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 2022
PERFORMANCE RECORD
As at As at
30 June 2022 31 December
2021
Net assets (US$'000)1 135,199 194,838
Net asset value per ordinary share (US$ cents) 459.10 496.28
Ordinary share price (mid-market) (US$ cents)2 431.13 461.19
Ordinary share price (mid-market) (pence) 355.00 340.50
Discount3 6.1% 7.1%
Performance (with dividends reinvested)
Net asset value per share (US$ cents)3 -5.1% -12.5%
Ordinary share price (US$ cents)2,3 -4.0% -11.8%
Ordinary share price (pence)3 7.2% -11.0%
MSCI EM Latin America Index (net return, on a US Dollar -0.6% -8.1%
basis)4
For the For the
six months six months
ended ended
30 June 2022 30 June 2021 Change %
Revenue
Net profit on ordinary activities after 6,767 3,414 +98.2
taxation (US$'000)
Revenue earnings per ordinary share (US$ 18.11 8.70 +108.2
cents)
Dividends per ordinary share (US$ cents)
Quarter to 31 March 7.76 6.97 +11.3
Quarter to 30 June 5.74 7.82 -26.6
Total dividends paid and payable 13.50 14.79 -8.7
PERFORMANCE FROM 31 DECEMBER 2016 TO 30 JUNE 2022
MSCI EM Latin
America Index
Share price NAV (net basis)
2017 31.3 29.0 23.7
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* -4.0 -5.1 -0.6
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 2022.
1 The change in net assets reflects the market movements during the period,
the tender offer in the period and dividends paid.
2 Based on an exchange rate of US$1.21445 to £1 at 30 June 2022 and US$1.35445
to £1 at 31 December 2021, representing a change of 10.3% 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 (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 2022.
OVERVIEW AND PERFORMANCE
The global macro-economic and geopolitical backdrop through the first half of
2022 has been challenging, with concerns over global inflation, lagging growth
in China and the war between Russia and Ukraine all posing significant
headwinds for markets. Despite these concerns, Latin American markets have
outperformed both developed market and MSCI Emerging Markets indices over the
period under review with the MSCI EM Latin America Index up by 10.9% in
Sterling terms and down by just 0.6% in US Dollar terms, compared to a fall in
the MSCI Emerging Markets Index of 8.1% in Sterling terms and 17.6% in US
Dollar terms and a decline in the MSCI World Index of 11.3% in Sterling terms
and 20.5% in US Dollar terms respectively. Elevated commodity prices have been
a significant contributor to this regional outperformance, driving improvements
in terms of trade and economic growth and enabling commodity-rich countries in
the region to reduce fiscal deficits. From a country perspective, markets in
Chile and Brazil performed best over the period under review, up by 8.9% and
2.8% respectively; Mexico and Peru were among the weakest equity markets in the
region down by 7.9% and 5.9% respectively.
Against this backdrop, the Company's net asset value per share fell by 5.1%
over the period in US Dollar terms (lagging the benchmark by 4.5%). In Sterling
terms the NAV rose by 5.9% over the same period and the benchmark rose by
10.9%. The share price fell by 4.0% in US Dollar terms (but increased by 7.2%
in Sterling terms). The underperformance was largely driven by stock selection
in Brazil, as tighter global liquidity and a reduced risk appetite drove
valuations down for a number of what your portfolio managers believe to be
quality, domestic growth stocks. Another factor impacting the stock performance
of these quality, domestic growth equities include the steep hiking of local
interest rates in Brazil. As a result, the domestic Brazilian equity market saw
a great deal of redemptions from local investment funds forcing prices down in
a somewhat indiscriminate manner. We believe this has created a degree of
disconnect between underlying bottom-up fundamentals of Brazilian equities and
stock market valuations. Additional information on the main contributors to and
detractors from performance for the period under review is given in the
Investment Manager's Report below.
DIVIDS DECLARED IN RESPECT OF THE YEAR TO 30 JUNE 2022
Dividend Announcement
(cents per date Pay date
share)
Quarter to 30 September 2021 6.56 1 October 2021 8 November 2021
Quarter to 31 December 2021 6.21 4 January 2022 8 February 2022
Quarter to 31 March 2022 7.76 1 April 2022 16 May 2022
Quarter to 30 June 2022 5.74 1 July 2022 12 August 2022
Total 26.27
REVENUE RETURN AND DIVIDS
Revenue return for the six months ended 30 June 2022 was 18.11 cents per share
(2021: 8.70 cents per share).
The Company has declared dividends totalling 26.27 cents per share in respect
of the twelve months to 30 June 2022 representing a yield of 6.1% (calculated
based on a share price of 431.13 cents per share, equivalent to the Sterling
price of 355.00 pence per share translated into cents at a rate of US$1.21
prevailing on 30 June 2022).
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 2022, a balance of US$5.1 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. It is promising to note that since the dividend policy was introduced
in July 2018, the Company's discount has narrowed from 14.9% as at 1 July 2018
to 6.1% as at 30 June 2022.
PERFORMANCE TRIGGERED TER OFFER
Your Company's Directors have always recognised that our role is to act in the
best interests of our shareholders. We have regularly consulted with our major
shareholders to understand their objectives and used their input to guide our
strategy and policies. We note their desire for the Company to continue with
its existing investment policy and the overwhelming shareholder support for the
vote on the continuation of the Company at the AGM in May 2022. We also
recognise that it is in the long-term interests of shareholders that shares do
not trade at a significant discount to their prevailing NAV and to this end,
the Board put in place a discount control mechanism covering the four years to
31 December 2021 to offer a tender for up to 24.99% of shares in issue to the
extent that certain performance and average discount targets over the four year
period to 31 December 2021 were not met (more detail on the performance and
discount targets and the tender mechanism can be found in the Company's Annual
Report for the year to 31 December 2021 on pages 37 and 43). This resulted in a
tender offer for 24.99% of the Company's shares being put to shareholders for
approval at a General Meeting held on 19 May 2022 and subsequently implemented
as summarized below.
A total of 22,844,851 shares were validly tendered under the tender offer,
representing approximately 58.2% of the Company's issued share capital,
excluding shares held in treasury. As the offer was oversubscribed, it was
scaled back and eligible shareholders who validly tendered shares in excess of
their basic entitlement of 24.99% had their basic entitlement satisfied in full
plus approximately 19.70895% of the excess amount they tendered, in accordance
with the process described in the tender circular published on 5 April 2022. In
total, 9,810,979 shares (representing 24.99% of the eligible share capital)
were repurchased by the Company and subsequently cancelled.
