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

Information disclosed in accordance with Article 5 Transparency Directive and DTR 4.2

Half Yearly Financial Results Announcement for Period Ended 30 June 2017
 

PERFORMANCE RECORD

FINANCIAL HIGHLIGHTS

CHAIRMAN’S STATEMENT
for the six months ended 30 June 2017

OVERVIEW AND PERFORMANCE

The region saw a degree of volatility in the 6 months to 30 June 2017 with geopolitical headlines driving performance.

Following a strong start to the year in the first quarter on the back of interest rate cuts and proposals for pension and labour reforms, the Brazilian market was rocked by yet another political scandal in the second quarter with President Temer being charged with passive corruption, with the stock market ending the period up by only 3%.

The Mexican stock market performed strongly, returning 24% in the first half of the year, driven by a stronger currency, improving macro data and hopes of a more accommodating relationship with the United States of America.

Argentina also made headway, with the Merval gaining over 40% on improving economic data and possible inclusion in the MSCI Emerging Markets Index.

In the Andean region, Peru benefitted from increased public infrastructure investment and the stock market was up by 13%. The positive outcome to the Presidential elections in Chile moved the market ahead by 14% whilst Colombia suffered from macroeconomic weakness and low oil prices, with the market rising by only 9%.

Against this background, the MSCI EM Latin America Index ended the period up by 10.3% in US dollar terms (4.9% in sterling terms). By comparison the Company’s net asset value (NAV) increased by 11.3% in US dollar terms (6.1% in sterling terms) and the share price increased by 10.7% in US dollar terms (5.3% in sterling terms). (All percentages calculated with income reinvested). Further details of the factors which contributed to performance are set out in the Investment Manager’s Report.

Since 30 June 2017 and up until close of business on 25 September 2017, the Company’s NAV has increased by 14.0% in sterling terms and by 18.4% in US dollar terms. The share price has increased by 17.6% in sterling terms and by 22.1% in US dollar terms (all percentages calculated with income reinvested).

EARNINGS AND DIVIDENDS

The revenue return per share for the period amounted to 7.50 cents (2016: 9.85 cents). The Board is pleased to declare an interim dividend of 6.00 cents per share (2016: 6.00 cents per share), which will be paid on 30 October 2017 to shareholders on the register as at 6 October 2017 (ex-dividend date of 5 October 2017).

DISCOUNT CONTROL

The next tender offer for 24.99% of the ordinary shares in issue (excluding treasury shares) will 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; and

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

In the period from 1 January 2016 to 25 September 2017 the cum-income discount of the Company’s ordinary shares has averaged 13.6%.  Over the same period the Company’s NAV has increased by 65.0% compared to an increase in the benchmark of 68.5% (both on a US dollar basis with income reinvested).

The Directors continue to monitor the discount at which the ordinary shares trade to their prevailing NAV and in the six months to 30 June 2017 the cum-income discount of the ordinary shares has averaged 14.0% and ranged from a discount of 8.8% to 17.6%.

OUTLOOK

It has been frustrating to watch the first steps towards structural reform in Brazil blown off course by further political scandal. The region still needs to adjust to an economic environment where subdued commodity prices require greater fiscal discipline and also needs to provide a stable background more conducive to making long term investment decisions. The feared negative impact on Mexico's economy, from the election of President Trump has so far been less than expected however.

The prospect of a modest economic recovery in Brazil following the sharp slowdown, coupled with further reductions in interest rates, should provide scope for further progress in the region’s largest equity market. Elsewhere our portfolio manager favours Peru and Argentina, where the prospect of continued infrastructure spending in Peru and further steps taken in Argentina towards obtaining emerging market status should continue to be positive factors.

Carolan Dobson
Chairman
27 September 2017

INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT

The Chairman’s Statement and the Investment Manager’s Report give details of the events which have occurred during the period and their impact on the financial statements.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks faced by the Company can be divided into various areas as follows:

• Counterparty;

• Investment performance;

• Income/dividend;

• Legal and regulatory compliance;

• Operational;

• Market;

• Financial; and

• Marketing.

The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 31 December 2016. A detailed explanation can be found on pages 8 to 10 of the Annual Report and Financial Statements which are available on the website at blackrock.co.uk/brla.

In the view of the Board, there have not been any changes to the fundamental nature of the principal risks and uncertainties since the previous report and these are equally applicable to the remaining six months of the financial year as they were to the six months under review.

GOING CONCERN

The Directors are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and is financially sound. For this reason they continue to adopt the going concern basis in preparing the financial statements. The Company has a portfolio of investments which are considered to be readily realisable and is able to meet all of its liabilities from its assets and income generated from these assets. Ongoing charges (excluding finance costs and taxation) for the year ended 31 December 2016 were approximately 1.2% of net assets.

