Annual Financial Report

RNS Number : 4817R

Aberdeen Latin American Inc Fd Ltd

04 November 2011

 



ABERDEEN LATIN AMERICAN INCOME FUND LIMITED

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 AUGUST 2011

1.  CHAIRMAN'S STATEMENT

Background and Overview

I am pleased to report that in this first period since launch on 16 August 2010 to 31 August 2011 your Company delivered a net asset value total return* of 6.4% compared to our composite benchmark return of 6.0% for the same period.

The share price total return was 5.3%. Both the equity and fixed income elements of the portfolio contributed positively to that performance over a period that was marked by ever increasing volatility.

The well documented problems in developed economies and the feared effect on trade and commodity prices has impacted the region so that the net asset value at the time of writing had fallen to 95.4p per share from 102.31p as at 31 August.

*Launch date 16 August 2010. NAV total return based on opening NAV of 98.8p

Dividends

Following the payment of the fourth interim dividend of 1.25 pence per share on 31 October 2011, the Company has also satisfied its aim of providing ordinary shareholders with an initial yield of 4.25% on the issue price of 100p. Income generation from the portfolio remains in line with expectations and it is the Company's aim to pay a minimum dividend of 4.25 pence per share for the year ending 31 August 2012 and to grow dividends over time. This remains subject to investee company performance, the level of income from investments, currency movements and possible unforeseen circumstances and does not constitute a profit forecast.

Gearing

We have continued to maintain our geared position in the form of bank borrowings of US$8 million drawn under the terms of a £10 million multi-currency revolving credit facility which was renewed in August for a further year with an option for the Company to rollover for a further 12 months thereafter. The current all-in rate of interest on this draw down is 1.3935%.

Buy-back and Issuance Policy

As indicated at launch, the Company has undertaken to operate an active discount management policy through the use of share buy-backs, the objective being to maintain the price at which the Company's Ordinary shares trade relative to their underlying net asset value at a discount of no more than 5%. I am pleased to report that with the exception of only a few trading days, the Company's Ordinary shares have traded at a premium to net asset value throughout the period since launch and we have not purchased any Ordinary shares to date. We will, however, seek to renew the power to buy back Ordinary shares at the Company's annual general meeting ("AGM"). Any purchases will be made through the market at a discount to the prevailing net asset value per Ordinary share in circumstances where the Directors believe that any such purchase will enhance shareholder value. We will also renew the authority to purchase Subscription shares for cancellation and any purchases of Subscription shares will only be made if the net asset value per Ordinary share is greater than 120p (the exercise price of the Subscription shares). The buy back of Subscription shares and Ordinary shares will be subject to the Listing Rules and Jersey Law and will be at the absolute discretion of the Directors.

The Directors have authority to issue Ordinary shares representing up to 10% of the Company's existing issued Ordinary share capital, which will expire at the AGM and we will seek to renew that authority at the AGM. Ordinary shares will only ever be issued at a premium to the prevailing net asset value per Ordinary share and will therefore be accretive and not disadvantageous to Ordinary shareholders or Subscription shareholders. We are also convening an extraordinary general meeting of the Company to be held immediately following the conclusion of the AGM, at which we will propose resolutions to enable the Company to raise further funds through the issue of 'C' Shares if there is sufficient demand at any time. Conducting an issue of 'C' Shares is designed to overcome the potential disadvantages for existing Ordinary shareholders that could arise from a substantial issue of further Ordinary shares for cash. Shareholders will find full details of this proposal, including its benefits for existing Shareholders, in a circular accompanying this annual report.

Annual General Meeting

The AGM will be held at 10.00 a.m. on 12 December 2011 at No.1 Seaton Place, St Helier, Jersey and your Board looks forward to meeting as many shareholders as possible on the day. The Board has also made arrangements for a London investment presentation by our Managers to be held at their offices at Bow Bells House, 1 Bread Street, London EC4M 9HH at 12 noon on 18 January 2012. This will be followed by a light buffet lunch and all shareholders are most welcome to attend.

Outlook

Latin American equities, bonds and their currencies are expected to remain vulnerable to external headwinds. The outlook for growth following the European leaders plans for bank recapitalisation and the restructure of Greece's debt remains unclear. The US economy is ailing and soft employment and consumer confidence indicators suggest private consumption will remain depressed. Elsewhere investors are increasingly worried about a slowdown in China's real estate sector and risks of a sharp domestic downturn should the property bubble burst. Overall, these developments point to a volatile period ahead.

That said, the market gyrations are unlikely to undermine the long-term fundamentals of the asset class. We see the recent pullback more as a function of heightened risk aversion than a structural shift. Having survived the previous global financial crisis, with no significant defaults or debt scares, Latin American economies should remain resilient. The share prices of some high quality companies are trading now at attractive levels after the market correction; this makes the current buying opportunity appealing and our Managers have been adding to some of their preferred equity holdings in turn. Equally, while Latin American sovereign debt should not be considered a "safe haven" by investors, the yields available from countries with more favourable fiscal and debt levels and better growth prospects than most in the developed world, assist us considerably in delivering the "above average yield" element of our objective.

I look forward to reporting to you at the time of our half-yearly results which will cover the period to 28 February 2012 and will be published in April 2012. Shareholders who wish to keep up to date with developments in the interim may wish to visit the Company's website www.latamincome.co.uk where there are regular updates from the Manager as well as the latest net asset value and share price information which is updated daily.

Richard Prosser

Chairman

3 November 2011

2.  MANAGER'S REPORT

Performance Commentary

During the period under review, the equity portfolio rose by 7.4%, outperforming the benchmark MSCI EM Latin America 10/40 Composite Index's total return of 0.4% in sterling terms. Stock selection, particularly in Brazil, was the key contributor to relative return. As bottom-up stock pickers, our country and sector allocations are driven by where we can find quality companies with attractive valuations. This approach may lead to significant deviations from the index.

In Brazil, dental insurer OdontoPrev was a significant outperformer. It posted a total return of close to 60%, boosted by its deal with Banco de Brasil, which will expand its distribution reach into the relatively under-penetrated individual insurance market. Car rental company Localiza was supported by robust revenue, while port operator Wilson, Sons as well as Brasil Foods gained on the back of solid earnings results. Brasil Foods also benefited from a favourable anti-trust ruling that allowed it to integrate the operations acquired from a competitor. Department store operator Lojas Renner also performed well on the back of an accretive acquisition of a homeware retailer.

Conversely, our Mexican holdings were the main detractors from relative return. In particular, homebuilder Urbi was weak due to the continued weakness of the domestic economy. Our single Argentine holding, Tenaris, also performed poorly due to a margin squeeze as it was not able to raise prices as fast as the increase in input costs. In Brazil, bookstore operator Saraiva disappointed because of industry concerns related to the transition of book sales towards a more digital model, while banks such as Bradesco, also suffered owing to concerns over consumer indebtedness.

The fixed income portfolio returned 12.7%, outperforming the JP Morgan GBI-EM Global Diversified Latin America Composite by 2%. Mexico, where we were underweight, delivered a positive contribution of 1.2% over the period, largely from security selection. Our decision not to invest in Colombia and currency moves added 1.4%. In Brazil our overweight position slightly underperformed the benchmark country return but a combination of the overweight position and a favourable contribution from currency produced a net outperformance of 0.3%.

Portfolio activity

From the Company's inception we quickly initiated positions in companies and re-balanced where necessary to bring them into line with the model portfolio. More recently, we initiated a new position in Bancolombia, one of Colombia's largest lenders, to gain exposure to the growing domestic banking sector. We also introduced Chilean retailer Falabella on the back of price weakness, and participated in the initial public offering of Arezzo, a Brazilian shoe manufacturer and retailer. 

