ALAI.L Regulatory News (ALAI)

ABERDEEN LATIN AMERICAN INCOME FUND LIMITED

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 AUGUST 2021

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 America through a diversified portfolio of equities and fixed income investments.

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 abrdn Capital International Limited ("ACIL"), previously called Aberdeen Standard Capital International Limited ("ASCIL"), which is registered with the Jersey Financial Services Commission ("JFSC") for the conduct of fund services business. The investment management of the Company has been delegated to Aberdeen Asset Managers Limited ("AAML"). Both AAML and ACIL are wholly owned subsidiaries of abrdn plc ("abrdn").

References throughout this document to abrdn refer to ACIL and AAML and their responsibilities as Manager and Investment Manager respectively to the Company.

FINANCIAL HIGHLIGHTS

CHAIRMAN'S STATEMENT

Overview

The year to 31 August 2021 was an eventful and testing one for Latin American risk assets, with spells of volatility regularly impacting financial markets in the region. This was highlighted by the contrasting fortunes of the Company's two asset classes. Equities posted double-digit gains as the recovery continued from 2020's coronavirus-induced shocks. Conversely, bonds retreated modestly as inflation and fiscal worries lifted yields.

Against this backdrop, the portfolio's composite benchmark rose by 17.5% in sterling terms over the 12 months to the end of August 2021. Your Company largely kept pace, with its net asset value ("NAV"), on a total return basis, advancing by a similar 17.4%. The share price, on a total return basis, fared even better, up by 20.9%, finishing the year at 55.75 pence, which helped to narrow the discount to NAV. The Company did especially well in the first half of the year, but performance, relative to the benchmark, moderated later in the period, due in part to investor attitudes towards the Latin American region that proved unfavourable for segments of the Company's portfolio. The Manager has taken steps to address the more notable risks and believes that several of the recent drivers of negative relative performance are temporary. The Investment Manager's Review above provides a more detailed explanation of the portfolio's performance.

More than one year on, Covid-19 remains the primary determinant of asset prices. Whereas efforts to contain infections and boost economic stimulus were priorities earlier in the pandemic, investors' subsequent focus turned to the brightening prospects for economies and corporate earnings. This was largely triggered by the commencement of vaccination programs, which enabled governments worldwide to loosen restrictions and reopen more sectors. Unfortunately, Latin America lagged the rest of the world in this respect as logistical constraints hindered the initial vaccine rollout in several countries. Nonetheless, I am heartened to note that inoculation rates have broadly picked up, alongside a concomitant decline in caseloads.

Overall, a combination of improving vaccination rates, easing curbs and the impact of prior stimulus efforts contributed to a strengthening economic recovery. The rosier outlook globally provided added stimulus, underpinning a robust rally in commodity prices and benefiting the region's resource exporters. Encouragingly, prospects still appear upbeat, with the International Monetary Fund recently upgrading its full-year GDP growth forecasts for two key markets, Brazil and Mexico.

However, a less welcome consequence of the better than expected rebound was the return of inflation. This was driven by rising food and energy prices, volatile currencies, together with global supply-chain disruptions. Central banks, wary of the price pressures that have long impacted the region, wasted little time in reverting to a tighter policy stance. In this regard, Brazil was the most aggressive, lifting its benchmark rate five times in 2021, from 2% to 6.25%. Mexico, Chile and Peru also raised borrowing costs, with more increases expected. The better news is that, with interest rates near record lows due to the pandemic, there is room for future hikes. These proactive moves, it is hoped, will reduce inflation to more sustainable levels.

Meanwhile, fresh worries in domestic politics added some unease. This was perhaps most evident in Colombia, where large-scale protests erupted violently against a government plan to raise taxes on food and other essentials. The extended unrest sparked a broad-based sell off in the domestic market. Investors also trimmed their exposures to Peru after leftist candidate Pedro Castillo unexpectedly won the presidential election. There were fears about his populist platform, although he appears to have moderated his stance since taking office. It was a similar story in Chile, where the election of a left-leaning assembly to rewrite the constitution raised worries among foreign investors about more radical proposals. In Brazil, heightened tensions between the president and the supreme court amid persistent concern over the country's strained fiscal position hampered the market's gains. By comparison, things appeared calmer in Mexico. In fact, markets there reacted well after voters denied the ruling party a supermajority in mid-term elections, an outcome that bolstered checks and balances against President Andres Manuel Lopez Obrador's government.

