BlackRock Latin American Investment Trust Plc - Final Results
(Legal Entity Identifier: UK9OG5Q0CYUDFGRX4151)
Information disclosed in accordance with Article 5 Transparency Directive, DTR 4.1
Annual Results Announcement for the year ended
PERFORMANCE RECORD
As at As at 31 December 31 December 2023 2022 Net assets (US$’000)1 189,719 148,111 Net asset value per ordinary share (US$ 644.24 502.95 cents ) Ordinary share price (mid-market) (US$ 569.84 457.10 cents)2 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$ 35 .3% 4.7% cents)2,3 Ordinary share price (mid-market)(pence)3 27.6% 18.0% MSCI EM Latin America Index (net return, on a 32.7% 8.9% US Dollar basis)4 For the For the year ended year ended 31 December 31 December 2023 2022 Change % Revenue Net profit on ordinary activities after 8,967 13,842 –35.2 taxation (US$'000) Revenue earnings per ordinary share (US$ 30.45 41.48 –26.6 cents) Dividends per ordinary share (US$ cents) Quarter to 31 March 6.21 7.76 –20.0 Quarter to 30 June 7.54 5.74 +31.4 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:
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
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
CHAIRMAN’S STATEMENT
Dear Shareholder,
I am pleased to present the Annual Report to shareholders for the year ended
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
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
REVENUE RETURNS AND DIVIDENDS
Total revenue return for the year was
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
Dividends declared in respect of the year ended
Dividend Pay date Quarter to 31 March 20236.21 cents 16 May 2023 Quarter to 30 June 20237.54 cents 11 August 2023 Quarter to 30 September 20237.02 cents 9 November 2023 Quarter to 31 December 20238.05 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
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
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
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
(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
(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
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
The Company has not bought back any shares during the year ended
BOARD COMPOSITION
As previously advised in last year’s Annual Report,
ANNUAL GENERAL MEETING
The Company’s Annual General Meeting will be held in person at the offices of BlackRock at 12 Throgmorton Avenue,
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
The geopolitical environment is currently changing with three blocks emerging, US aligned,
Chairman
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
All markets within our universe generated positive returns in 2023.
In
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
PERFORMANCE REVIEW AND POSITIONING
The Company outperformed its benchmark over the 12-month period ending
Over the period, the Company generated positive returns in a number of countries. The most notable outperformer was
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
In
Elsewhere in the region, Ecopetrol, a petroleum producer in
While
Over the period, we have taken advantage of the strong performance in
We also made some changes to our Mexican book. We exited
We ended the year with
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
We are especially positive about the outlook for
We remain positive on the outlook for the Mexican economy as it is a key beneficiary of the ‘friend-shoring’ of global supply chains.
We continue to closely monitor the political and economic situation in
We remain optimistic about the outlook for
TEN LARGEST INVESTMENTS
as at
Together, the ten largest investments represented 55.3% of total investments of the Company’s portfolio as at
1 Vale (2022: 1st)
Materials
Market value – American depositary share (ADS):
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):
Market value – preference shares ADR:
Market value – ordinary shares:
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
3 Banco Bradesco (2022: 6th)
Financials
Market value – ADR:
Market value – preference shares:
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:
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:
Share of investments: 5.1% (2022: 5.2%)
is a stock exchange located in
6 FEMSA (2022: 3rd)
Consumer Staples
Market value – ADR:
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:
Market value – ordinary shares:
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
8 Grupo Aeroportuario del Pacifico (2022: 14th)
Industrials
Market value – ADS:
Share of investments: 4.0% (2022: 2.3%)
is a
9 Itaú Unibanco (2022: 7th)
Financials
Market value – ADR:
Share of investments: 3.8% (2022: 4.9%)
is a Brazilian financial services group that services individual and corporate clients in
10 Grupo Financiero Banorte (2022: 8th)
Financials
Market value – ordinary shares:
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
PORTFOLIO OF INVESTMENTS
as at
Market value % of US$’000 investments Brazil Vale – ADS 18,331 9.6 Petrobrás – ADR 6,666 Petrobrás – preference shares ADR 6,091} 8.6 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
PORTFOLIO ANALYSIS
as at
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 – 1.9 – – – – – – 1.9 2.5 Services Consumer 10.6 – – – – – – – 10.6 3.2 Discretionary Consumer 6.4 10.8 1.2 – – – – – 18.4 18.7 Staples 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 – – – 1.6 – – – – 1.6 1.5 Technology Materials 9.7 4.7 1.5 – – – – – 15.9 21.7 Real Estate – 2.8 – – – – – – 2.8 6.9 Net other – – – – – – – (0.6) (0.6) (6.8) liabilities 2023 total 60.5 27.4 5.6 2.9 2.5 1.7 – (0.6) 100.0 – investments 2022 total 64.0 28.5 6.1 3.4 – 2.3 2.5 (6.8) – 100.0 investments
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
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
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
BlackRock Latin American Investment Trust plc year ended31 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 8.78% against management
* Calculated as the percentage of the portfolio holdings at
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 1Human 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
