BlackRock Latin American Investment Trust Plc - Final Results

BlackRock Latin American Investment Trust plc
(Legal Entity Identifier: UK9OG5Q0CYUDFGRX4151)

Information disclosed in accordance with Article 5 Transparency Directive, DTR 4.1

Annual Results Announcement for the year ended 31 December 2017

PERFORMANCE RECORD

Attributable to ordinary shareholders	31 December 2017	31 December 2016	Change  %
Assets
Net assets (US$’000)	279,590	221,730	+26.1
Net asset value per ordinary share (US$ cents)	710.17c	563.20c	+26.1
– with income reinvested*			+29.0
Ordinary share price (mid-market) (US$ cents)**	622.29c	486.52c	+27.9
– with income reinvested*			+31.3
Ordinary share price (mid-market) (pence)	460.00p	393.75p	+16.8
– with income reinvested*			+19.9

   

	Year ended  31 December 2017	Year ended  31 December 2016	Change  %
Revenue
Net profit after taxation (US$’000)	5,129	7,044	-27.2
Revenue profit per ordinary share (US$ cents)	13.03c	17.89c	-27.2
Dividends per ordinary share
Interim (US$ cents)	6.00c	6.00c	+0.0
Final (US$ cents)	7.00c	9.00c	-22.2
	--------	--------	--------
Total dividends paid and payable (US$ cents)	13.00c	15.00c	-13.3
	--------	--------	--------

Source: BlackRock.

*       Net asset value and share price performance include the dividend reinvestments.
**      Based on an exchange rate of $1.3528 to £1 at 31 December 2017 and $1.2356 to £1 at 31 December 2016.

CHAIRMAN’S STATEMENT

I am pleased to present the Annual Report to shareholders for the year ended 31 December 2017.

MARKET OVERVIEW
Latin American markets continued their recovery in 2017, on the back of improved global economic growth prospects, and some improvement in the political landscape in the region as a whole during the year. The largest contribution to performance across the region came from the Brazilian stock market (up by 24.5% over the year). This was driven by lower inflation, lower interest rates and the Central Bank’s quantitative easing program, which all created a positive environment for economic growth. The positive momentum behind the reform agenda also buoyed investor confidence.

Markets in the Andean region performed well over the year, in particular Chile where the stock market ended the year up by 43.6% and Argentina where the market was up by 73.6%. Despite a slight correction mid-way through the year as a result of market concerns over mid-term elections, the Argentine economy grew steadily through the year with inflation trending downwards.

In Mexico, market performance was more mixed, with a strong start to the year. Improving macro economic data in the second quarter proved to be shortlived and was offset to an extent in the second half of the year by concerns surrounding domestic politics and North American Free Trade Agreement (NAFTA) which, combined with interest rate increases to combat persistent inflation, has led to economic stagnation.

PERFORMANCE
I am pleased to report a profitable year for investing in the stock markets of Latin America.

Over the year ended 31 December 2017 the Company’s net asset value per share (NAV) returned 29.0%¹ in US Dollar terms (17.7%¹ in Sterling terms) compared with a benchmark return of 24.2%¹ in US Dollar terms (13.4%¹ in Sterling terms). The share price returned 31.3%¹ in US Dollar terms (19.9%¹ in Sterling terms). Since 31 December 2017 and up to the close of business on 9 March 2018, the Company’s NAV has increased by 12.4%¹ in US Dollar terms (9.6%¹ in Sterling terms). The share price has increased by 10.1%¹ in US Dollar terms (7.4%¹ in Sterling terms) over the same period. Details of the factors affecting performance are set out in the Investment Manager’s Report.

After a disappointing year in 2016 for our fund's performance against its benchmark, it is encouraging to note that 2017 showed a significant improvement with an outperformance of nearly 5 percentage points in US$ terms. This takes the 5 year return on net asset value per share to -11.9%¹ compared to the benchmark total return of -13.7%¹, an annualised difference to the benchmark of +0.4% (all calculations on a US Dollar basis).

Whilst this level of outperformance is considerably lower than the Board are aiming for, considering the volatile political environment over the period this was acceptable.

1. All percentages calculated with income reinvested.

Over the past year the Board have agreed with the manager that the performance target and risk profile of the underlying asset portfolio should be increased and that gearing should be used more actively. The Board view that 105% of net asset value is the neutral level of gearing over the longer term and that gearing should be used actively in an approximate range of plus or minus 10% around this as measured at the time that gearing is instigated. These current parameters sit within the Company’s gearing policy as set out in the investment policy contained in the Strategic Report in the Annual Report and Financial Statements which states that net borrowings are not expected to exceed 25% of net assets under normal circumstances, and the Company’s Articles of Association which limit net borrowings to 100% of capital and reserves.

Our portfolio manager, Will Landers, also manages several Latin American open ended vehicles. This change in performance and risk targets for our Company is likely over the longer term to generate a different profile of performance than that of the open ended vehicles.

CONTRIBUTION TO TOTAL RETURN FOR THE YEAR ENDED 31 DECEMBER 2017
 

Benchmark return	24.2%
Asset allocation	1.5%
Stock selection	3.7%
Gearing	0.9%
Management fees & operating costs	-1.3%
NAV total return	29.0%

Source: BNY Mellon.

BNY Mellon provide performance attribution based on a Brinson Fachler daily transactions-based methodology. This service is in line with GIPS (Global Investment Performance Standards) recommendations but may not be considered to be of audit quality, however the analysis is considered to be useful management information.

REVENUE RETURN AND DIVIDENDS
As mentioned in my statement last year, we did not write any call options in this financial year as we were optimistic for stock markets. Accordingly total revenue return for the year was considerably lower at 13.03 cents per share (2016: 17.89 cents per share). This is not a reflection of weakness in the companies the fund invests in, which have produced good profit growth.  Rather this is due to the lack of option premium taken through the revenue account this year. Dividend growth from the underlying asset portfolio was approximately 17%.

The Board recommends a final dividend of 7.00 cents per share (2016: 9.00 cents per share) which will be payable on 6 June 2018 to shareholders on the register as at 27 April 2018. This makes a total dividend of 13.00 cents per share (2016: 15.00 cents per share) for the year.

FUTURE DIVIDEND POLICY
As part of the Board’s overall strategy to reduce the discount at which the Company’s shares trade, the Board believes that enhancing demand for the Company’s shares and making them more attractive to new investors is an important component. Over the last few years, there has been a growing demand for investment trust shares from retail investors particularly for shares that offer an attractive, and regular dividend. With this in mind, the Directors in conjunction with the Investment Manager and the Company’s broker have reviewed the Company’s dividend policy. As a consequence, the Directors are proposing to amend the dividend policy as follows:

• The Company’s intention is to pay a regular quarterly dividend equivalent to 1.25% of the Company’s US Dollar NAV;

• The dividends will be calculated based on the US Dollar NAV at close of business on the last working day of December, March, June and September;

• The dividends will be paid in November, February, May and August each year; and

• Dividends will be financed through a combination of available net income in each financial year and revenue and capital reserves.

As the new policy is subject to shareholder approval at the 2018 AGM in May, the year to 31 December 2018 will represent a transitional period with three quarterly dividends of 1.25% of the respective quarter end NAVs for June, September and December 2018 being paid in August and November 2018 and February 2019 respectively.  For illustrative purposes, based on the year-end US Dollar NAV of 710.17 cents per share, this would result in dividends of 26.63 cents being paid in respect of the 2018 financial year, representing a yield of 4.3% based on the share price at 31 December 2017 (which compares to the current dividend yield of 2.1% for the year to 31 December 2017).

This proposed increase in the level of dividend will be funded out of capital reserves to the extent that current year revenue and revenue reserves are insufficient. The Board believes that pressure placed on the investment managers to seek a higher income yield from the underlying portfolio itself could detract from total returns. By uncoupling the dividend policy of the Company from the split of capital and revenue returns generated by the portfolio, the Board’s aim is to attract new buyers for the Company’s shares, whilst maintaining the portfolio’s ability to generate attractive total returns.

The Board believes that the change to the Company’s dividend policy will widen the appeal of the Company to investors as it will provide a more attractive yield. In turn, the increased demand for the Company’s shares is expected to result in a narrowing of the discount to net asset value over time.

The Board anticipates that this change of policy will be permanent. However, it will keep the policy (and its expected positive impact on the discount level) under review and may amend it in the light of potential changes in the expected total returns to be earned from the portfolio or changes in the nature of returns desired by shareholders.

PERFORMANCE TRIGGERED TENDER OFFER
The Company had in place a discount control mechanism in the form of a tender offer for 24.99% of the ordinary shares in issue (excluding treasury shares) to be implemented in 2018 if:

• The continuation vote in 2018 is approved by shareholders;

• The Company has underperformed the benchmark index on a cumulative US Dollar total return basis by more than 1% per annum over the previous two financial years ended 31 December 2017; and

• The discount to the cum income NAV has on average exceeded 5% over the same two year period.

As already announced, for the two years to 31 December 2017 the Company’s NAV increased by 61.7% and the benchmark increased by 63.2% on a US Dollar total return basis. The Company’s average discount over the same period was 13.4% which is in excess of the target of 5%. As only one of the required tests has been met the performance triggered tender offer will not therefore be implemented.

DISCOUNT MANAGEMENT AND PROPOSED CHANGES TO DISCOUNT CONTROL MECHANISM
The Directors continue to monitor the discount at which the ordinary shares trade to their prevailing NAV and in the year to 31 December 2017 the cum-income discount on the ordinary shares in Sterling terms has averaged 13.4% and ranged between 8.0% and 17.6%. Investor sentiment towards regional stock markets tends to be quite cyclical as a result of most Latin American economies being more cyclical than those of the broader global economy even though long-term economic growth expectations are strong. Therefore shares of Latin American investment trusts often experience quite volatile levels of discount. Previously, the Board has tried to reduce this volatility by the tender mechanism described above. The Board also offers shareholders the right to vote on whether the Company should continue in existence every 2 years.

However, the Board has previously voiced its concern that a 2 year performance target for the tender mechanism and the liquidity implications of funding a possible call on capital is restricting the Investment Manager’s ability to take a sufficiently long term approach to investing in quality companies in the region. Accordingly the Board believe that it is in shareholders’ interests that a longer time period for assessing performance be adopted.

The Board is therefore proposing a discount control policy for the four year period from 1 January 2018 to 31 December 2021 whereby shareholders are offered a tender for 24.99 per cent of the shares in issue, excluding treasury shares, (at a tender price reflecting the latest cum income NAV less 2 per cent and related portfolio realisation costs) in the event that the continuation vote for each relevant biennial period is approved (being the continuation votes at the AGMs in 2020 and 2022), where either of the following conditions have been met:

(i) the annualised total NAV return of the Company does not exceed the annualised benchmark index (being the MSCI EM Latin American Index) US Dollar total return by more than 100 basis points over the four year period from 1 January 2018 to 31 December 2021 (the Calculation Period).

