudited) (audited)(unaudited) (unaudited) (audited)(unaudited) (unaudited) (audited)
Gains/
(losses)
on
investments
held at
fair
value
through
profit
or
loss - - - 23,868 (57,207) (54,496) 23,868 (57,207) (54,496)
Change in
the
value
of
convertible
bonds
held
at fair
value
through
profit
or
loss - - - - (3,200) - - (3,200) -
Exchange
losses - - - (653) (302) (1,380) (653) (302) (1,380)
Income from
investments
held
at
fair
value
through
profit
or
loss 2 6,561 6,384 11,175 - - - 6,561 6,384 11,175
Other
income 2 1,796 1,304 2,362 - - - 1,796 1,304 2,362
Investment
management
and
performance
fees 3 (343) (406) (759) (1,028) (1,217) (2,276) (1,371) (1,623) (3,035)
Operating
expenses 4 (620) (397) (1,015) (33) (75) (83) (653) (472) (1,098)
----- ----- ----- ------ ------ ------ ------ ------ ------
Net return/
(loss)
before
finance
costs
and
taxation 7,394 6,885 11,763 22,154 (62,001) (58,235) 29,548 (55,116) (46,472)
Finance
costs (16) (280) (427) (48) (842) (1,280) (64) (1,122) (1,707)
----- ----- ----- ------ ------ ------ ------ ------ ------
Net return/
(loss)
on
ordinary
activities
before
taxation 7,378 6,605 11,336 22,106 (62,843) (59,515) 29,484 (56,238) (48,179)
Taxation on
ordinary
activities (1,124) (967) (1,431) 219 464 632 (905) (503) (799)
----- ----- ----- ------ ------ ------ ------ ------ ------
Net return/
(loss)
on
ordinary
activities
after
taxation 6,254 5,638 9,905 22,325 (62,379) (58,883) 28,579 (56,741) (48,978)
----- ----- ----- ------ ------ ------ ------ ------ ------
Return/
(loss)
per
ordinary
share -
basic
and
diluted
(US$ cents) 8 15.89 13.95 24.83 56.70 (154.31) (147.61) 72.59 (140.36) (122.78)
===== ===== ===== ===== ====== ====== ===== ====== ======
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. There is no material difference between the net return/
(loss) on ordinary activities before taxation and the net return/(loss) for the
financial period stated above and the historical cost equivalents.
Reconciliation of movements in shareholders' funds
for the six months ended 30 June 2014
Called
up Share Capital Non-
share premium redemption distributable Captial 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 2014 (unaudited)
At 31 December 2013 4,144 11,719 4,843 4,356 275,683 14,600 315,345
Return for the period - - - - 22,325 6,254 28,579
Dividends paid(1) - - - - - (5,905) (5,905)
----- ------ ----- ----- ------- ------ -------
At 30 June 2014 4,144 11,719 4,843 4,356 298,008 14,949 338,019
----- ------ ----- ----- ------- ------ -------
For the six months ended
30 June 2013 (unaudited)
At 31 December 2012 4,384 11,641 4,602 4,356 353,772 20,958 399,713
(Loss)/return for the
period - - - - (62,379) 5,638 (56,741)
Share buy backs - - - - (19,206) - (19,206)
Cancellation of treasury
shares (227) - 227 - - - -
Dividends paid(2) - - - - - (10,358) (10,358)
----- ------ ----- ----- ------- ------ -------
At 30 June 2013 4,157 11,641 4,829 4,356 272,187 16,238 313,408
----- ------ ----- ----- ------- ------ -------
For the year ended
31 December 2013 (audited)
At 31 December 2012 4,384 11,641 4,602 4,356 353,772 20,958 399,713
(Loss)/return for the year - - - - (58,883) 9,905 (48,978)
Share buy backs - - - - (19,206) - (19,206)
Cancellation of treasury
shares (241) - 241 - - - -
Conversion of bond 1 78 - - - - 79
Dividends paid(3) - - - - - (16,263) (16,263)
----- ------ ----- ----- ------- ------ -------
At 31 December 2013 4,144 11,719 4,843 4,356 275,683 14,600 315,345
===== ====== ===== ===== ======= ====== =======
1. Final dividend in respect of the year ended 31 December 2013 of 15.00 cents
per share declared on 25 February 2014 and paid on 2 May 2014.
2. Second interim dividend in respect of the year ended 31 December 2012 of
25.00 cents per share declared on 27 February 2013 and paid on 26 April 2013.
3. Second interim dividend paid in respect of the year ended 31 December 2012
of 25.00 cents per share declared on 27 February 2013 and paid on 26 April 2013
and interim dividend for the year ended 31 December 2013 of 15.00 cents per
share declared on 23 August 2013 and paid on 4 October 2013.
