blackrock latin american investment trust plc...latin american investment trust plc half yearly...

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BlackRock Latin American Investment Trust plcHalf Yearly Financial Report 30 June 2020



Contents

1

OverviewInvestment objective and Investment approach 1

Performance record 2

Chairman’s statement 4

Investment manager’s report 7

14

PortfolioGeographic and sector allocations 14

Ten largest investments 15

Portfolio 17

20

GovernanceInterim management report and responsibility statement 20

22

Financial StatementsIncome statement 22

Statement of changes in equity 23

Balance sheet 24

Statement of cash flows 25

Notes to the financial statements 26

41

Additional informationDirectors, management and other service providers 41

Shareholder information 42

Glossary 44



1HALF YEARLY FINANCIAL REPORT 30 JUNE 2020

BlackRock Latin American Investment Trust plc

Investment objectiveThe Company’s objective is to secure long term capital growth and an attractive total return primarily through investing in quoted securities in Latin America.

Investment approach• The Board strongly believes that our closed end structure is the most appropriate

for active equity investment in Latin America and its well-known advantages are the major factors differentiating us from our many open ended competitors. 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.

• As an actively managed fund our primary aims over the medium term are significant outperformance of our benchmark index (the MSCI Emerging Markets (EM) Latin America Index (Net Return)) and most of our competitors on a risk adjusted basis. Our portfolio and performance will diverge from the returns obtained simply by investing in the index.

• The portfolio will be chosen from a spread of companies which are listed in, or whose main activities are in, Latin America.

• BlackRock Fund Managers Limited (the Manager) is encouraged to consider appropriate investments in Latin American companies outside the index.

• The Board actively seeks to maintain control over the level and volatility of the discount between share price and the net asset value (NAV).

• We will selectively employ gearing with the aim of enhancing returns. The Board view that 105% of the 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 Company pays a regular quarterly dividend equivalent to 1.25% of the Company’s US Dollar NAV at the end of each calendar quarter.

Further details about the Company, including the latest annual and half yearly financial reports, fact sheets and stock exchange announcements, are available on the website at blackrock.com/uk/brla

A member of the Association of Investment Companies



2 BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC

As at 30 June

2020 (unaudited)

As at 31 December

2019 (audited)

Change %

Net assets (US$’000)1 175,087 287,444 -39.1

Net asset value per ordinary share (US$ cents) 445.97c 732.15c -39.1

– with dividends reinvested2 -37.6

Ordinary share price (mid-market) (US$ cents)3 418.87c 643.17c -34.9


Ordinary share price (mid-market) (pence) 339.00p 485.50p -30.2


Discount2 6.1% 12.2% n/a

MSCI EM Latin America Index (Net return)4 361.53 558.16 -35.2

For the six months ended

30 June 2020

(unaudited)

For the six months ended

30 June 2019

(unaudited)Change

%

Revenue

Net profit after taxation (US$’000) 1,119 3,111 -64.0

Revenue profit per ordinary share (US$ cents) 2.85 7.92 -64.0

Dividends per ordinary share (US$ cents)

Quarter to 31 March 4.59 8.56 -46.4

Quarter to 30 June 5.57 9.15 -39.1

Source: BlackRock.1 The change in net assets reflects the market movements during the period and dividends paid.2 Alternative Performance Measures, see Glossary on pages 44 to 51.3 Based on an exchange rate of $1.2356 to £1 at 30 June 2020 and $1.3248 to £1 at 31 December 2019.4 The Company’s performance benchmark (the MSCI EM Latin America Index) may be calculated on

either a Gross or a Net return basis. Net return (NR) indices calculate the reinvestment of dividends net of withholding taxes using the tax rates applicable to non-resident institutional investors, and hence give a lower total return than indices where calculations are on a Gross basis (which assumes that no withholding tax is suffered). As the Company is subject to withholding tax rates for the majority of countries in which it invests, the NR basis is felt to be the most accurate, appropriate, consistent and fair comparison for the Company.

Performance record




Performance from 31 December 2014 to 30 June 2020

2015

-9.6 -9.2-12.3

-30.6 -30.9 -31.0

22.018.2

17.5

-6.9

-33.1

-5.4

-37.6

-6.6

-35.2

22.225.2

31.0 31.3 29.0

23.7

2016 2017 2018 2019 2020*

Share price (total return) MSCI EM Latin America Index (total return, net basis)

Source: BlackRock Investment Management (UK) Limited and Datastream. Performance figures are calculated in US Dollar terms with dividends reinvested.* Six month performance to 30 June 2020.

NAV (total return)

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%




Overview and performanceLatin American stock markets had a promising start to the year but were severely impacted by the COVID-19 pandemic as it escalated through the period under review. As significantly lower levels of global activity sharply affected commodity prices that generate much of Latin America’s economic wealth, the MSCI EM Latin America Index (net return) dropped sharply by 35.2% over the six months ended 30 June 2020. The Company’s NAV fell by 37.6% and the share price fell by 33.1% over the same period (all calculations with dividends reinvested on a US Dollar basis).

All countries in the region posted negative returns during the six months under review with Colombia and Brazil the worst hit (falling by 44.8% and 38.9% respectively) with the impact of COVID-19 exacerbated by the severe declines in oil prices following Saudi Arabia’s price war with Russia in March 2020.

Additional information on the main contributors to and detractors from performance for the period under review is given in the Investment Manager’s report on pages 7 to 13.

From 30 June 2020 up until close of business on 7 September 2020, the Company’s NAV has risen by 8.2% in US Dollar terms and by 1.4% in Sterling terms. The share price has fallen by 0.8% in US Dollar terms and by 7.1% in Sterling terms (all percentages calculated with dividends reinvested).