The initial asset allocation of the Company's portfolio, namely in the region of 60% to equities with the balance in sovereign debt has been maintained throughout the period.

Country Overview

In Brazil, the Central Bank had been raising interest rates in an effort to combat inflation which had been persistently above the official target of 4.5%. There were, however, some interesting developments with the increase in interest rates in July of 0.25% to 12.5% being reversed by 0.5% only a month later. The Central Bank's monetary policy committee ("Copom") cited the deterioration in the global economic backdrop for this quick reversal. It added that the constraints to which the world's advanced economies are exposed may extend for longer than previously anticipated which could result in a reduction in trade flows, softer investment flows, tighter credit conditions and deterioration in consumer and business sentiment. The September Copom minutes were dovish and suggest there will be two more rate cuts of 50 basis points in October and December. The Copom also introduced a new alternative growth scenario for the next two years, where it sees inflation falling below the 4.5% target.

Since the period end a number of central banks have intervened in the currency market to reduce the volatility of their currencies.  Mexico chose not to, despite the rapid depreciation of the peso, with Finance Minister Meade noting that recent peso moves should be seen in the context of market liquidity and that it does not make sense to defend a particular currency level. The central bank is sitting on a comfortable level of currency reserves, currently US$136 billion, and has access to a US$74 billion Flexible Credit Facility with the International Monetary Fund (IMF) - so they have plenty of firepower to intervene in the event of further volatility.

Peruvian bonds continued their recent strong run supported by the agreement on the new tax scheme for the mining companies, one of the key policies of the Humala government. This will provide additional annual revenues of PEN3 billion, higher than the original estimates of PEN2 billion. Peru was also upgraded to BBB by Standard & Poor's ("S&P"), under the expectation that broad fiscal and monetary policy continuity under the new government will support a more flexible economic policy and growth. S&P highlighted the designations of respected technocrats as part of President Humala's team as a positive development. 

Outlook

Despite considerable external headwinds, Latin America remains an attractive asset class. Much of the region has sound fiscal and monetary policies, solid financial systems, and prudent banking practices. This is a marked contrast to the many problems that are currently being worked through in some of the more developed economies around the world. Besides this, there has been increasing focus on corporate governance standards, which have generally been improving over the last several years.

We remain optimistic about our equity holdings in the region, given the growing pool of well-managed companies, declining levels of corporate debt, healthy profitability and attractive valuations. As such, we believe that companies in the portfolio are in good shape to weather any further weakness in the global economy, and Latin American equities remain attractive investment opportunities. In addition, Latin American sovereign debt continues to provide attractive yields, particularly when compared to developed markets, and we believe investors will benefit by looking beyond the current market volatility.

We continue to believe that our proprietary research and application of a disciplined investment process should continue to offer investors the potential for significant returns in the medium to long term.

Aberdeen Asset Managers Limited

3 November 2011

3.  RESULTS

Financial Highlights
	31 August 2011
Total assets	£58,222,000
Total equity shareholders' funds (net assets)	£53,309,000
Ordinary share price (mid market)	102.50p
Subscription share price (mid market)	12.50p
Net asset value per Ordinary share	102.31p
Premium to net asset value per Ordinary share	0.19%
Actual gearing	8.46%
Potential gearing	9.22%
Dividends and earnings
Total return per Ordinary share	6.44p
Revenue return per Ordinary share	4.82p
Dividends per Ordinary share	4.25p
Dividend cover	1.13 times
Revenue reserves{A}	£950,000
Operating costs
Total expense ratio	1.9%
{A }Excludes payment of fourth interim dividend of 1.25p per Ordinary share equating to £651,000.

Performance (total return)

	1 year	Since launch{A}
	% return	% return
Ordinary share price	+1.0	+5.3
Net asset value per Ordinary share	+8.6	+6.4
Composite MSCI EM Latin American 10/40 Index/JP Morgan GBI-EM Global Diversified Index (Latin American carve out) (sterling adjusted)	+4.6	+6.0
{A} Launch date 16 August 2010. NAV total return based on opening NAV of 98.8p

Dividends

	Rate	xd date	Record date	Payment date
1st interim 2011	1.00p	22 December 2010	24 December 2010	31 January 2011
2nd interim 2011	1.00p	6 April 2011	8 April 2011	28 April 2011
3rd interim 2011	1.00p	6 July 2011	8 July 2011	29 July 2011
4th interim 2011	1.25p	5 October 2011	7 October 2011	31 October 2011
Total dividends 2011	4.25p

4.  BUSINESS REVIEW

Investment Objective

The investment objective of the Company is to provide Ordinary shareholders with a total return, with an above average yield, primarily through investing in Latin America.

Investment Policy

The Company will invest in the Latin American region through investment in:

-      companies listed on stock exchanges in the Latin American region;

-      Latin American securities (such as ADRs and GDRs) listed on other international stock exchanges;

-      companies listed on other international exchanges that derive significant revenues or profits from the Latin American region; and

-       debt issued by governments in the Latin American region.

The Company will invest in a diversified portfolio consisting primarily of equities, equity-related and fixed income investments, with at least 25% of its gross assets invested in equity and equity-related investments and at least 25% of its gross assets invested in fixed income investments. The Company's investment policy is flexible, enabling it to invest in all types of securities, including (but not limited to) equities, preference shares, debt, convertible securities, warrants, depositary receipts and other equity-related securities. 

The Company was incorporated on 30 June 2010.  A review of the Company's activities is given in the Chairman's Statement and the Manager's Review.  This includes a review of the business of the Company and its principal activities, likely future developments of the business and dividends declared during the year by the Company.  The principal risks associated with the Company are detailed below and in note 16 to the financial statements. The Key Performance Indicators for the Company include NAV performance, share price performance and benchmark performance.

The current Directors, Richard Prosser, Martin Adams, Jeremy Arnold, George Baird and Martin Gilbert were the only Directors in office during the period. They were appointed on 30 June 2010, date of incorporation, save for Mr Baird who was appointed on 9 July 2010.

The Company does not make political donations or expenditures and has not made any donations for charitable purposes during the year and in common with most investment trusts, the Company has no employees.  Directors' & Officers' liability insurance cover has been maintained throughout the year at the expense of the Company.

Principal Activity and Status

The business of the Company is that of an investment company investing in the Latin American region. The objective of the Company is set out above. The Company is registered with limited liability in Jersey as a closed-end investment company under the Companies (Jersey) Law 1991 with registered number 106012. In addition, the Company constitutes and is regulated as a collective investment fund under the Collective Investments Funds (Jersey) Law 1988. The Company intends to manage its affairs so as to be a qualifying investment for inclusion in the stocks and shares component of an Individual Savings Account ('ISA') and it is the Directors' intention that the Company should continue to be a qualifying trust.

Share Capital

As at 31 August 2011 there were 52,106,185 Ordinary shares and 10,421,236 Subscription shares in issue. Each Subscription share carries the right to convert such share into one Ordinary share on 31 December in any of the years 2013 to 2015 (inclusive) at a price of 120p per share.

