Interim Results
Merrill Lynch Latin Amer Inv. Trust
08 August 2006
8 August 2006
MERRILL LYNCH LATIN AMERICAN INVESTMENT TRUST PLC
Interim announcement of results in respect of the six months
ended 30 June 2006
• The Company's net asset value per share increased by 9.4% under performing
its benchmark, the MSCI EM Latin American Index by 2.7% (both in US$
terms on a total return basis).
• The Company's share price increased by 17.6% (in US$ terms on a total
return basis).
• Basic earnings per share amounted to 5.47 cents for the period (six
months to 30 June 2005: 7.23 cents).
• The Directors have declared an interim dividend of 2.50 cents per share,
(in line with the dividend paid for the period to 30 June 2005 of 2.50
cents), payable on 12 September 2006 to shareholders on the register on 18
August 2006.
• The discount to NAV narrowed over the period from 11.0% as at 31 December
2005 to 4.4% as at 30 June 2006, and currently stands at 2.9%.
• The Directors have resolved to exercise their discretion to implement the
next tender offer for up to 20% of the issued share capital at a discount
to net asset value of 2.0%, which has a calculation date of 2 October 2006.
For further information please contact:
Peter Burnell, Chairman - 01434 632292
Jonathan Ruck Keene, Managing Director Investment Trusts - 020 7743 2178
Nigel Webb, Director Media & Communications - 020 7743 5938
Merrill Lynch Investment Managers
Or
William Clutterbuck
The Maitland Consultancy - 020 7379 5151
The Chairman, Peter Burnell, comments:
'Performance
For the six months to 30 June 2006 Latin America, along with most emerging
markets, was pushed higher in the earlier part of the year as investors
continued to search for more aggressive returns and found interesting
opportunities in the region. When markets started to react to concerns about
slowing US economic growth alongside increasing inflation and the implications
for US Federal policy, risk appetite diminished significantly and Latin
American markets experienced an almost 30% correction from mid May to mid June.
As these fears diminished, markets recovered in the latter part of June. Against
this background the Company's net asset value ('NAV') ended the period at 588.95
cents per share (equivalent to 318.42 pence per share), an increase of 9.4%
above its year end value on a total return basis (US$ dollar terms). In
comparison the benchmark index returned 12.1% over the same period whilst the
share price rose to 304.50 pence per share, a rise of 8.9% in sterling terms and
17.6% in US dollar terms on a total return basis. Most of the underperformance
against the index occurred during the second quarter at the beginning of which
Merrill Lynch Investment Manager ('MLIM') took over as investment manager. This
was due to a combination of transaction expenses arising from the portfolio
rebalancing, poor stock selection in Brazil and unfortunate timing in taking out
the gearing. The discount ended the period at 4.4% which is much improved on the
year end rate of 11%. Since the end of the review period, the NAV has increased
by 4.9% compared to a return of 4.3% from the benchmark index. Further details
on performance are set out in the Manager's report
Gearing
The Company currently has three committed loan facilities totalling US$44.5m and
has drawn down a total of US$20m. The gearing was drawn down in mid May shortly
before the period of extreme market volatility and, as mentioned above, its
timing was therefore unfortunate. The decision to gear was based on the
Manager's belief that Latin American markets looked attractive relative to their
own history as well as relative to other global markets. All of the gearing was
deployed in the Brazilian market, our largest country overweight, where we
continue to find some of the most attractive country-level valuation parameters
in the world coupled with attractive country-specific catalysts.
Dividends
Dividend income in the period gave rise to revenue returns of 5.47 cents per
share (six months to 30 June 2005: 7.23 cents per share). The Board is pleased
to declare an interim dividend of 2.5 cents per share (six months to 30 June
2005: 2.50 cents per share), which will be paid on 12 September 2006 to
shareholders on the register on 18 August 2006 (ex-dividend date 16 August
2006).
Tender offer
During the period the Board implemented a tender offer for 24.99% of the shares
in issue at a discount of 2% to NAV with 18,526,120 shares being cancelled with
effect from 15 May 2006. No further shares were purchased for cancellation in
the period.
