Half-year Report
29/09/2023 16:13
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 2023
PERFORMANCE RECORD
As at As at
30 June 31 December
2023 2022
Net assets (US$'000) 1 177,535 148,111
Net asset value per ordinary share (US$ cents) 602.86 502.95
Ordinary share price (mid-market) (US$ cents) 2 513.63 457.10
Ordinary share price (mid-market) (pence) 404.00 380.00
Discount 3 14.8% 9.1%
For the For the
six months year
ended ended
30 June 31 December
2023 2022
Performance (with dividends reinvested)
Net asset value per share (US$ cents) 3 25.8% 6.6%
Ordinary share price (mid-market) (US$ cents) 2,3 18.5% 4.7%
Ordinary share price (mid-market) (pence) 3 12.1% 18.0%
MSCI EM Latin America Index (net return, on a US Dollar basis) 4 18.5% 8.9%
For the For the
six months six months
ended ended
30 June 30 June Change
2023 2022 %
Revenue
Net profit on ordinary activities after taxation (US$'000) 4,494 6,767 -33.6
Revenue earnings per ordinary share (US$ cents) 15.26 18.11 -15.7
Dividends per ordinary share (US$ cents)
Quarter to 31 March 6.21 7.76 -20.0
Quarter to 30 June 7.54 5.74 +31.4
Total dividends paid and payable 13.75 13.50 +1.9
PERFORMANCE FROM 31 DECEMBER 2018 TO 30 JUNE 2023
Share price NAV MSCI EM Latin America Index (net basis)
% % %
2018 -6.9 -5.4 -6.6
2019 22.0 18.2 17.5
2020 -9.3 -14.5 -13.8
2021 -11.8 -12.5 -8.1
2022 4.7 6.6 8.9
2023* 18.5 25.8 18.5
Sources: BlackRock Investment Management (UK) Limited and Datastream.
Performance figures are calculated in US Dollar terms with dividends
reinvested.
* Six month performance to 30 June 2023.
1 The change in net assets reflects the portfolio movements during the period
and dividends paid.
2 Based on an exchange rate of US$1.27 to £1 at 30 June 2023 and US$1.20 to
£1 at 31 December 2022, representing a change of 5.8% in the value of the
US Dollar against British Pound Sterling.
3 Alternative Performance Measures, see Glossary, contained within the Half
Yearly Financial Report.
4 The Company's performance benchmark index (the MSCI EM Latin America Index)
may be calculated on either a gross or a net return basis. Net return (NR)
indices calculate the reinvestment of dividends net of withholding taxes using
the tax rates applicable to non-resident institutional investors, and hence
give a lower total return than indices where calculations are on a gross basis
(which assumes that no withholding tax is suffered). As the Company is subject
to withholding tax rates for the majority of countries in which it invests,
the NR basis is felt to be the more accurate, appropriate, consistent and fair
comparison for the Company.
Chairman's Statement
Dear Shareholder
I am pleased to present the Half Yearly Financial Report to shareholders for
the six months ended 30 June 2023. It is pleasing to note that the Company's
net asset value with dividends reinvested has outperformed the benchmark by
7.3 percentage points over the period in US Dollar terms. In Sterling terms,
the net asset value with dividends reinvested rose by 18.8% over the same
period and the benchmark rose by 12.1%. The share price rose by 18.5% in US
Dollar terms and increased by 12.1% in Sterling terms.
Overview and performance
Latin American equity markets have outperformed both developed markets and
MSCI Emerging Markets indices over the period under review with the MSCI EM
Latin America Index up by 18.5%, compared to the MSCI Emerging Markets Index
that returned 4.9% and a rise in the MSCI World Index of 15.1% (all in US
Dollar terms respectively). The Mexican economy has been a key beneficiary
from the shifting of global supply chains and coupled with a prudent fiscal
policy and a strong export sector, Mexico has replaced China as America's
largest trade partner. In Brazil the government's fiscal policies proved to be
more cautious than expected, inflation has fallen to below 4% which has helped
paved the way for interest rate cuts. This resulted in a significant shift in
investor sentiment towards Brazil, especially in the second quarter of 2023.
From a country perspective, equity markets in Mexico and Brazil performed best
over the period under review, up by 27.1% and 16.8% respectively, representing
83.5% of the portfolio; Colombia was the weakest equity market in the region
down by 3.3%.
The Company's outperformance was largely driven by stock selection in Brazil
and Mexico. The portfolio was overweight in domestic Brazil, positioning that
reflected the Investment Manager's view that interest rates were excessively
high. The Manager's expectation was for interest rates to be cut this year;
which has seen this increasingly being priced by the market in Brazil which
has been a very strong contributor to the portfolio's returns. Mexico also
contributed meaningfully, with real estate and consumer staples being the main
drivers. The real estate sector, supported by an increase in rental income as
more US companies moved their manufacturing operations from China to Mexico,
performed strongly. Mexico has benefitted significantly this year from the
"near-shoring" theme where US companies look to diversify their supply chains
and move production closer to home. At the sector level, materials and
industrials have been the outperformers and energy and consumer staples were
the biggest detractors. Additional information on the main contributors to and
detractors from performance for the period under review is given in the
following Investment Manager's Report.
Dividends declared in respect of the year to 30 June 2023
Dividend Announcement
(US$ cents per share) date Pay date
Quarter to 30 September 2022 6.08 3 October 2022 9 November 2022
Quarter to 31 December 2022 1 19.29 3 January 2023 8 February 2023
Quarter to 31 March 2023 6.21 3 April 2023 16 May 2023
Quarter to 30 June 2023 7.54 3 July 2023 11 August 2023
Total 39.12
1 Quarter to 31 December 2022 includes an additional special dividend of 13.00
cents.
Revenue return and dividends
Revenue return for the six months ended 30 June 2023 was 15.26 cents per share
(2022: 18.11 cents per share). The primary driver for this decrease is the
reduction in dividends paid by portfolio companies.
The Company has declared dividends totalling 39.12 cents per share in respect
of the twelve months to 30 June 2023 representing a yield of 7.6% (calculated
based on a share price of 513.63 cents per share, equivalent to the Sterling
price of 404.00 pence per share translated into cents at a rate of US$1.27
prevailing on 30 June 2023).
Under the Company's dividend policy, dividends are calculated and paid
quarterly, based on 1.25% of the US Dollar NAV at close of business on the
last working day of March, June, September and December respectively;
additional information in respect of the payment timetable is set out in the
Annual Report and Financial Statements. Dividends will be financed through a
combination of available net income in each financial year and revenue and
capital reserves. The dividends paid and declared by the Company in the last
twelve months have been funded from current year revenue and brought forward
revenue reserves.
As at 30 June 2023, a balance of US$5.7 million remained in revenue reserves.
