BlackRock Latin American
Investment Trust
plc
(Legal Entity Identifier:
UK9OG5Q0CYUDFGRX4151)
Information disclosed in
accordance with Article 5 Transparency Directive, DTR
4.1
Annual Results
Announcement for the year ended 31 December
2023
PERFORMANCE
RECORD
|
As
at |
As
at |
|
|
31
December |
31
December |
|
|
2023 |
2022 |
|
|
Net assets
(US$’000)1 |
189,719 |
148,111 |
|
|
Net asset value per ordinary share (US$
cents) |
644.24 |
502.95 |
|
|
Ordinary share price (mid-market) (US$
cents)2 |
569.84 |
457.10 |
|
|
Ordinary share price (mid-market)
(pence) |
447.00 |
380.00 |
|
|
Discount3 |
11.5% |
9.1% |
|
|
For the
year |
For the
year |
|
|
ended |
ended |
|
|
31
December |
31
December |
|
|
2023 |
2022 |
|
|
Performance (with dividends
reinvested) |
|
|
|
|
Net asset value per share (US$
cents)3 |
37.8% |
6.6% |
|
|
Ordinary share price (mid-market) (US$
cents)2,3 |
35.3% |
4.7% |
|
|
Ordinary share price (mid-market)
(pence)3 |
27.6% |
18.0% |
|
|
MSCI EM Latin America Index (net return, on a US
Dollar basis)4 |
32.7% |
8.9% |
|
|
|
|
|
|
For
the |
For
the |
|
|
year
ended |
year
ended |
|
|
31
December |
31
December |
|
|
2023 |
2022 |
Change
% |
|
Revenue |
|
|
|
|
Net profit on ordinary activities after taxation
(US$'000) |
8,967 |
13,842 |
–35.2 |
|
Revenue earnings per ordinary share (US$
cents) |
30.45 |
41.48 |
–26.6 |
|
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 |
|
Quarter to 30
September |
7.02 |
6.08 |
+15.5 |
|
Quarter to 31
December |
8.05 |
6.29 |
+28.0 |
|
Special
dividend5 |
– |
13.00 |
n/a |
|
Total dividends
payable/paid |
28.82 |
38.87 |
–25.9 |
Sources: BlackRock
Investment Management (UK) Limited and
Datastream.
Performance figures are
calculated in US Dollar terms with dividends
reinvested.
1
The change in net assets reflects the portfolio movements during
the year and dividends paid.
2
Based on an exchange rate of US$1.27
to £1 at 31 December 2023 and
US$1.20 to £1 at 31 December
2022.
3
Alternative Performance Measures, see Glossary contained within the
Annual Report and Financial
Statements.
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.
5
During the year ended 31 December
2022, revenue earned by the Company was enhanced by a number
of stock and special dividends, coupled with the effect of the
tender offer reducing the number of ordinary shares in issue post
May 2022. In order to maintain
investment trust status, which requires the distribution of 85% of
the Company’s revenue, the Board announced the payment of an
additional dividend of 13.00 cents
per ordinary share for the financial year to 31 December
2022.
CHAIRMAN’S
STATEMENT
Dear
Shareholder,
I am pleased to present
the Annual Report to shareholders for the year ended 31 December 2023, which has delivered strong
absolute returns and as I shall discuss below, provided grounds for
optimism in the outlook for Latin American
equities.
MARKET
OVERVIEW
Latin American markets
have significantly outperformed both developed market and the MSCI
Emerging Markets indices over the year under review, with the MSCI
EM Latin America Index net return of 32.7% in US Dollar terms,
compared to a rise in the MSCI Emerging Markets EMEA Index net
return of 8.6% in US Dollar terms and an increase in the MSCI World
Index net return of 24.4% in US Dollar
terms.
PERFORMANCE
Over the year ended
31 December 2023 the Company’s net
asset value per share, with dividends reinvested rose by 37.8% in
US Dollar terms, which compares to the benchmark returns with
dividends reinvested of 32.7%. The share price rose by 35.3% in US
Dollar terms (but increased by 27.6% in Sterling terms). The
outperformance was driven by good stock selection across a range of
markets, most notably driven by stock selection in Mexico, as the country has been and continues
to be a key beneficiary from the shifting of global supply chains
and coupled with a prudential fiscal policy and a strong export
sector, Mexico has replaced
China as America’s largest trade
partner. The stock selection in Brazil was also a contributing factor to
performance, the portfolio was overweight in domestic Brazil, this positioning reflected the
Investment Manager’s view that interest rates were excessively
high, with their expectation for interest rates to be cut during
the year which has seen this increasingly being priced by the
market in Brazil which has been a
strong contributor to the portfolio’s
returns.
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 over the year the
portfolio managers have used gearing actively with a low of 100.3%
in May 2023 and a high of 108.9% of
NAV in January 2023. Average gearing
for the year to 31 December 2023 was
103.1% of NAV.
REVENUE RETURNS AND
DIVIDENDS
Total revenue return for
the year was 30.45 cents per share
(2022: 41.48 cents per share). The
decrease of 26.6% was largely due to the reduction in dividends
paid by portfolio companies. 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.
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 Company has declared interim dividends totalling
28.82 cents per share in respect of
the year ended 31 December 2023
(2022: 38.87 cents per share) as
detailed in the table below; this represented a yield of 5.1% based
on the Company’s share price at 31 December
2023.
Dividends declared in
respect of the year ended 31 December
2023
|
Dividend |
Pay
date |
|
|
|
|
Quarter to 31 March
2023 |
6.21 cents |
16 May 2023 |
|
Quarter to 30 June
2023 |
7.54 cents |
11 August
2023 |
|
Quarter to 30 September
2023 |
7.02 cents |
9 November
2023 |
|
Quarter to 31 December
2023 |
8.05 cents |
9 February
2024 |
|
Total |
28. 82
cents |
|
The dividends paid and
declared by the Company in 2023 have been funded from current year
revenue and brought forward revenue reserves. As at 31 December 2023, a balance of US$5,876,000 remained in revenue reserves, which
is sufficient to cover approximately two and a half quarterly
dividend payments at the most recently declared dividend rate of
8.05 cents per
share.
Dividends may be funded
out of capital reserves to the extent that current year revenue and
revenue reserves are insufficient. The current and previous years
dividends have been funded from the high levels of income generated
by the portfolio companies and revenue reserves. Next year it is
anticipated that capital reserves may be utilised to supplement the
dividend if there is lower income received from the underlying
portfolio companies. The Board believes that this removes pressure
from the portfolio 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 2018, the Company’s discount has
narrowed from an average of 13.5% for the two-year period preceding
the introduction of the new policy on 13
March 2018 to 11.5% as at 31 December
2023.
ESG AND SOCIALLY
RESPONSIBLE INVESTMENT
As a Board we believe that
good Environmental, Social and Governance (ESG) behaviour by the
companies we invest in is important to the long-term financial
success of our Company and believe we should be active in
encouraging the companies we invest in to adopt good standards of
governance. Accordingly, the board travelled to Sao Paulo last year to meet a number of the
companies we invest in to discuss their governance policies. We
also travelled to Brasilia and met
a number of government officials and politicians to learn more
about current approaches to the rainforest and Brazil’s role as a
large producer of vital food, timber, minerals and
oil.
The Board receives regular
reporting from the portfolio managers on ESG matters and extensive
analysis of our portfolio’s ESG footprint and actively engages with
the portfolio managers to discuss when significant engagement may
be required with the management teams of our Company’s portfolio
holdings. The portfolio managers are supported by the extensive ESG
resources within BlackRock and devote a considerable amount of time
to understanding the ESG risks and opportunities facing companies
and industries in the portfolio. The Company does not seek to
become an Article 8 or 9 company under the EU’s Sustainable Finance
Disclosure Regulation legislation and does not intend to seek to
have one of the 4 sustainability labels under the FCA’s
Sustainability Disclosure Requirements regime. However,
consideration of ESG analytics, data and insights is integrated
into the investment process when weighing up the risk and reward
benefits and there is more information in relation to BlackRock’s
approach to ESG integration contained within the Annual Report and
Financial Statements.
DISCOUNT MANAGEMENT AND
NEW DISCOUNT CONTROL MECHANCISM
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 annualised total NAV return on a US
Dollar basis for the year ended 31 December 2023 was +21.2%,
outperforming the annualised benchmark return of +20.2% over the
year by 1.0% (equivalent to 100 basis
points).
The cum-income discount of
the Company’s ordinary shares over the calculation period has
averaged 10.8%.
For the current year the
cum-income discount has ranged from 6.8% to 18.6%, ending the year
on a discount of 11.5% at 31 December
2023.
The Company has not bought
back any shares during the year ended 31
December 2023 and up to the date of publication of this
report.
BOARD
COMPOSITION
As previously advised in
last year’s Annual Report, Professor Doctor did not seek
re-election at the 2023 AGM. The Board wishes to thank Professor
Doctor for her many years of excellent service, we wish her the
best for the future.
ANNUAL GENERAL
MEETING
The Company’s Annual
General Meeting will be held in person at the offices of BlackRock
at 12 Throgmorton Avenue, London EC2N 2DL on Wednesday, 22 May 2024 at 12.00 noon. Details of the
business of the meeting are set out in the Notice of Annual General
Meeting contained within the Annual Report and Financial
Statements.
The Board very much looks
forward to meeting shareholders and answering any question you may
have on the day. We hope you can attend this year’s AGM; a buffet
lunch will be made available to shareholders who have attended the
AGM.
OUTLOOK
Following the Board’s
visit to Brazil in November 2023, it was encouraging to see the
positive market sentiment for a range of the portfolio companies
operating in Brazil. The Brazilian
Government had embarked on some significant tax reforms which
should allow businesses to operate more efficiently. The
government’s continued prudent fiscal policy should enable the
country’s central bank to decrease interest rates further which in
turn should help stimulate the domestic
economy.
The geopolitical
environment is currently changing with three blocks emerging, US
aligned, China aligned and the
non-aligned, who are benefiting from trading with both of the other
blocks. The markets in the Latin American region have managed to
remain somewhat removed from the global geopolitical conflicts and
so far, have been able to benefit from significant opportunities
for direct investment as governments and businesses globally
re-think supply chain configuration and seek to diversify risk away
from countries more prone to geopolitical fallouts. The region is
rich in natural resources of crude oil and natural gas and is also
a major source of copper and lithium which are critical materials
for the green energy transition. Not only is Latin America rich in natural resources, it is
also an agricultural powerhouse. The region accounts for close to
25%1 of global exports in agricultural and fisheries
products, and its significance in the global food supply chain is
anticipated to increase in the future. The Board is optimistic for
the outlook for Latin American equities.
Carolan Dobson
Chairman
26
March 2024
1
Source:
https://www.weforum.org/agenda/2024/01/latin-america-solution-food-insecurity
INVESTMENT MANAGER’S
REPORT
MARKET
OVERVIEW
The MSCI EM Latin America
Index gained +32.7% during 2023, significantly outperforming other
Emerging Market (EM) regions. For reference, both the Asia-Pacific (APAC) and Europe, Middle
East and Africa (EMEA)
regions posted mid-single digit returns with the MSCI AC Asia
Pacific ex Japan index up 4.6%
while the MSCI Emerging Markets EMEA Index climbed 8.6% in 2023.
The region also outperformed the MSCI USA Index, which was up 27.1%, and Developed
Market equities, as represented by the MSCI World Index, up 24.4%.
All performance figures are calculated in US Dollar terms with
dividends reinvested.
All markets within our
universe generated positive returns in 2023. Argentina was the standout performer,
returning 65.7%, making it the best performing market globally. The
market surged after libertarian Javier Milei picked up a majority
of the votes, and finished ahead of Sergio
Massa, the incumbent Finance Minister, in the elections that
concluded on 19 November 2023. Javier
Milei’s unexpected victory instilled cautious optimism in the
market about the country’s potential for economic reform and the
possibility of central bank orthodoxy.
In Brazil, Luiz Inacio
Lula da Silva was sworn in as president on 1 January 2023. While the Brazilian market
experienced some turmoil in the first half of the year, mainly due
to concerns around fiscal prudency and lower activity resulting
from elevated interest rates, the market bounced back in the latter
half of the year, rising 32.7% in 2023. A large portion of the
rally can be attributed to the much-awaited rate cuts, which
finally began in August, when the central bank cut its policy rate
by 50 basis points in response to falling inflation. The market
continued to trend upwards in the latter half of the year, as the
increased likelihood for rate cuts in the
United States of America (US) should provide room for the
central bank to ease more aggressively in
2024.
Mexico was yet another market that performed
well in 2023, rising 40.9%. The market has benefitted from a
gradual fall in inflation and resulting interest rate cut
expectations. Performance had been further buoyed by a stronger
than expected US market. It is also worth pointing out that
the country has been and continues to be, a relative beneficiary of
increased geopolitical tensions, as countries such as the US are
looking to diversify their supply chains away from China. In 2023, Mexico also overtook China to become the US’ largest trading
partner.
Political and social
unrest has been the dominating picture of the Chilean and Peruvian
markets throughout much of 2023, where both countries ended the
year flat. In December, the Chilean population rejected the
suggested changes to their constitution, for the second year in a
row. This marks an end to the constitutional saga, for now, that
has been ongoing since 2019. In Colombia, we note the improvement in the
country’s external balance.
PERFORMANCE REVIEW AND
POSITIONING
The Company outperformed
its benchmark over the 12-month period ending 31 December 2023, returning +37.8% in
US Dollar terms. Over the same time horizon, the Company’s
benchmark, the MSCI Latin America Index, returned +32.7% on
a net basis in US Dollar terms.
Over the period, the
Company generated positive returns in a number of countries. The
most notable outperformer was Mexico, driven by strong stock selection. Our
positioning in Brazil was a
reflection of the view that interest rates would come down, a view
that played out in the latter half of the year as the central bank
cut its policy rate for the first time in three years. It has
since continued to cut in response to a normalisation in inflation,
which has supported our domestic positioning in particular.
Colombian exposure also contributed positively. On the flipside,
Argentina exposure detracted on
the margin. From a sector lens, the best performing sectors were
industrials and materials while consumer staples and health care
detracted from performance.
Our position in
Vale, a Brazilian iron ore miner, was the largest
contributor to relative returns over the year. Our underweight
position in the company throughout the first half of 2023 was
supportive to Company performance as iron ore prices declined on
the back of disappointing commodity demand in China. As we became incrementally more
positive on the name, and due to its relative weakness, we added to
the position in the latter half of the year which proved timely.
Rate sensitive names in Brazil
have also done well with investment management platform
XP and off-benchmark exposure to low-income
homebuilder MRV Engenharia amongst the top
contributors. For XP, in addition to delivering
strong results, the company is also benefitting from increased
flows from fixed income to equities as rates come down. In the case
of MRV Engenharia, lower rates entail more
affordable housing and lower costs on interest which is beneficial
as this is a highly levered name. No exposure to
WEG, a Brazilian electric equipment company, has
also contributed to relative returns. The company has been faced
with sequential growth challenges, particularly due to a solar
demand slowdown in Brazil which is
impacting the company’s outlook.
In Mexico, our overweight position in consumer
company FEMSA, was supportive of relative returns,
with a strong operating environment at its core convenience store
business Oxxo. Cemex, the Mexican cement producer,
was another contributor on a relative basis. Being underweight
the stock helped the portfolio’s relative returns as the stock
declined on fears of rising input costs. Another significant
outperformer was Fibra Uno Administracion, the
Mexican real estate operator. This is a stock that has continued to
benefit from the nearshoring theme, i.e. increased foreign
investment and demand for industrial properties. The stock also
rose following the announcement of a potential IPO where the
company would carve out a new vehicle of their industrial real
estate assets.
