BlackRock Latin American Investment Trust
plc
(Legal Entity Identifier: UK9OG5Q0CYUDFGRX4151)
Information disclosed in accordance with Article 5 Transparency
Directive and DTR 4.2
Half Yearly Financial Results Announcement for Period Ended
30 June 2023
PERFORMANCE
RECORD
|
As
at
|
As
at
|
|
30
June
|
31
December
|
|
2023
|
2022
|
Net assets
(US$'000)1
|
177,535
|
148,111
|
Net asset
value per ordinary share (US$ cents)
|
602.86
|
502.95
|
Ordinary
share price (mid-market) (US$ cents)2
|
513.63
|
457.10
|
Ordinary
share price (mid-market) (pence)
|
404.00
|
380.00
|
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$ cents)3
|
25.8%
|
6.6%
|
Ordinary
share price (mid-market) (US$ cents)2,3
|
18.5%
|
4.7%
|
Ordinary
share price (mid-market) (pence)3
|
12.1%
|
18.0%
|
MSCI EM
Latin America Index (net return, on a US Dollar
basis)4
|
18.5%
|
8.9%
|
|
For
the
|
For
the
|
|
|
six
months
|
six
months
|
|
|
ended
|
ended
|
|
|
30
June
|
30
June
|
Change
|
|
2023
|
2022
|
%
|
Revenue
|
|
|
|
Net profit
on ordinary activities after taxation (US$'000)
|
4,494
|
6,767
|
-33.6
|
Revenue
earnings per ordinary share (US$ cents)
|
15.26
|
18.11
|
-15.7
|
Dividends
per ordinary share (US$ cents)
|
|
|
|
Quarter to
31 March
|
6.21
|
7.76
|
-20.0
|
Quarter to
30 June
|
7.54
|
5.74
|
+31.4
|
Total
dividends paid and payable
|
13.75
|
13.50
|
+1.9
|
PERFORMANCE
FROM 31 DECEMBER 2018 TO 30 JUNE 2023
|
Share
price
%
|
NAV
%
|
MSCI
EM Latin America Index (net basis)
%
|
2018
|
-6.9
|
-5.4
|
-6.6
|
2019
|
22.0
|
18.2
|
17.5
|
2020
|
-9.3
|
-14.5
|
-13.8
|
2021
|
-11.8
|
-12.5
|
-8.1
|
2022
|
4.7
|
6.6
|
8.9
|
2023*
|
18.5
|
25.8
|
18.5
|
Sources:
BlackRock Investment Management (UK) Limited and
Datastream.
Performance
figures are calculated in US Dollar terms with dividends
reinvested.
* Six month
performance to 30 June
2023.
1 The
change in net assets reflects the portfolio movements during the
period and dividends paid.
2 Based
on an exchange rate of US$1.27 to £1
at 30 June 2023 and US$1.20 to £1 at 31
December 2022, representing a change of 5.8% in the value of
the US Dollar
against British Pound Sterling.
3 Alternative
Performance Measures, see Glossary, contained within the Half
Yearly Financial Report.
4 The
Company's performance benchmark index (the MSCI EM Latin America
Index) may be calculated on either a gross or a net return basis.
Net return (NR) indices calculate the reinvestment of dividends net
of withholding taxes using the tax rates applicable to non-resident
institutional investors, and hence give a lower total return than
indices where calculations are on a gross basis (which assumes that
no withholding tax is suffered). As the Company is subject to
withholding tax rates for the majority of countries in which it
invests, the NR basis is felt to be the more accurate, appropriate,
consistent and fair comparison for the Company.
Chairman's Statement
Dear
Shareholder
I am pleased to present the Half Yearly Financial Report to
shareholders for the six months ended 30
June 2023. It is pleasing to note that the Company's net
asset value with dividends reinvested has outperformed the
benchmark by 7.3 percentage points over the period in US Dollar
terms.
In Sterling terms, the net asset value with dividends reinvested
rose by 18.8% over the same period and the benchmark rose by 12.1%.
The share price rose by 18.5% in US Dollar terms and increased by
12.1% in Sterling terms.
Overview
and performance
Latin American equity markets have outperformed both developed
markets and MSCI Emerging Markets indices over the period under
review with the MSCI EM Latin America Index up by 18.5%, compared
to the MSCI Emerging Markets Index that returned 4.9% and a rise in
the MSCI World Index of 15.1% (all in US Dollar terms
respectively). The Mexican economy has been a key beneficiary from
the shifting of global supply chains and coupled with a prudent
fiscal policy and a strong export sector, Mexico has replaced China as America's largest trade partner. In
Brazil the government's fiscal
policies proved to be more cautious than expected, inflation has
fallen to below 4% which has helped paved the way for interest rate
cuts. This resulted in a significant shift in investor sentiment
towards Brazil, especially in the
second quarter of 2023. From a country perspective, equity markets
in Mexico and Brazil performed best over the period under
review, up by 27.1% and 16.8% respectively, representing 83.5% of
the portfolio; Colombia was the
weakest equity market in the region down by 3.3%.
The Company's outperformance was largely driven by stock selection
in Brazil and Mexico. The portfolio was overweight in
domestic Brazil, positioning that
reflected the Investment Manager's view that interest rates were
excessively high. The Manager's expectation was for interest rates
to be cut this year; which has seen this increasingly being priced
by the market in Brazil which has
been a very strong contributor to the portfolio's returns.
Mexico also contributed
meaningfully, with real estate and consumer staples being the main
drivers. The real estate sector, supported by an increase in rental
income as more US companies moved their manufacturing operations
from China to Mexico, performed strongly. Mexico has benefitted significantly this year
from the "near-shoring" theme where US companies look to diversify
their supply chains and move production closer to home. At the
sector level, materials and industrials have been the outperformers
and energy and consumer staples were the biggest detractors.
Additional information on the main contributors to and detractors
from performance for the period under review is given in the
following Investment Manager's Report.
Dividends
declared in respect of the year to 30 June
2023
|
Dividend
|
Announcement
|
|
|
(US$
cents per share)
|
date
|
Pay
date
|
Quarter to
30 September 2022
|
6.08
|
3 October
2022
|
9 November
2022
|
Quarter to
31 December 20221
|
19.29
|
3 January
2023
|
8 February
2023
|
Quarter to
31 March 2023
|
6.21
|
3 April
2023
|
16 May
2023
|
Quarter to
30 June 2023
|
7.54
|
3 July
2023
|
11 August
2023
|
Total
|
39.12
|
|
|
1 Quarter to
31 December 2022 includes an
additional special dividend of 13.00
cents.
Revenue
return and dividends
Revenue
return for the six months ended 30 June
2023 was 15.26 cents per share
(2022: 18.11 cents per share). The
primary driver for this decrease is the reduction in dividends paid
by portfolio companies.
The Company
has declared dividends totalling 39.12
cents per share in respect of the twelve months to
30 June 2023 representing a yield of
7.6% (calculated based on a share price of 513.63 cents per share, equivalent to the
Sterling price of 404.00 pence per
share translated into cents at a rate of US$1.27 prevailing on 30
June 2023).
Under the
Company's dividend policy, dividends are calculated and paid
quarterly, based on 1.25% of the US Dollar
NAV at close of business on the last working day of March, June,
September and December respectively; additional information in
respect of the payment timetable is set out in the Annual Report
and Financial Statements. Dividends will be financed through a
combination of available net income in each financial year and
revenue and capital reserves. The dividends paid and declared by
the Company in the last twelve months have been funded from current
year revenue and brought forward revenue reserves.
As at
30 June 2023, a balance of
US$5.7 million
remained in revenue reserves. Dividends will be funded out of
capital reserves to the extent that current year revenue and
revenue reserves are fully utilised. The Board believes that this
removes pressure from the investment managers to seek a higher
income yield from the underlying portfolio itself which could
detract from total returns. The Board also believes the Company's
dividend policy will enhance demand for the Company's shares and
help to narrow the Company's discount, whilst maintaining the
portfolio's ability to generate attractive total
returns.
Discount
management and discount control mechanism
The Board
remains committed to taking appropriate action to ensure that the
Company's shares do not trade at a significant discount to their
prevailing NAV and have sought to reduce discount volatility by
offering shareholders a discount control mechanism covering the
four years to 31 December 2025. This
mechanism offers shareholders a tender
for 24.99% of the shares in issue excluding treasury shares
(at a tender
price reflecting the latest cum-income NAV less 2% and related
portfolio realisation costs) in the event that the continuation
vote to be put to the Company's AGM in 2026 is approved, where
either of the following conditions have been met:
(ii)
the
annualised total NAV return of the Company does not exceed the
annualised benchmark index (being the MSCI EM Latin America Index)
(net return, on a US Dollar basis) by more than 50 basis points
over the four year period from 1 January
2022 to 31 December
2025 (the Calculation Period); or
(ii)
the average
daily discount to the cum-income NAV exceeds 12% as calculated with
reference to the trading of the shares over the Calculation
Period.
