Half-year Report

RNS Number : 6873X

Aberdeen Latin American Inc Fd Ltd

06 May 2021

 

6 May 2021

Aberdeen Latin American Income Fund Limited

Legal Entity Identifier (LEI): 549300DN623WEGE2MY04

Half Yearly Results for the Six Months to 28 February 2021

Information disclosed in accordance with paragraph 4.2 of the Disclosure Guidance and Transparency Rules

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

	28 February 2021	31 August 2020	% change
Total assets (£'000)	39,226	37,855	+3.6
Equity shareholders' funds (£'000)	33,726	32,355	+4.2
Net asset value per Ordinary share	59.05p	56.65p	+4.2
Ordinary share price	54.20p	49.15p	+10.3
Discount to net asset value per Ordinary share{A}	8.2%	13.2%
Net gearing{A}	15.3%	16.1%
Ongoing charges ratio{A}	2.00%	2.00%
{A} Considered to be an Alternative Performance Measure.

Performance (total return){A}	Six months ended 28 February 2021	Year ended 31 August 2020
Net asset value	+7.2%	-27.5%
Ordinary share price	+13.9%	-24.4%
Composite MSCI EM Latin American 10/40 Index/JP Morgan GBI-EM Global Diversified Index (Latin America carve out)(sterling adjusted)	+5.8%	-22.9%
{A} Considered to be an Alternative Performance Measure.
Source: Aberdeen Standard Investments, Lipper and Morningstar.

INTERIM BOARD REPORT - CHAIRMAN'S STATEMENT

Overview

After performing poorly for much of 2020, Latin American assets delivered a positive return over the six months under review, despite bouts of volatility in very challenging conditions. Markets rallied in the final quarter of 2020 on hopes that the first rollouts of Covid-19 vaccines would herald the beginning of the end for the pandemic. However, sentiment turned cautious again in the New Year as the spectre of inflation re-surfaced, eroding some of the gains.

In this environment, the fortunes of the Company's two asset classes diverged. Equities chalked up healthy returns, whereas bond prices retreated. Overall, the portfolio's composite benchmark finished up by 5.8% in sterling terms. Relatively, your Company performed better, with the net asset value (NAV)  total return increasing by 7.2%. The share price rose by 13.9%, which helped to further narrow the share price discount to NAV. I was pleased to note that your Managers' choice of holdings was the chief contributor to the Company's outperformance over this period. This is a testament to the Manager's long-term approach and focus on building a high-conviction portfolio of quality stocks and bonds.

Several themes influenced the markets' direction. The ebb and flow of the battle against Covid-19 remained foremost in investors' thoughts. Worryingly, Latin America continues to struggle in bringing infections down and mitigating the mounting death toll. Both Mexico and Chile were compelled to re-impose lockdowns in December, with Mexican leader Andres Manuel Lopez Obrador himself succumbing to the virus for a while. The arrival of vaccines brought hope to the battered region, but inoculations were quickly beset by logistical challenges.  In Brazil, President Bolsonaro's attitudes to Covid-19 and vaccinations caused political turmoil as infection rates soared. That said, Chile emerged as a bright spot, with the country among the world's fastest in administering vaccinations. The trajectory of the virus and speed and efficacy of these vaccination campaigns will be crucial in buttressing the economic recovery.

Beyond Covid-19, domestic politics was another source of uncertainty. In Brazil, concerns over the country's fragile fiscal position heightened after the government unveiled a new minimum income welfare scheme. In contrast, momentum for other reforms appeared to stall, with little progress on proposed changes to the tax system. Meanwhile, investors were disenchanted by a new law that overturned previous energy market reforms in Mexico in favour of state-owned providers. Political instability gripped Argentina and Peru as well. In Argentina, uncertainty over the export cap on corn after a three-day farmers' strike exposed rifts within the government. As for Peru, a flurry of leadership changes followed the impeachment of former president Martin Vizcarra for alleged corruption. Within a week, large-scale protests forced his replacement, Manuel Merino, to resign. Only after market-friendly technocrat Francisco Sagasti took the reins on an interim basis were investors appeased.

All that said, optimism over vaccines, still loose monetary policies and President Joe Biden's election victory in the US lent support to asset prices. At the same time, we saw some rotation away from growth oriented stocks that benefited from pandemic induced disruptions. Notably, the brightening economic outlook globally buoyed prices of commodities, including crude oil, copper and iron ore, which are crucial drivers of these key regional economies. In particular, this benefited the markets in Chile, Mexico and Peru, along with the mining and energy sectors.

Starkly, a notable name that missed out on the rally, Brazil's Petrobras, was victim of an enforced change in top management. This came after Brazil's President Jair Bolsonaro moved to replace CEO Roberto Castello Branco for not aligning with the government on fuel pricing. While the Company holds an underweight position in the state-owned oil giant, when compared to the benchmark, your Manager acted swiftly to further reduce the position over fears of further political interference. Your Manager continues to monitor developments and wrote to the Petrobras board to express support for the executive team. Nonetheless, this was a clear illustration of the importance of active management when investing in Latin America, where governance still warrants much scrutiny despite tangible improvements over the years.

Environmental, Social & Governance (ESG)

The Board continues to actively engage with the Manager on the assessment and integration of ESG factors in the Manager's investment process.  At the Company's strategy meeting in early March 2021, the Board and Manager discussed at length the Manager's ESG practices for both the equity sleeve and fixed income elements of the portfolio. The Board has challenged the Manager to enhance its ESG reporting to the Board to allow the Board to provide more comprehensive ESG reporting to its shareholders and intends to provide more details to the Company's shareholders in the next Annual Report.

Dividends

The Board is pleased to declare a second interim dividend of 0.875 pence per Ordinary share (2020: 0.875p) in respect of the year ending 31 August 2021 payable on 28 May 2021 to Ordinary shareholders on the register at close of business on 14 May 2021 (ex-dividend date 13 May 2021).

