29 Apr 2019 07:00
29 April 2019
Aberdeen Latin American Income Fund Limited
Legal Entity Identifier (LEI): 549300DN623WEGE2MY04
Half Yearly Results for the Six Months to 28 February 2019
Information disclosed in accordance with paragraph 4.2 of the Disclosure Guidance and Transparency Rules
The investment objective of the Company is to provide Ordinary shareholders with a total return, with an above average yield, primarily through investing in Latin American securities.
28 February 2019 | 31 August2018 | %change | |
Total assets (£'000) | 52,716 | 48,825 | +8.0 |
Equity shareholders' funds (£'000) | 46,216 | 42,325 | +9.2 |
Net asset value per Ordinary share | 78.22p | 70.34p | +11.2 |
Ordinary share price (mid-market) | 68.20p | 60.80p | +12.2 |
Discount to net asset value on Ordinary shares{A} | 12.8% | 13.6% | |
Net gearing{A} | 13.5% | 14.2% | |
Ongoing charges ratio{A} | 2.00% | 2.00% | |
{A} Considered to be an Alternative Performance Measure. | |||
Performance (total return){A} | ||
Six months ended | Yearended | |
28 February 2019 | 31 August2018 | |
Net asset value | +13.8% | -18.8% |
Ordinary share price | +15.3% | -18.5% |
Composite MSCI EM Latin American 10/40 Index/JP Morgan GBI-EM Global Diversified Index (Latin America carve out)(sterling adjusted) | +11.2% | -10.9% |
Source: Aberdeen Standard Investments, Lipper and Morningstar. | ||
{A} Considered to be an Alternative Performance Measure. | ||
INTERIM BOARD REPORT - CHAIRMAN'S STATEMENT
Overview
The Company's Net Asset Value ("NAV") total return (capital return plus dividends reinvested) rose by 13.8% during the six month period ended 28 February 2019, ahead of the composite benchmark's 11.2% gain. During the period, the Ordinary shares delivered a share price total return of 15.3%.
Latin American equities and bonds performed strongly in the six months under review, despite a litany of global worries, such as prolonged trade tensions between the US and China, the US Federal Reserve's accelerated policy normalisation and concerns over a slowdown in global economic growth. The key events that shaped the performance, however, predominantly came from within the region, specifically the election outcomes and policies of the governments in Brazil and Mexico.
At the beginning of the period, the market snapped back from the aftermath of the third-quarter of 2018, when the fiscal crisis in Argentina had sent markets into a tailspin. The rebound began in Mexico, where early optimism over President Andrés Manuel López Obrador's (AMLO) seemingly market friendly rhetoric and structural reform agenda wooed investors. Additionally, the preliminary US-Mexico-Canada trade agreement (USMCA) boosted sentiment. In Brazil, stocks rebounded ahead of Jair Bolsonaro's win in the presidential elections in October, and maintained its upward momentum on the back of higher investor confidence in the new government's reform agenda.
Soon after, however, share prices declined and continued to fall until the period end. Mexican stocks sold-off after the AMLO government cancelled a multi-billion dollar international airport project, based on a controversial referendum. Growing concerns over the government's use of such public consultations to decide on key infrastructure projects, as well as its policy limiting the banking sector's ability to charge fees, kept investors at bay. Tightening monetary conditions brought on by the Fed's fourth rate hike in December put pressure on local currencies and hampered returns. Currency depreciation was more pronounced in Mexico, Peru, Colombia and Argentina. Mexican and Argentinian central banks were compelled to followed suit, raising their rates, while Colombia held its rate unchanged. Despite fresh austerity measures and an increased IMF bailout, Argentina struggled to get the peso and its economy back on track.
Mitigating losses were gains in Brazil, where the real bounced back and markets rallied amid sustained investor confidence in the economic and structural reform policies of the Bolsonaro government, in particular the much-watched pension reform bill that was submitted to Congress in February. Despite a devastating disaster in Minas Gerais in January that shook up the mining industry, Brazilian equities held up well, and even gained on the back of higher iron-ore prices. The spike in iron ore was due to speculation of possible supply shortages stemming from the authorities shutting down several other mining operations run by Vale, the operator involved in the disaster.
Since the beginning of 2019, markets rebounded on positive sentiment over the Fed's decision to hold fire and take a more patient approach towards further tightening. Still, headwinds prevailed from continued uncertainty about the Mexican government's increasingly interventionist policies and doubts about its commitment to push through effective reforms in the energy sector. Overall, the energy sector experienced some volatility over the period due to unstable oil prices. Brazilian state-owned oil company Petrobas, which the Manager introduced in the period, emerged a winner in this environment. However, the portfolio's relatively lower exposure to the company capped gains.
Dividends
We have declared a second interim dividend of 0.875p per Ordinary share in respect of the year to 31 August 2019 payable on 17 May 2019 to Ordinary shareholders on the register on the record date of 3 May 2019.
Board Changes
Martin Adams retired as a non-executive Director of the Company on 13 December 2018, having served on the Board since launch in 2010. The Board wishes to express their sincere thanks to Martin for his significant contribution to the Company during his tenure.