Dividends will be funded out of capital reserves to the extent that current
year revenue and revenue reserves are fully utilised. The Board believes that
this removes pressure from the investment managers to seek a higher income
yield from the underlying portfolio itself which could detract from total
returns. The Board also believes the Company's dividend policy will enhance
demand for the Company's shares and help to narrow the Company's discount,
whilst maintaining the portfolio's ability to generate attractive total
returns.
Discount management and discount control mechanism
The Board remains committed to taking appropriate action to ensure that the
Company's shares do not trade at a significant discount to their prevailing
NAV and have sought to reduce discount volatility by offering shareholders a
discount control mechanism covering the four years to 31 December 2025. This
mechanism offers shareholders a tender for 24.99% of the shares in issue
excluding treasury shares (at a tender price reflecting the latest
cum-income NAV less 2% and related portfolio realisation costs) in the event
that the continuation vote to be put to the Company's AGM in 2026 is approved,
where either of the following conditions have been met:
(ii) the annualised total NAV return of the Company does not exceed the
annualised benchmark index (being the MSCI EM Latin America Index) (net
return, on a US Dollar basis) by more than 50 basis points over the four year
period from 1 January 2022 to 31 December 2025 (the Calculation Period); or
(ii) the average daily discount to the cum-income NAV exceeds 12% as
calculated with reference to the trading of the shares over the Calculation
Period.
In respect of the above conditions, the Company's total NAV return on a
US Dollar basis for the period from 1 January 2022 to 30 June 2023 was
21.5% on an annualised basis, outperforming the annualised benchmark return of
18.6% for the same period by 2.9 percentage points (equivalent to 290 basis
points (please see the Glossary contained within the Half Yearly Report for
more information). The cum-income discount of the Company's ordinary shares
has averaged 12.1% for this period and ranged from a discount of 6.8% to
16.3%, ending the period on a discount of 14.8% at 30 June 2023.
The Company has not bought back any shares during the six months ended
30 June 2023 and up to the date of publication of this report.
Gearing
The Board's view is that 105% of NAV is the neutral level of gearing over the
longer term and that gearing should be used actively in an approximate range
of plus or minus 10% around this as measured at the time that gearing is
instigated. The Board is pleased to note that the Managers have used gearing
actively throughout the period, with a high of 108.9% in January 2023. The
Company held net cash of 2.6% as at 30 June 2023 as the Manager took profits,
particularly in Brazil, after a strong period of relative performance. Average
gearing for the six months under review was 104.5% (year to 31 December 2022:
108.7%).
Board composition
Professor Mahrukh Doctor, who had served on the Board since 2009 and as Senior
Independent Director since March 2019, retired from the Board at the Company's
AGM in March 2023. The Board thanks Professor Doctor for her many years of
excellent service, and wishes her the best for the future.
Outlook
Equity markets in the Latin American region saw a very strong start to 2023
and Latin American equity markets remain attractively valued on both an
absolute and relative basis. The Latin American region should have higher
economic growth prospects than advanced economies in the near future. Central
banks in the region have followed traditional monetary policies, unlike many
developed countries, so as inflation falls across the region, there is
potential for lower interest rates which in turn should stimulate economic
activity. The region is rich in natural resources, including fossil fuels of
crude oil and natural gas, creating favourable supply and demand dynamics. It
is also a major source of copper and lithium, (critical materials for the
green energy revolution), as well as a key producer of a wide range of food
commodities. Latin America also provides significant opportunities for direct
investment as governments and businesses globally re-think supply chain
configurations and seek to diversify risk.
The Board remains optimistic for the outlook for Latin American equities. In
spite of major difficulties in other major emerging markets like China and
Russia, Latin America continues to provide a bright and improving region but
political challenges remain.
Carolan Dobson
Chairman
29 September 2023
Investment Manager's Report
Market overview
Latin America had a stellar first half of 2023, gaining +18.5%, with all
markets ending the period in positive territory, bar Colombia (-3.3%). Mexico
led the charge (+27.1%) and to the surprise of many, even outperforming the
MSCI USA Index (+16.8%) as well as emerging markets more broadly (MSCI
Emerging Markets Index +4.9%). This was due to a prudent fiscal policy and a
strong export sector as the country replaced China as America's largest trade
partner. Mexico has been a key beneficiary from the shifting of global supply
chains. Like most of Latin America their prudent monetary policy has been
successful in tackling inflation. Brazil was another outperformer (+16.8%) as
the government's fiscal policies proved to be more prudent than expected,
while inflation receded to below 4%, paving the way for interest rate cuts.
This resulted in a significant shift in sentiment towards Brazil, especially
in the second quarter. Among the smaller markets, Peru returned +15.3% and
Chile +7.8%. All performance figures are calculated in US Dollar terms with
dividends reinvested.
While the majority of Mexico's outperformance was in the first quarter, Brazil
underperformed as uncertainty around fiscal policy dominated sentiment early
in the year. Negative remarks by the newly appointed President Lula regarding
high interest rates set by the central bank created a standoff between the
two. Despite inflation trending down the central bank kept interest rates
unchanged as they were not given comfort around fiscal sustainability by
President Lula's leftist government.
Elsewhere in the region political volatility has been the common theme. In
Peru, social unrest triggered by the arrest of President Pedro Castillo in
December 2022 continued to weigh on markets in the first half of 2023. The new
president remains unpopular and has struggled to form an effective government.
In Colombia politics remain unstable and valuations have been at multi-year
lows following the negative reaction to the country's first ever left-wing
government.
The second quarter saw a shift in sentiment towards Brazil, in part resulting
from the release of the highly anticipated fiscal framework proposed by the
finance minister Fernando Haddad. The proposed new rules were well received as
they were more orthodox than expected by investors. The equity market
continued to do well in the following months as expectations for a monetary
easing cycle increased. This has also been supported by inflation that has
continued to trend lower, reaching 3.2% in June. Less uncertainty around the
fiscal outlook and the downward trend in inflation remains key for the central
bank to start reducing rates. Monetary policy easing is likely the most
important support for both the economy and the equity market.
Performance review and positioning
The Company outperformed its benchmark over the six month period ended 30 June
2023, returning +25.8% in US Dollar terms. Over the same time horizon, the
Company's benchmark, the MSCI Latin America Index, returned +18.5% on a net
basis in US Dollar terms.
Our highest conviction position in the portfolio was our overweight in
domestic Brazil. This positioning reflected our view that interest rates,
currently at 13.75% were excessively high, and our expectation is for rates to
be cut this year. In the second quarter of this year we have seen this thesis
increasingly priced by the market and year-to-date our stock selection in
Brazil has been a very strong contributor to the portfolio's returns. Mexico
also contributed meaningfully, with real estate and consumer staples the main
drivers. The real estate sector overall did very well, supported by an
increase in rental income as more US companies moved their manufacturing
operations from China to Mexico, while Argentina was the only country where
the portfolio saw negative returns. At the sector level, materials and
industrials have been the outperformers and energy and consumer staples were
the biggest detractors.