Elsewhere in the region,
Ecopetrol, a petroleum producer in Colombia, outperformed. Chilean lithium
producer Sociedad Quimica Y Minera (SQM) was
another strong performer during the last month of the year as the
stock rose in anticipation of the announcement of the partnership
with state entity Codelco, which has extended their mining lease in
the Atacama until 2060.
While Brazil exposure has benefitted the Company
more broadly, some names lagged with supermarket chain
Assai being the biggest detractor over the period.
The company sold off earlier in the year after its majority
shareholder, Casino, showed signs of weak liquidity. This weighed
on the stock after an announcement that Casino would be selling a
portion of its shares. Brazilian retailers Arezzo
and Grupo De Moda Soma (Soma) also hurt relative
returns over the period as the retail sector was negatively
impacted by the announcement of a tax reform, which could be margin
dilutive for the sector. We maintain conviction in these names and
believe that continued rate cuts from the central bank should be
supportive for domestic consumption. Elsewhere, overweight position
in Mexican silver miner MAG Silver Corp also
detracted amid declining silver prices.
Over the period, we have
taken advantage of the strong performance in Brazil to take profits in names that have
outperformed or where our investment thesis has played out. We
exited our position in Gerdau, a steel producer,
and rotated this into iron ore producer Vale on a
relative performance basis. We also exited XP
following strong performance. As we believe continued rate cuts in
Brazil should be supportive for
domestic consumption, we initiated holdings in retailers
Soma and Lojas Renner. For Soma
specifically, we believe that mistakes made in the previous cycles
have been overly penalized by the market, and we believe that their
brand Farm Rio is one of the strongest brands in Brazil.
We also made some changes
to our Mexican book. We exited Cemex, the Mexican
cement producer, and used some of the proceeds to top up our
holding in Walmart de Mexico y Centroamerica (Walmex). The
latter has underperformed on cost pressures and disinflation, but
we believe the negative earnings revisions are coming to an end. We
also trimmed our exposure to rate sensitive bank Grupo
Financiero Banorte. In Colombia, we initiated a position in bank
Bancolombia on the back of cheap valuation and as
the Colombian government has shown more signs of orthodoxy than
initially expected. We took profits and exited Colombian oil &
gas company Ecopetrol as our investment thesis has
played out and as we are getting incrementally more negative on the
outlook for oil prices. We also took some profits in
Globant, the Argentinian IT services company,
following strong performance.
We ended the year with
Argentina as the largest portfolio
overweight, driven by two off-benchmark holdings. Our second
largest overweight position is in Panama, driven by an off-benchmark holding in
the industrials sector. On the other hand, we remain underweight in
Peru due to its ongoing political
and economic uncertainty. We remain optimistic about the outlook
for Brazil and have been selective
in our positioning, with a preference for domestic businesses that
will benefit more from further rate cuts.
OUTLOOK
We believe that global
markets are starting to feel the impact of higher interest rates,
noting slowing credit growth as evidence that a demand slowdown may
be imminent in developed markets. When combined with a Chinese
economy which is struggling to find its footing we find it
difficult to see where a meaningful pick up in global growth could
come from. On the other hand, we observe stronger fundamentals in
EM, particularly in Latin America,
as inflation has decreased and central banks have eased monetary
policies across many of our markets. This is typically a good set
up as domestic economies should see a cyclical
improvement.
We are especially positive
about the outlook for Brazil. We
believe that the combination of a benign outlook for inflation and
a relatively prudent fiscal policy by the government will
enable the central bank to decrease interest rates faster than
market participants currently expect. We expect further upside to
the equity market in the next 12-18 months as local capital starts
flowing back into the market.
We remain positive on the
outlook for the Mexican economy as it is a key beneficiary of the
‘friend-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 some profits after a strong relative performance,
solely because we see even more upside in other Latin American
markets such as Brazil. We also
note that the Mexican economy will be relatively more sensitive to
a potential slowdown in economic activity in the United States.
We continue to closely
monitor the political and economic situation in Argentina, after libertarian Javier Milei
unexpectedly won the presidential elections in November. Milei is
facing a very difficult situation, with inflation at 210% year on
year, foreign exchange reserves depleted and multiple economic
imbalances. The country needs to go through a painful adjustment
process and we worry about the hardship that this inflicts on
society. We are hopeful that the country comes out stronger after
the adjustment process, but we have limited exposure to the
Argentinian economy for now.
We remain optimistic about
the outlook for Latin America.
Central banks have been proactive in increasing interest rates to
help control inflation, which has fallen significantly across the
region. As such we have started to see central banks beginning to
lower interest rates, which should support both economic activity
and asset prices. In addition, the whole region is benefitting from
being relatively isolated from global geopolitical conflicts. In a
world splitting into three groups: those aligned with China, those aligned with the US and the rest,
the latter group which have been coined as the “Transactional 25”,
are uniquely positioned to benefit from their ability to trade with
both blocs. We are already seeing an increase in their share of
global Foreign Direct Investment (FDI) flows, with the prime
example being Mexico. Although
some investor attention in 2024 may focus on the political and
social challenges in countries such as Ecuador, Guyana and Panama, we maintain that the region when taken
as a whole, appears to be a more attractive investment destination
than many in the market currently
believe.
Sam Vecht and Christoph
Brinkmann
BlackRock Investment
Management (UK) Limited
26
March 2024
TEN LARGEST
INVESTMENTS
as at 31 December 2023
Together, the ten largest
investments represented 55.3% of total investments of the Company’s
portfolio as at 31 December 2023
(2022: 53.5%).
1 Vale (2022:
1st)
Materials
Market value – American
depositary share (ADS): US$18,331,000
Share of investments: 9.6%
(2022: 9.5%)
is one of the world’s
largest mining groups, with other businesses 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.
2 Petrobrás (2022:
2nd)
Energy
Market value – American
depositary receipt (ADR): US$6,666,000
Market value – preference
shares ADR: US$6,091,000
Market value – ordinary
shares: US$3,705,000
Share of investments: 8.6%
(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.
3 Banco Bradesco
(2022: 6th)
Financials
Market value – ADR:
US$8,726,000
Market value – preference
shares: US$3,276,000
Share of investments: 6.2%
(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 saving
bonds.
4 Walmart de México
y Centroamérica (2022: 21st)
Consumer
Staples
Market value – ordinary
shares: US$11,317,000
Share of investments: 5.9%
(2022: 1.9%)
is also known as Walmex,
it is the Mexican and Central American Walmart
division.
5 B3 (2022:
5th)
Financials
Market value – ordinary
shares: US$9,814,000
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.
6 FEMSA (2022:
3rd)
Consumer
Staples
Market value – ADR:
US$9,126,000
Share of investments: 4.8%
(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.
7 AmBev (2022:
4th)
Consumer
Staples
Market value – ADR:
US$6,394,000
Market value – ordinary
shares: US$1,542,000
Share of investments: 4.2%
(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 and Canada.
8 Grupo
Aeroportuario del Pacifico (2022:
14th)
Industrials
Market value – ADS:
US$7,694,000
Share of investments: 4.0%
(2022: 2.3%)
is a Mexican airport
operator headquartered in Guadalajara,
Mexico. The company holds concessions to operate, maintain
and develop approximately 10 international airports in the Pacific
and Central regions of Mexico, and
an international airport in Jamaica.
9 Itaú Unibanco
(2022: 7th)
Financials
Market value – ADR:
US$7,208,000
Share of investments: 3.8%
(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.
10 Grupo Financiero
Banorte (2022: 8th)
Financials
Market value – ordinary
shares: US$5,966,000
Share of investments: 3.1%
(2022: 4.8%)
is a Mexican banking and
financial services holding company and is one of the largest
financial groups in the country. It operates as a universal
bank and provides a wide array of products and services through its
broker dealer, annuities and insurance companies, retirements
savings funds (Afore), mutual funds, leasing and factoring company
and warehousing.
All percentages reflect
the value of the holding as a percentage of total investments. For
this purpose, where more than one class of securities is held,
these have been aggregated.
The percentages in
brackets represent the value of the holding as at 31 December 2022.
PORTFOLIO OF
INVESTMENTS
as at 31 December 2023
|
Market |
|
|
|
value |
|
%
of |
|
US$’000 |
|
investments |
|
Brazil |
|
|
|
|
Vale – ADS |
18,331 |
|
9.6 |
|
Petrobrás –
ADR |
6,666 |
} |
8.6 |
|
Petrobrás – preference shares
ADR |
6,091 |
|
Petrobrás |
3,705 |
|
Banco Bradesco –
ADR |
8,726 |
} |
6.2 |
|
Banco Bradesco – preference
shares |
3,276 |
|
B3 |
9,814 |
|
5.1 |
|
AmBev – ADR |
6,394 |
} |
4.2 |
|
AmBev |
1,542 |
|
Itaú Unibanco –
ADR |
7,208 |
|
3.8 |
|
Hapvida
Participacoes |
5,618 |
|
3.0 |
|
EZTEC Empreendimentos e
Participacoes |
4,263 |
|
2.2 |
|
Sendas
Distribuidora |
4,217 |
|
2.2 |
|
Arezzo Industria e
Comercio |
4,028 |
|
2.1 |
|
Alpargatas |
3,874 |
|
2.0 |
|
Lojas
Renner |
3,823 |
|
2.0 |
|
Vamos |
3,792 |
|
2.0 |
|
Rumo |
3,441 |
|
1.8 |
|
Grupo De Moda
Soma |
2,808 |
|
1.5 |
|
Pagseguro
Digital |
1,992 |
|
1.1 |
|
Rede D'or Sao
Luiz |
1,912 |
|
1.0 |
|
IRB Brasil
Resseguros |
1,776 |
|
0.9 |
|
MRV
Engenharia |
1,417 |
|
0.8 |
|
114,714 |
|
60.1 |
|
Mexico |
|
|
|
|
Walmart de México y
Centroamérica |
11,317 |
|
5.9 |
|
FEMSA – ADR |
9,126 |
|
4.8 |
|
Grupo Aeroportuario del Pacifico –
ADS |
7,694 |
|
4.0 |
|
Grupo Financiero
Banorte |
5,966 |
|
3.1 |
|
Fibra Uno Administracion –
REIT |
5,222 |
|
2.7 |
|
MAG Silver
Corp |
4,595 |
|
2.4 |
|
Grupo
México |
4,360 |
|
2.3 |
|
America Movil –
ADR |
3,708 |
|
2.0 |
|
51,988 |
|
27.2 |
|
Chile |
|
|
|
|
Sociedad Química Y Minera -
ADR |
5,585 |
|
2.9 |
|
Empresas
CMPC |
2,880 |
|
1.5 |
|
Cia Cervecerias
Unidas |
1,366 |
} |
1.2 |
|
Cia Cervecerias Unidas –
ADR |
968 |
|
10,799 |
|
5.6 |
|
Argentina |
|
|
|
|
Globant |
2,969 |
|
1.6 |
|
Tenaris |
2,513 |
|
1.3 |
|
5,482 |
|
2.9 |
|
Colombia |
|
|
|
|
Bancolombia |
4,714 |
|
2.5 |
|
4,714 |
|
2.5 |
|
Panama |
|
|
|
|
Copa
Holdings |
3,178 |
|
1.7 |
|
3,178 |
|
1.7 |
|
Total
investments |
190,875 |
|
100.0 |
All investments are in
equity shares unless otherwise stated.
The total number of
investments held at 31 December 2023
was 39 (2022: 40). At 31 December
2023, the Company did not hold any equity interests
comprising more than 3% of any company’s share capital
(2022: none).
PORTFOLIO
ANALYSIS
as at 31 December 2023
Geographical weighting
(gross market exposure) vs MSCI EM Latin America
Index
|
|
% of net
assets |
MSCI EM Latin America
Index |
|
|
|
|
|
Brazil |
60.5 |
61.3 |
|
Mexico |
27.4 |
29.0 |
|
Chile |
5.6 |
5.4 |
|
Argentina |
2.9 |
0.0 |
|
Colombia |
2.5 |
1.2 |
|
Panama |
1.7 |
0.0 |
|
Peru |
0.0 |
3.1 |
Sources: BlackRock and
MSCI.
Sector and geographical
allocations
|
|
|
|
|
|
|
|
Net
other |
2023 |
2022 |
|
Brazil |
Mexico |
Chile |
Argentina |
Colombia |
Panama |
Peru |
liabilities |
Total |
Total |
|
% |
% |
% |
% |
% |
% |
% |
% |
% |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Communication
Services |
– |
1.9 |
– |
– |
– |
– |
– |
– |
1.9 |
2.5 |
|
Consumer
Discretionary |
10.6 |
– |
– |
– |
– |
– |
– |
– |
10.6 |
3.2 |
|
Consumer
Staples |
6.4 |
10.8 |
1.2 |
– |
– |
– |
– |
– |
18.4 |
18.7 |
|
Energy |
8.7 |
– |
– |
1.3 |
– |
– |
– |
– |
10.0 |
9.4 |
|
Financials |
17.3 |
3.1 |
– |
– |
2.5 |
– |
– |
– |
22.9 |
30.9 |
|
Health Care |
4.0 |
– |
– |
– |
– |
– |
– |
– |
4.0 |
4.4 |
|
Industrials |
3.8 |
4.1 |
2.9 |
– |
– |
1.7 |
– |
– |
12.5 |
7.6 |
|
Information
Technology |
– |
– |
– |
1.6 |
– |
– |
– |
– |
1.6 |
1.5 |
|
Materials |
9.7 |
4.7 |
1.5 |
– |
– |
– |
– |
– |
15.9 |
21.7 |
|
Real Estate |
– |
2.8 |
– |
– |
– |
– |
– |
– |
2.8 |
6.9 |
|
Net other
liabilities |
– |
– |
– |
– |
– |
– |
– |
(0.6) |
(0.6) |
(6.8) |
|
2023 total
investments |
60.5 |
27.4 |
5.6 |
2.9 |
2.5 |
1.7 |
– |
(0.6) |
100.0 |
– |
|
2022 total
investments |
64.0 |
28.5 |
6.1 |
3.4 |
– |
2.3 |
2.5 |
(6.8) |
– |
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Source:
BlackRock.
ENVIRONMENAL, SOCIAL AND
GOVERANCE ISSUES AND APPROACH
The Board’s
approach
Environmental, social and
governance (ESG) issues can present both opportunities and risks to
long-term investment performance. The securities within the
Company’s investment remit are typically large producers of vital
food, timber, minerals and oil supplies, and consequently face many
ESG challenges and headwinds as they grapple with the impact of
their operations on the environment and resources. The Board is
also aware that there is significant room for improvement in terms
of disclosure and adherence to global best practices for corporates
throughout the Latin American region, which lags global peers when
it comes to ESG best practice. These ESG issues faced by companies
in the Latin American investment universe are a key focus of the
Board, and it is committed to a diligent oversight of the
activities of the Manager in these areas. Whilst the Company does
not exclude investment in stocks on ESG criteria and has not
adopted an ESG investment strategy, ESG considerations are
integrated into the investment process when weighing up the risk
and reward benefits of investment decisions. The Board believes
that communication and engagement with portfolio companies is
important and can lead to better outcomes for shareholders and the
environment than merely excluding investment in certain
areas.
More information on
BlackRock’s approach to ESG integration, as well as activity
specific to the BlackRock Latin American Investment Trust plc
portfolio, is set out below. BlackRock has defined ESG integration
as the practice of incorporating material ESG information and
consideration of sustainability risks into investment decisions in
order to enhance risk-adjusted returns. ESG integration does not
change the Company’s investment objective or constrain the
Investment Manager’s investable universe and does not mean that an
ESG or impact focused investment strategy or any exclusionary
screens have been or will be adopted by the Company. Similarly, ESG
integration does not determine the extent to which the Company may
be impacted by sustainability risks. More information on
sustainability risks may be found in the AIFMD Fund Disclosures
document of the Company available on the Company’s website at
https://www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock-latin-america-trust-plc.pdf.