The Board regularly considers Board composition and succession planning and was delighted to welcome Heather MacCallum as a non-executive Director with effect from 24 April 2019. Heather was previously a partner of KPMG LLP and has extensive financial services and investment companies experience, and the Board looks forward to working with her.
Share Capital
During the period the Company purchased 1,090,000 Ordinary shares for cancellation at a weighted average discount of 13.0% to the prevailing NAV per share (ex income). The Board will continue to make selective use of share buybacks, subject to prevailing market conditions and where to do so would be in Shareholders' interests. Subsequent to the period end a further 330,000 Ordinary shares have been purchased for cancellation. At the date of this report, there are 58,755,324 Ordinary Shares in issue and 6,107,500 held in treasury and the Ordinary shares are trading at a discount of 12.4% to the NAV (ex income).
Gearing
The level of drawings under the Company's three year £8 million multi-currency revolving facility agreement with Scotiabank (Ireland) Designated Activity Company remained constant at £6.5 million throughout the six months under review. This represents net gearing of 13.5% at the period end. The Board will continue to monitor the level of gearing under recommendation from the Investment Manager and in the light of market conditions.
Ongoing Charges
As previously indicated, the Board is pleased to have secured agreement from the Manager to ensure that the Company's ongoing charges ratio ("OCR") will not exceed 2.0% when calculated annually as at 31 August. To the extent that the OCR exceeds 2.0% the Manager will rebate part of its fees in order to bring that ratio down to 2.0%.
Outlook
Coming into the new year, the outlook for the global economy has somewhat improved with the possibility of the US-China trade spat being resolved soon. Despite this, investors remain nervous as GDP growth forecasts have been downgraded. Acknowledging this deterioration in the global economic momentum, the Fed responded with a wait-and-see stance and markets have cheered the prospect of a suspension in rate hikes for the first half of 2019. Emerging markets stand to benefit from this, as the pressure on their central banks to defend their currencies ease.
In Latin America, regional politics continues to be a determinant of market direction. In Brazil, investors are watchful over the progress of the pension bill that was submitted to Congress. While confident that the bill will eventually pass, it is likely the original proposal will be diluted and take longer than previously expected since a Constitutional amendment, backed by a qualified majority of 60% in both the lower house and Senate is necessary. Despite brewing political scandals, investors seem encouraged by the administration's commitment towards fiscal and structural reforms. Bolsonaro's attempt to improve relations with the US might also open doors for increased bilateral trade between the two largest nations in the Americas.
Investors, however, are less enamoured with developments in Mexico. The AMLO government's "public consultation" reflects populism, which will weigh on confidence and serves to keep foreign investors aloof. The central bank shaved its growth forecast and the peso has yet to recover from oil price volatility.
Despite the short-term uncertainties, I remain optimistic about your Company's high-quality portfolio, given its resilience. I also have confidence in your Manager's ability to select investments backed by solid fundamentals and long-term growth potential that will continue to deliver robust yields.
Richard Prosser
Chairman
26 April 2019
INTERIM BOARD REPORT - INVESTMENT MANAGER'S REVIEW
Performance Commentary
Latin American equities faced increased volatility during the period under review but edged higher ahead of other emerging markets in sterling terms. On the global front, investors were more optimistic amid signs that the US-China trade spat was nearing an end, as well as continued reassurances from the US Federal Reserve that no further rate hikes were planned for the first half of the year. However, the key events that shaped the market during the six months came from within the region. Jair Bolsonaro's presidential election win in October helped the market recover on expectation that his proposed reforms agendas could boost economic health. In contrast, Mexico sold-off on increased concerns around controversial policies under the newly-elected President López Obrador. The central bank also lowered its growth forecast following fuel rationing and lower crude production.
Against this backdrop, your Company's equity portfolio advanced significantly by 16.49% in sterling terms, ahead of the benchmark MSCI Emerging Markets Latin America 10/40 Index's 13.83% gain.
The choice of holdings in Brazil and Mexico added to performance. At the stock level, the main contributor was Lojas Renner. Its robust performance benefited from the recovery in consumption and continued good execution. Software provider Linx also did well, as it revealed the launch of its payment business. Arezzo, Multiplan and Ultrapar contributed to gains as stock prices recovered from earlier weakness, on improved sentiment and positive economic outlook under the new Brazilian president. Meanwhile, not holding Mexican America Movil and Grupo Televisa was also positive for your company, as these led the market decline on disappointing results, affected by the weaker Mexican peso.
On the flip side, your portfolio's lower exposure to Petrobras was the main detractor as the Brazilian state-owned oil company performed well, driven by positive sentiment around the presidential election outcome. Mexican bank Banorte suffered on the back of concerns around potential government intervention in the banking sector, particularly on fee-income and the pension business.
In the six months under review both the regional and the broader global environment became more positive for the Latin American debt markets. Currencies broadly stabilised after the significant depreciation seen in the first half of last year. Inflation started to converge towards the central banks' inflation targets, while economic activity was weaker than expected, allowing the monetary authorities to end the rate hiking cycles and move towards a neutral stance. This policy shift was further supported by the Federal Reserve stepping back from its rate hiking policy. The recovery of the commodities markets towards the end of the review period was also helpful.