The price at which tendered shares were repurchased was equal to 98% of the Net
Asset Value per share as at a calculation date of 20 May 2022, as adjusted for
the estimated related portfolio realisation costs per tendered share, and
amounted to 417.0889 pence per share. Tender proceeds were paid to shareholders
on 26 May 2022.
DISCOUNT MANAGEMENT AND NEW 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 new
discount control mechanism covering the four years to 31 December 2025. This
mechanism will offer 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:
(i) the annualised total NAV return of the Company does not exceed the
annualised benchmark index (being the MSCI EM Latin America Index) US Dollar
(net return) 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 six month period from 1 January 2022 to 30 June 2022
was -5.1%, underperforming the benchmark return of -0.6% for the same period by
4.5%. The cum-income discount of the Company's ordinary shares has averaged
6.1% for this period and ranged from a premium of 0.6% to a discount of 11.0%,
ending the period on a discount of 6.1% at 30 June 2022.
Other than the shares repurchased under the tender offer implemented in May
2022, the Company has not bought back any shares during the six months ended 30
June 2022 and up to the date of publication of this report (no shares were
bought back in the year to 31 December 2021).
CHANGE OF PORTFOLIO MANAGER
As announced on 9 September 2022, Sam Vecht, who has co-managed the portfolio
alongside Ed Kuczma since December 2018, became the lead portfolio manager of
the Company with Mr Kuczma stepping down from his role. Christoph Brinkmann has
been appointed as deputy portfolio manager. Mr Vecht is a Managing Director
in BlackRock's Global Emerging Markets Equities team and has extensive
experience in the investment trust sector, having managed a number of UK
investment trusts since 2004. He has also been portfolio manager for the
BlackRock Emerging Markets Equity Strategies Fund since September 2015, and the
BlackRock Frontiers Investment Trust plc since 2010, both of which have
invested in the Latin American region since launch.
Mr Brinkmann, a Vice President in the Global Emerging Markets Equities Team,
has covered multiple sectors and countries across the Latin American region. He
joined BlackRock in 2015 after graduating from the University of Cologne with a
Masters in Finance and a CEMS Masters in International Management.
Mr Vecht and Mr Brinkmann are supported by the extensive resources and
significant expertise of BlackRock's Global Emerging Market team which has a
proven track record in emerging market equities. The team is made up of c.40
investment professionals researching over 1,000 companies across the global
emerging markets universe inclusive of Latin America.
Your Board notes that Mr Vecht's new role as lead portfolio manager provides
continuity for the Company and welcomes the addition of Mr Brinkmann to the
team as deputy portfolio manager. The Board are grateful to Mr Kuczma for his
commitment and contribution to the Company and wish him well in his future
endeavours.
OUTLOOK
After a challenging year in 2021, markets in the Latin American region saw a
very strong start to 2022. Higher commodity prices and historically cheap
currencies have helped to cushion Latin America from the global economic
headwinds over the first half of the year. Moving into the second half of 2022,
the region faces the challenges of sharply rising core inflation and political
uncertainty. In particular, uncertainty over the outcome of the upcoming
presidential election in Brazil (by far the largest component of the benchmark
at circa 70%) has depressed markets and valuations are at unprecedented lows.
Despite this, our portfolio managers believe that companies in Latin America
are well-versed in dealing with inflationary pressures and should benefit from
rising geopolitical tensions which have sharply increased the focus on Latin
America as an investment destination in an emerging market context. The region
provides significant opportunities for direct investment as governments and
businesses globally re-think supply chain configurations and seek to diversify
risk.
Whilst the global economic outlook appears to be increasingly sombre, the Board
remains hopeful for the relative outlook for Latin American equities.
Carolan Dobson
Chairman
14 September 2022
INVESTMENT MANAGER'S REPORT
MARKET OVERVIEW
As highlighted in the Investment Manager's report contained within the Annual
Report for the year to 31 December 2021, the team was optimistic that the Latin
American region could be a bright spot for investors in 2022. In line with
these expectations, Latin America did indeed outperform both developed markets
(as represented by the MSCI World Index) and the MSCI Emerging Markets Index
for the six months ended 30 June 2022. Through the year to date so far, the
major events that have influenced markets relate to global inflation, mainland
Chinese growth and the war between Russia and Ukraine. Despite these
challenges, Latin American equities have delivered a strong start to the year
in relative terms and opportunities remain for further outperformance in the
region going forward.
Latin America has proven to be resilient despite myriad challenges in 2022,
helped in large part by elevated commodity prices leading to broad improvements
in terms of trade, economic growth and a reduction in fiscal deficits. Taking
stock of the first half of 2022, the rise in commodity prices has come at a
beneficial time as most countries in the region had already enacted grand
fiscal stimulus programmes over the past few years to bridge the gap in
economic activity due to the COVID-19 pandemic. The higher raw material prices
have allowed commodity rich nations to expedite the process of reducing fiscal
deficits and levels of indebtedness as increased royalties have led to
better-than-expected tax revenues for governments in the region. However,
markets remain uncertain over growth prospects for the second half of 2022
given significant inflation concerns and interest rate expectations, both this
year and in 2023. These potential growth concerns come despite very positive
terms of trade, which historically have led to increased investment in the
region. Lingering uncertainties over macroeconomic policy frameworks is a key
part of the headwind, especially as failure to control inflation remains a
prominent risk in the United States and European Union.
% Return (with Local currency Local indices2
MSCI Country % Price change dividends (% vs. USD) (% change)
Indices reinvested)1
Argentina -16.5 -14.6 -18.0 -4.8 (MERVAL)
Brazil -2.1 2.8 6.0 -6.0 (Ibovespa)
Chile 7.0 8.9 -7.2 11.2 (IGPA)
Colombia -7.3 -3.7 -2.1 -3.0 (COLCAP)
Mexico -9.2 -7.9 2.0 -7.5 (IPC)
Peru -8.6 -5.9 4.5 -9.0 (S&P/BVL)
% Return (with Commodity prices
Indices % Price change dividends Commodity/Index (% change)
reinvested)1
MSCI EM Latin -4.2 -0.6 CRB Index3 3.2
America
MSCI Emerging Asia -18.1 -17.2 Oil (WTI)4 40.6
MSCI Emerging -18.8 -17.6 Gold -1.2
Markets
MSCI World -21.2 -20.5 Copper -16.8
S&P 500 -20.6 -20.2 Corn 25.4
MSCI Europe -22.2 -20.8 Soybeans 26.1
1 MSCI total return indices are net of withholding taxes.
2 Indices listed are the local market indices in that country.
3 Commodity Research Bureau Index.
4 West Texas Intermediate.
Sources: Bloomberg and MSCI for the six months to 30 June 2022.