Despite these uncertainties, the picture at the company level still looks fairly promising. Crucially, corporate profits largely surpassed forecasts across most sectors lending support to equity prices. Furthermore, new opportunities are emerging that make the investment landscape appear attractive to our Manager. For example, more businesses are now catering to the growing adoption of digital solutions and services, a direct result of the pandemic and associated lockdowns. Another emerging segment is tapping into the global "green" push, encompassing a diverse group of sectors, from renewable power generation to electric vehicles.

While there is certainly an attractive array of opportunities, your Manager's discerning eye and active approach remains important, especially with regards to risk mitigation. This is because there is still significant variation in the quality of companies across the region and unexpected developments can suddenly sap investor confidence, particularly on the governance front. A recent example was Geopark, an oil and gas explorer held in your Company's portfolio. The unrest in Colombia hurt the company's share price, but this was exacerbated by a board level dispute, which further weighed down on it. Your Manager very quickly engaged with the company to gain a deeper understanding of the issues. Having extracted some reassurance from management, your Manager concluded that the impact of these events did not fundamentally impair the case for investing in the company and retained the portfolio's exposure. Nonetheless, it continues to remain vigilant.

Results and Dividends

The earnings per share for the year ended 31 August 2021 were 2.66p (2020: 2.21p), reflecting a 20% increase over 2020 following the severe impact of the pandemic on dividend payouts in the prior year. The Company has continued to pay four interim dividends of 0.875p per share (2020: 0.875p) in respect of the 12 month financial period maintaining the total level of dividends for the year at 3.5p per share (2020: 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 these accumulated reserves to maintain distributions to shareholders where there is a shortfall in earnings. To finance the dividends during the year, the Company paid £480,000 (2020: £742,000) from its revenue reserve. Following the payment of dividends during the financial year, the Company continued to carry forward £1,482,000 (2020: £1,962,000) in its revenue reserve. After accounting for the fourth interim dividend which was paid after the year end the revenue reserve held the equivalent of over 0.49x of a full year's current distribution.

The Board has reviewed revenue forecasts and, as previously reported, believes that, if the volatility experienced in the Latin American region continues and currencies remain weak, it is likely that the payment of a sustainable and covered dividend may necessitate a lower dividend payment in future years. We will continue to review this position closely.

The Board is pleased that the Manager continues to support the Company to ensure that its ongoing charges ratio ("OCR") does 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 £127,000 (2020: £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 as the Manager sought to benefit from the bounce back in equities. At the financial year end, the portfolio comprised 64.5% in equities and 35.5% in bonds (2020: 59.5% equities, 40.5% bonds). The Board and Manager will continue to keep this portfolio split under review to seek to exploit market opportunities.

Share Capital

There has been no change to the Company's share capital structure during the financial year. 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 Ordinary share price discount to NAV is 13.5%.

Gearing

The Company refinanced its £6 million multi-currency revolving credit facility agreement with Scotiabank Europe plc during the financial year. In August 2021, the Company entered into a two year unsecured revolving multi-currency loan facility with The Bank of Nova Scotia, London Branch, which expires on 14 August 2023. At the year-end £5,500,000 was drawn down (2020 - £5,500,000). The Board continues to monitor the level of gearing under recommendation from the Manager and in light of market conditions.

Change of Company Name

Shareholders may be aware that the Company's Manager has recently rebranded as abrdn plc. The Board has discussed the impact of this on the Company and considers an alignment of the Company's name with that of the Manager and its new brand to be beneficial.

The Board is therefore proposing that the name of the Company be changed to "abrdn Latin American Income Fund Limited".

Under the terms of the Company's Articles of Association, the change of name requires to be approved by shareholders and the special resolution to do so is included in the Notice of Meeting for the Annual General Meeting ("AGM") on 20 December 2021. If approved, the change of the Company's name will be effected as soon as possible after the AGM.

