BlackRock Latin American bounces back in 2016 – annual report summary

Our annual report summary series delivers a condensed analysis of a selected investment trust's annual report, including details of the trust's aim, investment style, portfolio focuses, gearing policy, charges and performance.

BlackRock Latin American Trust

BlackRock Latin American Trust (BRLA) invests for long-term growth in companies quoted or conducting their main activities in Latin America. Its report for the year to 31 December 2016 shows shareholders’ funds of $221.7 million (£172 million).

Will Landers has managed BRLA since March 2006. He favours mispriced/undervalued companies with proven management, good governance, good medium-term earnings prospects, coupled with strong balance sheets and cash flow generation. Investment decisions also incorporate a macro overview.

The board states BRLA’s closed-ended status allows it to invest in a higher proportion of mid-sized and smaller companies than its open-ended competitors.

At end-2016 the portfolio comprised 67 investments, including 6 unlisted securities.

Brazilian companies accounted for an overweight 65 per cent compared with its MSCI EM Latin American index benchmark, up from 46 per cent a year earlier. Mexican exposure was halved to an underweight 23.6 per cent.

Financials and consumer staples were the largest sectors at 30.9 per cent and 22.3 per cent of the portfolio. Gearing was 2.1 per cent and ongoing charges 1.2 per cent.

In US dollar terms, NAV and share price total returns were 25.2 per cent and 22.2 per cent respectively (49.2 per cent and 45.9 per cent in sterling terms). The trust’s failure to match the 31.5 per cent rise in its benchmark was attributed to an overly cautious Brazilian weighting early in the year and failure to reduce its Mexican weighting sufficiently fast later on.

Earnings per share fell 25.8 per cent to 17.89 US cents, partly because the manager stopped writing call options as the market strengthened. The total dividend was cut from 21 to 15 US cents.

Discount controls comprise a biennial continuation vote, and a tender for up to 25 per cent of the ordinary shares every second year if the trust has underperformed its benchmark and the average discount has exceeded 5 per cent. Both fall due in 2018.

You can read the full annual report on the BlackRock website.

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