Blackrock Lat A Regulatory News (BRLA)

BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC - Final Results

PR Newswire

London, March 8

BlackRock Latin American Investment Trust plc

Annual results announcement for the yearended 31 December 2016

PERFORMANCE RECORD

FINANCIAL HIGHLIGHTS

Source: BlackRock.

*Based on an exchange rate of 1.2356 (2015: 1.4738).

OVERVIEW

CHAIRMAN’S STATEMENT

I am pleased to present my first Annual Report to shareholders as Chairman of the Company for the year ended 31 December 2016.

MARKET OVERVIEW

It has been a year of considerable drama for investors in the region. The realisation in the spring that impeachment proceedings against Brazilian President Dilma Rousseff would be successful, and thereby create the conditions in which meaningful political reforms would be possible, provided the impetus for a significant rally in both the Brazilian stock market and currency. This coupled with the recovery in the oil price and other commodity prices as China started to inflate its economy, drove Latin American markets to deliver one of the best regional performances across world stock markets.

It was a great year to be an investor in Latin American stock markets.

Our portfolio manager quickly reacted to this rapid change of environment by a significant reallocation of the portfolio back into Brazil. However the portfolio had started the year in quite a defensive position, as was appropriate to the economic and political conditions at that time, and this defensive stance lost performance in the initial market rally. There is more detail on portfolio performance in the report from BlackRock Investment Management (UK) Limited (the Investment Manager) on pages 12 to 15 of the Annual Report and Financial Statements.

More recently, the increasingly protectionist rhetoric of President Trump during both the US presidential election campaign, and subsequently as President, has undermined confidence in the Mexican Peso and called into question the long-term competitive advantage of Mexico as a manufacturing region within the NAFTA free trade area. The underlying cost advantages of manufacturing in Mexico are considerable and should eventually provide support to the Mexican economy. However, there are likely to be a lot of political events to endure before cost economics will be the most important factor in investors’ minds.

Given the unexpectedness and the extent of this year’s political and economic developments, it has been a difficult time for active managers to match the returns achieved by the MSCI EM Latin America Index. It is disappointing that our return in 2016 has lagged that of the index, but the absolute returns in dollar terms have been very strong, and even more so for sterling-based investors.

PERFORMANCE

Over the year ended 31 December 2016 the Company’s net asset value per share (NAV) returned 25.2% in US Dollar terms (49.2% in Sterling terms) compared with a benchmark return of 31.5% (56.8% in Sterling terms). The share price returned 22.2% in US Dollar terms (45.9% in Sterling terms). (All percentages calculated with income reinvested.)

Since 31 December 2016 and up to the close of business on 7 March 2017, the Company’s NAV has increased by 12.9% in US Dollar terms (14.4% in Sterling terms). The share price has increased by 11.7% in US Dollar terms (13.1% in Sterling terms) over the same period.

CONTRIBUTION TO TOTAL RETURN FOR THE YEAR ENDED 31 DECEMBER 2016

Source: BNY MellonBNY Mellon provide Performance Attribution based on a Brinson Fachler daily transactions-based methodology. This service is in line with GIPS recommendations but may not be considered to be of audit quality, the analysis is considered to be useful management information.CALL OPTIONS

Since 2013, the Investment Manager has run a small portfolio of writing call options backed by stocks held within our portfolio. This has generated an incremental return in every year of operation, as the premium paid to a writer of calls has generally been more generous than the risk of the stock being called away has warranted. However, the Investment Manager and the Board are optimistic about the outlook for Latin American stock markets and that does not currently provide an optimum market backdrop to writing call options. The Investment Manager ceased writing call options part way through last year and will await better market conditions for call option writing before restarting.

The income from writing call options is taken to the income statement and this means that overall income can be quite volatile from year to year.

REVENUE RETURN AND DIVIDENDS

The revenue return for the year was 17.89 cents per share (2015: 24.10 cents per share). The Board therefore recommends a final dividend of 9.00 cents per share (2015: 6.00 cents per share) which will be payable on 12 May 2017 to shareholders on the register as at 24 March 2017. This makes a total dividend of 15.00 cents per share (2015: 21.00 cents per share) for the year. In 2016 earnings per share benefitted from 5.67c from the period when option writing was in force, so if stock market conditions remain buoyant in 2017 and no option writing is conducted the Company will not benefit from these additional earnings. However, the Investment Manager is optimistic for the dividend prospects from the companies in our portfolio and the Board expects to pay dividends in line with the underlying dividend payments from those companies.