Board Changes

In accordance with the Board's succession plan, I will step down as Chairman after the AGM in December 2021, with a view to retiring upon appointment of an additional independent non-executive director. Howard Myles has agreed to become the independent Chairman immediately after the AGM and a search is currently ongoing for an additional Jersey-resident independent non-executive director. Howard was appointed as a non-executive director on 1 October 2020 and on behalf of the Board, I am delighted to welcome him to his new role.

Annual General Meeting

This year's AGM will be held on Monday, 20 December 2021 at 8:30am at the offices of abrdn Capital International Limited, 1st Floor, Sir Walter Raleigh House, 48-50 Esplanade, St Helier, Jersey JE2 3QB. Based on current local Government Guidelines, I hope that shareholders will be permitted to attend the AGM and I look forward to meeting shareholders on the day.

However, given the risk of any potential increase in the number of Covid-19 cases in Jersey, leading to further lockdowns, 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 I would ask that shareholders submit questions to the Board prior to the AGM, and in any event before Wednesday, 15 December 2021. The Board or the Investment Manager will respond to all questions received. You may submit questions to the Board by email to Latin.American@abrdn.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 by way of notice on the Company website.

Outlook

While the outlook for Latin America certainly appears much brighter than a year ago, investors should be mindful of the remaining risks. Most obviously, although the pace of vaccinations and infection levels seem to be on the right track, the experience of Asia shows how quickly things can turn again for the worse and caution is warranted. The spectre of inflation is another worry. Policymakers must strike a balance and ensure that tighter monetary policies do not derail the pickup witnessed in economic activity and growth. Additionally, many of the country-specific political risks are yet unresolved, and could dampen sentiment if things deteriorate.

That said, the macroeconomic backdrop remains broadly supportive for the region. The restoration of global trade should boost these commodity-dependent markets, while the reopening of domestic economies augurs well for the consumer and services segments. Moreover, the expansion of major structural themes, including middle-class consumption, digitalisation, infrastructure development and green technologies, should underpin growth over the longer term.

Allied to these promising prospects is an ever-widening selection of companies and sectors. With this in mind, I believe that your Manager's prudent approach should hold the Company in good stead. The underlying holdings in your Company's portfolio have not only been rigorously screened, but are also carefully monitored. These are well-run businesses, with solid financials, robust competitive advantages, clear earnings drivers, and, with our Manager's encouragement, improving commitment to environmental, social and governance best practices. I am confident that this focus on quality will position your Company well for not only the current but the future challenges of investing in the region, and supports the Company's objective of delivering sustainable, long-term returns to shareholders.

Richard Prosser,

Chairman

9 November 2021

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 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% of 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 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" below, 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 above. 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 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 above details the key investment decisions taken during the year and subsequently. The Investment Manager has continued to manage 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 on pages 27 to 29 of the 2021 Annual Report and Accounts. 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.

Dividend Despite the continued weakness of Latin American currencies against Sterling as a result of the Covid-19 pandemic, which have continued to have economic effects on the Company's equity investments in the form of pared back distributions, the Board has, supplemented by revenue reserves, maintained the level of the Company's dividend. The Board regularly reviews revenue forecasts and announced to the market that, if the volatility experienced in the region continues and currencies remain weak, it is likely that the payment of a sustainable and covered dividend may necessitate a lower dividend payment in future years. The Board is reviewing closely the strength of the Company's investments and its balance sheet and is monitorly closely the impact of Covid-19 and associated vaccine rollouts, together with the ramifications for the region, valuations and recurring earnings, while balancing the income requirements of its shareholders, and will continue to keep its distribution policy under close review.

Gearing The Company utilises gearing in the form of bank debt with the aim of enhancing shareholder returns over the longer term. In August 2021, the Board refinanced its unsecured revolving multi-currency loan facility with The Bank of Nova Scotia, London Branch (previously Scotiabank Europe plc) expiring on 14 August 2023. At the Board's instruction, the Investment Manager sought terms of a number of banks and the Board believes that the terms offered by The Bank of Nova Scotia, London Branch were the most compelling.

Change of Company Name As set out in the Chairman's Statement, the Board is seeking shareholder approval at the Company's AGM to align the Company's name to the Manager. The Board believes that there are benefits for the Company, and it shareholders, for the Company's name to be closely aligned to the Manager's brand.