Principal Risk Factors

Ordinary Shares

The market price of the Ordinary shares, as well as being affected by their underlying net asset value ("NAV"), also takes into account their dividend yield, prevailing interest rates, the interaction of supply and demand for the Ordinary shares in the market, market conditions generally and general investor sentiment. As a result, and notwithstanding the existence of share buy-back powers and the Board's discount management policy, the market price of the Ordinary shares may vary considerably from the NAV per Ordinary share (representing either a discount or a premium to that NAV) and may fall when the underlying NAV per Ordinary share is rising, or vice versa. The exercise of the conversion rights conferred by the Subscription shares will result in a dilution of Ordinary shareholders' interests if the NAV per Ordinary share exceeds the conversion price payable on the conversion of a Subscription share at the relevant time.

Subscription Shares

Subscription shares represent a geared investment, so a relatively small movement in the market price of the Ordinary shares may result in a disproportionately large movement, unfavourable as well as favourable, in the market price of the Subscription shares. The market price of the Subscription shares may therefore be volatile. Although Subscription shares are tradable securities, market liquidity in the Subscription shares may be less than that of the Ordinary shares.

Shares General

Investment in the Ordinary shares and/or the Subscription shares should be regarded as medium to long-term in nature and may not be suitable as a short-term investment.

Dividends

The Company will only pay dividends on the Ordinary shares to the extent that it has sufficient financial resources available for the purpose in accordance with Jersey Company law. Accordingly, there is no guarantee that the Company's dividend objective will be met and the amount of dividends paid to Ordinary shareholders may fluctuate.

Borrowings

Whilst the use of borrowings should enhance the total return on the Ordinary shares where the return on the Company's underlying assets is rising and exceeds the cost of borrowing, it will have the opposite effect where the underlying return is falling, further reducing the total return on the Ordinary shares. The use of borrowing may increase the volatility of the NAV of the Ordinary shares and the share price of the Ordinary shares and/or the Subscription shares.

Market Risks

Investment in emerging securities markets such as in the Latin American region involves greater risks and other considerations not typically associated with investment in more developed securities markets. Stockmarket movements and changes in economic conditions (including, for example, interest rates, foreign exchange rates and rates of inflation), industry conditions, corporate governance, competition, political and diplomatic events, tax or other laws, investors' perceptions and other factors can substantially either adversely or favourably affect the value of the securities in which the Company invests and, therefore, the Company's performance and prospects. The risks inherent in Latin America may result in increased volatility in the shares of Latin American companies and portfolios which invest in them when compared to their counterparts in developed markets. Investment companies investing in Latin America may display greater share price and NAV volatility than those investing in developed markets.

Foreign Exchange Risks

The Company will account for its activities, report its results and net asset value per Ordinary share and declare and pay dividends in sterling while its investments will be made and realised in other currencies. Accordingly, the movement of exchange rates between sterling and the other currencies in which the Company's investments are denominated or its borrowings are drawn may have a material effect, unfavourable as well as favourable, on the returns otherwise experienced on the investments made by the Company. Foreign exchange risk may increase the volatility of the NAV and, consequently, share price of the Ordinary shares.

Taxation and Exchange Controls

Any change in the Company's tax status or in taxation legislation or in the interpretation of taxation legislation or in the tax treatment of dividends, interest or other investment income received by the Company could affect the value of the investments held by the Company, affect the Company's ability to provide returns to Ordinary shareholders or alter the post-tax returns to Ordinary shareholders. The Company may purchase investments that may be subject to exchange controls or withholding taxes in various jurisdictions. In the event that exchange controls or withholding taxes are imposed with respect to any of the Company's investments, the effect will generally be to reduce the income received by the Company on its investments and the capital value of the affected investments.

Duration

The Company does not have a fixed life and, therefore, unless shareholders vote to wind up the Company, shareholders will only be able to realise their investment through the stockmarket.

5.  STATEMENT OF DIRCTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the Group financial statements in accordance with applicable law and regulations.

Jersey Company law requires the Directors to prepare financial statements for each financial period in accordance with any generally accepted accounting principles. The financial statements of the Group are required by law to give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors should:

-      select suitable accounting policies and then apply them consistently;

-      make judgments and estimates that are reasonable and prudent;

-      specify which generally accepted accounting principles have been adopted in their preparation; and,

-      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business

The Directors are responsible for keeping accounting records which are sufficient to show and explain its transactions and are such as to disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements prepared by the Group comply with the requirements of the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that to the best of their knowledge:

-      the financial statements, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and

-      the Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

For Aberdeen Latin American Income Fund Limited

Richard Prosser

Chairman

3 November 2011

6. INVESTMENT PORTFOLIO

Ten Largest Equity Investments

As at 31 August 2011

			Valuation	Total
			2011	assets
Company	Sector	Country	£'000	%
Vale ADR
The Brazilian miner is the world's lowest-cost iron-ore producer and, in recent years, has made acquisitions to diversify its asset base.	Materials	Brazil	3,074	5.3
Petroleo Brasileiro ADR
An emerging world-class integrated oil company in Brazil, it holds vast reserves, has made substantial new oil finds and will stand to gain from the growing demand for oil from emerging economies.	Energy	Brazil	3,026	5.2
Banco Bradesco ADR
A leading Brazilian bank with a good quality loan portfolio, it has benefited from robust growth in retail lending.	Banks	Brazil	2,891	5.0
Amer Movil ADR
The largest integrated telecom company in Latin America. It is most dominant in its home market of Mexico, where it has a significant market share.	Telecommunication Services	Mexico	2,104	3.6
Lojas Renner
One of the leading department store chains in Brazil with a nationwide presence.	Retailing	Brazil	1,517	2.6
Fomento Economico Mexicano ADR
The Mexican beverage company, which is also the leading Coca-Cola bottler in Latin America, is poised to benefit from rising domestic consumption. Its earnings tend to be relatively defensive because its products are largely consumer staples.	Food Beverage & Tobacco	Mexico	1,430	2.5
Grupo Financiero Banorte
The largest locally owned Mexican bank. It partnered the post office to gain access to cheaper funding and acquired a Texas bank to tap the growing Hispanic population in the US.	Banks	Mexico	1,355	2.3
Itau Unibanco Holdings ADR
Brazil's largest privately-owned bank, it is strongly capitalised and well positioned with decent growth and asset quality.	Banks	Brazil	1,337	2.3
Ultrapar Participacoes ADR
Brazilian fuels and chemicals company with defensive qualities. It has strengthened its distribution network with its acquisition of the Texaco-brand of gasoline stations in Brazil.	Energy	Brazil	1,331	2.3
Multiplan Empreendimentos
A Brazilian mall owner with well-located shopping malls, a solid tenant base and near-full occupancy, as well as a pipeline of sites under development.	Real Estate	Brazil	1,294	2.2
Top ten equity investments			19,359	33.3