(ii) The average daily discount to the cum-income NAV exceeds 12 per cent as calculated with reference to the trading of the shares over the Calculation Period.

The making of any tender offer pursuant to the above will be conditional upon the Company having the required shareholder authority or such shareholder authority being obtained, the Company having sufficient distributable reserves to effect the repurchase and, having regard to its continuing financial requirements, sufficient cash reserves to settle the relevant transactions with shareholders, and the Company’s continuing compliance with the Listing Rules and all other applicable laws and regulations. The Company may require a minimum level of participation in any such tender offer to be met, failing which the tender offer may be declared void.

Further details of the tender mechanism and shareholder continuation vote are set out in the Strategic Report contained within the Annual Report and Financial Statements.

This new discount control mechanism will be supported by the proposed changes to the Company’s dividend policy as described above, which will provide a more attractive yield and widen the appeal of the Company to investors; the Board anticipates that the resultant increased demand for the Company’s shares will result in a narrowing of the discount to net asset value over time.

CORPORATE GOVERNANCE AND SOCIALLY RESPONSIBLE INVESTING
Although investment trusts do not employ staff and accordingly have no direct impact on social matters, they can be significant investors in the economies of the regions in which they invest. The Board believes that it is important to invest in companies whose boards act responsibly in respect of environmental, ethical and social issues, and has engaged a Manager with a disciplined approach to corporate governance and the resources to implement this on a global basis. BlackRock is one of the world’s leading asset management firms and has a rigorous approach to corporate governance with the BlackRock Investment Stewardship team responsible for protecting and enhancing the value of clients’ assets through engagement with companies to encourage business and management practices that support sustainable financial performance over the long-term. This specialist team is a centralised resource for portfolio managers and provides insight on environmental, social and governance (ESG) considerations. This overlay approach ensures that BlackRock can most effectively use its voice as a long-term, actively engaged shareholder to protect the economic interests of its clients. The BlackRock Investment Stewardship team takes a regional approach to engagement in the context of globally consistent principles and is based in the US, UK, Japan, Hong Kong and Singapore. Regional advisory committees of investment colleagues help inform the team’s work and establish a shareholder value framework for the team’s engagements and policy development. Additional information on the Manager’s approach to socially responsible investing can be found at https://www.blackrock.com/corporate/about-us/investment-stewardship and is also given in the Corporate Governance Statement in the Annual Report and Financial Statements and the Manager’s policy on the exercise of voting rights attached to the Company’s portfolios disclosed in the Directors’ report in the Annual Report and Financial Statements.

BOARD COMPOSITION
The Board is mindful of the importance of succession planning.  Two of the five Directors currently serving on the Board (Mr Monteiro de Castro and Mr Whitehead) have been in office for more than nine years, and Dr Doctor (who was appointed on 17 November 2009), will have a tenure in excess of nine years with effect from November 2018.   With this in mind, the Board is planning to undertake a search and selection process in 2018, to identify a new Audit Committee Chairman with relevant experience and qualifications, with the intention that Mr Monteiro de Castro will step down prior to the end of March 2019 subject to a suitable replacement being identified.   Mr Whitehead has also notified the Board of his intention to step down prior to the end of May 2019.

CONTINUATION VOTE
Latin American equities are trading at attractive levels and should respond positively to any improvement in the region’s political and economic climate and are likely to be beneficiaries of the improving global economic climate. The Board therefore unanimously recommends that shareholders vote in favour of the continuation vote which will be proposed at the forthcoming AGM.

ANNUAL GENERAL MEETING
The AGM will be held at 12.00 noon on 30 May 2018 at the offices of BlackRock at 12 Throgmorton Avenue, London EC2N 2DL. We hope that as many shareholders as possible will attend. Following the AGM there will be a presentation by Will Landers, the portfolio manager, on the outlook for the year ahead and an opportunity to meet Will and the Directors.

OUTLOOK
Our portfolio manager continues to be positive about the prospects for the economies and stock markets of the region. Overall, the economic background seems set to improve across the region, with inflation under control or falling in most major economies. Political changes over the last year have supported economic reform and market-friendly legislation. Latin America has experienced a political shift to the right of centre in recent elections in Argentina, Peru and Chile, although the outcome of forthcoming elections in Brazil and Mexico might reverse this trend.  As such, elections here will be important for the region.

Our portfolio manager is more cautious on Mexico, given uncertainty over the forthcoming elections and additional pressures from the ongoing NAFTA negotiations; this view is reflected in the current underweight portfolio exposure. Colombia and Chile continue to be positioned in the portfolio as large underweights due to concerns over fiscal discipline in Colombia and excessive valuations in Chile.

Brazil remains the portfolio’s largest position both in absolute and relative terms. The improvement in the Brazilian economy following the departure from President Rousseff’s unsuccessful approach to more responsible policies means that the 2018 election is likely to result in victory for a candidate committed to continuing the current economic program. This in turn is likely to drive positive growth in Brazilian markets through 2018. The Argentine economy is also likely to see continued growth and falling inflation through 2018 and may benefit from a boost in June if the MSCI decide to reclassify Argentina from its Frontiers Index to its Emerging Markets Index.

CAROLAN DOBSON
Chairman
13 March 2018

STRATEGIC REPORT

The Directors present the Strategic Report of the Company for the year ended 31 December 2017.

OBJECTIVE
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.

STRATEGY, BUSINESS MODEL AND INVESTMENT POLICY
The Company invests in accordance with the objective given above. The Board is collectively responsible to shareholders for the long term success of the Company and is its governing body. There is a clear division of responsibility between the Board and the Manager. Matters for the Board include setting the Company’s strategy, including its investment objective and policy, setting limits on gearing (both bank borrowings and the effect of derivatives), capital structure, governance, and appointing and monitoring of performance of service providers, including the Manager.

The Company’s business model follows that of an externally managed investment trust, therefore the Company does not have any employees and outsources its activities to third party service providers including the Manager who is the principal service provider.

In accordance with the Alternative Investment Fund Managers Directive (AIFMD) the Company is an Alternative Investment Fund (AIF). BlackRock Fund Managers Limited (the Manager) is the Company’s Alternative Investment Fund Manager.

The management of the investment portfolio and the administration of the Company have been contractually delegated to the Manager who in turn (with the permission of the Company) has delegated certain investment management and other ancillary services to the Investment Manager. The Manager, operating under guidelines determined by the Board, has direct responsibility for the decisions relating to the day-to-day running of the Company and is accountable to the Board for the investment, financial and operating performance of the Company.

The Company delegates fund accounting services to BlackRock Investment Management (UK) Limited (BIM (UK) or the Investment Manager), which in turn sub-delegates these services to Bank of New York Mellon (International) Limited and also sub-delegates registration services to the Registrar, Computershare Investor Services PLC. Other service providers include the Depositary, The Bank of New York Mellon (International) Limited. Prior to 1 November 2017, the entity appointed as the Company’s Depository was BNY Mellon Trust & Depositary (UK) Limited. Details of the contractual terms with these service providers are set out in the Directors’ Report in the Annual Report and Financial Statements.

Our strategy is that the portfolio will be chosen from a spread of companies which are listed in, or whose main activities are in, Latin America.

As an actively managed fund our aim is to outperform comparable funds and the benchmark index over the medium to long term and consequently our portfolio and performance will diverge from the returns obtained simply by investing in the index.

INVESTMENT POLICY
As a closed end Company we are able to adopt a longer term investment horizon, and therefore may, when appropriate, have a higher proportion of less liquid mid and smaller capitalisation companies than comparable open-ended funds.

The portfolio is subject to a number of geographical restrictions relative to the benchmark index but the Investment Manager is not constrained from investing outside the index. For Brazil, Mexico, Chile, Argentina, Peru, Colombia and Venezuela, the portfolio weighting is limited to plus or minus 20 percentage points of the index weighting for each of those countries. For all other Latin American countries the limit is plus or minus 10 percentage points of the index weighting. Additionally, the Company may invest in the securities of quoted companies whose main activities are in Latin America but which are not established or incorporated in the region or quoted on a local exchange.

The Company’s policy is that up to 10% of the gross assets of the portfolio may be invested in unquoted securities.

The Company will not hold more than 15% of the market capitalisation of any one company and no more than 15% of the Company’s investments will be held in any one company as at the date any such investment is made.

No more than 15% of the gross assets of the portfolio shall be invested in other UK listed investment companies (including other investment trusts).

The Company may deal in derivatives (including options, futures and forward currency transactions) for the purposes of efficient portfolio management (i.e. for the purpose of reducing, transferring or eliminating investment risk in the underlying investments of a collective investment undertaking, including any technique or instrument used to provide protection against exchange and credit risks). Call options are also used for income generation purposes. No more than 20% of the Company’s portfolio by value may be under option at any given time.

The Company may underwrite or sub-underwrite any issue or offer for the sale of investments. No such commitment will be entered into if, at that time, the aggregate of such investments would exceed 10% of the net asset value of the Company or any such individual investment would exceed 3% of the net asset value of the Company.

The Company may, from time to time, use borrowings to gear its investment portfolio or in order to fund the market purchase of its own ordinary shares. Under the Company’s Articles of Association, the net borrowings of the Company may not exceed 100% of the Company’s adjusted capital and reserves. However, net borrowings are not expected to exceed 25% of net assets under normal circumstances. The Investment Manager may also hold cash or cash-equivalent securities when it considers it to be advantageous to do so.

The Company’s financial statements are maintained in US Dollars. Although many investments are likely to be denominated and quoted in currencies other than in US Dollars, the Company does not currently employ a hedging policy against fluctuations in exchange rates.

No material change will be made to the Company’s investment policy without shareholder approval.

INVESTMENT PROCESS
An overview of the investment process is set out below.

The Investment Manager’s main focus is to identify mispriced/undervalued companies, particularly those with proven management and good governance records, good earnings growth prospects over several years ahead, and strong balance sheets and cash flow generation.

The Manager’s experienced research analyst team conducts on the ground research, meeting with target companies, competitors, suppliers and others in the region in order to generate investment ideas for portfolio construction. In addition, the investment team meets regularly with government officials, central bankers, industry regulators and consultants.

Final investment decisions result from a combination of bottom-up, company specific research with top-down, macro analysis.

DISCOUNT MANAGEMENT AND PROPOSED CHANGES TO DISCOUNT CONTROL MECHANISM
The Directors recognise that it is in the long term interests of shareholders that shares do not trade at a significant discount to their prevailing NAV.

A special resolution was passed at the AGM of the Company held on 3 May 2017, granting the Directors authority to make market purchases of the Company’s ordinary shares to be held, sold, transferred or otherwise dealt with as treasury shares or cancelled upon completion of the purchase.