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 are highly relevant for the long-term. More information on the Manager's approach to ESG can be found on pages 33 to 36 of the 2021 Annual Report and Accounts.

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 on pages 100 and 101 of the 2021 Annual Report and Accounts.

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 is set out below.

The key, principal uncertainty for the Company during the financial year was the ongoing impact of the Covid-19 pandemic ("Covid-19") which continued to cause 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"). The Board does not expect the Company's business model, over the longer term, to be materially affected by Brexit.

The Board also regularly considers the increasing and emerging risk of ESG-related matters, particularly regarding the impact of climate change on financial performance of companies and the monitoring of developments in ESG reporting requirements, including how the Manager seeks to address them.

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 and a note of how these risks are managed, is contained in note 15 to the financial statements on pages 82 to 90 of the 2021 Annual Report and Accounts.

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 2023 including the financial covenants of the loans. The Directors will aim to agree a new facility upon the expiry of the current one in 2023 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 abrdn 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 Board has 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 abrdn on behalf of a number of investment companies under its management. The Company's financial contribution to the programme is matched by abrdn. abrdn'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 abrdn 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 2021, there were two male and two female Directors on the Board.

Environmental, Social and Human Rights Issues

The Company has no employees as it is managed by ACIL 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 outlined below.

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 all ESG matters, which could include modern slavery and human rights issues in investment portfolio companies. More information can be found on the Investment Manager's approach to ESG engagement on pages 33 to 36 of the 2021 Annual Report and Accounts.

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

Global Greenhouse Gas Emissions and Streamlined Energy and Carbon Reporting ("SECR")

All of the Company's activities are outsourced to third parties. The Company therefore has no greenhouse gas emissions to report from the operations of its business, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013. For the same reason as set out above, the Company considers itself to be a low energy user under the SECR regulations and therefore is not required to disclose energy and carbon information

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 on pages 6 to 9 of the 2021 Annual Report and Accounts, whilst the Investment Manager's views on the outlook for the portfolio are included on pages 12 to 13.

For and on behalf of the Board

Richard Prosser,

Chairman

9 November 2021

INVESTMENT MANAGER'S REVIEW

Performance Commentary

Latin American equities gained in the 12 months under review, although markets started off on the backfoot as the relentless uptick in Covid-19 infections worldwide and the tensions between the US and China threatened to scupper a nascent global recovery.

Fortunately 2020 ended on a high note as the approval and rollout of vaccines to combat the coronavirus and encouraging data out of the region's largest economy, Brazil, gave investors something to cheer about. The election of Joe Biden as US president also buoyed markets on hopes of a more nuanced approach in settling international disputes, and on the approval of his US$1.3 trillion stimulus package.

The looming spectre of new Covid-19 variants dampened market sentiment again as caseloads spiked in the New Year, compelling governments to re-impose social-distancing measures. In Brazil, political turmoil and government meddling in state-owned oil major Petrobras also weighed on the market.

However, rising demand for commodities, as many countries embarked on the road to recovery, pulled many Latin American markets back into positive territory as their export-oriented economies benefited from higher materials prices.

This, in addition to assurances from the US Federal Reserve and other developed market central banks of lower interest rates for longer, helped alleviate concerns of a resurgence in Covid-19 infections driven by the highly-infectious Delta variant toward the end of the Company's financial year.

Against this volatile backdrop, the Company's NAV performance, on a total return basis, almost matched that of its benchmark over the year, with the portfolio's net asset value rising by 17.4% versus a composite benchmark return of 17.5% in sterling terms. The Company's share price registered a total return of 20.9%.

At the stock level, key contributors to relative performance included our holdings in Bradespar, Grupo Financiero Banorte and Magazine Luiza.

The reopening of economies in North America, Europe and Asia, as Covid-19 infections ebbed, fuelled the iron-ore price rally, benefiting Bradespar, the holding company of Brazilian mining giant Vale. Meanwhile, Mexican lender Banorte's shares improved as the country's economic recovery gathered pace. Elsewhere, our underweight to Magazine Luiza, which we initiated during the period, proved astute as the Brazilian retail group's business continued to be affected by movement restrictions amid the periodic Covid-19 flare-ups. We still like the company for its exceptional strategy execution, particularly amid its shift to multichannel integration and digital fronts to overcome the challenges faced by its physical stores. Not holding investment in the Peruvian financial services firm Credicorp helped relative performance as its shares fell in tandem with the country's economic downturn seen throughout the period.