Franked Investment Income (FII) Group Litigation Order (GLO)In 2003 The Prudential Assurance Company Limited filed a case against HM Revenue & Customs (HMRC) on the treatment of foreign sourced dividends. The litigation concerned the tax treatment of UK-resident companies (including investment funds) that received dividends from portfolio shareholdings in non-UK companies. It had previously been settled that the UK dividend tax regime that applied to portfolio dividends prior to 2009 was contrary to EU law, as UK dividends were not subject to tax whereas non-UK dividends were taxable.

On 25 July 2018 the UK Supreme Court handed down its judgement in the Prudential case, ruling (inter alia) that non-UK dividends remained taxable but that credit should be given for the underlying foreign tax at the foreign nominal corporate income tax rate of the source country. In June 2020, the Company received correspondence from HMRC accepting the entitlement of the Company to claim for double tax relief in the relevant accounting periods in relation to underlying tax suffered on dividends from non-UK companies. The Board was advised that the receipt of a repayment in respect of these amounts had become sufficiently certain to merit recognition in the Company’s NAV, and it announced on 7 July 2020 that an asset of £1,572,210 had been reflected in the NAV in respect of these claims; the repayment from HMRC was subsequently received by the Company on 17 August 2020. As the original tax expense was debited to the revenue

Chairman’s statementfor the six months to 30 June 2020




column of the income statement, the benefit of this recovery has been credited to the revenue column of the income statement and will result in an uplift of 4.00 pence per share to the Company’s revenue earnings per share for the year to 31 December 2020. More information is given in note 16 on pages 39 and 40.

Earnings and dividendsThe revenue profit per share for the period amounted to 2.85 cents (30 June 2019: 7.92 cents). The significant fall in dividend income reflects the challenges faced by many portfolio companies as the COVID-19 pandemic disrupts business activity and revenue streams. The Company’s dividend policy is to pay regular quarterly dividends equivalent to 1.25% of the Company’s US Dollar cum-income NAV on the last working day of March, June, September and December each year, with the dividends being paid in February, May, August and November each year. As at the date of this report, total dividends of 27.34 cents per share have been declared by the Company over the last twelve months (as set out in the table below) representing a yield of 6.5% based on the share price at 30 June 2020. The yield on the Company’s shares projecting future quarterly dividends forward based on four quarters being paid at the same rate as the June 2020 quarter dividend of 5.57 cents per share, and based on the Company’s share price at 30 June 2020 converted to US Dollars at the exchange rate on 30 June 2020, would be 5.3%.

Dividend rate (cents per share)

Announcement date Pay date

Quarter to 30 September 2019 8.03 1 October 2019 8 November 2019

Quarter to 31 December 2019 9.15 2 January 2020 6 February 2020

Quarter to 31 March 2020 4.59 1 April 2020 17 May 2020

Quarter to 30 June 2020 5.57 1 July 2020 16 August 2020

Total 27.34

The dividends paid and declared by the Company in 2020 have been funded from a mixture of current year revenue, revenue reserves and other reserves. As at 30 June 2020, the Company had distributable reserves of US$150 million, sufficient to cover 67 quarters of dividend payments at the June 2020 quarter dividend rate. The Board believes that the use of capital reserves to fund dividend distributions removes pressure from the investment managers to seek a higher income yield from the underlying portfolio itself which could detract from total returns. The Board also believes the Company’s dividend policy will enhance demand for the Company’s shares and help to narrow the Company’s discount, whilst maintaining the portfolio’s ability to generate attractive total returns.

It is promising to note that since the dividend policy was introduced in July 2018, the Company’s discount has narrowed from 14.3% as at 31 December 2018 to 6.1% as at 30 June 2020.




Chairman’s statement continued

Discount controlThe next tender offer for 24.99% of the ordinary shares in issue (excluding treasury shares) will be implemented in 2022 if either of the following conditions are met:

(i) the annualised total NAV return of the Company does not exceed the annualised benchmark index (being the MSCI EM Latin America Index (Net Return)) US Dollar total return by more than 100 basis points over the four-year period from 1 January 2018 to 31 December 2021 (the Calculation Period);

(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.

The tender offer is also dependent upon the continuation vote for each relevant biennial period being approved.

In respect of the above conditions, the Company’s annualised total NAV return on a US Dollar basis for the 30 months to 30 June 2020 was -13.4%, underperforming the annualised benchmark return for the same period of -12.8% by 0.6%. The cum-income discount of the Company’s ordinary shares has averaged 12.5% for this period and ranged from a discount of 2.0% to 20.6%, ending on a discount of 6.1% at 30 June 2020.

OutlookThe impact of COVID-19 has adversely affected the global economy and could continue with a degree of severity and duration which cannot be predicted. The Latin American region is likely to suffer disproportionately as healthcare systems are less robust and many markets in Latin America (especially those reliant on foreign capital flows) do not have the financial reserves to adopt the extreme fiscal support policies implemented by governments elsewhere to mitigate the economic impact of the crisis. Over the second half of the year it is likely that current lockdown measures will ease further and activity in the industrial sector and in parts of the services sector where social distancing is less of a concern should rebound relatively quickly although most economies will not return to their pre-crisis level of GDP until at least 2021.

Through these times of elevated volatility and market stress, our portfolio managers remain focussed on the long term investment horizon, and on adhering to disciplined fundamental analysis from a bottom-up perspective in order to be able to respond swiftly to dislocations in the market as opportunities present themselves.

CAROLAN DOBSONChairman10 September 2020




Investment manager’s report

Market overviewPerformance in the Latin American markets was volatile through the first half of 2020. Equity markets started the year strongly, confirming the nascent recovery in global growth, but subsequently faltered as fears around the COVID-19 pandemic escalated. During the first quarter of 2020 equity markets sold-off aggressively on the back of concerns over the impact of COVID-19 and a substantial drop in oil prices on the global economy. Metals and commodities prices were hit hard as markets priced in expectations of significantly lower global growth. Later in the period Latin American equities rallied from sold off levels driven by a global rebound and a slight increase in mobility trends after distancing measures started to be lifted; optimism that COVID-19 cases had peaked and that from here economies would gradually reopen and economic activity normalise helped equity prices to partially recover.