Investment Portfolio - Other Investments

As at 31 August 2011

			Valuation	Total
			2011	assets
Company	Sector	Country	£'000	%
Tenaris ADR	Industrial Metals	Argentina	1,101	1.9
Natura Cosmeticos	Personal Goods	Brazil	1,091	1.9
Banco Santander-Chile ADR	Banks	Chile	1,041	1.8
Grupo Aeroportuario de Sureste	Industrial Transportation	Mexico	848	1.5
Cia Souza Cruz	Tobacco	Brazil	712	1.2
Wal-Mart de Mexico	General Retailers	Mexico	696	1.2
OdontoPrev	Health Care Equipment & Services	Brazil	638	1.1
Kimberly-Clark de Mexico	Personal Goods	Mexico	628	1.1
S.A.C.I. Falabella	General Retailers	Chile	628	1.1
BM&FBovespa	Financial Services	Brazil	587	1.0
Top twenty equity investments			27,329	47.1
Localiza Rent a Car	General Retailers	Brazil	585	1.0
Grupo Aeroportuario del Centro Nort ADR	Industrial Transportation	Mexico	532	0.9
Wilson, Sons	Industrial Transportation	Brazil	531	0.9
Brasil Foods Sponsored ADR	Food Producers	Brazil	511	0.9
Organizacion Soriana	General Retailers	Mexico	508	0.9
Bradespar	Materials	Brazil	488	0.8
Valid Solucoes e Servicos de Seguranca	Support Services	Brazil	488	0.8
Arezzo Industria e Comercio	Personal Goods	Brazil	482	0.8
Urbi Desarrollos Urbanos	Household Goods & Home Construction	Mexico	423	0.7
Amil Participacoes	Health Care Equipment & Services	Brazil	383	0.7
Top thirty equity investments			32,260	55.5
WEG	Electronic & Electrical Equipment	Brazil	359	0.6
TOTVS	Software & Computer Services	Brazil	328	0.6
Saraiva Livreiros Editores	Media	Brazil	305	0.5
Embraer Spons ADR	Aerospace & Defence	Brazil	297	0.5
Grupo Bancolombia	Banks	Colombia	245	0.4
Total equity investments			33,794	58.1

Investment Portfolio - Bonds As at 31 August 2011
Issue	Sector	Country	Valuation	Total
			2011	Assets
			£'000	%
Brazil (Fed Rep of) 10% 01/01/13	Government Bonds	Brazil	6,268	10.8
Brazil (Fed Rep of) 10% 01/01/17	Government Bonds	Brazil	4,530	7.8
Mexico (United Mexican States) 8% 11/06/20	Government Bonds	Mexico	2,999	5.1
Mexico (United Mexican States) 8% 07/12/23	Government Bonds	Mexico	2,562	4.4
Mexico (United Mexican States) 7.75% 14/12/17	Government Bonds	Mexico	1,567	2.7
Brazil (Fed Rep of) 10% 01/01/21	Government Bonds	Brazil	1,551	2.7
Peru (Rep of) 7.84% 12/08/20	Government Bonds	Peru	1,301	2.2
Uruguay (Rep of) 5% 14/09/18	Government Bonds	Uruguay	1,230	2.1
Peru (Rep of) 6.95% 12/08/31	Government Bonds	Peru	721	1.2
Mexico (United Mexican States) 7.5% 03/06/27	Government Bonds	Mexico	682	1.2
Central Bank of Argentina 2% 04/02/18	Government Bonds	Argentina	381	0.6
Total value of Bonds			23,792	40.8
Total value of equity investments			33,794	58.1
Total value of investments			57,586	98.9
Net current assets {A}			636	1.1
Total assets			58,222	100.0

{A} excluding banks loans of £4,913,000

7.   CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		For the period from
		incorporation{A} to 31 August 2011
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Income	3
Dividend income		3,355	-	3,355
Interest income		23	-	23
		_______	_______	_______
Total revenue		3,378	-	3,378
		_______	_______	_______
Gains on investments held at fair value through profit or loss	9	-	1,653	1,653
Currency gains	14	-	93	93
		_______	_______	_______
		3,378	1,746	5,124
		_______	_______	_______
Expenses
Investment management fee	4	(250)	(374)	(624)
Other operating expenses	5	(464)	(416)	(880)
		_______	_______	_______
Profit before finance costs and taxation		2,664	956	3,620
Finance costs	6	(75)	(112)	(187)
		_______	_______	_______
Profit before taxation		2,589	844	3,433
Taxation		(76)	-	(76)
		_______	_______	_______
Profit for the period attributable to equity shareholders		2,513	844	3,357
		_______	_______	_______
Earnings per Ordinary share (pence)	8
Basic		4.82	1.62	6.44
		_______	_______	_______
Diluted {B}		n/a	n/a	n/a
{A} 30 June 2010.		_______	_______	_______
{B} No dilutive impact
The Group does not have any income or expense that is not included in profit for the period, and therefore the "Profit for the period" is also the "Total comprehensive income for the period", as defined in IAS 1 (revised).
All of the profit and total comprehensive income is attributable to the equity holders of the parent company. There are no minority interests.
The total column of this statement represents the Statement of Comprehensive Income of the Group, prepared in accordance with IFRS. The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
All items in the above statement derive from continuing operations.
The accompanying notes are an integral part of these financial statements.

8.  CONSOLIDATED BALANCE SHEET

		As at
		31 August
		2011
	Notes	£'000
Non-current assets
Investments held at fair value through profit or loss	9	57,586
		__________
Current assets
Cash	10	403
Other receivables	11	602
		__________
Total current assets		1,005
		__________
Total assets		58,591
Current liabilities	12
Bank loan		(4,913)
Forward foreign exchange contracts		(108)
Other payables		(261)
		__________
Total current liabilities		(5,282)
		__________
Net assets		53,309
		__________
Equity capital and reserves
Equity capital	13	51,515
Capital reserve	14	844
Revenue reserve		950
		__________
Equity shareholders' funds		53,309
		__________
Net asset value per Ordinary share (pence):	15
Basic		102.31
		__________
Diluted {A}		n/a
{A} no dilutive impact		__________

9.  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the period from incorporation{A} to 31 August 2011
		Share	Capital	Revenue
		capital	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000
Balance on incorporation{A}		-	-	-	-
Profit for the period attributable to equity holders		-	844	2,513	3,357
Issue of share capital		52,653	-	-	52,653
Issue costs		(1,138)	-	-	(1,138)
Dividends paid	7	-	-	(1,563)	(1,563)
		_______	_______	_______	_______
Balance at 31 August 2011		51,515	844	950	53,309
{A} 30 June 2010.		_______	_______	_______	_______

10.  CONSOLIDATED CASH FLOW STATEMENT

	For the period from
	incorporation{A} to
	31 August 2011
	£'000
Dividend income received	1,000
Fixed interest income received	1,645
Deposit interest received	23
Investment management fee paid	(526)
Other cash expenses	(769)
	_______
Cash generated from operations	1,373
Interest paid	(181)
Overseas withholding tax paid	(76)
	_______
Net cash inflow from operating activities	1,116
Cash flows from investing activities
Purchases of investments	(72,399)
Sales of investments	16,619
	_______
Net cash outflows from investing activities	(55,780)
Cash flows from financing activities
Equity shares issued	52,653
Equity shares issue costs	(1,138)
Equity dividends paid	(1,563)
Loan drawndown	5,167
	_______
Net cash inflows from financing activities	55,119
Net increase in cash	455
	_______
Foreign exchange	(52)
Cash at start of period	-
	_______
Cash at end of period	403
{A} 30 June 2010.	_______

11.   NOTES TO THE FINANCIAL STATEMENTS

	For the period from 30 June 2010 to 31 August 2011
1.		Principal activity
		The Company is a closed-end investment company incorporated in Jersey, with its shares having a premium listing on the London Stock Exchange.
		The Group financial statements consolidate the financial statements of the Company and its subsidiary, Aberdeen Latin American Income Fund LLC. The principal activity of its foreign subsidiary is similar in all relevant respects to that of its Jersey parent.