The Company does not meet
the criteria for Article 8 or 9 products under the EU Sustainable
Finance Disclosure Regulation (“SFDR”) and the investments
underlying this financial product do not take into account the EU
criteria for environmentally sustainable economic
activities.
BlackRock’s approach to
ESG integration
BlackRock believes that
sustainability risks – including climate risk are investment risks.
As a fiduciary, we manage material risks and opportunities that
could impact portfolios. Sustainability can be a driver of
investment risks and opportunities, and we incorporate them in our
firm wide processes when they are material. This in turn (in
BlackRock’s view) is likely to drive a significant reallocation of
capital away from traditional carbon intensive industries over the
next decade. BlackRock believes that carbon-intensive companies
will play an integral role in unlocking the full potential of the
energy transition, and to do this, they must be prepared to adapt,
innovate and pivot their strategies towards a low carbon
economy.
BlackRock incorporates
into its firmwide processes relevant, financially material
information, including financially material data and information
related to ESG. BlackRock's investment view is that doing so can
provide better risk-adjusted returns for its clients over the long
term.
BlackRock has a framework
for ESG integration that permits a diversity of approaches across
different investment teams, strategies and particular client
mandates. As with other investment risks and opportunities, the
financial materiality of ESG considerations may vary by issuer,
sector, product, mandate, and time horizon. As such BlackRock's ESG
integration framework needs to allow for flexibility across
investment teams. Depending on the investment approach, financially
material ESG data or information may help inform the due diligence,
portfolio or index construction, and/or monitoring processes of
client portfolios, as well as BlackRock's approach to risk
management.
BlackRock's ESG
integration framework is built upon its history as a firm founded
on the principle of thorough and thoughtful risk management.
Aladdin, BlackRock's core risk management and investment technology
platform, allows investors to leverage financially material ESG
data or information as well as the combined experience of
BlackRock's investment teams to effectively identify investment
opportunities and investment risks. BlackRock's heritage in risk
management combined with the strength of the Aladdin platform
enables BlackRock’s approach to ESG
integration.
BlackRock structures its
approach to ESG integration around three main pillars: investment
processes, material insights and transparency. These pillars
underpin ESG integration at BlackRock, and they are supported by
equipping BlackRock employees with investment relevant ESG data,
tools, and education.
More information in
respect of BlackRock's approach to ESG integration can be found at
https://www.blackrock.com/corporate/literature/publication/blk-esg-investment-statement-web.pdf
BlackRock Latin American
Investment Trust plc - Investment Stewardship Engagement with
portfolio companies in the year ended 31
December
2023
Given the Board’s belief
in the importance of engagement and communication with portfolio
companies, they receive regular updates from the Manager in respect
of activity undertaken for the year under review. The Board notes
that over the year to 31 December 2023, 53 total company
engagements were held with the management teams of 25 portfolio
companies representing 74% of the portfolio by % of holdings at
31 December 2023. To put this into
context, there were 34 companies in the BlackRock Latin American
Investment Trust plc portfolio at 31
December 2023. Additional information is set out in the
table below and charts contained within the Annual Report and
Financial Statements as well as the key engagement themes for the
meetings held in respect of the Company’s portfolio
holdings.
|
BlackRock Latin American Investment Trust
plc |
|
year ended 31 December
2023 |
|
|
|
Number of engagements
held |
53 |
|
Number of companies
met |
25 |
|
% of equity investments
covered* |
74% |
|
Shareholder meetings voted
at |
50 |
|
Number of proposals voted
on |
654 |
|
Number of votes against
management |
69 |
|
% of total votes represented by votes against
management |
8.78% |
* Calculated as the
percentage of the portfolio holdings at 31
December 2023 represented by the portfolio companies that
engagements were held with.
|
Engagement Topics
1 |
Engagement Topics
1 |
|
% |
|
Climate Risk
Management |
25 |
|
Water and
Waste |
7 |
|
Other company impacts on the
environment |
1 |
|
Business Oversight/Risk
Management |
45 |
|
Corporate Strategy |
44 |
|
Board Composition and
Effectiveness |
36 |
|
Governance Structure |
35 |
|
Sustainability
Reporting |
26 |
|
Remuneration |
15 |
|
Board Gender
Diversity |
7 |
|
Executive Management |
6 |
|
Other |
1 |
|
Human Capital
Management |
9 |
|
Community
Relations |
5 |
|
Privacy & Data
Security |
5 |
|
Diversity and
Inclusion |
2 |
|
Business Ethics and
Integrity |
2 |
|
Other company impacts on people/human
rights |
2 |
|
Indigenous Peoples
Rights |
1 |
|
Health and
Safety |
1 |
|
Supply Chain Labour
Management |
1 |
|
Social Risks &
Opportunities |
1 |
|
Engagement
Themes1 |
|
% |
|
Governance |
53 |
|
Environmental |
25 |
|
Social |
22 |
1 Most engagement
conversations cover multiple topics. More detail about BIS’
engagement priorities can be found here:
www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pdf.
The number of meetings held in respect of the Company’s portfolio
holdings; at which a particular topic is
discussed.
Investment
Stewardship
Consistent with
BlackRock’s fiduciary duty as an asset manager, BlackRock
Investment Stewardship (BIS) seeks to support investee companies in
their efforts to deliver long-term financial value on behalf of
their clients. These clients include public and private pension
plans, governments, insurance companies, endowments, universities,
charities and ultimately, individual investors, among others. BIS
serves as a link between BlackRock’s clients and the companies they
invest in. Clients depend on BlackRock to help them meet their
investment goals; the business and governance decisions that
companies make may have a direct impact on BlackRock’s clients’
long-term investment outcomes and financial
wellbeing.
Global
Principles
The BIS Global Principles,
regional voting guidelines, and engagement priorities
(collectively, the ‘BIS policies’) set out the core elements of
corporate governance that guide BIS’ efforts globally and within
each regional market, including when engaging with companies and
voting at shareholder meetings when authorised to do so on behalf
of clients. Each year, BIS reviews its policies and updates them as
necessary to reflect changes in market standards and regulations,
insights gained over the year through third-parties and its own
research, and feedback from clients and companies. BIS’ Global
Principles are available on its website at
https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-engprinciples-global.pdf.
Regional voting
guidelines
BIS’ voting guidelines are
intended to help clients and companies understand its thinking on
key governance matters. They are the benchmark against which it
assesses a company’s approach to corporate governance and the items
on the agenda to be voted on at a shareholder meeting. BIS applies
its guidelines pragmatically, taking into account a company’s
unique circumstances where relevant. BlackRock informs voting
decisions through research and engages as necessary. BIS reviews
its voting guidelines annually and updates them as necessary to
reflect changes in market standards, evolving governance practice
and insights gained from engagement over the prior year. BIS’
regional voting guidelines are available on its website at
www.blackrock.com/corporate/about-us/investment-stewardship#stewardship-policies.
BlackRock is committed to
transparency in terms of disclosure on its stewardship activities
on behalf of clients. BIS publishes its stewardship policies – such
as the BIS Global Principles, regional voting guidelines and
engagement priorities – to help BlackRock’s clients understand its
work to advance their interests as long-term investors in public
companies. Additionally, BIS publishes both annual and quarterly
reports detailing its stewardship activities, as well as vote
bulletins that describe its rationale for certain votes at high
profile shareholder meetings. More detail in respect of BIS
reporting can be found at
www.blackrock.com/corporate/insights/investment-stewardship.
BlackRock’s reporting and
disclosures
In terms of its own
reporting, BlackRock believes that the Sustainability Accounting
Standards Board provides a clear set of standards for reporting
sustainability information across a wide range of issues, from
labour practices to data privacy to business
ethics.
For evaluating and
reporting climate-related risks, as well as the related governance
issues that are essential to managing them, the Task Force on
Climate-related Financial Disclosures (TCFD) provides
a valuable framework.
BlackRock recognises that
reporting to these standards requires significant time, analysis,
and effort. BlackRock’s 2022 TCFD report can be found
at www.blackrock.com/corporate/literature/continuous-disclosure-and-important-information/tcfdreport-2022-blkinc.pdf.
STRATEGIC
REPORT
The Directors present the
Strategic Report of the Company for the year ended 31 December 2023.
Objective
The Company’s objective is
to secure long-term capital growth and an attractive total return
primarily through investing in quoted securities in Latin America.
Strategy, business model
and investment policy
Strategy
The Company invests in
accordance with the objective given above. The Board is
collectively responsible to shareholders for the long-term success
of the Company and is its governing body. There is a clear division
of responsibility between the Board and the Manager. Matters for
the Board include setting the Company’s strategy, including its
investment objective and policy, setting limits on gearing (both
bank borrowings and the effect of derivatives), capital structure,
governance, and appointing and monitoring of performance of service
providers, including the Manager.
Business
model
The Company’s business
model follows that of an externally managed investment trust;
therefore the Company does not have any employees and outsources
its activities to third party service providers including the
Manager who is the principal service
provider.
In accordance with the
Alternative Investment Fund Managers’ Directive (AIFMD), as
implemented, retained and onshored in the UK, the Company is an
Alternative Investment Fund (AIF). BlackRock Fund Managers Limited
(the Manager) is the Company’s Alternative Investment Fund
Manager.
The management of the
investment portfolio and the administration of the Company have
been contractually delegated to the Manager who in turn (with the
permission of the Company) has delegated certain investment
management and other ancillary services to BlackRock Investment
Management (UK) Limited (BIM (UK) or
the Investment Manager). The Manager, operating under guidelines
determined by the Board, has direct responsibility for the
decisions relating to the day-to-day running of the Company and is
accountable to the Board for the investment, financial and
operating performance of the Company. The Company delegates fund
accounting services to the Manager, which in turn sub-delegates
these services to The Bank of New York Mellon (International)
Limited. Other service providers include the Depositary, The Bank
of New York Mellon (International) Limited and the Registrar,
Computershare Investor Services PLC.
Details of the contractual
terms with these service providers are set out in the Directors’
Report contained within the Annual Report and Financial
Statements.
Our strategy is that the
portfolio will be chosen from a spread of companies which are
listed in, or whose main activities are in, Latin America.
As an actively managed
fund, our primary aims over the medium term are significant
outperformance of our benchmark index (the MSCI EM Latin America
Index – net total return basis). The Investment Manager is not
constrained from investing outside the index. Our portfolio and
performance will diverge from the returns obtained simply by
investing in the index.
Investment
policy
As a closed-end company we
are able to adopt a longer-term investment horizon, and therefore
may, when appropriate, have a higher proportion of less liquid mid
and smaller capitalisation companies than comparable open ended
funds.
The portfolio is subject
to a number of geographical restrictions relative to the benchmark
index but the Investment Manager is not constrained from investing
outside the index. For Brazil,
Mexico, Chile, Argentina, Peru, Colombia and Venezuela, the portfolio weighting is limited
to plus or minus 20% of the index weighting for each of those
countries. For all other Latin American countries the limit is plus
or minus 10% of the index weighting. Additionally, the Company may
invest in the securities of quoted companies whose main activities
are in Latin America but which are
not established or incorporated in the region or quoted on a local
exchange.
The Company’s policy is
that up to 10% of the gross assets of the portfolio may be invested
in unquoted securities. For the year ended 31 December 2023 and up to the date of this
report, the Company did not hold any unquoted
securities.
The Company will not hold
more than 15% of the market capitalisation of any one company and
no more than 15% of the Company’s investments will be held in any
one company as at the date any such investment is
made.
No more than 15% of the
gross assets of the portfolio shall be invested in other UK listed
investment companies (including other investment
trusts).
The Company may deal in
derivatives (including options, futures and forward currency
transactions) for the purposes of efficient portfolio management
(i.e. for the purpose of reducing, transferring or eliminating
investment risk in the underlying investments of a collective
investment undertaking, including any technique or instrument used
to provide protection against exchange and credit risks). No more
than 20% of the Company’s portfolio by value may be under option at
any given time. The Company did not deal in any derivatives in the
year ended 31 December 2023, nor has
it entered into any derivative contracts since the year end and up
to the date of this report.
The Company may underwrite
or sub-underwrite any issue or offer for the sale of investments.
No such commitment will be entered into if, at that time, the
aggregate of such investments would exceed 10% of the net asset
value of the Company or any such individual investment would exceed
3% of the net asset value of the Company.
The Company may, from time
to time, use borrowings to gear its investment portfolio or in
order to fund the market purchase of its own ordinary shares. Under
the Company’s Articles of Association, the net borrowings of the
Company may not exceed 100% of the Company’s adjusted capital and
reserves (as defined in the Glossary contained within the Annual
Report and Financial Statements). However, net borrowings are not
expected to exceed 25% of net assets under normal circumstances.
The Investment Manager may also hold cash or cash-equivalent
securities when it considers it to be advantageous to do
so.
The Company’s financial
statements are maintained in US Dollars. Although many investments
are likely to be denominated and quoted in currencies other than in
US Dollars, the Company does not currently employ a hedging policy
against fluctuations in exchange rates.
No material change will be
made to the Company’s investment policy without shareholder
approval.
Investment
process
An overview of the
investment process is set out below.
The Investment Manager’s
main focus is to invest in securities that provide opportunities
for strong capital appreciation relative to our benchmark. We aim
to maintain a concentrated portfolio of high conviction investment
ideas that typically consists of companies with a combination of
mispriced growth potential and/or display attributes of sustained
value creation that are underappreciated by the financial
markets.
The Manager’s experienced
research analyst team conducts on the ground research, meeting with
target companies, competitors, suppliers and others in the region
in order to generate investment ideas for portfolio construction.
In addition, the investment team meets regularly with government
officials, central bankers, industry regulators and
consultants.
Final investment decisions
result from a combination of bottom-up, company specific research
with top-down, macro analysis.
Share rating and discount
control
The Directors recognise
that it is in the long term interests of shareholders that shares
do not trade at a significant discount to their prevailing NAV. The
Board monitors the level of the Company’s discount to NAV on an
ongoing basis.
Over the year under
review, the Company’s share price traded in the range of a discount
of 6.8% to 18.6% and at the year end stood at a discount of 11.5%.
Further details setting out how the discount or premium at which
the Company’s shares trade is calculated are included in the
Glossary contained within the Annual Report and Financial
Statements.
A special resolution was
passed at the AGM of the Company held on 22
May 2023, granting the Directors’ authority to make market
purchases of the Company’s ordinary shares to be held, sold,
transferred or otherwise dealt with as treasury shares or cancelled
upon completion of the purchase. The Board intends to renew this
authority at the AGM to be held in May
2024.
The Board adopted a new
discount control mechanism, for the four year period from
1 January 2022 to 31 December 2025.
Under this new mechanism
the Board undertakes to make a tender offer to shareholders for
24.99% of the issued share capital (excluding treasury shares) of
the Company at a tender price reflecting the latest cum-income Net
Asset Value (NAV) less 2% and related portfolio realisation costs
if, over the four year period from 1 January
2022 to 31 December 2025 (the
‘Calculation Period’), either of the following conditions are
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 total
return by more than 50 basis points over 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 ordinary shares over the
Calculation Period.
The making and
implementation of this tender offer will be conditional, amongst
other things, upon the Company having the required shareholder
authority or such shareholder authority being obtained, the Company
having sufficient distributable reserves to effect the repurchase
of any successfully tendered shares and, having regard to its
continuing financial requirements, sufficient cash reserves to
settle the relevant transactions with shareholders, the Company’s
biennial continuation votes being approved at the Annual General
Meetings in 2024 and 2026. The Board believes that a four year
performance target enables the Manager to take a sufficiently long
term approach to investing in quality companies in the region, and
it believes that it is in shareholders’ interests as a whole that
this time period for assessing performance be
adopted.