DISCOUNT MANAGEMENT

The Directors continue to monitor the discount at which the ordinary shares trade to their prevailing NAV and in the year to 31 December 2016 the cum-income discount on the ordinary shares in Sterling terms has averaged 13.4% and ranged between 8.1% and 18.1%.

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. Therefore shares of Latin American investment trusts often experience quite volatile levels of discount. The Board has tried to reduce this volatility by offering shareholders the opportunity to tender just under 25% of the ordinary shares in issue (excluding treasury shares) every 2 years, should our discount, on average, be above 5% and performance has been more than 1% per annum under the benchmark on a cumulative basis. The Board also offers shareholders the right to vote on whether the trust should continue in existence every 2 years. Further details of the tender mechanism and shareholder continuation vote are set out on pages 7 and 8 of the Annual Report and Financial Statements.

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. Accordingly we are considering whether, after this current measurement period has expired, it would be in shareholders’ interests to propose to shareholders that a longer time period might be more appropriate.

DIRECTORATE

Both Peter Burnell and Michael St Aldwyn retired from the Board on 2 March 2017. Peter had been on the Board since the launch of the Company in 1990 and had served as Chairman since 1997. In that time he has successfully steered the Company through a number of volatile periods and I would like to thank him on behalf of the Board and the Company’s shareholders for his wise counsel and guidance.

Micky had served on the Board since 1996 and his extensive knowledge of the region has been enormously valuable to us over many years and again I would like to thank him on behalf of the Board and the Company’s shareholders for his contribution over the last 20 years.

I am delighted to welcome Nigel Webber to the Board with effect from 1 April 2017. Mr Webber’s broad investment experience has seen him lead the design of investment solutions for affluent and high-net-worth individuals across global markets and multiple asset classes. Most recently, he was Global Chief Investment Officer for HSBC Private Banking where he held global responsibility for all investment activity for Group Private Banking. During his time at HSBC, Mr Webber was also Chairman of the Global Investment Committee for Group Private Bank and Chairman for HSBC Alternative Investments Limited. Prior to this, he held a number of blue-chip executive positions around the world for investment and asset management businesses. He is also a qualified accountant.

OUTLOOK

Our portfolio manager enters 2017 positive about the economic outlook for the region. With some stabilisation of the Brazilian economy after a prolonged recessionary spell, he also sees the prospect of reducing interest rates as the year progresses. He is also hopeful that much needed social security reform will be effected in the first half of the year. In addition he is optimistic about recent political change in both Peru and Argentina.

It remains to be seen how much Mexico's existing free trade arrangements with the US, enshrined in NAFTA will alter in coming months, and also the extent to which the integration of US and Mexican supply chains, and existing contractual obligations, will render dramatic change difficult to implement. Nonetheless the uncertainty is likely to be damaging in the short term for the Mexican stock market.

Although many Latin American stock markets have performed well in 2016 they still remain modestly rated relative to their improving earnings prospects.

ANNUAL GENERAL MEETING

The AGM will be held at 12.00 noon on 3 May 2017 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.

CAROLAN DOBSONChairman9 March 2017

STRATEGIC REPORT

The Directors present the Strategic Report of the Company for the year ended 31 December 2016.

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.

Other service providers include the Depositary, BNY Mellon Trust & Depositary (UK) Limited (BNYMTD), the fund accountant, Bank of New York Mellon (International) Limited (BNYM), and the registrar, Computershare Investor Services PLC (Computershare).

Details of the contractual terms with third party service providers are set out in the Directors’ Report on page 22 of 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 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 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 29 April 2016, 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.

On 23 August 2013, the Board introduced a new discount control policy, which, in their view, is better suited to the longer term interests of the Company and its shareholders. If the biennial continuation vote is approved by shareholders on each occasion, and if (i) the Company has underperformed the benchmark index on a US Dollar total return basis by more than 1% per annum over the previous two financial years and (ii) if the discount to the cum income NAV has on average exceeded 5% over the same two year period, the Board will implement a tender offer for 24.99% of the ordinary shares in issue (excluding treasury shares). The tender price will be the cum income NAV (less 2% to cover the costs of the tender offer). The current two year measurement period began on 1 January 2016 with the next continuation vote being considered by shareholders at the AGM in 2018.

In the year to 31 December 2016 the Company has underperformed the benchmark by 6.3 percentage points in US Dollar terms and the cum income discount of the ordinary shares in the one year period has averaged 13.4% and has ranged from 8.1% to 18.1%.

PERFORMANCE

Details of the Company’s performance are set out in the Chairman’s Statement on pages 4 and 5 of the Annual Report and Financial Statements.