For evaluating and reporting climate-related risks, as well as the related governance issues that are essential to managing them, the
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
Objective
The Company’s objective is to secure long-term capital growth and an attractive total return primarily through investing in quoted securities in
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
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
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,
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
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
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
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
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
The Board adopted a new discount control mechanism, for the four year period from
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
(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
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
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
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
Of total dividends of
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
(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
(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
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
As at
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
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
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
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 to31 March 2023 6.21 cents 16 May 2023 Quarter to30 June 2023 7.54 cents 11 August 2023 Quarter to30 September 2023 7.02 cents 9 November 2023 Quarter to31 December 2023 8.05 cents 9 February 2024 Total28.82 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,
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
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:
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
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
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
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
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
The Market Abuse Regulation came into force on
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
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
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
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
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
• 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
• 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
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
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
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
By order of the Board
For and on behalf of
Company Secretary
TRANSACTIONS WITH THE AIFM AND THE INVESTMENT MANAGER
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
In addition to the above services, BIM (
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
The ultimate holding company of the Manager and the Investment Manager is BlackRock, Inc., a company incorporated in
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
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
All current members of the Board hold ordinary shares in the Company.
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
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 applicableUK 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
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
For and on behalf of the Board
Chairman
INCOME STATEMENT
for the year ended
2023 2022 Revenue Capital Total Revenue Capital Total Notes US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Gains on investments held at fair value through profit – 45,717 45,717 – 1,258 1,258 or loss Gains/(losses) on foreign – 22 22 – (183) (183) exchange Income from investments held at fair value through profit 3 10,915 – 10,915 15,438 – 15,438 or loss Other income 3 49 – 49 21 – 21 Total income 10,964 45,739 56,703 15,459 1,075 16,534 Expenses Investment management fee 4 (339) (1,019) (1,358) (333) (999) (1,332) Other operating expenses 5 (724) (19) (743) (609) (17) (626) Total operating expenses (1,063) (1,038) (2,101) (942) (1,016) (1,958) Net profit on ordinary activities before finance costs and 9,901 44,701 54,602 14,517 59 14,576 taxation Finance costs (88) (263) (351) (81) (243) (324) Net profit/(loss) on ordinary activities before taxation 9,813 44,438 54,251 14,436 (184) 14,252 Taxation (charge)/credit (846) – (846) (594) 11 (583) Net profit/(loss) on ordinary activities after taxation 8,967 44,438 53,405 13,842 (173) 13,669 Earnings/(loss) per ordinary share (US$ 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
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
Called Share Capital Non- up premium redemption distributable Capital Revenue share capital account reserve reserve reserves reserve Total Note US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 For the year ended 31 December 2023 At 31 December 3,163 11,719 5,824 4,356 114,343 8,706 148,111 2022 Total comprehensive income: Net profit – – – – 44,438 8,967 53,405 for the year Transactions with owners, recorded directly to equity: Dividends 6 – – – – – (11,797) (11,797) paid1 At 31 December 3,163 11,719 5,824 4,356 158,781 5,876 189,719 2023 For the year ended 31 December 2022 At 31 December 4,144 11,719 4,843 4,356 165,947 3,829 194,838 2021 Total comprehensive (loss)/income: Net (loss)/profit – – – – (173) 13,842 13,669 for the year Transactions with owners, recorded directly to equity: Tender 8 – – – – (51,017) – (51,017) offer2 Tender offer 8 – – – – (414) – (414) cost Cancellation (981) – 981 – – – – of shares Dividends 6 – – – – – (8,965) (8,965) paid3 At 31 December 3,163 11,719 5,824 4,356 114,343 8,706 148,111 2022
1
Quarterly dividend of
2
On
3
Quarterly dividend of
For information on the Company’s distributable reserves, please refer to note 15 contained within the Annual Report and Financial Statements.