During the period the Company incurred purchase transaction costs of US$162,000
(six months ended 30 June 2013: US$183,000; year ended 31 December 2013:
US$484,000) and sales transaction costs of US$357,000 (six months ended 30 June
2013: US$291,000; year ended 31 December 2013: US$578,000). All transaction
costs have been included within the capital column of the Income Statement.
Balance sheet
as at 30 June 2014
30 30 31
June June December
2014 2013 2013
US$'000 US$'000 US$'000
Notes (unaudited) (unaudited) (audited)
Fixed assets
Investments held at fair value
through profit or loss 346,383 359,899 325,703
------- ------- -------
Current assets
Debtors 7,062 5,238 2,472
Cash at bank and in hand 2,097 23,059 1,963
------- ------- -------
9,159 28,297 4,435
------- ------- -------
Creditors - amounts falling due
within one year
Bank overdraft (6,993) - (10,377)
Deferred taxation (280) - (298)
Corporation Tax (475) - -
Derivative instruments - written
call options (1,040) (248) (281)
Other creditors and accruals (8,711) (7,316) (3,813)
------- ------- -------
(17,499) (7,564) (14,769)
------- ------- -------
Net current (liabilities)/assets (8,340) 20,733 (10,334)
------- ------- -------
Total assets less current
liabilities 338,043 380,632 315,369
Creditors - amounts falling due
after more than one year
Convertible bonds held at fair
value through profit or loss 6 - (67,200) -
Non-equity redeemable shares 6 (24) (24) (24)
------- ------- -------
(24) (67,224) (24)
------- ------- -------
Net assets 338,019 313,408 315,345
======= ======= =======
Capital and reserves
Called up share capital 7 4,144 4,157 4,144
Share premium account 11,719 11,641 11,719
Capital redemption reserve 4,843 4,829 4,843
Non-distributable reserve 4,356 4,356 4,356
Capital reserves 298,008 272,187 275,683
Revenue reserve 14,949 16,238 14,600
------- ------- -------
Total shareholders' funds 338,019 313,408 315,345
======= ======= =======
Net asset value per ordinary
share (US$ cents) - basic and
diluted (30 June 2013: debt at
fair value) 8 858.58 796.23 800.99
======= ======= =======
Cash flow statement
for the six months ended 30 June 2014
Six Six
months months Year
ended ended ended
30 30 31
June June December
2014 2013 2013
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Net cash inflow from operating activities 8,293 6,338 11,043
Servicing of finance
Finance costs (64) (1,122) (2,379)
Taxation paid (447) (500) (758)
------ ------- -------
Capital expenditure and financial
investment
Purchase of investments (87,364) (121,638) (263,202)
Proceeds from sale of investments 89,038 164,180 341,875
Capital expenses (33) (95) (61)
------ ------- -------
Net cash inflow from capital expenditure
and financial investment 1,641 42,447 78,612
------ ------- -------
Equity dividends paid (5,905) (10,358) (16,263)
------ ------- -------
Net cash inflow before financing 3,518 36,805 70,255
------ ------- -------
Financing
Repurchase of convertible bonds - - (63,921)
Share buy backs - (19,147) (19,071)
------ ------- -------
Net cash outflow from financing - (19,147) (82,992)
------ ------- -------
Increase/(decrease) in cash in the period 3,518 17,658 (12,737)
====== ======= =======
Reconciliation of net return before finance costs and taxation to net cash flow
from operating activities for the six months ended 30 June 2014
Six Six
months months Year
ended ended ended
30 30 31
June June December
2014 2013 2013
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Net return/(loss) before finance costs
and taxation 29,548 (55,116) (46,472)
(Gains)/losses on investments held at
fair value through profit or loss (23,868) 57,207 54,496
Fair value adjustment for the convertible
bonds - 3,200 -
Exchange losses of a capital nature 653 302 1,380
Non-operating expenses of a capital
nature 33 75 83
Decrease in accrued income 672 669 1,178
Decrease in other debtors - - 7
Increase in creditors 1,255 1 371
----- ----- ------
Net cash inflow from operating activities 8,293 6,338 11,043
===== ===== ======
Notes to the financial statements
for the six months ended 30 June 2014
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 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 2013, and in accordance with UK Generally Accepted Accounting
Practice ("UK GAAP") and with the Statement of Recommended Practice "Financial
Statements of Investment Companies" ("SORP") revised in January 2009.
Under FRS26 "Financial instruments: Measurements" the Company has designated
its assets and liabilities as being measured as "fair value through profit or
loss". The fair value of fixed asset investments is deemed to be 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.