The MSCI EM Latin America Index (Net return) benchmark ended the period down by 35.2% (in US Dollar terms with dividends reinvested), underperforming emerging and developed markets as shown in the table below. Weak commodity prices put pressure on local currencies in the Latin American region and exacerbated market falls. All countries in the region posted negative returns during the six months under review. Argentina was a relative winner during this period, outperforming in the region although markets still ended the period down by 12.8%. Markets in Colombia and Brazil were worst hit by heightened COVID-19 concerns and severe declines in oil prices following Saudi Arabia’s price war with Russia in March.

Regions/indices:

MSCI Indices Local currency

(% vs. USD)Local indices

(% change)% Price change

% Total return1

Argentina -12.8 -12.8 -15.0 -21.08 (MERVAL)

Brazil -39.5 -38.9 -26.4 -39.54 (Ibovespa)

Chile -25.2 -23.2 -8.0 -14.64 (IGPA)

Colombia -46.7 -44.8 -12.6 -31.10 (IGBC)

Mexico -28.8 -28.4 -17.7 -28.59 (IPC)

Peru -32.4 -29.1 -6.5 -23.21 (S&P/BVL)




Investment manager’s report continued

Regions/indices:

MSCI Indices

Commodity/Index

Commodity prices (% change)

% Price change

% Total return1

MSCI EM Latin America -36.0 -35.2 CRB Index2 -10.3

MSCI Emerging Asia -4.4 -3.5 Oil (WTI)3 -35.7

MSCI Emerging Markets -10.7 -9.8 Gold 18.2

MSCI World -6.6 -5.8 Copper -2.9

S&P 500 -4.0 -3.4 Corn -12.7

MSCI Europe -14.0 -12.8 Soybeans -6.2

1 MSCI total return indices are net of withholding taxes.2 Commodity Research Bureau Index.3 West Texas Intermediate.

Source: Bloomberg (all figures in US Dollar terms) for the six months to 30 June 2020.

Portfolio reviewDuring the first half of 2020 the Company’s NAV fell by 37.6%, underperforming the Company’s benchmark (the MSCI EM Latin America Index) which fell by 35.2% over the same time period (all calculations in US Dollar terms with dividends reinvested).

40%

45%

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

105%

110%

Performance from 1 January 2020 to 30 June 2020

Dec

19

Jan

20

Feb

20

Mar

20

Ap

r 20

May

20

Jun

20

Share price (total return)

MSCI EM Latin America Index (total return, net basis)

Sources: BlackRock Investment Management (UK) Limited and Datastream.Performance figures are calculated in US Dollar terms, with dividends reinvested, rebased to 100 as at 1 January 2020.

NAV (total return)




Contributors to relative returnsThe Company’s stock selection in Mexico was the largest contributor to relative returns over the period under review. From a stock specific perspective, the portfolio’s overweight position in the Brazilian online retailer, B2W CIA Digital, was the largest individual contributor to relative performance during the period as the company’s online presence enabled it to maintain strong gross merchandise volume growth through the evolving pandemic. An off-benchmark holding in Via Varejo, a Brazilian retail company, also contributed positively to relative performance as the stock price rose, benefitting from the turnaround of the firm’s e-commerce platform under new management. The portfolio’s overweight position in the Brazilian retailer, Lojas Americanas, also added to relative returns.

Detractors from relative returnsAllocation to Chile detracted most from relative performance over the period. In terms of individual holdings, an overweight position in Banco do Brasil detracted most as the stock price fell on the back of interest rate cuts and fears of increasing defaults amongst borrowers as the Brazilian economy struggled in the face of the global pandemic. The lack of portfolio positioning in Magazine Luiza, one of the largest Brazilian online retail companies, was also among the top detractors to performance, as the stock continued to rise along with other online retailers benefiting from the COVID-19 lockdown. An off-benchmark holding in Qualicorp Consultoria, a healthcare insurer in Brazil, weighed on returns during the period as the stock price declined following the replacement of the Chief Financial Officer. In addition an off-benchmark position in the Brazilian low-cost airline, GOL Linhas Aéreas Inteligentes, also detracted from relative returns during the period as travel stocks were hit by the COVID-19 outbreak and fears of a global recession.

More details in respect of the most significant stock specific contributors and detractors are set out in the table below.

Top contributors:Total effect (bps): Top detractors:

Total effect (bps):

B2W CIA Digital 87 Azul -41

Via Varejo 52 WEG -42

Lojas Americanas 47GOL Linhas Aéreas Inteligentes -52

IRB Brasil Resseguros 42 Magazine Luiza -53

Afya 38 Banco do Brasil -63

Source: BlackRock.





Portfolio positioningDuring times of elevated volatility and market stress it is important to focus on the long-term investment horizon, adhere to disciplined fundamental analysis from a bottom-up perspective and be ready to respond to dislocations in the market as opportunities present themselves. Consequently over the six months ending 30 June 2020 we have taken advantage of the opportunities provided by depressed valuations to increase portfolio exposure to high conviction names.

We initiated a position in Lojas Renner, the largest Brazilian department stores clothing company. We also added to our position in Vale, a Brazilian mining and iron ore company, as we felt that the stock was trading on attractive valuations and we anticipate that increased iron ore demand from China (as the economy emerges from lockdown) will boost prices.