From a single stock level, the position that contributed the most to absolute
returns was Mrv Engenharia (Mrv), a Brazilian homebuilder. The shift in
expectations regarding interest rate cuts has helped the share price, as lower
interest rates should increase demand in housing via improved affordability.
In addition, Mrv is highly leveraged and lower rates would significantly ease
the interest expense burden and improve cash generation. Separately, Mrv
focuses on affordable housing for the low-income segment, which is a key
priority for the new administration under Lula. Brazilian toll road operator
CCR was also a sizeable positive contributor. CCR's share price increased on
the back of resilient operating trends that were reported in mid-February. IRB
Brasil Resseguros, a Brazilian reinsurer, has also started to see a
turnaround in their underwriting cycle, helping the shares recover from
depressed levels. The positive development in profits have helped mitigate
capital raise worries that had been depressing the stock price. Material
sector names were also among the top contributors. These included Cemex,
a Mexican cement producer which outperformed supported by increasing cement
prices and strong Q1 2023 results. Our underweights in Vale, a Brazilian
mining company, and Sociedad Quimica y Minera (SQM), a Chilean lithium
producer for electric vehicles (EVs) contributed on a relative basis.
Disappointing commodity demand in China was the driver for both companies'
underperformance. For SQM specifically, a weakening demand for EVs in China
led to a sharp decline in lithium prices. The recent political developments
regarding state involvement in the lithium sector have also hurt the share
price, but in our view do not represent a material fundamental change.
Our overweight in Brazilian supermarket chain, Assai, was the biggest
detractor as the market became somewhat concerned about whether the leveraged
balance sheet could withstand a period of lower food inflation. In addition,
majority shareholder Casino is facing financial difficulties itself and was
forced to significantly reduce its stake in Assai, creating a new supply of
shares to the market. Tenaris, our off-benchmark holding in Argentina,
underperformed. The weakness in the stock has mainly been due to sensitivity
to the oil price as the company produces steel tubes and pipes for oil and gas
companies. Our underweight in Brazilian financials weighed on relative
returns.
Considering the very strong performance of domestic Brazilian assets in the
second quarter (+20.7%) we started to trim our positions, and as a result the
weight in Brazil has been somewhat reduced. We have reduced or exited
positions where our thesis has largely played out and the stocks have
performed well, such as toll road operator CCR, shopping mall Iguatemi and
financial names like B3, the stock exchange and XP, an investment manager. We
have rotated some of the capital into higher conviction names that have lagged
the overall market rally we have seen in recent months, such as PagSeguro
Digital. PagSeguro Digital provides solutions for online payments, and while
the fees they charge their merchants are fixed their funding costs have been
going up with the rising interest rate. A decrease in the policy rate should
reduce their costs and boost revenues.
We also locked in gains in Mexico following the strong performance in the
first quarter; we exited our position in Vesta, a real estate company that has
been benefitting from US companies moving their manufacturing operations from
Asia to Mexico. Vesta is a name that we have held for a long time, but that
we currently see as rather fairly valued as more investors have discovered the
name. We reduced our position in FEMSA, a convenience store operator that
had done very well, and we reduced our position size in Cemex. We initiated
a position in Mag Silver Corp, a silver miner operating in Mexico, which is
ramping up its key asset this year and recently reached commercial production.
In addition, we started a position in Ecopetrol, an oil and gas company in
Colombia, where the government has committed to pay outstanding receivables
that the government owes the company. Amongst financials we switched from
Credicorp in Peru to Bancolombia in Colombia due to more attractive
valuations.
We ended the period overweight Argentina and Panama as we are maintaining
exposure to off-benchmark names. We are underweight Mexico and Peru. At the
sector level, we are overweight consumer discretionary and health care, while
being most underweight in utilities and communication services.
Share price NAV MSCI EM
% % Latin America Index
(net return, on a
US Dollar basis)
%
Dec-22 100.00 100 100
Jan-23 107.34 109.97 109.87
Feb-23 100.87 101.94 103.06
Mar-23 99.36 102.32 103.93
Apr-23 100.93 106.26 106.72
May-23 106.10 111.56 105.81
Jun-23 118.52 125.75 118.52
Sources: BlackRock Investment Management (UK) Limited and Datastream.
Performance figures are calculated in US Dollar terms, with dividends
reinvested, rebased to 100 as at 1 January 2023.
Outlook
The outlook for the Mexican economy remains positive as it is a key
beneficiary from the re-shoring of global supply chains. Mexico remains
defensive as both fiscal and the current accounts are in order. While our view
remains positive, we have taken profits after a strong relative performance,
solely because we see even more upside in other Latin American markets such as
Brazil. In addition, we believe that the Mexican economy will be relatively
more sensitive to a potential slowdown in economic activity in the US in
response to rising interest rates there.
We continue to have a very positive view on Brazil, even though our thesis of
slowing inflation and sound fiscal policies has partially played out already.
While the market is now pricing in interest rate cuts, these have not yet
started, and the positive economic impact is yet to come. In addition, while
international investors have moved capital to Brazil, local equity flows have
continued to be negative year-to-date as equity markets struggle to compete
with a risk-free rate of return of close to 14%. We therefore see Brazil as
very early stage in its positive economic cycle and continue to see further
upside over the next 12-18 months. We have significantly scaled back our
positions after the strong performance, but domestic Brazil remains a dominant
bet in the portfolio.
Political uncertainty has been the overriding market sentiment in other
countries in Latin America. We believe this will continue to impact market
performance, and we have a cautious view on Chile, Colombia and Peru. However,
despite the political headwinds in Colombia, we are seeing a slow improvement
in macroeconomics and believe it can become an attractive market again once
the political climate stabilises.
In a global context, we remain optimistic about Latin America as a whole.
Central banks have been proactive in increasing interest rates, which has now
resulted in falling inflation. Thus, we will likely see a monetary easing
cycle in most countries in Latin America, which should support both economic
activity and asset prices. In addition to this normal economic cycle, the
whole region is benefitting from being somewhat isolated from global
geopolitical conflicts. We believe that this will lead to both an increase in
foreign direct investment and an increase in allocation from investors across
the region. As such we are optimistic about the outlook for Latin American
stocks over the next 12-24 months.
Sam Vecht
Christoph Brinkmann
BlackRock Investment Management (UK) Limited
29 September 2023
PORTFOLIO ANALYSIS
As at 30 June 2023
GEOGRAPHIC WEIGHTING (GROSS MARKET EXPOSURE) VS MSCI EM LATIN AMERICA INDEX
Country % of net assets MSCI EM Latin America Index
Brazil 58.3 57.9
Mexico 25.2 31.5
Chile 6.0 6.4
Argentina 3.9 0.0
Colombia 2.5 1.1
Panama 1.5 0.0
Peru 0.0 3.1
Sources: BlackRock and MSCI.