The current level of dividend has been maintained, supplemented by revenue reserves, despite the weakening of Latin American currencies against sterling predominantly due to the impact of the Covid-19 pandemic and the continuing economic effects on the Company's equity investments, many of which have scaled back their distributions to conserve cash where possible through lockdowns. This has meant that the sterling income receipts of the Company have been reduced.

One of the great benefits of the investment trust structure allows the Company to use accumulated reserves to maintain distributions to shareholders where there is a shortfall in earnings and it is the Directors' current intention to utilise revenue reserves to maintain the interim dividend payments at the same level at least for the year ending 31 August 2021.

If the volatility experienced in the region continues and currencies remain weak, the Directors believe that it is likely that the payment of a sustainable and covered dividend may necessitate a lower dividend payment in future years. The Board, together with the Manager, continues to analyse the impact on revenues and places great emphasis on exercising prudence, particularly in these uncertain times, to ensure that the robustness of the Company's balance sheet is maintained and will continue to keep its distribution policy under close review.

Share Capital

There has been no change to the Company's share capital structure during the six months under review.  The Company has not bought back any shares, or issued any shares, in light of the volatile markets. However, the Company will make selective use of buybacks, subject to prevailing market conditions and having regard to the size of the Company, where it would be in the best interests of shareholders to do so. At the time of writing, the Company's share price discount to NAV is 6.9%.

Gearing

The level of drawings under the Company's one year £6 million multi-currency revolving facility agreement with Scotiabank Europe PLC remained at £5.5 million during the period. This represents net gearing of 15.3% at the period end.

The Board will continue to monitor the level of gearing under recommendation from the Manager and in the light of market conditions. The facility is due to expire in August 2021 and the Board is considering options for renewal.

Ongoing Charges

The Board's agreement with the Manager, to ensure that the Company's ongoing charges ratio ("OCR") will not exceed 2.0% when calculated annually as at 31 August, continues. To the extent that the OCR exceeds 2.0% the Manager will rebate part of its fees in order to bring that ratio down to 2.0%.

Outlook

Several risks continue to cloud the outlook for Latin America. Most notably, the region is still struggling to contain the pandemic, with national health systems under increasing strain. Much will depend on how quickly nations and governments can overcome problems and ramp up vaccinations. Meanwhile, the recent uptick in inflation could compel the authorities to ease policy support faster than expected. A busy electoral calendar poses further question marks, with upcoming elections in Mexico, Chile and Peru. As for Brazil and Argentina, investors remain watchful on those governments' ability and willingness to follow through on pending reforms.

Nonetheless, there are certainly more reasons to be optimistic at this point. The projected rebound in global growth should prove supportive for the trade and commodity-linked economies across the region. Another point worth noting is that Latin American stocks were relative laggards across the broader emerging market asset class pick-up in 2020. Therefore, equity valuations look attractive to the Manager, especially if corporate earnings recover concurrently.

Looking longer term, your Manager and I remain excited by Latin America's appeal as an investment destination, given the region's huge potential. Pandemic-induced shifts, such as increased digitalisation, are likely to endure, alongside other structural growth drivers, including rising consumption and demand for services and infrastructure. The holdings in your Company's portfolio are plugged in to many of these trends helped by the Manager's recent purchases. Furthermore, these businesses have the qualities, in terms of well-established franchises, sound financials and experienced management, that set them apart from other rivals. All these points help to ensure that the Company is both resilient amid the present challenges and also well-positioned for a post-Covid-19 world.

Richard Prosser,

Chairman

5 May 2021

INTERIM BOARD REPORT - INVESTMENT MANAGER'S REVIEW

Performance

Latin American equities rose in the six months under review. Initially, share prices fell in tandem with global markets amid concerns of a decelerating global economy. Among the litany of woes were a sell-off in tech stocks, the falling oil price, lingering US-China tensions and a surge in Covid-19 cases worldwide.

Over the period, Latin American debt markets retreated with local currency bonds posting negative returns, while Latin American currencies depreciated (in aggregate) against Sterling. Towards the calendar year end Latin American equity markets rebounded sharply as positive news about multiple successful vaccines trials and their subsequent rollout fuelled hopes that a global economic turnaround would come sooner rather than later. Better economic data lent strength to the optimism. Also bolstering market sentiment was Joe Biden's victory in the US presidential election, as well as the proposed US$1.9 trillion stimulus package announced which supported global markets. The upbeat mood buoyed sectors that had been hit the hardest by the pandemic amid a value-rotation trade. Conversely, technology and internet growth sector stocks lagged.

The rally proved short-lived, however, with stock prices falling again in the new year. A spike in infection rates worldwide triggered another round of lockdowns. Adding to the regional benchmark's slide was Brazilian President Jair Bolsonaro's move to replace the chief executive of Petrobras, Roberto Castello Branco, with a former army general, following a double-digit increase in gasoline and diesel prices.

Rising bond yields and escalating inflation also contributed to the retreat in equity markets. However, the benchmark hung onto much of its earlier gains to close the period higher, helped in part by the sustained rise in commodity prices.

Against this really volatile backdrop, the Company outperformed its benchmark over the half year, with its net asset value rising by 7.2% in sterling total return terms, whereas the share price total return registered a gain of 13.9%. In comparison, the composite benchmark rose by 5.8%.

The return of investors to emerging market local currency bond funds helped returns in November but entering 2021 we saw higher volatility in emerging market fixed income instruments amid the sell-off in US bonds, following the announcement of the US$1.9 trillion stimulus package. The 10-year US Treasury yield reached levels last seen in January 2020. Rising oil prices helped the oil-sensitive Latin American currencies, with the price of Brent crude moving up to US$66.13 per barrel by the end of the period. This was mainly due to the developing vaccine optimism as mentioned and the expectation of production cuts from the Organisation of Petroleum Exporting Countries and 10 other oil producers.