The Company currently has in place a discount control mechanism whereby (subject to the biennial continuation vote being passed) a tender for 24.99% of the Company’s shares will be implemented if certain performance and average discount targets are not met.  Full details of these targets and of the tender mechanism are set out in the Chairman’s Statement.  As announced on 3 January 2018, the Company met its performance target for the two years ended 31 December 2017, and as a result the tender will not be implemented.

As explained in the Chairman’s Statement, the Board is concerned that a 2 year performance target for the tender mechanism and the liquidity implications of funding a possible call on capital is restricting the Investment Manager’s ability to take a sufficiently long term approach to investing in quality companies in the region, and it believes that it is in shareholders’ interests as a whole that a longer time period for assessing performance be adopted.  Consequently the Board is proposing to amend its discount control policy, for the four year period from 1 January 2018 to 31 December 2021 as set out in detail in the Chairman’s Statement. The new discount control mechanism will be a tender for 24.99 per cent. of the shares in issue excluding treasury shares (at a tender price reflecting the latest cum income NAV less 2 per cent and related portfolio realisation costs) subject to the Company not meeting either a performance target or an average discount target over the period.  Full details of these targets are set out within the Chairman’s Statement. The tender will also be conditional on the passing of the biennial continuation votes at the AGMs in 2020 and 2022.

PERFORMANCE
Details of the Company’s performance are set out in the Chairman’s Statement.

The Investment Manager’s Report forms part of this Strategic Report and includes a review of the main developments during the year, together with information on investment activity within the Company’s portfolio.

PORTFOLIO ANALYSIS
As at 31 December 2017, the Company held 65 investments of which 6 were unlisted investments. A detailed analysis of these investments and the sector and geographical allocations are provided in the Investment Manager's report below.

RESULTS AND DIVIDENDS
The results for the Company are set out in the Income Statement below. The total profit for the year on ordinary activities, after taxation, was US$63,765,000 (2016: US$45,511,000) of which the revenue profit amounted to US$5,129,000 (2016: US$7,044,000), and the capital profit amounted to US$58,636,000 (2016: US$38,467,000).

The Directors recommend the payment of a final dividend as set out in the Chairman’s Statement.

The Board is putting proposals for a new dividend policy to shareholders for approval at the AGM on 30 May 2018. Details of this policy are set out in the Chairman’s Statement and in the Notice of Annual General Meeting contained in the Annual Report and Financial Statements.

KEY PERFORMANCE INDICATORS
At each Board meeting, the Directors consider a number of performance measures to assess the Company’s success in achieving its objectives. The key performance indicators (KPIs) used to measure the progress and performance of the Company over time are comparable to those reported by other investment trusts and are set out below.

Performance

At each meeting the Board reviews the performance of the portfolio as well as the net asset value and share price for the Company and compares this to the performance of other companies in the peer group of Latin American open and closed end funds and to the benchmark.

The Board also regularly reviews a number of indices and ratios to understand the impact on the Company’s relative performance of the various components such as asset allocation and stock selection.

Information on the Company’s performance is given in the performance record above and the Chairman’s Statement and Investment Managers’ Report.

Premium/discount to NAV

The Directors recognise that it is in the long term interests of shareholders that shares do not trade at a significant discount to their prevailing NAV.

The Board monitors the level of the Company’s discount to NAV on an ongoing basis and considers strategies for managing any discount. In the year to 31 December 2017, the Company’s share price to NAV traded in the range of a discount of 8.0% to a discount of 17.6% on a cum income basis.

No shares were issued or bought back during the year.

Further details setting out how the discount or premium at which the Company’s shares trade is calculated is included in the glossary contained within the Annual Report and Financial Statements.

Ongoing charges

The ongoing charges represent the Company’s management fee and all other recurring operating and investment management expenses, excluding finance costs, expressed as a percentage of average net assets.

The ongoing charges are based on actual costs incurred in the year as being the best estimate of future costs. The Board reviews the ongoing charges and monitors the expenses incurred by the Company on an ongoing basis against a peer group of Latin American open and closed end funds. A definition setting out in detail how the operating charges ratio is calculated is included in the glossary contained within the Annual Report and Financial Statements.

Composition of shareholder register

The Board is mindful of the importance of a diversified shareholder register and the need to make the Company’s shares attractive to long term investors; it is therefore the Board’s aim to increase the diversity of the shareholder register over time. The Board monitors the retail element of the register, which is defined for these purposes as wealth managers, IFAs and direct private investors.  On this basis the Company’s share register currently comprises 33.9% retail investors; the Board will monitor this with the aim of growing the retail element of the register over time.

	Year ended  31 December 2017	Year ended  31 December 2016
Net asset value total return1	+29.0%	+25.2%
Share price total return1	+31.3%	+22.2%
Benchmark total return1	+24.2%	+31.5%
Discount to net asset value2	12.4%	13.6%
Revenue return per share – basic (cents)	13.03	17.89
Ongoing charges3	1.1%	1.2%
Retail element of share register	33.9%	35.6%

1.      Calculated in US Dollar terms with income reinvested. Further details of the calculation methodology are given in the glossary contained in the Annual Report and Financial Statements.
2.      Further details of the calculation methodology are given in the glossary contained in the Annual Report and Financial Statements.
3.      Ongoing charges, calculated as a percentage of average shareholders’ funds and using expenses, excluding finance costs and taxation. Further details of the calculation methodology are given in the glossary contained in the Annual Report and Financial Statements.

PRINCIPAL RISKS
The Company is exposed to a variety of risks and uncertainties and the key risks are set out below. The Board has put in place a robust process to assess and monitor these risks. A core element of this is the Company’s risk register. This identifies the risks facing the Company and assesses the likelihood and potential impact of each risk and the quality of controls operating to mitigate it. A residual risk rating is then calculated for each risk based on the outcome of the assessment. This approach allows the effect of any mitigating procedures to be reflected in the final assessment.

The risk register, its method of preparation and the operation of key controls in the Manager’s and third party service providers systems of internal control are reviewed on a regular basis by the Audit Committee. In order to gain a more comprehensive understanding of the Manager’s and other third party service providers’ risk management processes and how these apply to the Company’s business, the Audit Committee periodically receives presentations from BlackRock’s Internal Audit and Risk & Quantitative Analysis teams. Where produced, the Audit Committee also reviews Service Organisation Control (SOC 1) reports from the Company’s service providers.

The current risk register includes a number of risks which have been categorised as follows:

• Counterparty;

• Investment performance;

• Income/dividend;

• Legal and regulatory compliance;

• Operational;

• Market;

• Financial; and

• Marketing

The principal risks and uncertainties faced by the Company during the financial year, together with the potential effects, controls and mitigating factors, are set out in the table below.

Principal Risk	Mitigation/Control
Counterparty
Potential loss that the Company could incur if a counterparty is unable (or unwilling) to perform on its commitments.	Due diligence is undertaken before contracts are entered into and exposures are diversified across a number of counterparties. The Depositary is liable for restitution for the loss of financial instruments held in custody unless able to demonstrate the loss was a result of an event beyond its reasonable control.
Investment performance
Returns acheived are relevant primarily upon the performance of the portfolio. The Board is responsible for: - deciding the investment strategy to fulfil the Company's objective; and - for monitoring the performance of the Investment Manager and the implementation o fthe investment stratgey. An inappropriate investment strategy may lead to: - poor performance compared to the benchmark index and the Company's peer group; - a loss of capital; and - dissatisfied shareholders.	To manage this risk the Board: - regularly reviews the Company’s investment mandate and long term strategy; - has set investment restrictions and guidelines which the Investment Manager monitors and regularly reports on; -receives from the Investment Manager a regular explanation of stock selection decisions, portfolio exposure, gearing and any changes in gearing and the rationale for the composition of the investment portfolio; and - monitors the maintenance of an adequate spread of investments in order to minimise the risks associated with factors specific to particular sectors, based on the diversification requirements inherent in the investment policy.
Income/dividend
Under the Company’s current dividend policy, the ability to pay dividends is dependent on a number of factors including the level of dividends earned from the portfolio. Income returns from the portfolio are dependent, among other things, upon the Company successfully pursuing its investment policy. Should shareholders approve the proposed changes to the Company’s dividend policy at the forthcoming AGM, the Company’s ability to fulfil its dividend policy will be less restricted, and dependent only on sufficient distributable reserves being available for this purpose. The Company has the ability to make dividend distributions out of capital reserves as well as revenue reserves in order to meet its stated objective. These combined reserves are substantial and the Board consider that the risk that they would be insufficient to cover the dividend is very remote. Under the new dividend policy, there is also a risk that by paying a substantial portion of dividends out of capital reserves, the Company erodes its capital base and that this has an impact on longer term total returns. The rate at which this may occur and the degree to which dividends are funded from capital are also dependent upon the level of dividends and other income earned from the portfolio, which in turn depends (among other things) upon the Company successfully pursuing its investment policy. Any change in the tax treatment of dividends or interest received by the Company, including as a result of withholding taxes or exchange controls imposed by jurisdictions in which the Company invests, may reduce the level of dividends received by shareholders.	The Board monitors this risk through the receipt of detailed income forecasts and considers the level of income at each meeting. The Company has built up revenue reserves which can be drawn upon as required and has substantial capital reserves which are available for distribution by way of dividend. The Investment Manager has the ability to write options (within set parameters) which generate additional income. Any changes to the Company’s dividend policy are communicated to the market on a timely basis and shareholder approval will be sought for significant changes. To the extent the proposed changes to the Company’s dividend policy as set out in the Chairman’s Statement are adopted, the Board will monitor the impact of the new policy on the Company’s capital base and the impact of this over time on total return.
Legal and regulatory compliance
Amongst other relevant laws and regulations, the Company has been accepted by HM Revenue & Customs as an investment trust, subject to continuing to meet the relevant eligibility conditions and operates as an investment trust in accordance with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from capital gains tax on the profits realised from the sale of its investments. Any breach of the relevant eligibility conditions could lead to the Company losing investment trust status and being subject to corporation tax on capital gains realised within the Company’s portfolio. In such event the investment returns of the Company may be adversely affected. Any serious breach could result in the Company and/or the Directors being fined or the subject of criminal proceedings or the suspension of the Company’s shares which would in turn lead to a breach of the Corporation Tax Act 2010. The Company is required to comply with the provisions of the Companies Act 2006, the Alternative Investment Fund Managers Directive, the UK Listing Rules and Disclosure & Transparency Rules and the Market Abuse Regulations.	The Investment Manager monitors investment movements and the amount of proposed dividends, if any, to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached. The results are reported to the Board at each meeting. Compliance with the accounting rules affecting investment trusts is also carefully and regularly monitored. The Company Secretary and the Company’s professional advisers provide regular reports to the Board in respect of compliance with all applicable rules and regulations.
Operational
In common with most other investment trust companies, the Company has no employees. The Company therefore relies on the services provided by third parties. Accordingly, it is dependent on the control systems of the Manager and BNY Mellon (International) Limited (the Depositary and Fund Accountant), who maintain the Company’s assets, dealing procedures and accounting records. The security of the Company’s assets, dealing procedures, accounting records and adherence to regulatory and legal requirements depend on the effective operation of the systems of these other third party service providers. Failure by any service provider to carry out its obligations to the Company could have a material adverse effect on the Company’s performance. Disruption to the accounting, payment systems or custody records could prevent the accurate reporting and monitoring of the Company’s financial position.	Due diligence is undertaken before contracts are entered into with third party service providers. Thereafter, the performance of the provider is subject to regular review and reported to the Board. Most third party service providers produce Service Organisation Control (SOC 1) reports to provide assurance regarding the effective operation of internal controls as reported on by their reporting accountants. These reports are provided to the Audit Committee for their review. The Company’s assets are subject to a strict liability regime and in the event of a loss of financial assets held in custody, the Depositary must return assets of an identical type or the corresponding amount, unless able to demonstrate the loss was a result of an event beyond its reasonable control. The Board reviews the overall performance of the Manager, Investment Manager and all other third party service providers and compliance with the Investment Management Agreement on a regular basis. The Board also considers the business continuity arrangements of the Company’s key service providers.
Market
Market risk arises from volatility in the prices of the Company’s investments. It represents the potential loss the Company might suffer through holding investments in the face of negative market movements. There may be exposure to significant economic, political and currency risks due to the location of the operation of the businesses in which the Company may invest. Shares in businesses in which the Company invests can prove volatile and this may be reflected in the Company’s share price. The Company may also invest in smaller capitalisation companies or in the securities markets of developing countries which are not as large as the more established securities markets and have substantially less trading volume, which may result in a lack of liquidity and higher price volatility.	The Board considers asset allocation, stock selection, unquoted investments, if any, and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager. The Board monitors the implementation and results of the investment process with the Investment Manager.
Financial
The Company’s investment activities expose it to a variety of financial risks that include interest rate, currency and liquidity risk.	Details of these risks are disclosed in note 16 to the financial statements, together with a summary of the policies for managing these risks.
Marketing
Marketing efforts are inadequate or, don’t comply with relevant regulatory requirements, and fail to communicate adequately with shareholders or reach out to potential new shareholders, resulting in reduced demand for the Company’s shares and a widening discount.	The Board focuses significant time on communicating directly with the major shareholders and reviewing marketing strategy and initiatives. All investment trust marketing documents are subject to appropriate review and authorisation.

