TIDMBRLA
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$'000)1 177,535 148,111
Net asset value per ordinary 602.86 502.95
share (US$ cents)
Ordinary share price (mid 513.63 457.10
-market) (US$ cents)2
Ordinary share price (mid 404.00 380.00
-market) (pence)
Discount3 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$ 25.8% 6.6%
cents)3
Ordinary share price (mid 18.5% 4.7%
-market) (US$ cents)2,3
Ordinary share price (mid 12.1% 18.0%
-market) (pence)3
MSCI EM Latin America Index 18.5% 8.9%
(net return, on a US Dollar
basis)4
For the For the
six months six months
ended ended
30 June 30 June Change
2023 2022 %
Revenue
Net profit on ordinary 4,494 6,767 -33.6
activities after taxation
(US$'000)
Revenue earnings per ordinary 15.26 18.11 -15.7
share (US$ cents)
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 13.75 13.50 +1.9
payable
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.
1The change in net assets reflects the portfolio movements during the period and
dividends paid.
2Based 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 USDollar
against British Pound Sterling.
3Alternative Performance Measures, see Glossary, contained within the Half
Yearly Financial Report.
4The 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 6.08 3 October 2022 9 November 2022
September 2022
Quarter to 31 19.29 3 January 2023 8 February 2023
December 20221
Quarter to 31 6.21 3 April 2023 16 May 2023
March 2023
Quarter to 30 7.54 3 July 2023 11 August 2023
June 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 USDollar 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$5.7million 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 atender for 24.99% of the shares in issue
excluding treasury shares (atatender 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 31December 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 USDollar
basis for the period from 1January 2022 to 30June 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 30June
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 aprudent 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 ina 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 astandoff 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 amonetary easing cycle
increased. This has also been supported by inflation that has continued to trend
lower, reaching 3.2% inJune. 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), aBrazilian 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.
Inaddition, 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, aBrazilian 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, aMexican 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 arelative basis. Disappointing commodity demand in China was the driver for
both companies' underperformance. For SQM specifically, aweakening 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 aname that we have held for a long time, but that we currently
see as rather fairly valued as more investors have discovered the name.
Wereduced our position in FEMSA, aconvenience store operator that had done very
well, and we reduced our position size in Cemex. We initiated aposition 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 12-18months. 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 ofthe
industry. The group controls significant assets across Africa, North and South
America, Europe and Asia, with amajority of production based in Brazil.
2Banco 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.
3Vale (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.
4Grupo 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.
5FEMSA (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.
6B3 (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.
7AmBev (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.
8Itaú 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.
9Gerdau (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.
10Hapvida Participacoes (2022: 9th)
Health Care
Market value - Ordinary shares: US$5,392,000
Share of investments: 3.1% (2022: 2.8%)
is a Brazilian holding healthcare company. The company operates with a vertical
service structure and is one of the largest healthcare solutions providers in
the country. The company provides medical assistance and dental care plans and
their operating structure includes facilities such as hospitals, walk-in
emergencies, clinics or diagnostic imaging units.
All percentages reflect the value of the holding as a percentage of total
investments. For this purpose, where more than one class of securities is held,
these have been aggregated. The percentages in brackets represent the value of
the holding as at 31 December 2022.
Together, the ten largest investments represent 52.8% of the total investments
(ten largest investments as at 31December 2022: 53.5%).