SECTOR ALLOCATION (GROSS MARKET EXPOSURE) VS MSCI EM LATIN AMERICA INDEX
Sector % of net assets MSCI EM Latin America Index
Financials 26.7 25.0
Materials 18.0 21.4
Consumer Staples 15.1 16.7
Energy 12.1 9.9
Industrials 8.8 9.1
Consumer Discretionary 5.6 1.7
Health Care 4.3 1.5
Communication Services 2.4 7.1
Real Estate 2.3 0.8
Information Technology 2.1 0.5
Utilities 0.0 6.3
Sources: BlackRock and MSCI.
Ten largest investments
As at 30 June 2023
1 Petrobrás (2022: 2nd)
Energy
Market value - American depositary receipt (ADR): US$7,042,000
Market value - Preference shares ADR: US$5,837,000
Market value - Ordinary shares: US$2,958,000
Share of investments: 9.2% (2022: 7.1%)
is a Brazilian integrated oil and gas group, operating in the exploration and
production, refining, marketing, transportation, petrochemicals, oil product
distribution, natural gas, electricity, chemical-gas and biofuel segments
of the industry. The group controls significant assets across Africa, North
and South America, Europe and Asia, with a majority of production based in
Brazil.
2 Banco Bradesco (2022: 6th)
Financials
Market value - ADR: US$8,601,000
Market value - Preference shares: US$3,175,000
Share of investments: 6.8% (2022: 5.1%)
is one of Brazil's largest private sector banks. The bank divides its
operations into two main areas - banking and insurance services and management
of complementary private pension plans and savings bonds.
3 Vale (2022: 1st)
Materials
Market value - American depositary share (ADS): US$10,099,000
Share of investments: 5.8% (2022: 9.5%)
is one of the world's largest mining groups, with other business in logistics,
energy and steelmaking. Vale is the world's largest producer of iron ore and
nickel but also operates in the coal, copper, manganese and ferro-alloys
sectors.
4 Grupo Financiero Banorte (2022: 8th)
Financials
Market value - Ordinary shares: US$10,091,000
Share of investments: 5.8% (2022: 4.8%)
is a Mexican banking and financial services holding company and is one of the
largest financial groups in the country. It operates as a universal bank and
provides a wide array of products and services through its broker dealer,
annuities and insurance companies, retirements savings funds (Afore), mutual
funds, leasing and factoring company and warehousing.
5 FEMSA (2022: 3rd)
Consumer Staples
Market value - ADR: US$9,451,000
Share of investments: 5.5% (2022: 6.0%)
is a Mexican beverages group which engages in the production, distribution,
and marketing of beverages. The firm also produces, markets, sells, and
distributes Coca-Cola trademark beverages, including sparkling beverages.
6 B3 (2022: 5th)
Financials
Market value - Ordinary shares: US$8,815,000
Share of investments: 5.1% (2022: 5.2%)
is a stock exchange located in Brazil, providing trading services in an
exchange and OTC environment. B3's scope of activities include the creation
and management of trading systems, clearing, settlement, deposit and
registration for the main classes of securities, from equities and corporate
fixed income securities to currency derivatives, structured transactions and
interest rates, and agricultural commodities. B3 also acts as a central
counterparty for most of the trades carried out in its markets and offers
central depository and registration services.
7 AmBev (2022: 4th)
Consumer Staples
Market value - ADR: US$7,698,000
Share of investments: 4.5% (2022: 5.3%)
is a Brazilian brewing group which engages in the production, distribution,
and sale of beverages. Its products include beer, carbonated soft drinks and
other non-alcoholic and non-carbonated products with operations in Brazil,
Central America, the Caribbean (CAC) and Canada.
8 Itaú Unibanco (2022: 7th)
Financials
Market value - ADR: US$6,128,000
Share of investments: 3.5% (2022: 4.9%)
is a Brazilian financial services group that services individual and corporate
clients in Brazil and abroad. Itaú Unibanco was formed through the merger of
Banco Itaú and Unibanco in 2008. It operates in the retail banking and
wholesale banking segments.
9 Gerdau (2022: 22nd)
Materials
Market value - Preference shares: US$6,079,000
Share of investments: 3.5% (2022: 1.9%)
is a Brazilian long steel producer. Gerdau's North American business divisions
manufacture long and special steel products, such as long carbon steel, long
special steel, flat steel and forged and cast parts. These products are used
for the agricultural, automotive, construction, distribution, energy,
industrial and mining markets.
10 Hapvida Participacoes (2022: 9th)
Health Care
Market value - Ordinary shares: US$5,392,000
Share of investments: 3.1% (2022: 2.8%)
is a Brazilian holding healthcare company. The company operates with a
vertical service structure and is one of the largest healthcare solutions
providers in the country. The company provides medical assistance and dental
care plans and their operating structure includes facilities such as
hospitals, walk-in emergencies, clinics or diagnostic imaging units.
All percentages reflect the value of the holding as a percentage of total
investments. For this purpose, where more than one class of securities is
held, these have been aggregated. The percentages in brackets represent the
value of the holding as at 31 December 2022.
Together, the ten largest investments represent 52.8% of the total investments
(ten largest investments as at 31 December 2022: 53.5%).
Portfolio of investments
as at 30 June 2023
Market
value % of
US$'000 investments
Brazil
Petrobrás - ADR 7,042 } 9.2
Petrobrás - preference shares ADR 5,837
Petrobrás 2,958
Banco Bradesco - ADR 8,601 } 6.8
Banco Bradesco - Preference Shares 3,175
Vale - ADS 10,099 5.8
B3 8,815 5.1
AmBev - ADR 7,698 4.5
Itaú Unibanco - ADR 6,128 3.5
Gerdau - Preference Shares 6,079 3.5
Hapvida Participacoes 5,392 3.1
Arezzo Industria e Comercio 4,794 2.8
Rumo 4,315 2.5
Sendas Distribuidora 3,795 2.2
Mrv Engenharia 3,512 2.0
Pagseguro Digital 3,346 1.9
IRB Brasil Resseguros 2,450 1.4
XP 2,382 1.4
Rede D'or Sao Luiz 2,204 1.3
Movida Participações 1,964 1.1
EZTEC Empreendimentos e Participacoes 1,539 0.8
CCR 1,369 0.8
Localiza Rent A Car 21 0.1
103,515 59.8
Mexico
Grupo Financiero Banorte 10,091 5.8
FEMSA - ADR 9,451 5.5
Grupo Aeroportuario del Pacifico - ADS 5,060 2.9
America Movil 4,331 2.5
Fibra Uno Administracion - REIT 4,124 2.4
Grupo México 3,776 2.2
MAG Silver Corp 3,093 1.8
Walmart de México y Centroamérica 2,901 1.7
Cemex - ADR 1,932 1.1
44,759 25.9
Chile
Sociedad Química Y Minera - ADR 4,246 2.5
Cia Cervecerias Unidas 1,723 } 1.7
Cia Cervecerias Unidas - ADR 1,255
Empresas CMPC 2,809 1.6
Banco Santander-Chile - ADR 581 0.3
10,614 6.1
Argentina
Globant 3,742 2.2
Tenaris 3,120 1.8
6,862 4.0
Colombia
Ecopetrol ADR 2,599 1.5
Bancolombia 1,899 1.1
4,498 2.6
Panama
Copa Holdings 2,725 1.6
2,725 1.6
Total Investments 172,973 100.0
All investments are in equity shares unless otherwise stated.