The MSCI returns shown above are on a USD basis. However, the local indices are
on a local currency basis.
From a country perspective, Chile and Brazil performed the most strongly,
posting region-leading returns in the first half of 2022. Brazilian markets
returned +2.8%, with domestic economic activity recovering and an upward bias
to earnings estimates, all while inflation continues to climb higher, leading
to an aggressive interest rate hiking cycle. Broadly speaking, we find
valuations remain very low and earnings expectations are reasonable. The
market has remained volatile ahead of the Presidential election in the fourth
quarter of 2022, and we see the prospects of a possible relief rally once the
election results are known and the uncertainty clears. In Chile, markets
returned +8.9% over the period due in part to robust economic activity as the
country was quick to reopen following rapid vaccination distribution and a new
program of allowed pension withdrawals providing liquidity to consumers.
Additionally, Chilean banks have been supported by a low level of default on
debt and a high level of provisioning. Conversely, Mexico and Peru were the
weakest equity markets in Latin America in the first half of 2022, returning
-7.9% and -5.9% respectively. In Mexico, the post-pandemic recovery in economic
growth has been lacklustre given high inflation, rising interest rates and
persistent frictions between the government and the private sector. In Peru,
continued political uncertainty has similarly weighed on private investment and
consumer confidence as President Castillo has spent much of his first year in
office focused on defending impeachment attempts from the Congress.
Having delivered steep and persistent policy rate hikes for several quarters,
Latin American monetary tightening cycles are well advanced. We believe that a
peak in inflation may be reached in the second half of 2022 as higher prices
have a strong behavioural impact on consumption through demand destruction
while supply should increase in response to high prices. Brazil specifically
has enacted a number of fiscal measures to reduce taxes in essential goods as a
measure to ease inflation. A strong coordinated response by global central
banks to raise interest rates should also help to ease further price
escalations but will remain a headwind to growth as a consequence. The strong
policy action will have consequences for growth in the US and Europe at the
same time that China is facing mobility restrictions related to their zero
COVID-19 policy. Tighter liquidity measures will be detrimental for growth in
emerging economies; however we feel that Latin American central banks have a
long history of experience dealing with inflationary environments. The
pre-emptive front loading of interest rate hikes in the region will allow Latin
American countries to be amongst the first globally to be in a position to
start cutting interest rates to support domestic economic development. We
believe this will prove to be a catalyst for Latin American equities going
forward.
PERFORMANCE FROM 1 JANUARY 2022 TO 30 JUNE 2022
MSCI EM Latin
America Index
Share price NAV (net basis)
December 21 100.00 100.00 100.00
January 22 105.67 108.18 107.38
February 22 111.13 112.22 112.56
March 22 127.85 126.66 127.26
April 22 113.38 109.37 110.74
May 22 121.82 115.76 119.80
June 22 96.02 94.88 99.43
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 2022.
TOP PORTFOLIO CONTRIBUTORS/DETRACTORS TO THE COMPANY'S NAV
Top contributors: Total effect Top detractors: Total effect
(bps): (bps):
BB Seguridade 67.9 Globant -112.6
Participações
Magazine Luiza 47.5 Hapvida Participações -99.8
B3 44.8 CEMEX -86.7
Lojas Americanas 37.0 Sociedad Quimica y Minera de -82.1
Chile
Natura & Co 32.8 Marfrig Global Foods -57.0
Source: BlackRock.
PORTFOLIO POSITIONING
The Company underperformed its benchmark during the first half of 2022. Over
the period, the Company's NAV returned +5.9% with the share price returning
+7.2%. The Company's benchmark, the MSCI EM Latin America Index, returned
+10.9% on a net basis (all performance returns in Sterling terms with dividends
reinvested).
Security selection in Peru and a lack of exposure to Colombia contributed most
to relative performance, while allocation to Argentina and security selection
in Chile detracted the most from relative performance.
At a security level, an overweight in Brazilian insurance company BB Seguridade
Participações, and Brazilian stock exchange B3, were top relative contributors
over the six-month period. BB Seguridade Participações outperformed as the
stock benefitted from higher investment income given the rapid rise in
Brazilian interest rates. For B3, the stock rallied early in the year on
resilient trading volumes and increased demand from foreign investors in the
local equity market. The Company's lack of exposure to one of Brazil's largest
electronics and appliance retail chains, Magazine Luiza, also contributed
positively to relative performance as the stock underperformed following
concerns around competition and personal consumption in Brazil.
On the other hand, an off-benchmark holding of Globant, an Argentinian
information technology (IT) and software development company, detracted most
from relative performance (although in our opinion, Globant's investment themes
remain strong). The company has about 30% of its work force in Argentina,
while the majority of its revenues come from serving multinational, blue-chip
companies such as Disney and Electronic Arts operating mainly in the developed
markets. The company is well skilled in regard to transforming business models
to adapt to an increasingly digitalised world by offering services such as
augmented coding, artificial intelligence and virtual reality applications. We
believe the company is in a strong position as an exporter of low-cost computer
programming talent to developed markets. An overweight in Brazilian healthcare
company, Hapvida Participações, also detracted from relative performance as the
stock has been challenged this year following a COVID-19 related spike in
healthcare costs which have eroded the company's profitability. We continue to
have strong conviction in the stock as Hapvida Participações recently merged
with Intermedica, another large healthcare peer which will give the combined
entity greater scale and translate into better procurement terms going forward.
Aside from that, our position in Mexican cement player CEMEX also detracted
from performance as higher energy prices impacted the company's profitability.
CURRENT PORTFOLIO POSITIONING
The Company ended the period with its largest country overweight in Brazil and
Mexico. While Argentina also shows as a regional overweight, the Company holds
a single holding in Argentina through the IT consulting company, Globant.
Additional position increases have been allocated to Brazilian staples and
Mexican financials.
