ALAI.L Regulatory News (ALAI)

ABERDEEN LATIN AMERICAN INCOME FUND LIMITED

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 AUGUST 2020

Legal Entity Identifier (LEI): 549300DN623WEGE2MY04

STRATEGIC REPORT - COMPANY SUMMARY AND FINANCIAL HIGHLIGHTS

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 American securities.

Gearing

The Board considers that returns to Ordinary Shareholders can be enhanced by the judicious use of borrowing. The Board is responsible for the level of gearing in the Company and reviews the position on a regular basis. Pursuant to the level of gearing set by the Board, the Company may borrow up to an amount equal to 20% of its net assets, calculated at the time of drawing. The Company will not have any fixed, long-term borrowings.

Risk Diversification

The Company has 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.

Management

During the financial year, the Company was managed by Aberdeen Private Wealth Management Limited ("APWML"), which is registered with the Jersey Financial Services Commission ("JFSC") for the conduct of fund services business. Subsequent to the end of the Company's financial year APWML merged on 30 September 2019 with Aberdeen Standard Capital International Limited ("ASCIL"), a wholly owned subsidiary of Standard Life Aberdeen PLC, by way of a merger process set out in the Companies (Jersey) Law 1991. Following the merger, ASCIL is the ongoing entity and the new contracting party to all of APWML's previous agreements and became the Company's Manager and Company Secretary. Following the merger of APWML and ASCIL, the investment management of the Company continues to be delegated to Aberdeen Asset Managers Limited ("AAML"), a wholly owned subsidiary of Standard Life Aberdeen plc. Aberdeen Standard Investments is a brand of the investment businesses of the merged entity.

References throughout this document to Aberdeen Standard Investments refer to APWML, ASCIL and AAML and their responsibilities as Manager and Investment Manager respectively to the Company.

FINANCIAL HIGHLIGHTS

CHAIRMAN'S STATEMENT

Overview

Any optimism fuelled by the signing of an initial US-China deal last December, which seemingly would have prevented a global trade war, vanished as the Covid-19 virus pandemic ("Covid-19") swiftly spread across the world. With healthcare systems in many regions overwhelmed, governments locked down their economies to contain the virus. This action, however, proved to be a double-edged sword as many key industries were badly hurt as business activity ground to a halt.

As more local businesses succumbed and consequently job losses mounted, central banks cut interest rates in quick succession, while governments unleashed massive amounts of fiscal stimulus in efforts to cushion the financial impact on the poor and unemployed.

Although Covid-19 arrived in Latin America later than other regions it still hit very hard. Looking at some key markets within the continent, the Brazilian administration's initial poor management of the pandemic caused Latin America's largest economy to report the highest number of cases. Political infighting exacerbated the situation, with President Jair Bolsonaro's controversial handling of the Covid-19 crisis forcing two health ministers to quit in quick succession. However, the government's subsequent swift action in rolling out relief packages, among the most extensive in the region, coupled with the central bank's aggressive interest rate cuts helped lessen the blow to faltering growth.

Meanwhile, Chile's relatively sound economic fundamentals, along with the government's prompt action in limiting the contagion, helped the country maintain some semblance of stability. But it remains to be seen if such measures can hold up in the face of a prolonged onslaught by Covid-19.

Conversely, Mexico's economy, already in a weakened state, was further hurt by social-distancing measures as well as the muted fiscal response from President Andres Manuel Lopez Obrador's administration. Fearing the financial repercussions, the authorities allowed businesses to reopen even before infection rates showed any significant signs of ebbing.

Elsewhere, Argentina has had to deal with the twin challenges of negotiating a palatable debt restructuring plan with international creditors, while combatting rising infection rates in spite of lockdowns. I am heartened to see that at least the former has reached a favourable resolution for now.

Results and Dividends

Against an extremely challenging background globally, the Company's NAV Total Return was -27.5% (2019:+22.4%), lagging the benchmark's -22.9% (2019: +17.4%) return. While the result is clearly disappointing at first glance, I would like to emphasise that your Manager has maintained its investment strategy and continues to have strong conviction in the Company's underlying portfolio while offering shareholders an attractive yield from a mix of good quality companies and bonds. A more detailed discussion can be found in your Manager's report.

The ordinary share price fell from 69.2p at 31 August 2019 to 49.2p per share although the share price discount to NAV narrowed from -16.0% at 31 August 2019 to -13.2% as at the financial year end.

The earnings per share for the year ended 31 August 2020 were 2.21p (2019: 4.27p), reflecting the severe impact of the pandemic. The Company has maintained four interim dividends of 0.875p per share (2019: 0.875p) in respect of the 12 month financial period bringing the total level of dividends for the year to 3.5p per share (2019: 3.5p). As reported during the year, the Board is aware of the importance of income to the Company's shareholders, particularly during times of prolonged market stress and has maintained the dividend. Whilst there has been a clear impact to earnings resulting from Covid-19, the Directors have previously noted the accumulated revenue reserve. One of the benefits of the investment company structure is that the Company may use accumulated reserves to maintain distributions to shareholders where there is a shortfall in earnings. To finance the dividends during the year, the Company paid £742,000 (2019: nil) from its revenue reserves. Following the payment of dividends made during the financial year, the Company continued to carry forward £1,962,000 (2019: £2,704,000) in its revenue reserve. After accounting for the fourth interim dividend paid after the year end the revenue reserve held the equivalent of over 70% of a full year's current distribution.

The Board is pleased that the Manager continues to support the Company to ensure that its ongoing charges ratio ("OCR") will not exceed 2.0% when calculated annually at 31 August. To the extent that the OCR exceeds 2.0%, the Manager continues to rebate part of its fees in order to reduce the ratio down to 2.0%. Subsequent to the year end, a sum of £83,000 had been repaid by the Manager to the Company in order to maintain the OCR at 2.0%.

Portfolio

During the year, the allocation between equities and bonds was adjusted. At the financial year end, the portfolio comprises 59.5% equities and 40.5% bonds (2019: 59.1% equities, 40.9% bonds). The Board and Manager will continue to keep this portfolio split under review to seek to exploit market opportunities.

Share Capital Management

During the year, the Company purchased 887,000 ordinary shares for cancellation at a total cost of £624,000, all at a discount to NAV. This resulted in an enhancement of 0.19% in NAV per share. In light of ongoing market volatility arising from the Covid-19 pandemic, and the lack of meaningful impact on the discount during these extraordinary times, the Board reviewed its share buyback programme during the financial year. The Company has not bought back any shares since March 2020 but 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 8.3%.

Gearing

The Company refinanced its £8 million multi-currency revolving credit facility agreement with Scotiabank (Ireland) Designated Activity Company during the financial year. In August 2020, the Company entered into a one year unsecured revolving multi-currency loan facility with Scotiabank Europe plc expiring on 14 August 2021. At the year end £5,500,000 was drawn down (2019 - £6,000,000). The Board will continue to monitor the level of gearing under recommendation from the Manager and in light of the market conditions.

Board Changes

During the year, the Board, led by the Nomination Committee, conducted a search for a new independent non-executive director using the services of an independent recruitment consultant. The Directors were delighted to welcome Howard Myles to the Board on 1 October 2020. Howard brings a wealth of knowledge in relation to closed-end funds including experience of the Latin American region. George Baird retired as a Director at the AGM in December 2019 and Heather MacCallum assumed the role of Audit Committee Chair.

Service Provider Changes

The Board also made changes to the Company's service providers during the year under review. The Board appointed Nplus1 Singer Advisory LLP as its sole corporate broker in August 2020. The Company, led by the Audit Committee, also undertook a tender for its required audit services. Following the conclusion of the tender, the Board approved the appointment of PricewaterhouseCoopers CI LLP ("PwC") as the Company's auditor. PwC has undertaken the audit of the Company's Financial Statements and shareholders will be invited to vote upon their appointment at the Company's Annual General Meeting. The Board would like to formally thank Ernst & Young LLP, the Company's auditor since launch in 2010, for their support over the years.