The Investment Manager’s Report on pages 12 to 15 of the Annual Report and Financial Statements, 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 2016, the Company held 67 investments of which 6 were unlisted investments. A detailed analysis of these investments and the sector and geographical allocations are provided on pages 16 to 19 of the Annual Report and Financial Statements.

RESULTS AND DIVIDENDS

The results for the Company are set out in the Income Statement on page 43 of the Annual Report and Financial Statements. The total profit for the year on ordinary activities, after taxation, was US$45,511,000 (2015: a loss of US$83,670,000) of which the revenue profit amounted to US$7,044,000 (2015: US$9,489,000), and the capital profit amounted to US$38,467,000 (2015: a loss of US$93,159,000).

The Directors recommend the payment of a final dividend as set out in the Chairman’s Statement on page 4 of 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.

1. Calculated in US Dollar terms with income reinvested.

2. Ongoing charges, calculated as a percentage of average shareholders’ funds and using expenses, excluding finance costs and taxation.

The Board 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. The Board also reviews the performance and ongoing charges of the Company against a peer group of Latin American open and closed end funds.

As detailed above, 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.

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 52 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 following table.

As required by the UK Corporate Governance Code (2014 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 2014 Code on UK Corporate Governance, 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) if certain conditions are met. The outcome of this event is 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 2022.

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 2016, 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 2022, 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 on page 32 of 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 2016, all of whom held office throughout the year, are set out in the governance structure and Directors’ biographies on page 20 of the Annual Report and Financial Statements.

Nigel Webber has been appointed as a Director of the Company with effect from 1 April 2017 and his biography is also set out on page 20 of the Annual Report and Financial Statements.

Following the retirement of Peter Burnell and Michael St Aldwyn and the appointment of Nigel Webber, the Board will consist 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 on pages 4 and 5 of the Annual Report and Financial Statements, including the Investment Manager’s Report and portfolio analysis on pages 12 to 19 of the Annual Report and Financial Statements, form part of the Strategic Report.

The Strategic Report was approved by the Board at its meeting on 9 March 2017.

BY ORDER OF THE BOARDANNETTE B POWLEYFor and on behalf ofBLACKROCK INVESTMENT MANAGEMENT (UK) LIMITEDCompany Secretary

9 March 2017

RELATED PARTY TRANSACTIONS

BlackRock Fund Managers Limited (BFM) was appointed as the Company’s AIFM with effect from 2 July 2014. 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 on pages 21 and 22 of the Annual Report and Financial Statements.

The investment management fee for the year was US$1,867,000 (2015: US$1,820,000), as disclosed in Note 4 on page 50 of the Annual Report and Financial Statements. At the year end, an amount of US$479,000 was outstanding in respect of these fees (2015: US$794,000).

In addition to the above services, BlackRock has provided the Company with marketing services. The total fees recognised for these services for the year ended 31 December 2016 amounted to US$12,000 excluding VAT (2015: US$94,000). Marketing fees of US$85,000 (2015: US$183,000) were outstanding at 31 December 2016.

Disclosures of the Directors’ interests in the ordinary shares of the Company and fees and expenses payable to the Directors are set out below and are also contained in the Directors’ Remuneration Report on pages 26 to 28 of the Annual Report and Financial Statements.

At 31 December 2016, an amount of US$ nil (2015: US$ nil) was payable to Directors in respect of their annual fees.

The Board currently consists of four non-executive Directors, all of whom are considered to be independent by the Board. Nigel Webber has been appointed as a Director of the Company with effect from 1 April 2017. 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 £36,000 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 on pages 26 to 28 of 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 and Mahrukh Doctor holds 680 ordinary shares.

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 on page 20 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 2014 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 on pages 34 to 36 of 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 2016, 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 BOARDCAROLAN DOBSONChairman9 March 2017

PERFORMANCE

INVESTMENT MANAGER’S REPORT

MARKET OVERVIEW

2016 was a year marked by significant and unexpected market-moving events, from the Brexit vote to the US presidential election, all of which led to elevated volatility levels across global equity markets. Latin America outperformed both emerging markets and developed markets, posting the strongest regional performance for the year.

The market’s positive return for the year was not achieved in a straight line. Latin American equities struggled in January 2016, experiencing some stabilisation in currencies and the beginning of a recovery in commodity prices during February. As we progressed into March, Latin American equities saw strong performance, especially from Brazil, which reacted positively to the increasing likelihood of political change. The second quarter was driven by positive news flow in Brazil and Peru, changes in interest rate expectations by the US Federal Reserve and the Brexit vote. In Brazil, the market was driven by the continuation of President Rousseff’s impeachment process and a change in economic direction by the interim administration. In Peru, the market friendly outcome of the Peruvian presidential election and the announcement from MSCI that Peru will not be reclassified to frontier market status propelled that market higher. Elsewhere in the region, Argentina continued to make progress on its reform agenda. Despite the short term volatility created by the Brexit vote, the overall impact on Latin American equities was short-lived as the market recovered quickly.