The Company was overweight in Brazil during the six-month period. There is
considerable uncertainty ahead of the November 2022 election and some strains
are appearing in the public finances. Despite this, we are finding plenty of
opportunity at the individual stock level as we believe valuations are low and
positioning is light. We are taking positions in traditional banks and
insurance companies that should be beneficiaries of rising interest rates. We
also see opportunities in healthcare, as countries aim to rectify the
weaknesses in their health infrastructure exposed by COVID-19. Over the period
we added to Rede D'Or São Luiz, a Brazilian healthcare company, as earnings
momentum remains strong as the company accelerates its leadership position
through both organic expansion and acquisitions in a market with attractive
long term growth opportunities. We have also been adding to Brazilian
healthcare company, Hapvida Participações. We continue to have strong
conviction in the stock as we see the name trading at attractive fundamentals
following recent underperformance.
The Company continues to have no exposure to Colombia (as was the case
throughout 2021). The country has a rising fiscal deficit and need for tax and
social reform. We believe the recent presidential election poses a serious risk
of macro policy regime change, which could materially impact corporate earnings
growth and profitability.
At the sector level, we are overweight financials as we see potential for
profitability to improve in a high interest rate environment. We are also
overweight real estate as we are attracted to inflation protected rents and
realignment of supply-chains benefitting industrial warehousing in Mexico.
Conversely, we are underweight energy as we find the current spike in oil
prices is unsustainable given demand destruction, supply and substitution
responses.
OUTLOOK
Over the past two-plus years, global equities have transitioned from one
unimaginable health crisis to a period of escalating inflation driven by supply
constraints from geopolitical conflict caused by the war in Ukraine. Latin
America has also gone through a heavy political cycle over this time with most
countries in Latin America facing changes in leadership creating additional
uncertainties. We look forward to some of the external noise potentially going
back to "normal" levels as the dramatic whipsaws seen in monetary, fiscal,
political, inflationary and productivity variables return to pre-COVID-19
trends. Despite the many factors generating volatility for equity markets, in
our opinion Latin American markets have the potential to prove resilient in
many ways to global stresses. Rising commodity prices have been supportive for
external current accounts and fiscal accounts. High gaps in interest rate
differentials between Latin American central banks and developed market peers
have emerged and this combined with strong terms of trade have started to push
currencies towards appreciation from depressed levels in the recent past. Core
inflation has moved sharply higher, and the expectations are for an easing in
terms of this spike but the run-rate for inflation should (in our view) remain
elevated with a struggle to return to target ranges any time soon. We would
argue that the concern regarding global inflation is more an issue for
developed markets where consumers and central banks have become accustomed to
low levels of inflation. Latin America has a strong history of dealing with
inflation and we believe the strong proactive measures taken by the region's
central banks allow for greater comfort on a relative basis.
We remain overweight in Brazilian equities. While the Company's asset
allocation in Brazil looks to gain strategic exposure to the current commodity
cycle, there are some positive signs emerging on the domestic side (growth,
fiscal and labour market). Inflation has the potential to come down faster than
expected due to reduction in taxation for consumers and interest rate cuts in
2021, which we expect should support Brazilian stocks. Uncertainty regarding
the upcoming presidential election is priced-in, in our view, as valuations are
at an unprecedented low.
We have grown more cautious on Chilean equities as the strong performance
year-to-date has been mostly concentrated in commodity related stocks. This
leaves the vast majority of the index constituents trading at a significant
discount to historical levels. We are cautious on earnings momentum as the
economy faces a tough backdrop and subdued business confidence related to
changes to the regulatory environment and higher taxation.
We enter the second half of 2022 overweight in Mexican equities but have
reduced our exposure relative to the start of the year given less compelling
valuations compared to the rest of Latin American markets and lack of
catalysts. Inflationary pressure is a concern in the near term which implies
additional monetary tightening by the central banks in the coming months. Also,
higher commodity prices have a net negative impact on the external current
accounts and fiscal accounts.
We remain underweight in Colombia as policy risk continues to weigh on
equities, on top of weak fundamentals stemming from Colombia's twin deficits.
We expect the policy uncertainty, tightening monetary policy and inflationary
pressure to weigh down the benefits of higher oil prices, increased consumer
spending, and attractive valuations.
Finally, we are neutral on Peru as further downside risks related to Castillo's
administration currently look limited: the proposal for a Constitutional
Assembly was defeated in Congress, and there is no support with which the
unpopular President can enact structural reforms to the economic model. The
country has also maintained fiscal discipline and an independent monetary
policy (possibly the only two positive highlights from this administration).
Peru continues to have one of the lowest debt/gross domestic product (GDP)
ratios in the region, at 36%, relatively small fiscal and current deficits,
and, despite the political volatility, its real GDP is expected to grow by
above the region's average in 2022.
In summary, we remain optimistic on the prospects for Latin American equities
despite the impact of external risks (possible US recession, weak growth in
China) as well as domestic risks (presidential elections in Brazil, persistent
high inflation/high interest rates).
Given the level of valuations, we believe risks are more than reflected in
current prices.
Furthermore, earnings expectations have consistently risen for 2022 on higher
commodity prices and better than expected economic activity. For 2023, we
anticipate that earnings growth expectations excluding Materials and Energy
should remain robust. We have argued that companies in Latin America are
well-versed in dealing with inflationary pressures and the pre-emptive hiking
measures in the region should provide a buffer to start stimulating for growth
from a point of high interest rates. Geopolitical and governance tensions in
Russia and China have amplified the interest in Latin America as an investment
destination in an emerging market context. The region's productive, skilled and
low-cost labour base with close proximity to the United States provides ample
opportunities for direct investment as current supply chain configurations are
being reconsidered with nearshoring in mind. Given the balance of risks, light
positioning and appealing valuations, we continue to believe investors can
benefit from improving fundamentals in the region.
Sam Vecht
BlackRock Investment Management (UK) Limited
14 September 2022
PORTFOLIO ANALYSIS
as at 30 June 2022
GEOGRAPHICAL WEIGHTING (GROSS MARKET EXPOSURE) VS MSCI EM LATIN AMERICA INDEX
Country % of net assets MSCI EM Latin
America Index
Brazil 64.6 61.9
Mexico 31.1 26.9
Chile 6.5 6.4
Peru 2.8 2.8
Argentina 2.5 0.0
Panama 2.3 0.0
Colombia 0.0 2.0
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 30.0 23.4
Materials 22.8 23.2
Consumer Staples 15.9 14.6
Industrials 9.4 7.2
Energy 8.6 12.0
Communication Services 5.7 8.0
Real Estate 5.3 0.6
Health Care 4.5 2.0
Consumer Discretionary 4.2 2.5
Information Technology 2.5 0.5
Utilities 0.9 6.0
Sources: BlackRock and MSCI.