In Argentina, the government announced in November plans to seek to roll the Stand-By Arrangement (SBA) programme with the International Monetary Fund (IMF) into an Extended Fund Facility. This would allow the country to repay its debt to the IMF over 4.5-10 years (rather than 3.25-5 years under an SBA). State-owned energy company YPF also announced an exchange offer and consent solicitation in January. The company made an offer to the bondholders of its seven outstanding US dollar bonds to exchange their notes for a combination of cash and new bonds. Foreign exchange restrictions limiting the company's ability to repay its bonds maturing in March 2021 drove the announcement.

Brazil's economy benefited from the increased global stimulus in the wake of the US elections, with the central bank choosing to keep rates on hold in December, at 2%. The monetary policy meeting minutes highlighted that the central bank's inflation forecasts and market expectations are sufficiently close to the target, which led to the central bank's removal of forward guidance.

Early in the period, Banco de Mexico reduced its policy rate by 25 basis points (bps) to 4.25%. Despite subsequent market expectations of further cuts, the central bank maintained this rate until February when it was cut again by 25bps to 4.0%. The move heralded a resumption of its easing cycle, which was paused in the fourth quarter of 2020, to support weaker economic activity. Like most Latin American countries, activity generally improved in the fourth quarter, with Mexico's monthly GDP proxy falling by 2.7% year on year in December, from -4.1% in November. This brought the annual economic contraction to -4.3% in the fourth quarter of 2020, from -8.6% in the third quarter. The industrial sector led the recovery, supported by manufacturing and construction.

Over the period, the Company's bond portfolio returned 0.2% in Sterling terms, compared to the benchmark JPM GBI-EM Global Diversified Latin America Index's return of -2.0%. The yield on the index rose by 60bps to end the period at 5.55%. In particular, the Company's overweight exposure to Uruguayan bonds helped returns. Not holding Chilean bonds also helped us, as did security selection in Mexico, Colombia and Peru. Currency effects in Brazil and Colombia helped performance.

Conversely, currency effects in Mexico, Peru and Uruguay detracted from returns and the lack of exposure to the Chilean Peso proved detrimental, as it rose over the period. Security selection in Brazil, underweight positioning in Mexico, overweight exposure to Peru and a lack of holdings in the Dominican Republic also weighed on performance.

The Company's equity portfolio returned 12.2% in sterling terms over the period, compared to the benchmark MSCI EM Latin American 10/40 Index return of 10.9%.  Key contributors to the Company's equity performance  included Bradespar, Grupo Financiero Banorte, Geopark, Mercado Libre and Banco Santander Chile.

Notably, the improving commodity prices benefited Bradespar and Santander Chile. In particular, Bradespar, Vale's holding company, saw its shares boosted by better iron ore prices amid steady demand from China. Miner Vale's decision to resume dividend payments earlier than expected provided an extra fillip as well. We think the restart of these payments reflects the company's confidence in its production outlook. Meanwhile, Santander Chile was lifted by positive market sentiment arising from the country's faster vaccine rollout and robust copper prices. Similarly, Geopark's shares climbed in tandem with a recovery in the oil price, as well as on an improving outlook. Also aiding the portfolio's performance was lender Banorte, given the brightening outlook and after it had posted better quarterly profits. Meanwhile, Mercado Libre, the region's largest e-commerce retailer, not only gained from the earlier lockdowns that had forced consumers online, but also from its upgraded investment plan to ramp up its logistics capability allowing it to cater for the greater online shopping demand.

Conversely, impacting returns adversely were Grupo Mexico, Rumo, Cemex and Lojas Renner. The Company's small exposure to Grupo Mexico proved costly as the same forces lifting Bradespar and Vale also boosted its shares. Railway logistics company Rumo's shares pulled back on poor volumes. However, we believe its long-term growth prospects remain supported by its competitive advantages and the sector's high barriers to entry, coupled with vast organic growth opportunities. Not having any exposure to Cemex detracted from performance as the Mexican cement maker did well, helped by the ongoing fiscal spending on infrastructure and positive momentum in the construction segment. However, the Company does not hold Cemex because of long-held concerns over its balance sheet management, as well as the strategic direction of its business. Lastly, Lojas Renner's shares suffered given the continued challenging prospects facing the Brazilian retailer amid the pandemic.

Portfolio Activity

During the six month period under review, we initiated several Brazilian equity positions including leading learning-system provider Arco Platform, which has a large addressable market, and Omega Geracao, a leading wind farm operator with an established track record of profitable growth with room for new project expansion. Both were trading at valuations we considered to be attractive. We also subscribed in the initial public offering of Brazilian online homewares retailer Mobly, which is poised to gain market share from offline retail driven by a large number of products, lower prices and favourable demographics with young generations increasingly opting to shop online.  In Mexico, we established a position in Grupo Mexico, which we view as a cheaper proxy for exposure to its subsidiary, Southern Copper, a leading global copper producer with a low-cost asset base.  It benefits from a supportive outlook with limited supply and rising copper demand amid long-term electrification and green energy trends.

During the period, we sold out of several positions, including Ambev, Kimberly Clark Mexico, Odontoprev, as well as Embotelladora Andina, in part to reduce our exposure to consumer staples. In addition, we exited Linx following StoneCo's increased bid and after the acquisition received the necessary approvals.

In the fixed income portfolio, we shortened duration in Mexico, increased exposure to Colombia and reduced our holdings in Peru. Meanwhile, in emerging-market currencies, we increased our Brazilian Real exposure and reduced exposure to the Colombian Peso.

Outlook

Looking ahead, we are cautiously optimistic about the outlook for Latin America. The conditions for an equity market rebound look good as valuations remain supportive, in both historic and relative terms. The continent is likely to be buoyed by a broad-based economic recovery globally, as it is well positioned to latch on to any improving external backdrop. That said, investors' rising risk appetites have engendered a rotation from growth stocks into more cyclical ones. Whether this can be sustained is of course partly contingent on how well the region is able to keep a lid on the pandemic and how well inoculation programmes are implemented. These factors will determine not only the pace of any recovery, but also whether more fiscal and monetary support will be required. 