The Directors have resolved to exercise their discretion to implement the next
tender offer which has a calculation date of 2 October. Under the terms of the
offer Shareholders may tender for purchase all or part of their holdings of
shares for cash. The price at which shares will be purchased will be the
prevailing net asset value per share as at the close of business on 2 October,
subject to a discount of 2% (to cover the likely costs of the tender offer). The
tender offer will be for a maximum of 20% in aggregate of the shares in issue as
at 2 October. A circular relating to the tender offer will be sent to
shareholders with the interim report.
Savings Schemes
The Company's shares are now available through the Merrill Lynch Investment
Trusts Savings Scheme which includes a savings plan, ISA and PEP. We believe
that this offers an easy and cost effective way to invest in the shares of the
Company.
F&C Management wrote to all the participants in its savings schemes in early
August offering them the opportunity to either transfer free of charge to the
MLIM Savings Scheme or transfer into another of their managed trusts. The
Directors firmly believe that in spite of three years' exceptional performance
in Latin American markets, prospects continue to be excellent looking forward on
a medium term view. We therefore very much hope that participants in the F&C
scheme will continue to invest in the Company through the MLIM Scheme. Please
note that the deadline for returning your forms is 16 October 2006. All
participants will have the opportunity to participate in the forthcoming tender
offer, therefore all transfers to the MLIM Savings Scheme will be made after the
tender offer effective date which is expected to be on or around 9 October 2006.
If you do not instruct F&C, your shares in the Company will be sold and this may
result in a capital gains tax liability.
Prospects
Despite the likelihood of further volatility in the near term, we expect certain
key Latin American markets to perform positively in the second half of 2006 and
into 2007, given that the recent sharp sell off makes equity valuations
attractive. Assuming that the market's read on the FED was correct and that we
are nearing the end of their tightening cycle, we expect market fundamentals
will once again drive performance. In this instance, Brazil looks very
attractive in both a Latin American context as well as in a wider global
emerging markets arena. Brazilian valuations continue to be very compelling; the
Brazilian Central Bank has room to continue cutting local interest rates given
falling inflation, and the forthcoming October presidential elections should not
represent a market moving event. For all these reasons, Brazil is our largest
country overweight. We have a small underweight position in Mexico, where we
still see long-term value following the closely contested presidential elections
on 2 July. Chile continues to offer challenging valuation levels and remains an
underweight market.'
Commenting upon the outlook for the Company, Will Landers of Merrill Lynch
Investment Managers, the Investment Manager, notes:
'Latin American Market Overview
For the six months ended 30 June 2006, the Company's NAV and share price rose by
9.4% and 17.6% respectively, both in total return terms.
The first half of 2006 continued to show significant volatility in Latin
American markets, newsflow and changes in expectations regarding US interest
rates, their impact on risk pricing, elections throughout the region and the
perceived Latin American shift to the left, all affecting market sentiment.
Moreover, Brazilian interest rate policy and the velocity of interest rate cuts,
continued commodities demand from China, and the path of the US dollar have
caused significant changes in market direction. As a result, Latin American
markets were up significantly during the month of January, moved mostly sideways
through the middle of April, had a strong move up from mid April through to mid
May, had a sharp sell-off from mid May to mid June and recovered some lost
ground in the last two weeks of the period. For the period under review, the
MSCI Free Latin America Index returned 12.1%, having reached a high point in mid
May with a return of 32.1%.
Market returns Local market Exchange Rate
Close YTD change (US$) Close YTD change
Argentina 1,711 8.7% 3.09 -1.8%
Brazil 36,361 17.5% 2.17 7.9%
Chile 2,126 3.3% 539 -5.0%
Colombia 7,662 -28.5% 2,574 -11.2%
Mexico 19,147 1.4% 11.34 -6.2%
Peru 8,156 78.6% 3.26 4.8%
Venezuela 30,747 50.8% 2,147 0.0%
MSCI Latin American 313.05 12.1% - -
Source: Bloomberg
This year will be one of the busiest years for elections in Latin America -
since late last year, presidential elections have been held in Bolivia, Chile,
Colombia, Ecuador and Peru, to be followed by Mexico in July, Brazil in October
and Venezuela in December. While concerns regarding Latin America's supposed
move to the left were widely reported in the press, equity markets for the most
part ignored such concerns. The three most liquid Latin American equity markets
- Brazil, Mexico and Chile - are seen to have strong institutions along with
sound fiscal and monetary policies and maturing democracies that are able to
deal with changes in government without negatively impacting their economies.