TEN LARGEST INVESTMENTS
1= Vale (2021: 1st)
Materials
Market value - American depositary share (ADS): US$13,004,000
Share of investments: 8.8% (2021: 7.6%)
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, and manganese and
ferro-alloys sectors.
2= Petrobrás (2021: 2nd)
Energy
Market value - American depositary receipt (ADR): US$6,575,000
Market value - Preference shares ADR: US$5,016,000
Share of investments: 7.8% (2021: 7.5%)
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.
3+ Banco Bradesco (2021: 4th)
Financials
Market value - ADR: US$9,097,000
Share of investments: 6.1% (2021: 5.3%)
is one of Brazil's largest private sector banks. The bank divides its
operations in two main areas - banking services and insurance services,
management of complementary private pension plans and savings bonds.
4+ Itaú Unibanco (2021: 21st)
Financials
Market value - ADR: US$8,439,000
Share of investments: 5.7% (2021: 1.9%)
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.
5+ Walmart de México y Centroamérica (2021: 6th)
Consumer Staples
Market value - Ordinary shares: US$6,872,000
Share of investments: 4.6% (2021: 4.5%)
is the Mexican and Central American division of Walmart Stores Inc, with
operations in Mexico, Guatemala, El Salvador, Honduras, Nicaragua and Costa
Rica. The group operates eight brands in the region, covering the discount,
winery, supermarket and supercenter segments.
6+ Grupo Financiero Banorte (2021: 7th)
Financials
Market value - Ordinary shares: US$6,624,000
Share of investments: 4.5% (2021: 4.5%)
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.
7+ FEMSA (2021: 15th)
Consumer Staples
Market value - ADR: US$6,354,000
Share of investments: 4.3% (2021: 2.5%)
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.
8- B3 (2021: 5th)
Financials
Market value - Ordinary shares: US$5,889,000
Share of investments: 4.0% (2021: 4.6%)
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.
9+ AmBev (2021: 26th)
Consumer Staples
Market value - ADR: US$5,734,000
Share of investments: 3.9% (2021: 1.6%)
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 and the Caribbean (CAC) and Canada.
10+ Suzano Papel e Celulose (2021: 12th)
Materials
Market value - Ordinary shares: US$4,670,000
Share of investments: 3.1% (2021: 3.0%)
is a Brazilian pulp and paper group. The pulp segment produces and sells
hardwood eucalyptus pulp and fluff mainly to supply the export market, with any
surplus destined to the domestic market. The paper segment consists of
production and sale of paper to meet the demands of both domestic and export
markets.
All percentages reflect the value of the holding as a percentage of total
investments. For this purpose, where more than one class of securities is held,
these have been aggregated. The percentages in brackets represent the value of
the holding as at 31 December 2021.
Together, the ten largest investments represent 52.8% of the total investments
(ten largest investments as at 31 December 2021: 51.3%).
PORTFOLIO OF INVESTMENTS
as at 30 June 2022
Market
value % of
US$'000 investments
Brazil
Vale - ADS 13,004 8.8
Petrobrás - ADR 6,575 } 7.8
Petrobrás - preference shares - ADR 5,016
Banco Bradesco - ADR 9,097 6.1
Itaú Unibanco - ADR 8,439 5.7
B3 5,889 4.0
AmBev - ADR 5,734 3.9
Suzano Papel e Celulose 4,670 3.1
Hapvida Participações 3,898 2.6
BB Seguridade Participações 3,295 2.2
TIM 3,211 2.2
Sendas Distribuidora 2,537 1.7
Gerdau - preference shares 2,313 1.6
Movida Participações 2,209 1.5
Santos Brasil Participações 2,127 1.4
Rede D'Or São Luiz 2,102 1.4
Afya 1,947 1.3
CIA Locação das Américas 1,736 1.2
Neoenergia 1,254 0.8
Arezzo Indústria e Comércio 1,080 0.7
XP Inc 760 0.5
Smartfit Escola 439 0.3
87,332 58.8
Mexico
Walmart de México y Centroamérica 6,872 4.6
Grupo Financiero Banorte 6,624 4.5
FEMSA - ADR 6,354 4.3
CEMEX - ADR 4,283 2.9
América Movil - ADR 4,088 2.7
Corporación Inmobiliaria Vesta 3,638 2.4
Grupo Aeroportuario del Pacifico - ADS 3,580 2.4
Fibra Uno Administración - REIT 3,526 2.4
Grupo México 3,241 2.2
42,206 28.4
Chile
Empresas CMPC 3,462 2.3
Banco Santander-Chile - ADR 2,734 1.9
Falabella 2,561 1.7
8,757 5.9
Peru
Credicorp 3,760 2.5
3,760 2.5
Argentina
Globant 3,354 2.3
3,354 2.3
Panama
Copa Holdings 3,048 2.1
3,048 2.1
Total Investments 148,457 100.0
All investments are in equity shares unless otherwise stated.
The total number of investments held at 30 June 2022 was 36 (31 December 2021:
40). At 30 June 2022, the Company did not hold any equity interests comprising
more than 3% of any company's share capital (31 December 2021: 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 2021. A detailed explanation can be found on pages 44 to 47 and in
note 16 on pages 95 to 102 of the Annual Report and Financial Statements which
are available on the website maintained by BlackRock at www.blackrock.com/uk/
brla.
The ongoing COVID-19 pandemic has had a profound impact on all aspects of
society in recent years. The impact of this significant event on the Company's
financial risk exposure is disclosed in note 16 of the Annual Report and
Financial Statements.
The Directors have assessed the impact of market conditions arising from the
COVID-19 outbreak on the Company's ability to meet its investment objective.
Based on the latest available information, the Company continues to be managed
in line with its investment objective, with no disruption to its operations.
Certain financial markets have fallen towards the end of the financial period
due primarily to geopolitical tensions arising from Russia's invasion of
Ukraine and the impact of the subsequent range of sanctions, regulations and
other measures which impaired normal trading in Russian securities.
In the view of the Board, other than those matters noted above, there have not
been any material changes to the fundamental nature of these risks since the
previous report and these principal risks and uncertainties, as summarised, are
as applicable to the remaining six months of the financial year as they were to
the six months under review.
GOING CONCERN
The Board remains mindful of the ongoing uncertainty surrounding the potential
duration of the COVID-19 pandemic and its longer term effects on the global
economy and the current heightened geopolitical risk. Nevertheless, the
Directors, having considered the nature and liquidity of the portfolio, the
Company's investment objective and 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' RESPONSIBILTY 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 14 September 2022
and the above Responsibility Statement was signed on its behalf by the
Chairman.