Within the region, performance varied between countries. Brazil was the outperformer, with both the currency and local bonds recording significant gains. This can largely be explained by the election of Jair Bolsonaro as president in October, and his choice of a credible and market-friendly economic team. As a result markets went from pricing in 400 basis points of rate hikes before the elections to completely pricing out any tightening, bringing down the entire yield curve. On the other side, Argentina substantially underperformed its regional peers. Despite the economic recession, fiscal consolidation and very high interest rates, inflation continued to rise throughout the review period, putting pressure on the local bond market and also the currency.
Against this backdrop, your Company's bond portfolio advanced by 8.24% in sterling terms, ahead of the benchmark JPM GBI-EM Global Diversified Latin America Index's 7.12% gain.
Portfolio Activity
During the period, we made several changes to the equity holdings within your portfolio, adding and paring stocks based out their performance and outlook. Notably, we exited Hering, Iguatemi and Bancolombia after share price outperformance and reinvested the proceeds in other high-conviction names. Your portfolio now includes Petrobras and Notre Dame Intermedica. Petrobras is the largest petroleum company in Brazil. We added the company on its improving outlook and higher conviction to its overall deleveraging drive. Meanwhile, Notre Dame Intermedica is a high quality integrated healthcare operator in a segment with plenty of potential growth. We also remain positive on its outlook.
In the bond portfolio, we reduced exposure to Mexican rates and currency, concerned by the new president's unorthodox and populist economic policies. We increased our exposure to the Colombian peso, as the currency weakened following the big drop in international oil prices in the last quarter of 2018. However, we have trimmed our duration exposure in Colombia after the strong performance of local rates. We also added exposure in Argentina, through the most defensive short dated policy rate linked instruments, which provide an exceptionally high coupon yield.
Outlook
It is likely to be a volatile year for Latin America, as global concerns around trade developments, the direction of the US dollar as well as the oil price will continue to pose risks. Within the region, local politics, reform and infrastructure developments will determine investor sentiment. While the political calendar is much quieter than last year, when we saw elections in Brazil, Mexico and Colombia, the election in Argentina in October will keep investors excited. Beyond that, political volatility should be less impactful than 2018, allowing the region to focus on delivering stable, sustainable and inclusive growth. This should have a positive impact on corporate earnings and share prices. In the longer term, population growth, a more affluent middle class and low labour costs, should be positive for the domestic economy. The economic push will be supportive for most companies, in particular financials and consumer companies. Moreover, valuations remain compelling relative to their global peers.
We continue to believe that the region offers great value for long term investors and are optimistic about your Company's outlook. Latin American countries in general have seen their external balances improved in the last few years, while the rate hikes last year demonstrated the authorities' ability to react in the face of market pressures. We have also seen efforts to improve the fiscal balances, although there remains a lot to be done for many countries.
Against this backdrop, the bond portfolio continues to generate sufficient income, while the equity portfolio remains focused on selecting stocks that can benefit from stable growth, healthy consumption and structural improvements. This, along with their solid balance sheets and good management provide us with added confidence. We continue to engage with company's management to ensure that their goals continue to be aligned with that of the shareholders' and remain diligent in our efforts to drive improvement and shareholder returns. At the same time, we continue to look out for other investment opportunities that can take advantage of new growth opportunities, to ensure that the portfolio remains well-positioned for the future.
Aberdeen Asset Managers Limited
26 April 2019
INTERIM BOARD REPORT
Going Concern
The Directors have undertaken a rigorous review of the Company's ability to continue as a going concern. The Company's assets, including those of its subsidiary, consist of a diverse portfolio of listed equities, equity-related investments and fixed income investments which, in most circumstances, are realisable within a very short timescale.
The Directors are mindful of the principal risks and uncertainties disclosed below and review on a regular basis forecasts detailing revenue and liabilities and the Company's operational expenses. Consequently the Directors believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future and at least 12 months from the date of this Half-Yearly Report. Accordingly, they continue to adopt the going concern basis in preparing the Half-Yearly Report.
Principal Risks and Uncertainties
The principal risks and uncertainties affecting the Company are set out in detail on page 10 of the Annual Report and Financial Statements for the year ended 31 August 2018 and have not changed. They can be summarised under the following headings:
- Investment strategy and objectives;
- Investment portfolio, investment management;
- Financial obligations;
- Financial and regulatory;
- Operational; and
- Income and dividend risk.
Directors' Responsibility Statement
The Directors are responsible for preparing this Half-Yearly Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:
- The condensed set of financial statements has been prepared in accordance with International Accounting Standards (IAS) 34 "Interim Financial Reporting" and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and,
- the Interim Board Report contained within the Half-Yearly Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the FCA's Disclosure Guidance and Transparency Rules.
The Half-Yearly Report includes a fair review of the information required on material transactions with related parties and any changes to those described in the Annual Report.