The main driver for the third quarter was continued positive political developments as the vote to impeach former President Rousseff was finalized in late August. Later in the quarter Donald Trump’s improvement in the polls for the US presidential election caused volatility in the Mexican Peso. The last quarter of the year started strongly on the back of positive political developments in both Brazil and Chile. In Brazil, the Lower House approved a spending cap bill and left-wing parties lost considerable ground in the mayoral elections. Latin American equities were the biggest underperformers in the global markets for the month of November following the victory of Donald Trump in the US presidential election. Mexico and Brazil, along with most emerging markets, underperformed in November. The region was essentially flat in December, with Brazil managing to regain some of the ground lost post the US election thanks to the approval of key reforms and improved inflation numbers.

YEAR TO 31 DECEMBER 2016 PERFORMANCE FIGURES

Sources: Bloomberg and BlackRock (all figures in US Dollar terms) as of 31 December 2016.

Brazil was the top performing emerging market in 2016, returning over 60% in US Dollar terms on the back of the impeachment of former President Rousseff. The Brazilian Real gained 22% and was the top performing currency in the region. The Brazilian Central Bank began a much awaited easing cycle during the fourth quarter and reduced rates by 50 bps to 13.75% with two cuts. Inflation declined by over 400 bps in 2016, finishing the year at 6.29%, back within the Central Bank’s stated range of 4.5% plus or minus 2%. We expect interest rate cuts to accelerate in 2017 as inflation is forecast to continue falling closer to the stated goal.

Mexico was the only country in the region to post a negative return for the year having been one of the strongest performers in 2015. It was a drag on the region, posting a fall of 10.7% on the year punctuated by its currency devaluing by 17%. The Mexican Peso, one of the worst performing currencies in the region, suffered from concerns regarding the campaign promises from Donald Trump around trade/NAFTA and immigration/border wall. Despite remittances maintaining a solid pace for the year, concerns about consumer confidence, increasing inflation and ratings downgrades weighed on Mexican shares. Only the Argentine Peso fared worse than the Mexican Peso among Latin American currencies, depreciating by almost 19% for the year as the Macri administration continued to normalise its relationship with markets and allow the currency to trade freely.

Most Andean countries were impacted by commodity price swings this year. Chile and Peru have a higher exposure to, and fiscal dependency on, copper prices, while Colombia’s exposure is more centered on oil prices. Peru was the second best performing equity market in the region in 2016 returning almost 54%, while Colombia returned 24% and Chile 13%. Peru has benefited from the positive outcome of its presidential election which saw market friendly candidate Pedro Pablo Kuczynski (PPK) win in the second round in June. If PPK can make progress on his pro-growth agenda, it should have a positive impact as pent-up demand for infrastructure investment is unlocked.

PERFORMANCE REVIEW

During the year to 31 December 2016, the Company posted a 25.2% increase in its NAV in US Dollar terms (equivalent to 49.5% in Sterling terms). These returns trailed the 31.5% return in the MSCI Latin America Index over the same time period in US Dollar terms (equivalent to 56.8% in Sterling terms).

For the full year, the major areas of negative attribution stemmed from underperforming the Brazilian market rally early in the year, and, to a lesser extent, not being aggressive enough in reducing our Mexican positions during the second half of the year. Positive cash balances early in the year also hurt performance as the market rallied. The primary detractor from performance was stock selection in Brazil. The Company also suffered from an overweight position in Mexico in the first half of the year, further impacted by negative stock selection during the fourth quarter. At the stock level, being underweight Brazilian iron ore miner Vale for a significant part of the year had the largest negative effect on overall portfolio performance, detracting over 2%. Holding on to Brazilian pulp stock, Fibria Celulose, for too long earlier in the year as the Brazilian Real rallied also cost close to 2% in performance. Within Mexico, overweight positions to Femsa, Grupo Financiero Banorte, Corporacion Inmobiliaria Vesta, Walmart de Mexico and Volaris together accounted for approximately 300 bps of underperformance.