The total number of investments held at 30 June 2023 was 42 (31 December 2022:
40). At 30 June 2023, the Company did not hold any equity interests comprising
more than 3% of any company's share capital (31 December 2022: nil).
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 2022. A detailed explanation can be found on pages 41 to 45 and in
note 16 on pages 91 to 98 of the Annual Report and Financial Statements which
are available on the website maintained by BlackRock at
www.blackrock.com/uk/brla.
The Board and the Investment Manager continue to monitor investment
performance in line with the Company's investment objectives, and the
operations of the Company and the publication of net asset values are
continuing.
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 Board is mindful of the risk that unforeseen or unprecedented events
including (but not limited to) heightened geopolitical tensions such as the
war in Ukraine, high inflation and the current cost of living crisis has had a
significant impact on global markets. Notwithstanding this significant degree
of uncertainty, the Directors, having considered the nature and liquidity of
the portfolio, the Company's investment objective, the Company's projected
income and expenditure, are satisfied that the Company has adequate resources
to continue in operational existence for the foreseeable future and is
financially sound.
Related party disclosure and transactions with the Investment Manager
BlackRock Fund Managers Limited (BFM) was appointed as the Company's AIFM
(Alternative Investment Fund Manager) 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 11
to the financial statements below.
The related party transactions with the Directors are set out in note 12 to
the financial statements below.
Directors' Responsibility Statement
The Disclosure Guidance and Transparency Rules (DTR) of the UK Listing
Authority require the Directors to confirm their responsibilities in relation
to the preparation and publication of the Interim Management Report and
Financial Statements.
The Directors confirm to the best of their knowledge and belief that:
· the condensed set of financial statements contained within the Half Yearly
Financial Report has been prepared in accordance with the applicable UK
Accounting Standard FRS 104 Interim Financial Reporting; 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 Financial Conduct Authority's (FCA)
Disclosure Guidance 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 29 September
2023 and the above Responsibility Statement was signed on its behalf by the
Chairman.
CAROLAN DOBSON
For and on behalf of the Board
29 September 2023
Income Statement
for the six months ended 30 June 2023
Six months ended 30 June 2023 (unaudited) Six months ended 30 June 2022 (unaudited) Year ended 31 December 2022 (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Notes US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Gains/(losses) on investments held
at fair value through profit or loss - 33,031 33,031 - (8,655) (8,655) - 1,258 1,258
Gains/(losses) on foreign exchange - 25 25 - (231) (231) - (183) (183)
Income from investments held
at fair value through profit or loss 2 5,503 - 5,503 7,599 - 7,599 15,438 - 15,438
Other income 2 21 - 21 18 - 18 21 - 21
Total income/(loss) 5,524 33,056 38,580 7,617 (8,886) (1,269) 15,459 1,075 16,534
Expenses
Investment management fee 3 (161) (482) (643) (186) (558) (744) (333) (999) (1,332)
Other operating expenses 4 (382) (7) (389) (308) (6) (314) (609) (17) (626)
Total operating expenses (543) (489) (1,032) (494) (564) (1,058) (942) (1,016) (1,958)
Net profit/(loss) on ordinary
activities before finance costs
and taxation 4,981 32,567 37,548 7,123 (9,450) (2,327) 14,517 59 14,576
Finance costs (43) (128) (171) (30) (90) (120) (81) (243) (324)
Net profit/(loss) on ordinary
activities before taxation 4,938 32,439 37,377 7,093 (9,540) (2,447) 14,436 (184) 14,252
Taxation (charge)/credit (444) - (444) (326) 11 (315) (594) 11 (583)
Net profit/(loss) on ordinary
activities after taxation 4,494 32,439 36,933 6,767 (9,529) (2,762) 13,842 (173) 13,669
Earnings/(loss) per ordinary
share (US$ cents) 7 15.26 110.15 125.41 18.11 (25.50) (7.39) 41.48 (0.52) 40.96
The total columns of this statement represent the Company's profit and loss
account. The supplementary revenue and capital accounts 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 the Company.
The net profit/(loss) on ordinary activities for the period disclosed above
represents the Company's total comprehensive income/(loss).
Statement of Changes in Equity
for the six months ended 30 June 2023
Called Share Capital Non-
up share premium redemption distributable Capital Revenue
capital account reserve reserve reserves reserve Total
Note US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
For the six months ended 30 June 2023
(unaudited)
At 31 December 2022 3,163 11,719 5,824 4,356 114,343 8,706 148,111
Total comprehensive income:
Net profit for the period - - - - 32,439 4,494 36,933
Transaction with owners, recorded
directly to equity:
Dividends paid 1 5 - - - - - (7,509) (7,509)
At 30 June 2023 3,163 11,719 5,824 4,356 146,782 5,691 177,535
For the six months ended 30 June 2022
(unaudited)
At 31 December 2021 4,144 11,719 4,843 4,356 165,947 3,829 194,838
Total comprehensive (loss)/income:
Net (loss)/profit for the period - - - - (9,529) 6,767 (2,762)
Transaction with owners, recorded
directly to equity:
Tender offer 2 (981) - 981 - (51,017) - (51,017)
Tender offer costs - - - - (376) - (376)
Dividends paid 3 5 - - - - - (5,484) (5,484)
At 30 June 2022 3,163 11,719 5,824 4,356 105,025 5,112 135,199
For the year ended 31 December
2022 (audited)
At 31 December 2021 4,144 11,719 4,843 4,356 165,947 3,829 194,838
Total comprehensive (loss)/income:
Net (loss)/profit for the year - - - - (173) 13,842 13,669
Transactions with owners, recorded
directly to equity:
Tender offer 2 - - - - (51,017) - (51,017)
Tender offer cost - - - - (414) - (414)
Cancellation of shares (981) - 981 - - - -
Dividends paid 4 5 - - - - - (8,965) (8,965)
At 31 December 2022 3,163 11,719 5,824 4,356 114,343 8,706 148,111
1Quarterly dividend of 6.29 cents per share for the year ended 31 December
2022, declared on 3 January 2023 and paid on 8 February 2023; special
dividend of 13.00 cents per share for the year ended 31 December 2022,
declared on 3 January 2023 and paid on 8 February 2023; and quarterly
dividend of 6.21 cents per share for the year ending 31 December 2023,
declared on 3 April 2023 and paid on 16 May 2023.