Carolan Dobson
For and on behalf of the Board
14 September 2022
INCOME STATEMENT
for the six months ended 30 June 2022
Six months ended 30 Six months ended 30 Year ended 31 December
June 2022 June 2021 2021
(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$'000
(Losses)/ - (8,655) (8,655) - 14,049 14,049 - (36,963) (36,963)
gains on
investments
held at
fair value
through
profit or
loss
(Losses)/ - (231) (231) - 283 283 - 173 173
gains on
foreign
exchange
Income from 2 7,599 - 7,599 4,367 - 4,367 12,199 - 12,199
investments
held at
fair value
through
profit or
loss
Other 2 18 - 18 - - - - - -
income
Total 7,617 (8,886) (1,269) 4,367 14,332 18,699 12,199 (36,790) (24,591)
income/
(loss)
Expenses
Investment 3 (186) (558) (744) (229) (689) (918) (431) (1,295) (1,726)
management
fee
Other 4 (308) (6) (314) (404) 4 (400) (783) (10) (793)
operating
expenses
Total (494) (564) (1,058) (633) (685) (1,318) (1,214) (1,305) (2,519)
operating
expenses
Net profit/ 7,123 (9,450) (2,327) 3,734 13,647 17,381 10,985 (38,095) (27,110)
(loss) on
ordinary
activities
before
finance
costs and
taxation
Finance (30) (90) (120) (24) (71) (95) (53) (158) (211)
costs
Net profit/ 7,093 (9,540) (2,447) 3,710 13,576 17,286 10,932 (38,253) (27,321)
(loss) on
ordinary
activities
before
taxation
Taxation (326) 11 (315) (296) - (296) (685) - (685)
(charge)/
credit
Net profit/ 6,767 (9,529) (2,762) 3,414 13,576 16,990 10,247 (38,253) (28,006)
(loss) on
ordinary
activities
after
taxation
Earnings/ 7 18.11 (25.50) (7.39) 8.70 34.58 43.28 26.10 (97.44) (71.34)
(loss) per
ordinary
share (US$
cents)
The total column of this statement represents 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 2022
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 2022
(unaudited)
At 31 December 4,144 11,719 4,843 4,356 165,947 3,829 194,838
2021
Total
comprehensive
(loss)/income:
Net (loss)/ - - - - (9,529) 6,767 (2,762)
profit for the
period
Transaction
with owners,
recorded
directly to
equity:
Tender offer (981) - 981 - (51,017) - (51,017)
Tender offer - - - - (376) - (376)
costs
Dividends 5 - - - - - (5,484) (5,484)
paid1
At 30 June 3,163 11,719 5,824 4,356 105,025 5,112 135,199
2022
For the six
months ended
30 June 2021
(unaudited)
At 31 December 4,144 11,719 4,843 4,356 206,047 3,042 234,151
2020
Total
comprehensive
income:
Net profit - - - - 13,576 3,414 16,990
for the period
Transaction
with owners,
recorded
directly to
equity:
Dividends 5 - - - - - (5,661) (5,661)
paid2
At 30 June 4,144 11,719 4,843 4,356 219,623 795 245,480
2021
For the year
ended 31
December
2021
(audited)
At 31 December 4,144 11,719 4,843 4,356 206,047 3,042 234,151
2020
Total
comprehensive
(loss)/income:
Net (loss)/ - - - - (38,253) 10,247 (28,006)
profit for the
year
Transactions
with owners,
recorded
directly to
equity:
Dividends 5 - - - - (1,847) (9,460) (11,307)
paid3
At 31 December 4,144 11,719 4,843 4,356 165,947 3,829 194,838
2021
1 Quarterly 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 ending 31 December 2022, declared
on 1 April 2022 and paid on 16 May 2022.
2 Quarterly dividend of 7.45 cents per share for the year ended 31 December
2020, declared on 4 January 2021 and paid on 8 February 2021; quarterly
dividend of 6.97 cents per share for the year ended 31 December 2021, declared
on 1 April 2021 and paid on 10 May 2021.
3 Quarterly dividend of 7.45 cents per share for the year ended 31 December
2020, declared on 4 January 2021 and paid on 8 February 2021; quarterly
dividend of 6.97 cents per share for the year ended 31 December 2021, declared
on 1 April 2021 and paid on 10 May 2021; quarterly dividend of 7.82 cents per
share for the year ended 31 December 2021, declared on 1 July 2021 and paid on
6 August 2021; quarterly dividend of 6.56 cents per share for the year ended 31
December 2021, declared on 1 October 2021 and paid on 8 November 2021.
For information on the Company's distributable reserves, please refer to note 9
below.
BALANCE SHEET
as at 30 June 2022
30 June 2022 30 June 2021 31 December
2021
(unaudited) (unaudited) (audited)
Notes US$'000 US$'000 US$'000
Fixed assets
Investments held at fair value 148,457 273,440 212,182
through profit or loss
Current assets
Debtors 1,217 2,340 466
Cash and cash equivalents 58 297 463
Total current assets 1,275 2,637 929
Creditors - amounts falling due
within one year
Bank overdraft (12,993) (27,599) (16,980)
Other creditors (1,516) (2,963) (1,258)
Total current liabilities (14,509) (30,562) (18,238)
Net current liabilities (13,234) (27,925) (17,309)
135,223 245,515 194,873
Creditors - amounts falling due after
more than one year
Non-current tax liability 6 - (11) (11)
Non-equity redeemable shares 6 (24) (24) (24)
(24) (35) (35)
Net assets 135,199 245,480 194,838
Capital and reserves
Called up share capital 8 3,163 4,144 4,144
Share premium account 11,719 11,719 11,719
Capital redemption reserve 5,824 4,843 4,843
Non-distributable reserve 4,356 4,356 4,356
Capital reserves 105,025 219,623 165,947
Revenue reserve 5,112 795 3,829
Total shareholders' funds 7 135,199 245,480 194,838
Net asset value per ordinary share 7 459.10 625.27 496.28
(US$ cents)
STATEMENT OF CASH FLOWS
for the year ended 30 June 2022
Six months Six months Year
ended ended ended
30 June 2022 30 June 2021 31 December
2021
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Operating activities
Net (loss)/profit on ordinary activities (2,447) 17,286 (27,321)
before taxation
Add back finance costs 120 95 211
Losses/(gains) on investments held at fair 8,655 (14,049) 36,963
value through profit or loss
Losses/(gains) on foreign exchange 231 (283) (173)
Sales of investments held at fair value 92,179 71,615 144,427
through profit or loss
Purchases of investments held at fair value (37,120) (80,184) (142,206)
through profit or loss
Increase in other debtors (751) (421) (21)
Increase in other creditors 209 1,093 318
Taxation on investment income (326) (296) (685)
Net cash generated from/(used in) operating 60,750 (5,144) 11,513
activities
Financing activities
Interest paid (120) (95) (211)
Tender offer (51,017) - -
Tender costs paid (316) - -
Dividends paid (5,484) (5,661) (11,307)
Net cash used in financing activities (56,937) (5,756) (11,518)
Increase/(decrease) in cash and cash 3,813 (10,900) (5)
equivalents
Cash and cash equivalents at the beginning of (16,517) (16,685) (16,685)
the period/year
Effect of foreign exchange rate changes (231) 283 173
Cash and cash equivalents at the end of the (12,935) (27,302) (16,517)
period/year
Comprised of:
Cash at bank 58 297 463
Bank overdraft (12,993) (27,599) (16,980)
(12,935) (27,302) (16,517)
NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 30 June 2022
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 2021.