On the positive contribution side of the equation, the portfolio benefited from an underweight position in Chile, which was a laggard for the full year. In addition, an overweight position and stock selection in Peru, which was the second best performing market in the region for the year behind Brazil, also proved correct. The option overwriting strategy also added to performance. The largest individual contributor to performance for the year was an underweight position in Mexican broadcaster Grupo Televisa, which suffered due to weakness in its broadcast business, a weak macro environment and overall concerns about its exposure to Univision in the US broadcast market. An underweight position in Mexican telecommunications company America Movil added to returns as the stock was impacted by ongoing competitive pressures, especially in Mexico and Brazil, and post the Brexit vote given its exposure to Europe. A lack of exposure to Brazilian industrial stock Embraer contributed positively to performance as the stock suffered as a result of the strengthening of the Brazilian Real, the low visibility on the company’s business jet division and increased competition in the commercial segment. In addition, an overweight position in top private Brazilian bank Itaú was a positive contributor given the rally in large capitalization Brazilian stocks, as was an overweight to Peruvian gold producer Minas Buenaventura given the strong performance of gold.

PORTFOLIO

As at the end of December 2016, we held over 65% of total investments in Brazil, which is almost 20% higher than at the start of the financial year. At the sector level, relative to the benchmark, we maintained overweight positions in banks, consumer staples, energy and real estate. These were funded by holding underweight positions in telecoms, consumer discretionary and utilities.

The most notable change in Brazil this year has been our increased exposure to oil & gas and metals & mining. We initiated a position in Petrobrás in March and moved it to a large overweight by the middle of the year; we also built a position in iron ore producer Vale during the year as the underlying commodity continued to outperform the market’s expectations for pricing. In addition, we selectively added to and rotated our banking exposure within Brazil. The move into Petrobrás was also used as an instrument to increase the sensitivity of the portfolio to market moves overall as we looked to benefit from the dramatically changing political situation in Brazil as impeachment proceedings began against President Rousseff. We rotated our banking exposure in Brazil by adding to Banco Bradesco and introducing Banco do Brasil, partially funded by reducing Itaú Unibanco. We increased our position in Banco Bradesco as we expect better upside relative to Itaú Unibanco. Banco Bradesco had underperformed due to concerns about its merger with HSBC Brazil. We introduced Banco do Brasil given our positive view on the management changes, cost cutting initiatives and falling provisions, which should contribute positively to return on equity expansion and earnings growth in coming years.

In Mexico, we reduced our weighting in the country from 42.1% of total investments at the start of the year to 23.6% at the end of December as we used Mexico to fund our move into Brazil (part of the changes in relative weights were also caused by the significant outperformance of Brazilian equities over Mexican). At the sector level, we favour beverages and infrastructure, as well as select retailers and banks, while being underweight wireless telecommunications, industrial conglomerates and media. Over the course of the year we reduced our position in Cemex and more recently reduced exposure to the property sector.

In the Andean region, we exited our position in Minas Buenaventura in Peru as the stock had reached our price target. Exposure to Colombia has remained fairly constant during the year while exposure to Chile has been reduced as we sold our position in retailer Falabella given increased concerns regarding the timing of a potential economic pick-up in Chile.

In Argentina, President Macri had a successful first year with respect to reforms. As a result, we increased exposure to off-benchmark Argentina via Pampa Energia in the energy sector during the second quarter given attractive valuations and an improving pricing environment.

OUTLOOK

We enter 2017 maintaining a large overweight in Brazil. We expect the Brazilian Central Bank to continue to be aggressive in reducing interest rates after a higher than consensus 75 bps cut during the first meeting of 2017 on January 11th; the Selic rate currently stands at 13%, and with inflation expected to finish the year close to the 4.5% target, there is room for the Central Bank to bring rates back to single digits by the end of the year or early 2018. This should be the main driver for improved economic activity in the short-term. By the end of the second quarter, passage of social security reform will be critical to ensure that medium to long-term fiscal numbers improve, thus providing the economy with a path for sustainable growth.

Meanwhile, we maintain the underweight position in Mexico as the market looks to digest whatever policies will be pursued by the Trump administration.

President Trump’s statements about renegotiating all trade agreements, including NAFTA, and moving to build a wall across the border between the US and Mexico, have all caused significant volatility to Mexico’s currency, created question marks about Mexico’s potential growth rate, and caused rating agencies to begin to review Mexico’s credit ratings (no changes at this point) – all of which increase the country’s risk premium, thus making equities less attractive.

Peru remains our favoured Andean country, with infrastructure investments expected to be the main driver to improving economic activity under PPK. In off benchmark Argentina, changes in the finance ministry at the turn of the year should result in a higher focus on fiscal reforms, which should be positive for investor confidence in that country; the recent final removal of any currency control for local equity investments should encourage a potential reclassification of that market from frontiers to emerging, which should be positive for equity valuations. We maintain an underweight position in Chile as we monitor the presidential elections in the fourth quarter and the potential for that country to join its neighbours in a move to more market-friendly policies. Finally, we maintain an underweight in Colombia given concerns that the head wind from higher taxes has not been fully priced in by local equities.