2On 26 May 2022, the Company repurchased and subsequently cancelled 9,810,979
shares. The price at which tendered shares were repurchased was 417.09 pence
per share.
3Quarterly dividend of 6.21 cents per share for the year ended 31 December
2021, declared on 4 January 2022 and paid on 8 February 2022; and quarterly
dividend of 7.76 cents per share for the year ended 31 December 2022, declared
on 1 April 2022 and paid on 16 May 2022.
4Quarterly dividend of 6.21 cents per share for the year ended 31 December
2021, declared on 4 January 2022 and paid on 8 February 2022; quarterly
dividend of 7.76 cents per share for the year ended 31 December 2022, declared
on 1 April 2022 and paid on 16 May 2022; quarterly dividend of 5.74 cents per
share for the year ended 31 December 2022, declared on 1 July 2022 and paid
on 12 August 2022; and quarterly dividend of 6.08 cents per share, declared
on 3 October 2022 and paid on 9 November 2022.
For information on the Company's distributable reserves, please refer to note
9 below.
Balance Sheet
as at 30 June 2023
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Notes US$'000 US$'000 US$'000
Fixed assets
Investments held at fair value through profit or loss 172,973 148,457 158,149
Current assets
Debtors 1,671 1,217 1,572
Cash and cash equivalents 4,076 58 160
Total current assets 5,747 1,275 1,732
Creditors - amounts falling due within one year
Bank overdraft - (12,993) (10,731)
Other creditors (1,161) (1,516) (1,015)
Total current liabilities (1,161) (14,509) (11,746)
Net current assets/(liabilities) 4,586 (13,234) (10,014)
Net current assets 177,559 135,223 148,135
Creditors - amounts falling due after more than one year
Non-equity redeemable shares 6 (24) (24) (24)
(24) (24) (24)
Net assets 177,535 135,199 148,111
Capital and reserves
Called up share capital 8 3,163 3,163 3,163
Share premium account 11,719 11,719 11,719
Capital redemption reserve 5,824 5,824 5,824
Non-distributable reserve 4,356 4,356 4,356
Capital reserves 146,782 105,025 114,343
Revenue reserve 5,691 5,112 8,706
Total shareholders' funds 7 177,535 135,199 148,111
Net asset value per ordinary share (US$ cents) 7 602.86 459.10 502.95
Statement of Cash Flows
for the year ended 30 June 2023
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Operating activities
Net profit/(loss) on ordinary activities before taxation 37,377 (2,447) 14,252
Add back finance costs 171 120 324
(Gains)/losses on investments held at fair value through profit or loss (33,031) 8,655 (1,258)
(Gains)/losses on foreign exchange (25) 231 183
Sales of investments held at fair value through profit or loss 65,988 92,179 123,691
Purchases of investments held at fair value through profit or loss (47,848) (37,120) (68,345)
Increase in other debtors (93) (751) (1,100)
Increase/(decrease) in other creditors 207 209 (304)
Taxation on investment income (444) (326) (594)
Net cash generated from operating activities 22,302 60,750 66,849
Financing activities
Interest paid (171) (120) (324)
Tender offer - (51,017) (51,017)
Tender costs paid - (316) (414)
Dividends paid (7,509) (5,484) (8,965)
Net cash used in financing activities (7,680) (56,937) (60,720)
Increase in cash and cash equivalents 14,622 3,813 6,129
Cash and cash equivalents at the beginning of the period/year (10,571) (16,517) (16,517)
Effect of foreign exchange rate changes 25 (231) (183)
Cash and cash equivalents at the end of the period/year 4,076 (12,935) (10,571)
Comprised of:
Cash at bank 4,076 58 160
Bank overdraft - (12,993) (10,731)
4,076 (12,935) (10,571)
Notes to the financial statements
for the six months ended 30 June 2023
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 financial statements of the Company are prepared on a going concern basis
in accordance with Financial Reporting Standard 104 Interim Financial
Reporting (FRS 104) applicable in the United Kingdom and Republic of Ireland
and the revised Statement of Recommended Practice - Financial Statements of
Investment Trusts Companies and Venture Capital Trusts (SORP) issued by the
Association of Investment Companies (AIC) in October 2019, and updated in July
2022, and the provisions of the Companies Act 2006.
The accounting policies and estimation techniques applied for the condensed
set of financial statements are as set out in the Company's Annual Report and
Financial Statements for the year ended 31 December 2022.
2. Income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Investment income:
Overseas dividends 5,261 7,066 14,515
Overseas REIT distributions 212 254 421
Overseas special dividends 30 258 480
Fixed interest income - 21 22
5,503 7,599 15,438
Other income:
Deposit interest 21 18 21
Total income 5,524 7,617 15,459
Dividends and interest received in cash during the period amounted to
US$5,058,000 and US$21,000 (six months ended 30 June 2022: US$6,382,000 and
US$42,000; year ended 31 December 2022: US$14,413,000 and US$45,000).
There were no special dividends recognised in capital in the period (six
months ended 30 June 2022: US$nil; year ended 31 December 2022: US$nil).
3. Investment management fee
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Investment management fee 161 482 643 186 558 744 333 999 1,332
Total 161 482 643 186 558 744 333 999 1,332
Under the terms of the investment management agreement, BFM is entitled to a
fee of 0.80% per annum based on the Company's daily Net Asset Value (NAV). The
fee is levied quarterly.
The investment management fee is allocated 25% to the revenue account and 75%
to the capital account of the Income Statement. There is no additional fee for
company secretarial and administration services.
4. Other operating expenses
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Allocated to revenue:
Custody fee 15 23 35
Depositary fees 1 7 7 15
Auditors' remuneration 2 31 24 50
Registrar's fees 21 15 33
Directors' emoluments 117 104 231
Marketing fees 48 54 83
Postage and printing fees 46 14 45
AIC fees - 6 -
Broker fees 22 19 38
Employer NI contributions 16 10 23
FCA fees 6 5 10
Write back of prior year expenses 3 (6) (10) (23)
Other administration costs 59 37 69
382 308 609
Allocated to capital:
Custody transaction charges 4 7 6 17
389 314 626
1 All expenses other than depositary fees are paid in Sterling and are
therefore subject to exchange rate fluctuations.
2 No non-audit services are provided by the Company's auditors.
3 Relates to prior year accrual for AIC fees and miscellaneous fees written
back during the six month period ended 30 June 2023 (six months ended 30 June
2022: postage and printing fees and other administration costs; year ended 31
December 2022: postage and printing fees, broker fees and other administration
costs).