BALANCE SHEET
as at
2023 2022 Notes US$’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
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 (45,717) (1,258) loss (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 (101,634) (68,345) loss 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
1. Principal activity
The Company was incorporated on
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
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
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$’000 Investment income: Overseas dividends 10,339 14,515 Overseas REIT distributions 416 421 Overseas special dividends 160 480 Fixed interest income – 22 Total investment income 10,915 15,438 Other income: Deposit interest 47 21 Interest from Cash Fund 2 – 49 21 Total income 10,964 15,459
Dividends and interest received in cash during the year amounted to
No special dividends have been recognised in capital in 2023 (2022: US$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
5
For the year ended
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 – 13 January 2023 8 February 2023 1,852 2,438 dividend of6.29 cents Year to 31 December 2022 – 13 January 2023 8 February 2023 3,828 – dividend of13.00 cents Quarter to 31 March 2023 – 14 April 2023 16 May 2023 1,829 3,047 dividend of6.21 cents Quarter to 30 June 2023 – 14 July 2023 11 August 2023 2,221 1,690 dividend of7.54 cents Quarter to 30 September 2023 – 13 October 2023 9 November 2023 2,067 1,790 dividend of7.02 cents 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
The Company’s cum-income US Dollar NAV at
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
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 – 8.05cents1 (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
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 8,967 13,842 (US$’000) Net capital profit/(loss) attributable to ordinary 44,438 (173) shareholders (US$’000) Total profit attributable to ordinary shareholders 53,405 13,669 (US$'000) Total shareholders’ funds (US$’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 30.45 41.48 diluted Capital earnings/(loss) per share (US$ cents) – basic 150.90 (0.52) and diluted 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
There are no dilutive securities at the year end.
8. Share capital
Ordinary Treasury Total Nominal shares shares shares value number number number US$’000 Allotted, called up and fully paid share capital comprised: Ordinary shares of10 cents each At 31 December 2022 29,448,641 2,181,662 31,630,303 3,163 At 31 December 2023 29,448,641 2,181,662 31,630,303 3,163
During the period to
The ordinary shares give shareholders voting rights, the entitlement to all of the capital growth in the Company’s assets and to all income from the Company that is resolved to be distributed.
9. Reserves
Distributable Reserves Capital reserve Capital arising on reserve revaluation Share Capital Non- arising on of premium redemption distributable investments investments Revenue account reserve reserve sold held reserve US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 At 31 December 11,719 5,824 4,356 114,178 165 8,706 2022 Movement during the year: Total comprehensive income: Net profit – – – 15,965 28,473 8,967 for the year Transactions with owners, recorded directly to equity: Dividends paid during – – – – – (11,797) the year At 31 December 11,719 5,824 4,356 130,143 28,638 5,876 2023 Distributable Reserves Capital reserve Capital arising on reserve revaluation Share Capital Non- arising on of premium redemption distributable investments investments Revenue account reserve reserve sold held reserve US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 At 31 December 11,719 4,843 4,356 158,700 7,247 3,829 2021 Movement during the year: Total comprehensive income/(loss): Net profit/ (loss) for the – – – 6,909 (7,082) 13,842 year Transactions with owners, recorded directly to equity: Tender offer – – – (51,017) – – Tender offer – – – (414) – – cost Cancellation – 981 – – – – of shares Dividends paid during – – – – – (8,965) the year from revenue At 31 December 11,719 5,824 4,356 114,178 165 8,706 2022
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
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 Level 1 Level 2 Level 3 Total loss as at 31 December 2023 US$’000 US$’000 US$’000 US$’000 Equity investments 190,875 – – 190,875 Total 190,875 – – 190,875 Financial assets at fair value through profit or Level 1 Level 2 Level 3 Total loss as at 31 December 2022 US$’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
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
Under the terms of the overdraft facility agreement, the Company’s total indebtedness shall at no time exceed
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
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
In addition to the above services, BIM (
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
The ultimate holding company of the Manager and the Investment Manager is BlackRock, Inc., a company incorporated in
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
Significant holdings
The following investors are:
a. funds managed by the
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 (
As at
Total % of shares held by Number of Significant Significant Investors who Total % of shares held by Investors who are not are not affiliates of Related affiliates of BlackRock Group BlackRock Funds BlackRock Group or BlackRock, or BlackRock, Inc. Inc. 1.0 20.7 1 As at31 December 2022 Total % of shares held by Number of Significant Significant Investors who Total % of shares held by Investors who are not are not affiliates of Related affiliates of BlackRock Group BlackRock Funds BlackRock Group or BlackRock, or BlackRock, Inc. Inc. 1.7 20.7 1
14. Contingent liabilities
There were no contingent liabilities at
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
The comparative figures are extracts from the audited financial statements of
This announcement was approved by the Board of Directors on
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,
17. Annual General Meeting
The Annual General Meeting of the Company will be held at
ENDS
The Annual Report will also be available on the
For further information, please contact:
Tel: 020 7743 3000
Press Enquiries:
E-mail: BlackRockInvestmentTrusts@lansons.com or
EdH@lansons.com