Growth momentum may accelerate into the second half of the year once significant progress has been made in rolling out the Covid-19 vaccines and governments start to lift mobility restrictions. The IMF forecast emerging-market growth at 6% this year, from an estimated contraction of 3.3% in 2020. We expect fiscal and monetary policies to remain supportive, while a more predictable US presidency should also be favourable for the Company.

There are, as ever, several key risks to consider, such as possible policy missteps, political upheaval, and idiosyncratic issues facing each Latin American nation. Key among these are worries over Brazil's high government debt and its ability to balance its fiscal discipline with the need to support an economy that is still suffering the impact of the pandemic. In Chile, much progress has been made on the inoculation front, but there are uncertainties over Constitutional reform that need to be monitored.

More broadly though, as the global economy recovers, investors will start to worry about inflation and the likelihood that it could trigger a tapering of governments' policy support. Already, Brazil's central bank has raised interest rates, while Mexico approaches the end of the road to further rate cuts. Meanwhile, although the Biden administration has brought with it a greater degree of predictability, the friction in US-China relations is likely to persist.

From a portfolio perspective, investment in Latin America remains attractive due to its diverse range of high-quality companies and bonds, and structural growth drivers, including youthful demographics. We will continue to leverage on our bottom-up expertise to identify quality investments, with good fundamentals, and at reasonable valuations, to enhance the portfolio. By sticking to our disciplined approach, we expect the Company's investments to deliver sustainable returns to shareholders over the longer term. 

Aberdeen Asset Managers Limited

5 May 2021

INTERIM BOARD REPORT

Directors' Responsibility Statement

The Directors are responsible for preparing the Half Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

· The condensed set of financial statements has been prepared in accordance with International Accounting Standards (IAS) 34 "Interim Financial Reporting" and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

· The Interim Board Report (constituting the interim management report) includes a fair review of the information required by DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

· The financial statements include a fair review of the information required by DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.

Principal Risks and Uncertainties

The Board regularly reviews the principal risks and uncertainties faced by the Company together with the mitigating actions it has established to manage the risks.  These are set out within the Strategic Report contained within the Annual Report for the year ended 31 August 2020 and comprise the following risk categories:

· Investment strategy and objectives;

· Investment portfolio, investment management;

· Financial obligations;

· Financial and regulatory;

· Operational; and

· Income and dividend risk.

The Board notes that there are a number of contingent risks which continue to stem from the Covid-19 pandemic that may impact the operation of the Company. These include investment risks surrounding the companies in the portfolio such as employee absence, reduced demand, reduced turnover and supply chain breakdowns.  Although the development of Covid-19 vaccines has mitigated the risks to the Company, the economic impact of Covid-19 and the various emerging strains continue to be monitored closely.  The Manager will continue to review carefully the composition of the Company's portfolio and to be pro-active in taking investment decisions where necessary. Operationally, Covid-19 has the potential to affect the suppliers of services to the Company including the Manager and other key third parties. Throughout the Covid-19 pandemic, these services have continued to be supplied seamlessly and the Board will continue to monitor arrangements in the form of regular updates from the Manager.

In all other respects, the Company's principal risks and uncertainties have not changed materially since the date of the 2020 Annual Report.

Going Concern

In accordance with the FRC guidance, the Directors have undertaken a rigorous review of the Company's ability to continue as a going concern.

The Company's assets, including those of its  wholly owned subsidiary, Aberdeen Latin American Income Fund LLC, consist of a diverse portfolio of listed equities, equity-related investments and fixed income investments exposed to the Latin American market which, in most circumstances, are realisable within a very short timescale.

Based on the Company's current levels of financial resources, the Directors believe that the Company is well placed to manage its business risks successfully despite uncertainties in the economic outlook.

The Directors are mindful of the principal risks and uncertainties facing the Company and review on a regular basis forecasts detailing revenue and liabilities and the Company's operational expenses. Consequently the Directors believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future and at least 12 months from the date of this Half Yearly Report. Accordingly, they continue to adopt the going concern basis in preparing the Half Yearly Report.

For and on behalf of the Board

Richard Prosser,

Chairman

5 May 2021

Top 10 Investments

As at 28 February 2021

Vale ADR		Banco Bradesco ADR{A}
Vale is a leading producer of iron ore and pellets. Vale also produces nickel, copper and coal. It operates large logistics systems, including railroads and maritime terminals which are integrated with its' mining operations.		A leading privately-owned Brazilian bank with a well recognised brand, robust loan portfolio and experienced management team.
Wal-Mart de Mexico		Grupo Financiero Banorte
The largest food and general retailer in Mexico with an established presence across a number of smaller Central American markets.		Mexico's leading privately-owned bank with a well recognised nationwide brand, sizeable pension business and proven track record in conservative lending.
B3 Brasil Bolsa Balco{B}		Fomento Economico Mexicano ADR
B3 is a vertically integrated stock exchange provider of securities, commodities and futures trading services along with depository and registration for fixed income securities and clearinghouse for private assets in Brazil.		FEMSA is the controlling shareholder of leading Latam Coca-Cola bottler Coca-Cola FEMSA. Through FEMSA Comercio, it owns the leading convenience store business in Mexico and Latam - i.e. OXXO, as well as leading Pharmacies, and a gas station business in Mexico. FEMSA is one of the largest shareholders of Heineken and has been diversifying into new growth avenues in the US.
Banco Santander-Chile ADR		Bradespar{B}
Leading privately-owned bank in Chile, with a well regarded controlling shareholder, and solid operating track record.		A holding company where the single underlying asset is Brazil's iron ore producer Vale.  Bradespar shares trade at a discount to Vale shares.
Rumo{B}		Mercadolibre
A Brazilian logistics company mainly focused on railway line logistics in Brazil. It is the largest company in Latin America in this segment, and the company also provides transportation services.		Leading e-commerce player in Latam with high market share across the region's key markets. It also has a strong FinTech business part of its digital ecosystem.