4 For the six month period ended 30 June 2023, expenses of US$7,000 (six
months ended 30 June 2022: US$6,000; year ended 31 December 2022: US$17,000)
were charged to the capital account of the Income Statement. These relate to
transaction costs charged by the custodian on sale and purchase trades.
The direct transaction costs incurred on the acquisition of investments
amounted to US$51,000 for the six months ended 30 June 2023 (six months ended
30 June 2022: US$60,000; year ended 31 December 2022: US$93,000). Costs
relating to the disposal of investments amounted to US$83,000 for the six
months ended 30 June 2023 (six months ended 30 June 2022: US$86,000; year
ended 31 December 2022: US$119,000). All transaction costs have been included
within the capital reserves.
5. Dividends
The Company's cum-income US Dollar NAV at 31 March 2023 was 496.41 cents per
share, and the Directors declared a first quarterly interim dividend of 6.21
cents per share. The dividend was paid on 16 May 2023 to holders of ordinary
shares on the register at the close of business on 14 April 2023.
In accordance with FRS 102 Section 32 Events After the End of the Reporting
Period, the final dividend payable on ordinary shares is recognised as a
liability when approved by shareholders. Interim dividends are recognised only
when paid.
Dividends on equity shares paid during the period were:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Quarter to 31 December 2021 - dividend of 6.21 cents - 2,438 2,438
Quarter to 31 March 2022 - dividend of 7.76 cents - 3,046 3,047
Quarter to 30 June 2022 - dividend of 5.74 cents - - 1,690
Quarter to 30 September 2022 - dividend of 6.08 cents - - 1,790
Quarter to 31 December 2022 - dividend of 6.29 cents 1,852 - -
Special dividend for year to 31 December 2022 - 13.00 cents 3,828 - -
Quarter to 31 March 2023 - dividend of 6.21 cents 1,829 - -
7,509 5,484 8,965
6. Creditors - amounts falling due after more than one year
As at As at As at
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Non-equity redeemable shares 24 24 24
24 24 24
At 30 June 2023 the Company had net surplus management expenses of US$868,000
(30 June 2022: US$1,030,000; 31 December 2022: US$868,000) and a non-trade
loan relationship deficit of US$1,606,000 (30 June 2022: US$1,308,000;
31 December 2022: US$1,606,000). A deferred tax asset was not recognised in
the period ended 30 June 2023 or in the year ended 31 December 2022 as it was
unlikely that there would be sufficient future taxable profits to utilise
these expenses.
Non-equity redeemable shares
The redeemable shares of £1 each carry the right to receive a fixed dividend
at the rate of 0.10% per annum on the nominal amount thereof. They are capable
of being redeemed by the Company at any time and confer no rights to receive
notice of, attend or vote at general meetings except where the rights of
holders are to be varied or abrogated. On a winding up, the capital paid up on
such shares ranks pari passu with, and in proportion to, any amounts of
capital paid to the holders of ordinary shares, but does not confer any
further right to participate in the surplus assets of the Company.
7. Earnings and net asset value per ordinary share
Revenue, capital earnings/(loss) and net asset value per ordinary share are
shown below and have been calculated using the following:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Net revenue profit attributable to ordinary shareholders (US$'000) 4,494 6,767 13,842
Net capital profit/(loss) attributable to ordinary shareholders (US$'000) 32,439 (9,529) (173)
Total profit/(loss) attributable to ordinary shareholders (US$'000) 36,933 (2,762) 13,669
Total shareholders' funds (US$'000) 177,535 135,199 148,111
The weighted average number of ordinary shares in issue during the
period on which the earnings per ordinary share was calculated was: 29,448,641 37,362,470 33,373,033
The actual number of ordinary shares in issue at the end of each period
on which the net asset value per ordinary share was calculated was: 29,448,641 29,448,641 29,448,641
The number of ordinary shares in issue, including treasury shares at the
period/year end was: 31,630,303 31,630,303 31,630,303
Earnings per share
Calculated on weighted average number of ordinary shares:
Revenue earnings per share (US$ cents) - basic and diluted 15.26 18.11 41.48
Capital earnings/(loss) per share (US$ cents) - basic and diluted 110.15 (25.50) (0.52)
Total earnings/(loss) per share (US$ cents) - basic and diluted 125.41 (7.39) 40.96
As at As at As at
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Net asset value per ordinary share (US$ cents) 602.86 459.10 502.95
Ordinary share price (mid-market) (US$ cents) 1 513.63 431.13 457.10
1 Based on an exchange rate of US$1.27 to £1 (30 June 2022: US$1.21; 31
December 2022: US$1.20).
There were no dilutive securities at 30 June 2023 (30 June 2022: nil; 31
December 2022: nil).
8. Called up share capital
Ordinary Treasury Total Nominal
shares shares shares value
number number number US$'000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 10 cents each:
At 31 December 2022 29,448,641 2,181,662 31,630,303 3,163
At 30 June 2023 29,448,641 2,818,662 31,630,303 3,163
During the six months ended 30 June 2023, no ordinary shares were repurchased
(six months ended 30 June 2022: 9,810,979 shares for a total cost of
US$51,393,000; year ended 31 December 2022: 9,810,979 shares for a total cost
of US$51,431,000).
The ordinary shares give shareholders voting rights, the entitlement to all of
the capital growth in the Company's assets, and to all income from the Company
that is resolved to be distributed.
9. Reserves
The share premium and capital redemption reserve are not distributable
reserves under the Companies Act 2006. In accordance with ICAEW Technical
Release 02/17BL on Guidance on Realised and Distributable Profits under the
Companies Act 2006, the special reserve and capital reserve may be used as
distributable reserves for all purposes and, in particular, the repurchase by
the Company of its ordinary shares and for payments as dividends. In
accordance with the Company's Articles of Association, the special reserve,
capital reserve and the revenue reserve may be distributed by way of dividend.
The gain on the capital reserve arising on the revaluation of investments of
US$24,454,000 (30 June 2022: loss of US$11,041,000; 31 December 2022: gain of
US$165,000) is subject to fair value movements and may not be readily
realisable at short notice, as such it may not be entirely distributable. The
investments are subject to financial risks; as such capital reserves (arising
on investments sold) and the revenue reserve may not be entirely distributable
if a loss occurred during the realisation of these investments.
10. Valuation of financial instruments
The Company's investment activities expose it to the various types of risk
which are associated with the financial instruments and markets in which it
invests. The risks are substantially consistent with those disclosed in the
previous annual financial statements with the exception of those outlined
below.
Market risk arising from price risk
Price risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market prices (other than
those arising from interest rate risk or currency risk), whether those changes
are caused by factors specific to the individual financial instrument or its
issuer, or factors affecting similar financial instruments traded in the
market. Local, regional or global events such as war, acts of terrorism, the
spread of infectious illness or other public health issues, recessions,
climate change or other events could have a significant impact on the Company
and its investments.