In respect
of the above conditions, the Company's total NAV return on a
US Dollar
basis for the period from 1 January
2022 to 30 June
2023 was 21.5% on an annualised basis, outperforming the
annualised benchmark return of 18.6% for the same period by 2.9
percentage points (equivalent to 290 basis points (please see the
Glossary contained within the Half Yearly Report for more
information). The cum-income discount of the Company's ordinary
shares has averaged 12.1% for this period and ranged from a
discount of 6.8% to 16.3%, ending the period on a discount of 14.8%
at 30 June 2023.
The Company
has not bought back any shares during the six months ended
30 June
2023 and up to the date of publication of this
report.
Gearing
The Board's
view is that 105% of NAV is the neutral level of gearing over the
longer term and that gearing should be used actively in an
approximate range of plus or minus 10% around this as measured at
the time that gearing is instigated. The Board is pleased to note
that the Managers have used gearing actively throughout the period,
with a high of 108.9% in January
2023. The Company held net cash of 2.6% as at 30 June 2023 as the Manager took profits,
particularly in Brazil, after a
strong period of relative performance. Average gearing for the six
months under review was 104.5% (year to 31
December 2022: 108.7%).
Board
composition
Professor
Mahrukh Doctor, who had served on
the Board since 2009 and as Senior Independent Director since
March 2019, retired from the Board at
the Company's AGM in March 2023. The
Board thanks Professor Doctor for her many years of excellent
service, and wishes her the best for the future.
Outlook
Equity
markets in the Latin American region saw a very strong start to
2023 and Latin American equity markets remain attractively valued
on both an absolute and relative basis. The Latin American region
should have higher economic growth prospects than advanced
economies in the near future. Central banks in the region have
followed traditional monetary policies, unlike many developed
countries, so as inflation falls across the region, there is
potential for lower interest rates which in turn should stimulate
economic activity. The region is rich in natural resources,
including fossil fuels of crude oil and natural gas, creating
favourable supply and demand dynamics. It is also a major source of
copper and lithium, (critical materials for the green energy
revolution), as well as a key producer of a wide range of food
commodities. Latin America also
provides significant opportunities for direct investment as
governments and businesses globally re-think supply chain
configurations and seek to diversify risk.
The Board
remains optimistic for the outlook for Latin American
equities.
In spite of
major difficulties in other major emerging markets like
China and Russia, Latin
America continues to provide a bright and improving region
but political challenges remain.
Carolan Dobson
Chairman
29 September 2023
Investment Manager's Report
Market
overview
Latin America had a stellar first half of 2023, gaining
+18.5%, with all markets ending the period in positive territory,
bar Colombia (-3.3%). Mexico led the charge (+27.1%) and to the
surprise of many, even outperforming the MSCI USA Index (+16.8%) as well as emerging markets
more broadly (MSCI Emerging Markets Index +4.9%). This was due to
a prudent
fiscal policy and a strong export sector as the country replaced
China as America's largest trade
partner. Mexico has been a key
beneficiary from the shifting of global supply chains. Like most of
Latin America their prudent
monetary policy has been successful in tackling inflation.
Brazil was another outperformer
(+16.8%) as the government's fiscal policies proved to be more
prudent than expected, while inflation receded to below 4%, paving
the way for interest rate cuts. This resulted in a
significant shift in sentiment towards Brazil, especially in the second quarter.
Among the smaller markets, Peru
returned +15.3% and Chile +7.8%.
All performance figures are calculated in US Dollar terms with
dividends reinvested.
While the
majority of Mexico's
outperformance was in the first quarter, Brazil underperformed as uncertainty around
fiscal policy dominated sentiment early in the year. Negative
remarks by the newly appointed President Lula regarding high
interest rates set by the central bank created a standoff
between the two. Despite inflation trending down the central bank
kept interest rates unchanged as they were not given comfort around
fiscal sustainability by President Lula's leftist
government.
Elsewhere
in the region political volatility has been the common theme. In
Peru, social unrest triggered by
the arrest of President Pedro
Castillo in December 2022
continued to weigh on markets in the first half of 2023. The new
president remains unpopular and has struggled to form an effective
government. In Colombia politics
remain unstable and valuations have been at multi-year lows
following the negative reaction to the country's first ever
left-wing government.
The second
quarter saw a shift in sentiment towards Brazil, in part resulting from the release of
the highly anticipated fiscal framework proposed by the finance
minister Fernando Haddad. The
proposed new rules were well received as they were more orthodox
than expected by investors. The equity market continued to do well
in the following months as expectations for a monetary
easing cycle increased. This has also been supported by inflation
that has continued to trend lower, reaching 3.2%
in June.
Less uncertainty around the fiscal outlook and the downward trend
in inflation remains key for the central bank to start reducing
rates. Monetary policy easing is likely the most important support
for both the economy and the equity market.
Performance
review and positioning
The Company
outperformed its benchmark over the six month period ended
30 June 2023, returning +25.8% in US
Dollar terms. Over the same time horizon, the Company's benchmark,
the MSCI Latin America Index, returned +18.5% on a net basis in US
Dollar terms.
Our highest
conviction position in the portfolio was our overweight in domestic
Brazil. This positioning reflected
our view that interest rates, currently at 13.75% were excessively
high, and our expectation is for rates to be cut this year. In the
second quarter of this year we have seen this thesis increasingly
priced by the market and year-to-date our stock selection in
Brazil has been a very strong
contributor to the portfolio's returns. Mexico also contributed meaningfully, with
real estate and consumer staples the main drivers. The real estate
sector overall did very well, supported by an increase in rental
income as more US companies moved their manufacturing operations
from China to Mexico, while Argentina was the only country where the
portfolio saw negative returns. At the sector level, materials and
industrials have been the outperformers and energy and consumer
staples were the biggest detractors.
From a
single stock level, the position that contributed the most to
absolute returns was Mrv
Engenharia (Mrv),
a Brazilian
homebuilder. The shift in expectations regarding interest rate cuts
has helped the share price, as lower interest rates should increase
demand in housing via improved affordability. In addition,
Mrv is highly leveraged and lower rates would significantly ease
the interest expense burden and improve cash generation.
Separately, Mrv focuses on affordable housing for the low-income
segment, which is a key priority for the new administration under
Lula. Brazilian toll road operator CCR
was also a
sizeable positive contributor. CCR's share price increased on the
back of resilient operating trends that were reported in
mid-February. IRB
Brasil Resseguros,
a Brazilian
reinsurer, has also started to see a turnaround in their
underwriting cycle, helping the shares recover from depressed
levels. The positive development in profits have helped mitigate
capital raise worries that had been depressing the stock price.
Material sector names were also among the top contributors. These
included Cemex,
a Mexican
cement producer which outperformed supported by increasing cement
prices and strong Q1 2023 results. Our underweights in
Vale,
a Brazilian mining company, and Sociedad
Quimica y Minera (SQM), a Chilean
lithium producer for electric vehicles (EVs) contributed on
a relative
basis. Disappointing commodity demand in China was the driver for both companies'
underperformance. For SQM specifically, a weakening
demand for EVs in China led to a
sharp decline in lithium prices. The recent political developments
regarding state involvement in the lithium sector have also hurt
the share price, but in our view do not represent a material
fundamental change.
Our
overweight in Brazilian supermarket chain, Assai,
was the biggest detractor as the market became somewhat concerned
about whether the leveraged balance sheet could withstand a period
of lower food inflation. In addition, majority shareholder Casino
is facing financial difficulties itself and was forced to
significantly reduce its stake in Assai, creating a new supply of
shares to the market. Tenaris,
our off-benchmark holding in Argentina, underperformed. The weakness in the
stock has mainly been due to sensitivity to the oil price as the
company produces steel tubes and pipes for oil and gas companies.
Our underweight in Brazilian financials weighed on relative
returns.
Considering
the very strong performance of domestic Brazilian assets in the
second quarter (+20.7%) we started to trim our positions, and as a
result the weight in Brazil has
been somewhat reduced. We have reduced or exited positions where
our thesis has largely played out and the stocks have performed
well, such as toll road operator CCR, shopping mall Iguatemi and
financial names like B3,
the stock exchange and XP,
an investment manager. We have rotated some of the capital into
higher conviction names that have lagged the overall market rally
we have seen in recent months, such as PagSeguro
Digital. PagSeguro
Digital provides solutions for online payments, and while the fees
they charge their merchants are fixed their funding costs have been
going up with the rising interest rate. A decrease in the policy
rate should reduce their costs and boost revenues.