For and on behalf of the Board
Richard Prosser
Chairman
26 April 2019
Investment Portfolio - Equities
As at 28 February 2019
| | | Total |
| | Valuation | assetsC |
Company | Country | £'000 | % |
Banco Bradesco ADRA | Brazil | 2,669 | 5.1 |
Itau Unibanco Holdings ADRA | Brazil | 2,308 | 4.4 |
PetrobrasB | Brazil | 1,946 | 3.7 |
Lojas RennerB | Brazil | 1,184 | 2.2 |
Grupo Financiero Banorte | Mexico | 1,176 | 2.2 |
Fomento Economico Mexicano ADR | Mexico | 1,158 | 2.2 |
BradesparB | Brazil | 1,103 | 2.1 |
Grupo Aeroportuario Sureste ADR | Mexico | 1,057 | 2.0 |
AmbevB | Brazil | 995 | 1.9 |
Vale ADR | Brazil | 950 | 1.8 |
Top ten equity investments | | 14,546 | 27.6 |
Multiplan EmpreendimentosB | Brazil | 902 | 1.7 |
Wal-Mart de Mexico | Mexico | 886 | 1.7 |
B3 Brasil Bolsa BalcoB | Brazil | 886 | 1.7 |
Localiza Rent A CarB | Brazil | 685 | 1.3 |
Arca Continental | Mexico | 670 | 1.3 |
Arezzo Industria e ComercioB | Brazil | 636 | 1.2 |
Ultrapar Participacoes ADR | Brazil | 556 | 1.1 |
Banco Santander-Chile ADR | Chile | 486 | 0.9 |
Parque AraucoB | Chile | 484 | 0.9 |
Embotelladora Andina 'A' PrefB | Chile | 471 | 0.9 |
Top twenty equity investments | | 21,208 | 40.3 |
S.A.C.I. FalabellaB | Chile | 466 | 0.9 |
WEGB | Brazil | 454 | 0.9 |
Infraestructura Energetica Nova | Mexico | 443 | 0.8 |
TOTVSB | Brazil | 440 | 0.8 |
OdontoprevB | Brazil | 390 | 0.7 |
LinxB | Brazil | 372 | 0.7 |
Globant | Argentina | 368 | 0.7 |
Wilson, SonsB | Brazil | 367 | 0.7 |
Grupo Finaciero Santander | Mexico | 362 | 0.7 |
Itausa Investimentos Itau PrefB | Brazil | 354 | 0.7 |
Top thirty equity investments | | 25,224 | 47.9 |
Cementos Pacasmayo | Peru | 320 | 0.6 |
Notredame IntermedicaB | Brazil | 302 | 0.6 |
Tenaris ADR | Argentina | 298 | 0.6 |
Hoteles City Express | Mexico | 283 | 0.5 |
BBVA Banco Frances | Argentina | 270 | 0.5 |
Raia DrogasilB | Brazil | 265 | 0.5 |
Kimberly-Clark de Mexico | Mexico | 257 | 0.5 |
Grupo Lala | Mexico | 228 | 0.4 |
Valid SolucoesB | Brazil | 223 | 0.4 |
Brasil FoodsB | Brazil | 203 | 0.4 |
Top forty equity investments | | 27,873 | 52.9 |
Brasil Foods Sponsored ADR | Brazil | 138 | 0.3 |
Grupo Aeroportuario Centro Norte | Mexico | 127 | 0.2 |
Grana Y Montero | Peru | 124 | 0.2 |
Ultrapar ParticipacoesB | Brazil | 102 | 0.2 |
Fossal | Peru | 2 | 0.0 |
Total equity investments | | 28,366 | 53.8 |
A Holding includes investment in common and ADR lines. | |||
B Held in Subsidiary. | |||
C Excluding bank loans of £6,500,000. | |||
Investment Portfolio - Bonds
As at 28 February 2019
| | Total |
| Valuation | assetsB |
Issue | £'000 | % |
Brazil (Fed Rep of) 10% 01/01/25A | 4,557 | 8.6 |
Colombia (Rep of) 9.85% 28/06/27 | 3,397 | 6.4 |
Brazil (Fed Rep of) 10% 01/01/21A | 3,011 | 5.7 |
Mex Bonos Desarr Fix Rt 10% 20/11/36 | 2,005 | 3.8 |
Mex Bonos Desarr Fix Rt 8.5% 18/11/38 | 1,720 | 3.3 |
Uruguay (Rep of) 4.375% 15/12/28 | 1,699 | 3.2 |
Peru (Rep of) 6.95% 12/08/31 | 1,276 | 2.4 |
Argentina (Rep of) Frn 21/06/20 | 1,136 | 2.2 |
Petroleos Mexicanos 7.47% 12/11/26 | 826 | 1.6 |
Uruguay (Rep of) 9.875% 20/06/22 | 781 | 1.5 |
Top ten bond investments | 20,408 | 38.7 |
Uruguay (Rep of) 4.25% 05/04/27 | 757 | 1.4 |
Brazil (Fed Rep of) 10% 01/01/27A | 616 | 1.2 |
Mex Bonos Desarr Fix Rt 10% 05/12/24 | 581 | 1.1 |
Peru (Rep of) 6.95% 12/08/31 | 405 | 0.8 |
Argentina (Rep of) 15.5% 17/10/26 | 308 | 0.6 |
Mexico (United Mexican States) 7.75% 13/11/42 | 125 | 0.3 |
Petroleos Mexicanos 7.19% 12/09/24 | 120 | 0.2 |
Peru (Rep of) 6.15% 12/08/32 | 58 | 0.1 |
Total value of bonds | 23,378 | 44.4 |
Total value of equity investments | 28,366 | 53.8 |
Total value of portfolio investments | 51,744 | 98.2 |
Other net assets held in subsidiary | 310 | 0.6 |
Total investments | 52,054 | 98.8 |
Net current assetsB | 662 | 1.2 |
Total assetsB | 52,716 | 100.0 |
A Held in Subsidiary. | ||
B Excluding bank loans of £6,500,000. | ||
Distribution of Investments
As at 28 February 2019
| Equities | Bonds | Total |
Country | % | % | % |
Argentina | 1.8 | 2.8 | 4.6 |
Brazil | 35.5 | 15.8 | 51.3 |
Chile | 3.7 | - | 3.7 |
Colombia | - | 6.6 | 6.6 |
Mexico | 12.8 | 10.4 | 23.2 |
Peru | 0.9 | 3.4 | 4.3 |
Uruguay | - | 6.3 | 6.3 |
______ | ______ | ______ | |
| 54.7 | 45.3 | 100.0 |
______ | ______ | ______ |
Condensed Statement of Comprehensive Income
Six months ended | ||||