As required by the UK Corporate Governance Code, the Board has undertaken a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. Those principal risks have been described in the above table together with an explanation of how they are managed and mitigated. The Board will continue to assess these risks on an ongoing basis.

VIABILITY STATEMENT
In accordance with provision C.2.2 of the UK Corporate Governance Code, the Directors have assessed the prospects of the Company over a longer period than the 12 months referred to by the ‘Going Concern’ guidelines. The Board recognises that it is obliged to propose a biennial continuation vote, with the next vote at the AGM in 2018, and offer a tender for 24.99% of the Company’s ordinary shares in issue (excluding treasury shares) at the AGM in 2022 if certain conditions are met. The outcome of these events are unknown at the present time, however, notwithstanding these uncertainties, given the factors stated below, the Board expects the Company to continue for the foreseeable future and has therefore conducted this review for the period up to the AGM in 2023.

In choosing this period for its assessment of the viability of the Company the Directors have considered the following matters:

• the Company has a relatively liquid portfolio (as at 31 December 2017, 100% of the portfolio was estimated as being capable of being liquidated within 20 days);

• the Company’s expenses and liabilities are relatively stable;

• the Company’s business model should remain attractive for much longer than the period up to the AGM in 2023, unless there is a significant economic or regulatory change;

• the Company’s principal risks and uncertainties as set out above are unlikely to change materially;

• the impact of a significant fall in Latin American markets on the value of the Company’s investment portfolio;

• the ongoing relevance of the Company’s investment objective, business model and investment policy in the current environment; and

• the level of demand for the Company’s shares.

The Directors reviewed the assumptions and considerations underpinning the Company’s existing going concern assertion which are based on:

• processes for monitoring costs;

• key financial ratios;

• evaluation of risk management and controls;

• portfolio risk profile;

• share price discount to NAV;

• gearing; and

• counterparty exposure and liquidity risk.

Based on the results of their analysis, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment.

FUTURE PROSPECTS
The Board’s main focus is the achievement of capital growth and an attractive total return. The future of the Company is dependent upon the success of the investment strategy. The outlook for the Company is discussed in both the Chairman’s Statement and the Investment Manager’s Report.

SOCIAL, COMMUNITY AND HUMAN RIGHTS ISSUES
As an investment trust with no employees, the Company has no direct social or community responsibilities or impact on the environment. However, the Company believes that it is in shareholders’ interests to consider human rights issues, environmental, social and governance factors when selecting and retaining investments. Details of the Company’s policy on socially responsible investment are set out in the Corporate Governance Statement contained in the Annual Report and Financial Statements.

MODERN SLAVERY ACT
As an investment vehicle the Company does not provide goods or services in the normal course of business, and does not have customers. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015. In any event, the Board considers the Company’s supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

DIRECTORS, GENDER REPRESENTATION AND EMPLOYEES
The Directors of the Company on 31 December 2017, all of whom with the exception of Nigel Webber held office throughout the year, are set out in the Governance Structure and Directors’ Biographies section of the Annual Report and Financial Statements.

Nigel Webber was appointed as a Director of the Company with effect from 1 April 2017 and his biography is also set out in the Governance Structure and Directors' Biographies section of the Annual Report and Financial Statements.

The Board consists of 3 men and 2 women.

The Company does not have any employees, therefore there are no disclosures to be made in that respect.

The Chairman’s Statement, along with the Investment Manager’s Report and portfolio analysis, form part of the Strategic Report.

The Strategic Report was approved by the Board at its meeting on 13 March 2018.

BY ORDER OF THE BOARD
SARAH BEYNSBERGER
For and on behalf of
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
Company Secretary
13 March 2018

TRANSACTIONS WITH THE AIFM AND THE INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months’ notice. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed in the Directors’ Report in the Annual Report and Financial Statements.

The investment management fee is levied quarterly, based on 0.80% per annum of the net asset value on the last day of each month.

The investment management fee due for the year ended 31 December 2017 amounted to US$2,119,000 (2016: US$1,867,000), as disclosed in note 4. At the year end, an amount of US$1,150,000 was outstanding in respect of these fees (2016: US$479,000).

In addition to the above services BlackRock has provided the Company with marketing services. The total fees paid or payable for these services for the year ended 31 December 2017 amounted to US$120,000 excluding VAT (2016: US$12,000). Marketing fees of US$112,000 (2016: US$85,000) were outstanding at 31 December 2017.

RELATED PARTY TRANSACTIONS

Disclosures of the Directors’ interests in the ordinary shares of the Company and fees and expenses payable to the Directors are set out in the Directors’ Remuneration Report in the Annual Report and Financial Statements. At 31 December 2017, an amount of US$ nil (2016: US$ nil) was outstanding in respect of Directors’ fees.

The Board currently consists of four non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £46,000, the Chairman of the Audit Committee receives an annual fee of £35,000 and each other Director receives an annual fee of £31,000. This excludes expenses paid to each of the Directors which are set out in the Directors' Remuneration Report in the Annual Report and Financial Statements.

All current members of the Board hold ordinary shares in the Company. Carolan Dobson holds 4,792 ordinary shares, Antonio Monteiro de Castro holds 47,000 ordinary shares, Laurence Whitehead holds 15,203 ordinary shares, Mahrukh Doctor holds 686 ordinary shares and Nigel Webber holds 5,000 ordinary shares.

INVESTMENT MANAGER’S REPORT

MARKET OVERVIEW
Latin American equities remained volatile through 2017, ending the year up +24.2% in USD terms. Intra-regional performance remained mixed for most of the year, primarily driven by macro-political headlines. Markets in Brazil (+24.5%) led the region early on as the Central Bank took advantage of lower inflation, keeping positive momentum in their easing cycle to incentivise domestic growth. This continued through December, resulting in 675bps being cut off the headline rate this year, and expectations for at least one more cut in the first quarter of 2018. Markets responded in kind, with performance also supported by increased confidence surrounding the reform agenda. Later cuts through the third and fourth quarters, helped to buoy periods of underperformance stemming from waning confidence in obtaining resolution for key reforms tied to President Temer’s agenda; a direct result of political scandal, which resulted from President Temer being charged by the General Prosecutor with passive corruption in June.

The Mexican market (+16.3%) also started the year off well, posting gains from a stronger Peso, a dovish Fed and improved views regarding its relationship with the US. Further market strength, on the back of improving macro data in the second quarter and signs of peaking inflation, was relatively short lived. Uncertainty surrounding domestic politics and NAFTA complexity weighed on the market in the back half of the year, with underperformance amplified by stubborn inflation, which lead to the Bank of Mexico resuming rate hikes, putting additional pressure on the currency.

On the other hand, markets in the Andean region maintained a strong run of performance through year-end, with Chile ending 2017 up +43.6%. The currency and market resumed its upward trajectory in December after correcting a month earlier, as the presidential run-off election resulted in victory for center-right candidate, Sebastián Piñera. Similarly, Argentina kept its title of top regional performer, after gaining +73.6%. Despite a slight pullback at the end of the second quarter on the back of investor caution surrounding mid-term elections and the level of support for President Macri’s reform agenda, Argentina grew at a relatively steady pace throughout the year as inflation continued its downward trend, affirming Macri’s gradualist approach in implementing economic policy.

YEAR TO 31 DECEMBER 2017 PERFORMANCE FIGURES

	MSCI Indices
Regions/Indices	% Price Change	% Total Return	Local Currency  (% vs. USD)	Local Indices  (% Change)
Brazil	21.00	24.49	-1.42	26.86 (Ibovespa)
Chile	39.77	43.57	9.09	34.95 (IGPA)
Colombia	13.82	16.64	0.40	16.11 (IGBC)
Mexico	13.56	16.22	5.49	8.38 (IPC)
Peru	33.49	38.37	3.85	28.31 (S&P/BVL)
Argentina	72.27	73.58	-15.05	77.72 (MERVAL)
MSCI LatAm	20.83	24.16	CRB Index	2.19
MSCI Emerging Asia	42.83	42.83	Oil (WTI)	12.47
MSCI Emerging Markets	34.35	37.70	Gold	12.61
MSCI World	20.11	23.10	Copper	33.12
S&P 500	19.42	21.82	Corn	-1.42
MSCI Europe	7.28	10.81	Soybeans	3.60

Sources: Bloomberg and JPM as of 31 December 2017.