We also
locked in gains in Mexico
following the strong performance in the first quarter; we exited
our position in Vesta,
a real estate company that has been benefitting from US companies
moving their manufacturing operations from Asia to Mexico. Vesta is a name
that we have held for a long time, but that we currently see as
rather fairly valued as more investors have discovered the name.
We reduced
our position in FEMSA,
a convenience
store operator that had done very well, and we reduced our position
size in Cemex. We initiated a position
in Mag
Silver Corp, a silver
miner operating in Mexico, which
is ramping up its key asset this year and recently reached
commercial production. In addition, we started a position in
Ecopetrol,
an oil and gas company in Colombia, where the government has committed
to pay outstanding receivables that the government owes the
company. Amongst financials we switched from Credicorp
in
Peru to Bancolombia
in
Colombia due to more attractive
valuations.
We ended
the period overweight Argentina
and Panama as we are maintaining
exposure to off-benchmark names. We are underweight Mexico and Peru. At the sector level, we are overweight
consumer discretionary and health care, while being most
underweight in utilities and communication services.
|
|
Share price
%
|
NAV
%
|
MSCI EM
Latin America Index
(net return, on a
US Dollar basis)
%
|
Dec-22
|
|
100.00
|
100
|
100
|
Jan-23
|
|
107.34
|
109.97
|
109.87
|
Feb-23
|
|
100.87
|
101.94
|
103.06
|
Mar-23
|
|
99.36
|
102.32
|
103.93
|
Apr-23
|
|
100.93
|
106.26
|
106.72
|
May-23
|
|
106.10
|
111.56
|
105.81
|
Jun-23
|
|
118.52
|
125.75
|
118.52
|
Sources:
BlackRock Investment Management (UK) Limited and
Datastream.
Performance
figures are calculated in US Dollar terms, with dividends
reinvested, rebased to 100 as at 1 January
2023.
Outlook
The outlook
for the Mexican economy remains positive as it is a key beneficiary
from the re-shoring of global supply chains. Mexico remains defensive as both fiscal and
the current accounts are in order. While our view remains positive,
we have taken profits after a strong relative performance, solely
because we see even more upside in other Latin American markets
such as Brazil. In addition, we
believe that the Mexican economy will be relatively more sensitive
to a potential slowdown in economic activity in the US in response
to rising interest rates there.
We continue
to have a very positive view on Brazil, even though our thesis of slowing
inflation and sound fiscal policies has partially played out
already. While the market is now pricing in interest rate cuts,
these have not yet started, and the positive economic impact is yet
to come. In addition, while international investors have moved
capital to Brazil, local equity
flows have continued to be negative year-to-date as equity markets
struggle to compete with a risk-free rate of return of close to
14%. We therefore see Brazil as
very early stage in its positive economic cycle and continue to see
further upside over the next 12-18 months.
We have significantly scaled back our positions after the strong
performance, but domestic Brazil
remains a dominant bet in the portfolio.
Political
uncertainty has been the overriding market sentiment in other
countries in Latin America. We
believe this will continue to impact market performance, and we
have a cautious view on Chile,
Colombia and Peru. However, despite the political headwinds
in Colombia, we are seeing a slow
improvement in macroeconomics and believe it can become an
attractive market again once the political climate
stabilises.
In a global
context, we remain optimistic about Latin
America as a whole. Central banks have been proactive in
increasing interest rates, which has now resulted in falling
inflation. Thus, we will likely see a monetary easing cycle in most
countries in Latin America, which
should support both economic activity and asset prices. In addition
to this normal economic cycle, the whole region is benefitting from
being somewhat isolated from global geopolitical conflicts. We
believe that this will lead to both an increase in foreign direct
investment and an increase in allocation from investors across the
region. As such we are optimistic about the outlook for Latin
American stocks over the next 12-24 months.
Sam Vecht
Christoph Brinkmann
BlackRock
Investment Management (UK) Limited
29 September 2023
PORTFOLIO
ANALYSIS
As at
30 June 2023
GEOGRAPHIC
WEIGHTING (GROSS MARKET EXPOSURE) VS MSCI EM LATIN AMERICA INDEX
Country
|
% of net assets
|
MSCI EM Latin America Index
|
Brazil
|
58.3
|
57.9
|
Mexico
|
25.2
|
31.5
|
Chile
|
6.0
|
6.4
|
Argentina
|
3.9
|
0.0
|
Colombia
|
2.5
|
1.1
|
Panama
|
1.5
|
0.0
|
Peru
|
0.0
|
3.1
|
Sources:
BlackRock and MSCI.
SECTOR
ALLOCATION (GROSS MARKET EXPOSURE) VS MSCI EM LATIN AMERICA INDEX
Sector
|
% of net assets
|
MSCI EM Latin America Index
|
Financials
|
26.7
|
25.0
|
Materials
|
18.0
|
21.4
|
Consumer Staples
|
15.1
|
16.7
|
Energy
|
12.1
|
9.9
|
Industrials
|
8.8
|
9.1
|
Consumer Discretionary
|
5.6
|
1.7
|
Health Care
|
4.3
|
1.5
|
Communication Services
|
2.4
|
7.1
|
Real Estate
|
2.3
|
0.8
|
Information Technology
|
2.1
|
0.5
|
Utilities
|
0.0
|
6.3
|
Sources:
BlackRock and MSCI.
Ten largest investments
As at
30 June 2023
1 Petrobrás
(2022:
2nd)
Energy
Market
value - American depositary receipt (ADR): US$7,042,000
Market
value - Preference shares ADR: US$5,837,000
Market
value - Ordinary shares: US$2,958,000
Share
of investments: 9.2% (2022: 7.1%)
is a
Brazilian integrated oil and gas group, operating in the
exploration and production, refining, marketing, transportation,
petrochemicals, oil product distribution, natural gas, electricity,
chemical-gas and biofuel segments of the
industry. The group controls significant assets across Africa, North and South America, Europe and Asia, with a majority
of production based in Brazil.
2 Banco
Bradesco (2022:
6th)
Financials
Market
value - ADR: US$8,601,000
Market
value - Preference shares: US$3,175,000
Share
of investments: 6.8% (2022: 5.1%)
is one of
Brazil's largest private sector
banks. The bank divides its operations into two main areas -
banking and insurance services and management of complementary
private pension plans and savings bonds.
3 Vale
(2022:
1st)
Materials
Market
value - American depositary share (ADS): US$10,099,000
Share
of investments: 5.8% (2022: 9.5%)
is one of
the world's largest mining groups, with other business in
logistics, energy and steelmaking. Vale is the world's largest
producer of iron ore and nickel but also operates in the coal,
copper, manganese and ferro-alloys sectors.
4 Grupo
Financiero Banorte (2022:
8th)
Financials
Market
value - Ordinary shares: US$10,091,000
Share
of investments: 5.8% (2022: 4.8%)
is a
Mexican banking and financial services holding company and is one
of the largest financial groups in the country. It operates as a
universal bank and provides a wide array of products and services
through its broker dealer, annuities and insurance companies,
retirements savings funds (Afore), mutual funds, leasing and
factoring company and warehousing.
5 FEMSA
(2022:
3rd)
Consumer
Staples
Market
value - ADR: US$9,451,000
Share
of investments: 5.5% (2022: 6.0%)
is a
Mexican beverages group which engages in the production,
distribution, and marketing of beverages. The firm also produces,
markets, sells, and distributes Coca-Cola trademark beverages,
including sparkling beverages.
6 B3
(2022:
5th)
Financials
Market
value - Ordinary shares: US$8,815,000
Share
of investments: 5.1% (2022: 5.2%)
is a stock
exchange located in Brazil,
providing trading services in an exchange and OTC environment. B3's
scope of activities include the creation and management of trading
systems, clearing, settlement, deposit and registration for the
main classes of securities, from equities and corporate fixed
income securities to currency derivatives, structured transactions
and interest rates, and agricultural commodities. B3 also acts as a
central counterparty for most of the trades carried out in its
markets and offers central depository and registration
services.
7 AmBev
(2022:
4th)
Consumer
Staples
Market
value - ADR: US$7,698,000
Share
of investments: 4.5% (2022: 5.3%)
is a
Brazilian brewing group which engages in the production,
distribution, and sale of beverages. Its products include beer,
carbonated soft drinks and other non-alcoholic and non-carbonated
products with operations in Brazil, Central
America, the Caribbean
(CAC) and Canada.
8 Itaú
Unibanco (2022:
7th)
Financials
Market
value - ADR: US$6,128,000
Share
of investments: 3.5% (2022: 4.9%)
is a
Brazilian financial services group that services individual and
corporate clients in Brazil and
abroad. Itaú Unibanco was formed through the merger of Banco Itaú
and Unibanco in 2008. It operates in the retail banking and
wholesale banking segments.