2. INCOME
Six months Six months Year
ended ended ended
30 June 2022 30 June 2021 31 December
2021
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Investment income:
Overseas dividends 7,066 4,059 11,655
Overseas REIT distributions 254 164 307
Overseas special dividends 258 133 223
Fixed interest income 21 11 14
7,599 4,367 12,199
Other income:
Deposit interest 18 - -
Total income 7,617 4,367 12,199
Dividends and interest received in cash during the period amounted to
US$6,382,000 and US$42,000 (six months ended 30 June 2021: US$3,575,000 and
US$12,000; year ended 31 December 2021: US$12,285,000 and US$12,000).
There were no special dividends recognised in capital in the period (six months
ended 30 June 2021: US$nil; year ended 31 December 2021: US$nil).
3. INVESTMENT MANAGEMENT FEE
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Investment 186 558 744 229 689 918 431 1,295 1,726
management
fee
Total 186 558 744 229 689 918 431 1,295 1,726
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 2022 30 June 31 December
2021 2021
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Allocated to revenue:
Custody fee 23 31 61
Depositary fees1 7 12 22
Auditors' remuneration2 24 31 60
Registrar's fees 15 20 40
Directors' emoluments 104 126 254
Employer NI contributions 10 17 27
Marketing fees 54 65 101
Postage and printing fees 14 50 73
AIC fees 6 4 22
Broker fees 19 31 56
FCA fees 5 7 12
Write back of prior year expenses3,4 (10) (36) (42)
Other administration costs 37 46 97
308 404 783
Allocated to capital:
Custody transaction charges4,5 6 (4) 10
314 400 793
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 printing fees, postage fees and
miscellaneous fees written back during the six month period ended 30 June 2022.
4 Relates to prior year accrual for AIC fees, Director search fees and custody
transaction charges written back during the year ended 31 December 2021.
5 For the six month period ended 30 June 2022, expenses of US$6,000 (six months
ended 30 June 2021: income of US$4,000; year ended 31 December 2021: expenses
of US$10,000) 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$60,000 for the six months ended 30 June 2022 (six months ended
30 June 2021: US$72,000; year ended 31 December 2021: US$136,000). Costs
relating to the disposal of investments amounted to US$86,000 for the six
months ended 30 June 2022 (six months ended 30 June 2021: US$105,000; year
ended 31 December 2021: US$178,000). All transaction costs have been included
within the capital reserves.
5. DIVIDS
The Company's cum-income US Dollar NAV at 31 March 2022 was 620.97 cents per
share, and the Directors declared a first quarterly interim dividend of 7.76
cents per share. The dividend was paid on 16 May 2022 to holders of ordinary
shares on the register at the close of business on 19 April 2022.
In accordance with FRS 102 Section 32 Events After the End of the Reporting
Period, the final dividend payable on ordinary shares is recognised as a
liability when approved by shareholders. Interim dividends are recognised only
when paid.
Dividends on equity shares paid during the period were:
Six months Six months Year
ended ended ended
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Quarter to 31 December 2020 - dividend of - 2,925 2,925
7.45 cents
Quarter to 31 March 2021 - dividend of - 2,736 2,736
6.97 cents
Quarter to 30 June 2021 - dividend of - - 3,070
7.82 cents
Quarter to 30 September 2021 - dividend - - 2,576
of 6.56 cents
Quarter to 31 December 2021 - dividend of 2,438 - -
6.21 cents
Quarter to 31 March 2022 - dividend of 3,046 - -
7.76 cents
5,484 5,661 11,307
6. CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
As at As at As at
30 June 2022 30 June 31 December
2021 2021
(unaudited) (unaudited) (audited)
US$'000 US$'000 US$'000
Non-current tax liability - 11 11
Non-equity redeemable shares 24 24 24
24 35 35
At 30 June 2022 the Company had net surplus management expenses of US$1,030,000
(30 June 2021: US$992,000; 31 December 2021: US$844,000) and a non-trade loan
relationship deficit of US$1,308,000 (30 June 2021: US$1,095,000; 31 December
2021: US$1,308,000). A deferred tax asset was not recognised in the period
ended 30 June 2022 or in the year ended 31 December 2021 as it was unlikely
that there would be sufficient future taxable profits to utilise these
expenses.
Non-equity redeemable shares
The redeemable shares of £1 each carry the right to receive a fixed dividend at
the rate of 0.10% per annum on the nominal amount thereof. They are capable of
being redeemed by the Company at any time and confer no rights to receive
notice of, attend or vote at general meetings except where the rights of
holders are to be varied or abrogated. On a winding up, the capital paid up on
such shares ranks pari passu with, and in proportion to, any amounts of capital
paid to the holders of ordinary shares, but does not confer any further right
to participate in the surplus assets of the Company.