We funded these purchases by reducing portfolio exposure to Brazilian banks, trimming holdings in Itaú Unibanco and Banco Bradesco, as we believe mounting headwinds in terms of NIM (Net Interest Margin) pressure (arising from interest rate cuts and the rising potential of loan defaults) should diminish returns going forward. We sold the portfolio’s holding in the Mexican food retailer, Walmart de Mexico and reduced exposure to the regional telecommunications operator, América Movil, taking profit on these stocks which had been strong relative outperformers thanks to their resilient business models. Later in the period we initiated a position in AmBev as we felt that the stock price was undervalued and we anticipate a recovery in beer volumes from the prior depressed levels. We also sold our holding in the Brazilian healthcare operator, Notre Dame Intermedica, taking profits on the back of strong performance.

The Company ended the period being overweight to Brazil and Argentina and underweight to Chile, Mexico, Colombia and Peru, with off-benchmark positions in Panama. At the sector level, the portfolio was overweight to consumer discretionary and materials and underweight to consumer staples and financials.

OutlookLatin American economies bottomed through April and May amid social mobility restrictions imposed as a result of COVID-19. More recently governments have begun to gradually open their respective economies, albeit at different rates and with the pandemic only now showing signs of stabilizing in terms of new cases and deaths. Looking ahead to the second half of the year, official second quarter GDP figures and monthly economic data indicates that of countries in the region, Brazil has experienced the lowest level of economic slowdown, with Peru at the other end of the scale.




Brazil

The Brazilian government’s aggressive fiscal programs, including the ‘corona voucher’ transfer to low income families, meant that not only was Brazil the best performing economy in the second quarter, but that it suffered the shallowest drop in output during the pandemic apart from Chile. Retail sales in Brazil through June 2020 were back to their average pre-crisis levels, whereas other countries were at least 15% below that level. Although Brazil’s aggressive fiscal programs have supported growth, there are costs associated with this stimulus. While government support for low-income families has been economically and politically successful, it will also push the primary budget deficit to approximately 15% of GDP this year and gross debt close to 100% of GDP. With the need to reduce spending, the government is debating a redesign of its fiscal and social policies for next year, which may help diminish the government deficit to close to 5% in 2021, partially curbing a quickly-deteriorating public debt trajectory. While there are risks to the medium-term fiscal outlook, an excessively fast decrease in fiscal support could also threaten the recovery next year. The economy’s ability to balance between fiscal sustainability and a fiscal cliff of rapid spending contraction will be an ongoing challenge for the country. Given the recent strength in consumption-related numbers and business leading indicators, 2020 growth forecasts have been revised upwards by economists and a robust recovery is expected for 2021; we see some upward risk to that forecast.

Mexico

Mexico has taken a much more conservative fiscal stance than Brazil and has refrained from providing households and firms with substantial levels of COVID-19-specific support. It is not clear that such fiscal austerity in the face of the worst economic slowdown on record will pay off. Mexico was late to see an improvement in manufacturing having kept factories closed through May and has witnessed a sharp loss of employment (seven million jobs through June 2020), particularly in micro-businesses. These are jobs that may not come back quickly if firms are forced out of business, lowering Mexico’s ability to generate growth going forward. Even in the absence of aggressive fiscal stimulus, Mexico faces major fiscal challenges. By the government’s own admission, its stabilization funds will be mostly used up this year, while Pemex continues to deteriorate both financially as well as operationally. Moreover, private investment remains side-lined partly on account of uncertainty over the direction of government economic policy. In this context, it is difficult to see what the catalyst for growth in Mexico might be, likely resulting in a slower post-COVID-19 recovery than its peers.

Chile

The three major Andean countries (Chile, Colombia and Peru) have found themselves trying to cope with the COVID-19 health emergency while at the same time addressing long-dated domestic issues that may hinder the pace of recovery. In Chile, while activity




numbers have shown a modest but sustained improvement since June, the tight political schedule of coming months may weigh on investment decisions in the next months.

Peru

Peru remains the worst performing economy as the Latin American region emerges from the COVID-19 pandemic, having imposed the strictest shutdown in the region, although its recovery is also the sharpest now that it has started to reopen. Economic recovery is reliant on the speed of reactivation in key sectors such as construction and mining. However political discord over strategies to deal with the economic emergency is feeding a climate of political uncertainty as the country moves towards general elections in April 2021.

Colombia

Along with its Andean peers, Colombia appears to be over the worst part of the COVID-19 shock on the economy, although the country has less fiscal room for manoeuvre than Chile and Peru. With public debt rising above 65% of GDP in 2020 the Colombian economy faces an uncertain future.

Reasons to invest in Latin AmericaThe government-mandated temporary shutdown of businesses in practically every jurisdiction around the world has created an expected degree of havoc in activity. In pragmatic terms, we need to focus on the impacts of the path chosen (including present policies and future impacts). The focus now needs to be on identifying the recovery’s chance of continuation and any long-term trauma for the economies.

Our constructive outlook for Latin equities is based on three pillars:

i. corporate operating leverage;

ii. a global reflation trade underpinned by historic amounts of global stimulus; and

iii. a prolonged period of low or negative real interest rates to help governments de-leverage.

Within this context, we retain an overweight portfolio exposure to Brazil and see positives coming from the strong tailwind of lower interest and the multiplier effect this can have on consumption and investment. Valuations were perceived as very asymmetric in March and April, but not anymore. At the same time access to debt and equity markets has been fluid during the pandemic and we are seeing companies emerge with stronger balance sheets. Additionally, we see industries becoming increasingly consolidated as the pandemic has forced businesses that were already facing challenges before the crisis





to scale back, creating opportunities for the industry leading companies that we invest in to gain market share. In this regard we are optimistic on the ability for corporates to earn attractive returns relative to the prevailing cost of capital over the longer term.