9 Gerdau
(2022:
22nd)
Materials
Market
value - Preference shares: US$6,079,000
Share
of investments: 3.5% (2022: 1.9%)
is a
Brazilian long steel producer. Gerdau's North American business
divisions manufacture long and special steel products, such as long
carbon steel, long special steel, flat steel and forged and cast
parts. These products are used for the agricultural, automotive,
construction, distribution, energy, industrial and mining
markets.
10 Hapvida
Participacoes (2022:
9th)
Health
Care
Market
value - Ordinary shares: US$5,392,000
Share
of investments: 3.1% (2022: 2.8%)
is a
Brazilian holding healthcare company. The company operates with a
vertical service structure and is one of the largest healthcare
solutions providers in the country. The company provides medical
assistance and dental care plans and their operating structure
includes facilities such as hospitals, walk-in emergencies, clinics
or diagnostic imaging units.
All
percentages reflect the value of the holding as a percentage of
total investments. For this purpose, where more than one class of
securities is held, these have been aggregated. The percentages in
brackets represent the value of the holding as at 31 December 2022.
Together,
the ten largest investments represent 52.8% of the total
investments (ten largest investments as at 31 December
2022: 53.5%).
Portfolio of investments
as at
30 June 2023
|
Market
|
|
|
|
value
|
|
%
of
|
|
US$'000
|
|
investments
|
Brazil
|
|
|
|
Petrobrás -
ADR
|
7,042
|
}
|
9.2
|
Petrobrás -
preference shares ADR
|
5,837
|
Petrobrás
|
2,958
|
Banco
Bradesco - ADR
|
8,601
|
}
|
6.8
|
Banco
Bradesco - Preference Shares
|
3,175
|
Vale -
ADS
|
10,099
|
|
5.8
|
B3
|
8,815
|
|
5.1
|
AmBev -
ADR
|
7,698
|
|
4.5
|
Itaú
Unibanco - ADR
|
6,128
|
|
3.5
|
Gerdau -
Preference Shares
|
6,079
|
|
3.5
|
Hapvida
Participacoes
|
5,392
|
|
3.1
|
Arezzo
Industria e Comercio
|
4,794
|
|
2.8
|
Rumo
|
4,315
|
|
2.5
|
Sendas
Distribuidora
|
3,795
|
|
2.2
|
Mrv
Engenharia
|
3,512
|
|
2.0
|
Pagseguro
Digital
|
3,346
|
|
1.9
|
IRB Brasil
Resseguros
|
2,450
|
|
1.4
|
XP
|
2,382
|
|
1.4
|
Rede D'or
Sao Luiz
|
2,204
|
|
1.3
|
Movida
Participações
|
1,964
|
|
1.1
|
EZTEC
Empreendimentos e Participacoes
|
1,539
|
|
0.8
|
CCR
|
1,369
|
|
0.8
|
Localiza
Rent A Car
|
21
|
|
0.1
|
|
103,515
|
|
59.8
|
Mexico
|
|
|
|
Grupo
Financiero Banorte
|
10,091
|
|
5.8
|
FEMSA -
ADR
|
9,451
|
|
5.5
|
Grupo
Aeroportuario del Pacifico - ADS
|
5,060
|
|
2.9
|
America
Movil
|
4,331
|
|
2.5
|
Fibra Uno
Administracion - REIT
|
4,124
|
|
2.4
|
Grupo
México
|
3,776
|
|
2.2
|
MAG Silver
Corp
|
3,093
|
|
1.8
|
Walmart de
México y Centroamérica
|
2,901
|
|
1.7
|
Cemex -
ADR
|
1,932
|
|
1.1
|
|
44,759
|
|
25.9
|
Chile
|
|
|
|
Sociedad
Química Y Minera - ADR
|
4,246
|
|
2.5
|
Cia
Cervecerias Unidas
|
1,723
|
}
|
1.7
|
Cia
Cervecerias Unidas - ADR
|
1,255
|
Empresas
CMPC
|
2,809
|
|
1.6
|
Banco
Santander-Chile - ADR
|
581
|
|
0.3
|
|
10,614
|
|
6.1
|
Argentina
|
|
|
|
Globant
|
3,742
|
|
2.2
|
Tenaris
|
3,120
|
|
1.8
|
|
6,862
|
|
4.0
|
Colombia
|
|
|
|
Ecopetrol
ADR
|
2,599
|
|
1.5
|
Bancolombia
|
1,899
|
|
1.1
|
|
4,498
|
|
2.6
|
Panama
|
|
|
|
Copa
Holdings
|
2,725
|
|
1.6
|
|
2,725
|
|
1.6
|
Total
Investments
|
172,973
|
|
100.0
|
All
investments are in equity shares unless otherwise
stated.
The total
number of investments held at 30 June
2023 was 42 (31 December 2022:
40). At 30 June 2023, the Company did
not hold any equity interests comprising more than 3% of any
company's share capital (31 December
2022: nil).
Interim Management Report and Responsibility
Statement
The
Chairman's Statement and the Investment Manager's Report give
details of the events which have occurred during the period and
their impact on the financial statements.
Principal
risks and uncertainties
The
principal risks faced by the Company can be divided into various
areas as follows:
· Counterparty;
· Investment
performance;
· Income/dividend;
· Legal
and regulatory compliance;
· Operational;
· Market;
· Financial;
and
· Marketing.
The Board
reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Financial Statements for the year
ended 31 December 2022. A detailed
explanation can be found on pages 41 to 45 and in note 16 on pages
91 to 98 of the Annual Report and Financial Statements which are
available on the website maintained by BlackRock at
www.blackrock.com/uk/brla.
The Board
and the Investment Manager continue to monitor investment
performance in line with the Company's investment objectives, and
the operations of the Company and the publication of net asset
values are continuing.
In the view
of the Board, there have not been any changes to the fundamental
nature of the principal risks and uncertainties
since the
previous report and these are equally applicable to the remaining
six months of the financial year as they were to the
six months
under review.
Going
concern
The Board
is mindful of the risk that unforeseen or unprecedented events
including (but not limited to) heightened geopolitical tensions
such as the war in Ukraine, high
inflation and the current cost of living crisis has had a
significant impact on global markets. Notwithstanding this
significant degree of uncertainty, the Directors, having considered
the nature and liquidity of the portfolio, the Company's investment
objective, the Company's projected income and expenditure, are
satisfied that the Company has adequate resources to continue in
operational existence for the foreseeable future and is financially
sound.
Related
party disclosure and transactions with the Investment
Manager
BlackRock
Fund Managers Limited (BFM) was appointed as the Company's AIFM
(Alternative Investment Fund Manager) with effect from 2 July 2014. BFM has (with the Company's consent)
delegated certain portfolio and risk management services, and other
ancillary services, to BlackRock Investment Management (UK) Limited
(BIM (UK)). Both BFM and
BIM (UK) are regarded as related
parties under the Listing Rules. Details of the fees payable are
set out in note 11
to the financial statements below.
The related
party transactions with the Directors are set out in note 12 to the
financial statements below.
Directors'
Responsibility Statement
The
Disclosure Guidance and Transparency Rules (DTR) of the UK Listing
Authority require the Directors to confirm their responsibilities
in relation to the preparation and publication of the Interim
Management Report and Financial Statements.
The
Directors confirm to the best of their knowledge and belief
that:
· the
condensed set of financial statements contained within the Half
Yearly Financial Report has been prepared in accordance with the
applicable UK Accounting Standard FRS 104
Interim Financial Reporting; and
· the
Interim Management Report, together with the Chairman's Statement
and the Investment Manager's Report, include a fair review of the
information required by 4.2.7R and 4.2.8R of the Financial Conduct
Authority's (FCA) Disclosure Guidance and Transparency
Rules.
The Half
Yearly Financial Report has not been audited or reviewed by the
Company's Auditor.
The Half
Yearly Financial Report was approved by the Board on 29 September 2023 and the above Responsibility
Statement was signed on its behalf by the Chairman.