PORTFOLIO ENERGY
During the year, the Company posted a +29.0% increase in its NAV, while its share price appreciated +31.3%. This resulted in the outperformance of its benchmark, the MSCI Latin America Index, which returned +24.2% over the same time period (all calculations in USD terms with income reinvested).

Brazilian selection was the top contributor to returns, largely supported by the Central Bank’s extended rate cutting cycle. Aside from our financials positioning, which tends to be a relatively strong proxy to broad market performance, consumer discretionary names such as Arezzo and Magazine Luiza were among the top contributors as domestic growth started to come back into the economy. From a more stock specific basis, rail logistics firm Rumo performed well as shareholders approved a capital raise plan in the third quarter, which should improve the company’s positioning in their concession renewal negotiations and ease potential financing terms with BNDES (the Brazilian Development Bank). Our off-benchmark allocation to Argentina was also a primary contributor to 2017’s outperformance. Utility Pampa Energia, made strong gains in the first half of the year, as many protectionist structures within the industry were dismantled, paving the way for increased corporate efficiency and profitability gains. Lender, Grupo Supervielle, was the top individual contributor for the period. On the other hand, our heavy underweight to Chile throughout the year, was the primary detractor to relative performance, as momentum on the back of presidential election sentiment drove the market to recent highs. As a result, a lack of positioning in lithium producer, SQM, as well as energy name, Empresas Copec, weighed on returns. An off-bench position in Peruvian construction stock, Grana y Montero, also hurt performance as the company’s pipeline concession failed to gain the necessary financing package amid the Odebrecht scandal early on in the year.

PORTFOLIO POSITIONING
Over the 12 months ending 31 December 2017, we notably took advantage of the Company’s ability to employ leverage, increasing our gross exposure to approximately 108% at the year-end. The team had subsequently added to positions across the region, with a focus on increasing exposure to domestic consumption related stocks. This was most noticeable within Brazil, as we took our consumer discretionary exposure from a neutral level to a large overweight. Specifically, we initiated positions in six different companies across the sector, including traditional retailers like Lojas Renner, digitally-focused platforms like B2W, as well as low-income homebuilders like MRV. Similarly, in Argentina, we added risk to lenders, Grupo Supervielle and Grupo Galicia, as they stand to benefit from increasing consumer credit growth. On the other hand, despite adding risk across our Mexican positioning, we remain cautious of the market as the domestic political landscape remains relatively challenged, and could impact broader investor sentiment as we head deeper into the 2018 election season. As a result, we reduced exposure to domestic names in favour of ‘non-Mexico’ Mexican exposure. This led to the re-introduction of America Movil to the portfolio as competitive and regulatory pressures ease, while reducing exposure to Walmex and Banorte, and exiting Fibra Uno. The Company ended the period being overweight Brazil, Mexico, and Peru, while being underweight Chile and Colombia. At the sector level, we are overweight the domestic consumer and energy sectors, while being underweight utilities and industrials.

OUTLOOK
We enter 2018 with a positive view on Latin American equities as an asset class and with a portfolio that we believe is positioned to benefit from positive market performance. While the year will be another busy political year, culminating with Mexican presidential elections in July and Brazilian presidential elections in October, we expect that improving economic fundamentals will drive equity markets higher. Latin America has seen a shift to the right of center in recent presidential elections in Argentina, Peru, and most recently Chile. Historically, shifts to the left have taken place in times of slowing economic growth and rising inflation – in the current scenario with inflation under control or falling in most major economies in the region and our expectation of GDP growth faster in 2018 than was experienced in 2017 in most Latin American countries, we would expect this shift to the right to continue, and thus market friendly policies to be a driver for a third year in a row of positive Latin American equity returns.

Brazil remains our largest position both in absolute and relative terms. The Central Bank is at the end of an easing cycle that started in October of 2016 and so far has seen the Central Bank’s reference SELIC (Sistema Especial de Liquid a ção e Custodia or Special Clearance and Escrow System) rate cut by 725 basis point to 7.0% at the end of 2017. Inflation was below 3% for the full year 2017 and is expected to be below the 4.5% target rate for 2018, thus leaving room for some additional easing during the first quarter of 2018 (there was a 25 basis point cut in the first quarter of the year). In addition, many reforms were passed under President Temer which are aimed at reducing the cost of doing business in Brazil – the most important of which was the Labour Reform. In 2018, the main focus on the reform front is the passage of some form of Social Security Reform, helping to stabilize government accounts in the medium term. As for the 2018 election, while the scenario is unclear as to who will be running, we feel confident that a candidate committed to continuing the current economic program will likely win the election given the improvement in economic activity, falling unemployment rates, greater availability of consumer credit given falling rates and an improved economic scenario and the fact that unsuccessful policies under President Rousseff drove the country into a deep and long-lasting recession.

Mexico is the country where we have less clarity about the presidential election – and therefore are maintaining a cautious, underweight position in our portfolio. Mexico’s economy should benefit in 2018 from a drop in inflation after last year’s spike driven by the removal of gasoline and diesel subsidies. A fragmented candidate pool leads to uncertainties around the election results – especially given that Mexico is one of the few countries in the region that does not call for a run-off from the top two vote-getters if no candidate achieves a majority in the first round. Additional pressures from the ongoing NAFTA negotiations could have a further impact on voter preference. Finally, growth in Mexico is not expected to be significantly higher in 2018 vs 2017. All of this leads us to our current positioning.

Argentina remains an off benchmark position in the portfolio, but the second highest country overweight. President Macri continues to deliver on an aggressive reform agenda, bolstered by his coalition’s mid-term election win. We expect the country to post faster growth and falling inflation in 2018 and are maintaining our positive view on Argentine equities – with a potential boost from MSCI in June should they finally decide to reclassify Argentina from its Frontiers Index to its Emerging Markets Index. Peru continues to be a promise for faster growth, but the political turmoil around President Kuczynksi’s administration have delayed the country’s infrastructure investment plan. Colombia and Chile remain as large underweights, the former given fiscal imbalances and the potential need for additional fiscal tightening, and the latter mostly on unattractive valuation levels.

WILL LANDERS
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
13 March 2018

TEN LARGEST INVESTMENTS AS AT 31 DECEMBER 2017

Vale – 8.1% (2016: 4.5%) is the world’s largest producer of iron ore, with operations in several other commodities, including nickel, copper and alumina, among others. The company is the lowest cash cost producer of iron ore and is positioned to benefit from a tight iron ore market and growth in demand from Chinese steel makers. The company recently entered Brazil's Novo Mercado, adhering to the highest standards of global governance.

Itaú Unibanco – 7.4% (2016: 7.4%) is Brazil’s largest private sector bank. Having suffered no major setbacks during the recessionary period from 2015 to mid-2017, we believe Brazil’s private banks are well capitalised and ready to benefit from the on-going economic recovery.

Banco Bradesco – 6.7% (2016: 9.2%) is Brazil’s second largest private sector bank. Having suffered no major setbacks during the recessionary period from 2015 to mid-2017, we believe Brazil’s private banks are well capitalised and ready to benefit from the on-going economic recovery.

Petrobrás – 6.4% (2016: 9.0%) is Brazil’s vertically integrated oil company. Petrobrás management, in place since 2016, has been successful in instituting a transparent pricing policy for gasoline diesel, initiating a divestiture program of non-core assets, and significantly reducing the company’s leverage.

America Movil – 5.1% (2016: nil) is Latin America’s largest telecommunications provider. The company has been benefiting from a more benign regulatory and competitive environment since 2017 – we expect this to continue in 2018.

AmBev – 5.0% (2016: 3.9%) is Brazil’s leading beverages company with operations throughout the region. The company is well positioned to continue to benefit from its defensive position as the region’s largest consumer staples producer, while maintaining a strong focus on preserving operating cost discipline throughout its operations, a perennial AmBev management strength.

Femsa – 3.9% (2016: 3.8%) is the Mexican holding company that provides an investment vehicle to Mexico’s domestic retail market via its controlling interest in Coca-Cola’s largest independent bottler, Coca-Cola Femsa, with operations throughout Latin America, Mexico’s fastest growing retailing chain, Oxxo, which has over 20,000 convenience stores throughout Mexico and a 12% stake in global brewer Heineken.

B3 – 2.9% (2016: 3.8%) is Brazil’s leading financial exchange and stands to benefit from higher trading volumes as investment comes back to Brazil and local investors allocate more assets into equities given a lower interest rate environment.

Credicorp – 2.7% (2016: 2.9%) is Peru’s largest financial conglomerate. It stands to benefit from the expected recovery in Peru’s economic activity throughout 2018.

Grupo Financiero Banorte – 2.6% (2016: 3.5%) is Mexico’s leading Mexican-owned bank. Mexico has one of the lowest credit penetration rates in the region, offering Banorte a significant growth driver. The announced merger with Interacciones should be accretive to shareholders starting already in 2018.

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 2016. Together, the ten largest investments represents 50.8% of total investments (ten largest Investments at 31 December 2016: 51.3%).