Annual General Meeting

This year's Annual General Meeting will be held on Thursday, 10 December 2020 at 10:00am at the offices of Aberdeen Standard Investments, 1st Floor, Sir Walter Raleigh House, 48-50 Esplanade, St Helier, Jersey JE2 3QB.

In light of the current Government Guidelines surrounding the Covid-19 pandemic, and current and expected future social distancing requirements, only the formal business set out in the Notice of the Meeting will be considered, with no presentation by the Investment Manager and no refreshments. At the time of writing, it is likely that Members will be restricted from attending the AGM in person or by attorney or by corporate representative. Therefore, the Board encourages all shareholders to exercise their votes in respect of the meeting in advance to ensure that votes are registered and counted at the meeting.

The Board welcomes questions from our shareholders and, given the format and prevailing circumstances, I would ask shareholders to submit questions to the Board prior to the AGM, and in any event before Monday, 7 December 2020. The Board or the Investment Manager will respond to all questions received. You may submit questions to the Board by email to Latin.American@aberdeenstandard.com.

The Board will continue to monitor Government Guidelines around social distancing in relation to Covid-19 and will update shareholders on any changes to the arrangements for the AGM. However, should social distancing measures be relaxed, we would urge all shareholders to take the health and well-being of their fellow investors into account when deciding whether or not to attend the AGM. I trust that shareholders will be understanding and supportive of this approach. In future, the Board expects to revert back to its normal AGM proceedings and looks forward to welcoming shareholders in person.

Articles of Association

At the Company's Annual General Meeting, one of the resolutions being proposed relates to a change to the Company's Articles of Association ("the Articles"). The change will enable the Company to hold virtual and hybrid general meetings (including annual general meetings) in the future. The changes proposed are being sought in response to challenges posed by government restrictions on social interactions as a result of Covid-19, which have made it impossible for shareholders to attend physical general meetings.

The Board is committed to ensuring that future general meetings (including AGMs) incorporate a physical meeting when law and regulation permits and where shareholders can meet with the Board face to face. The potential to hold a general meeting through wholly electronic means is intended as a solution to be adopted as a contingency to ensure the continued smooth operation of the Company in extreme operating circumstances where physical meetings are prohibited. The Company has no present intention of holding a wholly electronic general meeting but wants to be prepared for the future.

Outlook

The near-term outlook for Latin America remains challenging. Many countries face the difficult decision of whether to keep their economies open to stave off a deeper recession or to re-impose draconian social-distancing measures and localised lockdowns amid elevated numbers of Covid-19 cases. Worsening relations between the world's two largest economic giants, the US and China, also pose a substantial danger to both financial markets and international trade as they engage in tit-for-tat punitive measures. That said, in Brazil, the Bolsonaro administration's fiscal stimulus has provided ammunition to better cushion the impact of the virus on its citizens. Subsequently, continued reforms to ensure fiscal discipline will be needed in light of the massive government spending and rise in debt levels. For Mexico, the ratification of a trade deal by key partners, the US and Canada should help its economy recover in the longer term. Elsewhere, receding coronavirus cases in Chile would allow the government to focus on putting key sectors, such as mining, back on the growth track. And finally, with the successful conclusion of debt restructuring talks in Argentina, more foreign investment could eventually find its way back.

Although Latin America's road to recovery may well be an arduous one, the region is not alone during these pandemic times. I am confident that your Manager's prudent investment approach and on-the-ground presence in the region should help in the selection of good quality investments with robust competitive advantages and exposure to segments of the economy that are still resilient in spite of the pandemic. These companies are likely to deliver steady, risk-adjusted returns over the long-term. Your Manager will continue to capitalise on market volatility to add to high-conviction holdings or introduce new names at appealing valuations seeking to add value for shareholders who at times this year have clearly suffered extreme volatility.

Richard Prosser,

Chairman

4 November 2020

STRATEGIC REPORT - OVERVIEW OF STRATEGY

Investment Objective and Business Model

The Company aims to provide private and institutional investors with exposure to the above average long-term capital growth prospects of Latin America combined with an attractive yield.

The business of the Company is that of an investment company and the Directors do not envisage any change in this activity in the foreseeable future.

Investment Policy and Approach

The Company invests in:

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

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

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

- debt issued by governments and companies in the Latin American region.

The Company has 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.

Whilst the Board has provided the Investment Manager with broad investment guidelines in order to ensure a spread of risk, the Company's portfolio is not managed by reference to any benchmark and, therefore, the composition of its portfolio is not restricted by minimum or maximum country, market capitalisation or sector weightings. The Manager follows a bottom-up investment process based on its conviction in individual stocks. Top-down factors are secondary in portfolio construction, with diversification rather than formal controls guiding geographical and sector weights.

The Company may invest, where appropriate, in open-ended collective investment schemes and closed-ended funds that invest in the Latin American region.

Derivative investments may be used for efficient portfolio management and hedging and may also be used in order to achieve the investment objective and to enhance portfolio performance. The Company may purchase and sell derivative investments such as exchange-listed and over-the-counter put and call options on currencies, securities, fixed income, currency and interest rate indices and other financial instruments, purchase and sell financial futures contracts and options thereon and enter into various interest rate and currency transactions such as swaps, caps, floors or collars or credit transactions and credit derivative instruments. The Company may also purchase derivative instruments that combine features of these instruments. The Manager employs a risk management process to oversee and manage the Company's exposure to derivatives. The Manager may use one or more separate counterparties to undertake derivative transactions on behalf of the Company, and may be required to pledge collateral in order to secure the Company's obligations under such contracts. The Manager will assess on a continuing basis the creditworthiness of counterparties as part of its risk management process.

The Company may underwrite or sub-underwrite any issue or offer for sale of investments.

The Board considers that returns to Ordinary Shareholders can be enhanced by the judicious use of borrowing. The Board is responsible for the level of gearing in the Company and reviews the position on a regular basis. Pursuant to the level of gearing set by the Board, the Company may borrow up to an amount equal to 20% of its net assets calculated at the time of drawing. The Company will not have any fixed, long-term borrowings.

The Company may also use derivative instruments for gearing purposes, in which case the investment restrictions will be calculated on the basis that the Company has acquired the securities to which the derivatives are providing exposure.

The Company will normally be fully invested. However, during periods in which economic conditions or other factors warrant, the Company may reduce its exposure to securities and increase its position in cash and money market instruments.

The Company invests and manages its assets, including its exposure to derivatives, with the objective of spreading risk in line with the Company's investment policy.

The Company may only make material changes to its investment policy (including the level of gearing set by the Board) with the approval of Ordinary Shareholders (in the form of an ordinary resolution).

Investment Restrictions

The minimum and maximum percentage limits set out under "Investment Policy and Approach" and "Investment Restrictions" will only be applied at the time of the relevant acquisition, trade or borrowing. No more than 15% of the Company's or the Subsidiary's gross assets will be invested in any one company.

The Company will not invest more than 10%, in aggregate, of the value of its gross assets in other investment companies admitted to the Official List of the Financial Conduct Authority, provided that this restriction does not apply to investments in any such investment companies which themselves have stated investment policies to invest no more than 15% of their gross assets in other listed investment companies admitted to the Official List of the Financial Conduct Authority.

The Company may invest up to 25% of its gross assets in non-investment grade government debt issues (being debt issues rated BB+/Ba1 or lower).

The Company's aggregate gross exposure to derivative instruments will not exceed 50% of its gross assets.

The Company will not acquire securities that are unlisted or unquoted at the time of investment (with the exception of securities which are about to be listed or traded on a stock exchange). However, the Company may continue to hold securities that cease to be listed or quoted if the Investment Manager considers this to be appropriate.