CAROLAN DOBSON
For and on
behalf of the Board
29 September 2023
Income Statement
for the six
months ended 30 June 2023
|
|
Six
months ended 30 June 2023
(unaudited)
|
Six
months ended 30 June 2022
(unaudited)
|
Year
ended 31 December 2022
(audited)
|
|
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
Notes
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
Gains/(losses)
on investments held
|
|
|
|
|
|
|
|
|
|
|
at
fair value through profit or loss
|
|
-
|
33,031
|
33,031
|
-
|
(8,655)
|
(8,655)
|
-
|
1,258
|
1,258
|
Gains/(losses)
on foreign exchange
|
|
-
|
25
|
25
|
-
|
(231)
|
(231)
|
-
|
(183)
|
(183)
|
Income
from investments held
|
|
|
|
|
|
|
|
|
|
|
at
fair value through profit or loss
|
2
|
5,503
|
-
|
5,503
|
7,599
|
-
|
7,599
|
15,438
|
-
|
15,438
|
Other
income
|
2
|
21
|
-
|
21
|
18
|
-
|
18
|
21
|
-
|
21
|
Total
income/(loss)
|
|
5,524
|
33,056
|
38,580
|
7,617
|
(8,886)
|
(1,269)
|
15,459
|
1,075
|
16,534
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
Investment
management fee
|
3
|
(161)
|
(482)
|
(643)
|
(186)
|
(558)
|
(744)
|
(333)
|
(999)
|
(1,332)
|
Other
operating expenses
|
4
|
(382)
|
(7)
|
(389)
|
(308)
|
(6)
|
(314)
|
(609)
|
(17)
|
(626)
|
Total
operating expenses
|
|
(543)
|
(489)
|
(1,032)
|
(494)
|
(564)
|
(1,058)
|
(942)
|
(1,016)
|
(1,958)
|
Net
profit/(loss) on ordinary
|
|
|
|
|
|
|
|
|
|
|
activities
before finance costs
|
|
|
|
|
|
|
|
|
|
|
and
taxation
|
|
4,981
|
32,567
|
37,548
|
7,123
|
(9,450)
|
(2,327)
|
14,517
|
59
|
14,576
|
Finance
costs
|
|
(43)
|
(128)
|
(171)
|
(30)
|
(90)
|
(120)
|
(81)
|
(243)
|
(324)
|
Net
profit/(loss) on ordinary
|
|
|
|
|
|
|
|
|
|
|
activities
before taxation
|
|
4,938
|
32,439
|
37,377
|
7,093
|
(9,540)
|
(2,447)
|
14,436
|
(184)
|
14,252
|
Taxation
(charge)/credit
|
|
(444)
|
-
|
(444)
|
(326)
|
11
|
(315)
|
(594)
|
11
|
(583)
|
Net
profit/(loss) on ordinary
|
|
|
|
|
|
|
|
|
|
|
activities
after taxation
|
|
4,494
|
32,439
|
36,933
|
6,767
|
(9,529)
|
(2,762)
|
13,842
|
(173)
|
13,669
|
Earnings/(loss)
per ordinary
|
|
|
|
|
|
|
|
|
|
|
share
(US$ cents)
|
7
|
15.26
|
110.15
|
125.41
|
18.11
|
(25.50)
|
(7.39)
|
41.48
|
(0.52)
|
40.96
|
The total
columns of this statement represent the Company's profit and loss
account. The supplementary revenue and capital accounts are both
prepared under guidance published by the Association of Investment
Companies (AIC). All items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the period. All income is attributable to the equity holders
of the Company.
The net
profit/(loss) on ordinary activities for the period disclosed above
represents the Company's total comprehensive
income/(loss).
Statement of Changes in Equity
for the six
months ended 30 June 2023
|
|
Called
|
Share
|
Capital
|
Non-
|
|
|
|
|
|
up
share
|
premium
|
redemption
|
distributable
|
Capital
|
Revenue
|
|
|
|
capital
|
account
|
reserve
|
reserve
|
reserves
|
reserve
|
Total
|
|
Note
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
For
the six months ended 30 June 2023
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
At 31
December 2022
|
|
3,163
|
11,719
|
5,824
|
4,356
|
114,343
|
8,706
|
148,111
|
Total
comprehensive income:
|
|
|
|
|
|
|
|
|
Net
profit for the period
|
|
-
|
-
|
-
|
-
|
32,439
|
4,494
|
36,933
|
Transaction
with owners, recorded
|
|
|
|
|
|
|
|
|
directly
to equity:
|
|
|
|
|
|
|
|
|
Dividends
paid1
|
5
|
-
|
-
|
-
|
-
|
-
|
(7,509)
|
(7,509)
|
At
30 June 2023
|
|
3,163
|
11,719
|
5,824
|
4,356
|
146,782
|
5,691
|
177,535
|
|
|
|
|
|
|
|
|
|
For
the six months ended 30 June 2022
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
At 31
December 2021
|
|
4,144
|
11,719
|
4,843
|
4,356
|
165,947
|
3,829
|
194,838
|
Total
comprehensive (loss)/income:
|
|
|
|
|
|
|
|
|
Net
(loss)/profit for the period
|
|
-
|
-
|
-
|
-
|
(9,529)
|
6,767
|
(2,762)
|
Transaction
with owners, recorded
|
|
|
|
|
|
|
|
|
directly
to equity:
|
|
|
|
|
|
|
|
|
Tender
offer2
|
|
(981)
|
-
|
981
|
-
|
(51,017)
|
-
|
(51,017)
|
Tender
offer costs
|
|
-
|
-
|
-
|
-
|
(376)
|
-
|
(376)
|
Dividends
paid3
|
5
|
-
|
-
|
-
|
-
|
-
|
(5,484)
|
(5,484)
|
At
30 June 2022
|
|
3,163
|
11,719
|
5,824
|
4,356
|
105,025
|
5,112
|
135,199
|
For
the year ended 31 December
|
|
|
|
|
|
|
|
|
2022
(audited)
|
|
|
|
|
|
|
|
|
At 31
December 2021
|
|
4,144
|
11,719
|
4,843
|
4,356
|
165,947
|
3,829
|
194,838
|
Total
comprehensive (loss)/income:
|
|
|
|
|
|
|
|
|
Net
(loss)/profit for the year
|
|
-
|
-
|
-
|
-
|
(173)
|
13,842
|
13,669
|
Transactions
with owners, recorded
|
|
|
|
|
|
|
|
|
directly
to equity:
|
|
|
|
|
|
|
|
|
Tender
offer2
|
|
-
|
-
|
-
|
-
|
(51,017)
|
-
|
(51,017)
|
Tender
offer cost
|
|
-
|
-
|
-
|
-
|
(414)
|
-
|
(414)
|
Cancellation
of shares
|
|
(981)
|
-
|
981
|
-
|
-
|
-
|
-
|
Dividends
paid4
|
5
|
-
|
-
|
-
|
-
|
-
|
(8,965)
|
(8,965)
|
At
31 December 2022
|
|
3,163
|
11,719
|
5,824
|
4,356
|
114,343
|
8,706
|
148,111
|
1Quarterly
dividend of 6.29 cents per share for
the year ended 31 December 2022,
declared on 3 January 2023 and paid
on 8 February
2023; special dividend of 13.00
cents per share for the year ended 31
December 2022, declared on 3 January
2023 and paid on 8 February
2023; and quarterly dividend of 6.21
cents per share for the year ending 31 December 2023, declared on 3 April 2023 and paid on 16 May 2023.
2On
26 May 2022, the Company repurchased
and subsequently cancelled 9,810,979 shares. The price at which
tendered shares were repurchased was 417.09
pence per share.
3Quarterly
dividend of 6.21 cents per share for
the year ended 31 December 2021,
declared on 4 January 2022 and paid
on 8 February
2022; and quarterly dividend of 7.76
cents per share for the year ended 31
December 2022, declared on 1 April
2022 and paid on 16 May
2022.
4Quarterly
dividend of 6.21 cents per share for
the year ended 31 December 2021,
declared on 4 January 2022 and paid
on 8 February
2022; quarterly dividend of 7.76
cents per share for the year ended 31
December 2022, declared on 1 April
2022 and paid on 16 May
2022; quarterly dividend of 5.74
cents per share for the year ended 31
December 2022, declared on 1 July
2022 and paid on 12 August
2022; and quarterly dividend of 6.08
cents per share, declared on 3
October 2022 and paid on 9 November
2022.
For
information on the Company's distributable reserves, please refer
to note 9 below.