2. Income
Six Six
months months Year
ended ended ended
30 30 31
June June December
2014 2013 2013
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Income from investments:
Overseas dividends 6,326 5,495 10,096
Outperformance warrants 204 574 644
Interest income 31 315 435
----- ----- ------
6,561 6,384 11,175
----- ----- ------
Other income:
Traded option premiums 1,790 1,303 2,359
Deposit interest 6 1 3
----- ----- ------
1,796 1,304 2,362
----- ----- ------
Total 8,357 7,688 13,537
===== ===== ======
During the period, the Company received premiums totalling US$1,983,000 (six
months ended 30 June 2013: US$1,471,000; year ended 31 December 2013:
US$2,532,000) for writing covered call options for the purposes of revenue
generation, of which US$1,790,000 (six months ended 30 June 2013: US$1,303,000;
year ended 31 December 2013: US$2,359,000) was taken to income. All derivative
transactions were based on constituent stocks in MSCI EM Latin America Index.
At 30 June 2014, there were 41 open options positions with an associated
liability of US$1,040,000; (six months ended 30 June 2013: 11 open options
positions and associated liability of US$248,000; year ended 31 December 2013:
17 open options positions and associated liability of US$281,000).
The Company also participated in outperformance warrants contracts in 3
securities during the period (six months ended 30 June 2013: 6 securities; 31
December 2013: 8 securities) which generated income of US$204,000 (six months
ended 30 June 2013: US$574,000; year ended 31 December 2013: US$644,000).
3. Investment management and performance fees
BlackRock receives an annual management fee of 0.85% per annum of the NAV plus
a performance fee equal to 10% of any outperformance of the NAV per share against
the benchmark, the MSCI EM Latin America Index (in US dollar terms on a total
return basis) plus a hurdle of 1%. The performance fee is capped at 1% of NAV.
No performance fee was payable in respect of the six months ended 30 June 2014,
six months ended 30 June 2013 or the year ended 31 December 2013.
The total fee currently payable to BlackRock in any twelve month period is
limited to 4.99% of the NAV. However, as BlackRock is only entitled to a basic
fee of 0.85% of the NAV and the performance fee is capped at 1.0% of the NAV,
the amount paid to BlackRock by the Company in respect of fees in any twelve
month period is expected to be substantially lower than 4.99% of the NAV.
Six months Six months Year
ended ended ended
30 June 2014 30 June 2013 31 December 2013
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Investment
management fee 343 1,028 1,371 406 1,217 1,623 759 2,276 3,035
4. Operating expenses
Six Six
months months Year
ended ended ended
30 30 31
June June December
2014 2013 2013
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Custody fee 55 63 121
Directors' emoluments - fees for services
to the Company* 169 130 363
Marketing fees 127 - 38
Other administration costs 269 204 493
--- --- -----
620 397 1,015
--- --- -----
Transaction charge - capital 33 75 83
--- --- -----
653 472 1,098
=== === =====
*Directors' fees are paid in Sterling and are therefore subject to exchange rate
fluctuations.5. Dividends
The Board has declared an interim dividend of 15.00 cents (2013: 15.00 cents)
payable on 3 October 2014 to shareholders on the register as at 5 September
2014. The total cost of this dividend, based on 39,369,620 ordinary shares in
issue at 19 August 2014 is US$5,905,000 (30 June 2013: 39,361,585 shares and
total cost of US$5,905,000).
6. Creditors - amounts falling due after more than one year
Six Six
months months Year
ended ended ended
30 30 31
June June December
2014 2013 2013
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Convertible bonds at par - 64,000 -
-- ------ --
Fair value adjustment in respect of the
convertible bonds - 3,200 -
-- ------ --
- 67,200 -
-- ------ --
Non equity redeemable shares 24 24 24
-- ------ --
24 67,224 24
== ====== ==
Non equity redeemable shares
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
Ordinary Treasury Total Nominal
shares shares shares value
number number number US$'000
Allotted, called up and fully
paid share capital comprised:
Ordinary shares of 10 cents
each
---------- --------- ---------- -----
At 31 December 2013 39,369,620 2,071,662 41,441,282 4,144
---------- --------- ---------- -----
At 30 June 2014 39,369,620 2,071,662 41,441,282 4,144
========== ========= ========== =====
There was no change in share capital in the period.
8. Returns and net asset value per ordinary share
30 30 31
June June December
2014 2013 2013
(unaudited) (unaudited) (audited)
Net revenue return attributable to
ordinary shareholders (US$'000) 6,254 5,638 9,905
------- ------- -------
Net capital return/(loss) attributable to
ordinary shareholders (US$'000) 22,325 (62,379) (58,883)
------- ------- -------
Total return/(loss) attributable to
ordinary shareholders (US$'000) 28,579 (56,741) (48,978)
------- ------- -------
Equity shareholders' funds (US$'000) 338,019 313,408 315,345
------- ------- -------
The weighted average number of ordinary
shares in issue during the period on
which the basic and diluted return per
ordinary share was calculated was: 39,369,620 40,426,030 39,891,106
---------- ---------- ----------
The actual number of ordinary shares in
issue at the end of each period on which
the net asset value was calculated was: 39,369,620 39,361,585 39,369,620
---------- ---------- ----------
Basic & diluted return per share**
Revenue return per share 15.89 13.95 24.83
------ ------ ------
Capital return/(loss) per share 56.70 (154.31) (147.61)
------ ------ ------
Total return/(loss) per share 72.59 (140.36) (122.78)
------ ------ ------
Net asset value per share (30 June 2013,
debt at fair value) 858.58 796.23 800.99
------ ------ ------
Ordinary share price (mid-market)* 776.34 705.27 719.25
====== ====== ======
* The Company's share price is quoted in sterling and the above represents the
US dollar equivalent.