No underwriting or sub-underwriting commitment will be entered into if the aggregate of such investments would exceed 10% of the Company's net assets and no such individual investment would exceed 5% of the Company's net assets.

The Board has adopted a policy that the value of the Company's borrowings or derivatives (but excluding collateral held in respect of any such derivatives) will not exceed 30% the Company's net assets.

Duration

The Company does not have a fixed life or continuation vote.

Benchmark

The Company measures its performance against a composite benchmark index weighted as to 60% MSCI EM Latin America 10/40 Index and 40% JP Morgan GBI-EM Global Diversified (Latin America Carve Out) (both in sterling terms) (the "Benchmark"). The Company does not seek to replicate the Benchmark index in constructing its portfolio and the portfolio is not managed by reference to any index. It is likely, therefore, that there will be periods when the Company's performance will be uncorrelated to any index or benchmark.

Promoting the Company's Success

In accordance with corporate governance best practice, the Board is now required to describe to the Company's shareholders how the Directors have discharged their duties and responsibilities over the course of the financial year following the guidelines set out in the UK under section 172 (1) of the Companies Act 2006 (the "s172 Statement"). This Statement, from 'Promoting the Success of the Company' to "Long Term Investment", provides an explanation of how the Directors have promoted the success of the Company for the benefit of its members as a whole, taking into account the likely long term consequences of decisions, the need to foster relationships with all stakeholders and the impact of the Company's operations on the environment.

The purpose of the Company is to provide private and institutional investors with exposure to the above average long-term capital growth prospects of Latin America combined with an attractive yield. The Company's Investment Objective is disclosed in the Annual Report. The activities of the Company are overseen by the Board of Directors of the Company.

The Board's philosophy is that the Company should operate in a transparent culture where all parties are treated with respect and provided with the opportunity to offer practical challenge and participate in positive debate which is focused on the aim of achieving the expectations of shareholders and other stakeholders alike. The Board reviews the culture and manner in which the Manager operates at its regular meetings and receives regular reporting and feedback from the other key service providers.

Investment trusts, such as the Company, are long-term investment vehicles, with a recommended holding period of five or more years. Typically, investment trusts are externally managed, have no employees, and are overseen by an independent non-executive board of directors. Your Company's Board of Directors sets the investment mandate, monitors the performance of all service providers (including the Manager) and is responsible for reviewing strategy on a regular basis. All this is done with the aim of preserving and, indeed, enhancing shareholder value over the longer term.

Shareholder Engagement

The following table describes some of the ways we engage with our shareholders:

Other Service Providers

The other key stakeholder group is that of the Company's third party service providers. The Board is responsible for selecting the most appropriate outsourced service providers and monitoring the relationships with these suppliers regularly in order to ensure a constructive working relationship. Our service providers look to the Company to provide them with a clear understanding of the Company's needs in order that those requirements can be delivered efficiently and fairly. The Board, via the Management Engagement Committee, ensures that the arrangements with service providers are reviewed at least annually in detail. The aim is to ensure that contractual arrangements remain in line with best practice, services being offered meet the requirements and needs of the Company and performance is in line with the expectations of the Board, Manager, Investment Manager and other relevant stakeholders. Reviews include those of the Company's custodian, registrar, broker and auditor.

Principal Decisions

Pursuant to the Board's aim of promoting the long term success of the Company, the following principal decisions have been taken during the year:

Portfolio The Investment Manager's Review details the key investment decisions taken during the year and subsequently. The Investment Manager has continued to monitor the investment portfolio throughout the year under the supervision of the Board. The Board has continued to support the Company's mandate and has encouraged the Investment Manager to engage with investee companies on ESG issues, as set out below. A list of the key portfolio changes can be found below. The Management Engagement Committee, on behalf of the Board, has reviewed the continued appointment of the Investment Manager, and the terms of the Management Agreement, and believes that its continued appointment is in the best interests of Shareholders.

Board Appointment The Board has continued to progress its succession plans during the year resulting in the decision to appoint Howard Myles as an independent non-executive Director with effect from 1 October 2020. Further details are provided in the Chairman's Statement. The Board believes that the appointment of Howard Myles benefits Shareholders by ensuring a smooth and orderly refreshment of the Board which serves to provide continuity and maintain the Board's oversight of the Manager. 

Gearing The Company utilises gearing in the form of bank debt with the aim of enhancing shareholder returns over the longer term. In August 2020, the Board refinanced its unsecured revolving multi-currency loan facility with Scotiabank Europe plc expiring on 14 August 2021. At the Board's instruction, the Investment Manager sought terms of a number of banks and the Board believes that the terms offered by Scotiabank were the most compelling.

Share Buybacks During the year, the Board bought back Ordinary shares opportunistically in order to manage the discount by providing liquidity to the market.

ESG The Board is responsible for overseeing the work of the Investment Manager and this is not limited solely to the investment performance of the portfolio companies. The Board also has regard for environmental (including climate change), social and governance matters that subsist within the portfolio companies. The Board is supportive of the Investment Manager's pro-active approach to ESG engagement and encourages it, believing that ESG factors put the 'long-term' in long-term investing. More information on the Manager's approach to ESG can be found in the Annual Report.

Audit In accordance with best practice the Audit Committee conducted an audit tender to select a new independent auditor. Having established the needs of the Company, a number of audit firms were invited to tender. Following a detailed review and interview process, PwC was selected. A resolution to formally appoint PwC as the Company's auditor is being proposed at the AGM.

Broker The Board appointed Nplus1 Singer Advisory LLP ("Nplus1 Singer") as its corporate broker during the financial year. The Board believes that Nplus1 Singer has the required skills and experience to provide the Board, and its investors, with strong corporate broking services.

Long Term Investment

The Investment Manager's investment process seeks to outperform over the longer term. The Board has in place the necessary procedures and processes to continue to promote the long term success of the Company. The Board will continue to monitor, evaluate and seek to improve these processes as the Company continues to grow over time, to ensure that the investment proposition is delivered to shareholders and other stakeholders in line with their expectations.

Key Performance Indicators ("KPIs")

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and determine the progress of the Company in pursuing its investment policy. The main KPIs identified by the Board in relation to the Company which are considered at each Board meeting are as follows:

Further commentary on the Company's performance is contained in the Chairman's Statement and Investment Manager's Review and further explanation of the terms is provided in the Glossary in the Annual Report.

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The Board has carried out a robust assessment of the risks and uncertainties facing the Company at the current time in the table below together with a description of the mitigating actions taken by the Board. The Board has also identified emerging risks through a process of evaluating which of the principal risks increased materially during the year and / or, through market intelligence, are expected to grow significantly. The principal risks associated with an investment in the Company's shares are published monthly on the Company's factsheet and they can be found in the Pre-Investment Disclosure Document published by the Manager, both of which are on the Company's website. The Board reviews the risks and uncertainties faced by the Company in the form of a risk matrix and heat map annually and a summary of the principal risks are set out below.

The key, principal uncertainty for the Company emerging during the second half of the Company's financial year was the outbreak of the Covid-19 pandemic ("Covid-19") which caused significant economic disruption and contributed to global stock market volatility. The longer term effects of Covid-19 on the Latin American region are as yet unknown. From an operational perspective, the Manager, on behalf of the Board, sought assurances from the Company's key service providers, as well as from its own operations, that they had invoked business continuity procedures and appropriate contingency arrangements to ensure that they remain able to meet their contractual obligations to the Company.

In carrying out the assessment, the Board also considered the uncertainty arising from the end of the transition period on 31 December 2020 for the UK leaving the EU ("Brexit"). Overall, the Board does not expect the Company's business model, over the longer term, to be materially affected by Brexit.