In Brazil, the Central Bank has been very active in reducing interest rates,
having cut rates by 375 basis points in aggregate during their four meetings in
the first half of 2006, bringing the SELIC rate to 15.25%. Inflation
expectations continue to be below the Central Bank's goal of 4.50% for 2006,
providing room for more cuts during the remainder of the year. The domestic
economy is reacting to the easing cycle, loan demand continues to be very
strong, and the export sector continues to post record performances on a monthly
basis despite the almost 8% appreciation of the Real during the period. At the
company level, earnings growth continues to be robust, balance sheets are in
good shape, and valuations continue to trade below historical averages. The
market seems comfortable with the potential re-election of President Lula, who
currently has a strong lead in all polls for the October election.
In Mexico, the economy continues to perform well, with inflation hovering around
3% for the year and GDP growth close to 4%. Mexico continues to benefit from
strong oil performance (the largest contributor to the Federal budget) as well
as the good performance of the US economy (destination for over 85% of Mexico's
exports). The stock market continues to trade close to its historical average
valuation parameters.
The Chilean market did not react as positively as expected during the sell-off
in the latter part of the period given the economy's strong reliance on copper
and the commodity's price volatility during the period. Valuation parameters
remain at the top end of all emerging markets.
The region's smaller markets offer few investable opportunities from a liquidity
standpoint. Colombia's move in June to lift capital controls on local equity
investments could pave the way for improved liquidity and potentially new equity
issuances, but the market sold off strongly during the period following strong
outperformance during the latter parts of 2005. In Peru, president-elect Alan
Garcia's views towards the mining sector and the potential for further taxation
cause us to remain cautious over investments in the country. Argentina's
stringent capital controls restrict investments in that country to ADRs.
Portfolio
Following our appointment as Manager at the end of March, we enacted a large buy
/sell program in order to bring the portfolio in line with our investment
outlook as further described below. We introduced 5% gearing in mid May,
following the tender offer at a 2% discount to NAV.
At the period end, the Company held investments in 58 Latin American companies.
At the country level, the portfolio is heavily weighted towards the Brazilian
market, with an 8.5% overweight position (almost 64% of assets) versus our
benchmark, representing the only significant country overweight. Mexico is a
slight underweight at 27.3% of assets, with Chile accounting for 4.6% and
Argentina 3.0%. The portfolio is well diversified from an industry standpoint,
with no industry accounting for more than 21% of assets.
Outlook
The Company is positioned to benefit from the low valuations offered by the
Brazilian market and the expected consumer led economic growth, a continued
economic expansion in Chile (and to a certain extent Argentina), and somewhat
insulated from Mexican politics by holding stocks in Mexico that should not be
heavily affected by the result of that country's elections.
In Brazil, where rates have been cut to 15.75% in the period, we expect the
easing cycle to continue, albeit at a slower pace, finishing 2006 at or below
14%. While this would still give Brazil a real interest rate of around 10%, we
expect that this significant reduction in rates will result in strong domestic
economic growth. This, coupled with continued expansion in Brazil's trade
account as exports continue to perform well, should enable Brazil to post
overall GDP growth of around 4% in 2006, and allow Brazilian companies to post
strong double digits earnings growth for the third year in a row. As Brazilian
valuations remain at the low end of global equity markets and we do not expect
any changes in fiscal or monetary policy from the incoming administration
(regardless of whether President Lula is re-elected or the PSDB returns to the
presidency), Brazil remains our favourite equity market in Latin America.
In Mexico, the expectation that polarised politics will continue to limit the
ability of the next government to enact much needed constitutional reforms makes
us cautious about the region. Valuations are not excessive, but they are at the
higher end of recent history. Our Mexico portfolio is positioned in companies
with significant foreign operations, such as America Movil and Cemex, as well as
companies that will do well irrespective of the winner in the presidential
election (infrastructure and homebuilding sectors). At the end of the day,
Mexico has sound fiscal policies and an independent Central Bank focused on
inflation targeting that should allow the country to continue to do well.
Chilean valuations remain at the high end of emerging markets, and as such we
have an underweight position - the stocks we do hold tend to provide us with
exposure to the consumer economy, which should do well in this period of strong
copper prices as well as a strong Chilean peso. In addition, many of our Chilean
holdings give us exposure to the Argentine consumer, as our Argentine portfolio
is mostly geared towards global players in oil services and steel.