28 February 2019 | ||||
(unaudited) | ||||
Revenue | Capital | Total | ||
Notes | £'000 | £'000 | £'000 | |
Income | ||||
Income from investments | 3 | 1,641 | - | 1,641 |
Gains/(losses) on financial assets held at fair value through profit or loss | - | 4,589 | 4,589 | |
Currency (losses)/gains | - | (66) | (66) | |
Gains/(losses) on forward currency contracts held at fair value | - | 60 | 60 | |
_________ | _________ | _________ | ||
1,641 | 4,583 | 6,224 | ||
_________ | _________ | _________ | ||
Expenses | ||||
Investment management fee | (104) | (156) | (260) | |
Other operating expenses | 4 | (216) | - | (216) |
_________ | _________ | _________ | ||
Profit/(loss) before finance costs and taxation | 1,321 | 4,427 | 5,748 | |
Finance costs | (24) | (36) | (60) | |
_________ | _________ | _________ | ||
Profit/(loss) before taxation | 1,297 | 4,391 | 5,688 | |
Taxation | (25) | - | (25) | |
_________ | _________ | _________ | ||
Profit/(loss) for the period | 1,272 | 4,391 | 5,663 | |
_________ | _________ | _________ | ||
Earnings per Ordinary share (pence) | 5 | 2.13 | 7.36 | 9.49 |
_________ | _________ | _________ | ||
The profit/(loss) for the period is also the comprehensive income for the period. | ||||
The total columns of this statement represent the Statement of Comprehensive Income, prepared in accordance with IFRS. The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. | ||||
All items in the above statement derive from continuing operations. | ||||
The accompanying notes are an integral part of the financial statements. | ||||
Condensed Statement of Comprehensive Income (Cont'd)
Six months ended | ||||
28 February 2018 | ||||
(unaudited) | ||||
Revenue | Capital | Total | ||
Notes | £'000 | £'000 | £'000 | |
Income | ||||
Income from investments | 3 | 1,600 | - | 1,600 |
Gains/(losses) on financial assets held at fair value through profit or loss | - | (3,639) | (3,639) | |
Currency (losses)/gains | - | 13 | 13 | |
Gains/(losses) on forward currency contracts held at fair value | - | (43) | (43) | |
_________ | _________ | _________ | ||
1,600 | (3,669) | (2,069) | ||
_________ | _________ | _________ | ||
Expenses | ||||
Investment management fee | (117) | (175) | (292) | |
Other operating expenses | 4 | (261) | - | (261) |
_________ | _________ | _________ | ||
Profit/(loss) before finance costs and taxation | 1,222 | (3,844) | (2,622) | |
Finance costs | (20) | (30) | (50) | |
_________ | _________ | _________ | ||
Profit/(loss) before taxation | 1,202 | (3,874) | (2,672) | |
Taxation | (33) | - | (33) | |
_________ | _________ | _________ | ||
Profit/(loss) for the period | 1,169 | (3,874) | (2,705) | |
_________ | _________ | _________ | ||
Earnings per Ordinary share (pence) | 5 | 1.89 | (6.27) | (4.38) |
_________ | _________ | _________ | ||
The profit/(loss) for the period is also the comprehensive income for the period. | ||||
The total columns of this statement represent the Statement of Comprehensive Income, prepared in accordance with IFRS. The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. | ||||
All items in the above statement derive from continuing operations. | ||||
The accompanying notes are an integral part of the financial statements. | ||||
Condensed Statement of Comprehensive Income (Cont'd)
Year ended | ||||
31 August 2018 | ||||
(audited) | ||||
Revenue | Capital | Total | ||
Notes | £'000 | £'000 | £'000 | |
Income | ||||
Income from investments | 3 | 3,095 | - | 3,095 |
Gains/(losses) on financial assets held at fair value through profit or loss | - | (12,043) | (12,043) | |
Currency (losses)/gains | - | 44 | 44 | |
Gains/(losses) on forward currency contracts held at fair value | - | (42) | (42) | |
_________ | _________ | _________ | ||
3,095 | (12,041) | (8,946) | ||
_________ | _________ | _________ | ||
Expenses | ||||
Investment management fee | (222) | (333) | (555) | |
Other operating expenses | 4 | (473) | - | (473) |
_________ | _________ | _________ | ||
Profit/(loss) before finance costs and taxation | 2,400 | (12,374) | (9,974) | |
Finance costs | (42) | (63) | (105) | |
_________ | _________ | _________ | ||
Profit/(loss) before taxation | 2,358 | (12,437) | (10,079) | |
Taxation | (45) | (171) | (216) | |
_________ | _________ | _________ | ||
Profit/(loss) for the period | 2,313 | (12,608) | (10,295) | |