Conversely, our holding in the Chilean shopping mall operator Parque Arauco proved detrimental to performance. Its shares were weighed down by rolling social distancing measures imposed to curb Covid-19 infection rates and political concerns in the country. Nevertheless, we do expect the firm's operating statistics to rebound as the economy reopens, while good rental collections thus far are a reassuring sign of stable demand given its high quality assets.

Brazilian railway operator Rumo's shares were dented by lower grain cargo volumes as poor weather conditions affected the growing and harvesting of crops over the year. However, we believe its long-term growth story remains intact, supported by a deep competitive advantage around its business and entry barriers, as well as numerous opportunities for its organic expansion.

Meanwhile, Grupo Mexico also negatively impacted relative returns. The Mexican conglomerate's shares jumped as its materials related businesses had benefited from the copper price rally before we initiated the holding. Although we are historically underweight in the sector, we will continue to selectively add to companies that pass our quality assessment and demonstrate a willingness to engage on Environmental, Social and Governance ("ESG") matters. This is consistent with our long-term quality investment process.

Elsewhere, another initiation, Arco Platform weighed on performance. The Brazilian K-12 learning systems platform business was affected by social-distancing restrictions which kept schools shut for most of 2021. We expect the firm to emerge from the pandemic with an expanded addressable market as education institutions reopen.

Latin American debt markets retreated over the 12-month period. Local-currency bonds posted negative returns, while Latin American currencies appreciated (in aggregate) against sterling. Although the market saw increased volatility at the start of the period, momentum quickly turned positive following the US elections. News of the multiple successful Covid-19 vaccine trials and the passing of the new US stimulus bill supported global markets, even as a second wave of Covid-19 infections surged and many countries reinstated lockdown measures. The return of investment into emerging markets local-currency bond funds helped returns in November 2020.

Entering 2021, we saw higher volatility in emerging-market fixed-income instruments amid the sell-off in US bonds, following the announcement of a US$1.9 trillion US stimulus package. This shifted in February, when risk assets began to climb, driven by higher commodity prices, stronger inflation prospects, positive vaccine sentiment and the passing of the US Covid-19 relief package. Markets performed strongly towards the end of the period, as risk sentiment improved as vaccine rollouts accelerated - particularly in the developed world - and led to economic re-openings. Rising oil prices helped the oil-sensitive Latin American currencies, with the price of Brent crude moving up to US$72.99 per barrel by the end of the period, mainly due to vaccine optimism.

In Argentina, the government announced plans in November to seek to roll the Stand-By Arrangement programme with the International Monetary Fund (IMF) into an Extended Fund Facility. Meanwhile, the economy expanded at the fastest pace since 2018 in the first quarter of 2021, with GDP clocking a 2.5% year-on-year (y/y) increase. This performance was driven by higher agricultural prices, which boosted exports, as well as a continued recovery in investment and consumer spending. At the end of May 2021, the government also won a 60-day grace period from the so-called Paris Club of government creditors. It reached a deal to avoid another default by paying USD 430 million in two installments. The first installment was paid on July 31 2021 and extended the bulk of a USD 2.4 billion payment to the Paris Club. Argentina will have until 31 March 31 2022 to reach an agreement with its lenders. In August 2021, annual inflation rose to 51.8% year on year.

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%. However, in March 2021, it raised the benchmark Selic rate by 75 basis points (bps), for the first time in six years, to dampen down inflation expectations. It also trimmed its economic growth outlook for 2021 to 3.6%, from 3.8%. In the second quarter, the Selic rate was raised further, taking it to an almost pre-pandemic 4.25%. The central bank is regarded as one of the most hawkish among emerging markets. The lower house of Brazil's National Congress approved a privatisation bill that allows the dilution of the government's share in the state-owned electricity company Eletrobras from the current 60% to 45%. The move is expected to raise as much as US$20 billion for the state's coffers.