SECTION 172 STATEMENT:
PROMOTING THE SUCCESS OF BLACKROCK LATIN AMERICAN INVESTMENT TRUST
PLC
The Companies
(Miscellaneous Reporting) Regulations 2018 require directors to
explain more fully how they have discharged their duties under
Section 172(1) of the Companies Act 2006 in promoting the success
of their companies for the benefit of members as a whole. This
enhanced disclosure covers how the Board has engaged with and
understands the views of stakeholders and how stakeholders’ needs
have been taken into account, the outcome of this engagement and
the impact that it has had on the Board’s
decisions.
As the Company is an
externally managed investment company and does not have any
employees or customers, the Board considers the main stakeholders
in the Company to be the shareholders, key service providers (being
the Manager and Investment Manager, the Custodian, Depositary,
Registrar and Broker) and investee companies. The reasons for this
determination, and the Board’s overarching approach to engagement,
are set out in the table below.
Stakeholders
Shareholders
Continued shareholder
support and engagement are critical to the continued existence of
the Company and the successful delivery of its long-term strategy.
The Board is focused on fostering good working relationships with
shareholders and on understanding the views of shareholders in
order to incorporate them into the Board’s strategy and objectives
in delivering long-term growth and income.
Manager and Investment
Manager
The Board’s main working
relationship is with the Manager, who is responsible for the
Company’s portfolio management (including asset allocation, stock
and sector selection) and risk management, as well as ancillary
functions such as administration, secretarial, accounting and
marketing services. The Manager has sub-delegated portfolio
management to the Investment Manager. Successful management of
shareholders’ assets by the Investment Manager is critical for the
Company to successfully deliver its investment strategy and meet
its objective. The Company is also reliant on the Manager as AIFM
to provide support in meeting relevant regulatory obligations under
the AIFMD and other relevant legislation.
Other key service
providers
In order for the Company
to function as an investment trust with a listing on the premium
segment of the official list of the FCA and trade on the London
Stock Exchange’s (LSE) main market for listed securities, the Board
relies on a diverse range of advisors for support in meeting
relevant obligations and safeguarding the Company’s assets. For
this reason the Board considers the Company’s Custodian,
Depositary, Registrar and Broker to be stakeholders. The Board
maintains regular contact with its key external providers and
receives regular reporting from them through the Board and
Committee meetings, as well as outside of the regular meeting
cycle.
Investee
companies
Portfolio holdings are
ultimately shareholders’ assets, and the Board recognises the
importance of good stewardship and communication with investee
companies in meeting the Company’s investment objective and
strategy. The Board monitors the Manager’s stewardship activities
and receives regular feedback from the Manager in respect of
meetings with the management of investee
companies.
A summary of the key areas
of engagement undertaken by the Board with its key stakeholders in
the year under review and how Directors have acted upon this to
promote the long-term success of the Company are set out in the
table below.
Areas of
Engagement
Investment mandate and
objective
Issue
The Board is committed to
promoting the role and success of the Company in delivering on its
investment mandate to shareholders over the long term. However, the
Board recognises that securities within the Company’s investment
remit may involve significant additional risk due to the political
volatility and environmental, social and governance concerns facing
many of the countries in the Company’s investment universe. These
ESG issues should be a key focus of our Manager’s research. More
than ever, consideration of material ESG information and
sustainability risk is an important element of the investment
process and must be factored in when making investment decisions.
The Board also has responsibility to shareholders to ensure that
the Company’s portfolio of assets is invested in line with the
stated investment objective and in a way that ensures an
appropriate balance between spread of risk and portfolio
returns.
Engagement
The Board believes that
responsible investment and sustainability are important to the
longer-term delivery of growth in capital and income and has worked
very closely with the Manager throughout the year to regularly
review the Company’s performance, investment strategy and
underlying policies, and to understand how ESG considerations are
integrated into the investment process.
While the Company has not
adopted an ESG investment strategy or exclusionary screens, the
Manager’s approach to the consideration of ESG factors in respect
of the Company’s portfolio, as well as its engagement with investee
companies to encourage the adoption of sustainable business
practices which support long-term value creation, are kept under
review by the Board. The Manager reports to the Board in respect of
its consideration of ESG factors and how these are integrated into
the investment process; a summary of BlackRock’s approach to ESG
integration is set out within the Annual Report and Financial
Statements.
The Board discussed ESG
concerns in respect of specific portfolio companies with the
Manager, including the investment rationale for holding companies
with poor ESG ratings and the engagement being entered into with
management teams to address the underlying issues driving these
ratings.
The Company does not seek
to become an Article 8 or 9 company under the EU Sustainable
Finance Disclosure Regulation (EU SFDR) legislation and will not
seek to have one of the 4 sustainability labels under the FCA’s
Sustainability Disclosure Requirements (SDR) regime, as the
Board believes engagement is likely to be more effective in
Latin America than exclusion. The
Investment Manager has access to a range of data sources, including
principal adverse indicator (PAI) data, when making decisions on
the selection of investments. However, whilst BlackRock considers
ESG risks for all portfolios and these risks may coincide with
environmental or social themes associated with the PAIs, unless
stated otherwise in the AIFMD Disclosure Document, the Company does
not commit to considering PAIs in driving the selection of its
investments.
Impact
The portfolio activities
undertaken by the Manager, can be found in the Investment Manager’s
Report above.
Dividend
target
Issue
A key element of the
Board’s overall strategy to reduce the discount at which the
Company’s shares trade is the Company’s dividend policy whereby the
Company pays a regular quarterly dividend equivalent to 1.25% of
the Company’s US Dollar NAV at the end of each calendar quarter.
The Board believes this policy which produced a dividend yield of
5.1% (based on the share price of 569.84 cents per share at
31 December 2023, equivalent to the Sterling price of
447.00 pence per share translated
into US cents at the rate prevailing at 31 December 2023 of
US$1.27 to £1), enhances demand for
the Company’s shares, which will help to narrow the Company’s
discount over time. These dividends are funded out of capital
reserves to the extent that current year revenue and revenue
reserves are insufficient; 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 but keep the dividend policy and its impact on total
return under review.
Engagement
The Manager reports total
return performance statistics to the Board on a regular basis,
along with the portfolio yield and the impact of the dividend
policy on brought forward distributable
reserves.
The Board reviews the
Company’s discount on a regular basis and holds regular discussions
with the Manager and the Company’s broker regarding the discount
level.
The Manager provides the
Board with feedback and key performance statistics regarding the
success of the Company’s marketing initiatives which include
messaging to highlight the quarterly
dividends.
The Board also reviews
feedback from shareholders in respect of the level of dividend,
shareholders may attend the Company’s Annual General Meeting where
formal questions may be put to the Board.
Impact
Since the dividend policy
was introduced in July 2018, the
Company’s discount has narrowed from an average of 13.5% for the
two year period preceding the introduction of the new policy
on 13 March 2018 to an average of 11.3% for the period from
14 March 2018 to 31 December
2023. At 22 March 2024 the discount stood
at 12.1%.
Of total dividends of
US$11,797,000 paid out in the year,
US$6,116,000 has been paid out of
current year revenue.
The Company’s portfolio
managers attend professional investor/analyst meetings and webcast
presentations live to professional and private investors over the
year to promote the Company and raise the profile in terms of the
investment strategy, including the dividend
policy.
Discount
management
Issue
The Board recognises that
it is in the long-term interests of shareholders that shares do not
trade at a significant discount to their prevailing
NAV.
Engagement
The Board has put in place
a discount control mechanism covering the four years to
31 December 2025 whereby shareholders will be offered 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 for each relevant biennial period is approved
(being the continuation votes at the AGMs in 2024 and 2026), 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 total return by more than 50 basis points
over the four year period from 1 January
2022 to 31 December 2025;
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.
Further details are set out in the Strategic Report contained
within the Annual Report and Financial
Statements.
The Board monitors the
tender trigger targets described within the Annual Report and
Financial Statements on a regular basis in conjunction with the
Manager. The Manager provides regular performance updates and
detailed performance attribution.
Impact
The Company’s average
discount for the period from 1 January
2022 to 31 December 2023 was 10.8%1 compared
to the tender discount threshold
of 12.0%1.
The Company’s annualised
NAV performance of 21.2% for the same period outperformed the
benchmark (which rose by 20.2% on an annualised basis) by 1.0%
(equivalent to 100 basis points). For the tender not to be
triggered, the NAV must outperform the benchmark by more than 50
basis points on an annualised basis over the four years to
31 December 2025. The Company’s
discount has widened over the year under review, from 9.1% at
31 December 2022 to 11.5% at 31 December
2023.
As at 22 March 2024 the discount was
12.1%.
1
Alternative Performance Measures, see Glossary contained within the
Annual Report and Financial
Statements.
Service levels of third
party providers
Issue
The Board acknowledges the
importance of ensuring that the Company’s principal suppliers are
providing a suitable level of service: including the Manager in
respect of investment performance and delivering on the Company’s
investment mandate; the Custodian and Depositary in respect of
their duties towards safeguarding the Company’s assets; the
Registrar in its maintenance of the Company’s share register and
dealing with investor queries and the Company’s Broker in respect
of the provision of advice and acting as a market maker for the
Company’s shares.
Engagement
The Manager reports to the
Board on the Company’s performance on a regular basis. The
Board carries out a robust annual evaluation of the Manager’s
performance, their commitment and available
resources.
The Board performs an
annual review of the service levels of all third party service
providers and concludes on their suitability to continue in their
role.
The Board receives regular
updates from the AIFM, Depositary, Registrar and Broker on an
ongoing basis.
The Board works closely
with the Manager to gain comfort that business continuity plans
continue to operate effectively for all of the Company’s service
providers.
Impact
All performance
evaluations were performed on a timely basis and the Board
concluded that all third party service providers, including the
Manager, Custodian, Depositary and Fund Accountant were operating
effectively and providing a good level of
service.
The Board has received
updates in respect of business continuity planning from the
Company’s Manager, Custodian, Depositary, Fund Accountant, Broker,
Registrar and Printer, and is confident that arrangements are in
place to ensure that a good level of service will be
maintained.
Board
composition
Issue
The Board is committed to
ensuring that its own composition brings an appropriate balance of
knowledge, experience and skills, and that it is compliant with
best corporate governance practice under the UK Code,
including guidance on tenure and the composition of the Board’s
committees.
Engagement
The Board regularly
reviews succession planning arrangements. The Nomination Committee
has agreed the selection criteria and the method of selection,
recruitment and appointment. Board diversity, including gender, is
taken into account when establishing recruitment criteria. When
undertaking recruitment activity, the Board will use the services
of an external search consultant to identify suitable
candidates.
All Directors are subject
to a formal evaluation process on an annual basis (more details and
the conclusions in respect of the 2023 evaluation process are
contained within the Annual Report and Financial Statements). All
Directors stand for re-election by shareholders annually.
Shareholders may attend the AGM and raise any queries in respect of
Board composition or individual Directors in person, or may contact
the Company Secretary or the Chairman using the details provided
within the Annual Report and Financial Statements if they wish to
raise any issues.
Impact
As at the date of this
report, the Board is comprised of two women and
two men.
Details of each Director’s
contribution to the success and promotion of the Company are set
out in the Directors’ Report contained within the Annual Report and
Financial Statements. The Directors are not aware of any issues
that have been raised directly by shareholders in respect of Board
composition in 2023. Details for the proxy voting results in favour
and against individual Directors’ re-election at the 2022 AGM
are given on the Company’s website at
www.blackrock.com/uk/brla.
Shareholders
Issue
Continued shareholder
support and engagement are critical to the continued existence of
the Company and the successful delivery of its long-term
strategy.
Engagement
The Board is committed to
maintaining open channels of communication and to engage with
shareholders. The Company welcomes and encourages attendance and
participation from shareholders at its Annual General Meetings.
Shareholders therefore have the opportunity to meet the Directors
and Investment Manager and to address questions to them
directly.
The Annual Report and Half
Yearly Financial Report are available on the BlackRock website and
are also circulated to shareholders either in printed copy or via
electronic communications. In addition, regular updates on
performance, monthly factsheets, the daily NAV and other
information are also published on the website at
www.blackrock.com/uk/brla.
The Board also works
closely with the Manager to develop the Company’s marketing
strategy, with the aim of ensuring effective communication with
shareholders in respect of the investment mandate and objective.
Unlike trading companies, one-to-one shareholder meetings usually
take the form of a meeting with the portfolio managers as opposed
to members of the Board. As well as attending regular investor
meetings the portfolio managers hold regular discussions with
wealth management desks and offices to build on the case for, and
understanding of, long-term investment opportunities in
Latin America. The Manager also coordinates public relations
activity, including meetings between the portfolio managers and
relevant industry publications to set out their vision for the
portfolio strategy and outlook for the region. The Manager releases
monthly portfolio updates to the market to ensure that investors
are kept up to date in respect of performance and other portfolio
developments, and maintains a website on behalf of the Company that
contains relevant information in respect of the Company’s
investment mandate and objective. If shareholders wish to raise
issues or concerns with the Board, they are welcome to do so at any
time. The Chairman is available to meet directly with shareholders
periodically to understand their views on governance and the
Company’s performance where they wish to do so. She may be
contacted via the Company Secretary whose details are contained
within the Annual Report and Financial
Statements.
Impact
The Board values any
feedback and questions from shareholders ahead of and during Annual
General Meetings in order to gain an understanding of their views
and will take action when and as appropriate. Feedback and
questions will also help the Company evolve its reporting, aiming
to make reports more transparent and
understandable.
Feedback from all
substantive meetings between the Investment Manager and
shareholders will be shared with the Board. The Directors will also
receive updates from the Company’s broker on any feedback from
shareholders, as well as share trading activity, share price
performance and an update from the Investment
Manager.
The portfolio managers
attended a number of professional investor meetings throughout
the year and held discussions with a range of wealth
management desks and offices in respect of the Company during the
year under review. The Manager also held group webcasts in the year
to provide investors with portfolio updates and give them the
opportunity to discuss any issues with the portfolio managers. 53
press articles about the Company were published in the year under
review focusing on the Company’s profile and the case for long-term
investment opportunities in Latin America. These included
11 pieces of national coverage, 23 pieces of intermediary
coverage and 21pieces of consumer investment
coverage.
Performance
Details of the Company’s
performance are set out in the Chairman’s Statement
above.
The Investment Manager’s
Report above forms part of this Strategic Report and includes a
review of the main developments during the year, together with
information on investment activity within the Company’s
portfolio.
Portfolio
analysis
A detailed analysis of the
investments and the sector and geographical allocations is provided
above.
Results and
dividends
The results for the
Company are set out in the Income Statement below. The total gain
for the year on ordinary activities, after taxation, was
US$53,405,000 (2022: gain of
US$13,669,000) of which the revenue
profit amounted to US$8,967,000
(2022: US$13,842,000), and the
capital gain amounted to US$44,438,000 (2022: capital loss of US$173,000).
Under the Company’s
dividend policy, dividends are calculated based on 1.25% of the US
Dollar NAV at close of business on the last working day of March,
June, September and December and are paid in May, August, November
and February respectively. Dividends will be financed through
a combination of available net income in each financial year
and revenue and capital reserves. The Company has declared interim
dividends totalling 28.82 cents per share under this policy in
respect of the year ended 31 December 2023 as detailed in the
Annual Report and Financial Statements.
Details of this policy are
also set out in the Chairman’s Statement
above.
NAV, share price and index
performance
At each meeting the Board
reviews the detail of the performance of the portfolio as well as
the net asset value and share price (total return) for the Company
and compares this to the performance of other companies in the peer
group of Latin American open and closed-end funds and to our
benchmark.
The Board also regularly
reviews a number of indices and ratios to understand the impact on
the Company’s relative performance of the various components such
as asset allocation and stock selection.
Information on the
Company’s performance is given in the performance record contained
within the Annual Report and Financial Statements and the
Chairman’s Statement and Investment Manager’s Report
above.