An explanation of other risks relating to the Company's investment activities, specifically market risk including interest rate risk, foreign currency risk and other price risk, liquidity risk, credit risk, gearing risk and a note of how these risks are managed, is contained in note 15 to the financial statements.

Viability Statement

The Company does not have a formal fixed period strategic plan but the Board formally considers risks and strategy at least annually. The Board considers the Company, with no fixed life, to be a long term investment vehicle, but for the purposes of this viability statement has decided that a period of three years is an appropriate period over which to report. The Board considers that this period reflects an appropriate balance between looking out over a long term horizon and the inherent uncertainties of looking out further than three years.

In assessing the viability of the Company over the review period the Directors have carried out a robust assessment of the principal risks detailed in the Strategic Report focussing upon the following factors:

- The ongoing relevance of the Company's investment objective in the current environment;

- The demand for the Company's shares evidenced by the historical level of premium and or discount;

- The level of income generated by the Company;

- The liquidity of the Company's portfolio; and,

- The flexibility of the Company's multi-currency loan facility which matures in August 2021 including the financial covenants of the loans. The Directors will aim to agree a new facility upon the expiry of the current one in 2021 and in the event that satisfactory renewal terms are not available at that time the facility will be repaid from portfolio sales.

Accordingly, taking into account the Company's current position, the fact that Aberdeen Standard Investments has agreed to reduce the fees payable to the Manager to the extent necessary to ensure that the Ongoing Charges Ratio does not exceed 2.0%, the fact that the Company's investments are mostly liquid and the potential impact of its principal risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this Report. In making this assessment, the Board has considered that matters such as the ongoing Covid-19 pandemic, significant economic or stock market volatility, significant discount to NAV, a substantial reduction in the liquidity of the portfolio, or changes in investor sentiment could have an impact on its assessment of the Company's prospects and viability in the future.

Promoting the Company

The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the value and rating of the Company's shares. The Board believes an effective way to achieve this is through subscription to and participation in the promotional programme run by Aberdeen Standard Investments on behalf of a number of investment companies under its management. The Company's financial contribution to the programme is matched by Aberdeen Standard Investments. Aberdeen Standard Investment's promotional team reports quarterly to the Board giving analysis of the promotional activities as well as updates on the shareholder register and any changes in the make-up of that register.

The purpose of the programme is both to communicate effectively with existing shareholders and to gain new shareholders with the aim of improving liquidity and enhancing the value and rating of the Company's shares. Communicating the long-term attractions of your Company is key and therefore the Company also supports the Aberdeen Standard Investments investor relations programme which involves regional roadshows, promotional and public relations campaigns.

Board Diversity

The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge represented on the Board in order to allow the Board to fulfil its obligations. The Board also recognises the benefits and is supportive of the principle of diversity in its recruitment of new Board members. The Board will not display any bias for age, gender, race, sexual orientation, religion, ethnic or national origins, or disability in considering the appointment of its Directors. However, the Board will continue to ensure that all appointments are made on the basis of merit against the specification prepared for each appointment and, therefore, the Company does not consider it appropriate to set diversity targets. At 31 August 2020, there was one male and two female Directors on the Board.

Environmental, Social and Human Rights Issues

The Company has no employees as it is managed by Aberdeen Standard Capital International Limited ("ASCIL") and ordinarily all activities are contracted out to third party service providers. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is in the Annual Report.

Due to the nature of the Company's business, being a company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 because it has no turnover. The Company is therefore not required to make a slavery and human trafficking statement. In any event, the Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter. Through the Manager and its engagement with investee companies, the Company has oversight over supply chains within the portfolio. The Board encourages the Manager to engage with investee companies on ESG issues, which could include modern slavery and human rights issues in investment portfolio companies.

The Company's Manager has confirmed that it complies with the 2015 Modern Slavery Act.

The Company has no greenhouse gas emissions to report from the operations of its business, nor does it have responsibility for any other emissions producing sources.

Future

Many of the non-performance related trends likely to affect the Company in the future are common across all closed ended investment companies, such as the attractiveness of investment companies as investment vehicles and the impact of regulatory changes. These factors need to be viewed alongside the outlook for the Company, both generally and specifically, in relation to the portfolio. The Board's views on the general outlook for the Company can be found in the Chairman's Statement whilst the Investment Manager's views on the outlook for the portfolio are included below.

For and on behalf of the Board

Richard Prosser,

Chairman

4 November 2020

INVESTMENT MANAGER'S REVIEW

Performance Commentary

Latin American equities fell sharply in sterling terms in the year to August 2020, lagging both emerging and developed markets. At the same time, local bond markets remained resilient on the back of deep rate cuts, although this was more than offset by the depreciation of the regional currencies against sterling.

Coronavirus, or the Covid-19 pandemic ("Covid-19"), seemed to arrive in Latin America later than other continents but hit the region hard. Stock prices were weighed down by both currency volatility and the economic impact of Covid-19. Declining oil prices were a key contributor to losses. Brent crude fell dramatically in February as the rise of coronavirus fuelled fears of a global economic slowdown, coupled with an oil price war between Russia and Saudi Arabia. The price recovered to US$45.28 per barrel at the end of August - a small recovery, but still a considerable fall over the period. Buffering the decline to some extent at least were aggressive monetary and fiscal stimulus packages implemented at home and also by major trading partners around the globe.

Brazil saw the passing of the much-debated pension reform bill in October, one of President Bolsonaro's flagship policies and a major step in the fiscal consolidation process. The country's initial light-touch approach to Covid-19 led to one of the world's highest infection rates. Authorities reacted to the crisis with a positive fiscal package, one of the largest among emerging markets, which included cash handouts to households and employment support programs. Meanwhile, the central bank cut its policy rate to a record low of 2% and rolled out liquidity support and capital relief measures. The huge increase in the budget deficit ignited fears of fiscal deterioration, even though authorities pledged to restore prudent policies once the pandemic was over. Signs of a rapid economic rebound in the third quarter after the deep fall in activity underpinned investor sentiment, and contributed to the resilience of the local stock market, at least in local currency terms.

In Mexico, the revamped US-Mexico-Canada Agreement was ratified by Congress in December 2019, reducing trade uncertainty. Mexico's economy was struggling before Covid-19 took hold - shrinking by 0.1% in 2019. As a result of the pandemic this negative trend continued, with an 18.9% contraction in the second quarter. Uniquely among major emerging market economies Mexico decided not to support its economy with a fiscal stimulus. Banco de Mexico maintained its accommodative policy throughout the period, cutting interest rates eight times from 8% to 4.5%, in reaction to the stuttering economy.

In Chile, ongoing protests over income inequality hindered the export-dependent economy. These demonstrations hampered mining activity, which in turn, dampened the currency. On the policy front, allowing workers to partially withdraw pension savings injected additional liquidity. However, this could burden its fiscal position in the medium term.

In Argentina, Alberto Fernandez was sworn in as president in December 2019 after defeating incumbent Mauricio Macri in the October presidential elections. The new leader announced his intention to seek sovereign debt restructuring negotiations with current investors and the International Monetary Fund. Positive sentiment on the massive write-offs by its creditors outweighed the Covid-19 impact on an anaemic economy. Although debt restructuring has provided the government with a lifeline, the implementation of currency controls to prop up the Peso has made it harder for local corporations to tap into foreign capital. Several restructuring plans were proposed and turned down in the first half of 2020; the country missed a bond payment in May, technically meaning it entered into its ninth default. Finally, in August, the government won majority support, swapping 99% of the bonds in question for new securities. In addition, the Covid-19 pandemic has badly affected the Argentinian economy.

Against this backdrop, your Company's equity portfolio fell by 29.7% in sterling terms during the financial year, outperforming the MSCI Emerging Markets Latin America 10/40 Index which fell by 30.29%. The Company's bond portfolio returned -12.79% in sterling terms, compared to the benchmark JPM GBI-EM Global Diversified Latin America Index's return of -13.01%. The yield on the index fell 82 basis points to end the period at 4.95%.