Overall, we remain positive about Latin American equity markets given their
attractive valuation relative to their own history as well as to other emerging
markets, the region's sound fiscal policies, low inflation rates, reduced debt
levels both at the public as well as corporate level, and strong focus on
corporate governance.'
Ten Largest Holdings
Petroleo Brasileiro (Petrobras) (13.8%) dominates the upstream and downstream
oil and gas sector in Brazil and is one of the 15 largest integrated oil
companies in the world. The company has recently unveiled plans for high single
digit compound production growth until 2015 which would make it one of the
largest oil companies globally.
Cia Vale Rio Doce (CVRD) (9.5%) is the world's fourth largest diversified mining
company. Iron ore is the key product but it also has a significant exposure to
copper, bauxite, aluminium, logistics and steel.
America Movil (9.0%) is the dominant cellular player in Latin America.
Operations commenced in Mexico, where they are the market leader with 80% market
share. Operations, via acquisitions, have expanded their presence into most of
the region; including Brazil, Argentina, Colombia and Chile. The company
continues to be the prime beneficiary of increased cellular penetration and
consumption growth.
Banco Bradesco (8.5%) is the second largest bank in Brazil by market
capitalisation, offering services such as consumer loans, corporate loans,
insurance and leasing. Prospects remain bright as credit penetration increases
following interest rate declines.
Usiminas (3.7%) produces steel in Brazil with products including flat and hot
rolled steel.
AmBev CIA de Bebidas (3.2%) is the leading brewer in Brazil with market share of
close to 70% in beer. They are also the sole distributor of Pepsi products.
International operations range from South America to Canada. Volume growth is
aided by low penetration and supportive population dynamics. Management is
widely regarded as being amongst the most efficient globally, allowing for
strong cash generation.
Banco Itau (2.7%) is the largest bank in Brazil by market capitalisation,
offering services such as consumer loans, corporate loans, insurance and
investment banking. Profitability has consistently been the highest in the
banking system, with return on equity above 30%.
Wal-Mart de Mexico (Walmex) (2.6%) is the largest retailer in Mexico and is at
least twice the size of its nearest competitor. Walmex operates a portfolio of
different formats including Supercentres (hypermarkets), Sams wholesale clubs,
Bodega discount stores, Superama supermarkets and Suburbia apparel stores.
Walmex is an extremely well managed company growing its selling space in double
digits every year which is entirely financed by its own internal cash flow.
Tenaris (2.5%) is the leading global player in the production of seamless steel
pipes. High oil prices and increased rig activity have created a very favourable
environment. Operations range from Mexico, Italy to Argentina. More recently
entrance into the lucrative US market was achieved by the purchase of Maverick.
Corporacion Geo (2.1%) is the most profitable homebuilder in Mexico. Government
sponsored initiatives and increased mortgage lending by the commercial banks are
helping to address the structural housing deficit.
All percentages reflect the value of the holding as a percentage of total
investments.
INCOME STATEMENT
for the six months ended 30 June 2006
Revenue return US$'000 Capital return US$'000 Total US$'000*
--------------------- ---------------------- ---------------------
Six months Six months Year ended Six months Six months Year ended Six months Six months Year ended
ended ended ended ended ended ended
30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05
Notes (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Gains on
investments - - - 55,274 27,297 118,684 55,274 27,297 118,684
held at
fair value
through
profit or
loss
(Losses)/
gains (2) 9 (2) (307) (659) (176) (309) (650) (178)
on
foreign
Exchange
Income 3 6,853 7,113 12,218 - - - 6,853 7,113 12,218
Investment
management 4 (683) (518) (1,132) (2,050) (1,555) (3,395) (2,733) (2,073) (4,527)
Fees
Operating
expenses 5 (707) (540) (1,133) (15) (31) (38) (722) (571) (1,171)
-------- -------- -------- --------- --------- ---------- --------- --------- ----------
Net return
before 5,461 6,064 9,951 52,902 25,052 115,075 58,363 31,116 125,026
finance
costs and
taxation
Finance (51) (23) (37) (152) (68) (109) (203) (91) (146)
costs
-------- -------- -------- --------- --------- ---------- --------- --------- ----------
Return on
ordinary 5,410 6,041 9,914 52,750 24,984 114,966 58,160 31,025 124,880
activities
before
taxation
Taxation on
ordinary (1,621) (1,000) (1,848) 661 216 379 (960) (784) (1,469)
activities
-------- -------- -------- --------- --------- ---------- --------- --------- ----------
Return on
ordinary 3,789 5,041 8,066 53,411 25,200 115,345 57,200 30,241 123,411
activities
after
taxation
-------- -------- -------- --------- --------- ---------- --------- --------- ----------
Return per
ordinary 8 5.47 7.23 10.98 77.05 36.12 157.08 82.52 43.35 168.06
share -
basic
(cents)
Return per
ordinary 8 - 6.52 10.36 - 32.58 148.18 - 39.10 158.54
share -
diluted
(cents)
*The total column of this statement represents the profit and loss account of
the Company. The supplementary revenue and capital return columns are both
prepared under guidance published by the Association of Investment Trusts
Companies ('AITC'). The Company has no recognised gains and losses other than
those disclosed in the Income Statement and the Reconciliation of Movement in
Shareholders' Funds. All items in the above statement derive from continuing
operations.