Balance Sheet
as at
30 June 2023
|
|
30
June
|
30
June
|
31
December
|
|
|
2023
|
2022
|
2022
|
|
|
(unaudited)
|
(unaudited)
|
(audited)
|
|
Notes
|
US$'000
|
US$'000
|
US$'000
|
Fixed
assets
|
|
|
|
|
Investments
held at fair value through profit or loss
|
|
172,973
|
148,457
|
158,149
|
Current
assets
|
|
|
|
|
Debtors
|
|
1,671
|
1,217
|
1,572
|
Cash and
cash equivalents
|
|
4,076
|
58
|
160
|
Total
current assets
|
|
5,747
|
1,275
|
1,732
|
Creditors
- amounts falling due within one year
|
|
|
|
|
Bank
overdraft
|
|
-
|
(12,993)
|
(10,731)
|
Other
creditors
|
|
(1,161)
|
(1,516)
|
(1,015)
|
Total
current liabilities
|
|
(1,161)
|
(14,509)
|
(11,746)
|
Net
current assets/(liabilities)
|
|
4,586
|
(13,234)
|
(10,014)
|
Net
current assets
|
|
177,559
|
135,223
|
148,135
|
Creditors
- amounts falling due after more than one year
|
|
|
|
|
Non-equity
redeemable shares
|
6
|
(24)
|
(24)
|
(24)
|
|
|
(24)
|
(24)
|
(24)
|
Net
assets
|
|
177,535
|
135,199
|
148,111
|
Capital
and reserves
|
|
|
|
|
Called up
share capital
|
8
|
3,163
|
3,163
|
3,163
|
Share
premium account
|
|
11,719
|
11,719
|
11,719
|
Capital
redemption reserve
|
|
5,824
|
5,824
|
5,824
|
Non-distributable
reserve
|
|
4,356
|
4,356
|
4,356
|
Capital
reserves
|
|
146,782
|
105,025
|
114,343
|
Revenue
reserve
|
|
5,691
|
5,112
|
8,706
|
Total
shareholders' funds
|
7
|
177,535
|
135,199
|
148,111
|
Net
asset value per ordinary share (US$ cents)
|
7
|
602.86
|
459.10
|
502.95
|
Statement of Cash Flows
for the
year ended 30 June 2023
|
Six
months
|
Six
months
|
Year
|
|
ended
|
ended
|
ended
|
|
30
June
|
30
June
|
31
December
|
|
2023
|
2022
|
2022
|
|
(unaudited)
|
(unaudited)
|
(audited)
|
|
US$'000
|
US$'000
|
US$'000
|
Operating
activities
|
|
|
|
Net
profit/(loss) on ordinary activities before taxation
|
37,377
|
(2,447)
|
14,252
|
Add back
finance costs
|
171
|
120
|
324
|
(Gains)/losses
on investments held at fair value through profit or loss
|
(33,031)
|
8,655
|
(1,258)
|
(Gains)/losses
on foreign exchange
|
(25)
|
231
|
183
|
Sales of
investments held at fair value through profit or loss
|
65,988
|
92,179
|
123,691
|
Purchases
of investments held at fair value through profit or loss
|
(47,848)
|
(37,120)
|
(68,345)
|
Increase in
other debtors
|
(93)
|
(751)
|
(1,100)
|
Increase/(decrease)
in other creditors
|
207
|
209
|
(304)
|
Taxation on
investment income
|
(444)
|
(326)
|
(594)
|
Net
cash generated from operating activities
|
22,302
|
60,750
|
66,849
|
Financing
activities
|
|
|
|
Interest
paid
|
(171)
|
(120)
|
(324)
|
Tender
offer
|
-
|
(51,017)
|
(51,017)
|
Tender
costs paid
|
-
|
(316)
|
(414)
|
Dividends
paid
|
(7,509)
|
(5,484)
|
(8,965)
|
Net
cash used in financing activities
|
(7,680)
|
(56,937)
|
(60,720)
|
Increase
in cash and cash equivalents
|
14,622
|
3,813
|
6,129
|
Cash and
cash equivalents at the beginning of the period/year
|
(10,571)
|
(16,517)
|
(16,517)
|
Effect of
foreign exchange rate changes
|
25
|
(231)
|
(183)
|
Cash
and cash equivalents at the end of the
period/year
|
4,076
|
(12,935)
|
(10,571)
|
Comprised
of:
|
|
|
|
Cash at
bank
|
4,076
|
58
|
160
|
Bank
overdraft
|
-
|
(12,993)
|
(10,731)
|
|
4,076
|
(12,935)
|
(10,571)
|
Notes to the financial statements
for the six
months ended 30 June 2023
1. Principal
activity and basis of preparation
The
principal activity of the Company is that of an investment trust
company within the meaning of Section 1158 of the Corporation Tax
Act 2010.
The
financial statements of the Company are prepared on a going concern
basis in accordance with Financial Reporting Standard 104 Interim
Financial Reporting (FRS 104) applicable in the United Kingdom and Republic of Ireland and the revised Statement
of Recommended Practice - Financial Statements of Investment Trusts
Companies and Venture Capital Trusts (SORP) issued by the
Association of Investment Companies (AIC) in October 2019, and updated in July 2022, and the provisions of the Companies
Act 2006.
The
accounting policies and estimation techniques applied for the
condensed set of financial statements are as set out in the
Company's Annual Report and Financial Statements for the year ended
31 December
2022.
2. Income
|
Six
months
|
Six
months
|
Year
|
|
ended
|
ended
|
ended
|
|
30
June
|
30
June
|
31
December
|
|
2023
|
2022
|
2022
|
|
(unaudited)
|
(unaudited)
|
(audited)
|
|
US$'000
|
US$'000
|
US$'000
|
Investment
income:
|
|
|
|
Overseas
dividends
|
5,261
|
7,066
|
14,515
|
Overseas
REIT distributions
|
212
|
254
|
421
|
Overseas
special dividends
|
30
|
258
|
480
|
Fixed
interest income
|
-
|
21
|
22
|
|
5,503
|
7,599
|
15,438
|
Other
income:
|
|
|
|
Deposit
interest
|
21
|
18
|
21
|
Total
income
|
5,524
|
7,617
|
15,459
|
Dividends
and interest received in cash during the period amounted to
US$5,058,000 and US$21,000 (six months ended 30 June
2022: US$6,382,000 and
US$42,000; year ended 31 December 2022: US$14,413,000 and US$45,000).
There were
no special dividends recognised in capital in the period (six
months ended 30 June 2022: US$nil;
year ended 31 December
2022: US$nil).
3. Investment
management fee
|
Six
months ended
30
June 2023
|
Six
months ended
30
June 2022
|
Year
ended
31
December 2022
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(audited)
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
Investment
management fee
|
161
|
482
|
643
|
186
|
558
|
744
|
333
|
999
|
1,332
|
Total
|
161
|
482
|
643
|
186
|
558
|
744
|
333
|
999
|
1,332
|
Under the
terms of the investment management agreement, BFM is entitled to a
fee of 0.80% per annum based on the Company's daily Net Asset Value
(NAV). The fee is levied quarterly.
The
investment management fee is allocated 25% to the revenue account
and 75% to the capital account of the Income Statement. There is no
additional fee for company secretarial and administration
services.
4. Other
operating expenses
|
Six
months
|
Six
months
|
Year
|
|
ended
|
ended
|
ended
|
|
30
June
|
30
June
|
31
December
|
|
2023
|
2022
|
2022
|
|
(unaudited)
|
(unaudited)
|
(audited)
|
|
US$'000
|
US$'000
|
US$'000
|
Allocated
to revenue:
|
|
|
|
Custody
fee
|
15
|
23
|
35
|
Depositary
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
|
1 All
expenses other than depositary fees are paid in Sterling and are
therefore subject to exchange rate fluctuations.
2 No
non-audit services are provided by the Company's
auditors.
3 Relates
to prior year accrual for AIC fees and miscellaneous fees written
back during the six month period ended 30
June 2023 (six months ended 30 June
2022: postage and printing fees and other administration
costs; year ended 31 December 2022:
postage and printing fees, broker fees and other administration
costs).
4 For
the six month period ended 30 June
2023, expenses of US$7,000
(six months ended 30 June 2022:
US$6,000; year ended 31 December 2022: US$17,000) were charged to the capital account of
the Income Statement. These relate to transaction costs charged by
the custodian on sale and purchase trades.
The direct
transaction costs incurred on the acquisition of investments
amounted to US$51,000 for the six
months ended 30 June
2023 (six months ended 30 June
2022: US$60,000; year ended
31 December 2022: US$93,000). Costs relating to the disposal of
investments amounted to US$83,000 for
the six months ended 30 June 2023
(six months ended 30 June 2022:
US$86,000; year ended 31 December 2022: US$119,000). All transaction costs have been
included within the capital reserves.
5. Dividends
The
Company's cum-income US Dollar NAV at 31
March 2023 was 496.41 cents
per share, and the Directors declared a first quarterly interim
dividend of 6.21 cents per share. The
dividend was paid on 16 May 2023 to
holders of ordinary shares on the register at the close of business
on 14 April 2023.
In
accordance with FRS 102 Section 32 Events After the End of the
Reporting Period, the final dividend payable on ordinary shares is
recognised as a liability when approved by shareholders. Interim
dividends are recognised only when paid.