Overall, our outlook for Latin American equities in 2017 is positive, led by our positive attitude towards the region’s largest market – Brazil.

WILL LANDERSBlackRock Investment Management (UK) Limited9 March 2017

PORTFOLIO

TEN LARGEST INVESTMENTS AS AT 31 DECEMBER 2016

Banco Bradesco – 9.2% (2015: 3.9%) is one of Brazil’s largest private sector banks. We remain positive on the prospects for select Brazilian banks given the change in political and economic direction by the new administration.

Petrobrás – 9.0% (2015: 2.0%) is Brazil’s vertically integrated oil company. The company stands to benefit from the recent change in administration via the impeachment of former President Rousseff as well as a stronger currency.

Itaú Unibanco – 7.4% (2015: 6.1%) is Brazil’s largest private sector bank. We remain positive on the prospects for selected Brazilian banks given the change in political and economic direction by the new administration.

Vale – 4.5% (2015: nil) 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.

AmBev – 3.9% (2015: 5.5%) is Brazil’s leading beverages company with operations throughout the Americas. The company is well positioned to continue to benefit from its defensive position as the region’s largest consumer staples producer, while maintaining a strong focus on preserving operating cost discipline throughout its operations, a perennial AmBev management strength.

BM&F Bovespa – 3.8% (2015: 2.1%) is Brazil’s leading financial exchange and stands to benefit from higher trading volumes as investment comes back to Brazil as well as from the merger with Cetip.

Femsa – 3.8% (2015: 6.7%) 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.

Grupo Financiero Banorte – 3.5% (2015: 5.1%) is Mexico’s leading Mexican-owned bank. We expect the company to continue to benefit from growth in lending activity.

BRF – 3.1% (2015: 3.3%) is Brazil’s largest branded food company; focusing on poultry and processed foods. The company is well positioned as the leading producer in the global poultry market. In Brazil, the company is the leading producer of processed meat products as well as chicken and pork.

Telefonica Brasil – 3.1% (2015: 2.2%) is Brazil’s largest telecommunications provider. We are positive about the company given its strong competitive position and potential regulatory changes.

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 51.3% of total investments (ten largest Investments at 31 December 2015: 46.2%).

INVESTMENTS AS AT 31 DECEMBER 2016

All investments are in equity shares unless otherwise stated.

† Unlisted securities.

There were no written call options held as at 31 December 2016 (31 December 2015, negative valuations of US$227,000 in respect of options held represent the notional cost of repurchasing the contracts at market prices).

The total number of investments held at 31 December 2016 was 67 (no call options or outperformance warrants were held) (31 December 2015: 65 excluding written call options and outperformance warrants). At 31 December 2016, the Company did not hold any equity interests comprising more than 3% of any company's share capital (31 December 2015: nil).

SECTOR AND GEOGRAPHICAL ALLOCATIONS

GEOGRAPHICAL WEIGHTING VS MSCI EM LATIN AMERICA INDEX

Sources: BlackRock and MSCI.

FINANCIAL STATEMENTS

INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2016

The total column of this statement represents the profit or loss of the Company.

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 and no operations were acquired or discontinued during the year. All income is attributable to the equity holders of the Company.

The Company does not have any other recognised gains or losses. The net profit/(loss) for the year disclosed above represents the Company’s total comprehensive income.

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016

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

2. Final dividend paid in respect of the year ended 31 December 2014 of 15.00 cents per share declared on 24 February 2015 and paid on 6 May 2015 and interim dividend for the year ended 31 December 2015 of 15.00 cents per share declared on 18 August 2015 and paid on 7 October 2015.

BALANCE SHEET AS AT 31 DECEMBER 2016

The financial statements on pages 43 to 65 of the Annual Report and Financial Statements were approved and authorised for issue by the Board of Directors on 9 March 2017 and signed on its behalf by Carolan Dobson, Chairman.

BlackRock Latin American Investment Trust plc

Registered in England, No. 2479975

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2016

* Includes dividends and interest received in the year of US$5,403,000 and US$309,000 (2015: US$7,834,000 and US$373,000) respectively.

NOTES TO THE FINANCIAL STATEMENTS1. PRINCIPAL ACTIVITIESThe 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 POLICIESThe principal accounting policies adopted by the Company are set out below.(a) Basis of preparationThe Company has presented its results and financial position under FRS 102, ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ (FRS 102), which forms part of revised Generally Accepted Accounting Practice (New UK GAAP) issued by the Financial Reporting Council (FRC) in 2013.