Details of the Company’s
discount control
The Board recognises that
it is in the long-term interests of shareholders that shares do not
trade at a significant discount to their prevailing NAV. The Board
monitors the level of the Company’s discount to NAV on an ongoing
basis and considers strategies for managing any discount. In the
year to 31 December 2023, the
Company’s share price to NAV traded in the range of a discount of
6.8% to 18.6% on a cum-income basis. The Board has in place
a discount control mechanism whereby it will offer
shareholders the ability to tender up to 24.99% of the Company’s
issued share capital at the AGM in 2026 if certain performance and
discount targets are not met. More details are given in the
Strategic Report contained within the Annual Report and Financial
Statements.
Further details setting
out how the discount or premium at which the Company’s shares trade
is calculated are included in the Glossary contained within the
Annual Report and Financial Statements.
Ongoing
charges
The ongoing charges
represent the Company’s management fee and all other operating
expenses, excluding finance costs, direct transaction costs,
custody transaction charges, VAT recovered, taxation and certain
non-recurring items expressed as a percentage of average daily net
assets.
The ongoing charges are
based on actual costs incurred in the year as being the best
estimate of future costs. The Board reviews the ongoing charges and
monitors the expenses incurred by the Company on an ongoing basis
against a peer group of Latin American open and closed-end funds.
A definition setting out in detail how the ongoing charges
ratio is calculated is included in the Glossary contained within
the Annual Report and Financial
Statements.
|
Dividend |
Pay
date |
|
|
|
|
Quarter to 31 March
2023 |
6.21 cents |
16 May 2023 |
|
Quarter to 30 June
2023 |
7.54 cents |
11 August
2023 |
|
Quarter to 30 September
2023 |
7.02 cents |
9 November
2023 |
|
Quarter to 31 December
2023 |
8.05 cents |
9 February
2024 |
|
Total |
28.82
cents |
|
Composition of shareholder
register
The Board is mindful of
the importance of a diversified shareholder register and the need
to make the Company’s shares attractive to long-term investors; it
is therefore the Board’s aim to increase the diversity of the
shareholder register over time. The Board monitors the retail
element of the register, which is defined for these purposes as
wealth managers, Independent Financial Advisors (IFAs) and direct
private investors. As at 31 December
2023, the Company’s share register comprised 54.6% retail
investors; the Board will monitor this with the aim of growing the
retail element of the register over time.
Key performance
indicators
At each Board meeting, the
Directors consider a number of performance measures to assess the
Company’s success in achieving its objectives. The key performance
indicators (KPIs) used to measure the progress and performance of
the Company over time are comparable to those reported by other
investment trusts and are set out below.
The table below sets out
the key KPIs for the Company. As indicated in footnote 2 to the
table, some of these KPIs fall within the definition of
‘Alternative Performance Measures’ (APMs) under guidance issued by
the European Securities and Markets Authority and additional
information explaining how these are calculated is set out in the
Glossary contained within the Annual Report and Financial
Statements.
|
Year
ended |
Year
ended |
|
31
December |
31
December |
|
2023 |
2022 |
|
Key Performance
Indicators |
|
|
|
Net asset value total
return1,2 |
37.8% |
6.6% |
|
Share price total
return1,2 |
35.3% |
4.7% |
|
Benchmark total return
(net)1 |
32.7% |
8.9% |
|
Discount to net asset
value2 |
11.5% |
9.1% |
|
Average discount to net asset value for the
year |
12.6% |
8.9% |
|
Revenue return per
share |
30.45c |
41.48c |
|
Ongoing
charges2,3 |
1.28% |
1.13% |
|
Retail element of share
register4 |
54.6% |
53.2% |
1
Calculated in US Dollar terms with dividends
reinvested.
2
Alternative Performance Measures, see Glossary contained within the
Annual Report and Financial Statements.
3
Ongoing charges represent the management fee and all other
operating expenses excluding finance costs, direct transaction
costs, custody transaction charges, VAT recovered, taxation, prior
year expenses written back and certain non-recurring items as a %
of average daily net assets.
4
Source: Richard Davies Investor
Relations.
PRINCIPAL
RISKS
The Company is exposed to
a variety of risks and uncertainties and the key risks are set out
below. The Board has put in place a robust process to identify,
assess and monitor the principal and emerging risks. A core element
of this process is the Company’s risk register. This identifies the
risks facing the Company and assesses the likelihood and potential
impact of each risk and the quality of controls operating to
mitigate it. A residual risk rating is then calculated for each
risk based on the outcome of the assessment. This approach allows
the effect of any mitigating procedures to be reflected in the
final assessment.
The risk register is
regularly reviewed and the risks reassessed. The risk environment
in which the Company operates is also monitored and regularly
appraised. New risks are also added to the register as they are
identified which ensures that the document continues to be an
effective risk management tool. The risk that unforeseen or
unprecedented events including (but not limited to) heightened
geo-political tensions such as the conflicts in Russia-Ukraine and the Middle East, high inflation and the current
cost of living crisis has had a significant impact on global
markets. The Board has taken into consideration the risks posed to
the Company by the crisis and incorporated these into the Company’s
risk register.
The risk register, its
method of preparation and the operation of key controls in the
Manager’s and third party service providers’ systems of internal
control are reviewed on a regular basis by the Audit Committee
in order to gain a more comprehensive understanding of the
Manager’s and other third party service providers’ risk management
processes and how these apply to the Company’s business.
BlackRock’s internal audit department provides an annual
presentation to the Audit Committee chairmen of the BlackRock
investment trusts setting out the results of testing performed in
relation to BlackRock’s internal control processes. Where produced,
the Audit Committee also reviews Service Organisation Control (SOC
1) reports from the Company’s service
providers.
As required by the UK
Corporate Governance Code, the Board has undertaken a robust
assessment of both the principal and emerging risks facing the
Company, including those that would threaten its business model,
future performance, solvency or liquidity. Those principal risks
have been described in the table that follows, together with an
explanation of how they are managed and mitigated. The Board will
continue to assess these risks on an ongoing basis. Emerging risks
are considered by the Board as they come into view and are
incorporated into the existing review of the Company’s risk
register. They were also considered as part of the annual
evaluation process. Additionally, the Manager considers emerging
risks in numerous forums and the Risk and Quantitative Analysis
team produces an annual risk survey. Any material risks of
relevance to the Company identified through the annual risk survey
will be communicated to the Board.
The Board will continue to
assess these risks on an ongoing basis. In relation to the 2018 UK
Corporate Governance Code, the Board is confident that the
procedures that the Company has put in place are sufficient to
ensure that the necessary monitoring of risks and controls has been
carried out throughout the reporting
period.
The current risk register
includes a number of risks which have been categorised as
follows:
•
Counterparty;
•
Investment performance;
•
Income/dividend;
•
Legal and regulatory compliance;
•
Operational;
•
Market;
•
Financial; and
•
Marketing.
The principal risks and
uncertainties faced by the Company during the financial year,
together with the potential effects, controls and mitigating
factors, are set out in the following
table.
Counterparty
Principal
Risk
Potential loss that the
Company could incur if a counterparty is unable (or unwilling) to
perform on its commitments.
Mitigation/Control
Due diligence is
undertaken before contracts are entered into and exposures are
diversified across a number of counterparties. The Board reviews
the controls put in place by the Investment Manager to monitor and
to minimise counterparty exposure, which include intra-day
monitoring of exposures to ensure that these are within set
limits.
The Depositary is liable
for restitution for the loss of financial instruments held in
custody unless able to demonstrate the loss was a result of an
event beyond its reasonable control.
Investment
performance
Principal
Risk
Returns achieved are
reliant primarily upon the performance of the
portfolio.
The Board is responsible
for:
•
deciding the investment strategy to fulfil the Company’s objective;
and
•
monitoring the performance of the Investment Manager and the
implementation of the investment strategy.
An inappropriate
investment strategy may lead to:
•
poor performance compared to the benchmark index and the Company’s
peer group;
•
a widening discount to NAV;
•
a reduction or permanent loss of capital;
and
•
dissatisfied shareholders and reputational
damage.
The Board is also
cognisant of the long term risk to performance from inadequate
attention to ESG issues, and in particular the impact of Climate
Change. More detail in respect of these risks can be found in the
AIFMD Fund Disclosures document available on the Company’s website
at
https://www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock-latin-america-trust-plc.pdf.
Mitigation/Control
To manage this risk the
Board:
•
regularly reviews the Company’s investment mandate and long-term
strategy;
•
has set investment restrictions and guidelines which the Investment
Manager monitors and regularly reports on;
•
receives from the Investment Manager a regular explanation of stock
selection decisions, portfolio exposure, gearing and any changes in
gearing and the rationale for the composition of the investment
portfolio; and
•
monitors the maintenance of an adequate spread of investments in
order to minimise the risks associated with factors specific to
particular sectors, based on the diversification requirements
inherent in the investment policy.
Consideration of material
ESG information and sustainability risks is integrated in the
Manager’s investment process, as set out within the Annual Report
and Financial Statements. This is monitored by the
Board.
Income/dividend
Principal
Risk
The Company’s dividend
policy is to pay dividends based on 1.25% of the US Dollar net
asset value at each quarter end. Under this policy, a portion of
the dividend is likely to be paid out of capital reserves, and over
time this might erode the capital base of the Company, with a
consequential impact on longer-term total returns. The rate at
which this may occur and the degree to which dividends are funded
from capital are also dependent upon the level of dividends and
other income earned from the portfolio. Income returns from the
portfolio are dependent, among other things, upon the Company
successfully pursuing its investment
policy.
Any change in the tax
treatment of dividends or interest received by the Company,
including as a result of withholding taxes or exchange controls
imposed by jurisdictions in which the Company invests, may reduce
the level of dividends received by
shareholders.
Mitigation/Control
The Board monitors this
risk through the receipt of detailed income forecasts and considers
the level of income at each meeting.
The Company has the
ability to make dividend distributions out of capital reserves as
well as revenue reserves to support any dividend target. These
reserves totalled US$158.8 million at
31 December 2023.
The Board is mindful of
the balance of shareholder returns between income and capital and
monitors the impact of the Company’s dividend on the Company’s
capital base and the impact over time on total
return.
Any changes to the
Company’s dividend policy are communicated to the market on a
timely basis and shareholder approval will be sought for
significant changes.
Legal and regulatory
compliance
Principal
Risk
The Company has been
approved by HM Revenue & Customs as an investment trust,
subject to continuing to meet the relevant eligibility conditions
and operates as an investment trust in accordance with Chapter 4 of
Part 24 of the Corporation Tax Act 2010. As such, the Company
is exempt from capital gains tax on the profits realised from the
sale of its investments.
Any breach of the relevant
eligibility conditions could lead to the Company losing investment
trust status and being subject to corporation tax on capital gains
realised within the Company’s portfolio. In such event the
investment returns of the Company may be adversely
affected.
Any serious breach could
result in the Company and/or the Directors being fined or the
subject of criminal proceedings or the suspension of the Company’s
shares which would in turn lead to a breach of the Corporation Tax
Act 2010.
Amongst other relevant
laws and regulations, the Company is required to comply with the
provisions of the Companies Act 2006, the Alternative
Investment Fund Managers’ Directive, the UK Listing Rules,
international sanctions and the FCA’s Disclosure Guidance and
Transparency Rules.
Mitigation/Control
The Investment Manager
monitors investment movements and the amount of proposed dividends,
if any, to ensure that the provisions of Chapter 4 of Part 24 of
the Corporation Tax Act 2010 are not breached. The results are
reported to the Board at each meeting.
Compliance with the
accounting rules affecting investment trusts is carefully and
regularly monitored. The Company Secretary and the Company’s
professional advisers provide regular reports to the Board in
respect of compliance with all applicable rules and
regulations.
Following authorisation
under the Alternative Investment Fund Managers’ Directive (AIFMD),
the Company and its appointed Alternative Investment Fund Manager
(AIFM) are subject to the risks that the requirements are not
correctly complied with. The Board and the AIFM also monitor
changes in government policy and legislation which may have an
impact on the Company.
The Market Abuse
Regulation came into force on 3 July 2016. The Board takes
steps to ensure that individual Directors (and their Persons
Closely Associated) are aware of their obligations under the
regulation and has updated internal processes which seek to ensure
the risk of non-compliance is effectively
mitigated.
Operational
Principal
Risk
In common with most other
investment trust companies, the Company has no employees. The
Company therefore relies on the services provided by third parties.
Accordingly, it is dependent on the control systems of the Manager
and The Bank of New York Mellon (International) Limited (the
Custodian, Depositary and Fund Accountant) who maintain the
Company’s assets, dealing procedures and accounting records. The
Company’s share register is maintained by the Registrar,
Computershare Investor Services PLC. The security of the Company’s
assets, dealing procedures, accounting records and adherence to
regulatory and legal requirements depend on the effective operation
of the systems of these other third party service providers. There
is a risk that a major disaster, such as floods, fire, a
global pandemic or terrorist activity, renders the Company’s
service providers unable to conduct business at normal operating
capacity and effectiveness.
Failure by any service
provider to carry out its obligations to the Company could have a
material adverse effect on the Company’s performance. Disruption to
the accounting, payment systems or custody records could prevent
the accurate reporting and monitoring of the Company’s financial
position.
Mitigation/Control
Due diligence is
undertaken before contracts are entered into with third party
service providers. Thereafter, the performance of the provider is
subject to regular review and reported to the
Board.
Most third party service
providers produce Service Organisation Control (SOC 1) reports to
provide assurance regarding the effective operation of internal
controls as reported on by their reporting accountants. These
reports are provided to the Audit Committee for their
review.
The Company’s
assets/financial instruments held in custody are subject to a
strict liability regime and in the event of a loss of such
financial assets held in custody, the Depositary must return assets
of an identical type or the corresponding amount, unless able to
demonstrate the loss was a result of an event beyond its reasonable
control.
The Board reviews the
overall performance of the Manager, Investment Manager and all
other third party service providers and compliance with the
Investment Management Agreement on a regular basis. The Board also
considers the business continuity arrangements of the Company’s key
service providers on an ongoing basis and reviews these as part of
their review of the Company’s risk register. The Board has received
updates from key service providers (the Manager, the Depositary,
the Custodian, the Fund Accountant, the Broker, the Registrar and
the Printer) confirming that appropriate business continuity
arrangements are in place.
Market
Principal
Risk
Market risk arises from
volatility in the prices of the Company’s investments. It
represents the potential loss the Company might suffer through
holding investments in the face of negative market movements. There
may be exposure to significant economic, geo-political and currency
risks due to the location of the operation of the businesses in
which the Company may invest, or as a result of a global economic
crisis such as the Russia-Ukraine and Middle
East conflicts. Shares in businesses in which the Company
invests can prove volatile and this may be reflected in the
Company’s share price. Market risk includes the potential impact of
events which are outside the Company’s control, including (but not
limited to) heightened geo-political tensions and military
conflict, a global pandemic and high inflation. The Company may
also invest in smaller capitalisation companies or in the
securities markets of developing countries which are not as large
as the more established securities markets and have substantially
less trading volume, which may result in a lack of liquidity and
higher price volatility.
Corruption also remains a
significant issue across the Latin American investment universe and
the effects of corruption could have a material adverse effect on
the Company’s performance. Accounting, auditing and financial
reporting standards and practices and disclosure requirements
applicable to many companies in Latin American countries may be
less rigorous than in other markets. As a result, there may be less
information available publicly to investors in these securities,
and such information as is available is often less
reliable.
Mitigation/Control
The Board considers asset
allocation, stock selection, unquoted investments, if any, and
levels of gearing on a regular basis and has set investment
restrictions and guidelines which are monitored and reported on by
the Investment Manager.
The Board monitors the
implementation and results of the investment process with the
Investment Manager.