RELATED PARTY DISCLOSURE AND TRANSACTIONS WITH THE INVESTMENT MANAGER

BlackRock Fund Managers Limited (BFM) was appointed as the Company’s AIFM with effect from 2 July 2014. 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)). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the fees payable are set out in note 10.

The related party transactions with the Directors are set out in note 11.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Disclosure and Transparency Rules (DTR) of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.

The Directors confirm to the best of their knowledge and belief that:

the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with applicable UK Accounting Standards and the Accounting Standards Board’s Statement ‘Half Yearly Financial Reports’; and

the Interim Management Report, together with the Chairman’s Statement and the Investment Manager’s Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the FCA’s Disclosure and Transparency Rules.

The half yearly financial report has not been audited or reviewed by the Company’s Auditor.

The half yearly financial report was approved by the Board on 27 September 2017 and the above responsibility statement was signed on its behalf by the Chairman.

Carolan Dobson
For and on behalf of the Board
27 September 2017

INVESTMENT MANAGER’S REPORT

MARKET OVERVIEW

Latin American performance was relatively volatile in the first six months of 2017, driven by geopolitical headlines across the region. The asset class enjoyed a strong start to the year with Brazil leading the region on the back of higher than expected interest rate cuts in January. Positive momentum from the ongoing easing cycle, in addition to confidence surrounding key labour and pension reform proposals helped support performance through the first quarter. Mexico posted gains from a stronger currency, a dovish Federal Reserve and improved views regarding its relationship with the United States of America. By the end of the quarter, amid positive sentiment and signs of a recovery, the Brazilian Central Bank had cut interest rates by 150 basis points (bps) bringing them down to 12.25%. On the other hand Banco de Mexico raised rates by 100 bps to 6.50% during the period in order to contain currency volatility associated with the Trump victory. Separately, Argentina rallied on the growing potential for index inclusion and improving economic data, while Chile outperformed due to better sentiment with respect to the outcome of their presidential elections.

Performance reversed in the second quarter as confidence in Brazil waned, resulting in the market being the region’s worst performer in the period under review, (+3%) severely underperforming both the emerging and developed market complexes. The market was shocked in May, driven by another wave of political scandal, which resulted in President Temer being charged by the General Prosecutor with passive corruption in June, further slowing his fiscal reform agenda from moving through congress. Intra-regional performance, however, remained mixed. Mexico continued to rally, ending the period up by 24% in US dollar terms. Performance was supported by a stronger peso and improving macro data including a pick-up in activity and improving consumer confidence, as well as market friendly news with the Institutional Revolutionary Party (PRI) winning a narrow victory in the state of Mexico and inflation showing signs of peaking. Argentina also posted strong results for the period, surging by over 40%, despite giving up some gains in June after the MSCI unexpectedly announced that it would postpone reclassifying the country to emerging market status, citing the need for further assessment over the persistence of economic improvements concerning market access. Peru ended the period up 13% driven by increased public infrastructure investment in the second quarter, as the country makes headway on their reconstruction plans to rebuild and restore areas damaged by extreme flooding earlier in the year. Colombia (+9%) underperformed the region on the back of macroeconomic weakness and low oil prices.

All figures in US Dollar terms and on a total return basis.

PORTFOLIO REVIEW

During the first half of 2017, the Company posted an 11.3% increase in its NAV in US dollar terms. These returns outperformed the +10.3% return in the MSCI EM Latin America Index over the same time period. Brazilian selection was the top contributor to returns led by strong returns early in the period from financials, Banco Bradesco and stock exchange, B3 (formerly BM&F Bovespa), as interest rate cuts led to signs of economic recovery. Going forward, B3 stands to benefit further as synergies from its merger with Cetip are realised. As the market corrected in the second quarter, our lack of positioning in meat producer, JBS, also contributed to relative performance, with the stock sliding following a scandal with company executives and Brazilian President Temer. Our persistent overweight to the country, however, detracted over the 6 month period following the negative political implications. Our off-benchmark allocation to Argentina was another bright spot for the Company, as the market trended higher on expectations of an MSCI reclassification. Despite the decision being postponed until the annual 2018 review, we believe that Argentina has made strides in their progress to dismantle many of the protectionist structures that previously hampered the economy. This has resulted in highly supportive conditions for future growth and subsequently provides for a compelling investment environment for longer term investors. The utility stock Pampa Energia, integrated oil name, YPF, and ecommerce retailer, Mercadolibre, remain among the top contributors to performance. On the other hand our underweight to Mexico weighed on returns as the broader market advanced on positive consumption and better than expected trade negotiations with the US concerning the future of NAFTA. Detractors during the period were primarily driven by stock specifics. Outside of broad market moves, Petrobrás and BRF weighed on returns, hampered by weak oil and the resignation of the company’s CFO, respectively. An off-benchmark position in Peruvian construction stock, Grana y Montero, hurt performance as the company’s pipeline concession failed to gain the necessary financing package amid the Odebrecht scandal in February. Lastly, our underweight to Mexican telecom, America Movil, weighed on returns as the stock rallied on easing competitive and regulatory pressures in the region.