2.	Accounting policies
	The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB ("IFRIC").
	(a)	Basis of preparation
		The accounting policies which follow set out those policies which apply in preparing the financial statements for the period ended 31 August 2011. There are no differences between the accounting policies applied in the Group and the Company.
		The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates which requires management to exercise its judgement in the process of applying the accounting policies. Actual results may differ from these estimates.
		The consolidated financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.
		Where presentational guidance set out in the Statement of Recommended Practice ("SORP"): 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued by the Association of Investment Companies ("AIC") in January 2009, is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
		At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective:
		IFRS 9 - Financial Instruments: Classification and Measurement (effective for annual periods beginning on or after 1 January 2013).
		Amendments to IFRS 1 - Severe Hyperinflation and Removal of Fixed Dates for First Time Adopters (effective for annual periods beginning on or after 1 July 2011).
		Amendments to IFRS 7 - Financial Instruments: Transfers of Financial Assets Disclosures (effective for annual periods beginning on or after 1 July 2011).
		IFRS 10 - Consolidated Financial Statements (early adoption permitted) (effective for annual periods beginning on or after 1 January 2013).
		IFRS 11 - Joint Arrangements (early adoption permitted) (effective for annual periods beginning on or after 1 January 2013).
		IFRS 12 - Disclosure of Interests in Other Entities (early adoption permitted) (effective for annual periods beginning on or after 1 January 2013).
		IFRS 13 - Fair Value Measurement (effective for annual periods beginning on or after 1 January 2013).
		Amendments to IAS 1 - Presentation of Items of Other Comprehensive Income (effective for annual periods beginning on or after 1 July 2012)
		Amendments to IAS 12 - Income Taxes - Deferred Tax Amendment (effective for annual periods beginning on or after 1 January 2012).
		Amendments to IAS 19 - Employee Benefits (effective for annual periods on or after 1 January 2013).
		Amendments to IAS 24 - Related Party Disclosures (effective for annual periods beginning on or after 1 January 2011).
		IAS 27 - Separate Financial Statements (early adoption permitted) (effective for annual periods beginning on or after 1 January 2013).
		IAS 28 - Investments in Associates and Joint Ventures (early adoption permitted) (effective 1 January 2013).
		Amendments to IFRIC 14 - Prepayments of a Minimum Funding Requirement (effective for annual periods beginning on or after 1 January 2011).
		The Directors do not anticipate that the adoption of these Standards and Interpretations in future periods will materially impact the Group's financial results in the period of initial application although there will be revised presentations to the Primary Financial Statements and additional disclosures. The Company intends to adopt the Standards in the reporting period when they become effective.
	(b)	Group accounts
		The Group financial statements consolidate the financial statements of the Company and its subsidiary, Aberdeen Latin American Income Fund LLC.
		The Subsidiary is fully consolidated from the date of its inception on 30 June 2010, being the date on which the Group obtained control, and will continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights, currently exercisable or convertible potential voting rights, or by way of contractual agreement. The financial statements of the Subsidiary are prepared for the same reporting period as the parent company, using consistent accounting policies.
	(c)	Presentation of Consolidated Statement of Comprehensive Income
		In order to better reflect the activities of an investment company and in accordance with guidance issued by the AIC, supplementary information which analyses the Consolidated Statement of Comprehensive Income between items of a revenue and capital nature has been presented.
	(d)	Segmental reporting
		The Directors are of the opinion that the Group is engaged in a single segment of business, being investment business.
		For management purposes, the Group is organised into one main operating segment, which invests in equity securities, debt instruments and related derivatives. All of the Group's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Group as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole.
		The Group has a highly diversified portfolio of investments and no single investment accounts for more than 20% of the Group's income or assets.
	(e)	Income
		Dividends receivable on equity shares are recognised in the Consolidated Statement of Comprehensive Income on the ex-dividend date. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Group's right to receive payment is established. Where a Group company has elected to receive dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised as income in the Consolidated Statement of Comprehensive Income. Provision is made for any dividends not expected to be received.
		The fixed returns on debt securities and non-equity shares are recognised using the effective interest rate method.
		Interest receivable from cash and short-term deposits is accrued to the end of the financial period.
	(f)	Expenses and interest payable
		All expenses, with the exception of interest expenses, which would be recognised using the effective interest method, are accounted for on an accruals basis. Expenses are charged to the revenue column of the Consolidated Statement of Comprehensive Income except as follows:
		issue expenses;
		expenses which are incidental to the acquisition or disposal of an investment are charged to the capital column of the Consolidated Statement of Comprehensive Income and separately identified and disclosed in note 9 (c);
		expenses are charged to the capital column of the Consolidated Statement of Comprehensive Income where a connection with the maintenance or enhancement of the value of the investments can be demonstrated; and
		the Group charges 60% of investment management fees and finance costs to capital, in accordance with the Board's expected long-term return in the form of capital gains and income respectively from the investment portfolio of the Group.
	(g)	Taxation
		In some jurisdictions, investment income and capital gains are subject to withholding tax deducted at the source of the income. The Group presents the withholding tax separately from the gross investment income in the Consolidated Statement of Comprehensive Income. For the purpose of the Consolidated Cash Flow Statement, cash inflows from investments are presented net of withholding taxes, when applicable.
	(h)	Investments
		All investments have been designated upon initial recognition at fair value through profit or loss. This is done because all investments are considered to form part of a group of financial assets which is evaluated on a fair value basis, in accordance with the Group's documented investment strategy, and information about the grouping is provided internally on that basis. Purchases of investments are recognised on a trade date basis and designated upon initial recognition as held at fair value through profit or loss. Sales of assets are also recognised on a trade date basis. Proceeds are measured at fair value, which is regarded as the proceeds of sale less any transaction costs.
		The fair value of the financial instruments is based on their quoted bid price at the Balance Sheet date, without deduction for any estimated future selling costs. Any unquoted investments would be held at fair value, as measured by the Directors using appropriate valuation methodologies such as earnings multiples, recent transactions and net assets. In the case of the Company's investment in the Subsidiary, of which the Company is the sole member, this has been measured at fair value, which is deemed to be its net asset value.
		Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Consolidated Statement of Comprehensive Income as "Gains on investments at fair value through profit or loss". Also included within this caption are transaction costs in relation to the purchase or sale of investments, including the difference between the purchase price of an investment and its bid price at the date of purchase.
	(i)	Cash
		Cash comprises cash in hand and at banks and short-term deposits.
	(j)	Other receivables and payables
		Other receivables do not carry any interest and are short-term in nature, and are, accordingly, stated at their nominal value. Other payables are non-interest bearing and are stated at their nominal value.
	(k)	Dividends payable
		Dividends are recognised in the financial statements in the period in which they are paid.
	(l)	Nature and purpose of reserves
		Capital reserve
		This reserve reflects any gains or losses on investments realised in the period along with any increases and decreases in the fair value of investments held that have been recognised in the Consolidated Statement of Comprehensive Income.
		Also, expenses, including finance costs are charged to this reserve in accordance with (f) above.
		Revenue reserve
		This reserve reflects all income and costs which are recognised in the revenue column of the Consolidated Statement of Comprehensive Income.
	(m)	Foreign currency
		The financial statements are presented in Sterling which is the Company's functional currency. Sterling is the currency in which funds from financing activities are generated, the currency in which receipts from operating activities are usually retained and the currency in which distributions are made.
		Overseas monetary assets and liabilities are converted into Sterling at the rate of exchange ruling at the Balance Sheet date. Transactions during the period involving foreign currencies are converted at the rate of exchange ruling at the transaction date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss and recognised in the Consolidated Statement of Comprehensive Income.
	(n)	Borrowings
		Monies borrowed to finance the investment objectives of the Company are stated at the amount of the net proceeds immediately after the issue plus cumulative finance costs less cumulative payments made in respect of the debt. The finance cost of such borrowings are allocated to years over the term of the debt at a constant rate on the carrying amount and, as per the Prospectus, are charged 40% to revenue and 60% to capital reserves to reflect the Company's investment policy and prospective income and capital growth.
		Borrowings are held at amortised cost using the effective interest rate method.
	(o)	Derivative financial instruments
		The Company's activities expose it primarily to the financial risks of changes in market prices, foreign currency exchange rates and interest rates. Derivative transactions which the Company may enter into include forward foreign exchange contracts, the purpose of which is to manage the currency risk arising from the Company's investing activities.
		Derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.
		Changes in fair value of derivative financial instruments are recognised in the Consolidated Statement of Comprehensive Income as they arise. If capital in nature, the change in fair value would be treated as a capital item in the Consolidated Statement of Comprehensive Income.