The current environment of heightened geopolitical risk given the war in
Ukraine has undermined investor confidence and market direction. In addition
to the tragic and devastating events in Ukraine, the war has constricted
supplies of key commodities, pushing prices up and creating a level of market
uncertainty and volatility which is likely to persist for some time.
Valuation of financial instruments
Financial assets and financial liabilities are either carried in the Balance
Sheet at their fair value (investments) or at an amount which is a reasonable
approximation of fair value (due from brokers, dividends and interest
receivable, due to brokers, accruals, cash and cash equivalents and
overdrafts). Section 34 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 page 84 of the Annual
Report and Financial Statements for the year ended 31 December 2022.
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 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 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 market data and these inputs could have a significant
impact on the instrument's valuation.
This category also includes instruments that are valued based on quoted prices
for similar instruments where significant entity determined adjustments or
assumptions are required to reflect differences between the instruments and
instruments for which there is no active market. The 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. 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 including an assessment of the relevant risks including but not
limited to credit risk, market risk, liquidity risk, business risk and
sustainability risk. The determination of what constitutes `observable' inputs
requires significant judgement by the Investment Manager and these risks are
adequately captured in the assumptions and inputs used in measurement of Level
3 assets or liabilities.
Fair values of financial assets and financial liabilities
The table below is an analysis of the Company's financial instruments measured
at fair value at the balance sheet date.
Financial assets at fair value through profit or loss at 30 June 2023 Level 1 Level 2 Level 3 Total
(unaudited) US$'000 US$'000 US$'000 US$'000
Equity investments 172,973 - - 172,973
Total 172,973 - - 172,973
Financial assets at fair value through profit or loss at 30 June 2022 Level 1 Level 2 Level 3 Total
(unaudited) US$'000 US$'000 US$'000 US$'000
Equity investments 148,457 - - 148,457
Total 148,457 - - 148,457
Financial assets at fair value through profit or loss at 31 December 2022 Level 1 Level 2 Level 3 Total
(audited) US$'000 US$'000 US$'000 US$'000
Equity investments 158,149 - - 158,149
Total 158,149 - - 158,149
The Company held no Level 3 securities as at 30 June 2023 (30 June 2022: none;
31 December 2022: none).
For exchange listed equity investments the quoted price is the bid price.
Substantially all investments are valued based on unadjusted quoted market
prices. Where such quoted prices are readily available in an active market,
such prices are not required to be assessed or adjusted for any business
risks, including climate risk, in accordance with the fair value related
requirements of the Company's financial reporting framework.
11. Transactions with the Investment Manager and AIFM
BlackRock Fund Managers Limited (BFM) provides management and administration
services to the Company under a contract which is terminable on six months'
notice. BFM has (with the Company's consent) delegated certain portfolio and
risk management services, and other ancillary services, to BlackRock
Investment Management (UK) Limited (BIM (UK)). Further details of the
investment management contract are disclosed on pages 47 and 48 of the
Directors' Report in the Company's Annual Report and Financial Statements for
the year ended 31 December 2022.
The investment management fee is levied quarterly, based on 0.80% per annum of
the net asset value. The investment management fee due for the six months
ended 30 June 2023 amounted to US$643,000 (six months ended 30 June 2022:
US$744,000; year ended 31 December 2022: US$1,332,000). At the period end, an
amount of US$643,000 was outstanding in respect of these fees (30 June 2022:
US$751,000; 31 December 2022: US$588,000).
In addition to the above services BIM (UK) has provided the Company with
marketing services. The total fees paid or payable for these services for the
period ended 30 June 2023 amounted to US$48,000 excluding VAT (six months
ended 30 June 2022: US$54,000; year ended 31 December 2022: US$83,000).
Marketing fees of US$128,000 were outstanding at 30 June 2023 (30 June 2022:
US$162,000; 31 December 2022: US$81,000).
During the period, the Manager pays the amounts due to the Directors. These
fees are then reimbursed by the Company for the amounts paid on its behalf. As
at 30 June 2023, an amount of US$227,000 (30 June 2022: US$109,000; 31
December 2022: US$110,000) was payable to the Manager in respect of Directors'
fees.
The ultimate holding company of the Manager and the Investment Manager is
BlackRock, Inc., a company incorporated in Delaware, USA.
12. Related party disclosure
Directors' emoluments
The Board consists of four non-executive Directors, all of whom are considered
to be independent of the Manager by the Board. None of the Directors has a
service contract with the Company. The Chairman receives an annual fee of
£50,200, the Chairman of the Audit Committee receives an annual fee of
£38,600, the Senior Independent Director and Chairman of the Remuneration
Committee receives an annual fee of £36,400 and each of the other Directors
receives an annual fee of £34,300.
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:
As at As at
29 September 30 June
2023 2023
Ordinary Ordinary
shares shares
Carolan Dobson (Chairman) 4,792 4,792
Craig Cleland 12,000 12,000
Laurie Meister 2,915 2,915
Nigel Webber 5,000 5,000
Significant holdings
The following investors are:
a. funds managed by the BlackRock Group or are affiliates of BlackRock, Inc.
(Related BlackRock Funds); or
b. investors (other than those listed in (a) above) who held more than 20% of
the voting shares in issue in the Company and are as a result, considered to
be related parties to the Company (Significant Investors).
As at 30 June 2023
Total % of shares held by Related BlackRock Funds Total % of shares held by Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc. Number of Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc.
1.2 21.2 1
As at 31 December 2022
Total % of shares held by Related BlackRock Funds Total % of shares held by Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc. Number of Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc.
1.7 20.7 1
13. Contingent liabilities
There were no contingent liabilities at 30 June 2023 (30 June 2022: none; 31
December 2022: none).
14. Publication of non-statutory accounts
The financial information contained in this Half Yearly Financial 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 2023 and
30 June 2022 has not been audited or reviewed by the Company's auditors.
The information for the year ended 31 December 2022 has been extracted from
the latest published audited financial statements, which have been filed with
the Registrar of Companies. 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.
15. Annual results
The Board expects to announce the annual results for the year ending 31
December 2023 in March 2024. Copies of the results announcement can be
obtained from the Secretary on 020 7743 3000 or by email at
cosec@blackrock.com. The Annual Report and Financial Statements should be
available by mid-March 2024, with the Annual General Meeting being held in May
2024.
For further information, please contact:
Sarah Beynsberger, Director, BlackRock Investment Management (UK) Limited
Tel: 020 7743 3000
Press enquiries:
Ed Hooper, Lansons Communications - Tel: 020 7294 3620
E-mail: BlackRockInvestmentTrusts@lansons.com or EdH@lansons.com
29 September 2023
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.com/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.
Copyright (c) 2023 PR Newswire Association,LLC. All Rights Reserved