** For the period ended 30 June 2014 there was no dilution.
Net asset value per share - debt converted
During the year ended 31 December 2013, the convertible bonds were either
redeemed or converted into ordinary shares. At 31 December 2013, the Company
did not have any dilutive securities in issue. However, for information
purposes, the table below sets out the NAV per share at 30 June 2013 with debt
converted at the conversion price of US$9.83 per share.
30 30 31
June June December
2014 2013 2013
(unaudited) (unaudited) (audited)
Net asset value per share - debt
converted
Net assets with convertible bonds at fair
value per balance sheet US$'000 n/a 313,408 n/a
-------- ---------- --------
Add back convertible bonds at fair value
US$'000 n/a 67,200 n/a
Accrued interest on convertible bonds at
balance sheet date US$'000 n/a 672 n/a
-------- ---------- --------
Adjusted net assets following conversion
of the convertible bonds (a) US$'000 n/a 381,280 n/a
-------- ---------- --------
Number of ordinary shares for NAV n/a 39,361,585 n/a
Number of ordinary shares arising on
conversion of convertible bonds US$ nil
(30 June 2013: US$64,000,000 @ US$8.98
and 31 December 2013: US$ nil) n/a 6,510,681 n/a
-------- ---------- --------
Number of ordinary shares following
conversion of convertible bonds (b) n/a 45,872,266 n/a
-------- ---------- --------
Net asset value per share - debt
converted (cents) (a/b) US$'000 n/a 831.18 n/a
======== ========== ========
9. Transaction with the Investment Manager
BlackRock Investment Management (UK) Limited ("BIM (UK)") provided management
and administration services to the Company until 2 July 2014. Details of the
fees payable in relation to these services are set out in note 3.
BlackRock Fund Managers Limited ("BFM") was appointed as the Company's
Alternative Investment Fund Manager ("AIFM") with effect from 2 July 2014.
BIM (UK) continues to act as the Company's Investment Manager under a
delegation agreement with BFM.
The investment management fee for the six months ended 30 June 2014 amounted
to US$1,371,000 (six months ended 30 June 2013: US$1,623,000; year ended
31 December 2013: US$3,035,000). No performance fee was payable for the six
months ended 30 June 2014, six months ended 30 June 2013 or the year ended
31 December 2013. At the period end, a total amount of US$2,048,000 was
outstanding in respect of these fees (six months ended 30 June 2013:
US$1,623,000; year ended 31 December 2013: US$1,414,000).
In addition to the above services, with effect from 1 November 2013, BlackRock
has provided the Company with marketing services. The total fee paid or payable
for these services ended 30 June 2014 amounted to US$127,000 excluding VAT (six
months ended 30 June 2013: nil; 31 December 2013: US$38,000) of which
US$165,000 (30 June 2013: nil; 31 December 2013: US$38,000) was outstanding at
30 June 2014.
10. Related party disclosure
The Board consists of five 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 2014, the Chairman receives an
annual fee of £43,500 (US$74,376), the Chairman of the Audit Committee/Senior
Independent Director receives an annual fee of £33,000 (US$56,423) and each of
the other Directors receives an annual fee of £29,000 (US$49,584).
At the period end members of the Board held ordinary shares in the Company as
set out below:
30
June
2014
Peter Burnell (Chairman) 3,000
Mahrukh Doctor 625
Antonio Monteiro de Castro 47,000
The Earl St Aldwyn 1,470
Laurence Whitehead 13,967
11. Contingent liabilities
There were no contingent liabilities at 30 June 2014, 30 June 2013 or
31 December 2013.
12. 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 2014 and
30 June 2013 has not been audited or reviewed.
The information for the year ended 31 December 2013 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 financial statements contained no qualification or statement under
sections 498(2) or (3) of the Companies Act 2006.
13. Annual results
The Board expects to announce the annual results for the year ending
31 December 2014 as prepared under UK GAAP in mid February 2015. 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 2015, with the
Annual General Meeting being held in April 2015.
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
19 August 2014
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/blackrock-latin-american-investment-trust-plc-
interim-report.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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