Early in the period, Banco de Mexico cut the benchmark policy rate by 25bps in February to 4.0%. The move was a resumption of its easing cycle, which was paused in the fourth quarter of 2020 to support weak economic activity. However, in a hawkish surprise, the move was reversed in the second quarter, raising the policy rate back to 4.25%. In August 2021, the central bank raised it further to 4.5%. The move was in line with market expectations, with the bank delivering a hawkish tone given the prevailing concerns on inflation. Moody's maintained the country's credit rating at Baa1 with a negative outlook. The rating agency cited the contained deterioration of the fiscal accounts and an improved economic outlook.

Over the period, the Company's bond portfolio returned 4.43% (gross of management expenses) in sterling terms, compared with the benchmark JPM GBI-EM Global Diversified Latin America Index's return of 1.61%. The yield on the index rose by 209bps to end the period at 7.04%.

In terms of management impact, asset allocation and selection drove the bond sleeve's relative outperformance, although currency allocation detracted somewhat from returns. The portfolio's overweight position in Uruguay and allocation to its inflation linked bonds had the largest positive contribution to relative performance. Our bond selection in Mexico also helped relative performance, as did the fact that we did not hold Chilean bonds or currency. On the other hand, overweight exposure to the Mexican peso had a small negative impact.

On the negative side, an underweight position in Mexico and a lack of exposure to the Dominican Republic weighed on returns. Elsewhere, security selection in Brazil and Colombia and exposure to the Mexican peso, Colombian peso and Peruvian sol detracted from performance.

Portfolio Activity

During the 12 months, aside from Magazine Luiza, Grupo Mexico and Arco Platform mentioned earlier, we initiated holdings in several Brazilian stocks, including Omega Geracao, a renewable power business with room for new project expansion and Sequoia, a leading private logistics provider that is well-positioned to serve the fast-growing e-commerce industry. We also subscribed to the initial public offers of Brazilian online homewares retailer Mobly, GetNinjas, an online platform which connects self-employed professionals with clients and biofuels company Raizen, a high-quality energy play with a range of assets, including best-in-class sugar and ethanol production, fuel distribution and renewable fuels.

Against this, we sold out of several positions, including Ambev, Kimberly Clark de Mexico, Odontoprev and Embotelladora Andina, in part to reduce our exposure to consumer staples. We also exited Linx following StoneCo's increased bid and, after its acquisition received the necessary approval, IEnova as we saw limited upside potential in the wake of the buyout offer from Sempra. We also sold positions in Aenza and Hoteles City Express due to our lower conviction in their business outlooks.

In the bond portfolio, we instigated a duration overweight in Brazil at the beginning of the financial year by selling shorter-dated positions, increasing longer-dated exposure and moving the foreign-exchange position to neutral from underweight versus the benchmark. These moves were driven by our observation that yields had corrected since the summer of 2020 and we saw value given the steeper curve. Additionally, we reduced our exposure to quasi-sovereign Mexican petroleum company Pemex to raise cash.

At the beginning of 2020, we had also reduced duration by selling longer-dated positions in Mexico and replacing them with shorter-dated positons. Furthermore, we realigned positions by increasing our exposure to Colombia and Brazil and carried out a relative value switch from 2031 Peru bonds into 2031 Brazil bonds.

Towards the end of the period, we further decreased our exposure to Pemex to cover outflows and increased positions in Peru. Finally, we raised cash by selling positions in Mexico, Uruguay and Brazil.

ESG Engagement

During the year we continued our engagement with companies on a wide-range of ESG matters, with a focus as always on collaboratively improving long-term quality for investors.

For example, from a governance perspective, we engaged with GeoPark to improve their protocols and transparency regarding share pledging and the company has since appointed an independent chair, resulting in the majority of the board comprising independent directors. Alongside this we held engagements with Bradespar culminating in the formation of a Socio Environmental Responsibility Policy. This policy governs Bradespars' stewardship practices on the board of directors at Vale. We believe this policy will help to ensure ESG improvements are catalysed at the company.