Contributors to Performance

Software companies were the biggest contributors to performance, followed by industrials and financials. Conversely, the materials and consumer sectors negatively impacted performance. At the country level, stock selection in Brazil and Argentina supported returns. However, your portfolio's Mexican and Chilean holdings detracted.

In the technology sector, Argentine software development company Globant contributed positively on accelerating digitalisation trends. This was also the case for Brazil's leading enterprise software solutions provider Totvs. Additionally, the off-benchmark holding in Linx helped the Company, as this leading retail software company rallied on news of a business combination proposal by Brazilian payments unicorn StoneCo.

For the industrial sector, your Company's exposure to WEG, though limited, proved beneficial. The Brazilian electrical motor company's share price doubled, driven by robust results.

Among financials, introducing Brazil's leading equity broker XP to the portfolio helped lift returns. XP's solid business growth was bolstered by the country's deepening capital markets. Stock exchange operator B3 also contributed with its trading volumes increasing as investors searched for yield in a record low interest rate environment. Conversely, holding Banco Bradesco muted portfolio gains as the lender was hurt by the economy's contraction and also suffered from deteriorating asset quality.

In the materials sector, Vale's share price rose on resilient iron-ore prices, along with the better news that it will resume dividends earlier than expected. Payouts had been suspended since the Brumadinho dam disaster. Our overall exposure to the miner, both directly, and via Bradespar's shareholding, supported the portfolio. Separately, Vale's investments to reduce its carbon emissions by one-third over the next decade could help its environmental, social, and governance standing.

Within the consumer sector, not holding Magazine Luiza proved costly for us as new social-distancing norms led to robust demand for the Brazilian retailer's extensive e-commerce business. On a brighter note, the initiation of Mercado Libre added to portfolio gains on the back of stellar results. The e-commerce major's June-quarter revenues rose sharply, thanks to a surge in online sales and virtual payments during the pandemic.

In the bond portfolio, allocation effects were positive for the Company, whereas currency and security selection dragged on performance. In particular, an overweight in Uruguay and Colombia helped drive performance, as did security selection in Colombia. The Company had no exposure to poor performers Chile or Argentina, a decision which aided relative returns. Moreover, the underweight position and security selection in Brazil contributed to performance.

Portfolio Activity

In the equities portion of the portfolio, we introduced Mercado Libre and XP during the review period. This proved to be positive for the portfolio for the reasons set out above. In the half yearly report to 29 February 2020, we highlighted the divestments of Ultrapar, BBVA, Tenaris and Lala. During the second half of the financial year, we also sold Banco Santander Mexico, given the heightened financial risks. Elsewhere, we sold Brazilian food giant BRF on declining conviction and to fund better opportunities elsewhere.

In the bond section of the portfolio, we completely exited our position in Argentina towards the beginning of the financial year in anticipation of the sovereign default. As a result of capital controls Argentina later was expelled from the bond index. We also reduced exposure to Mexican government bonds and the currency. Meanwhile, we subsequently increased our exposure to Peruvian and Colombian local currency bonds.

Outlook

As countries have begun to reopen their economies, there are signs that Covid-19 cases are starting to rise across the globe. The US, Asia and Central Europe are looking like potential hotspots. Of course, we would hope and expect governments around the world to be better prepared this time, therefore view the prospect of further full lockdowns like those seen in March as unlikely. However, even if the number of cases stabilises globally, the recovery path for many countries looks tougher than it did a few months ago. While all countries will suffer in the near term, the scale, duration and persistence of the shock will vary. This will depend on which countries had the most serious imbalances on the eve of this crisis, mount the strongest public health campaigns and put in place the most effective policy responses. We believe that this requires an even more granular approach to differentiating between countries in a stronger fundamental position and those whose existing challenges and imbalances will be exacerbated by this pandemic.

Brazil's economic outlook is mixed as its generous fiscal stimulus package supported consumption demand. However, the support package also affected the country's fiscal accounts and puts at risk the government's ability to meet the constitutional spending ceiling.

In Chile, relatively robust fiscal fundamentals and massive government stimulus should support growth. Caution exists though as income inequality and economic hardship worsened by the prolonged lockdown could lead to more street protests. Meanwhile, the referendum to consider amending the constitution adds to the political uncertainties ahead of next year's elections.

In Mexico, while domestic consumption remained muted given the lack of fiscal stimulus, the renewed free trade agreement with North America, in addition to those with the European Union and Japan, should continue to support exports.

Though cautious about where markets are headed, we are positive about the portfolio's long-term prospects, given our belief in the resilience of the underlying holdings. We will also take advantage of market volatility to pick up high-quality investments at more attractive valuations. In particular, we are focusing on companies backed by solid fundamentals and long-term growth potential that will over time deliver robust yields.

Brunella Isper and Viktor Szabó,

Aberdeen Asset Managers Limited

4 November 2020

PERFORMANCE (TOTAL RETURN)

DIVIDENDS

INVESTMENT PORTFOLIO

Ten Largest Equity Investments

As at 31 August 2020

Investment Portfolio - Equities

As at 31 August 2020

DIRECTORS' REPORT

The Directors present their Report and the audited financial statements for the year ended 31 August 2020.

Status

The Company is registered with limited liability in Jersey as a closed-ended investment company under the Companies (Jersey) Law 1991 with registered number 106012. In addition, the Company is constituted and regulated as a collective investment fund under the Collective Investments Funds (Jersey) Law 1988. The Company has no employees and makes no political or charitable donations. The Company has a wholly owned subsidiary, Aberdeen Latin American Income Fund LLC, registered in Delaware. The subsidiary is used to hold certain investments as part of the efficient management of the group.

The Company intends to continue to manage its affairs so as to be a qualifying investment for inclusion in the stocks and shares component of an Individual Savings Account and it is the Directors' intention that the Company should continue to be a qualifying investment.

Results and Dividends

Details of the Company's results and dividends are shown below. The Company's dividend policy is to pay interim dividends on a quarterly basis and for the year to 31 August 2020 dividends have been paid in January, May, August and October 2020.

Management Arrangements

The Company has an agreement (the "Management Agreement") with ASCIL for the provision of management, company secretarial and promotional services, details of which are shown in notes 5, 6 and 17 to the financial statements.

Under the Management Agreement, the Manager is entitled to both a management fee and a company secretarial and administration fee. 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%. In relation to the year ended 31 August 2020 an OCR rebate of £83,000 was payable by the Manager in order to ensure that the OCR did not exceed 2.0%.

The Directors review the terms of the Management Agreement on a regular basis and have confirmed that, due to the investment skills, experience and commitment of the Management team, in their opinion the continuing appointment of ASCIL on the terms agreed, is in the interests of Shareholders as a whole.

Share Capital

As at 31 August 2020 there were 57,113,324 Ordinary shares in issue and 6,107,500 Ordinary shares held in treasury. Details of changes to the Company's shares in issue during the year are provided in 'Your Company's Share Capital History' in the Annual Report.

Ordinary shareholders are entitled to vote on all resolutions which are proposed at general meetings of the Company. The Ordinary shares carry a right to receive dividends. On a winding up, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings.

Risk Management

Details of the principal risks and uncertainties and KPIs are disclosed above. Details of the financial risk management policies and objectives relative to the use of financial instruments by the Company are set out in note 15 to the financial statements.

Directors

Richard Prosser, Hazel Adam and Heather MacCallum, together with George Baird (who retired on 11 December 2019), were the only Directors in office during the financial year. Howard Myles was appointed as a Director on 1 October 2020, subsequent to the financial year end.