Dividends
on equity shares paid during the period were:
|
Six
months
|
Six
months
|
Year
|
|
ended
|
ended
|
ended
|
|
30
June
|
30
June
|
31
December
|
|
2023
|
2022
|
2022
|
|
(unaudited)
|
(unaudited)
|
(audited)
|
|
US$'000
|
US$'000
|
US$'000
|
Quarter to
31 December 2021 - dividend of 6.21 cents
|
-
|
2,438
|
2,438
|
Quarter to
31 March 2022 - dividend of 7.76 cents
|
-
|
3,046
|
3,047
|
Quarter to
30 June 2022 - dividend of 5.74 cents
|
-
|
-
|
1,690
|
Quarter to
30 September 2022 - dividend of 6.08 cents
|
-
|
-
|
1,790
|
Quarter to
31 December 2022 - dividend of 6.29 cents
|
1,852
|
-
|
-
|
Special
dividend for year to 31 December 2022 - 13.00 cents
|
3,828
|
-
|
-
|
Quarter to
31 March 2023 - dividend of 6.21 cents
|
1,829
|
-
|
-
|
|
7,509
|
5,484
|
8,965
|
6. Creditors
- amounts falling due after more than one year
|
As
at
|
As
at
|
As
at
|
|
30
June
|
30
June
|
31
December
|
|
2023
|
2022
|
2022
|
|
(unaudited)
|
(unaudited)
|
(audited)
|
|
US$'000
|
US$'000
|
US$'000
|
Non-equity
redeemable shares
|
24
|
24
|
24
|
|
24
|
24
|
24
|
At
30 June 2023 the Company had net
surplus management expenses of US$868,000 (30 June
2022: US$1,030,000;
31 December
2022: US$868,000) and a
non-trade loan relationship deficit of US$1,606,000 (30 June
2022: US$1,308,000;
31 December
2022: US$1,606,000). A
deferred tax asset was not recognised in the period ended
30 June 2023 or in the year ended
31 December 2022 as it was unlikely
that there would be sufficient future taxable profits to utilise
these expenses.
Non-equity
redeemable shares
The
redeemable shares of £1 each carry the right to receive a fixed
dividend at the rate of 0.10% per annum on the nominal amount
thereof. They are capable of being redeemed by the Company at any
time and confer no rights to receive notice of, attend or vote at
general meetings except where the rights of holders are to be
varied or abrogated. On a winding up, the capital paid up on such
shares ranks pari passu with, and in proportion to, any amounts of
capital paid to the holders of ordinary shares, but does not confer
any further right to participate in the surplus assets of the
Company.
7. Earnings
and net asset value per ordinary share
Revenue,
capital earnings/(loss) and net asset value per ordinary share are
shown below and have been calculated using the
following:
|
Six
months
|
Six
months
|
Year
|
|
ended
|
ended
|
ended
|
|
30
June
|
30
June
|
31
December
|
|
2023
|
2022
|
2022
|
|
(unaudited)
|
(unaudited)
|
(audited)
|
Net revenue
profit attributable to ordinary shareholders (US$'000)
|
4,494
|
6,767
|
13,842
|
Net capital
profit/(loss) attributable to ordinary shareholders
(US$'000)
|
32,439
|
(9,529)
|
(173)
|
Total
profit/(loss) attributable to ordinary shareholders
(US$'000)
|
36,933
|
(2,762)
|
13,669
|
Total
shareholders' funds (US$'000)
|
177,535
|
135,199
|
148,111
|
The
weighted average number of ordinary shares in issue during
the
|
|
|
|
period
on which the earnings per ordinary share was calculated
was:
|
29,448,641
|
37,362,470
|
33,373,033
|
The actual
number of ordinary shares in issue at the end of each
period
|
|
|
|
on
which the net asset value per ordinary share was calculated
was:
|
29,448,641
|
29,448,641
|
29,448,641
|
The number
of ordinary shares in issue, including treasury shares at
the
|
|
|
|
period/year
end was:
|
31,630,303
|
31,630,303
|
31,630,303
|
Earnings
per share
|
|
|
|
Calculated
on weighted average number of ordinary shares:
|
|
|
|
Revenue
earnings per share (US$ cents) - basic and diluted
|
15.26
|
18.11
|
41.48
|
Capital
earnings/(loss) per share (US$ cents) - basic and
diluted
|
110.15
|
(25.50)
|
(0.52)
|
Total
earnings/(loss) per share (US$ cents) - basic and
diluted
|
125.41
|
(7.39)
|
40.96
|
|
As
at
|
As
at
|
As
at
|
|
30
June
|
30
June
|
31
December
|
|
2023
|
2022
|
2022
|
|
(unaudited)
|
(unaudited)
|
(audited)
|
Net asset
value per ordinary share (US$ cents)
|
602.86
|
459.10
|
502.95
|
Ordinary
share price (mid-market) (US$ cents)1
|
513.63
|
431.13
|
457.10
|
1 Based
on an exchange rate of US$1.27 to £1
(30 June 2022: US$1.21; 31 December
2022: US$1.20).
There were
no dilutive securities at 30 June
2023 (30 June 2022: nil;
31 December 2022: nil).
8. Called
up share capital
|
Ordinary
|
Treasury
|
Total
|
Nominal
|
|
shares
|
shares
|
shares
|
value
|
|
number
|
number
|
number
|
US$'000
|
Allotted,
called up and fully paid share capital
comprised:
|
|
|
|
|
Ordinary
shares of 10 cents each:
|
|
|
|
|
At
31 December 2022
|
29,448,641
|
2,181,662
|
31,630,303
|
3,163
|
At
30 June 2023
|
29,448,641
|
2,818,662
|
31,630,303
|
3,163
|
During the
six months ended 30 June 2023, no
ordinary shares were repurchased (six months ended 30 June 2022: 9,810,979 shares for a total cost
of US$51,393,000; year ended
31 December 2022: 9,810,979 shares
for a total cost of US$51,431,000).
The
ordinary shares give shareholders voting rights, the entitlement to
all of the capital growth in the Company's assets, and to all
income from the Company that is resolved to be
distributed.
9. Reserves
The share
premium and capital redemption reserve are not distributable
reserves under the Companies Act 2006. In accordance with ICAEW
Technical Release 02/17BL on Guidance on Realised and Distributable
Profits under the Companies Act 2006, the special reserve and
capital reserve may be used as distributable reserves for all
purposes and, in particular, the repurchase by the Company of its
ordinary shares and for payments as dividends. In accordance with
the Company's Articles of Association, the special reserve, capital
reserve and the revenue reserve may be distributed by way of
dividend. The gain on the capital reserve arising on the
revaluation of investments of US$24,454,000 (30 June
2022: loss of US$11,041,000;
31 December 2022: gain of
US$165,000) is subject to fair value
movements and may not be readily realisable at short notice, as
such it may not be entirely distributable. The investments are
subject to financial risks; as such capital reserves (arising on
investments sold) and the revenue reserve may not be entirely
distributable if a loss occurred during the realisation of these
investments.
10. Valuation
of financial instruments
The
Company's investment activities expose it to the various types of
risk which are associated with the financial instruments and
markets in which it invests. The risks are substantially consistent
with those disclosed in the previous annual financial statements
with the exception of those outlined below.
Market
risk arising from price risk
Price risk
is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market prices
(other than those arising from interest rate risk or currency
risk), whether those changes are caused by factors specific to the
individual financial instrument or its issuer, or factors affecting
similar financial instruments traded in the market. Local, regional
or global events such as war, acts of terrorism, the spread of
infectious illness or other public health issues, recessions,
climate change or other events could have a significant impact on
the Company and its investments.
The current
environment of heightened geopolitical risk given the war in
Ukraine has undermined investor
confidence and market direction. In addition to the tragic and
devastating events in Ukraine, the
war has constricted supplies of key commodities, pushing prices up
and creating a level of market uncertainty and volatility which is
likely to persist for some time.
Valuation
of financial instruments
Financial
assets and financial liabilities are either carried in the Balance
Sheet at their fair value (investments) or at an amount which is a
reasonable approximation of fair value (due from brokers, dividends
and interest receivable, due to brokers, accruals, cash and cash
equivalents and overdrafts). Section 34 of FRS 102 requires the
Company to classify fair value measurements using a fair value
hierarchy that reflects the significance of inputs used in making
the measurements. The valuation techniques used by the Company are
explained in the accounting policies note on page 84 of the Annual
Report and Financial Statements for the year ended 31 December 2022.
Categorisation
within the hierarchy has been determined on the basis of the lowest
level input that is significant to the fair value measurement of
the relevant asset.