Portfolio of investments
as at 30 June 2023
Market
value % of
US$'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 sincethe previous report and
these are equally applicable to the remaining six months of the financial year
as they were to the sixmonths 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 note11 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 FRS104 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 Six months
Year
ended 30 ended 30
ended 31
June 2023 June 2022
December
2
022
(unaudited) (unaudited)
(
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$'000
Gains/(losses) on
investments held
at fair value - 33,031 33,031 - (8,655) (8,655)
- 1,258 1,258
through profit or
loss
Gains/(losses) on - 25 25 - (231) (231)
- (183) (183)
foreign exchange
Income from
investments held
at fair value 2 5,503 - 5,503 7,599 - 7,599
15,438 - 15,438
through profit or
loss
Other income 2 21 - 21 18 - 18
21 - 21
Total 5,524 33,056 38,580 7,617 (8,886) (1,269)
15,459 1,075 16,534
income/(loss)
Expenses
Investment 3 (161) (482) (643) (186) (558) (744)
(333) (999) (1,332)
management fee
Other operating 4 (382) (7) (389) (308) (6) (314)
(609) (17) (626)
expenses
Total operating (543) (489) (1,032) (494) (564) (1,058)
(942) (1,016) (1,958)
expenses
Net profit/(loss)
on ordinary
activities before
finance costs
and taxation 4,981 32,567 37,548 7,123 (9,450) (2,327)
14,517 59 14,576
Finance costs (43) (128) (171) (30) (90) (120)
(81) (243) (324)
Net profit/(loss)
on ordinary
activities before 4,938 32,439 37,377 7,093 (9,540) (2,447)
14,436 (184) 14,252
taxation
Taxation (444) - (444) (326) 11 (315)
(594) 11 (583)
(charge)/credit
Net profit/(loss)
on ordinary
activities after 4,494 32,439 36,933 6,767 (9,529) (2,762)
13,842 (173) 13,669
taxation
Earnings/(loss)
per ordinary
share (US$ 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 premium redemption distributable Capital
Revenue
share
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 3,163 11,719 5,824 4,356 114,343
8,706 148,111
December
2022
Total
comprehensive
income:
Net profit - - - - 32,439
4,494 36,933
for the
period
Transaction
with
owners,
recorded
directly to
equity:
Dividends 5 - - - - -
(7,509) (7,509)
paid1
At 30 June 3,163 11,719 5,824 4,356 146,782
5,691 177,535
2023
For the six
months
ended 30 June
2022
(unaudited)
At 31 4,144 11,719 4,843 4,356 165,947
3,829 194,838
December
2021
Total
comprehensive
(loss)/income:
Net - - - - (9,529)
6,767 (2,762)
(loss)/profit
for the
period
Transaction
with
owners,
recorded
directly to
equity:
Tender offer2 (981) - 981 - (51,017) -
(51,017)
Tender offer - - - - (376) -
(376)
costs
Dividends 5 - - - - -
(5,484) (5,484)
paid3
At 30 June 3,163 11,719 5,824 4,356 105,025
5,112 135,199
2022
For the year
ended
31 December
2022
(audited)
At 31 4,144 11,719 4,843 4,356 165,947
3,829 194,838
December
2021
Total
comprehensive
(loss)/income:
Net - - - - (173)
13,842 13,669
(loss)/profit
for the year
Transactions
with
owners,
recorded
directly to
equity:
Tender offer2 - - - - (51,017) -
(51,017)
Tender offer - - - - (414) -
(414)
cost
Cancellation (981) - 981 - - -
-
of
shares
Dividends 5 - - - - -
(8,965) (8,965)
paid4
At 31 3,163 11,719 5,824 4,356 114,343
8,706 148,111
December
2022
1Quarterly dividend of 6.29 cents per share for the year ended 31 December 2022,
declared on 3 January 2023 and paid on 8February 2023; special dividend of 13.00
cents per share for the year ended 31 December 2022, declared on 3 January 2023
and paid on 8February 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 8February 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 8February 2022; quarterly dividend of
7.76 cents per share for the year ended 31 December 2022, declared on 1 April
2022 and paid on 16May 2022; quarterly dividend of 5.74 cents per share for the
year ended 31 December 2022, declared on 1July 2022 and paid on 12August 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 172,973 148,457 158,149
value through profit or loss
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 4,586 (13,234) (10,014)
assets/(liabilities)
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 7 602.86 459.10 502.95
share (US$ cents)
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 37,377 (2,447) 14,252
activities before taxation
Add back finance costs 171 120 324
(Gains)/losses on investments held (33,031) 8,655 (1,258)
at fair value through profit or
loss
(Gains)/losses on foreign exchange (25) 231 183
Sales of investments held at fair 65,988 92,179 123,691
value through profit or loss
Purchases of investments held at (47,848) (37,120) (68,345)
fair value through profit or loss
Increase in other debtors (93) (751) (1,100)
Increase/(decrease) in other 207 209 (304)
creditors
Taxation on investment income (444) (326) (594)
Net cash generated from operating 22,302 60,750 66,849
activities
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 (7,680) (56,937) (60,720)
activities
Increase in cash and cash 14,622 3,813 6,129
equivalents
Cash and cash equivalents at the (10,571) (16,517) (16,517)
beginning of the period/year
Effect of foreign exchange rate 25 (231) (183)
changes
Cash and cash equivalents at the 4,076 (12,935) (10,571)
end of the period/year
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 31December 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 30June 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 31December 2022: US$nil).
3.Investment management fee
Six Six Year
months months ended
ended ended
31
30 June 30 June
December
2023 2022 2022
(unaudited) (unaudited)
(audited)
Revenue Capital Total Revenue Capital Total
Revenue Capital Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
US$'000 US$'000 US$'000
Investment 161 482 643 186 558 744 333
999 1,332
management
fee
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 fees1 7 7 15
Auditors' remuneration2 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 expenses3 (6) (10) (23)
Other administration costs 59 37 69
382 308 609
Allocated to capital:
Custody transaction charges4 7 6 17
389 314 626
1All expenses other than depositary fees are paid in Sterling and are therefore
subject to exchange rate fluctuations.