The Directors' beneficial holdings are disclosed in the Directors' Remuneration Report. No Director has a service contract with the Company. The Directors' interests in contractual arrangements with the Company are as shown in note 17 to the financial statements. Details of the Directors retiring and seeking election or re-election at the Annual General Meeting on 10 December 2020 are disclosed below within the Nomination Committee section.

Corporate Governance

The Company is committed to high standards of corporate governance. The Board is accountable to the Company's Shareholders for good governance.

The Company is a member of the Association of Investment Companies ("AIC"). The Board has considered the principles and provisions of the AIC Code of Corporate Governance as published in February 2019 ("AIC Code"). The AIC Code addresses the principles and provisions set out in the UK Corporate Governance Code ("UK Code"), as well as setting out provisions on issues which are of specific relevance to the Company.

The AIC Code is available on the AIC's website: theaic.co.uk.

The Board considers that reporting against the provisions of the AIC Code which has been endorsed by the FRC provides more relevant information to shareholders.

The Board confirms that, during the year, the Company complied with the principles and provisions of the AIC, and the relevant provisions of the UK Code, except as set out below:

The UK Corporate Governance Code includes provisions relating to:

- interaction with the workforce (provisions 2, 5 and 6);

- the role and responsibility of the chief executive (provisions 9 and 14);

- previous experience of the chairman of a remuneration committee (provision 32); and

- executive directors' remuneration (provisions 33 and 36 to 40).

The Board considers that these provisions are not relevant to the position of the Company, being an externally-managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions. The full text of the Company's Corporate Governance Statement can be found on the Company's website, latamincome.co.uk.

The Directors attended Board and Committee meetings during the year ended 31 August 2020 as follows (with their eligibility to attend the relevant meeting in brackets):

* George Baird retired from the Board on 11 December 2019.

Policy on Tenure

In normal circumstances, it is the Board's expectation that Directors will not serve beyond the Annual General Meeting following the ninth anniversary of their appointment. However, the Board takes the view that independence of individual Directors is not necessarily compromised by length of tenure on the Board and that continuity and experience can add significantly to the Board's strength. The Board believes that recommendation for re-election should be on an individual basis following a rigorous review which assesses the contribution made by the Director concerned, but also taking into account the need for managed succession and diversity.

It is also the Board's policy that the Chair of the Board will not serve as a Director beyond the Annual General Meeting following the ninth anniversary of their appointment to the Board. However, this may be extended in exceptional circumstances or to facilitate effective succession planning and the development of a diverse Board. In such a situation the reasons for the extension will be fully explained to shareholders. Given his length of service, the Nomination Committee has considered the continued appointment of Richard Prosser as Chairman and its assessment is set out in the Annual Report.

The Board has a schedule of matters reserved to it for decision and the requirement for Board approval on these matters is communicated directly to the senior staff at Aberdeen Standard Investments. Such matters include strategy, gearing, treasury and dividend policy. Full and timely information is provided to the Board to enable the Directors to function effectively and to discharge their responsibilities. The Board also reviews the financial statements, performance and revenue budgets.

There is an agreed procedure for Directors to take independent professional advice if necessary and at the Company's expense. This is in addition to the access which every Director has to the advice and services of the Company Secretary, which is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with.

Board Committees

As the Company has no employees and the Board is comprised wholly of non-executive Directors and given the size and nature of the Company, the Board has not established a separate remuneration committee. Directors' remuneration is determined by the Board as a whole. The remuneration of the Directors has been set in order to attract individuals of a calibre appropriate to the future development of the Company. The Company's policy on Directors' remuneration, together with details of the remuneration of each Director, is detailed in the Directors' Remuneration Report in the Annual Report.

Audit Committee

The Report of the Audit Committee is set out in the Annual Report.

Management Engagement Committee ("MEC")

The Board has appointed a MEC which comprises the entire Board. Richard Prosser is Chairman of the MEC. The Committee has defined terms of reference which are reviewed and re-assessed for their adequacy on an annual basis. Copies of the terms of reference are published on the Company's website: latamincome.co.uk.

The function of the MEC is to review performance of the Company's service providers and to ensure that the Manager and the Investment Manager comply with the terms of the Management Agreement and that the provisions of the agreement follow industry practice, and remain competitive and in the best interest of Shareholders as a whole. The MEC remains satisfied that the continuing appointment of the Investment Manager and Manager on the terms agreed is in the interests of Shareholders as a whole. The key factors taken into account in reaching this decision were the investment skills, experience and commitment and performance record of Aberdeen Standard Investments. The Management Agreement may be terminated by either party by giving not less than 12 months' notice in writing. The MEC has also considered the performance of the Company's other service providers and remains satisfied that they support the Company effectively on reasonable commercial terms.

Nomination Committee

The Board has established a Nomination Committee, comprising all of the Directors, with Richard Prosser as Chairman. Appointments to the Board of Directors are considered by the Nomination Committee. The Committee has defined terms of reference which are reviewed and re-assessed for their adequacy on an annual basis. Copies of the terms of reference are published on the Company's website: latamincome.co.uk. The Committee reviews the effectiveness of the Board, succession planning, Board appointments, inductions and training, and determines the Directors' remuneration policy and level of remuneration.

During the year the Nomination Committee initiated a search to find a new independent non-executive Director. The Board agreed the required skills and experience required of the new Director and appointed Fletcher Jones, an independent search consultant, to assist the Board in its search. The Directors drew up a specification for the appointment and interviewed a shortlist of suitable candidates. Following the interviews, the Directors appointed Howard Myles as an independent non-executive Director of the Company with effect from 1 October 2020.

During the year, the Committee also undertook an annual appraisal during which the Chairman of the Board, individual Directors and the performance of the Committees and the Board as a whole was assessed. The process involved the completion of questionnaires by each Director. The results of the process were discussed by the Board following its completion. The outcome of the appraisal process was judged by the Board to be satisfactory with all Directors having contributed effectively at the meetings that they had attended during the year. The Board also reviewed the Chairman's and Directors' other commitments and is satisfied that the Chairman and other Directors are capable of devoting sufficient time to the Company.

At the AGM on 10 December 2020, Richard Prosser, Hazel Adam and Heather MacCallum will offer themselves for re-election as Directors of the Company and Howard Myles will offer himself for election.

The Board has considered the contribution of each Director and considers that there is a balance of skills and experience within the Board to lead the Company and that all Directors contribute effectively. In accordance with the provisions of the AIC Code and the Board's Policy on Tenure, the Board has scrutinised the contribution and independence of Richard Prosser who has now served on the Board, and as Chairman, for ten years and five months. The Directors are unanimously of the opinion that Richard Prosser was independent on appointment and remains independent of the Manager in character and judgement. He exercises independence of thought, considers shareholder views in every decision and is not overly reliant upon the Manager. During the financial year, Richard Prosser met with shareholders independently of the Manager to hear shareholder views directly and discussed those views with the Board. He continues to act independently serving the interests of shareholders. The Board has considered the relatively short tenure of the Board, excluding Richard Prosser, and believes that Richard Prosser's continued appointment gives the Board continuity and corporate memory, particularly during the current challenges posed by Covid-19. His continued appointment will facilitate effective succession planning and the development of a diverse Board. Accordingly, the Board has no hesitation in recommending to Shareholders the re-election of Richard Prosser. The Board has also reviewed, and wholeheartedly supports, the proposed re-election of Hazel Adams and Heather MacCallum, and proposed election of Howard Myles.

The Board's policy on diversity is disclosed in the Strategic Report above.

The Role of the Chairman

The Chairman is responsible for providing effective leadership to the Board, by setting the tone of the Company, demonstrating objective judgement and promoting a culture of openness and debate. The Chairman facilitates the effective contribution, and encourages active engagement, by each Director. In conjunction with the Company Secretary, the Chairman ensures that Directors receive accurate, timely and clear information to assist them with effective decision-making. The Chairman leads the evaluation of the Board and individual Directors, and acts upon the results of the evaluation process by recognising strengths and addressing any weaknesses. The Chairman also engages with major shareholders and ensures that all Directors understand shareholder views.