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
Share Share Capital Special Warrant Non Other Revenue Total
Capital premium redemption reserve reserve distributable capital reserve US$'000
US$'000 account reserve US$'000 £'000 reserve reserve US$'000
US$'000 US$'000 US$'000 US$'000
for the
six months
ended 30
June 2006
At 31
December 7,413 11,655 1,573 32,837 - 4,356 338,691 6,727 403,252
2005
Net return
from
ordinary - - - - - - 53,411 3,789 57,200
activities
Share buy (1,852) - 1,852 (32,837) - - (95,291) - (128,128)
backs
Dividends - - - - - - - (4,819) (4,819)
paid(1)
-------- --------- -------- -------- -------- -------- ---------- -------- ----------
At 30 June 5,561 11,655 3,425 - - 4,356 296,811 5,697 327,505
2006
-------- --------- -------- -------- -------- -------- ---------- -------- ----------
for the
six months
ended 30
June 2005
At 31
December 6,977 63,880 972 - 3,484 872 223,346 2,757 302,288
2004
Transfer
of
share - (61,562) - 61,562 - - - - -
premium
to special
reserve
Net return
from
ordinary - - - - - - 25,200 5,041 30,241
activities
Share buy - - - - - - - - -
backs
Tender - - - - - (19) - (19)
costs
Dividends - - - - - - - (2,093) (2,093)
paid(2)
-------- --------- -------- -------- -------- -------- ---------- -------- ----------
At 30 June 6,977 2,318 972 61,562 3,484 872 248,527 5,705 330,417
2005
-------- --------- -------- -------- -------- -------- ---------- -------- ----------
for the
year ended
31
December
2005
At 31
December 6,977 63,880 972 - 3,484 872 223,346 2,757 302,288
2004
Transfer
of
share - (61,562) - 61,562 - - - - -
premium
to special
reserve
Net return
from
ordinary - - - - - - 115,345 8,066 123,411
activities
Share buy (601) - 601 (28,725) - - - - (28,725)
backs
Shares
issued
on 1,037 9,337 - - (3,484) 3,484 - - 10,374
conversion
of
warrants
Dividends - - - - - - - (4,096) (4,096)
paid(3)
-------- --------- -------- -------- -------- -------- ---------- -------- ----------
At 31
December 7,413 11,655 1,573 32,837 - 4,356 338,691 6,727 403,252
2005
-------- --------- -------- -------- -------- -------- ---------- -------- ----------
The transaction costs incurred on the acquisition and disposal of investments
are included within the capital reserve and amounted to $1,126,000 for the six
months ended 30 June 2006 (six months ended 30 June 2005: $833,000; year ended
31 December 2005: $1,655,000).
(1) Second interim dividend in respect of the year ended 31 December 2005 of 6.50
cents per share paid on 19 May 2006 to shareholders on the register at 18 April
2006
(2) Second interim dividend in respect of the year ended 31 December 2004 of 3.00