Investment Portfolio - Equities

As at 28 February 2021

						Total
				Valuation		portfolio
Company	Country			£'000		%
Vale ADR	Brazil			2,085		5.4
Banco Bradesco ADR{A}	Brazil			1,656		4.3
Wal-Mart de Mexico	Mexico			1,247		3.2
Grupo Financiero Banorte	Mexico			1,181		3.0
B3 Brasil Bolsa Balco{B}	Brazil			1,132		2.9
Fomento Economico Mexicano ADR	Mexico			1,039		2.7
Banco Santander-Chile ADR	Chile			960		2.5
Bradespar{B}	Brazil			927		2.4
Rumo{B}	Brazil			832		2.1
Mercadolibre	Argentina			785		2.0
Top ten equity investments				11,844		30.5
Globant	Argentina			724		1.9
Arca Continental	Mexico			715		1.8
Raia Drogasil{B}	Brazil			707		1.8
Petrobras{B}	Brazil			684		1.8
Parque Arauco{B}	Chile			649		1.7
Grupo Aeroportuario Centro Norte	Mexico			609		1.6
Notredame Intermedica{B}	Brazil			606		1.5
Lojas Renner{B}	Brazil			585		1.5
Geopark	Chile			548		1.4
Itau Unibanco Holdings ADR{A}	Brazil			539		1.4
Top twenty equity investments				18,210		46.9
Localiza Rent A Car{B}	Brazil			534		1.4
Grupo Mexico SAB de CV	Mexico			527		1.4
Falabella{B}	Chile			475		1.2
TOTVS{B}	Brazil			407		1.0
Omega Geracao{B}	Brazil			395		1.0
WEG{B}	Brazil			376		1.0
Grupo Aeroportuario Sureste ADR	Mexico			370		1.0
Multiplan Empreendimentos NPB{B}	Brazil			353		0.9
Arezzo Industria e Comercio{B}	Brazil			348		0.9
Cementos Pacasmayo	Peru			327		0.8
Top thirty equity investments				22,322		57.5
Mobly{B}	Brazil			325		0.8
Arco Platform	Brazil			301		0.8
Itausa Investimentos Itau{B}	Brazil			296		0.8
XP	Brazil			294		0.8
Infraestructura Energetica	Mexico			266		0.7
Wilson, Sons{B}	Brazil			232		0.6
BK Brasil{B}	Brazil			213		0.5
Aenza ADR	Peru			91		0.2
Hoteles City Express	Mexico			66		0.2
Fossal	Peru			1		0.0
Total equity investments				24,407		62.9
{A} Holding includes investment in ADR(held by the Company) and equity (held by the Subsidiary).
{B} Held in Subsidiary.

Investment Portfolio - Bonds

As at 28 February 2021

		Total
	Valuation	portfolio
Bonds	£'000	%
Colombia (Rep of) 9.85% 28/06/27	2,432	6.3
Brazil (Fed Rep of) 10% 01/01/25{A}	2,168	5.6
Uruguay (Rep of) 4.375% 15/12/28	1,506	3.9
Mex Bonos Desarr Fix Rt 10% 20/11/36	1,346	3.5
Mex Bonos Desarr Fix Rt 8.5% 18/11/38	1,127	2.9
Petroleos Mexicanos 7.47% 12/11/26	814	2.1
Peru (Rep of) 6.95% 12/08/31	784	2.0
Uruguay (Rep of) 4.25% 05/04/27	702	1.8
Brazil (Fed Rep of) 10% 01/01/27{A}	686	1.8
Colombia (Rep of) 7% 30/06/32	565	1.4
Top ten bond investments	12,130	31.3
Brazil (Fed Rep of) 10% 01/01/23{A}	483	1.2
Brazil (Fed Rep of) 10% 01/01/29{A}	408	1.1
Peru (Rep of) 6.85% 12/02/42	393	1.0
Peru (Rep of) 6.95% 12/08/31	389	1.0
Mex Bonos Desarr Fix Rt 10% 05/12/24	201	0.5
Secretaria Tesouro 10% 01/01/31{A}	175	0.5
Petroleos Mexicanos 7.19% 12/09/24	112	0.3
Uruguay (Rep of) 9.875% 20/06/22	98	0.2
Total bond investments	14,389	37.1
Total investments	38,796	100.0
{A} Held in Subsidiary.

Distribution of Investments

As at 28 February 2021

	Equities	Bonds	Total
Country	%	%	%
Argentina	3.9	-	3.9
Brazil	35.6	10.2	45.8
Chile	6.8	-	6.8
Colombia	-	7.7	7.7
Mexico	15.5	9.3	24.8
Peru	1.1	4.0	5.1
Uruguay	-	5.9	5.9
	62.9	37.1	100.0

Condensed Statement of Comprehensive Income  

		Six months ended
		28 February 2021
		(unaudited)
		Revenue	Capital	Total
	Notes	'000	'000	'000
Income
Income from investments	3	881	-	881
Realised losses on financial assets held at fair value through profit or loss		-	(116)	(116)
Unrealised gains/(losses) on financial assets held at fair value through profit or loss		-	1,810	1,810
Realised currency (losses)/gains		-	(25)	(25)
Unrealised currency (losses)/gains		-	(28)	(28)
Realised gains/(losses) on forward exchange currency contracts		-	366	366
Unrealised (losses)/gains on forward currency contracts		-	(78)	(78)
		881	1,929	2,810
Expenses
Investment management fee		(80)	(121)	(201)
Other operating expenses	4	(168)	-	(168)
Profit/(loss) before finance costs and taxation		633	1,808	2,441
Finance costs		(17)	(34)	(51)
Profit/(loss) before taxation		616	1,774	2,390
Taxation		(19)	-	(19)
Profit/(loss) for the period		597	1,774	2,371
Earnings per Ordinary share (pence)	5	1.04	3.11	4.15