		For the period
		from incorporation
		to 31 August 2011
3.	Income	£'000
	Income from investments
	Dividend income	1,158
	Fixed interest income	2,197
		_______
		3,355
		_______
	Other operating income
	Deposit interest	23
		_______
	Total income	3,378
		_______

		For the period
		from incorporation to 31 August 2011
		Revenue	Capital	Total
4.	Investment management fee	£'000	£'000	£'000
		_______	_______	_______
	Investment management fee	250	374	624
		_______	_______	_______
	The Company has an agreement with Aberdeen Private Wealth Management Limited ("APWM") for the provision of management services. This agreement has been sub-delegated to Aberdeen Asset Managers Limited.
	During the period, the management fee was payable monthly in arrears and was based on an annual amount of 1% of the net asset value of the Group, valued monthly. The agreement is terminable on one year's notice. The balance due to APWM at the year end was £98,000. Investment management fees are charged 40% to revenue and 60% to capital.

			For the period
			from incorporation
			to 31 August 2011
5.	Other administrative expenses - revenue		£'000
	Directors' fees		93
	Marketing contribution		39
	Secretarial and administration fee		104
	Auditor's remuneration
	-	fees payable to the Group auditor for the audit of the Group's annual accounts	23
	-	fees payable to the Group auditor for the review of the Group's interim accounts	5
	Legal and advisory fees		16
	Custodian and overseas agents' charges		75
	Broker's fees		30
	Stock exchange fees		16
	Other		63
			_______
			464
			_______
	The Company has an agreement with Aberdeen Asset Management PLC ("AAM PLC") for the provision of marketing services in relation to the Company's participation in the Aberdeen Investment Trust Share Plan and ISA. The total fees paid and payable under the agreement during the period were £39,000, all of which was due to AAM PLC at the period end.
	In addition, the Company has an agreement with Aberdeen Private Wealth Management Limited for the provision of company secretarial and administration services. This agreement has been sub-delegated to Aberdeen Asset Managers Limited ("AAM Limited"). AAM Limited is entitled to an annual fee of £100,000, which increases annually in line with any increase in the UK Retail Price Index. A balance of £17,000 was due to AAM Limited at the period end.
			For the period
			from incorporation
			to 31 August 2011
	Other administrative expenses - capital		£'000
	Brazilian IOF Tax - incurred relating to the purchase of investments in the Brazilian market		416
			_______

		For the period
		from incorporation to 31 August 2011
		Revenue	Capital	Total
6.	Finance costs	£'000	£'000	£'000
	Bank loans and overdrafts	75	112	187
		_______	_______	_______
	Finance costs are charged 40% to revenue and 60% to capital as disclosed in the accounting policies (note 2(f)).

		For the period
		from incorporation
		to 31 August 2011
7.	Dividends on equity shares	£'000
	Amounts recognised as distributions to equity holders in the period:
	First interim dividend for 2011 - 1.0p per Ordinary share	521
	Second interim dividend for 2011 - 1.0p per Ordinary share	521
	Third interim dividend for 2011 - 1.0p per Ordinary share	521
		_______
		1,563
		_______
	The fourth interim dividend for the period has not been included as a liability in these financial statements as it was announced and paid after 31 August 2011.

8.	Return per Ordinary share
	The basic earnings per Ordinary share is based on the net profit after taxation of £3,357,000 and on 52,106,185 Ordinary shares, being the weighted average number of Ordinary shares in issue during the period.
	The calculation of the diluted returns per Ordinary share is carried out in accordance with IAS 33, "Earnings per Share". For the purposes of calculating diluted returns per Ordinary share, the number of Ordinary shares is the weighted average used in the basic calculation plus the number of Ordinary shares deemed to be issued for on exercise of all Subscription shares by reference to the average share price of the Ordinary shares during the period. There is no dilutive impact on the returns per Ordinary share for the period as the average share price for the period was less than the 120p price at which shares may be subscribed for.
	The basic earnings per Ordinary share detailed above can be further analysed between revenue return and capital return as follows:
		Period ended
		31 August 2011
	Basic	Revenue	Capital	Total
	Net profit (£'000)	2,513	844	3,357
	Weighted average number of Ordinary shares in issue			52,106,185
	Return per Ordinary share (pence)	4.82	1.62	6.44

9.	Investments held at fair value through profit or loss		31 August 2011
	(a)	Group	£'000
		Opening valuation	-
		Purchases at cost (see section (c) below)	72,552
		Sales - proceeds	(16,619)
		Sales - realised net gains	505
		Increase in fair value of investments	1,148
			_______
		Closing valuation	57,586
			_______
			Period ended
			31 August 2011
			£'000
		Closing book cost	56,438
		Closing investment holdings fair value gains	1,148
			_______
		Closing valuation	57,586
			_______
			Period ended
			31 August 2011
		Gains on investments	£'000
		Realised gains on sales of investments	505
		Increase in fair value of investments	1,148
			_______
			1,653
			_______
	(b)	Subsidiary undertaking
		The parent company, Aberdeen Latin American Income Fund Limited is the 100% shareholder of subsidiary, Aberdeen Latin American Income Fund LLC, a limited liability company incorporated in Delaware, United States of America.
	(c)	Transaction costs
		During the period expenses incurred acquiring or disposing of Group investments were classified as fair value through profit or loss. These have been expensed through the capital column of the Consolidated Statement of Comprehensive Income, and are included within gains on investments at fair value through profit or loss in the Consolidated Statement of Comprehensive Income. The total costs were as follows:
			Period ended
			31 August 2011
			£'000
		Purchases	22
		Sales	8
			_______
			30
			_______

		2011
10.	Cash	£'000
	Cash at bank	403
		_______

		2011
11.	Other receivables	£'000
	Prepayments and accrued income	602
		_______
	None of the above amounts are past their due date or impaired.

			2011
12.	Current liabilities		£'000
	(a)	Bank loan	4,913
			_______
		The Company has a £10 million revolving multi currency facility with Scotiabank Europe plc. At the period end, US$8,000,000 has been drawn down under the facility, fixed to 17 November 2011 at an all-in rate of 1.3935%.
		The loan outstanding at 31 August 2011 is valued at the closing rate of exchange at the period end, resulting in a foreign exchange gain of £254,000 against the original book cost of the loan.
	(b)	Other payables	£'000
		Amounts due to brokers	27
		Other amounts due	234
			_______
			261
			_______

		2011
13.	Equity capital	Number	£'000
	Authorised
	Ordinary shares	Unlimited	Unlimited
	Subscription shares	Unlimited	Unlimited
	Issued and fully paid
	Ordinary shares issued in the period	52,106,185	52,106
	Subscription shares issued in the period	10,421,236	547
	Issue expenses	-	(1,138)
		__________	__________
	Balance carried forward	62,527,421	51,515
		__________	__________
	Following the issue of a Placing and Offer for Subscription document, 52,106,185 Ordinary shares were allotted and issued to investors at a price of 100p per Ordinary share. In addition 5,210,618 Subscription shares were issued on the basis of 1 Subscription share for every 10 Ordinary shares. Under the terms of the Aberdeen Subscription Share Agreement, the Manager was allotted and issued a further 5,210,618 Subscription shares, which were fully paid at a price of £0.105 per Subscription share. Expenses associated with the issue amounted to £1,138,000 and these costs have been deducted from the proceeds of the issue. Trading commenced in both lines of stock on 16 August 2010.
	The Ordinary shares give shareholders the entitlement to all of the capital growth in the Group's assets and to all the income from the Company that is resolved to be distributed.
	Each Subscription share confers the right to convert such share into one Ordinary share on 31 December in any of the years 2013 to 2015 (inclusive) at a price of 120p per share.