Furthermore, Latin America as a region is a key supplier of raw materials to China and the majority of the economic data published in August confirms that Chinese expansion continues apace, led by manufacturing and construction. This should support higher sustainability of commodity prices which in turn provides a favourable outlook for Latin American mining companies and related sectors. Additionally, after strong depreciation of Latin American currencies in the first half of this year, we see a bias towards currency appreciation over our investment horizon as local currencies look cheap in regard to developments related to terms of trade and reduction of current account deficits across the region. Monetary policy signals and the extent of fiscal stimulus in the United States suggest that the persistent strength of the US Dollar over Latin American currencies seen in the first half of this year has ability to unwind, providing a tailwind for total return for Latin American equities purchased in hard currency.

Finally, as Latin American equities have underperformed their Emerging Market peers since relative performance peaked in January this year, Latin American equity markets currently trade at a discount relative to their 10-year historical averages and their Emerging Market peers (based on consensus 12-month forward price-to-book value multiples). While the region still faces challenges in terms of the pace and shape of economic recovery, we are confident that long term equity investors can benefit from having exposure to the region for the reasons set out above.

ED KUCZMA and SAM VECHT BlackRock Investment Management (UK) Limited10 September 2020




Geographic and sector allocationsas at 30 June 2020

Geographic Weighting (Gross Market Exposure) vs MSCI EM Latin America Index

Sector allocation (Gross Market Exposure) vs MSCI EM Latin America Index

0

10

15 20 25 30

Health Care

Information Technology

Real Estate

Industrials

Communication Services

Utilities

Consumer Staples

Energy

Consumer Discretionary

Materials

Financials

% of net assets

MSCI EM Latin America Index

2.3

1.30.5

1.40.0

6.33.9

4.97.0

6.26.8

7.615.7

10.19.6

11.56.8

19.316.0

20.8

23.526.8

%

0 10 20 30 40 50 60 70 80

Colombia

Panama

Peru

Chile

Argentina

Mexico

Brazil

% of net assets


%

0.0

2.3

1.7

5.6

1.6

7.3

5.8

20.0

21.6

64.1

74.2

Sources: BlackRock and MSCI.


1.0

3.1

0.0

5 10




Geographic Weighting (Gross Market Exposure) vs MSCI EM Latin America Index

Sector allocation (Gross Market Exposure) vs MSCI EM Latin America Index

0

10

15 20 25 30

Health Care

Information Technology

Real Estate

Industrials

Communication Services

Utilities

Consumer Staples

Energy

Consumer Discretionary

Materials

Financials

% of net assets


2.3

1.30.5

1.40.0

6.33.9

4.97.0

6.26.8

7.615.7

10.19.6

11.56.8

19.316.0

20.8

23.526.8

%

0 10 20 30 40 50 60 70 80

Colombia

Panama

Peru

Chile

Argentina

Mexico

Brazil

% of net assets


%

0.0

2.3

1.7

5.6

1.6

7.3

5.8

20.0

21.6

64.1

74.2



1.0

3.1

0.0

5 10

Ten largest investmentsas at 30 June 2020

1 (2019 4th)Vale

Diversified mining company

Security type ADS

Market value $ 17,771,000

Share of portfolio % 9.4 (2019: 4.7)

MSCI ESG Rating CCC

One of the world’s largest mining companies, with other business in logistics, energy and steelmaking. Vale is the world’s largest producer of iron ore and nickel but also operates in the coal, copper, and manganese and ferro-alloys sectors.

2 (2019 1st)Petrobrás Integrated oil company

Security type ADR


Security type Preference shares



MSCI ESG Rating BBB

Brazilian integrated oil and gas company, 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 company controls significant assets across Africa, North and South America, Europe and Asia, with a majority of production based in Brazil.

3 (2019 5th)América Movil Telecommunications company

Security type ADR



MSCI ESG Rating B

The leading provider of integrated telecommunications services in Latin America, with wireless and fixed-line presence in Latin America, the US, and Central and Eastern Europe. The company touts the largest wireless subscriber base in the world outside of China and India.

4 (2019 19th)B3Financial services company

Security type Ordinary Shares



MSCI ESG Rating AA

One of the world’s largest financial market infrastructure providers by market value. The services it offers range from exchange trading, clearing and other post-trade services to registration of over-the-counter (OTC) transactions and of vehicle and real estate loans.

5 (2019 3rd)Banco BradescoBank

Security type ADR



MSCI ESG Rating A

One of Brazil’s largest private sector banks, the company divides its operations into two main areas – banking services and insurance services, management of complementary private pension plans and savings bonds.

MSCI ESG ratings look to identify environmental, social and governance risks and opportunities for individual stocks. Companies are rated on a scale from AAA to CCC according to their exposure to certain risks and their ability to manage them relative to the industry peers. A stock rated as AAA signifies a company which is leading in terms of ESG factors relative to its industry. On the other hand, a stock with a CCC score is considered a laggard, due to the presence of one or more ESG risks that MSCI perceives to be material. The rating scale is as follows: AAA, AA, A, BBB, BB, B, CCC. From AAA to AA a company is considered to be an ESG leader in its respective industry, A to BB is deemed to be an average score, whilst B and CCC represents a below average score.




6 (2019 2nd)Itaú Unibanco Bank

Security type ADR



MSCI ESG Rating BBB

Brazil’s largest private sector bank and the largest Latin American bank by assets and market capitalization, born through the merger of Banco Itaú and Unibanco in 2009. The company’s presence spans across the Americas, Europe and Asia, offering a blend of retail, private banking, and investment and corporate banking services.

7 (2019 10th)TerniumSteel manufacturer

Security type ADR



MSCI ESG Rating Unrated1

A leading steel company in Latin America, with a high integrated process to manufacture flat and long steel products. The company maintains production centres in Argentina, Brazil, Mexico, Colombia, the southern United States, and Central America.