INVESTMENTS AS AT 31 DECEMBER 2017

Country of operation	Market  value US$’000	% of  investments
Brazil
Vale – ADS	24,460	8.1
Itaú Unibanco – ADR	22,425	7.4
Banco Bradesco – ADR	20,224	6.7
Petrobrás – preference shares – ADR	13,748	}               6.4
Petrobrás – ADR	5,742
AmBev – ADR	11,610	}               5.0
AmBev	3,681
B3	8,924	2.9
Rumo Logistica Operada Multimodal	7,614	2.5
Lojas Renner	7,456	2.5
Ultrapar Participaçóes	6,996	2.3
Kroton Educacional	6,304	2.1
Telefonica Brasil – preference shares	3,518	}               1.8
Telefonica Brasil – ADR	1,853
Magazine Luiza	5,141	1.7
Lojas Americanas	5,128	1.7
Raia Drogasil	4,321	1.4
Banco do Brasil	4,317	1.4
BR Malls Participaçóes	4,068	1.3
Arezzo Industria e Comércio	3,709	1.2
Iguatemi Empresa	3,147	1.1
Iochpe-Maxion	2,757	}               0.9
Iochpe-Maxion Warrants 20/04/19	37
MRV Engenharia	2,695	0.9
IRB Brazil Resseguros	2,200	0.7
B2W CIA Digital	2,156	0.7
Localiza Rent a Car	1,874	0.6
Klabin 8% 08/01/19 convertible bond†	1,291	}               0.6
Klabin 7.25% 15/06/20 convertible bond†	273
Klabin 2.5% 15/06/22 convertible bond†	189
Klabin warrants 15/06/20†	–
Eneva	1,649	0.6
Linx	1,614	0.5
Azul – ADR	1,309	0.4
Minerva	1,244	0.4
Cia Hering	1,226	0.4
Cia Energetica do Sao Paulo – preference shares	1,192	0.4
Hypermarcas 11.3% 15/10/18 convertible bond†	48	0.0
Lupatech 6.5% 15/04/18 convertible bond†	23	0.0
	--------	--------
	196,163	64.6
	--------	--------
Mexico
America Movil – ADR	15,435	5.1
Femsa – ADR	11,738	3.9
Grupo Financiero Banorte	7,721	2.6
Grupo Mexico	7,287	2.4
Walmart de Mexico	6,703	2.2
Cemex SAB – ADR	5,803	1.9
Arca Continental	5,207	1.7
Banco Del Bajio	2,542	0.8
Alsea	2,236	0.7
Grupo Aeroportuario del Pacifico	1,031	}               0.7
Grupo Aeroportuario del Pacifico – ADS	1,027
Grupo Cementos De Chihuahua	2,026	0.7
Gruma	1,907	0.6
Corporacion Inmobiliaria Vesta	1,713	0.6
Administradora Industrial	1,603	0.5
Grupo GICSA	553	0.2
	--------	--------
	74,532	24.6
	--------	--------
Argentina
Grupo Supervielle – ADR	5,430	1.8
Pampa Energia – ADR	3,362	1.1
Grupo Financiero Galicia – ADR	1,905	0.6
Biotoscana Investments	1,341	0.4
Loma Negra Compania Industrial Argentina – ADS	1,025	0.3
	--------	--------
	13,063	4.2
	--------	--------
Peru
Credicorp	8,294	2.7
Southern Copper	3,321	1.1
	--------	--------
	11,615	3.8
	--------	--------
Chile
S.A.C.I Falabella	5,709	1.9
	--------	--------
	5,709	1.9
	--------	--------
Panama
Copa Holdings	1,474	0.5
	--------	--------
	1,474	0.5
	--------	--------
Colombia
Cemex Latam	1,072	0.4
	--------	--------
	1,072	0.4
	--------	--------
Total Investments	303,628	100.0
	======	=====

All investments are in equity shares unless otherwise stated.
† Unlisted securities.
The total number of investments held at 31 December 2017 was 65 (31 December 2016: 67). At 31 December 2017, the Company did not hold any equity interests comprising more than 3% of any company’s share capital.

SECTOR AND GEOGRAPHICAL ALLOCATIONS

	Brazil  %	Mexico  %	Argentina  %	Peru  %	Chile  %	Panama  %	Colombia  %	2017  Total  %	2016  Total  %
Consumer Discretionary	11.1	0.7	–	–	1.9	–	–	13.7	3.4
Consumer Staples	6.9	8.4	–	–	–	–	–	15.3	22.3
Energy	8.7	–	–	–	–	–	–	8.7	12.8
Financials	20.2	4.7	2.4	2.7	–	–	–	30.0	30.9
Health Care	–	–	0.4	–	–	–	–	0.4	–
Industrials	4.5	0.7	–	–	–	0.5	–	5.7	5.2
Information Technology	0.5	–	–	–	–	–	–	0.5	2.6
Materials	8.5	5.0	0.3	1.1	–	–	0.4	15.3	13.6
Real Estate	1.3	–	–	–	–	–	–	1.3	0.9
Telecommunication Services	1.8	5.1	–	–	–	–	–	6.9	3.1
Utilities	0.9	–	1.1	–	–	–	–	2.0	4.4
Fixed income	0.2	–	–	–	–	–	–	0.2	0.8
	--------	--------	--------	--------	--------	--------	--------	--------	--------
2017 total investments	64.6	24.6	4.2	3.8	1.9	0.5	0.4	100.0
	--------	--------	--------	--------	--------	--------	--------	--------	--------
2016 total investments	65.3	23.6	3.3	4.9	1.6	–	1.3		100.0
	--------	--------	--------	--------	--------	--------	--------	--------	--------

GEOGRAPHICAL WEIGHTING VS MSCI EM LATIN AMERICA INDEX

	Company	MSCI EM Latin America Index
Colombia	0.4	3.5
Panama	0.5	0.0
Chile	1.9	10.6
Peru	3.8	3.3
Argentina	4.2	0.0
Mexico	24.6	24.9
Brazil	64.6	57.7

Sources: BlackRock and MSCI.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company as at the end of each financial year and of the profit or loss of the Company for that year.

In preparing those financial statements, the Directors are required to:

• present fairly the financial position, financial performance and cash flows of the Company;

• select suitable accounting policies and then apply them consistently;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are also responsible for preparing the Strategic Report, Directors’ Report, the Directors’ Remuneration Report, the Corporate Governance Statement and the Report of the Audit Committee in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure and Transparency Rules.

The Directors have delegated responsibility to the Investment Manager for the maintenance and integrity of the Company’s corporate and financial information included on the Investment Manager’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names are listed in the Governance Structure and Directors' Biographies section of the Annual Report and Financial Statements, confirm to the best of their knowledge that:

• the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

• the Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

The 2016 UK Corporate Governance Code also requires Directors to ensure that the Annual Report and Financial Statements are fair, balanced and understandable. In order to reach a conclusion on this matter, the Board has requested that the Audit Committee advise on whether it considers that the Annual Report and Financial Statements fulfil these requirements. The process by which the Committee has reached these conclusions is set out in the Audit Committee’s report in the Annual Report and Financial Statements. As a result, the Board has concluded that the Annual Report and Financial Statements for the year ended 31 December 2017, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.

FOR AND ON BEHALF OF THE BOARD
CAROLAN DOBSON
Chairman
13 March 2018

INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2017

	Notes	Revenue  2017  US$’000	Revenue  2016  US$’000	Capital  2017  US$’000	Capital  2016  US$’000	Total  2017  US$’000	Total  2016  US$’000
Gains on investments held at fair value through profit or loss	8	–	–	60,641	39,802	60,641	39,802
Losses on foreign exchange		–	–	(94)	(105)	(94)	(105)
Income from investments held at fair value through profit or loss	3	6,975	6,212	–	–	6,975	6,212
Other income	3	–	2,792	–	–	–	2,792
		--------	--------	--------	--------	--------	--------
Total income		6,975	9,004	60,547	39,697	67,522	48,701
		--------	--------	--------	--------	--------	--------
Expenses
Investment management fees	4	(530)	(467)	(1,589)	(1,400)	(2,119)	(1,867)
Other operating expenses	5	(766)	(692)	(86)	(68)	(852)	(760)
		--------	--------	--------	--------	--------	--------
Total operating expenses		(1,296)	(1,159)	(1,675)	(1,468)	(2,971)	(2,627)
		--------	--------	--------	--------	--------	--------
Net profit on ordinary activities before finance costs and taxation		5,679	7,845	58,872	38,229	64,551	46,074
Finance costs		(79)	(13)	(236)	(39)	(315)	(52)
		--------	--------	--------	--------	--------	--------
Net profit on ordinary activities before taxation		5,600	7,832	58,636	38,190	64,236	46,022
Taxation		(471)	(788)	–	277	(471)	(511)
		========	========	========	========	========	========
Net profit on ordinary activities after taxation	7	5,129	7,044	58,636	38,467	63,765	45,511
		========	========	========	========	========	========
Earnings per ordinary share (US$ cents)	7	13.03	17.89	148.93	97.71	161.96	115.60
		========	========	========	========	========	========

The total column of this statement represents the Company’s profit and loss account.

The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. All income is attributable to the equity holders of the Company.

The net profit on ordinary activities for the year disclosed above represents the Company’s total comprehensive income.

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2017

	Notes	Called   up share   capital  US$’000	Share   premium  account  US$’000	Capital  redemption  reserve  US$’000	Non-  distributable   reserve  US$’000	Capital  reserves  US$’000	Revenue  reserve  US$’000	Total  US$’000
For the year ended 31 December 2017
At 31 December 2016		4,144	11,719	4,843	4,356	181,495	15,173	221,730
Total Comprehensive Income:
Profit for the year		–	–	–	–	58,636	5,129	63,765
Transaction with owners, recorded directly to equity:
Dividends paid1	6	–	–	–	–	–	(5,905)	(5,905)
		--------	--------	--------	--------	--------	--------	--------
At 31 December 2017		4,144	11,719	4,843	4,356	240,131	14,397	279,590
		--------	--------	--------	--------	--------	--------	--------
For the year ended 31 December 2016
At 31 December 2015		4,144	11,719	4,843	4,356	143,028	12,853	180,943
Total Comprehensive Income:
Profit for the year		–	–	–	–	38,467	7,044	45,511
Transaction with owners, recorded directly to equity:
Dividends paid2	6	–	–	–	–	–	(4,724)	(4,724)
		--------	--------	--------	--------	--------	--------	--------
At 31 December 2016		4,144	11,719	4,843	4,356	181,495	15,173	221,730
		--------	--------	--------	--------	--------	--------	--------

1. Interim dividend paid in respect of the year ended 31 December 2017 of 6.00 cents per share was declared on 27 September 2017 and paid on 30 October 2017. Final dividend paid in respect of the year ended 31 December 2016 of 9.00 cents per share was declared on 9 March 2017 and paid on 12 May 2017.

2. Interim dividend paid in respect of the year ended 31 December 2016 of 6.00 cents per share was declared on 9 September 2016 and paid on 28 October 2016. Final dividend paid for the year ended 31 December 2015 of 6.00 cents per share was declared on 8 March 2016 and paid on 9 May 2016. 