_________ | _________ | _________ | ||
Earnings per Ordinary share (pence) | 5 | 3.78 | (20.62) | (16.84) |
_________ | _________ | _________ | ||
The profit/(loss) for the period is also the comprehensive income for the period. | ||||
The total columns of this statement represent the Statement of Comprehensive Income, prepared in accordance with IFRS. The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. | ||||
All items in the above statement derive from continuing operations. | ||||
The accompanying notes are an integral part of the financial statements. | ||||
Condensed Balance Sheet
As at | As at | As at | ||
28 February 2019 | 28 February 2018 | 31 August 2018 | ||
(unaudited) | (unaudited) | (audited) | ||
Notes | £'000 | £'000 | £'000 | |
Non-current assets | ||||
Investments held at fair value through profit or loss | 52,054 | 57,603 | 48,277 | |
_________ | _________ | _________ | ||
Current assets | ||||
Cash | 290 | 36 | 411 | |
Forward foreign currency contracts | 115 | 68 | 96 | |
Other receivables | 612 | 595 | 442 | |
_________ | _________ | _________ | ||
1,017 | 699 | 949 | ||
_________ | _________ | _________ | ||
Current liabilities | ||||
Bank loan | 8 | (6,500) | (6,500) | (6,500) |
Forward foreign currency contracts | (55) | (1) | (35) | |
Other payables | (300) | (203) | (366) | |
_________ | _________ | _________ | ||
(6,855) | (6,704) | (6,901) | ||
_________ | _________ | _________ | ||
Net current liabilities | (5,838) | (6,005) | (5,952) | |
_________ | _________ | _________ | ||
Net assets | 46,216 | 51,598 | 42,325 | |
_________ | _________ | _________ | ||
Equity capital and reserves | ||||
Equity capital | 9 | 65,936 | 65,936 | 65,936 |
Capital reserve | (22,195) | (16,504) | (25,861) | |
Revenue reserve | 2,475 | 2,166 | 2,250 | |
_________ | _________ | _________ | ||
Equity shareholders' funds | 46,216 | 51,598 | 42,325 | |
_________ | _________ | _________ | ||
Net asset value per Ordinary share (pence) | 10 | 78.22 | 84.47 | 70.34 |
_________ | _________ | _________ | ||
The accompanying notes are an integral part of the financial statements. | ||||
Condensed Statement of Changes in Equity
Six months ended 28 February 2019 (unaudited) | |||||
Stated | Capital | Revenue | |||
capital | reserve | reserve | Total | ||
Notes | £'000 | £'000 | £'000 | £'000 | |
Balance at 31 August 2018 | 65,936 | (25,861) | 2,250 | 42,325 | |
Profit for the period | - | 4,391 | 1,272 | 5,663 | |
Dividends paid | 6 | - | - | (1,047) | (1,047) |
Purchase of own shares for treasury | - | (725) | - | (725) | |
______ | ______ | ______ | ______ | ||
Balance at 28 February 2019 | 65,936 | (22,195) | 2,475 | 46,216 | |
______ | ______ | ______ | ______ | ||
Six months ended 28 February 2018 (unaudited) | |||||
Stated | Capital | Revenue | |||
capital | reserve | reserve | Total | ||
Notes | £'000 | £'000 | £'000 | £'000 | |
Balance at 31 August 2017 | 65,936 | (11,846) | 2,080 | 56,170 | |
(Loss)/profit for the period | - | (3,874) | 1,169 | (2,705) | |
Dividends paid | 6 | - | - | (1,083) | (1,083) |
Purchase of own shares for cancellation | - | (784) | - | (784) | |
______ | ______ | ______ | ______ | ||
Balance at 28 February 2018 | 65,936 | (16,504) | 2,166 | 51,598 | |
______ | ______ | ______ | ______ | ||
Year ended 31 August 2018 (audited) | |||||
Stated | Capital | Revenue | |||
capital | reserve | reserve | Total | ||
Notes | £'000 | £'000 | £'000 | £'000 | |
Balance at 31 August 2017 | 65,936 | (11,846) | 2,080 | 56,170 | |
(Loss)/profit for the period | - | (12,608) | 2,313 | (10,295) | |
Dividends paid | 6 | - | - | (2,143) | (2,143) |
Purchase of own shares for treasury | - | (1,407) | - | (1,407) | |
______ | ______ | ______ | ______ | ||
Balance at 31 August 2018 | 65,936 | (25,861) | 2,250 | 42,325 | |
______ | ______ | ______ | ______ | ||
The accompanying notes are an integral part of the financial statements. | |||||
Condensed Cash Flow Statement
Six months ended | Six months ended | Year ended | |
28 February 2019 | 28 February 2018 | 31 August 2018 | |
(unaudited) | (unaudited) | (audited) | |
£'000 | £'000 | £'000 | |
Operating activities | |||
Dividend income | 147 | 124 | 508 |
Fixed interest income | 618 | 660 | 1,510 |
Income from Subsidiary | 497 | 565 | 1,190 |