Going Concern

In accordance with the FRC's 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.

The Company has considerable financial resources and, as a consequence, 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 disclosed above, including the ongoing impact of Covid-19 and possible implications of Brexit, and have reviewed forecasts detailing revenue and liabilities and 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 Annual Report. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements of the Company as at the date of the approval of this Report.

Internal Controls and Risk Management

The design, implementation and maintenance of controls and procedures to safeguard the assets of the Company and to manage its affairs properly extends to operational and compliance controls and risk management. The Board has prepared its own risk register which identifies potential risks both major and minor relating to: strategy; investment management; Shareholders; marketing; gearing; regulatory and financial obligations; third party service providers and the Board. The Board considers the potential cause and possible impact of these risks as well as reviewing the controls in place to mitigate these potential risks. A risk is rated by having a likelihood and an impact rating and the residual risk is plotted on a "heat map" and is reviewed regularly.

The Board is ultimately responsible for the Company's system of internal control and for reviewing its effectiveness. The Board confirms that there is an ongoing process for identifying, evaluating and managing the principal risks faced by the Company. This process has been in place for the period under review and up to the date of approval of this Annual Report and financial statements, and is regularly reviewed by the Board and accords with the FRC's guidance on internal controls. The Board has reviewed the effectiveness of the system of internal control. In particular, it has reviewed and updated the process for identifying and evaluating the principal risks affecting the Company and policies by which these risks are managed. The principal risks and uncertainties faced by the Company are detailed in the Strategic Report.

The key components designed to provide effective internal control are outlined below:

- the Manager prepares monthly forecasts and management accounts which allow the Board to assess the Company's activities and review its performance;

- the Board and the Manager have agreed clearly defined investment criteria, specified levels of authority and exposure limits; reports on these issues, including performance statistics and investment valuations, are regularly submitted to the Board and there are meetings with the Manager as appropriate;

- as a matter of course the Manager's compliance department continually reviews its operations;

- written agreements are in place which specifically define the roles and responsibilities of the Manager and other third-party service providers and the Audit Committee reviews, where relevant, periodic ISAE3402 Reports, a global assurance standard for reporting on internal controls for service organisations; the Board is made aware by the Manager of relevant exceptions in ISAE3402 reporting from key third party service providers as part of the Manager's third party service provider oversight regime;

- at its November 2020 meeting, the Audit Committee members carried out an annual assessment of internal controls for the year ended 31 August 2020 by considering documentation from Aberdeen Standard Investments, including the internal audit and compliance functions and taking account of events since 31 August 2020. The results of the assessment were then reported to the Directors at the Board meeting which followed; and,

- the Board has considered the need for an internal audit function but, because of the compliance and internal control systems in place at the Manager, has decided to place reliance on Manager's systems and internal audit procedures.

Internal control systems are designed to meet the Company's particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against mis-statement and loss.

Management of Conflicts of Interest

The Board has a procedure in place to deal with a situation where a Director has a conflict of interest. As part of this process, the Directors prepare a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director themselves or their connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with their wider duties is affected. Each Director is required to notify the Company Secretary of any potential, or actual, conflict situations that will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting.

No Director has a service contract with the Company although each Director is issued with a letter of appointment when appointed to the Board. The Directors' interests in contractual arrangements with the Company are as shown in note 17 to the financial statements. No other Directors had any interest in contracts with the Company during the period or subsequently.

The Board has adopted appropriate procedures designed to prevent bribery. The Company receives periodic reports from its service providers on the anti-bribery policies of these third parties. It also receives regular compliance reports from the Manager.

In the UK the Criminal Finances Act 2017 introduced a new corporate criminal offence of "failing to take reasonable steps to prevent the facilitation of tax evasion". The Board has confirmed that it is the Company's policy to conduct all of its business in an honest and ethical manner. The Board takes a zero-tolerance approach to facilitation of tax evasion, whether under UK law or under the law of any foreign country.

Substantial Interests

The Company has been advised that the following Shareholders owned 3% or more of the issued Ordinary share capital of the Company at 31 August 2020:

On 14 October 2020, Philip J Milton Stockbrokers advised the Company that it had purchased additional shares in the capital of the Company and now holds 6.0% of the issued share capital. On 2 November 2020, 1607 Capital Partners notified the Company that it had purchased additional shares in the capital of the Company and now holds 14.5% of the issued share capital.

There have been no other significant changes notified to the Company in respect of the above holdings between 31 August 2020 and 4 November 2020

Alternative Investment Fund Managers Directive ("AIFMD")

On 14 July 2014, the Jersey Financial Services Commission granted the Company a certificate of exemption from the application of the Alternative Investment Funds (Jersey) Regulations 2012 to any marketing it may carry out within any EU member state. ASCIL, as the Company's non-EEA alternative investment fund manager, also notified the FCA in accordance with the requirements of the UK National Private Placement Regime for inclusion of the Company on the UK register as a non-EEA alternative investment fund being marketed in the UK.

In addition, in accordance with Article 23 of the AIFMD and Rule 3.2.2 of the FCA FUND Sourcebook, ASCIL is required to make available certain disclosures for potential investors in the Company and these are available on the Company's website: latamincome.co.uk.

Annual General Meeting

The AGM will be held at 10.00 a.m. on Thursday, 10 December 2020 at the Company's registered office, Sir Walter Raleigh House, 48 - 50 Esplanade, St Helier, Jersey JE2 3QB. Resolutions including the following business will be proposed:

Dividend Policy

As a result of the timing of the payment of the Company's quarterly dividends, the Company's Shareholders are unable to approve a final dividend each year. In line with good corporate governance, the Board therefore proposes to put the Company's dividend policy to Shareholders for approval at the Annual General Meeting and on an annual basis thereafter.

The Company's dividend policy is that interim dividends on the Ordinary Shares are payable quarterly in relation to periods ending November, February, May and August. It is intended that, over the long term, the Company will pay quarterly dividends consistent with the expected annual underlying portfolio yield. Resolution 4 will seek shareholder approval for the dividend policy.

Appointment of Independent Auditor

As set out in the Report of the Audit Committee, PwC was appointed as the Company's auditor during the financial year. Please see the Annual Report for more details. The Directors will place a resolution before the Annual General Meeting to appoint PwC as independent auditor for the ensuing year, and to authorise the Directors to determine their remuneration.

Authority to Purchase the Company's Shares

In the past the Company has quoted that the aim of its discount management policy has been to try to maintain the price at which the Ordinary shares trade relative to the Company's NAV at a discount of no more that 5%. The Company's discount to NAV was -13.2% at 31 August 2020. As set out in the Chairman's Statement, in light of ongoing market volatility arising from the Covid-19 pandemic, and the lack of meaningful impact on the discount, the Board reviewed its share buyback programme and has not bought back any shares since March 2020. During the year under review the Company bought back 887,000 Ordinary shares for cancellation at a cost of £624,000. No shares have been bought back since the financial year end.

Purchases of Ordinary shares will only be made through the market for cash at prices below the prevailing exclusive of income NAV per Ordinary share (as last calculated), subject to prevailing market conditions and having regard to the size of the Company, where the Directors believe it is in the best interest of shareholders to do so.

Resolution 11, a special resolution, will be proposed to renew the Directors' authority to make market purchases of the Ordinary shares in accordance with the provisions of the FCA's Listing Rules. The Company will seek authority to purchase up to a maximum of 8,561,287 Ordinary shares (representing 14.99% of the current issued Ordinary share capital excluding treasury shares as at the date of publication of this Annual Report). The authority being sought shall expire at the conclusion of the Annual General Meeting in 2021 unless such authority is renewed prior to that time. Any Ordinary shares purchased in this way will either be cancelled and the number of Ordinary shares will be reduced accordingly, or the Ordinary shares will be held in treasury, in accordance with the authority previously conferred by Shareholders.