The Board also recognises
the benefits of a closed-end fund structure in extremely volatile
markets such as those experienced during the Russia-Ukraine and Middle
East conflicts. Unlike open ended counterparts, closed-end
funds are not obliged to sell down portfolio holdings at low
valuations to meet liquidity requirements for redemptions. During
times of elevated volatility in markets following the Russian
invasion of Ukraine and market
stress, the ability of a closed-end fund structure to remain
invested for the long term enables the portfolio managers to adhere
to disciplined fundamental analysis from a bottom-up perspective
and be ready to respond to dislocations in the market as
opportunities present themselves.
Financial
Principal
Risk
The Company’s investment
activities expose it to a variety of financial risks that
include interest rate, currency and
liquidity risk.
Mitigation/Control
Details of these risks are
disclosed in note 16 to the financial statements, together with a
summary of the policies for managing these
risks.
Marketing
Principal
Risk
Marketing efforts are
inadequate or do not comply with relevant regulatory requirements,
and fail to communicate adequately with shareholders or reach out
to potential new shareholders, resulting in reduced demand for the
Company’s shares and a widening
discount.
Mitigation/Control
The Board focuses
significant time on communicating directly with the major
shareholders and reviewing marketing strategy and
initiatives.
All investment trust
marketing documents are subject to appropriate review and
authorisation.
VIABILITY
STATEMENT
In accordance with
provision 31 of the 2018 UK Corporate Governance Code, the
Directors have assessed the prospects of the Company over a longer
period than the 12 months referred to by the ‘Going Concern’
guidelines. The Board recognises that it is obliged to propose a
biennial continuation vote, with the next vote at the AGM to be
held in May 2024. The outcome of
these events is unknown at the present time. In addition, the Board
is cognisant of the uncertainty surrounding the potential duration
of the Russia-Ukraine conflict and its impact on the global
economy and the prospects for many of the Company’s portfolio
holdings. Notwithstanding these uncertainties, given the factors
stated below, the Board expects the Company to continue for the
foreseeable future and has therefore conducted this review for the
period up to the AGM in 2027, being a period of three years
from the date of approval of this report. The Board considers three
years to be an appropriate time horizon, being a reasonable time
horizon to assess potential investments and the period being used
to assess performance for the Company’s Discount Control mechanism
(as set out in more detail within the Strategic Report contained
within the Annual Report and Financial
Statements).
In choosing this period
for its assessment of the viability of the Company the Directors
have considered the following matters:
•
the Company’s business model should remain attractive for much
longer than the period up to the AGM in 2027, unless there is a
significant economic or regulatory change;
• the
ongoing relevance of the Company’s investment objective, business
model and investment policy in the current environment (in
particular the Company’s closed-end structure which provides
intraday liquidity to investors and the ability for the portfolio
managers to invest over a longer-term time horizon than many
open ended peers). This longer-term investment horizon is
well-suited to Latin America as
the volatility of this region can make short term investing more
challenging. The Company is the only investment trust with exposure
to the Latin American region;
•
the Board keeps the Company’s principal risks and uncertainties as
set out below under review, and is confident that the Company has
appropriate controls and processes in place to manage these and to
maintain its operating model, even given the global economic
challenges posed by the Russia-Ukraine and Middle
East conflicts, the impact of climate change on portfolio
companies and the current climate of heightened geo-political
risk;
•
if the tender offer was to be implemented in 2026 was fully
subscribed, the Directors consider that the Company will still
retain sufficient assets and liquidity to remain viable and to
continue to operate in accordance with its business model and
investment mandate; and
•
the Board has reviewed the operational resilience of the Company
and its key service providers (the Manager, Depositary, Custodian,
Fund Accountant, Registrar and Broker) and have concluded that all
service providers are able to provide a good level of service for
the foreseeable future.
The Directors have also
reviewed the assumptions and considerations underpinning the
Company’s existing going concern assertion which are based
on:
•
processes for monitoring costs;
•
key financial ratios;
•
evaluation of risk management and
controls;
•
portfolio risk profile;
•
share price discount to NAV;
•
gearing; and
•
counterparty exposure and liquidity risk.
Based on the results of
their analysis, the Directors have a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due over the period of their
assessment.
Future
prospects
The Board’s main focus is
the achievement of capital growth and an attractive total return.
The future of the Company is dependent upon the success of the
investment strategy. The outlook for the Company is discussed in
both the Chairman’s Statement and the Investment Manager’s
Report.
Social, community and
human rights issues
As an investment trust
with no employees, the Company has no direct social or community
responsibilities or impact on the environment. However, the Company
believes that it is in shareholders’ interests to consider human
rights issues, environmental, social and governance factors when
selecting and retaining investments. Details of the Company’s
policy on socially responsible investment are set out within the
Annual Report and Financial Statements.
Modern Slavery
Act
As an investment vehicle
the Company does not provide goods or services in the normal course
of business, and does not have customers. Accordingly, the
Directors consider that the Company is not required to make any
slavery or human trafficking statement under the Modern Slavery Act
2015. In any event, the Board considers the Company’s supply
chains, dealing predominantly with professional advisers and
service providers in the financial services industry, to be low
risk in relation to this matter.
Directors, gender
representation and employees
The Directors of the
Company on 31 December 2023, all of
whom held office throughout the year, are set out in the governance
structure and Directors’ biographies contained within the Annual
Report and Financial Statements.
The Board’s aim regarding
diversity, including age, gender, educational and professional
background and other broader characteristics of diversity, is to
take these into account during the recruitment and appointment
process. However, the Board is committed to an objective of
appointing the most appropriate candidate, regardless of gender or
other forms of diversity, and therefore no targets have been set
against which to report.
The Parker Review in
respect of board diversity and the recent changes to the FCA’s
Listing Rules set new diversity targets and associated disclosure
requirements for UK companies listed on the premium and standard
segment of the London Stock Exchange. Listing Rule 9.8.6R (9)
requires listed companies to include a statement in their annual
reports and accounts in respect of certain targets on board
diversity, or if those new targets have not been met to disclose
the reasons for this. This new requirement applies to accounting
periods commencing on or after 1 April
2022. However, the Board did meet the diversity targets from
17 November 2009 up until Professor
Mahrukh Doctor resigned from the
Board on the 31 March 2023. The Board
has reduced in size to four directors, in an effort to reduce
costs, as the size of the Company has fallen post the tender offer,
which was completed in May 2022. The
Board will consider board diversity when seeking to appoint a new
director in the future.
Further information on the
composition and diversity of the Board can be found in the
disclosure table which follows below:
|
Number |
|
Number |
|
of
Board |
Percentage |
of
senior |
|
members |
of
Board |
roles
held1 |
|
Gender |
|
|
|
|
Men |
2 |
50 |
1 |
|
Women |
2 |
50 |
1 |
|
Ethnicity2 |
|
|
|
|
White British (or
any |
|
|
|
|
other white
background) |
4 |
100 |
2 |
|
Other |
0 |
0 |
0 |
1
A senior position is defined as the role of Chairman, Audit
Committee Chairman or Senior Independent
Director.
2
Categorisation of ethnicity is stated in accordance with the Office
of National Statistics
classification.
The Company does not have
any employees, therefore there are no disclosures to be made in
that respect.
The Chairman’s Statement
above, along with the Investment Manager’s Report and portfolio
analysis above, form part of the Strategic
Report.
The Strategic Report was
approved by the Board at its meeting on 26
March 2024.
By order of the
Board
GRAHAM
VENABLES
For and on behalf
of
BlackRock Investment
Management (UK) Limited
Company Secretary
26
March 2024
TRANSACTIONS WITH THE AIFM
AND THE INVESTMENT
MANAGER
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 in the Directors’
Report contained within the Annual Report and Financial
Statements.
The investment management
fee is levied quarterly, based on 0.80% per annum of the Company’s
daily net asset value. The investment management fee due for the
year ended 31 December 2023 amounted
to US$1,358,000 (2022: US$1,332,000), as disclosed in note 4 to the
Financial Statements (below). At the year end, an amount of
US$383,000 was outstanding in respect
of these fees (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 year ended 31
December 2023 amounted to US$104,000 excluding VAT (2022: US$83,000). Marketing fees of US$86,000 (2022: US$81,000) were outstanding at 31 December 2023.
During the year, 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
31 December 2023, an amount of
US$213,000 (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.
RELATED PARTY
DISCLOSURE
At the date of this
report, the Board consists of four Non-executive Directors, all of
whom are considered to be independent of the Manager by the
Board.
Disclosures of the
Directors’ interests in the ordinary shares of the Company and fees
and expenses payable to the Directors are set out in the Directors’
Remuneration Report contained within the Annual Report and
Financial Statements. At 31 December
2023, an amount of US$17,000
(2022: US$18,000) was outstanding in
respect of Directors’ fees.
The Board currently
consists of four non-executive Directors, all of whom are
considered to be independent by the Board. None of the
Directors has a service contract with the Company. For the year
ended 31 December 2023, the Chairman
received an annual fee of £50,200, the Chairman of the Audit
Committee received an annual fee of £38,600 and each other Director
received an annual fee of £34,300. This excludes expenses paid to
each of the Directors which are set out in the Directors'
Remuneration Report contained within the annual report and
financial statements. For the year ending 31
December 2024, the Chairman will receive an annual fee of
£52,800, the Chairman of the Audit Committee will receive an annual
fee of £40,600 and each other Director received an annual fee of
£36,100.
All current members of the
Board hold ordinary shares in the Company. Carolan Dobson holds 6,842 ordinary shares,
Nigel Webber holds 5,000 ordinary
shares, Craig Cleland holds 12,000
ordinary shares and Laurie Meister
holds 2,915 ordinary shares.
STATEMENT OF DIRECTORS’
RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL
STATEMENTS
The Directors are
responsible for preparing the Annual Report and Financial
Statements in accordance with applicable United Kingdom law and regulations. Company
law requires the Directors to prepare financial statements for each
financial year. Under these laws the Directors have elected to
prepare the financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law), including Financial Reporting
Standard FRS 102 The Financial Reporting Standard applicable in the
UK and Republic of Ireland (FRS
102).
Under company law the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company as at the end of each financial year and of
the profit or loss of the Company for that
year.
In preparing those
financial statements, the Directors are required
to:
-
select suitable accounting
policies in accordance with Section 10 of FRS 102 and then apply
them consistently;
-
present information,
including accounting policies, in a manner that provides relevant,
reliable, comparable and understandable
information;
-
make judgements and
accounting estimates that are reasonable and
prudent;
-
provide additional
disclosures when compliance with the specific requirements in FRS
102 is insufficient to enable users to understand the impact of
particular transactions, other events and conditions on the group
and company financial position and financial
performance;
-
state whether applicable
UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
and
-
prepare the financial
statements on the going concern basis unless it is inappropriate to
presume that the Company will continue in
business.
The Directors are
responsible for keeping adequate accounting records that are
sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial
position of the Company and enable them to ensure that the
financial statements comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are also
responsible for preparing the Strategic Report, Directors’ Report,
the Directors’ Remuneration Report, the Corporate Governance
Statement and the Report of the Audit Committee in accordance with
the Companies Act 2006 and applicable regulations, including the
requirements of the Listing Rules and the Disclosure Guidance and
Transparency Rules.
The Directors have
delegated responsibility to the Manager for the maintenance and
integrity of the Company’s corporate and financial information
included on the Investment Manager’s
website.
Legislation in the
United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Each of the Directors,
whose names are listed within the Annual Report and Financial
Statements, confirm to the best of their knowledge
that:
-
the Financial Statements,
prepared in accordance with applicable accounting standards, give a
true and fair view of the assets, liabilities, financial position
and profit or loss of the Company;
and
-
the Annual Report and
Financial Statements include a fair review of the development and
performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that it
faces.
The 2018 UK Corporate
Governance Code also requires Directors to ensure that the Annual
Report and Financial Statements are fair, balanced and
understandable. In order to reach a conclusion on this matter, the
Board has requested that the Audit Committee advise on whether it
considers that the Annual Report and Financial Statements fulfil
these requirements. The process by which the Committee has reached
these conclusions is set out in the Audit Committee’s report
contained within the Annual Report and Financial Statements. As a
result, the Board has concluded that the Annual Report and
Financial Statements for the year ended 31
December 2023, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Company’s position, performance,
business model and strategy.
For and on behalf of the
Board
CAROLAN DOBSON
Chairman
26
March 2024
INCOME
STATEMENT
for the year ended
31 December
2023
|
2023 |
2022 |
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Notes |
US$’000 |
US$’000 |
US$’000 |
US$’000 |
US$’000 |
US$’000 |
|
Gains on investments held
at |
|
|
|
|
|
|
|
|
fair value through profit or
loss |
|
– |
45,717 |
45,717 |
– |
1,258 |
1,258 |
|
Gains/(losses) on foreign
exchange |
|
– |
22 |
22 |
– |
(183) |
(183) |
|
Income from investments held
at |
|
|
|
|
|
|
|
|
fair value through profit or
loss |
3 |
10,915 |
– |
10,915 |
15,438 |
– |
15,438 |
|
Other
income |
3 |
49 |
– |
49 |
21 |
– |
21 |
|
Total
income |
|
10,964 |
45,739 |
56,703 |
15,459 |
1,075 |
16,534 |
|
Expenses |
|
|
|
|
|
|
|
|
Investment management
fee |
4 |
(339) |
(1,019) |
(1,358) |
(333) |
(999) |
(1,332) |
|
Other operating
expenses |
5 |
(724) |
(19) |
(743) |
(609) |
(17) |
(626) |
|
Total operating
expenses |
|
(1,063) |
(1,038) |
(2,101) |
(942) |
(1,016) |
(1,958) |
|
Net profit on ordinary
activities |
|
|
|
|
|
|
|
|
before finance costs and
taxation |
|
9,901 |
44,701 |
54,602 |
14,517 |
59 |
14,576 |
|
Finance
costs |
|
(88) |
(263) |
(351) |
(81) |
(243) |
(324) |
|
Net profit/(loss) on
ordinary |
|
|
|
|
|
|
|
|
activities before
taxation |
|
9,813 |
44,438 |
54,251 |
14,436 |
(184) |
14,252 |
|
Taxation
(charge)/credit |
|
(846) |
– |
(846) |
(594) |
11 |
(583) |
|
Net profit/(loss) on
ordinary |
|
|
|
|
|
|
|
|
activities after
taxation |
|
8,967 |
44,438 |
53,405 |
13,842 |
(173) |
13,669 |
|
Earnings/(loss) per
ordinary |
|
|
|
|
|
|
|
|
share (US$
cents) |
7 |
30.45 |
150.90 |
181.35 |
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
year. All income is attributable to the equity holders of the
Company.
The net profit/(loss) for
the year disclosed above represents the Company’s total
comprehensive income/(loss).
STATEMENT OF CHANGES IN
EQUITY
for the year ended
31 December
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 year ended
31 December 2023 |
|
|
|
|
|
|
|
|
|
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
year |
|
– |
– |
– |
– |
44,438 |
8,967 |
53,405 |
|
Transactions with owners,
recorded |
|
|
|
|
|
|
|
|
|
directly to
equity: |
|
|
|
|
|
|
|
|
|
Dividends
paid1 |
6 |
– |
– |
– |
– |
– |
(11,797) |
(11,797) |
|
At 31 December
2023 |
|
3,163 |
11,719 |
5,824 |
4,356 |
158,781 |
5,876 |
189,719 |
|
|
|
|
|
|
|
|
|
For the year ended
31 December 2022 |
|
|
|
|
|
|
|
|
|
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 |
8 |
– |
– |
– |
– |
(51,017) |
– |
(51,017) |
|
Tender offer
cost |
8 |
– |
– |
– |
– |
(414) |
– |
(414) |
|
Cancellation of
shares |
|
(981) |
– |
981 |
– |
– |
– |
– |
|
Dividends
paid3 |
6 |
– |
– |
– |
– |
– |
(8,965) |
(8,965) |
|
At 31 December
2022 |
|
3,163 |
11,719 |
5,824 |
4,356 |
114,343 |
8,706 |
148,111 |
1
Quarterly 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; quarterly dividend of 6.21 cents per share for the year ended
31 December 2023, declared on
3 April 2023 and paid on 16 May 2023; quarterly dividend of 7.54 cents per share for the year ended
31 December 2023, declared on 3 July
2023 and paid on 11 August
2023; quarterly dividend of 7.02
cents per share, declared on 2
October 2023 and paid on 9 November
2023.