Condensed Statement of Comprehensive Income (Cont'd)

		Six months ended
		29 February 2020
		(unaudited)
		Revenue	Capital	Total
	Notes	'000	'000	'000
Income
Income from investments	3	1,215	-	1,215
Realised losses on financial assets held at fair value through profit or loss		-	(542)	(542)
Unrealised gains/(losses) on financial assets held at fair value through profit or loss		-	(3,904)	(3,904)
Realised currency (losses)/gains		-	66	66
Unrealised currency (losses)/gains		-	6	6
Realised gains/(losses) on forward exchange currency contracts		-	(51)	(51)
Unrealised (losses)/gains on forward currency contracts		-	(13)	(13)
		1,215	(4,438)	(3,223)
Expenses
Investment management fee		(104)	(155)	(259)
Other operating expenses	4	(204)	-	(204)
Profit/(loss) before finance costs and taxation		907	(4,593)	(3,686)
Finance costs		(22)	(34)	(56)
Profit/(loss) before taxation		885	(4,627)	(3,742)
Taxation		(25)	-	(25)
Profit/(loss) for the period		860	(4,627)	(3,767)
Earnings per Ordinary share (pence)	5	1.49	(8.03)	(6.54)

Condensed Statement of Comprehensive Income (Cont'd)

		Year ended
		31 August 2020
		(audited)
		Revenue	Capital	Total
	Notes	'000	'000	'000
Income
Income from investments	3	1,896	-	1,896
Realised losses on financial assets held at fair value through profit or loss		-	(1,393)	(1,393)
Unrealised gains/(losses) on financial assets held at fair value through profit or loss		-	(12,579)	(12,579)
Realised currency (losses)/gains		-	85	85
Unrealised currency (losses)/gains		-	(60)	(60)
Realised gains/(losses) on forward exchange currency contracts		-	20	20
Unrealised (losses)/gains on forward currency contracts		-	84	84
		1,896	(13,843)	(11,947)
Expenses
Investment management fee		(180)	(269)	(449)
Other operating expenses	4	(386)	-	(386)
Profit/(loss) before finance costs and taxation		1,330	(14,112)	(12,782)
Finance costs		(39)	(58)	(97)
Profit/(loss) before taxation		1,291	(14,170)	(12,879)
Taxation		(24)	136	112
Profit/(loss) for the period		1,267	(14,034)	(12,767)
Earnings per Ordinary share (pence)	5	2.21	(24.47)	(22.26)

The profit/(loss) for the period is also the comprehensive income for the period.

The total columns of this statement represent the Statement of Comprehensive Income, 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 the financial statements.

Condensed Balance Sheet

		As at	As at	As at
		28 February 2021	29 February 2020	31 August 2020
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Non-current assets
Investments held at fair value through profit or loss		38,796	47,761	37,504
Current assets
Cash		405	281	306
Forward foreign currency contracts		41	47	162
Other receivables		790	740	160
		1,236	1,068	628
Current liabilities
Bank loan	8	(5,500)	(6,000)	(5,500)
Forward foreign currency contracts		(119)	(60)	(78)
Other payables		(687)	(395)	(199)
		(6,306)	(6,455)	(5,777)
Net current liabilities		(5,070)	(5,387)	(5,149)
Net assets		33,726	42,374	32,355
Equity capital and reserves
Equity capital	9	65,936	65,936	65,936
Capital reserve		(33,769)	(26,117)	(35,543)
Revenue reserve		1,559	2,555	1,962
Equity shareholders' funds		33,726	42,374	32,355
Net asset value per Ordinary share (pence)	10	59.05	74.15	56.65
The accompanying notes are an integral part of the financial statements.

Condensed Statement of Changes in Equity

Six months ended 28 February 2021 (unaudited)
		Stated	Capital	Revenue
		capital	reserve	reserve	Total
	Notes	'000	'000	'000	'000
Balance at 31 August 2020		65,936	(35,543)	1,962	32,355
Profit for the period		-	1,774	597	2,371
Dividends paid	6	-	-	(1,000)	(1,000)
Balance at 28 February 2021		65,936	(33,769)	1,559	33,726
Six months ended 29 February 2020 (unaudited)
		Stated	Capital	Revenue
		capital	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000
Balance at 31 August 2019		65,936	(20,885)	2,704	47,755
(Loss)/profit for the period		-	(4,627)	860	(3,767)
Dividends paid	6	-	-	(1,009)	(1,009)
Purchase of own shares for cancellation		-	(605)	-	(605)
Balance at 29 February 2020		65,936	(26,117)	2,555	42,374
Year ended 31 August 2020 (audited)
		Stated	Capital	Revenue
		capital	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000
Balance at 31 August 2019		65,936	(20,885)	2,704	47,755
(Loss)/profit for the period		-	(14,034)	1,267	(12,767)
Dividends paid	6	-	-	(2,009)	(2,009)
Purchase of own shares for cancellation		-	(624)	-	(624)
Balance at 31 August 2020		65,936	(35,543)	1,962	32,355
The accompanying notes are an integral part of the financial statements.