The Companies (Jersey) Law 1991 allows companies to either cancel shares or hold them in treasury following a buy-back. These powers give Directors additional flexibility and the Board considers that it is in the interest of the Company that such powers be available, including the power to hold treasury shares. Any future sales of Ordinary shares from treasury will only be undertaken at a premium to the prevailing NAV per Ordinary share for the benefit of all Shareholders. The Directors monitor the level of shares held in treasury and whilst there are no upper limits on the number of shares that can be held in treasury consideration will be given to cancelling treasury shares if the number becomes excessively high compared to the issued share capital.

Directors' Authority to Allot Relevant Securities

There are no provisions under Jersey law which confer rights of pre-emption upon the issue or sale of any class of shares in the Company. However, as the Ordinary shares are traded on the main market of the London Stock Exchange and have a premium listing, the Company is required to offer pre-emption rights to its Shareholders and the Articles of Association reflect this. Ordinary shares will only be issued at a premium to the prevailing NAV per Ordinary share and, therefore, any issue will not be dilutive to existing Ordinary Shareholders.

Unless previously disapplied by special resolution, in accordance with the FCA's Listing Rules, the Company is required to first offer any new shares or securities (or rights to subscribe for, or to convert or exchange into, shares) proposed to be issued for cash to Shareholders in proportion to their holdings in the Company. In order to provide for such share issues, your Board is therefore also proposing that an annual disapplication of the pre-emption rights is given to the Directors so that they may issue shares as and when appropriate. Accordingly, resolution 12, a Special resolution, proposes a disapplication of the pre-emption rights in respect of 10% of the shares in issue, set to expire on the earlier of eighteen months from the date of the resolution or at the conclusion of the Annual General Meeting to be held in 2021.

Approval and Adoption of New Articles of Association

Under resolution 13, which is proposed as a special resolution, the Company is proposing to amend its Articles of Association to allow the Company to hold general meetings by electronic or traditional means or both so that shareholders may participate remotely. As set out in the Chairman's Statement, the Company has no present intention of holding a wholly electronic general meeting but wants to be prepared for the future.

A copy of the Company's existing Articles of Association and proposed new Articles of Association marked to show all the changes will be available for inspection during normal business hours (excluding Saturdays, Sundays and bank holidays) at the Company's registered office, and on the Company's website, from the date of this notice of meeting until the close of the meeting. The proposed new Articles of Association will also be available for inspection at the annual general meeting at least 15 minutes prior to the start of the meeting and up until the close of the meeting.

Recommendation

Your Board considers all resolutions to be in the best interests of the Company and its members as a whole. Accordingly, your Board recommends that Ordinary Shareholders should vote in favour of all resolutions to be proposed at the Annual General Meeting, as they intend to do in respect of their own beneficial shareholdings.

Directors' & Officers Liability Insurance

Directors' & Officers' liability insurance cover has been maintained throughout the period at the expense of the Company.

Relations with Shareholders

The Directors place a great deal of importance on communication with Shareholders and welcome feedback from all Shareholders. The Chairman meets periodically with the largest Shareholders to discuss the Company. The Annual Report and financial statements are widely distributed to other parties who have an interest in the Company's performance. Shareholders and investors may obtain up to date information on the Company through the Manager's freephone information service and the Company's website: latamincome.co.uk.

The Board's policy is to communicate directly with Shareholders and their representative bodies without the involvement of the management group (either the Company Secretary or the Manager) in situations where direct communication is required.

The Notice of the Annual General Meeting, included within the Annual Report and financial statements, is ordinarily sent out at least 20 working days in advance of the meeting. All Shareholders have the opportunity to put questions to the Board or Manager, either formally at the Company's AGM or informally following the meeting. The Company Secretary is available to answer general Shareholder queries at any time throughout the year. The Directors are keen to encourage dialogue with Shareholders and the Chairman welcomes direct contact from Shareholders. In light of the ongoing Covid-19 pandemic and the likelihood that shareholders will not be able to attend the Company's Annual General Meeting on 10 December 2020, the Company asks that shareholders submit questions to the Board and Manager in advance of the AGM. The Board or Manager will respond to all questions received. You may submit questions to the Board by email to latin.american@aberdeen-asset.com.

Responsible Investment

The Board is aware of its duty to act in the interests of the Company. The Board acknowledges that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner. The Manager considers social, environmental and ethical factors which may affect the performance or value of the Company's investments. The Directors, through the Company's Manager, encourage companies in which investments are made to adhere to best practice in the area of Corporate Governance. They believe that this can best be achieved by entering into a dialogue with company management to encourage them, where necessary, to improve their policies in this area. The Company's ultimate objective however is to deliver superior investment returns for its shareholders. Accordingly, whilst the Manager will seek to favour companies which pursue best practice in the above areas, this must not be to the detriment of the return on the investment portfolio.

UK Stewardship Code and Proxy Voting as an Institutional Shareholder

Responsibility for actively monitoring the activities of portfolio companies has been delegated by the Board to the Manager which has sub-delegated that authority to the Investment Manager.

The full text of the Company's response to the Stewardship Code may be found on the Company's website: latamincome.co.uk.

Environmental, Social and Governance (ESG) Policy

The Board is aware of its duty to act in the best interests of the Company. As an investment company, the Company has no direct social, environmental or community responsibilities. However, the Board acknowledges that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner and the Board, therefore, ensures that they take regular account of the social, environment and ethical factors, which may affect the performance or value of the Company's investments, including climate change. Through the Manager the Company ensures it has oversight over its supply chains, which is monitored through the Company's investment process.

For and on behalf of the Board

Aberdeen Standard Capital International Limited,

Secretary

4 November 2020

1st Floor, Sir Walter Raleigh House

48 - 50 Esplanade,

St Helier

Jersey JE2 3QB

STATEMENT OF DIRECTORS' RESPONSIBILITIES

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

The Companies (Jersey) Law 1991 requires the Directors to prepare financial statements for each financial period in accordance with any generally accepted accounting principles. The financial statements of the Company are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company 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;

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

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

- assess whether the Annual Report and financial statements, taken as a whole, is 'fair, balanced and understandable'.

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 Company and enable them to ensure that the financial statements prepared by the Company comply with the requirements of the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for ensuring that the Company complies with the provisions of the Listing Rules and the Disclosure, Guidance & Transparency Rules of the Financial Conduct Authority which, with regard to corporate governance, require the Company to disclose how it has applied the principles, and complied with the provisions, of the UK Corporate Governance Code applicable to the Company.

Declaration

The Directors, being the persons responsible, hereby confirm to the best of their knowledge:

- that the financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

- that in the opinion of the Directors, the Annual Report and financial statements taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's position and performance, business model and strategy; and

- the Strategic Report, including the Chairman's Statement and the Investment Manager's Review, include a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces.

For and on behalf of the Board

Richard Prosser,

Chairman

4 November 2020

1st Floor, Sir Walter Raleigh House

48 - 50 Esplanade,

St Helier

Jersey JE2 3QB

The Manager is responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

STATEMENT OF COMPREHENSIVE INCOME

STATEMENT OF FINANCIAL POSITION

The financial statements were approved by the Board of Directors and authorised for issue on 6 November 2020 and were signed on its behalf by:

Richard Prosser

Chairman

The accompanying notes are an integral part of the financial statements.

STATEMENT OF CHANGES IN EQUITY

STATEMENT OF CASH FLOWS

The accompanying notes are an integral part of the financial statements.

NOTES TO THE FINANCIAL STATEMENTS