The financial statements have been prepared on a going concern basis in accordance with FRS 102, the 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 page 23 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 StatementIn order to reflect better the activities of an investment trust company and in accordance with guidance issued by the Association of Investment Companies (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 reportingThe Directors are of the opinion that the Company is engaged in a single segment of business being investment business.(d) IncomeDividends 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.

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 amount of the cash dividend foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend foregone is recognised in capital reserve.

Special dividends are treated as a capital receipt or a revenue receipt depending on the facts or circumstances of each particular case.

Fixed returns on non-equity securities are recognised on a time apportionment basis. The return on a debt 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.

Options may be 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. 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 closed out early, all the unamortised premium income still in capital is transferred to income at that date. The premium paid to close out the position is also treated as a revenue item. Where an option is exercised the gain or loss is accounted for as capital.(e) ExpensesAll expenses are accounted for on an accruals basis. Expenses have been charged wholly to the revenue column of the Income Statement, except as follows:

- expenses which are incidental to the acquisition or disposal of an investment are charged to the capital column of the Income Statement. Details of transaction costs on purchases and sales of investments are disclosed in note 11 on page 54 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; and

- performance fees have been allocated wholly to the capital column of the Income Statement, as the performance fee has been predominantly generated through capital returns of the investment portfolio.

(f) Finance costs 

Finance costs are accounted for on an accruals basis. Finance costs are allocated, insofar as they relate to the financing of the Company’s investments, 75% to the capital column and 25% to the revenue column of the Income Statement, in line with the Board’s expected long term split of returns, in the form of capital gains and income respectively, from the investment portfolio.(g) TaxationThe 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 temporary differences as at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred taxation assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the temporary differences are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discount basis.(h) Investments held at fair value through profit or lossThe 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 of investments are recognised at the trade date of the disposal. Proceeds will be measured at fair value which will be regarded as the proceeds of sale less any transaction costs.

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

The valuation of the outperformance warrant is derived from the quoted prices of the underlying securities.

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 Company has early adopted the amendments to FRS 102 ‘Fair value hierarchy disclosure’ effective for annual periods beginning on or after 1 January 2017. These amendments improve the consistency of fair value disclosure for financial instruments compared with those required by EU adopted IFRS.

The Company classifies financial instruments measured at fair value using a fair value hierarchy. The fair value hierarchy has the following categories:

Level 1 – Quoted market price 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) Dividends payableUnder 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 become a liability of the Company.

Interim dividends are only recognised in the financial statements in the period in which they are paid.(j) Foreign currency translationIn accordance with Section 30 of FRS 102, the Company is required to nominate a functional currency, being the currency in which the Company predominately 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 are translated into sterling 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.(k) Cash and cash equivalentsCash comprises cash in hand on-demand deposits and bank overdrafts payable on demand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.(l) Capital redemption reserveThe nominal value of ordinary shares repurchased for cancellation is transferred out of share capital and into the capital redemption reserve.

The full cost of ordinary shares repurchased and held in treasury is charged to capital reserves. Where treasury shares are subsequently reissued, any surplus is taken to the share premium account.(m) Capital reservesThe following transactions are accounted for in capital reserves:

- gains and losses on the disposal of fixed asset investments;

- realised exchange differences of a capital nature;

- cost of professional advice, including irrecoverable VAT, relating to the capital structure of the Company;

- other capital charges and credits charged or credited to this reserve in accordance with the above policies;

- cost of purchases of own ordinary shares and warrants;

- increases and decreases in the valuation of investments held at the year end; and

- unrealised exchange differences of a capital nature.

(n) DebtorsDebtors are sales for future settlement, other receivables 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.(o) CreditorsCreditors are purchases for future settlements, interest payable, share buyback cost and accruals in the ordinary course of business. Creditors are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

3. INCOME

Special dividends of US$7,000 have been recognised in capital (2015: US$100,000).

During the year, the Company received premiums totalling US$3,512,000 (2015: US$3,279,000) for writing covered call options for the purposes of revenue generation, of which US$2,792,000 (2015: US$3,300,000) was taken to income. All derivative transactions were based on constituent stocks in the MSCI EM Latin American Index. At 31 December 2016, there were no open option positions (2015: 45 open option positions with an associated liability of US$227,000).

The Company also participated in 5 outperformance warrants contracts in 2 securities during the year (2015: 4 contracts in 3 securities) which generated income of US$8,000 (2015: loss of US$88,000).