cents per share paid on 21 April 2005 to shareholders on the register at
29 March 2005.
(3) First interim dividend in respect of the year ended 31 December 2005 of 2.50
cents per share paid on 4 November 2005 to shareholders on the register as at
7 October 2005.
BALANCE SHEET
as at 30 June 2006
Notes 30 June 30 June 31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Investments at fair value through profit or loss 345,674 305,132 397,649
Current assets
Debtors 4,587 4,586 2,489
Cash at bank 6,171 3,614 4,582
Short term deposits - 27,000 -
---------- ---------- ----------
10,758 35,200 7,071
Creditors - amounts falling due within one year
US dollar bank loans (20,000) - -
Other creditors (8,903) (9,891) (1,444)
---------- ---------- ----------
(28,903) (9,891) (1,444)
---------- ---------- ----------
Net current (liabilities)/assets (18,145) 25,309 5,627
---------- ---------- ----------
Total assets less current liabilities 327,529 330,441 403,276
Creditors - amounts falling due after more
than one year
Non equity redeemable shares (24) (24) (24)
---------- ---------- ----------
Net assets 327,505 330,417 403,252
====== ====== ======
Capital and reserves
Share capital 7 5,561 6,977 7,413
Share premium account 11,655 2,318 11,655
Capital redemption reserve 3,425 972 1,573
Special reserve - 61,562 32,837
Warrant reserve - 3,484 -
Non distributable reserve 4,356 872 4,356
Capital reserve 296,811 248,527 338,691
Revenue reserve 5,697 5,705 6,727
---------- ---------- ----------
Total equity shareholders' funds 327,505 330,417 403,252
====== ====== ======
Net asset value per share - undiluted (cents) 8 588.95 473.58 543.95
====== ====== ======
Net asset value per share - diluted (cents) 8 - 425.22 -
====== ====== ======
CASH FLOW STATEMENT
for the six months ended 30 June 2006
Six months ended Six months ended Year ended
30 June 30 June 31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Net cash inflow from operating activities 5,779 5,001 6,824
Returns on investment and servicing of finance (81) (99) (129)
Taxation paid (858) (1,263) (2,084)
Capital expenditure and financial investment
Purchase of investments (236,434) (117,142) (271,301)
Proceeds from the sale of investments 345,664 149,464 296,470
Capital expenses (11) (44) (34)
----------- ----------- -----------
Net cash inflow from capital expenditure and financial
Investment 109,219 32,278 25,135
----------- ----------- -----------
Equity dividends paid (4,819) (2,093) (4,096)
Financing
Net loans drawndown/(repaid) 20,000 (11,250) (11,250)
Increase in short term deposits - (27,000) -
Purchase of ordinary shares (127,342) - (28,725)
Warrants exercised - 15 10,390
------------ ----------- -----------
Net cash outflow from financing (107,342) (38,235) (29,585)
------------ ----------- -----------
Increase/(decrease) in cash in the period 1,898 (4,411) (3,935)
======= ======= =======
RECONCILIATION OF NET RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH FLOW
FROM OPERATING ACTIVITIES
Six months ended Six months ended Year ended
30 June 30 June 31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Net return before finance costs and taxation 58,363 31,116 125,026
Gains on investments held at fair value through
profit or loss (55,274) (27,297) (118,684)
Exchange losses of a capital nature 307 659 176
Exchange losses/(gains) of a revenue nature 2 (9) 2
Non-operating expenses of a capital nature 15 31 38
Decrease in debtors 1,547 1,192 1,016
Increase/(decrease) in creditors 1,058 (489) (548)
Scrip dividends (239) (202) (202)
--------- --------- ---------
Net cash inflow from operating activities 5,779 5,001 6,824
--------- --------- ---------
Notes to the Interim Report
1. Principal activity
The Company conducts its business so as to qualify as an investment trust
company within the meaning of section 842 of the Income and Corporation Taxes
Act 1988.
2. Basis of Preparation
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Company's financial statements at 31 December
2005.
3. Income
Six months ended Six months ended Year ended
30 June 30 June 31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Income from investments:
Overseas dividends 6,566 6,574 11,559
Scrip dividends 239 202 202
Interest receivable and other income:
Deposit and cash fund interest 48 337 457
--------- --------- ---------
Total 6,853 7,113 12,218
--------- --------- ---------
4. Investment management fees
On 31 March 2006, the Company entered into an investment management agreement
with MLIM (the 'New Management Agreement'), under which MLIM will supply
discretionary investment management and administration services to the Company.