Condensed Statement of Cash Flows

	Six months ended	Six months ended	Year ended
	28 February 2021	29 February 2020	31 August 2020
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Operating activities
Dividend income	134	241	367
Fixed interest income	293	340	849
Income from Subsidiary	308	514	824
Interest income	-	1	2
Investment management fee paid	(65)	(268)	(477)
Other paid expenses	(82)	(382)	(490)
Cash generated from operating activities before finance costs and taxation	588	446	1,075
Interest paid	(43)	(57)	(98)
Withholding taxes paid	(19)	(11)	(24)
Net cash inflow from operating activities	526	378	953
Cash flows from investing activities
Purchases of investments	(2,433)	(1,714)	(5,351)
Proceeds from sales of investments	2,061	2,288	6,346
Receipts from Subsidiary	717	463	923
Net cash inflow from investing activities	345	1,037	1,918
Cash flows from financing activities
Equity dividends paid	(1,000)	(1,009)	(2,009)
Repurchase of own shares	-	(605)	(624)
Loan repaid	-	-	(500)
Net cash outflow from financing activities	(1,000)	(1,614)	(3,133)
Net decrease in cash	(129)	(199)	(262)
Foreign exchange	228	21	109
Cash at start of period	306	459	459
Cash and cash equivalents at end of period	405	281	306
The accompanying notes are an integral part of the financial statements.

Notes to the Financial Statements

For the six month period ended 29 February 2020

1.	Principal activity. The Company is a closed-end investment company incorporated in Jersey. Its Ordinary shares are traded on the London Stock Exchange and are listed in the premium segment of the Financial Conduct Authority's Official List. The Company's principal activity is investing in Latin American securities.
	The principal activity of its Delaware incorporated wholly owned subsidiary, Aberdeen Latin American Income Fund LLC, is similar in all relevant respects to that of its parent.

2.

Accounting policies - basis of preparation. The Half-Yearly Report has been prepared in accordance with International Accounting Standards (IAS) 34 - 'Interim Financial Reporting'. It has also been prepared using the same accounting policies applied for the year ended 31 August 2020 financial statements (which received an unqualified audit report), and which were prepared in accordance with International Financial Reporting Standards.

The financial statements have been prepared on a going concern basis. In accordance with the Financial Reporting Council's guidance on 'Going Concern and Liquidity Risk' the Directors have undertaken a review of the Company's assets which primarily consist of a diverse portfolio of listed equity shares, equity-related investments and fixed income investments which, in most circumstances, are realisable within a very short timescale, despite the principal risks and uncertainties facing the Company.

3.	Income from investments
		Six months ended	Six months ended	Year ended
		28 February 2021	29 February 2020	31 August 2020
		£'000	£'000	£'000
	Dividend income	184	269	317
	Fixed interest income	373	451	835
	Income from Subsidiary	324	494	742
		881	1,214	1,894
	Other Income
	Deposit interest	-	1	2
		881	1,215	1,896

4.	Other operating expenses - revenue
		Six months ended	Six months ended	Year ended
		28 February 2021	29 February 2020	31 August 2020
		£'000	£'000	£'000
	Directors' fees	50	47	87
	Promotional activities	12	12	24
	Secretarial and administration fees	-	17	42
	Auditor's remuneration:
	- fees payable for the audit of the annual accounts	18	16	35
	Legal and advisory fees	7	7	33
	Custodian and overseas agents' charges	24	37	57
	Broker fees	15	15	22
	Stock Exchange fees	11	10	20
	Registrar's fees	7	13	27
	Printing	13	12	19
	Other	11	18	20
		168	204	386

5.	Earnings per share
		Six months ended	Six months ended	Year ended
		28 February 2021	29 February 2020	31 August 2020
		pence	pence	pence
	Ordinary share - basic
	Revenue return	1.04	1.49	2.21
	Capital return	3.11	(8.03)	(24.47)
	Total return	4.15	(6.54)	(22.26)
	The figures above are based on the following:
		£'000	£'000	£'000
	Revenue return	597	860	1,267
	Capital return	1,774	(4,627)	(14,034)
	Total return	2,371	(3,767)	(12,767)
	Weighted average number of Ordinary shares in issue	57,113,324	57,586,978	57,349,075

6.	Dividends on Ordinary shares
		Six months ended	Six months ended	Year ended
		28 February 2021	29 February 2020	31 August 2020
		£'000	£'000	£'000
	Distributions to equity holders in the period:
	Second interim dividend for 2020 - 0.875p	-	-	500
	Third interim dividend for 2020 - 0.875p	-	-	500
	Fourth interim dividend for 2020 - 0.875p (2019 - 0.875p)	500	506	506
	First interim dividend for 2021 - 0.875p (2020 - 0.875p)	500	503	503
		1,000	1,009	2,009

7.	Transaction costs. During the period expenses incurred in acquiring or disposing of investments held at fair value though profit or loss have been expensed through the capital column of the Condensed Statement of Comprehensive Income, included within gains/(losses) on financial assets held at fair value through profit or loss. The total costs were as follows:
		Six months ended	Six months ended	Year ended
		28 February 2021	29 February 2020	31 August 2020
		£'000	£'000	£'000
	Purchases	3	4	7
	Sales	5	3	5
		8	7	12
	The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company's Key Information Document are calculated on a different basis and in line with the PRIIPs regulations.

8.	Bank loan. The Company has a £6 million one year revolving multi-currency facility with Scotiabank Europe PLC. At the period end, £5,500,000 (29 February 2020 - £6,000,000; 31 August 2020 - £5,500,000) had been drawn down in Sterling under the facility, fixed to 15 March 2021 at an all-in rate of 1.48325% (29 February 2020 - 1.78413%; 31 August 2020 - 1.50713%).
	At the date of this Report, £5,500,000 remains drawn down, fixed to 18 May 2021 at an all-in rate of 1.3285%.