In terms of other ESG matters, climate change was a key theme, as might be expected. We engaged with Omega Geracao regarding the implementation of an environmental management system to support continuous improvement of the company's environmental performance and were encouraged to hear that the company has now committed to a target of 95% coverage of their generation assets by 2022. With Petrobras, we discussed their announcement at the beginning of the financial year regarding becoming a signatory to the Task Force for Climate Related Disclosure. This is a positive step for Petrobras, as they became the first Emerging Market Exploration and Production ("E&P") company to join the initiative. We continue to engage on this matter, specifically regarding the disclosure and appropriate target for Scope 3 emissions.

Finally, at the beginning of 2021, your Manager joined the 30% club; this is a global investor initiative seeking to increase gender diversity at board and senior management level. We wrote to a number of companies, including Weg, and explained that we will take voting action in coming annual general meetings should we not see improvements regarding diversity at the board level.

Outlook

Your Manager takes a constructive view with regard to the outlook for Latin America as we see the region as well- positioned to benefit from a combination of a conducive external backdrop for commodities and a cyclical recovery in domestic economies as well as offering an attractive set of investments.

That said, we are cognisant that risks continue to cloud the near-term outlook. Externally, the accommodative stance of the US Federal Reserve is likely to support sentiment and capital flows for the region although investors are monitoring closely the signals with regard to the tapering process. Weaker activity from China can put pressure on commodity prices which so far have been beneficial to the region. Regionally, investors are mindful of the political calendar, while Covid-19 remains a concern with rising infections worldwide amid the spread of new and more contagious variants. Moreover, renewed movement restrictions if they were imposed could jeopardise the rebound in activity and growth and require further support from governments at a time when fiscal budgets are already tight. Inflation is a further issue to monitor, particularly in Brazil where fears around power rationing are back on investors' radars, reducing the near-term visibility on inflation and growth prospects.

At the Company level we remain encouraged by the healthy results delivered by our equity holdings as well as the opportunities for growth, which are likely to materialise irrespective of the broader economy. During the pandemic, many of our equity holdings have stepped up to improve their efficiency and digitalise, positioning them better for when economies fully reopen and underpinning the Manager's belief that they will be better placed to increase dividends. We continue to favour such quality businesses, with their industry-leading positions, solid balance sheets, and experienced management giving us added confidence. Most also have compelling long-term growth drivers that are underpinned by secular themes, such as infrastructural development, renewable energy and growing consumption. From a bond perspective, financing needs should remain contained for many Emerging Market economies where better-than-expected growth in the first half of the year led to robust revenue growth. The recovery of the global economy should continue to support commodity prices and Emerging Market exports. Overall, we believe that your Company's portfolio remains well-placed to deliver sustained returns over the longer term.

Brunella Isper and Viktor Szabó,

Aberdeen Asset Managers Limited

9 November 2021

PERFORMANCE (TOTAL RETURN)

DIVIDENDS

INVESTMENT PORTFOLIO

Ten Largest Equity Investments

As at 31 August 2021

Investment Portfolio - Equities

As at 31 August 2021

DIRECTORS' REPORT

The Directors present their Report and the audited financial statements for the year ended 31 August 2021.

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 above. The Company's dividend policy is to pay interim dividends on a quarterly basis and for the year to 31 August 2021 dividends have been paid in January, May, August and October 2021.

Management Arrangements

The Company has an agreement (the "Management Agreement") with ACIL 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 2021 an OCR rebate of £127,000 (2020: £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 ACIL on the terms agreed, is in the interests of Shareholders as a whole.

Share Capital

As at 31 August 2021 there were 57,113,324 Ordinary shares in issue and 6,107,500 Ordinary shares held in treasury. There were no changes to the Company's shares in issue during the year.

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, Heather MacCallum and Howard Myles were the only Directors in office during the financial year.

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 6 to the financial statements. All of the Directors are retiring and seeking re-election at the AGM on 20 December 2021. As part of an agreed succession plan, Richard Prosser will retire as Chairman of the Company immediately after the AGM and will remain as an independent non-executive director until the completion of a successful search for, and appointment of, an additional Jersey-based director. Howard Myles will succeed Richard Prosser as Company Chairman.

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);

- appointment of a senior independent director (provision 12);

- 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, with four Directors. 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 scheduled Board and Committee meetings during the year ended 31 August 2021 as follows (with their eligibility to attend the relevant meeting in brackets):

In addition to scheduled meetings, additional meetings of the Board and its Committees were held on an ad hoc basis throughout the year to deal with business outside of normal reporting cycles.