4. INVESTMENT MANAGEMENT AND PERFORMANCE FEES

The investment management fee has been calculated at 0.85% per annum on the NAV. Up until 31 December 2016, the Investment Manager was also entitled to a performance fee equal to 10% of any outperformance of the NAV per share against the benchmark, the MSCI EM Latin America Index (in US Dollar terms on a total return basis) plus a hurdle of 1%. The performance fee was capped at 1% of NAV.

No performance fee was payable in respect of the year to 31 December 2016 (2015: US$ nil).

The management fee has been reduced with effect from 1 January 2017 to 0.80% per annum of the Company’s NAV. In addition, the performance fee has been removed with effect from the same date.

5. OPERATING EXPENSES

* Directors’ fees are paid in sterling and are therefore subject to exchange rate fluctuations.

** The marketing fees at 31 December 2016 include marketing expenses of US$85,000 in respect of 2016 and the write back of 2015 marketing expenses of US$73,000.

There were no fees payable in the year in respect of non-audit services (2015: US$ nil). The underlying audit fee is invoiced in sterling and is therefore subject to exchange rate fluctuations. The fee has not changed materially from year to year.

Expenses of US$68,000 (2015: US$45,000) 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.

6. DIVIDENDS 

The Directors are recommending the payment of a final dividend in respect of the year ended 31 December 2016 of 9.00 cents per share (2015: final dividend of 6.00 cents per share) on 12 May 2017 to shareholders on the Company’s register on 24 March 2017. The recommended final dividend has not been included as a liability in these financial statements, as final dividends are only recognised in the financial statements once they have been approved by shareholders, or in the case of interim dividends, recognised when paid to shareholders.

The dividends disclosed in the note below have been considered in view of the requirements of section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies Act 2006, and the amount proposed for the year ended 31 December 2016 meets the relevant requirements as set out in this legislation.

* Based on 39,369,620 ordinary shares in issue at 9 March 2017

All dividends paid or payable are distributed from the Company’s distributable reserves.7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARETotal revenue and capital returns and net asset value per share are shown below and have been calculated using the following:

Basic and diluted earnings per share and net asset value per share are the same as the Company does not have any dilutive securities outstanding.

8. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS

Investments as at 31 December 2016 include outperformance warrants with a value of US$nil (2015: US$954,000). Any outperformance warrants held are linked to underlying listed securities which have available quoted prices, however the warrants are not listed in their own right. The valuation of outperformance warrants has been derived from the quoted prices of underlying securities.

During the year the Company incurred purchase transaction costs of US$302,000 (2015: US$166,000) and sales transaction costs of US$281,000 (2015: US$156,000). All transaction costs have been included within the capital reserves.

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

9. CALLED UP SHARE CAPITAL

No ordinary shares were repurchased during the year (2015: nil). No ordinary shares were cancelled during the year (2015: nil).

The number of ordinary shares in issue at the year end was 39,369,620 (2015: 39,369,620) excluding 2,071,662 (2015: 2,071,662) shares held in treasury.

The ordinary shares (excluding any shares held in treasury) carry the right to receive any dividends and have one voting right per ordinary share. There are no restrictions on the voting rights of the shares or on transfer of the shares.

10. RESERVES

* Represents the Company’s distributable reserves.

11. VALUATION OF FINANCIAL INSTRUMENTS

The Company has early adopted the amendments to FRS 102 ‘Fair Value Hierarchy disclosures’ effective for the annual periods beginning on or after 1 January 2017. These amendments improve the consistency of fair value disclosures from financial instruments with those required by EU adopted IFRS.

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 and cash equivalents 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 on pages 47 to 49 of 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 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 the unobservable 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 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 table below is an analysis of the Company’s financial instruments measured at fair value at the balance sheet date.

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

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. The Hypermarcas bond was transferred from Level 1 to Level 3 during the year as the website-based pricing methodology was re-assessed as ‘unobservable’ and was recorded at fair value as at 31 December 2016 (31 December 2015: no transfers). The Company held two Level 3 securities as at 31 December 2016 and one Level 3 security as at 31 December 2015.

For exchange listed equity investments the quoted price is the bid price. Written options have been valued based on market observable inputs represented by the underlying quoted securities to which these contracts expose the Company.

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 and Venture Capital Valuation Guidelines.

12. CONTINGENT LIABILITIES

There were no contingent liabilities at 31 December 2016 (2015: 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 2016 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 2016 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 2015, 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 9 March 2017.

14. ANNUAL REPORT

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

15. ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Tuesday, 3 May 2017 at 12:00 noon.

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: 020 7743 5284

Press Enquiries:

Lucy Horne, Lansons Communications – Tel: 020 7294 3689

E-mail: lucyh@lansons.com

9 March 2017

12 Throgmorton Avenue

London EC2N 2DL