The fair
value hierarchy has the following levels:
Level
1 - Quoted market price for identical instruments in active
markets
A financial
instrument is regarded as quoted in an active market if quoted
prices are readily available from an exchange, dealer, broker,
industry group, pricing service or regulatory agency and those
prices represent actual and regularly occurring market transactions
on an arm's length basis. These include exchange traded
derivatives. The Company does not adjust the quoted price for these
instruments.
Level
2 - Valuation techniques using observable
inputs
This
category includes instruments valued using quoted prices for
similar instruments in markets that are considered less active, or
other valuation techniques where all significant inputs are
directly or indirectly observable from market data.
Valuation
techniques used for non-standardised financial instruments such as
over-the-counter derivatives, include the use of comparable recent
arm's length transactions, reference to other instruments that are
substantially the same, discounted cash flow analysis, option
pricing models and other valuation techniques commonly used by
market participants making the maximum use of market inputs and
relying as little as possible on entity specific inputs.
Level
3 - Valuation techniques using significant unobservable
inputs
This
category includes all instruments where the valuation technique
includes inputs not based on market data and these inputs could
have a significant impact on the instrument's valuation.
This
category also includes instruments that are valued based on quoted
prices for similar instruments where significant entity determined
adjustments or assumptions are required to reflect differences
between the instruments and instruments for which there is no
active market. The Investment Manager considers observable data to
be that market data that is readily available, regularly
distributed or updated, reliable and verifiable, not proprietary,
and provided by independent sources that are actively involved in
the relevant market.
The level
in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the
lowest level input that is significant to the fair value
measurement. If a fair value measurement uses observable inputs
that require significant adjustment based on unobservable inputs,
that measurement is a Level 3 measurement.
Assessing
the significance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors
specific to the asset or liability including an assessment of the
relevant risks including but not limited to credit risk, market
risk, liquidity risk, business risk and sustainability risk. The
determination of what constitutes `observable' inputs requires
significant judgement by the Investment Manager and these risks are
adequately captured in the assumptions and inputs used in
measurement of Level 3 assets or liabilities.
Fair
values of financial assets and financial
liabilities
The table
below is an analysis of the Company's financial instruments
measured at fair value at the balance sheet date.
Financial
assets at fair value through profit or loss at 30 June
2023
|
Level
1
|
Level
2
|
Level
3
|
Total
|
(unaudited)
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
Equity
investments
|
172,973
|
-
|
-
|
172,973
|
Total
|
172,973
|
-
|
-
|
172,973
|
Financial
assets at fair value through profit or loss at 30 June
2022
|
Level
1
|
Level
2
|
Level
3
|
Total
|
(unaudited)
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
Equity
investments
|
148,457
|
-
|
-
|
148,457
|
Total
|
148,457
|
-
|
-
|
148,457
|
Financial
assets at fair value through profit or loss at 31 December
2022
|
Level
1
|
Level
2
|
Level
3
|
Total
|
(audited)
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
Equity
investments
|
158,149
|
-
|
-
|
158,149
|
Total
|
158,149
|
-
|
-
|
158,149
|
The Company
held no Level 3 securities as at 30 June
2023 (30 June 2022: none;
31 December 2022: none).
For
exchange listed equity investments the quoted price is the bid
price. Substantially all investments are valued based on unadjusted
quoted market prices. Where such quoted prices are readily
available in an active market, such prices are not required to be
assessed or adjusted for any business risks, including climate
risk, in accordance with the fair value related requirements of the
Company's financial reporting framework.
11. Transactions
with the Investment Manager and AIFM
BlackRock
Fund Managers Limited (BFM) provides management and administration
services to the Company under a contract
which is terminable on six months' notice. BFM has (with the
Company's consent) delegated certain portfolio and risk management
services, and other ancillary services, to BlackRock Investment
Management (UK) Limited (BIM (UK)).
Further details of the investment management contract are disclosed
on pages 47 and 48 of the Directors' Report in the Company's Annual
Report and Financial Statements for the year ended 31 December 2022.
The
investment management fee is levied quarterly, based on 0.80% per
annum of the net asset value. The investment management fee due for
the six months ended 30 June 2023
amounted to US$643,000 (six months
ended 30 June 2022: US$744,000; year ended 31
December 2022: US$1,332,000).
At the period end, an amount of US$643,000 was outstanding in respect of these
fees (30 June 2022: US$751,000; 31 December
2022: US$588,000).
In addition
to the above services BIM (UK) has
provided the Company with marketing services. The total fees paid
or payable for these services for the period ended 30 June 2023 amounted to US$48,000 excluding VAT (six months ended
30 June 2022: US$54,000; year ended 31
December 2022: US$83,000).
Marketing fees of US$128,000 were
outstanding at 30 June 2023
(30 June 2022: US$162,000; 31 December
2022: US$81,000).
During the
period, the Manager pays the amounts due to the Directors. These
fees are then reimbursed by the Company for the amounts paid on its
behalf. As at 30 June 2023, an amount
of US$227,000 (30 June 2022: US$109,000; 31 December
2022: US$110,000) was payable
to the Manager in respect of Directors' fees.
The
ultimate holding company of the Manager and the Investment Manager
is BlackRock, Inc., a company incorporated in Delaware, USA.
12. Related
party disclosure
Directors'
emoluments
The Board
consists of four non-executive Directors, all of whom are
considered to be independent of the Manager by the Board. None of
the Directors has a service contract with the Company. The Chairman
receives an annual fee of £50,200, the Chairman of the Audit
Committee receives an annual fee of £38,600, the Senior Independent
Director and Chairman of the Remuneration Committee receives an
annual fee of £36,400 and each of the other Directors receives an
annual fee of £34,300.
At the
period end and as at the date of this report members of the Board
held ordinary shares in the Company as set out below:
|
As
at
|
As
at
|
|
29
September
|
30
June
|
|
2023
|
2023
|
|
Ordinary
|
Ordinary
|
|
shares
|
shares
|
Carolan
Dobson (Chairman)
|
4,792
|
4,792
|
Craig
Cleland
|
12,000
|
12,000
|
Laurie
Meister
|
2,915
|
2,915
|
Nigel
Webber
|
5,000
|
5,000
|
Significant
holdings
The
following investors are:
a.
funds
managed by the BlackRock Group or are affiliates of BlackRock, Inc.
(Related BlackRock Funds); or
b. investors
(other than those listed in (a) above) who held more than 20% of
the voting shares in issue in the Company and are as a result,
considered to be related parties to the Company (Significant
Investors).
As at
30 June 2023
Total
% of shares held by Related
BlackRock Funds
|
Total
% of shares held by Significant Investors who are not affiliates
of BlackRock
Group or BlackRock, Inc.
|
Number
of Significant Investors who are not affiliates of
BlackRock
Group or BlackRock, Inc.
|
1.2
|
21.2
|
1
|
As at
31 December 2022
Total
% of shares held by Related
BlackRock Funds
|
Total
% of shares held by Significant Investors who are not affiliates
of BlackRock
Group or BlackRock, Inc.
|
Number
of Significant Investors who are not affiliates of
BlackRock
Group or BlackRock, Inc.
|
1.7
|
20.7
|
1
|
13. Contingent
liabilities
There were
no contingent liabilities at 30 June
2023 (30 June 2022: none;
31 December 2022: none).
14. Publication
of non-statutory accounts
The
financial information contained in this Half Yearly Financial
Report does not constitute statutory accounts as defined in Section
435 of the Companies Act 2006. The financial information for the
six months ended 30 June 2023 and
30 June 2022 has not been audited or
reviewed by the Company's auditors.
The
information for the year ended 31 December
2022 has been extracted from the latest published audited
financial statements, which have been filed with the Registrar of
Companies. The report of the auditor in those financial statements
contained no qualification or statement under Sections 498(2) or
(3) of the Companies Act 2006.
15. Annual
results
The Board
expects to announce the annual results for the year ending
31 December 2023 in March 2024. Copies of the results announcement
can be obtained from the Secretary on 020 7743 3000 or by email at
cosec@blackrock.com. The Annual Report and Financial Statements
should be available by mid-March
2024, with the Annual General Meeting being held in
May 2024.
For further information, please
contact:
Sarah Beynsberger, Director, BlackRock Investment Management (UK)
Limited
Tel: 020 7743 3000
Press enquiries:
Ed Hooper, Lansons Communications -
Tel: 020 7294 3620
E-mail: BlackRockInvestmentTrusts@lansons.com or
EdH@lansons.com
29 September 2023
12 Throgmorton Avenue
London EC2N 2DL
END
The Half Yearly Financial Report will also be available on the
BlackRock Investment Management website at
http://www.blackrock.com/uk/brla. Neither the contents of the
Manager's website nor the contents of any website accessible from
hyperlinks on the Manager's website (or any other website) is
incorporated into, or forms part of, this announcement.