BALANCE SHEET AS AT 31 DECEMBER 2017

	Notes	2017  US$’000	2016  US$’000
Fixed assets
Investments held at fair value through profit or loss	8	303,628	228,264
		--------	--------
Current assets
Debtors		1,658	1,639
Cash and cash equivalents		20	19
		--------	--------
		1,678	1,658
		--------	--------
Creditors – amounts falling due within one year
Bank overdraft		(23,702)	(6,741)
Other creditors		(1,752)	(1,189)
		--------	--------
		(25,454)	(7,930)
		--------	--------
Net current liabilities		(23,776)	(6,272)
		--------	--------
Total assets less current liabilities		279,852	221,992
		--------	--------
Creditors – amounts falling due after more than one year
Non current tax liability		(238)	(238)
		========	========
Non-equity redeemable shares		(24)	(24)
		========	========
		(262)	(262)
		========	========
Net assets		279,590	221,730
		========	========
Capital and reserves
Called up share capital	9	4,144	4,144
Share premium account	10	11,719	11,719
Capital redemption reserve	10	4,843	4,843
Non-distributable reserve	10	4,356	4,356
Capital reserves	10	240,131	181,495
Revenue reserve	10	14,397	15,173
		--------	--------
Total shareholders’ funds		279,590	221,730
		========	========
Net asset value per ordinary share (US$ cents)	7	710.17	563.20
		========	========

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2017

	2017  US$’000	2016  US$’000
Operating activities
Net profit before taxation	64,236	46,022
Add back finance costs	315	52
Gains on investments held at fair value through profit or loss	(60,641)	(39,802)
Losses on foreign exchange	94	105
Sales of investments	110,490	112,147
Purchases of investments	(125,099)	(122,452)
Increase in debtors	(22)	(620)
Increase/(decrease)in other creditors	452	(476)
Net movement in collateral pledged with brokers	–	703
Tax on investment income	(471)	(501)
	--------	--------
Net cash used from operating activities	(10,646)	(4,822)
	--------	--------
Financing activities
Interest paid	(315)	(52)
Dividends paid	(5,905)	(4,724)
	--------	--------
Net cash used in financing activities	(6,220)	(4,776)
	--------	--------
Decrease in cash and cash equivalents	(16,866)	(9,598)
	--------	--------
Cash and cash equivalents at the beginning of the year	(6,722)	2,981
Effect of foreign exchange rate changes	(94)	(105)
	--------	--------
Cash and cash equivalents at the end of the year	(23,682)	(6,722)
	========	========
Comprised of:
Cash at bank	20	19
Bank overdraft	(23,702)	(6,741)
	--------	--------
	(23,682)	(6,722)
	========	========

NOTES TO THE FINANCIAL STATEMENTS

1. PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment trust company within the meaning of Section 1158 of the Corporation Tax Act 2010.

2. ACCOUNTING POLICIES
The principal accounting policies adopted by the Company are set out below:

(a) Basis of preparation
The financial statements have been prepared on a going concern basis in accordance with FRS 102 and the revised Statement of Recommended Practice – ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (SORP) issued by the Association of Investment Companies (AIC) in November 2014 and the provisions of the Companies Act 2006.

The Company’s Articles of Association require that an ordinary resolution be put to the Company’s shareholders to approve the continuation of the Company on a biennial basis. The Directors are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and therefore consider the going concern assumption to be appropriate. The last resolution was put to shareholders at the 2016 AGM and the next such resolution will be put to shareholders at the AGM in 2018. (See the Notice of Annual General Meeting contained in the Annual Report and Financial Statements for further details). The Directors have no reason to believe that this resolution will not be passed.

The principal accounting policies adopted by the Company are set out below. Unless specified otherwise, the policies have been applied consistently throughout the year and are consistent with those applied in the preceding year. All of the Company’s operations are of a continuing nature.

The Company’s financial statements are presented in US Dollars, which is the functional and presentation currency of the Company. The US Dollar is the functional currency because it is the currency most related to the primary economic environment in which the Company operates. All values are rounded to the nearest thousand dollars (US$’000) except where otherwise indicated.

(b) Presentation of Income Statement
In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and a capital nature has been presented alongside the Income Statement.

(c) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment of business being investment business.

(d) Income
Dividends receivable on equity shares are treated as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. Provisions are made for dividends not expected to be received.

Special dividends are recognised on an ex-dividend basis and treated as capital or revenue depending on the facts and circumstances of each dividend.

Dividends are accounted for in accordance with Section 29 of FRS 102 on the basis of income actually receivable, without adjustment for the tax credit attaching to the dividends. Dividends from overseas companies continue to be shown gross of withholding tax.

Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the cash equivalent of the dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital.

Fixed returns on non-equity securities are recognised on a time apportionment basis. The return on a fixed interest security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security. Amounts amortised during the year are recognised in the Income Statement. Interest income is accounted for on an accruals basis unless the availability of accurate accrual information is limited in which case a cash receipts basis is used.

Options may be purchased or written over securities held in the portfolio for generating or protecting capital returns, or for generating or maintaining revenue returns. Where the purpose of the option is the generation of income, the premium is treated as a revenue item. Where the purpose of the option is the maintenance of capital, the premium is treated as a capital item. Options are held at fair value based on the bid/offer prices of the options written to which the Company is exposed. The value of the option is subsequently marked to market to reflect the fair value of the option based on traded prices.

Option premium income is recognised as revenue evenly over the life of the option contract and included in the revenue column of the Income Statement unless the option has been written for the maintenance and enhancement of the Company’s investment portfolio and represents an incidental part of a larger capital transaction, in which case any premia arising are allocated to the capital column of the Income Statement. Where the premium is taken to revenue, an appropriate amount is shown as capital return such that the total return reflects the overall change in the fair value of the option. When an option is exercised the gain or loss is accounted for as a capital gain or loss. Any cost on closing out an option is transferred to revenue along with any remaining unamortised premium.

(e) Expenses
All expenses are accounted for on an accruals basis. Expenses have been treated as revenue, except as follows:

• expenses which are incidental to the acquisition or disposal of an investment are treated as capital. Details of transaction costs on purchases and sales of investments are disclosed in note 10 of the Annual Report and Financial Statements;

• the investment management fee has been allocated 75% to the capital column and 25% to the revenue column of the Income Statement in line with the Board’s expected long term split of returns, in the form of capital gains and income respectively, from the investment portfolio.

(f) Finance costs
Finance costs are accounted for on an accruals basis. Finance costs are allocated, insofar as they relate to the financing of the Company’s investments, 75% to the capital column and 25% to the revenue column of the Income Statement, in line with the Board’s expected long term split of returns, in the form of capital gains and income respectively, from the investment portfolio.

(g) Taxation
The current tax effect of different items of expenditure is allocated between capital and revenue on the marginal basis using the Company’s effective rate of corporation taxation for the accounting period.

Deferred taxation is recognised in respect of all timing differences as at the financial reporting date, where transactions or events that result in an obligation to pay more taxation in the future or right to pay less tax in the future have occurred at the balance sheet date. Deferred taxation is measured on a non-discounted basis, at the average tax rate rates that are expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the timing differences can be deducted.

(h) Investments held at fair value through profit or loss
The Company’s investments are classified as held at fair value through profit or loss in accordance with Section 11 and 12 of FRS 102 and are managed and evaluated on a fair value basis in accordance with its investment strategy.

All investments are designated upon initial recognition as held at fair value through profit or loss. Purchases of investments are recognised on a trade date basis. Sales are recognised at the trade date of the disposal and the proceeds are measured at fair value, which is regarded as the proceeds of the sale less any transaction costs.

The fair value of the financial instruments is based on their quoted bid price at the balance sheet date on the exchange on which the investment is quoted, without deduction for the estimated future selling costs.

Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Income Statement as ‘Gains or losses on investments held at fair value through profit or loss’. Also included within this heading are transaction costs in relation to the purchase or sale of investments.

The fair value hierarchy consists of the following three levels:

Level 1 – Quoted prices for identical instruments in active markets

Level 2 – Valuation techniques using observable inputs

Level 3 – Valuation techniques using significant unobservable inputs

Unquoted investments are valued by the Directors at fair value using International Private Equity and Venture Capital Valuation Guidelines. This policy applies to unquoted fixed asset investments held by the Company.

(i) Debtors
Debtors include sales for future settlement, other debtors and pre-payments and accrued income in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.

(j) Creditors
Creditors include purchases for future settlement, interest payable, share buy back costs and accruals in the ordinary course of business. Creditors are classified as creditors – amounts due within one year if payment is due within one year or less. If not, they are presented as creditors – amounts due after more than one year.

(k) Dividends payable
Under Section 32 of FRS 102, final dividends should not be accrued in the financial statements unless they have been approved by shareholders before the balance sheet date. Dividends payable to equity shareholders are recognised in the Statement of Changes in Equity when they have been approved by shareholders and have become a liability of the Company. Interim dividends are only recognised in the financial statements in the period in which they are paid.

(l) Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash equivalents include bank overdrafts repayable on demand and short term, highly liquid investments, that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.

(m) Foreign currency translation
In accordance with Section 30 of FRS 102, the Company is required to nominate a functional currency being the currency in which the Company predominantly operates. The functional and reporting currency is US dollars, reflecting the primary economic environment in which the Company operates. Transactions in foreign currencies are translated into US dollars at the rates of exchange ruling on the date of the transaction. Foreign currency monetary assets and liabilities and non-monetary assets held at fair value are translated into US dollars at the rates of exchange ruling at the balance sheet date. Profits and losses thereon are recognised in the capital column of the Income Statement and taken to the capital reserve.

3. INCOME

	2017  US$’000	2016  US$’000
Investment income:
Overseas listed dividends	6,016	5,041
Overseas listed REIT distributions	62	296
Overseas listed special dividends	168	195
Overseas listed stock dividends	668	372
Outperformance warrants	–	8
Fixed interest income	111	417
Amortisation of fixed interest investments	(50)	(117)
	--------	--------
	6,975	6,212
	--------	--------
Other income:
Traded option premiums	–	2,792
	--------	--------
Total	6,975	9,004
	========	========

Dividends and interest received during the period amounted to US$6,748,000 and US$283,000 (2016: US$5,403,000 and US$309,000).

Special dividends of US$554,000 have been recognised in capital (2016: US$7,000).

During the year, the Company did not enter into any written covered call options for the purposes of revenue generation (2016: premiums received totalling US$3,512,000 of which US$2,792,000 were taken to income). All derivative transactions were based on constituent stocks in MSCI EM Latin American Index. There were no open option positions as at 31 December 2017 or 31 December 2016.

The Company did not participate in any outperformance warrants contracts during the year (2016: 5 contracts in 2 securities) which generated income of US$nil (2016: income of US$8,000).

4. INVESTMENT MANAGEMENT FEES

	2017			2016
	Revenue  US$’000	Capital  US$’000	Total  US$’000	Revenue  US$’000	Capital  US$’000	Total  US$’000
Investment management fee	530	1,589	2,119	467	1,400	1,867

With effect from 1 January 2017, the investment management fee has been calculated at 0.80% per annum on the Net Asset Value (NAV). Until 31 December 2016, the investment management fee was calculated at 0.85% per annum on the NAV.

With effect from 1 January 2017 the Company no longer pays a performance fee. No performance fee was payable in respect of the year ended 31 December 2016.

5. OTHER OPERATING EXPENSES

	2017  US$’000	2016  US$’000
Taken to revenue:
Custody fee	64	53
Depositary fees*	29	24
Auditors remuneration:
Audit fees	40	40
Non-audit fees***	8	–
Registrar’s fees	38	42
Directors’ emoluments**	241	213
Marketing fees	120	85
Marketing fee written back	–	(73)
Other administration costs	226	308
	--------	--------
	766	692
	--------	--------
Taken to capital:
Transaction charges	86	68
	--------	--------
	852	760
	--------	--------
The Company’s ongoing charges, calculated as a percentage of average shareholders’ funds and using operating expenses, excluding finance costs and taxation were:	1.1%	1.2%
	--------	--------

*       All expenses other than depositary fees are paid in sterling and are therefore subject to exchange rate fluctuations.
**      Further information on Directors’ emoluments can be found in the Directors’ Remuneration Report contained within the Annual Report and Financial Statements.
***    Non-audit fees relate to services provided by the auditors to review performance calculations for the two years ended 31 December 2017 used as a basis for the discount control mechanism. 