Policy on Tenure

In normal circumstances, it is the Board's expectation that Directors will not serve beyond the AGM 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 AGM 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.

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 abrdn. 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 proceduresare 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 on pages 54 to 56 of the 2021 Annual Report and Accounts.

Audit Committee

The Report of the Audit Committee is on pages 51 to 53 of the 2021 Annual Report and Accounts.

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 abrdn. 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 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 considered 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 20 December 2021, Richard Prosser, Hazel Adam, Heather MacCallum and Howard Myles will offer themselves for re-election as Directors of the Company.

The Board has considered the contribution of each Director, as set out on pages 41 and 42 of the 2021 Annual Report and Accounts, 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 scrutinised the contribution and independence of Richard Prosser who has served on the Board, and as Chairman, for eleven years and five months.

The Directors are unanimously of the opinion that Richard Prosser, who was independent on appointment, remains independent of the Manager in character and judgement. He exercises independence of thought, regularly considers shareholder views in decisions and is not overly reliant upon the Manager. Notwithstanding his continued independence, Richard Prosser will retire as Chairman on the conclusion of the forthcoming AGM, as part of an agreed succession plan, and upon completion of a search for, and the appointment of, an additional Jersey-resident non-executive Director, will retire from the Board. Howard Myles has agreed to become Chairman, and a search has already commenced for a new independent non-executive Director. The Committee considers the continuation of Richard's appointment as a Director to be a requirement over the short-term for the effective operation of the Board in its transitional phase.

Accordingly, the Board has reviewed, and unanimously supports, the proposed re-election of Hazel Adams, Heather MacCallum, Howard Myles and Richard Prosser.

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 Board has 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 Board believes that the Company is well placed to manage its business risks successfully despite uncertainties in the economic outlook.

The Board is mindful of the principal risks and uncertainties disclosed above, including the ongoing impact of Covid-19 and outlook for the Latin American region. It has reviewed forecasts detailing revenue and liabilities and believes 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 Board continues 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 2021 meeting, the Audit Committee members carried out an annual assessment of internal controls for the year ended 31 August 2021 by considering documentation from abrdn, including the internal audit and compliance functions and taking account of events since 31 August 2021. 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 the 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 6 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 2021:

On 8 October 2021, 1607 Capital Partners advised the Company that it had sold shares in the Company and now holds 10.0% of the issued Ordinary share capital.

There have been no other significant changes notified to the Company in respect of the above holdings between 31 August 2021 and 9 November 2021.

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. ACIL, 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, ACIL 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 8:30am on Monday, 20 December 2021 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 AGM 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 3 will seek shareholder approval for the dividend policy.

Appointment of Independent Auditor

The Directors will put a resolution before the AGM to re-appoint PricewaterhouseCoopers CI LLP ("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 -11.4% at 31 August 2021. As set out in the Chairman's Statement above, 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 during the financial year. 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 10, 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 AGM in 2022 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 11, 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 AGM to be held in 2022.

Change of Company Name

Resolution 12, which will be proposed as a special resolution, seeks shareholder approval to change the Company's name to "abrdn Latin American Income Fund Limited". The change of name is being proposed in order to align the Company's name with the name of the Manager's business, which has recently changed. If shareholders pass resolution 12, the Board will effect the change of name as soon as possible after the AGM.

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 AGM, 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 AGM, 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. You may submit questions to the Board by email to latin.american@abrdn.com.

Responsible Investment

The Board is aware of its duty to act in the best 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 investment in companies which pursue best practice in ESG matters, this is always considered in the context of return on the investment portfolio.

Directors' Report Continued

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.

ESG Policy

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, challenges whether decisions take appropriate account of the social, environment and ethical factors, which may affect the performance or value of the Company's investments, including climate change. More details on the Investment Manager's approach to ESG engagement can be found on pages 33 to 36 of the 2021 Annual Report and Accounts.

For and on behalf of the Board

abrdn Capital International Limited,

Secretary

9 November 2021

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 listed on pages 41 and 42 of the 2021 Annual Report and Accounts, 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

9 November 2021

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

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