PORTFOLIO POSITIONING

Over the period broad positioning remained relatively unchanged. The portfolio remains overweight Brazil and Peru, while being underweight Chile, Mexico, and Colombia. We also maintain an off-benchmark allocation to Argentina. We have, however, been fairly active trading within that construct. We added risk across our Mexican positioning amid improving macro data though 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. Specifically, we reduced exposure to domestic names in favour of companies with overseas exposure, resulting in the reintroduction of America Movil to the portfolio, while reducing exposure to Walmex and Banorte, and exiting Fibra Uno. We were also very active around news and sentiment in Brazil. We notably trimmed our Brazilian overweight following headlines implicating President Temer in corruption wrongdoing in May, specifically reducing exposure to Petrobras and Bradesco. We have since added back exposure, initiating positions in domestic retailer Lojas Renner, and low-income home builder, MRV, in part on the expectation that we will see continuity in the economic team and reform process, regardless of President Temer’s political status. Lastly, we shifted our Chilean positioning, taking profits from Enel Generacion and Itau Corpabanca following strong performance, using the proceeds to fund a position in retailer, Fallabella.

OUTLOOK

As we enter the third quarter, our positioning and outlook remain relatively unchanged. We continue to be overweight Brazil, Peru and off-benchmark Argentina, while being underweight Chile, Colombia and Mexico. In the near term, negative sentiment concerning another potential presidential scandal has reversed the green shoots seen over the last couple of months in Brazil and has put President Temer’s term and reform agenda into question. Despite weaker market confidence on the General Prosecutor’s decision to charge President Temer with passive corruption, we expect a scenario whereby continuity of government persists. As such the primary drivers for Brazilian equities should remain the same: a) the continued easing cycle (albeit at a slower pace) by the Central Bank which should help to bring forward the needed economic recovery; and b) progress on the reform agenda, especially pension reform, which should help to bring stability to government accounts in the medium term. Once the latter passes, we believe that this will open the door for the Central Bank to bring the easing cycle further forward, and potentially bring rates lower than market expectations. Meanwhile, despite a more conciliatory tone from the US government on the trade front, we maintain our cautious view on Mexican growth, and therefore our below benchmark weighting (despite a PRI win in the gubernatorial election in the state of Mexico in early June, results were not conclusive as to the likelihood of a MORENA (the National Regeneration Movement) victory in next year’s presidential elections). We continue to be underweight Chile due to rich valuations and lack of free-float liquidity, and despite slower than expected progress on the infrastructure front, we continue to favour Peru among its Andean neighbours. Argentina remains another top focus for the strategy as fundamentals persist, with the recent correction providing a positive entry point for longer-term investments.

Will Landers
BlackRock Investment Management (UK) Limited
27 September 2017

GEOGRAPHIC AND SECTOR ALLOCATIONS
as at 30 June 2017

GEOGRAPHIC WEIGHTING VS MSCI EM LATIN AMERICA INDEX

Sources: BlackRock and MSCI.

SECTOR ALLOCATION VS MSCI EM LATIN AMERICA INDEX

Sources: BlackRock and MSCI.

TEN LARGEST INVESTMENTS
as at 30 June 2017
 

Itaú Unibanco – 7.8% (2016: 7.4%) is Brazil’s largest private sector bank. We continue to prefer private sector banks over government controlled banks and should benefit from their strong balance sheets and readiness to resume loan growth as the Brazilian economy recovers.

Petrobrás – 6.8% (2016: 9.0%) is Brazil’s vertically integrated oil company. The company stands to benefit from improved governance, asset sales and a clear pricing policy for gasoline and diesel.

Vale – 6.0% (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 positive management change and improving corporate governance, most recently seen when shareholders approved a share conversion plan that should boost investor transparency and give equal votes to all shares.

Banco Bradesco – 5.6% (2016: 9.2%) is Brazil’s second largest private sector bank. Like Itaú, the bank has been managing its loan book conservatively ahead of Brazil’s economic slowdown and should benefit from their readiness to resume loan growth as the Brazilian economy recovers.