8 (2019 12th)AmBevBeverage manufacturer

Security type ADR



MSCI ESG Rating AA

Brazil’s leading beverages company with operations throughout the region. The company is well positioned to continue to benefit from its defensive position as the region’s largest consumer staples producer, while maintaining a strong focus on preserving operating cost discipline throughout its operations, a perennial AmBev management strength.

9 (2019 n/a)AfyaRetailer

Security type ADR


Share of portfolio % 3.2 (2019: n/a)

MSCI ESG Rating Unrated1

The leading medical education group in Brazil, based on number of medical school seats, delivering an end-to-end physician-centric ecosystem that serves students to be lifelong medical learners from the moment they join as medical students through their medical residency preparation, graduation program, and continuing medical education activities.

10 (2019 11th)B2W CIA DigitalRetailer

Security type Ordinary Shares



MSCI ESG Rating BBB

A Brazil-based company primarily engaged in the retail of goods through the Internet.

1 Unrated stocks have not yet been assessed by ESG ratings agencies and have not been allocated a rating. This may be for a number of reasons, including the fact that the companies may have only been publically listed for a short time and have insufficient operating history for an assessment to be made.

All percentages reflect the value of the holding as a percentage of total investments. For this purpose where more than one class of securities is held, these have been aggregated. The percentages in brackets represent the value of the holding as at 31 December 2019.

Together, the ten largest investments represent 50.1% of total investments (ten largest investments as at 31 December 2019: 47.8%).

Ten largest investments continuedas at 30 June 2020




Portfolioas at 30 June 2020

Market value

% of investments

US$’000

Brazil

Vale - ADS 17,771 9.4

Petrobrás – ADR 10,221 } 8.8 Petrobrás – preference shares – ADR 6,546 B3 8,926 4.7

Banco Bradesco – ADR 7,630 4.0

Itaú Unibanco – ADR 7,331 3.9

AmBev – ADR 6,801 3.6

Ayfa 6,011 3.2

B2W CIA Digital 5,853 3.1

Lojas Americanas – preference shares 4,319 } 3.1 Lojas Americanas 1,486 JBS 5,455 2.9

Companhia Energetica de Minas Gerais – preference shares 5,227 2.8

Lojas Renner 4,790 2.5

BB Seguridade Participações 4,577 2.4

Energisa – units 4,295 2.3

Petrobás Distribuido 3,887 2.0

Centrais Eletricas Brasileiras 2,532 } 2.0Centrais Eletricas Brasileiras – preference shares 1,330 GOL Linhas Aéreas Inteligentes 2,979 1.6

Via Varejo 2,850 1.5

Cyrela Brazil Realty 2,708 1.4

Cia Brasileira De Distribuição 2,420 1.3

Arco Platform 1,814 1.0

Banco do Brasil 1,048 0.5

Cielo 836 0.4




Market value

% of investments

US$’000

Klabin – composite units1 191 } 0.1 Klabin 2.5% 15/06/22 bond 73 129,907 68.5

Mexico

América Movil – ADR 10,933 5.8

Grupo México 5,281 2.8

Grupo Financiero Banorte 5,189 2.7

Fibra Uno Administracion – REIT 4,186 2.2

Grupo Aeroportuario del Pacífico – ADS 2,754 } 2.0 Grupo Aeroportuario del Pacífico 996 FEMSA – ADR 3,071 1.6

Corporación Inmobiliaria Vesta 2,545 1.3

34,955 18.4

Argentina

Ternium – ADR 6,815 3.6

YPF – ADR 3,441 1.8

10,256 5.4

Chile

Quimica Y Minera – ADR 3,417 1.8

Banco Santander–Chile 3,294 1.7

Banco de Chile 3,079 1.6

9,790 5.1

Peru

Southern Copper 2,946 1.6

2,946 1.6

Portfolio continuedas at 30 June 2020




Market value

% of investments

US$’000

Panama

Copa Holdings 1,805 1.0

1,805 1.0

Total Investments 189,659 100.0

All investments are in equity shares unless otherwise stated.

1 Composite Units include 1 ordinary share and 4 Preference shares.

The total number of investments held at 30 June 2020 was 43 (31 December 2019: 49). At 30 June 2020, the Company did not hold any equity interests comprising more than 3% of any company’s share capital (31 December 2019: nil).




Interim management report and responsibility statement

The Chairman’s Statement on pages 4 to 6 and the Investment Manager’s Report on pages 7 to 13 give details of the events which have occurred during the period and their impact on the financial statements.

Principal risks and uncertaintiesThe principal risks faced by the Company can be divided into various areas as follows:

• Counterparty; • Investment performance; • Income/dividend; • Legal and regulatory compliance; • Operational; • Market; • Financial; and • Marketing.

The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 31 December 2019. A detailed explanation can be found on pages 18 to 21 and in note 16 on pages 93 to 100 of the Annual Report and Financial Statements which are available on the website maintained by BlackRock at blackrock.com/uk/brla.

In the view of the Board, there have not been any changes to the fundamental nature of the principal risks and uncertainties since the previous report and these are equally applicable to the remaining six months of the financial year as they were to the six months under review.

Going concernThe Board is mindful of the continuing uncertainty surrounding the potential duration of the COVID-19 pandemic and its impact on the global economy, the Company’s assets and the potential for the level of revenue derived from the portfolio to reduce versus the prior year. The Board believes that the Company and its key third-party service providers have in place appropriate business continuity plans and will be able to maintain service levels through the COVID-19 pandemic.

The Directors are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and is financially sound. For this reason they continue to adopt the going concern basis in preparing the financial statements. The Company has a portfolio of investments which are considered to be readily realisable and is able to meet all of its liabilities from its assets and income generated from these assets. Ongoing charges excluding finance costs, direct transaction costs, custody transaction charges, taxation and certain non-recurring items for the year ended 31 December 2019 were approximately 1.13% of average net assets.