Interest income | 2 | - | 2 |
Investment management fee paid | (256) | (295) | (522) |
Other paid expenses | (185) | (271) | (508) |
_________ | _________ | _________ | |
Cash generated from operating activities before finance costs and taxation | 823 | 783 | 2,180 |
Interest paid | (62) | (49) | (104) |
Withholding taxes paid | (11) | (8) | (42) |
_________ | _________ | _________ | |
Net cash inflow from operating activities | 750 | 726 | 2,034 |
Cash flows from investing activities | |||
Purchases of investments | (3,055) | (6,386) | (7,853) |
Proceeds from sales of investments | 3,787 | 6,063 | 8,483 |
Receipts from Subsidiary | 232 | 864 | 651 |
_________ | _________ | _________ | |
Net cash inflow from investing activities | 964 | 541 | 1,281 |
_________ | _________ | _________ | |
Cash flows from financing activities | |||
Equity dividends paid | (1,047) | (1,083) | (2,143) |
Repurchase of own shares | (720) | (771) | (1,415) |
_________ | _________ | _________ | |
Net cash outflow from financing activities | (1,767) | (1,854) | (3,558) |
_________ | _________ | _________ | |
Net decrease in cash | (53) | (587) | (243) |
Foreign exchange | (68) | (30) | 1 |
Cash at start of period | 411 | 653 | 653 |
_________ | _________ | _________ | |
Cash and cash equivalents at end of period | 290 | 36 | 411 |
_________ | _________ | _________ | |
The accompanying notes are an integral part of the financial statements. | |||
Notes to the Financial Statements
For the six month period ended 28 February 2019
1. | Principal activity |
The Company is a closed-end investment company incorporated in Jersey. Its Ordinary shares are traded on the London Stock Exchange and are listed in the premium segment of the Financial Conduct Authority's Official List. The Company's principal activity is investing in Latin American securities. | |
The principal activity of its Delaware incorporated wholly owned subsidiary, Aberdeen Latin American Income Fund LLC, is similar in all relevant respects to that of its parent. |
2. | Accounting policies - basis of preparation |
The Half-Yearly Report has been prepared in accordance with International Accounting Standards (IAS) 34 - 'Interim Financial Reporting'. It has also been prepared using the same accounting policies applied for the year ended 31 August 2018 financial statements (which received an unqualified audit report), and which were prepared in accordance with International Financial Reporting Standards. | |
The financial statements have been prepared on a going concern basis. In accordance with the Financial Reporting Council's guidance on 'Going Concern and Liquidity Risk' the Directors have undertaken a review of the Company's assets which primarily consist of a diverse portfolio of listed equity shares, equity-related investments and fixed income investments which, in most circumstances, are realisable within a very short timescale. |
Six months ended | Six months ended | Yearended | ||
28 February 2019 | 28 February 2018 | 31 August 2018 | ||
3. | Income from investments | £'000 | £'000 | £'000 |
Dividend income | 227 | 267 | 545 | |
Fixed interest income | 803 | 735 | 1,409 | |
Income from Subsidiary | 609 | 598 | 1,139 | |
_________ | _________ | _________ | ||
1,639 | 1,600 | 3,093 | ||
_________ | _________ | _________ | ||
Other Income | ||||
Deposit interest | 2 | - | 2 | |
_________ | _________ | _________ | ||
1,641 | 1,600 | 3,095 | ||
_________ | _________ | _________ |
Six months ended | Six months ended | Yearended | ||
28 February 2019 | 28 February 2018 | 31 August 2018 | ||
4. | Other operating expenses - revenue | £'000 | £'000 | £'000 |
Directors' fees | 44 | 38 | 82 | |
Promotional activities | 12 | 20 | 41 | |
Secretarial and administration fees | 36 | 59 | 96 | |
Auditor's remuneration: | ||||
- fees payable for the audit of the annual accounts | 16 | 15 | 32 | |
Legal and advisory fees | 12 | 30 | 34 | |
Custodian and overseas agents' charges | 28 | 36 | 69 | |
Broker fees | 15 | 15 | 30 | |
Stock Exchange fees | 10 | 9 | 20 | |
Registrar's fees | 12 | 13 | 22 | |
Printing | 12 | 12 | 18 | |
Other | 19 | 14 | 29 | |
_________ | _________ | _________ | ||
216 | 261 | 473 | ||
_________ | _________ | _________ |
Six months ended | Six months ended | Yearended | ||
28 February 2019 | 28 February 2018 | 31 August 2018 | ||