		2011
14.	Capital reserves	£'000
	On incorporation	-
	Currency gains	93
	Movement in investment holdings fair value gains	1,148
	Gain on sales of investments	505
	Capitalised expenses	(902)
		_______
	At  31 August 2011	844
		_______
	The capital reserve includes gains of £1,148,000 which relate to the revaluation of investments held at the reporting date.

15.	Net asset value per Ordinary share
	The basic net asset value per Ordinary share is based on a net asset value of £53,309,000 and on 52,106,185 Ordinary shares, being the number of Ordinary shares in issue at the period end.
	The diluted net asset value per Ordinary share is calculated by reference to the total number of Ordinary shares in issue at the period end and on the assumption that the Subscriptions shares which are not subscribed at the period end were subscribed on the first day of the financial period at 120p per share. There is no dilutive impact on the net asset value as the basic net asset value is less than the price at which shares may be subscribed for.

16.	Financial instruments
	The Group's financial instruments comprise securities and other investments, cash balances and receivables and payables that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement and receivables for accrued income, short-term receivables and payables.
	The Manager has a rigorous investment management process, which ensures that the investment policy explained on page 2 is followed. Stock selection procedures are in place based on the active portfolio management and identification of stocks. The portfolio is reviewed on a periodic basis by a senior investment manager and also by the Manager's Investment Committee.
	The Manager has an independent Investment Risk department for reviewing the investment risk parameters of the Group's portfolio on a regular basis. The department reports to the Manager's Performance Review Committee which is chaired by the Manager's Chief Investment Officer. The department's responsibility is to review and monitor predicted portfolio risk and style characteristics using best practice, industry standard multi-factor models.
	Additionally, the Manager's Compliance department continually monitors the Group's investment and borrowing powers and reports to the Manager's Risk Management Committee.
	The main risks arising from the Group's financial instruments are: (i) market risk; (ii) liquidity risk; and (iii) credit risk.
	The Board regularly reviews and agrees policies for managing each of these risks, and these are summarised below. These policies have remained unchanged since the inception of the Group.
	The Board considers that the carrying amount of all disclosed receivables approximates to their fair values.
	(i)	Market risk
		The fair value or future cash flows of a financial instrument held by the Group may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, foreign currency risk and other price risk.
		Interest rate risk
		Interest rate movements may affect:
		- the fair value of the investments in fixed interest rate securities;
		- the level of income receivable on cash deposits;
		- interest payable on the Group's variable rate borrowings.
		Financial assets
		Although the majority of the Group's financial assets comprise equity shares which neither pay interest nor have a stated maturity date, at the period end the Group also held a number of fixed rate Government Bonds. Bond prices are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the Government's fiscal position, short-term interest rates and international market comparisons. The Investment Manager takes all these factors into account when making any investment decisions as well as considering the financial standing of the potential investee entity.
		Returns from bonds are fixed at the time of purchase, as the fixed coupon payments are known, as are the final redemption proceeds. This means that if a bond is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a bond the market price at any given time will depend on the market environment at that time. Therefore, a bond sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred.
		Financial liabilities
		The Group primarily finances its operations through use of equity, retained profits and bank borrowings. The Group has a revolving multi currency facility, details of which are disclosed in note 12. At the period end US$8,000,000 (equivalent to £4,913,000) had been drawn down at an all-in rate of 1.3935% per annum. Interest is due at the maturity date, being 17 November 2011. The loan is included in creditors falling due within one year.
		The Board actively monitors its bank borrowings. A decision on whether to roll over its existing borrowings will be made prior to their maturity dates, taking into account the Group's policy of not having any fixed, long-term borrowings.
		The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.
		The interest rate risk profile of the Group, excluding short-term receivables and payables, as at 31 August 2011 was as follows:
				Weighted average			Weighted
				period for which			average interest		Fixed		Floating	Non- interest
				rate is fixed			rate		rate		rate	bearing
				Years			%		£'000		£'000	£'000
		Assets
		Brazilian Government Bonds		3.81			10.45		12,349		-	-
		Mexican Government Bonds		10.24			6.92		7,810		-	-
		Peruvian Government Bonds		16.04			6.86		2,022		-	-
		Uruguayan Government Bonds		7.04			3.16		1,230		-	-
		Argentinian Government Bonds		6.44			0.96		381		-	-
		Equities		-			-		-		-	33,794
		Cash at bank - Sterling		-			-		-		422	-
		Cash at bank - Argentinian Peso		-			-		-		32	-
		Cash at bank - Mexican Peso		-			-		-		56	-
		Cash at bank - Brazilian Real		-			-		-		17	-
		Cash at bank - US Dollars		-			-		-		20	-
				_______			_______		_____		_______	_______
				-			-		23,792		547	33,794
				_______			_______		_____		_______	_______
		Liabilities
		Bank overdraft - Columbian Peso		-			-		-		(144)	-
		Short-term bank loan		0.21			1.39		(4,913)		-	-
				_______			_______		_____		_______	_______
				-			-		(4,913)		(144)	-
				_______			_______		_____		_______	_______
		The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on the bank loan is based on the interest rate payable.
		The floating rate assets consist of cash deposits on call earning interest at prevailing market rates, and are classified as having maturity dates of less than one year.
		The non-interest bearing assets represent the equity element of the portfolio.
		Maturity profile
		The following table sets out the carrying amount, by maturity, of the Group's financial instruments that are exposed to the interest rate risk at the Balance Sheet date:
			Within		Within			Within			More than
			1 year		1-2 years			3-5 years			5 years	Total
			£'000		£'000			£'000			£'000	£'000
		Fixed rate
		Bonds	-		6,268			-			17,524	23,792
		Bank loan	(4,913)		-			-			-	(4,913)
			_______		_______			_______			_______	_______
			(4,913)		6,268			-			17,524	18,879
			_______		_______			_______			_______	_______
		Floating rate
		Cash	403		-			-			-	403
			_______		_______			_______			_______	_______
		Interest rate sensitivity
		The sensitivity analysis demonstrates the sensitivity of the Group's results for the period to a reasonably possible change in interest rates, with all other variables held constant.
		The sensitivity of the profit/(loss) for the period is the effect of the assumed change in interest rates on:
		- the net interest income for the period, based on the floating rate financial assets held at the Balance Sheet date; and
		- changes in fair value of investments for the period, based on revaluing fixed rate financial assets at the Balance Sheet date.
		If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Group's:
		- profit for the period ended 31 August 2011 would increase / decrease by £192,000. This is attributable to the Group's exposure to interest rates on its floating rate cash balances, fixed interest securities and bank loan.
		- the Group holds no financial instruments that will have an equity reserve impact.
		In the opinion of the Directors, the above sensitivity analyses are not representative of the period as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Group's objectives.
		Foreign currency risk
		The Group's total return and net assets can be significantly affected by currency translation movements as the majority of the Group's assets and income are denominated in currencies other than Sterling, which is the Group's functional currency. Forward foreign currency contracts are used to mitigate the foreign currency risk of the Group's investing activities.
		Foreign currency exposure by currency of denomination:
						31 August 2011
										Net		Total
										monetary		currency
						Investments				assets		exposure
						£'000				£'000		£'000
		Argentinian Peso				381				32		413
		Brazilian Real				34,604				17		34,621
		Chilean Peso				1,669				-		1,669
		Columbian Peso				245				(144)		101
		Mexican Peso				16,334				56		16,390
		Peruvian Nuevo Sol				2,022				-		2,022
		Sterling				-				422		422
		Uruguayan Peso				1,230				-		1,230
		US Dollar				1,101				(4,893)		(3,792)
						_______				_______		_______
						57,586				(4,510)		53,076
						_______				_______		_______
		Foreign currency sensitivity
		The following table details the Group's sensitivity to a 10% increase and decrease in Sterling against the foreign currencies in which the Group has exposure. The sensitivity analysis includes foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates.
												2011
												£'000
		Argentinian Peso										41
		Brazilian Real										3,462
		Chilean Peso										167
		Columbian Peso										10
		Mexican Peso										1,639
		Peruvian Nuevo Sol										202
		Uruguayan Peso										123
		US Dollar										(379)
												_______
												5,265
												_______
		Other price risk
		Other price risks (ie. changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.
		It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. Both the allocation of assets and the stock selection process, as detailed on page 2, act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Group are all listed on various stock exchanges throughout Latin America.
		Other price risk sensitivity
		If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the period ended 31 August 2011 would have increased /(decreased) by £3,379,000 and equity reserves would have increased /(decreased) by the same amount.
	(ii)	Liquidity risk
		This is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk is not considered to be significant, as the Group's assets mainly comprise readily realisable securities which can be sold to meet funding requirements, if necessary. The bank loan and all other payables had a maturity date of 3 months or less at 31 August 2011.
	(iii)	Credit risk
		This is failure of the counterparty to a transaction to discharge its obligations under that transaction, which could result in the Group suffering a loss.
		The risk is not considered to be significant, and is managed as follows:
		- investment transactions are carried out with a large number of brokers, whose credit standing is reviewed periodically by the Manager, and limits are set on the amount that may be due from any one broker;
		- the risk of counterparty exposure due to failed trades causing a loss to the Group is mitigated by the review of failed trade reports on a monthly basis. In addition, the third-party administrator carries out a stock reconciliation to the custodians' records on a monthly basis to ensure discrepancies are picked up on a timely basis. The Manager's Compliance department carries out periodic reviews of the custodian's operations and reports its findings to the Manager's Risk Management Committee. This review will also include checks on the maintenance and security of investments held; and
		- cash is held only with reputable banks whose credit ratings are monitored on a regular basis.
		Credit risk exposure
		In summary, compared to the amounts included in the Balance Sheet, the maximum exposure to credit risk at 31 August 2011 was as follows:
											2011
											Balance	Maximum
											Sheet	exposure
											£'000	£'000
		Non-current assets
		Investments at fair value through profit or loss									57,586	23,792
		Current assets
		Cash at bank									403	403
											_______	_______
											57,989	24,195
											_______	_______
		None of the Group's financial assets are secured by collateral or other credit enhancements.
	(iv)	Gearing risk
		The Group's policy is to increase its exposure to equity markets through the judicious use of borrowings. When borrowings are invested in such markets, the effect is to magnify the impact on shareholders' funds of changes, both positive and negative, in the value of the portfolio.
		During the period the Group's borrowings were short-term loans, details of which can be found in note 12.
		Fair values of financial assets and financial liabilities
		Investments held at fair value through profit or loss are valued at their quoted bid prices which equate to their fair values. The Directors are of the opinion that the other financial assets and liabilities are stated at fair value in the Consolidated Balance Sheet.