Femsa – 4.4% (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 10,000 convenience stores throughout Mexico and a 12% stake in global brewer Heineken.

B3 (formerly BM&F Bovespa) – 4.0% (2016: 3.8%) is Brazil’s leading financial exchange and stands to benefit from higher trading volumes as investment comes back to Brazil as well as from synergies resulting from its merger with Cetip.

AmBev – 3.9% (2016: 3.9%) 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.

Grupo Financiero Banorte – 3.6% (2016: 3.5%) is Mexico’s leading Mexican-owned bank and is expected to continue to benefit from growing strength in the domestic economy and growth in lending activity.

America Movil – 3.4% (2016: 0.0%) is Latin America’s largest telecommunications provider. The company is expected to benefit from easing regulatory and competitive pressures.

Cemex – 2.8% (2016: 2.8%) is one of the world’s largest global building materials companies and is a leading supplier of cement, ready-mix concrete, and aggregates. The company should benefit from strong cement demand and prices in the US.

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 represent 48.3% of the total investments (ten largest investments as at 31 December 2016: 51.3%).

INVESTMENTS
30 June 2017

The total number of investments held at 30 June 2017 was 64 (31 December 2016: 67). At 30 June 2017, the Company did not hold any equity interests comprising more than 3% of any company’s share capital (31 December 2016: nil).

All investments are in equity shares unless otherwise stated.

INCOME STATEMENT
for the six months ended 30 June 2017

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 period. All income is attributable to the equity holders of BlackRock Latin American Investment Trust plc.

The Company does not have any other recognised gains or losses. The net profit for the period disclosed above represents the Company's total comprehensive income.

STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2017

The transaction costs incurred on the acquisition and disposal of investments are included within the capital reserves and amounted to US$172,000 for the six months ended 30 June 2017 (period ended 30 June 2016 US$302,000; year ended 31 December 2016 US$583,000).

BALANCE SHEET
as at 30 June 2017

STATEMENT OF CASH FLOWS
for the six months ended 30 June 2017

NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 30 June 2017

1. PRINCIPAL ACTIVITY AND BASIS OF PREPARATION

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.

The Company presents its results and positions 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 condensed set of financial statements has been prepared on a going concern basis in accordance with FRS 102 and FRS 104, ‘Interim Financial Reporting’ issued by the FRC in March 2015 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.

The accounting policies applied for the condensed set of financial statements with regard to measurement and classification are as set out in the Company’s Annual Report and Financial Statements for the year ended 31 December 2016. This reflects the Company’s application of Sections 11 and 12 of FRS 102, in relation to financial instruments, in full.

2. INCOME

Special dividends of US$360,000 (six months ended 30 June 2016: US$7,000; year ended 31 December 2016: US$7,000) have been recognised in capital and deducted from investment cost.

Dividends and interest received during the period amounted to US$4,444,000 and US$216,000 (six months ended 30 June 2016: US$3,140,000 and US$102,000; year ended 31 December 2016: US$5,403,000 and US$309,000) respectively.

During the period, the Company did not receive any premiums for writing put and covered call options for the purposes of revenue generation (six months ended 30 June 2016: US$2,425,000 (US$2,127,000 taken to income); year ended 31 December 2016: US$3,512,000 (US$2,792,000 taken to income)). All derivative transactions were based on constituent stocks in MSCI EM Latin America Index. At 30 June 2017, there were no open option positions; (six months ended 30 June 2016: 78 open option positions and associated liability of US$875,000; year ended 31 December 2016: no open option positions).

The Company did not participate in any outperformance warrant contracts during the period (six months ended 30 June 2016: 4 securities; year ended 31 December 2016: 5 securities) which generated income of US$nil (six months ended 30 June 2016; income of US$8,000; year ended 31 December 2016; income of US$8,000).

3. INVESTMENT MANAGEMENT FEE

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. The fee is allocated 25% to the revenue column and 75% to the capital column of the Income Statement.

With effect from 1 January 2017, the Company no longer pays a performance fee. No performance fee was payable in respect of the six months ended 30 June 2016 or for the year ended 31 December 2016.

4. OTHER OPERATING EXPENSES

5. DIVIDENDS

In accordance with FRS102 Section 32 ‘Events After the End of the Reporting Period’, the final dividend payable on ordinary shares is recognised as a liability when approved by shareholders. Interim dividends are recognised only when paid.