2
On 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.
3
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
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; 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 15 contained
within the Annual Report and Financial
Statements.
BALANCE
SHEET
as at 31 December 2023
|
|
2023 |
2022 |
|
Notes |
US$’000 |
US$’000 |
|
Fixed
assets |
|
|
|
|
Investments held at fair value through profit or
loss |
|
190,875 |
158,149 |
|
Current
assets |
|
|
|
|
Debtors |
|
2,135 |
1,572 |
|
Cash and cash
equivalents |
|
274 |
160 |
|
Total current
assets |
|
2,409 |
1,732 |
|
Creditors – amounts falling due within one
year |
|
|
|
|
Bank
overdraft |
|
(2,658) |
(10,731) |
|
Other
creditors |
|
(883) |
(1,015) |
|
Total current
liabilities |
|
(3,541) |
(11,746) |
|
Net current
liabilities |
|
(1,132) |
(10,014) |
|
Total assets less current
liabilities |
|
189,743 |
148,135 |
|
Creditors – amounts falling due after more than one
year |
|
|
|
|
Non-equity redeemable
shares |
|
(24) |
(24) |
|
|
(24) |
(24) |
|
Net
assets |
|
189,719 |
148,111 |
|
Capital and
reserves |
|
|
|
|
Called up share
capital |
8 |
3,163 |
3,163 |
|
Share premium
account |
9 |
11,719 |
11,719 |
|
Capital redemption
reserve |
9 |
5,824 |
5,824 |
|
Non-distributable
reserve |
9 |
4,356 |
4,356 |
|
Capital
reserves |
9 |
158,781 |
114,343 |
|
Revenue
reserve |
9 |
5,876 |
8,706 |
|
Total shareholders’
funds |
7 |
189,719 |
148,111 |
|
Net asset value per ordinary share (US$
cents) |
7 |
644.24 |
502.95 |
STATEMENT OF CASH
FLOWS
for the year ended
31 December
2023
|
2023 |
2022 |
|
US$’000 |
US$’000 |
|
Operating
activities |
|
|
|
Net profit on ordinary activities before
taxation |
54,251 |
14,252 |
|
Add back finance
costs |
351 |
324 |
|
Gains on investments held at fair value through
profit or loss |
(45,717) |
(1,258) |
|
(Gains)/losses on foreign
exchange |
(22) |
183 |
|
Sale of investments held at fair value through
profit or loss |
114,570 |
123,691 |
|
Purchase of investments held at fair value through
profit or loss |
(101,634) |
(68,345) |
|
Increase in other
debtors |
(569) |
(1,100) |
|
Decrease in other
creditors |
(71) |
(304) |
|
Taxation on investment
income |
(846) |
(594) |
|
Net cash generated from operating
activities |
20,313 |
66,849 |
|
Financing
activities |
|
|
|
Interest
paid |
(351) |
(324) |
|
Tender
offer |
– |
(51,017) |
|
Tender offer
costs |
– |
(414) |
|
Dividends
paid |
(11,797) |
(8,965) |
|
Net cash used in financing
activities |
(12,148) |
(60,720) |
|
Increase in cash and cash
equivalents |
8,165 |
6,129 |
|
Cash and cash equivalents at the start of the
year |
(10,571) |
(16,517) |
|
Effect of foreign exchange rate
changes |
22 |
(183) |
|
Cash and cash equivalents at end of the
year |
(2,384) |
(10,571) |
|
Comprised
of: |
|
|
|
Cash at
bank |
274 |
160 |
|
Bank
overdraft |
(2,658) |
(10,731) |
|
(2,384) |
(10,571) |
NOTES TO THE FINANCIAL
STATEMENTS
for the year ended
31 December
2023
1. Principal
activity
The Company was
incorporated on 12 March 1990 and its
principal activity is that of an investment trust company within
the meaning of Section 1158 of the Corporation Tax Act
2010.
2. Accounting
policies
The principal accounting
policies adopted by the Company are set out
below.
(a) Basis of
preparation
The financial statements
have been prepared on a going concern basis in accordance with The
Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) and the
revised Statement of Recommended Practice – Financial Statements of
Investment Trust Companies and Venture Capital Trusts (SORP),
issued by the Association of Investment Companies (AIC) in
October 2019 and updated in
July 2022, and the provisions of the
Companies Act 2006.
Substantially, all of the
assets of the Company consist of securities that are readily
realisable and, accordingly, the Directors are satisfied that the
Company has adequate resources to continue in operational existence
for the period to 31 December 2025,
being a period of at least 12 months from the date of approval of
these financial statements, and therefore consider the going
concern assumption to be appropriate. The Directors have reviewed
compliance with the covenants associated with the bank overdraft,
income and expense projections and the liquidity of the investment
portfolio in making their assessment.
The Directors have
considered the impact of climate change on the value of the
investments included in the Financial Statements and have concluded
that there was no further impact of climate change to be considered
as the investments are valued based on market pricing as required
by FRS 102.
None of the Company’s
other assets and liabilities were considered to be potentially
impacted by climate change.
The principal accounting
policies adopted by the Company are set out below. Unless specified
otherwise, the policies have been applied consistently throughout
the year and are consistent with those applied in the preceding
year. All of the Company’s operations are of a continuing
nature.
The Company’s financial
statements are presented in US Dollars, which is the
functional and presentation currency of the Company. The US Dollar
is the functional currency because it is the currency in which the
bulk of the Company’s assets (notably portfolio investments, cash
at bank, bank overdrafts and amounts due to and from brokers) are
denominated. All values are rounded to the nearest thousand US
Dollars (US$’000) except where otherwise
indicated.
(b) Presentation of Income
Statement
In order to reflect the
activities of an investment trust company and in accordance with
guidance issued by the AIC, supplementary information which
analyses the Income Statement between items of a revenue and a
capital nature has been presented alongside the Income
Statement.
(c) Segmental
reporting
The Directors are of the
opinion that the Company is engaged in a single segment of business
being investment business.
(d) Income
Dividends receivable on
equity shares are treated as revenue for the year on an ex-dividend
basis. Where no ex-dividend date is available, dividends receivable
on or before the year end are treated as revenue for the year.
Provisions are made for dividends not expected to be
received.
Special dividends are
recognised on an ex-dividend basis and treated as capital or
revenue depending on the facts or circumstances of each particular
dividend.
Dividends are accounted
for in accordance with Section 29 of FRS 102 on the basis of income
actually receivable, without adjustment for tax credits attaching
to the dividend. Dividends from overseas companies continue to be
shown gross of withholding tax.
Deposit interest
receivable is accounted for using the effective interest rate
method in accordance with Section 11 of FRS
102.
Where the Company has
elected to receive its dividends in the form of additional shares
rather than in cash, the cash equivalent of the dividend is
recognised as revenue. Any excess in the value of the shares
received over the amount of the cash dividend is recognised in
capital.
Fixed returns on
non-equity securities are recognised on a time apportionment
basis. The return on a fixed interest security is recognised on a
time apportionment basis so as to reflect the effective yield on
the debt security. Amounts amortised during the year are recognised
in the Income Statement. Interest income is accounted for on an
accruals basis.
(e) Expenses
All expenses, including
finance costs, are accounted for on an accruals basis. Expenses
have been charged wholly to the revenue account of the Income
Statement, except as follows:
•
expenses which are incidental to the acquisition or disposal of an
investment are treated as capital. Details of transaction costs on
the purchases and sales of investments are disclosed in note 10 of
the Annual Report and Financial
Statements;
•
expenses are treated as capital where a connection with the
maintenance or enhancement of the value of the investments can be
demonstrated; and
•
the investment management fee and finance costs have been allocated
75% to the capital account and 25% to the revenue account of the
Income Statement in line with the Board’s expected long-term split
of returns, in the form of capital gains and income respectively,
from the investment portfolio.
(f) Taxation
The tax expense represents
the sum of the tax currently payable and deferred tax. The tax
currently payable is based on the taxable profit for the year.
Taxable profit differs from net profit as reported in the Income
Statement because it excludes items of income or expenses that are
taxable or deductible in other years and it further excludes items
that are never taxable or deductible. The Company’s liability for
current tax is calculated using tax rates that were applicable at
the balance sheet date.
The current tax effect of
different items of expenditure is allocated between capital and
revenue on the marginal basis using the Company’s effective rate of
corporation tax for the accounting period.
Deferred taxation is
recognised in respect of all timing differences at the financial
reporting date, where transactions or events that result in an
obligation to pay more taxation in the future or right to less
taxation in the future have occurred at the balance sheet date.
Deferred taxation is measured on a non-discounted basis, at
the average tax rates that are expected to apply in the periods in
which the timing differences are expected to reverse based on tax
rates and laws that have been enacted or substantively enacted by
the balance sheet date. This is subject to deferred taxation assets
only being recognised if it is considered more likely than not that
there will be suitable profits from which the future reversal of
the timing differences can be deducted.
(g) Investments held at
fair value through profit or loss
The Company’s investments
are classified as held at fair value through profit or loss in
accordance with Sections 11 and 12 of FRS 102 and are managed and
evaluated on a fair value basis in accordance with its investment
strategy.
All investments are
classified upon initial recognition as held at fair value through
profit or loss. Purchases of investments are recognised on a trade
date basis. Sales are recognised at the trade date of the disposal
and the proceeds are measured at fair value, which is regarded as
the proceeds of the sale less any transaction
costs.
The fair value of the
financial investments is based on their quoted bid price at the
balance sheet date on the exchange on which the investment is
quoted, without deduction for the estimated future selling
costs.
Unquoted investments are
valued by the Directors at fair value using International Private
Equity and Venture Capital Valuation Guidelines. This policy
applies to all current and non-current asset investments of the
Company. These guidelines are aligned with FRS 102 and, where this
does not align, FRS 102 prevails.
Changes in the value of
investments held at fair value through profit or loss and gains and
losses on disposal are recognised in the Income Statement as ‘Gains
or losses on investments held at fair value through profit or
loss’. Also included within this heading are transaction costs
in relation to the purchase or sale of
investments.
The fair value hierarchy
consists of the following three levels:
Level 1 – Quoted market
prices for identical instruments in active
markets.
Level 2 – Valuation
techniques using observable inputs.
Level 3 – Valuation
techniques using significant unobservable
inputs.
(h) Debtors
Debtors include sales for
future settlement, other debtors and prepayments and accrued income
in the ordinary course of business. If collection is expected in
one year or less, they are classified as current assets. If not,
they are presented as non-current assets.
(i) Creditors
Creditors include
purchases for future settlement, interest payable, share buy back
costs and accruals in the ordinary course of business. Creditors
are classified as creditors – amounts falling due within one year
if payment is due within one year or less. If not, they are
presented as creditors – amounts falling due after more than one
year.
(j) Dividends
payable
Under Section 32 of FRS
102, final dividends should not be accrued in the financial
statements unless they have been approved by shareholders before
the balance sheet date. Dividends payable to equity shareholders
are recognised in the Statement of Changes in Equity when they have
been approved by shareholders and have become a liability of the
Company. Interim dividends are only recognised in the financial
statements in the period in which they are paid. Dividends are
financed through a combination of available net income in each
financial year and revenue and capital
reserves.
(k) Cash and cash
equivalents
Cash comprises cash in
hand and demand deposits. Cash equivalents include bank overdrafts
repayable on demand and short-term, highly liquid investments, that
are readily convertible to known amounts of cash and that are
subject to an insignificant risk of changes in
value.
(l) Foreign currency
translation
In accordance with Section
30 of FRS 102, the Company is required to determine a functional
currency being the currency in which the Company predominately
operates. The functional and reporting currency is US Dollars,
reflecting the primary economic environment in which the Company
operates. Transactions in foreign currencies are translated into US
Dollars at the rates of exchange ruling on the date of the
transaction. Foreign currency monetary assets and liabilities held
at fair value are translated into US Dollars at the rates of
exchange ruling at the balance sheet date. Non-monetary assets held
at fair value are translated into US Dollars at the rates of
exchange ruling when the fair value was determined. Profits and
losses thereon are recognised in the capital account of the Income
Statement and taken to the capital
reserve.
(m) Share repurchases,
share reissues and new share
issues
Shares repurchased and
subsequently cancelled – share capital is reduced by the nominal
value of the shares repurchased and capital redemption reserve is
correspondingly increased in accordance with Section 733 of the
Companies Act 2006. The full cost of the repurchase is charged to
the capital reserve.
Shares repurchased and
held in treasury – the full cost of the repurchase is charged to
the capital redemption reserve.
Where treasury shares are
subsequently re-issued:
•
amounts received to the extent of the repurchase price are credited
to the capital redemption reserve; and
•
any surplus received in excess of the repurchase price is taken to
the share premium account.
Where new shares are
issued, the par value is taken to called up share capital and
amounts received to the extent of any surplus received in excess of
the par value are taken to the share premium
account.
Share issue costs are
charged to the share premium account. Costs on share reissues are
charged to the capital reserve.
(n) Bank
borrowings
Bank overdrafts are
recorded as the proceeds received. Finance charges are accounted
for on an accruals basis in the Income Statement using the
Effective Interest Method and are added to the carrying amount of
the instruments to the extent that they are not settled in the
period in which they arise.
(o) Critical accounting
estimates and judgements
The Company makes
estimates and assumptions concerning the future. The resulting
accounting estimates and assumptions will, by definition, seldom
equal the related actual results. Estimates and judgements are
regularly evaluated and are based on historical experience and
other factors, including expectations of future events that are
believed to be reasonable under the circumstances. The Directors do
not believe that any accounting judgements or estimates have a
significant risk of causing a material adjustment to the
carrying amount of assets and liabilities within the next financial
year.
3. Income
|
2023 |
2022 |
|
US$’000 |
US$’000 |
|
Investment
income: |
|
|
|
Overseas
dividends |
10,339 |
14,515 |
|
Overseas REIT
distributions |
416 |
421 |
|
Overseas special
dividends |
160 |
480 |
|
Fixed interest
income |
– |
22 |
|
Total investment
income |
10,915 |
15,438 |
|
Other
income: |
|
|
|
Deposit
interest |
47 |
21 |
|
Interest from Cash
Fund |
2 |
– |
|
49 |
21 |
|
Total
income |
10,964 |
15,459 |
Dividends and interest
received in cash during the year amounted to US$9,671,000 and
US$49,000 (2022: US$14,413,000 and
US$45,000).
No special dividends have
been recognised in capital in 2023 (2022:
US$nil).
4. Investment management
fee
|
2023 |
2022 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
US$’000 |
US$’000 |
US$’000 |
US$’000 |
US$’000 |
US$’000 |
|
|
|
|
|
|
|
|
Investment management
fee |
339 |
1,019 |
1,358 |
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.
5. Other operating
expenses
|
2023 |
2022 |
|
US$’000 |
US$’000 |
|
Allocated to
revenue: |
|
|
|
Custody
fees |
33 |
35 |
|
Depositary
fees1 |
16 |
15 |
|
Auditor’s
remuneration2 |
58 |
50 |
|
Registrar’s
fees |
40 |
33 |
|
Directors’
emoluments3 |
222 |
231 |
|
Marketing
fees |
104 |
83 |
|
Postage and printing
fees |
65 |
45 |
|
AIC fees |
2 |
– |
|
Broker fees |
45 |
38 |
|
Employer NI
contributions |
27 |
23 |
|
FCA fee |
10 |
10 |
|
Write back of prior year
expenses4 |
(6) |
(23) |
|
Other administration
costs |
108 |
69 |
|
724 |
609 |
|
Allocated to
capital: |
|
|
|
Custody transaction
charges5 |
19 |
17 |
|
743 |
626 |
|
The Company’s ongoing charges6,
calculated as a percentage of average daily net assets
and |
|
|
|
using the management fee and all other operating
expenses, excluding finance costs,
direct |
|
|
|
transaction costs, custody transaction charges, VAT
recovered, taxation, prior year
expenses |
|
|
|
written back and certain non-recurring items
were: |
1.28% |
1.13% |
1
All expenses, other than depositary fees, are paid in British Pound
Sterling and are therefore subject to exchange rate
fluctuations.