Under the previous management arrangement F&C Emerging Markets Limited ('FCEM')
was paid a fee of 1.5% per annum of the Company's net assets up to US$200m, and
1% on net assets in excess of this amount. Additionally the FCEM received an
administration fee denominated in pounds sterling which was adjusted annually in
line with movements in the Retail Price Index. This fee amounted to US$48,000
for the period to 8 May 2006 (US$136,000 for the year to 31 December 2005).
Under the New Management Agreement, for the period from 31 March 2006 until the
time of the Company's Annual General Meeting ('AGM') in 2007, the Company will
pay MLIM a quarterly management and administration charge equal to 0.8% per
annum of the NAV, payable in arrears. For the period commencing on the date of
the Company's AGM in 2007 and for the duration of the agreement thereafter, the
Company will pay MLIM a quarterly management and administration fee equal to 1%
per annum of the NAV, payable in arrears. The management and administration
charges will be payable together with applicable VAT.
5. Operating expenses
Six months ended Six months ended Year ended
30 June 30 June 31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Custody fee 210 122 282
Other administration costs 497 418 851
------- ------ -------
707 540 1,133
------- ------ -------
6. Dividend
The interim dividend of 2.50 cents per share will be paid on 12 September 2006
to shareholders on the register at 18 August 2006. The total cost of the
dividend, based on 55,608,059 shares in issue (30 June 2005: 74,134,179 shares;
31 December 2005, 74,134,179 shares) is US$1,390,000 (30 June 2005:
US$2,003,000; 31 December 2005: US$4,819,000).
7. Share capital
Number Authorised Number Issued and
Nominal fully paid
US$'000 Nominal
US$'000
Ordinary shares of 10 cents each in issue
at 31 December 2005 110,000,000 11,000 74,134,179 7,413
Purchase of ordinary shares for cancellation,
in relation to the tender offer - - (18,526,120) (1,852)
---------------- --------- --------------- --------
At 30 June 2006 110,000,000 11,000 55,608,059 5,561
---------------- --------- --------------- --------
8. Net asset value and return per ordinary share
30 June 30 June 31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
The weighted average number of ordinary shares in issue
during the period, on which the return per ordinary share
was calculated, was: 69,323,529 69,770,192 73,431,788
Dilutive potential - 7,578,394 4,411,650
Weighted average number of shares for diluted return
calculations* - 77,348,586 77,843,438
The actual number of ordinary shares in issue at the end of
each period, on which the net asset value was calculated,
was: 55,608,059 69,770,192 74,134,179
cents cents cents
Revenue return per share - undiluted 5.47 7.23 10.98
Capital return per share - undiluted 77.05 36.12 157.08
------- ------- ---------
Total return per share - undiluted 82.52 43.35 168.06
------- ------- ---------
Revenue return per share - diluted* - 6.52 10.36
Capital return per share - diluted* - 32.58 148.18
------- ------- ---------
Total return per share - diluted* - 39.10 158.54
--------- --------- ---------
Net asset value per share - undiluted 588.95 473.58 543.95
Net asset value per share - diluted* - 425.22 -
Share price ** 563.20 371.00 484.00
--------- --------- ---------
* The Company did not have any dilutive securities during the six months ended 30 June 2006.
** The Company's share price is quoted in sterling and the above price represents the US dollar equivalent.
9. Publication of non-statutory accounts
The financial information contained in this interim report does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. The
financial information for the six months ended 30 June 2006 and 30 June 2005 has
not been audited.
The information for the year ended 31 December 2005 has been extracted from the
latest published audited financial statements, which have been filed with the
Registrar of Companies. The report of the auditors on those accounts contained
no qualification or statement under sections 237(2) or (3) of the Companies Act
1985.
10. Annual results
The Board expects to announce the annual results for the year ended 31 December
2006 in February 2007. Copies of the preliminary announcement can be obtained
from the Secretary on 020 7743 3000. The annual report should be available
March 2007.
11. Copies of the interim report will be posted to shareholders as soon as
practicable. Copies will also be available to the public from the Company's
registered office at 33 King William Street, London EC4R 9AS.
8 August 2006
33 King William Street
London EC4R 9AS
This information is provided by RNS
The company news service from the London Stock Exchange
Monday, 3rd February 2025
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