9.	Stated capital
		28 February 2021		29 February 2020		31 August 2020
		Number	£'000	Number	£'000	Number	£'000
	Issued and fully paid
	Ordinary shares in issue	57,113,324	65,936	57,143,324	65,936	57,113,324	65,936
	Ordinary shares held in Treasury	6,107,500	-	6,107,500	-	6,107,500	-
			65,936		65,936		65,936
	The Company's Ordinary shares have no par value.
	During the period ended 28 February 2021, no Ordinary shares (29 February 2020 - 857,000; 31 August 2020 - 887,000) were bought back for cancellation at a total cost of £nil (29 February 2020 - £605,000; 31 August 2020 - £624,000) including expenses. No Ordinary shares (29 February 2020 - nil; 31 August 2020 - nil) were bought back to be held in treasury. At 28 February 2021 there were 6,107,500 (29 February 2020 - 6,107,500 ; 31 August 2020 - 6,107,500) Ordinary shares held in treasury, which represented 9.66% (29 February 2020 - 9.66%; 31 August 2020 - 9.66%) of the Company's total issued share capital on those dates.
	There have been no further Ordinary shares bought back for either cancellation or to be held in treasury since the period end to the date of this Report.

10.	Net asset value per share. The net asset value per Ordinary share and the net asset values attributable to Ordinary shareholders at the period end calculated in accordance with the Articles of Association were as follows:
		As at	As at	As at
	Basic	28 February 2021	29 February 2020	31 August 2020
	Net assets attributable to Ordinary shareholders (£'000)	33,726	42,374	32,355
	Number of Ordinary shares in issue	57,113,324	57,143,324	57,113,324
	Net asset value per Ordinary share (p)	59.05	74.15	56.65

11.	Related party transactions and transactions with the Manager. 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 £201,000 (29 February 2020 - £259,000; 31 August 2020 - £449,000) of management fees were payable, of which £201,000 (29 February 2020 - £83,000; 31 August 2020 - £65,000) was outstanding at the period end.
	During the period fees in respect of promotional activities of £12,000 (29 February 2020 - £12,000; 31 August 2020 - £24,000) were payable with £16,000 (29 February 2020 - £4,000; 31 August 2020 - £4,000) outstanding at the period end.
	The company secretarial and administration fee is based on an annual amount of £127,000 (29 February 2020 - £125,000; 31 August 2020 - £125,000), increasing annually in line with any increases in the UK Retail Price Index, payable quarterly in arrears. During the period £nil (29 February 2020 - £17,000; 31 August 2020 - £42,000) was payable after deduction of a rebate of £64,000 (29 February 2020 - £45,000; 31 August 2020 - £83,000) to bring the OCR down to 2.0%, with £42,000 (29 February 2020 - £17,000; 31 August 2020 - £42,000) outstanding at the period end.
	The Manager has agreed to ensure that the Company's ongoing charges ratio ("OCR") will not exceed 2.0% when calculated annually as at 31 August. Until further notice, to the extent that the OCR ever exceeds 2.0% the Manager will rebate part of its fees in order to bring that ratio down to 2.0%.
	The Company owns 100% of the share capital of the Subsidiary. The Company receives income from the Subsidiary and there are no significant restrictions on the transfer of funds to or from the Subsidiary. During the period the Subsidiary transferred £1,025,000 (29 February 2020 - £616,000; 31 August 2020 - £923,000) to the Company by way of income and capital returns and at 28 February 2021 the amount due to the Company by its Subsidiary was £12,201,000 (29 February 2020 - £14,356,000; 31 August 2020 - £13,256,000), which is a loan to the Subsidiary and incorporated in the fair value of the investment in the Subsidiary as at the period end.

12.	Half Yearly Financial Report. The financial information for the six months ended 28 February 2021 and for the six months ended 29 February 2020 has not been audited.
	This Half-Yearly Financial Report was approved by the Board on 5 May 2021.

ALTERNATIVE PERFORMANCE MEASURES
Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes IFRS and the AIC SORP. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies.
Total return. NAV and share price total returns show how the NAV and share price have performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. NAV total return involves investing the net dividend in the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend. Share price total return involves reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend.
The tables below provide information relating to the NAVs and share prices of the Company on the dividend reinvestment dates during the six months ended 28 February 2021 and 29 February 2020 and the total return for the period.
	Dividend		Share
2021	rate	NAV	price
31 August 2020	N/A	56.65p	49.15p
8 October 2020	0.875p	57.56p	48.60p
7 January 2021	0.875p	67.49p	60.60p
28 February 2021	N/A	59.05p	54.20p
Total return		+7.2%	+13.9%
	Dividend		Share
2020	rate	NAV	price
31 August 2019	N/A	82.34p	69.20p
26 September 2019	0.875p	82.60p	71.50p
19 December 2019	0.875p	82.61p	71.60p
29 February 2020	N/A	74.15p	62.00p
Total return		-8.0%	-8.2%
Discount to net asset value per Ordinary share. The discount is the amount by which the share price of 54.20p (31 August 2020 - 49.15p) is lower than the net asset value per Ordinary share of 59.05p (31 August 2020 - 56.65p), expressed as a percentage of the net asset value per Ordinary share.
Net gearing. Net gearing measures the total borrowings of £5,500,000 (31 August 2020 - £5,500,000) less cash and cash equivalents of £405,000 (31 August 2020 - £306,000) divided by shareholders' funds of £33,726,000 (31 August 2020 - £32,355,000), expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes net amounts due to brokers of £54,000 (31 August 2020 - £nil) at the period end as well as cash at bank and in hand of £405,000 (31 August 2020 - £306,000).
Ongoing charges. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses and expressed as a percentage of the average net asset values with debt at fair value throughout the year. The ratio for 28 February 2021 is based on forecast ongoing charges for the year ending 31 August 2021.
		28 February 2021		31 August 2020
Investment management fees (£'000)		360		449
Administrative expenses (£'000)		342		386
Less: non-recurring charges (£'000)		(6)		(33)
Ongoing charges (£'000)		696		802
Average net assets (£'000)		34,812		40,107
Ongoing charges ratio		2.0%		2.0%
The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations which amongst other things, includes the cost of borrowings and transaction costs.

The Half-Yearly Financial Report will be available on the Company's website, www.latamincome.co.uk, and the Half-Yearly Report will be posted to shareholders in May 2021 and copies will be available from the Investment Manager.

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.  Investors may not get back the amount they originally invested.

 

END

 

 

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