Related party disclosure and transactions with the Investment ManagerBlackRock Fund Managers Limited (BFM) was appointed as the Company’s AIFM (Alternative Investment Fund Manager) with effect from 2 July 2014. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the fees payable are set out in note 11 on page 38.

The related party transactions with the Directors are set out in note 12 on page 38.

Directors’ responsibility statementThe Disclosure Guidance and Transparency Rules (DTR) of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.

The Directors confirm to the best of their knowledge and belief that:

• the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with the applicable UK Accounting Standard FRS 104 ‘Interim Financial Reporting’; and

• the Interim Management Report, together with the Chairman’s Statement and the Investment Manager’s Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the Financial Conduct Authority’s (FCA) Disclosure Guidance and Transparency Rules.

The half yearly financial report has not been audited or reviewed by the Company’s Auditor.

The half yearly financial report was approved by the Board on 10 September 2020 and the above responsibility statement was signed on its behalf by the Chairman.

CAROLAN DOBSONFor and on behalf of the Board10 September 2020




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Balance sheetas at 30 June 2020

Notes30 June

202030 June

201931 December

2019

US$’000 (unaudited)


US$’000 (audited)

Fixed assetsInvestments held at fair value through profit or loss 189,659 318,587 300,571

Current assets

Debtors 853 1,135 7,175

Cash and cash equivalents 125 128 305

978 1,263 7,480

Creditors - amounts falling due within one year

Bank overdraft (14,097) (24,664) (18,610)

Other creditors (1,191) (7,515) (1,735)

(15,288) (32,179) (20,345)

Net current liabilities (14,310) (30,916) (12,865)

Total assets less current liabilities 175,349 287,671 287,706

Creditors - amounts falling due after more than one year

Non current tax liability 6 (238) (238) (238)

Non-equity redeemable shares 6 (24) (24) (24)

(262) (262) (262)

Net assets 175,087 287,409 287,444

Capital and reserves

Called up share capital 8 4,144 4,144 4,144

Share premium account 11,719 11,719 11,719

Capital redemption reserve 4,843 4,843 4,843

Non-distributable reserve 4,356 4,356 4,356

Capital reserves 147,371 252,669 255,453

Revenue reserves 2,654 9,678 6,929

Total shareholders’ funds 7 175,087 287,409 287,444

Net asset value per ordinary share (US$ cents) 7 445.97 732.07 732.15




Statement of cash flowsfor the six months ended 30 June 2020

Six months ended

30 June 2020

Six months ended

30 June 2019

Year ended

31 December 2019



US$’000 (audited)

Operating activities

Net (loss)/profit on ordinary activities before taxation (106,655) 39,087 46,038

Add back finance costs 79 388 793

Losses/(gains) on investments held at fair value through profit or loss 107,548 (37,056) (40,807)

(Gains)/losses on foreign exchange (28) 336 128

Sales of investments held at fair value through profit or loss 156,366 130,661 256,355

Purchases of investments held at fair value through profit or loss (147,594) (126,293) (241,533)

Decrease in other debtors 913 1,240 43

(Decrease)/increase in other creditors (543) 204 894 Taxation on investment income (308) (370) (542)

Net cash generated from operating activities 9,778 8,197 21,369

Financing activities

Interest paid (79) (388) (793)Dividends paid (5,394) (6,553) (13,297)

Net cash used in financing activities (5,473) (6,941) (14,090)

Increase in cash and cash equivalents 4,305 1,256 7,279

Cash and cash equivalents at the beginning of the period/year (18,305) (25,456) (25,456)Effect of foreign exchange rate changes 28 (336) (128)

Cash and cash equivalents at the end of the period/year (13,972) (24,536) (18,305)

Comprised of:

Cash at bank 125 128 305 Bank overdraft (14,097) (24,664) (18,610)

(13,972) (24,536) (18,305)




1. Principal activity and basis of preparationThe principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010.

The Company presents its results and positions under FRS 102, ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ (FRS 102), which forms part of revised Generally Accepted Accounting Practice (New UK GAAP) issued by the Financial Reporting Council (FRC) in 2013 and updated in March 2018.

The condensed set of financial statements has been prepared on a going concern basis in accordance with FRS 102 and FRS 104, ‘Interim Financial Reporting’ issued by the FRC in March 2015 and the revised Statement of Recommended Practice – ‘Financial Statements of Investment Trusts Companies and Venture Capital Trusts’ (SORP) issued by the Association of Investment Companies (AIC) in October 2019 and the provisions of the Companies Act 2006.

The accounting policies applied for the condensed set of financial statements are as set out in the Company’s Annual Report and Financial Statements for the year ended 31 December 2019.

Notes to the financial statementsfor the six months ended 30 June 2020




2. Income

Six months ended

30 June 2020

Six months ended

30 June 2019

Year ended

31 December 2019



US$’000 (audited)

Investment income:

Overseas dividends 1,360 3,911 7,446

Overseas REIT distributions 132 127 278

Overseas special dividends 434 41 1,270

UK dividends – 172 197

Fixed interest income 42 5 40

1,968 4,256 9,231

Other income:

Deposit interest – 1 2

Total income 1,968 4,257 9,233

Dividends and interest received in cash during the period amounted to US$2,751,000 and US$67,000 (six months ended 30 June 2019: US$5,643,000 and US$18,000; year ended 31 December 2019: US$9,442,000 and US$49,000) respectively.

There were no special dividends recognised in capital (six months ended 30 June 2019: US$nil; year ended 31 December 2019: US$nil).