2No non-audit services are provided by the Company's auditors.
3Relates 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).
4For 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 30June 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 - - 2,438 2,438
dividend of 6.21 cents
Quarter to 31 March 2022 - - 3,046 3,047
dividend of 7.76 cents
Quarter to 30 June 2022 - - - 1,690
dividend of 5.74 cents
Quarter to 30 September 2022 - - 1,790
- dividend of 6.08 cents
Quarter to 31 December 2022 - 1,852 - -
dividend of 6.29 cents
Special dividend for year to 3,828 - -
31 December 2022 - 13.00
cents
Quarter to 31 March 2023 - 1,829 - -
dividend of 6.21 cents
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; 31December 2022: US$868,000) and a non-trade loan
relationship deficit of US$1,606,000 (30 June 2022: US$1,308,000; 31December
2022: US$1,606,000). A deferred tax asset was not recognised in the period ended
30 June 2023 or in the year ended 31 December 2022 as it was unlikely that there
would be sufficient future taxable profits to utilise these expenses.
Non-equity redeemable shares
The redeemable shares of £1 each carry the right to receive a fixed dividend at
the rate of 0.10% per annum on the nominal amount thereof. They are capable of
being redeemed by the Company at any time and confer no rights to receive notice
of, attend or vote at general meetings except where the rights of holders are to
be varied or abrogated. On a winding up, the capital paid up on such shares
ranks pari passu with, and in proportion to, any amounts of capital paid to the
holders of ordinary shares, but does not confer any further right to participate
in the surplus assets of the Company.
7.Earnings and net asset value per ordinary share
Revenue, capital earnings/(loss) and net asset value per ordinary share are
shown below and have been calculated using the following:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Net revenue profit attributable to 4,494 6,767 13,842
ordinary shareholders (US$'000)
Net capital profit/(loss) 32,439 (9,529) (173)
attributable to ordinary
shareholders (US$'000)
Total profit/(loss) attributable to 36,933 (2,762) 13,669
ordinary shareholders (US$'000)
Total shareholders' funds (US$'000) 177,535 135,199 148,111
The weighted average number of
ordinary shares in issue during the
period on which the earnings per 29,448,641 37,362,470 33,373,033
ordinary share was calculated was:
The actual number of ordinary shares
in issue at the end of each period
on which the net asset value per 29,448,641 29,448,641 29,448,641
ordinary share was calculated was:
The number of ordinary shares in
issue, including treasury shares at
the
period/year end was: 31,630,303 31,630,303 31,630,303
Earnings per share
Calculated on weighted average
number of ordinary shares:
Revenue earnings per share (US$ 15.26 18.11 41.48
cents) - basic and diluted
Capital earnings/(loss) per share 110.15 (25.50) (0.52)
(US$ cents) - basic and diluted
Total earnings/(loss) per share (US$ 125.41 (7.39) 40.96
cents) - basic and diluted
As at As at As at
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Net asset value per 602.86 459.10 502.95
ordinary share (US$
cents)
Ordinary share price 513.63 431.13 457.10
(mid-market) (US$
cents)1
1Based 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 Level 1 Level 2 Level 3 Total
through profit or loss at 30 June
2023
(unaudited) US$'000 US$'000 US$'000 US$'000
Equity investments 172,973 - - 172,973
Total 172,973 - - 172,973
Financial assets at fair value Level 1 Level 2 Level 3 Total
through profit or loss at 30 June
2022
(unaudited) US$'000 US$'000 US$'000 US$'000
Equity investments 148,457 - - 148,457
Total 148,457 - - 148,457
Financial assets at fair value Level 1 Level 2 Level 3 Total
through profit or loss at 31
December 2022
(audited) US$'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 acontract 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 Number of Significant Investors who are not
shares held affiliates of ?BlackRock Group or BlackRock,
Total % of by Inc.
shares held Significant
by Investors
?Related who are not
BlackRock affiliates
Funds of
?BlackRock
Group or
BlackRock,
Inc.
?1.2 21.2 1
?As at 31 December 2022
? Total % of Number of Significant Investors who are not
shares held affiliates of ?BlackRock Group or BlackRock,
Total % of by Inc.
shares held Significant
by Investors
?Related who are not
BlackRock affiliates
Funds 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.
This information was brought to you by Cision http://news.cision.com
END
(END) Dow Jones Newswires
September 29, 2023 11:13 ET (15:13 GMT)
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