The Board has declared an interim dividend of 6.00 cents (2016: 6.00 cents) payable on 30 October 2017 to shareholders on the register as at 6 October 2017. The total cost of this dividend, based on 39,369,620 ordinary shares in issue at 27 September 2017 is US$2,362,000 (30 June 2016: 39,369,620 shares and total cost of US$2,362,000).

6. CREDITORS – AMOUNT FALLING DUE AFTER MORE THAN ONE YEAR

¹ During the six months ended 30 June 2017, the Company has accounted for a provision for capital gains tax (CGT) potentially payable in Argentina. At 30 June 2017, CGT provided for in the financial statements for the six months ended 30 June 2017 amounted to US$217,000 on realised gains and US$180,000 on unrealised gains from Argentinian securities since 23 September 2013, the date when the Argentine tax reform bill became effective. There is still uncertainty as to whether the CGT will become payable and there is currently no established mechanism for paying it. In the event that no tax becomes payable the provision will be reversed. Additional legal opinions are currently being sought, and to the extent that legal advice indicates that it is more likely than not that Argentinian securities held by the Company are not subject to CGT, this provision may be reversed in the future.

Non equity redeemable shares

The redeemable shares of £1 each carry the right to receive a fixed dividend at the rate of 0.1% per annum on the nominal amount thereof. They are capable of being redeemed by the Company at any time and confer no rights to receive notice of, attend or vote at general meetings except where the rights of holders are to be varied or abrogated. On a winding up, the capital paid up on such shares ranks pari passu with, and in proportion to, any amounts of capital paid to the holders of ordinary shares, but does not confer any further right to participate in the surplus assets of the Company.

7. CALLED UP SHARE CAPITAL

There has been no change in share capital in the six months to 30 June 2017 or up to the date of this report.

8. RETURN AND NET ASSET VALUE PER ORDINARY SHARE

Total 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.

9. VALUATION OF FINANCIAL INSTRUMENTS

For the six months ended 30 June 2016 and the year ended 31 December 2016, 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 with these 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 48 and 49 of the Annual Report and Financial Statements for the year ended 31 December 2016.

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 prices 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. 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.

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 the 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% 08/01/09 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 during the period recorded at fair value as at 30 June 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 reassessed as ‘unobservable’.

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.

10. TRANSACTIONS WITH THE AIFM AND THE INVESTMENT MANAGER

BlackRock Fund Managers Limited (BFM) was appointed as the Company’s AIFM with effect from 2 July 2014. 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 note 3.

The investment management fee for the six months ended 30 June 2017 amounted to US$976,000 (six months ended 30 June 2016: US$894,000; year ended 31 December 2016: US$1,867,000).

At the period end, a total amount of US$492,000 was outstanding in respect of these fees (30 June 2016: US$899,000; 31 December 2016: US$479,000).

In addition to the above services, BIM (UK) has provided the Company with marketing services. The total fees recognised for the period ended 30 June 2017 amounted to US$63,000 excluding VAT (six months ended 30 June 2016: fee write back of US$27,000; year ended 31 December 2016: fee of US$12,000). Marketing fees of US$148,000 were outstanding at 30 June 2017 (30 June 2016: US$155,000; 31 December 2016: US$85,000).

11. RELATED PARTY DISCLOSURE

The Board consists of five non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £46,000, the Chairman of the Audit Committee/Senior Independent Director receives an annual fee of £35,000 and each of the other Directors receives an annual fee of £31,000.

At the period end and as at the date of this report members of the Board held ordinary shares in the Company as set out below:

12. CONTINGENT LIABILITIES

There were no contingent liabilities at 30 June 2017, 30 June 2016 or 31 December 2016.

13. PUBLICATION OF NON STATUTORY ACCOUNTS

The financial information contained in this half yearly report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the six months ended 30 June 2017 and 30 June 2016 has not been audited or reviewed.

The information for the year ended 31 December 2016 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies, unless otherwise stated. The report of the auditor in those financial statements contained no qualification or statement under sections 498(2) or (3) of the Companies Act 2006.

14. ANNUAL RESULTS

The Board expects to announce the annual results for the year ending 31 December 2017 as prepared under new UK GAAP in March 2018. Copies of the results announcement can be obtained from the Secretary on 020 7743 3000. The Annual Report and Financial Statements should be available by mid-March 2018, with the Annual General Meeting being held in May 2018.

For further information, please contact:

Simon White, Managing Director, BlackRock Investment Management (UK) Limited
Tel: 020 7743 5284

Press enquiries:

Lucy Horne, Lansons Communications – Tel:  020 7294 3689
E-mail:  lucyh@lansons.com

27 September 2017

12 Throgmorton Avenue
London EC2N 2DL

END

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