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Notes to the financial statements continued




4. Other operating expenses

Six months ended

30 June 2020

Six months ended

30 June 2019

Year ended

31 December 2019



US$’000 (audited)

Allocated to revenue:

Custody fee 27 29 61

Depositary fees1 12 14 26

Auditor’s remuneration 17 18 40

Registrar’s fees 18 20 36

Directors’ emoluments 110 123 271

Marketing fees 49 55 117

Postage and printing fees 16 25 47

AIC fees 16 11 22

Brokers fees 21 32 59

Employer NI contributions 10 15 32

FCA fees 5 5 11

Director search fees 13 – 29

Other administration costs 48 60 88

362 407 839

Allocated to capital:

Custody transaction charges 26 7 48

388 414 887

1 All expenses other than depositary fees are paid in Sterling and are therefore subject to exchange rate fluctuations.




5. DividendsThe Company’s cum-income US Dollar NAV at 31 March 2020 was 366.99 US$ cents per share, and the Directors declared a first quarterly interim dividend of 4.59 cents per share. The dividend was paid on 20 May 2020 to holders of ordinary shares on the register at the close of business on 14 April 2020.

In accordance with FRS 102 Section 32 ‘Events After the End of the Reporting Period’, the final dividend payable on ordinary shares is recognised as a liability when approved by shareholders. Interim dividends are recognised only when paid.

Dividends on equity shares paid during the period were:

Six months ended

30 June 2020

Six months ended

30 June 2019

Year ended 31 December

2019



US$’000 (audited)

Quarter to 31 December 2018 – dividend of 8.13 cents – 3,192 3,192

Quarter to 31 March 2019 – dividend of 8.56 cents – 3,361 3,361

Quarter to 30 June 2019 – dividend of 9.15 cents – – 3,592

Quarter to 30 September 2019 – dividend of 8.03 cents – – 3,152

Quarter to 31 December 2019 – dividend of 9.15 cents 3,592 – –

Quarter to 31 March 2020 – dividend of 4.59 cents 1,802 – –

5,394 6,553 13,297





6. Creditors – Amounts falling due after more than one year

As at 30 June

2020

As at 30 June

2019

As at 31 December

2019



US$’000 (audited)

Non current tax liability 238 238 238

Non-equity redeemable shares 24 24 24

262 262 262

At 30 June 2020 the Company had net surplus management expenses of US$nil (30 June 2019: US$nil; 31 December 2019: US$nil) and a non-trade loan relationship deficit of US$728,000 (30 June 2019: US$nil; 31 December 2019: US$728,000). A deferred tax asset was not recognised in the period ended 30 June 2019 or in the year ended 31 December 2019 as it was unlikely that there would be sufficient future taxable profits to utilise these expenses.

Non equity redeemable shares

The redeemable shares of £1 each carry the right to receive a fixed dividend at the rate of 0.1% per annum on the nominal amount thereof. They are capable of being redeemed by the Company at any time and confer no rights to receive notice of, attend or vote at general meetings except where the rights of holders are to be varied or abrogated. On a winding up, the capital paid up on such shares ranks pari passu with, and in proportion to, any amounts of capital paid to the holders of ordinary shares, but does not confer any further right to participate in the surplus assets of the Company.




7. Earnings and net asset value per ordinary shareRevenue and capital earnings per ordinary share and net asset value per ordinary share are shown below and have been calculated using the following:

Six months ended

30 June 2020

Six months ended

30 June 2019

Year ended

31 December 2019

(unaudited) (unaudited) (audited)

Net revenue profit attributable to ordinary shareholders (US$’000) 1,119 3,111 7,106

Net capital (loss)/profit attributable to ordinary shareholders (US$’000) (108,082) 35,606 38,390

Total (loss)/profit attributable to ordinary shareholders (US$’000) (106,963) 38,717 45,496

Equity shareholders’ funds (US$’000) 175,087 287,409 287,444

Earnings per shareThe weighted average number of ordinary shares in issue during the period on which the earnings per ordinary share was calculated, was: 39,259,620 39,259,620 39,259,620

The actual number of ordinary shares in issue at the end of the each period on which the net asset value per ordinary share was calculated, was: 39,259,620 39,259,620 39,259,620

The number of ordinary shares in issue, including treasury shares at the period/year end was: 41,441,282 41,441,282 41,441,282

Calculated on weighted average number of ordinary shares:

Revenue profit (US$ cents) 2.85 7.92 18.10

Capital (loss)/profit (US$ cents) (275.30) 90.70 97.78

Total (loss)/profit (US$ cents) (272.45) 98.62 115.88





7. Earnings and net asset value per ordinary share continued

As at 30 June

2020

As at 30 June

2019

As at 31 December

2019

(unaudited) (unaudited) (audited)

Net asset value per ordinary share (US$ cents) 445.97 732.07 732.15

Ordinary share price (mid-market) (US$ cents)1 418.87 659.26 643.17

1 The Company’s share price is quoted in Sterling and the above represents the US Dollar equivalent based on exchange rates of $1.2356 to £1 (30 June 2019: $1.2727; 31 December 2019: $1.3248).

8. Share capital

Ordinary shares

Treasury shares

Total shares

Nominal value

number number number US$’000

Allotted, called up and fully paid share capital comprised:

Ordinary shares of 10 cents each:

At 31 December 2019 and 30 June 2020 39,259,620 2,181,662 41,441,282 4,144

During the period to 30 June 2020, no ordinary shares were purchased and transferred to treasury (six months ended 30 June 2019: nil; year ended 31 December 2019: nil).

No treasury shares were cancelled during the period (six months ended 30 June 2019: nil; year ended 31 December 2019: nil) or for the period from 30 June 2020 to the date of this report.


Customer: BlackRock Project Title: BRLAIT Interim Report T: 0207 055 6500 F: 020 7

blackrock latin american investment trust plc...latin american investment trust plc half yearly...

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