17.	Capital management policies and procedures
	The Group's capital management objectives are:
	-	to ensure that the Group will be able to continue as a going concern; and
	-	to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt. The policy is that debt should not exceed 25% of net assets.
			2011
			£'000
	Debt		4,913
			_______
	Equity
	Equity capital		51,515
	Retained earnings and other reserves		1,794
			_______
	Net assets		53,309
			_______
	Debt as a % of net assets		9.2%
			_______
	The Board, with the assistance of the Manager monitors and reviews the broad structure of the Group's capital on an ongoing basis. This review includes:
	-	the planned level of gearing, which takes account of the Manager's views on the market;
	-	the need to buy back equity shares for cancellation, which takes account of the difference between the net asset value per share and the share price (ie the level of share price discount or premium);
	-	the need for new issues of equity shares; and
	-	the extent to which revenue in excess of that which is required to be distributed should be retained.

18.	Related party transactions
	Mr M J Gilbert is a director of Aberdeen Asset Management PLC, of which Aberdeen Private Wealth Management Limited ("APWM") is a subsidiary. Management, marketing and secretarial and administration services are provided by APWM. Mr Gilbert does not draw a fee for providing his services as a Director of the Company.
	The management fee is payable monthly in arrears based on an annual amount of 1% of the net asset value of the Company valued monthly. During the period £624,000 of management fees were payable, of which £98,000 was due at the period end.
	The marketing fee is based on an annual amount of £39,000 and is reviewed annually. During the period £39,000 of fees was payable and due at the period end.
	The company secretarial and administration fee is based on an annual amount of £100,000, increased annually in line with any increases in the UK RPI, payable quarterly in arrears. During the period £104,000 of fees were payable, of which £17,000 was due at the period end.

19.	Fair value hierarchy
	IFRS 7 'Financial Instruments: Disclosures' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:
	-	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
	-	Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and
	-	Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
	The financial assets and liabilities measured at fair value in the Balance Sheet grouped into the fair value hierarchy at the Balance Sheet date are as follows:
				Level 1	Level 2	Level 3	Total
			Note	£'000	£'000	£'000	£'000
	As at 31 August 2011
	Financial assets at fair value through profit or loss
	Quoted equities		a)	33,794	-	-	33,794
	Quoted bonds		b)	23,792	-	-	23,792
				_______	_______	_______	_______
	Net fair value			57,586	-	-	57,586
				_______	_______	_______	_______
	a)	Quoted equities
		The fair value of the Group's investments in quoted equities have been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.
	b)	Quoted bonds
		The fair value of the Group's investments in government quoted bonds has been determined by reference to their quoted bid prices at the reporting date.

The Annual General Meeting will be held at 10.00 a.m. on 12 December 2011 at No.1 Seaton Place, St Helier, Jersey JE4 8YJ.

In addition, the Board has made arrangements for a London investment presentation by the Managers to be held at their offices at Bow Bells house, 1 Bread Street, London EC4M 9HH at 12 noon on 18 January 2012.

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements. Investors may not get back the amount they originally invested.

The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 August 2011 are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The annual audited accounts will be delivered to the Jersey Financial Services Commission in due course.

The audited Annual Report and Accounts will be posted to in mid November. Copies may be obtained during normal business hours from the Company's Registered Office, Aberdeen Private Wealth Management Limited, No.1 Seaton Place, St Helier, Jersey JE4 8YJ or from the Company's website, www.latamincome.co.uk*

* Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

By Order of the Board

Aberdeen Asset Management PLC

Secretary

4 November 2011

 

END

 

 

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