7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Revenue, capital earnings/(loss) and net asset value per ordinary share are
shown below and have been calculated using the following:
Six months Six months Year
ended ended ended
30 June 2022 30 June 31 December
2021 2021
(unaudited) (unaudited) (audited)
Net revenue profit attributable to ordinary 6,767 3,414 10,247
shareholders (US$'000)
Net capital (loss)/profit attributable to (9,529) 13,576 (38,253)
ordinary shareholders (US$'000)
Total (loss)/profit attributable to ordinary (2,762) 16,990 (28,006)
shareholders (US$'000)
Total shareholders' funds (US$'000) 135,199 245,480 194,838
The weighted average number of ordinary shares in 37,362,470 39,259,620 39,259,620
issue during the period on which the earnings per
ordinary share was calculated was:
The actual number of ordinary shares in issue at 29,448,641 39,259,620 39,259,620
the end of each period on which the net asset
value per ordinary share was calculated was:
The number of ordinary shares in issue, including 31,630,303 41,441,282 41,441,282
treasury shares at the period/year end was:
Earnings per share
Calculated on weighted average number of ordinary
shares:
Revenue earnings per share (US$ cents) - basic 18.11 8.70 26.10
and diluted
Capital (loss)/earnings per share (US$ cents) - (25.50) 34.58 (97.44)
basic and diluted
Total (loss)/earnings per share (US$ cents) - (7.39) 43.28 (71.34)
basic and diluted
As at As at As at
30 June 2022 30 June 31 December
2021 2021
(unaudited) (unaudited) (audited)
Net asset value per ordinary share (US$ cents) 459.10 625.27 496.28
Ordinary share price (mid-market) (US$ cents)1 431.13 565.01 461.19
1 Based on an exchange rate of US$1.21445 to £1 (30 June 2021: US$1.3814; 31
December 2021: US$1.35445).
There were no dilutive securities at 30 June 2022 (30 June 2021: nil; 31
December 2021: nil).
8. CALLED UP SHARE CAPITAL
Ordinary Treasury Total Nominal
shares shares shares value
number number number US$'000
Allotted, called up and fully paid
share capital comprised: Ordinary
shares of 10 cents each:
At 31 December 2021 39,259,620 2,181,662 41,441,282 4,144
Tender offer (9,810,979) - (9,810,979) (981)
At 30 June 2022 29,448,641 2,181,662 31,630,303 3,163
During the period to 30 June 2022, 9,810,979 ordinary shares were purchased for
cancellation as a result of a tender offer for a total cost of US$51,393,000
(six months ended 30 June 2021: nil; year ended 31 December 2021: nil).
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 profits
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 reserves may be used as distributable
profits 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 reserves and
the revenue reserve may be distributed by way of dividend. The loss on capital
reserve arising on the revaluation of investments of US$11,041,000 (30 June
2021: gain of US$52,558,000; 31 December 2021: gain of US$7,247,000) 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
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.
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 88 of the Annual
Report and Financial Statements for the year ended 31 December 2021.
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset.
The fair value hierarchy has the following levels:
Level 1 - Quoted market price for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted
prices are readily and regularly available from an exchange, dealer, broker,
industry group, pricing service or regulatory agency and those prices represent
actual and regularly occurring market transactions on an arm's length basis.
These include exchange traded derivatives. The Company does not adjust the
quoted price for these instruments.
Level 2 - Valuation techniques using observable inputs
This category includes instruments valued using quoted prices for similar
instruments in markets that are considered less than active, or other valuation
techniques where all significant inputs are directly or indirectly observable
from market data. Valuation techniques used for non-standardised financial
instruments such as over-the-counter derivatives, include the use of comparable
recent arm's length transactions, reference to other instruments that are
substantially the same, discounted cash flow analysis, option pricing models
and other valuation techniques commonly used by market participants making the
maximum use of market inputs and relying as little as possible on entity
specific inputs.
Level 3 - Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes
inputs not based on 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. The determination of what constitutes 'observable' inputs
requires significant judgement by the Investment Manager.
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
2022
(unaudited) US$'000 US$'000 US$'000 US$'000
Equity investments 148,457 - - 148,457
Total 148,457 - - 148,457
Financial assets at fair value Level 1 Level 2 Level 3 Total
through profit or loss at 30 June
2021
(unaudited) US$'000 US$'000 US$'000 US$'000
Equity investments 273,406 - - 273,406
Fixed interest investments - 34 - 34
Total 273,406 34 - 273,440
Financial assets at fair value Level 1 Level 2 Level 3 Total
through profit or loss at 31 December
2021
(audited) US$'000 US$'000 US$'000 US$'000
Equity investments 212,151 - - 212,151
Fixed interest investments - 31 - 31
Total 212,151 31 - 212,182
The Company held no Level 3 securities as at 30 June 2022 (30 June 2021: nil;
31 December 2021: nil).
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 price related
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 49 and 50 of the Directors' Report
in the Company's Annual Report and Financial Statements for the year ended 31
December 2021.
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 2022 amounted to US$744,000 (six months ended 30 June 2021: US$918,000;
year ended 31 December 2021: US$1,726,000). At the period end, an amount of
US$751,000 was outstanding in respect of these fees (30 June 2021:
US$1,399,000; 31 December 2021: US$815,000).
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 2022 amounted to US$54,000 excluding VAT (six months ended
30 June 2021: US$65,000; year ended 31 December 2021: US$101,000). Marketing
fees of US$162,000 were outstanding at 30 June 2022 (30 June 2021: US$191,000;
31 December 2021: US$108,000).
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 2022, an amount of US$109,000 (30 June 2021: US$250,000; 31 December
2021: US$124,000) 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
The Board consists of five 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 £
47,800, the Chairman of the Audit Committee receives an annual fee of £36,700,
the Senior Independent Director and Chairman of the Remuneration Committee
receives an annual fee of £34,600 and each of the other Directors receives an
annual fee of £32,600.
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
13 September 30 June 2022
2022
Ordinary Ordinary
shares shares
Carolan Dobson (Chairman) 4,792 4,792
Craig Cleland 10,000 10,000
Mahrukh Doctor 686 686
Laurie Meister 2,915 2,915
Nigel Webber 5,000 5,000
13. CONTINENT LIABILITIES
There were no contingent liabilities at 30 June 2022 (30 June 2021: nil; 31
December 2021: nil).
14. PUBLICTION 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 2022 and
30 June 2021 has not been audited or reviewed by the Company's auditors.
The information for the year ended 31 December 2021 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 2022 in March 2023. 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 2023,
with the Annual General Meeting being held in May 2023.
FOR FURTHER INFORMATION PLEASE CONTACT:
Melissa Gallagher, Managing 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
14 September 2022
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.
END
(END) Dow Jones Newswires
September 14, 2022 07:16 ET (11:16 GMT)
Blackrock Latin American... (LSE:BRLA)
Historical Stock Chart
From Mar 2024 to Apr 2024
Blackrock Latin American... (LSE:BRLA)
Historical Stock Chart
From Apr 2023 to Apr 2024