2
No non-audit services were provided by the Company’s
Auditor.
3
Further information on Directors’ emoluments can be found in the
Directors’ Remuneration Report contained within the Annual Report
and Financial Statements. The Company has no
employees.
4
Relates to prior year accruals for AIC fees and other
administration costs written back during the year ended 31 December
2023 (2022: postage and printing fees, broker fees and other
administration costs).
5
For the year ended 31 December 2023, expenses of US$19,000 (2022:
US$17,000) were charged to the capital account of the Income
Statement. These relate to transaction costs charged by the
Custodian on sale and purchase
trades.
6
Alternative Performance Measures, see Glossary contained within the
Annual Report and Financial
Statements.
6. Dividends
|
|
|
2023 |
2022 |
|
Dividends paid on equity
shares: |
Record
date |
Payment
date |
US$’000 |
US$’000 |
|
|
|
|
|
|
Quarter to 31 December 2022 – dividend of 6.29
cents |
13 January
2023 |
8 February
2023 |
1,852 |
2,438 |
|
Year to 31 December 2022 – dividend of 13.00
cents |
13 January
2023 |
8 February
2023 |
3,828 |
– |
|
Quarter to 31 March 2023 – dividend of 6.21
cents |
14 April
2023 |
16 May 2023 |
1,829 |
3,047 |
|
Quarter to 30 June 2023 – dividend of 7.54
cents |
14 July
2023 |
11 August
2023 |
2,221 |
1,690 |
|
Quarter to 30 September 2023 – dividend of 7.02
cents |
13 October
2023 |
9 November
2023 |
2,067 |
1,790 |
|
|
|
11,797 |
8,965 |
The Company’s dividend
policy is to pay regular quarterly dividends equivalent to 1.25% of
the Company’s US Dollar NAV on the last working day of March, June,
September and December each year, with the dividends being paid in
May, August, November and February each year, respectively. For the
year ending 31 December 2023, the quarterly dividends were
calculated based on the Company’s cum-income US Dollar NAV at the
last working day of the quarter.
The Company’s cum-income
US Dollar NAV at 31 December 2023 as issued to the market was
644.24 cents per share, and the Directors have declared a fourth
quarterly interim dividend of 8.05 cents per share. The fourth
quarterly interim dividend was paid on 9 February 2024 to holders
of ordinary shares on the register at the close of business on 12
January 2024.
The total dividends
payable in respect of the year which form the basis of determining
retained income for the purpose of Section 1158 of the Corporation
Tax Act 2010 and Section 833 of the Companies Act 2006, and the
amount proposed for the year ended 31 December 2023, meet the
relevant requirements as set out in this
legislation.
|
2023 |
2022 |
|
US$’000 |
US$’000 |
|
Dividends paid or proposed on equity
shares: |
|
|
|
Quarter to 31 March 2023 – 6.21 cents (2022:
7.76) |
1,829 |
3,047 |
|
Quarter to 30 June 2023 – 7.54 cents (2022:
5.74) |
2,221 |
1,690 |
|
Quarter to 30 September 2023 – 7.02 cents (2022:
6.08) |
2,067 |
1,790 |
|
Quarter to 31 December 2023 – 8.05
cents1 (2022:
6.29) |
2,371 |
1,852 |
|
Year to 31 December 2023 – nil cents (2022:
13.00) |
– |
3,828 |
|
8,488 |
12,207 |
1
Based on 29,448,641 ordinary shares in issue at 12 January
2024.
All dividends paid or
payable are distributed from the Company’s distributable
reserves.
7. Earnings and net asset
value per ordinary share
Total revenue, capital
earnings/(loss) and net asset value per ordinary share are shown
below and have been calculated using the
following:
|
2023 |
2022 |
|
|
|
|
Net revenue profit attributable to ordinary
shareholders (US$’000) |
8,967 |
13,842 |
|
Net capital profit/(loss) attributable to ordinary
shareholders (US$’000) |
44,438 |
(173) |
|
Total profit attributable to ordinary shareholders
(US$'000) |
53,405 |
13,669 |
|
Total shareholders’ funds
(US$’000) |
189,719 |
148,111 |
|
Earnings per
share |
|
|
|
The weighted average number of ordinary shares in
issue during the year on which
the |
|
|
|
earnings per ordinary share was calculated
was: |
29,448,641 |
33,373,033 |
|
The actual number of ordinary shares in issue at
the year end on which the net
asset |
|
|
|
value was calculated
was: |
29,448,641 |
29,448,641 |
|
Revenue earnings per share (US$ cents) – basic and
diluted |
30.45 |
41.48 |
|
Capital earnings/(loss) per share (US$ cents) –
basic and diluted |
150.90 |
(0.52) |
|
Total earnings per share (US$ cents) – basic and
diluted |
181.35 |
40.96 |
|
|
|
|
As
at |
As
at |
|
31
December |
31
December |
|
2023 |
2022 |
|
|
|
|
Net asset value per ordinary share (US$
cents) |
644.24 |
502.95 |
|
Ordinary share price (US$
cents)1 |
569.84 |
457.10 |
1
Based on an exchange rate of US$1.27 to £1 at 31 December 2023 and
US$1.20 to £1 at 31 December
2022.
There are no dilutive
securities at the year end.
8. Share
capital
|
Ordinary |
Treasury |
Total |
Nominal |
|
shares |
shares |
shares |
value |
|
number |
number |
number |
US$’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 31 December
2023 |
29,448,641 |
2,181,662 |
31,630,303 |
3,163 |
During the period to 31
December 2023, no ordinary shares were repurchased (2022: 9,810,979
shares for a total cost of US$51,431,000) and no ordinary shares
were issued (2022: none).
The ordinary shares give
shareholders voting rights, the entitlement to all of the capital
growth in the Company’s assets and to all income from the Company
that is resolved to be distributed.
9. Reserves
|
Distributable
Reserves |
|
|
|
|
|
Capital |
|
|
|
|
|
|
reserve |
|
|
|
|
|
Capital |
arising
on |
|
|
|
|
|
reserve |
revaluation |
|
|
Share |
Capital |
Non- |
arising
on |
of |
|
|
premium |
redemption |
distributable |
investments |
investments |
Revenue |
|
account |
reserve |
reserve |
sold |
held |
reserve |
|
US$’000 |
US$’000 |
US$’000 |
US$’000 |
US$’000 |
US$’000 |
|
|
|
|
|
|
|
|
At 31 December
2022 |
11,719 |
5,824 |
4,356 |
114,178 |
165 |
8,706 |
|
Movement during the
year: |
|
|
|
|
|
|
|
Total comprehensive
income: |
|
|
|
|
|
|
|
Net profit for the
year |
– |
– |
– |
15,965 |
28,473 |
8,967 |
|
Transactions with owners, recorded directly to
equity: |
|
|
|
|
|
|
|
Dividends paid during the
year |
– |
– |
– |
– |
– |
(11,797) |
|
At 31 December
2023 |
11,719 |
5,824 |
4,356 |
130,143 |
28,638 |
5,876 |
|
Distributable
Reserves |
|
|
|
|
|
Capital |
|
|
|
|
|
|
reserve |
|
|
|
|
|
Capital |
arising
on |
|
|
|
|
|
reserve |
revaluation |
|
|
Share |
Capital |
Non- |
arising
on |
of |
|
|
premium |
redemption |
distributable |
investments |
investments |
Revenue |
|
account |
reserve |
reserve |
sold |
held |
reserve |
|
US$’000 |
US$’000 |
US$’000 |
US$’000 |
US$’000 |
US$’000 |
|
|
|
|
|
|
|
|
At 31 December
2021 |
11,719 |
4,843 |
4,356 |
158,700 |
7,247 |
3,829 |
|
Movement during the
year: |
|
|
|
|
|
|
|
Total comprehensive
income/(loss): |
|
|
|
|
|
|
|
Net profit/(loss) for the
year |
– |
– |
– |
6,909 |
(7,082) |
13,842 |
|
Transactions with owners, recorded directly to
equity: |
|
|
|
|
|
|
|
Tender
offer |
– |
– |
– |
(51,017) |
– |
– |
|
Tender offer
cost |
– |
– |
– |
(414) |
– |
– |
|
Cancellation of
shares |
– |
981 |
– |
– |
– |
– |
|
Dividends paid during the year from
revenue |
– |
– |
– |
– |
– |
(8,965) |
|
At 31 December
2022 |
11,719 |
5,824 |
4,356 |
114,178 |
165 |
8,706 |
The share premium account,
capital redemption reserve and non-distributable 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 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 such as dividends. In accordance with the
Company’s Articles of Association, capital reserves and the revenue
reserve may be distributed by way of dividend. The capital reserve
arising on the revaluation of investments of US$28,638,000 (2022:
gain of US$165,000) is subject to fair value movements and may not
be readily realisable at short notice, as such any gains 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
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 at bank and
bank 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 to the Financial
Statements contained within the Annual Report and Financial
Statements.
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 than active, or other valuation
techniques where 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 the 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 as at |
Level
1 |
Level
2 |
Level
3 |
Total |
|
31 December
2023 |
US$’000 |
US$’000 |
US$’000 |
US$’000 |
|
|
|
|
|
|
Equity
investments |
190,875 |
– |
– |
190,875 |
|
Total |
190,875 |
– |
– |
190,875 |
|
|
|
|
|
|
Financial assets at fair value through profit or
loss as at |
Level
1 |
Level
2 |
Level
3 |
Total |
|
31 December
2022 |
US$’000 |
US$’000 |
US$’000 |
US$’000 |
|
|
|
|
|
|
Equity
investments |
158,149 |
– |
– |
158,149 |
|
Total |
158,149 |
– |
– |
158,149 |
There were no transfers
between levels for financial assets and financial liabilities
during the year recorded at fair value as at 31 December 2023 and
31 December 2022. The Company did not hold any Level 3 securities
throughout the financial year or as at 31 December 2023 (2022:
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. Capital management
policies and procedures
The Company’s capital
management objectives are:
–
to ensure it will be able to continue as a going concern;
and
–
to secure long-term capital growth and an attractive total return
primarily through investing in quoted securities in
Latin America.
Gearing will be
selectively employed with the aim of enhancing returns. The Board
view that 105% of the net asset value 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. These current
parameters sit within the Company’s gearing policy as set out in
the investment policy contained within the Annual Report and
Financial Statements which states that net borrowings are not
expected to exceed 25% of net assets under normal circumstances,
and the Company’s Articles of Association which limit net
borrowings to 100% of capital and
reserves.
The Company’s total
capital as at 31 December 2023 was US$189,719,000 (2022:
US$148,111,000) comprised of equity, capital and
reserves.
Under the terms of the
overdraft facility agreement, the Company’s total indebtedness
shall at no time exceed US$25 million or 30% of the Company’s net
asset value (whichever is the lowest) (2022: US$25 million or 30%
of the Company’s net asset value (whichever is the
lowest)).
The Board with the
assistance of the Investment Manager monitors and reviews the broad
structure of the Company’s capital on an ongoing basis. This review
includes:
– the
planned level of gearing, which takes into account the Investment
Manager’s view on the market; and
– the
need to buy back equity shares, either for cancellation or to be
held in treasury, which takes account of the difference between the
NAV per share and the share price (i.e. the level of share price
discount or premium).
The Company is subject to
externally imposed capital requirements:
– as a
public company, the Company has a minimum share capital of £50,000;
and
– in
order to be able to pay dividends out of profits available for
distribution, the Company has to be able to meet one of the two
capital restrictions tests imposed on investment companies by
law.
During the year, the
Company complied with the externally imposed capital requirements
to which it was subject.
12. 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 in the Directors’ Report contained within the Annual
Report and Financial Statements.
The investment management
fee is levied quarterly, based on 0.80% per annum of the Company’s
daily net asset value. The investment management fee due for the
year ended 31 December 2023 amounted to US$1,358,000 (2022:
US$1,332,000), as disclosed in note 4 to the Financial Statements
(above). At the year end, an amount of US$383,000 was outstanding
in respect of these fees (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
year ended 31 December 2023 amounted to US$104,000 excluding VAT
(2022: US$83,000). Marketing fees of US$86,000 (2022: US$81,000)
were outstanding at 31 December 2023.
During the year, 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
31 December 2023, an amount of US$213,000 (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.
13. Related party
disclosure
At the date of this
report, the Board consists of four Non-executive Directors, all of
whom are considered to be independent of the Manager by the
Board.
Disclosures of the
Directors’ interests in the ordinary shares of the Company and fees
and expenses payable to the Directors are set out in the Directors’
Remuneration Report contained within the Annual Report and
Financial Statements. At 31 December 2023, an amount of US$17,000
(2022: US$18,000) was outstanding in respect of Directors’
fees.
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 31 December
2023
|
Total % of shares held by
Significant |
Number of Significant Investors
who |
|
Total % of shares held by
Related |
Investors who are not affiliates
of |
are not affiliates of BlackRock
Group |
|
BlackRock
Funds |
BlackRock Group or BlackRock,
Inc. |
or BlackRock,
Inc. |
|
|
|
|
1.0 |
20.7 |
1 |
|
As at 31 December
2022 |
|
|
|
Total % of shares held by
Significant |
Number of Significant Investors
who |
|
Total % of shares held by
Related |
Investors who are not affiliates
of |
are not affiliates of BlackRock
Group |
|
BlackRock
Funds |
BlackRock Group or BlackRock,
Inc. |
or BlackRock,
Inc. |
|
|
|
|
1.7 |
20.7 |
1 |
14. Contingent
liabilities
There were no contingent
liabilities at 31 December 2023 (2022:
none).
15. Publication of
Non-Statutory
Accounts
The financial information
contained in this announcement does not constitute statutory
accounts as defined in the Companies Act 2006. The 2023 Annual
Report and Financial Statements will be filed with the Registrar of
Companies shortly.
The Report of the Auditors
for the year ended 31 December 2023 contains no qualification or
statement under Section 498(2) or (3) of the Companies Act
2006.
The comparative figures
are extracts from the audited financial statements of BlackRock
Latin American Investment Trust plc for the year ended 31 December
2022, which have been filed with the Registrar of Companies, unless
otherwise stated. The Report of the Auditor on those financial
statements contained no qualification or statement under Section
498 of the Companies Act.
This announcement was
approved by the Board of Directors on 26 March
2024.
16. Annual
Report
Copies of the Annual
Report will be sent to members shortly and will also be available
from the registered office, c/o The Company Secretary, BlackRock
Latin American Investment Trust plc, 12 Throgmorton Avenue, London
EC2N 2DL.
17. Annual General
Meeting
The Annual General Meeting
of the Company will be held at 12 Throgmorton Avenue, London EC2N
2DL on Wednesday, 22 May 2024 at 12:00
noon.
ENDS
The Annual Report will
also be available on the BlackRock Investment Management website at
http://www.blackrock.co.uk/brla. Neither the contents of the
Investment Manager’s website nor the contents of any website
accessible from hyperlinks on the Investment Manager’s website (or
any other website) is incorporated into, or forms part of, this
announcement.
For further information,
please contact:
Melissa Gallagher,
Managing Director, Investment Trusts, 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
26 March
2024
12 Throgmorton
Avenue
London EC2N
2DL