Expenses of US$86,000 (2016: US$68,000) charged to the capital column of the Income Statement relate to transaction costs charged by the custodian on the purchase and sale of investments and charges on Brazilian foreign exchange transactions.

The Company has no employees.

6. DIVIDENDS

	Record date	Payment date	2017  US$’000	2016  US$’000
2015 Final dividend of 6.00 cents	29 March 2016	9 May 2016	–	2,362
2016 Interim dividend of 6.00 cents	23 September 2016	28 October 2016	–	2,362
2016 Final dividend of 9.00 cents	24 March 2017	12 May 2017	3,543	–
2017 Interim dividend of 6.00 cents	6 October 2017	30 October 2017	2,362	–
			--------	--------
			5,905	4,724
			=====	=====

The Directors have proposed a final dividend of 7.00 cents in respect of the year ended 31 December 2017. The proposed dividend will be paid on 6 June 2018, subject to shareholders’ approval on 30 May 2018, to shareholders on the Company’s register on 27 April 2018. The proposed final dividend has not been included as a liability in these financial statements, as final dividends are only recognised in the financial statements when they have been approved by shareholders, or in the case of interim dividends, recognised when paid to shareholders.

The total dividends payable in respect of the year which form the basis of determining retained income for the purpose of section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies Act 2006, and the amount proposed for the year ended 31 December 2017, meet the relevant requirements as set out in this legislation.

Dividends paid or proposed on equity shares:	2017  US$’000	2016  US$’000
Interim paid of 6.00 cents (2016: 6.00 cents)	2,362	2,362
Final proposed of 7.00 cents (2016: 9.00 cents)*	2,756	3,543
	--------	--------
	5,118	5,905
	--------	--------

*  Based upon 39,369,620 ordinary shares in issue at 13 March 2018. 

All dividends paid or payable are distributed from the Company’s distributable reserves.

7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Revenue and capital earnings per share are shown below and have been calculated using the following:

	2017	2016
Net revenue profit attributable to ordinary shareholders (US$’000)	5,129	7,044
Net capital profit attributable to ordinary shareholders (US$’000)	58,636	38,467
	--------	--------
Total profit attributable to ordinary shareholders (US$’000)	63,765	45,511
	--------	--------
Total shareholders’ funds (US$’000)	279,590	221,730
	--------	--------
Earnings per share
The weighted average number of ordinary shares in issue during the year on which the earnings per ordinary share was calculated was:	39,369,620	39,369,620
	--------	--------
The actual number of ordinary shares in issue at the end of each year on which the net asset value per ordinary share was calculated was:	39,369,620	39,369,620
	--------	--------
The number of ordinary shares in issue, including treasury shares at the year end was:	41,441,282	41,441,282
	--------	--------
Calculated on weighted average number of ordinary shares
Revenue profit (US$ cents)	13.03	17.89
Capital profit (US$ cents)	148.93	97.71
	--------	--------
Total profit (US$ cents)	161.96	115.60
	========	========

   

	2017	2016
Net asset value (US$ cents)	710.17	563.20
	--------	--------
Ordinary share price (US$ cents)	622.29	486.52
	========	========

There are no dilutive securities at the year end.

8. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS

	2017  US$’000	2016  US$’000
Overseas listed investments	301,804	226,284
	--------	--------
Overseas unlisted investments	1,824	1,980
	--------	--------
Valuation of investments at 31 December	303,628	228,264
	--------	--------
Valuation brought forward	228,264	177,899
Investment and derivative holding losses	1,015	67,240
	--------	--------
Opening cost of investments and derivatives	229,279	245,139
Additions at cost	125,210	122,226
Disposals at cost	(107,242)	(138,086)
	--------	--------
Cost carried forward	247,247	229,279
Closing investment holding gains/(losses)	56,381	(1,015)
	--------	--------
Closing valuation of investments	303,628	228,264
	========	========

Transaction costs of US$145,000 (2016: US$302,000) were incurred on the additions of investments. Costs relating to the disposal of investments during the year amounted to US$169,000 (2016: US$281,000). All transaction costs have been included within capital reserves.

Gains/(losses) on investments held at fair value through profit or loss

	2017  US$’000	2016  US$’000
Realised gains/(losses)on sales	3,245	(26,423)
Decrease in investment holding losses	57,396	66,225
	--------	--------
	60,641	39,802
	========	========

9. SHARE CAPITAL

	Ordinary  shares   number	Treasury   shares   number	Total  shares	Nominal  value  US$’000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 10 cents each
At 31 December 2016	39,369,620	2,071,662	41,441,282	4,144
At 31 December 2017	39,369,620	2,071,662	41,441,282	4,144
	========	========	========	========

No ordinary shares were repurchased or cancelled during the year (2016: nil).

10. RESERVES

	Share  premium  account  US$’000	Capital  redemption  reserve  US$’000	Non-   distributable   reserve   US$’000	Capital  reserve  arising on  investments  sold*  US$’000	Capital  reserves  arising on   revaluation   of  investments  held* US$’000	Revenue   reserve*   US$’000
At 31 December 2016	11,719	4,843	4,356	182,455	(960)	15,173
Movement during the year:
Total Comprehensive Income:
Gains on realisation of investments	–	–	–	3,245	–	–
Change in investment holding losses	–	–	–	–	57,396	–
Losses on foreign exchange transactions	–	–	–	(93)	(1)	–
Finance costs and expenses charged to capital	–	–	–	(1,911)	–	–
Net profit for the year	–	–	–	–	–	5,129
Dividends paid during the year	–	–	–	–	–	(5,905)
	--------	--------	--------	--------	--------	--------
At 31 December 2017	11,719	4,843	4,356	183,696	56,435	14,397
	--------	--------	--------	--------	--------	--------

* Represents the Company’s distributable reserves. 

11. VALUATION OF FINANCIAL INSTRUMENTS  
Financial assets and financial liabilities are either carried in the Balance Sheet at their fair value (investments) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash at bank and overdrafts). Section 11 of FRS 102 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Company are explained in the accounting policies note (note 2) in the Financial Statements contained within the Annual Report and Financial Statements.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.

The fair value hierarchy has the following levels:

Level 1 – Quoted market price for identical instruments in active markets.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. These include exchange traded derivatives. The Company does not adjust the quoted price for these instruments.

Level 2 – Valuation techniques using observable inputs.
This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

Valuation techniques used for non-standardised financial instruments such as over-the-counter derivatives, include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity specific inputs.

Level 3 – Valuation techniques using significant unobservable inputs.
This category includes all instruments where the valuation technique includes inputs not based on observable data and these inputs could have a significant impact on the instrument’s valuation.

This category also includes instruments that are valued based on quoted prices for similar instruments where significant entity determined adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market. The determination of what constitutes ‘observable’ inputs requires significant judgement by the Investment Manager. The Investment Manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.

Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes ‘observable’ inputs requires significant judgement by the Investment Manager.

The table below is an analysis of the Company’s financial instruments measured at fair value at the balance sheet date.

Financial assets at fair value through profit or loss as at 31 December 2017	Level 1  US$’000	Level 2  US$’000	Level 3  US$’000	TotaL  US$’000
Equity investments	301,804	–	–	301,804
Fixed interest investments	–	485	1,339	1,824
	--------	--------	--------	--------
Total	301,804	485	1,339	303,628
	========	========	========	========

   

Financial assets at fair value through profit or loss as at 31 December 2016	Level 1  US$’000	Level 2  US$’000	Level 3  US$’000	Total  US$’000
Equity investments	226,284	–	–	226,284
Fixed interest investments	–	582	1,398	1,980
	--------	--------	--------	--------
Total	226,284	582	1,398	228,264
	========	========	========	========

A reconciliation of fair value measurement in Level 3 is set out below.

Level 3 Financial assets at fair value through profit or loss at 31 December 2017	2017  US$’000	2016  US$’000
Opening fair value	1,398	1,288
Transfer from level 1 to level 3	–	121
Total losses included in gains on investments in the Income Statement: – assets held at the end of the year	(59)	(11)
	--------	--------
Closing balance	1,339	1,398
	========	========

The Level 3 investments in the table above relate to the Klabin 8% 08/01/19 convertible bond and Hypermarcas 11.3% 15/10/18 convertible bond. The Klabin bond is valued in line with the BOVESPA and converted to unit pricing. There were no transfers between levels for financial assets and financial liabilities recorded at fair value during the year ended 31 December 2017. The Hypermarcas bond was transferred from Level 1 to Level 3 during the year ended 31 December 2016 as the website-based pricing methodology was re-assessed as ‘unobservable’. The Company held two Level 3 securities as at 31 December 2017 (2016: 2).

For exchange listed equity investments the quoted price is the bid price.

The unquoted fixed asset investments, as shown in Level 3 have been valued based on the Directors’ best estimate based on latest information in line with the principles of the International Private Equity and Venture Capital Valuation Guidelines.

12. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 December 2017 (2016: US$ nil).

13. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006.  The 2017 annual report and financial statements will be filed with the Registrar of Companies shortly.

The report of the Auditors for the year ended 31 December 2017 contains no qualification or statement under Section 498(2) or (3) of the Companies Act 2006.

The comparative figures are extracts from the audited financial statements of BlackRock Latin American Investment Trust plc for the year ended 31 December 2016, 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 Section 498 of the Companies Act.

This announcement was approved by the Board of Directors on 13 March 2018.

14. ANNUAL REPORT
Copies of the annual report will be sent to members shortly and will also be available from the registered office, c/o The Company Secretary, BlackRock Latin American Investment Trust plc, 12 Throgmorton Avenue, London EC2N 2DL. 

15. ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Wednesday, 30 May 2018 at 12:00 noon.

This announcement contains inside information as defined in EU Regulation No. 596/2014 and is in accordance with the Company's obligations under Article 17 of that Regulation.   Upon the publication of this announcement the inside information within is now considered to be in the public domain.

ENDS

The Annual Report will also be available on the BlackRock Investment Management website at http://www.blackrock.co.uk/brla.  Neither the contents of the Investment Manager’s website nor the contents of any website accessible from hyperlinks on the Investment Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.

For further information, please contact:

Simon White, Managing Director, Investment Trusts, BlackRock Investment Management (UK) Limited

Tel: [phone]

Press Enquiries:

Lucy Horne, Lansons Communications – Tel:  [phone]

E-mail:  [e-mail]

13 March 2017

12 Throgmorton Avenue

London EC2N 2DL

 

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