5. | Earnings per share | pence | pence | pence |
Ordinary share - basic | ||||
Revenue return | 2.13 | 1.89 | 3.78 | |
Capital return | 7.36 | (6.27) | (20.62) | |
_________ | _________ | _________ | ||
Total return | 9.49 | (4.38) | (16.84) | |
_________ | _________ | _________ | ||
The figures above are based on the following: | ||||
£'000 | £'000 | £'000 | ||
Revenue return | 1,272 | 1,169 | 2,313 | |
Capital return | 4,391 | (3,874) | (12,608) | |
_________ | _________ | _________ | ||
Total return | 5,663 | (2,705) | (10,295) | |
_________ | _________ | _________ | ||
Weighted average number of Ordinary shares in issue | 59,673,169 | 61,743,487 | 61,152,947 | |
_________ | _________ | _________ | ||
Six months ended | Six months ended | Yearended | ||
28 February 2019 | 28 February 2018 | 31 August 2018 | ||
6. | Dividends on Ordinary shares | £'000 | £'000 | £'000 |
Distributions to equity holders in the period: | ||||
Second interim dividend for 2018 - 0.875p | - | - | 531 | |
Third interim dividend for 2018 - 0.875p | - | - | 529 | |
Fourth interim dividend for 2018 - 0.875p (2017 - 0.875p) | 526 | 543 | 543 | |
First interim dividend for 2019 - 0.875p (2018 - 0.875p) | 521 | 540 | 540 | |
_________ | _________ | _________ | ||
1,047 | 1,083 | 2,143 | ||
_________ | _________ | _________ |
7. | Transaction costs | |||
During the period expenses incurred in acquiring or disposing of investments held at fair value though profit or loss have been expensed through the capital column of the Condensed Statement of Comprehensive Income, included within gains/(losses) on financial assets held at fair value through profit or loss. The total costs were as follows: | ||||
Six months ended | Six months ended | Yearended | ||
28 February 2019 | 28 February 2018 | 31 August 2018 | ||
£'000 | £'000 | £'000 | ||
Purchases | 4 | 3 | 5 | |
Sales | 4 | 2 | 3 | |
_________ | _________ | _________ | ||
8 | 5 | 8 | ||
_________ | _________ | _________ | ||
The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company's Key Information Document are calculated on a different basis and in line with the PRIIPs regulations. | ||||
8. | Bank loan |
The Company has a £8 million three year revolving multi-currency facility with Scotiabank (Ireland) Designated Activity Company. At the period end, £6,500,000 (28 February 2018 - £6,500,000; 31 August 2018 - £6,500,000) had been drawn down in Sterling under the facility, fixed to 18 March 2019 at an all-in rate of 1.804425% (28 February 2018 - 1.57031%; 31 August 2018 - 1.795250%). | |
At the date of this Report, £6,500,000 remains drawn down, fixed to 17 May 2019 at an all-in rate of 1.807630%. |
28 February 2019 | 28 February 2018 | 31 August 2018 | |||||
9. | Stated capital | Number | £'000 | Number | £'000 | Number | £'000 |
Issued and fully paid | |||||||
Ordinary shares in issue | 59,085,324 | 65,936 | 61,085,324 | 65,936 | 60,175,324 | 65,936 | |
Ordinary shares held in Treasury | 6,107,500 | - | 5,487,500 | - | 6,107,500 | - | |
65,936 | 65,936 | 65,936 | |||||
The Company's Ordinary shares have no par value. | |||||||
During the period ended 28 February 2019, 1,090,000 (28 February 2018 - nil; 31 August 2018 290,000) Ordinary shares were bought back at a total cost of £725,000 (28 February 2018 - nil; 31 August 2018 £188,000) including expenses, for cancellation. No Ordinary shares (28 February 2018 - 1,052,500 Ordinary shares at total cost of £784,000; 31 August 2018 - 1,672,500 Ordinary shares at a total cost of £1,219,000) were bought back to be held in treasury. At 28 February 2019 there were 6,107,500 (28 February 2018- 5,487,500; 31 August 2018 - 6,107,500) Ordinary shares held in treasury, which represented 9.37% (28 February 2018 - 8.24%; 31 August 2018 - 9.21%) of the Company's total issued share capital on those dates. | |||||||
Following the period end a further 330,000 Ordinary shares have been bought back and cancelled at a total cost of £223,000 resulting in there being 58,755,324 Ordinary shares in issue and 6,107,500 Ordinary shares held for treasury at the date this Report was approved. Ordinary shares that have been purchased for treasury are available to be cancelled or sold at a later date. | |||||||
10. | Net asset value per share | |||
The net asset value per Ordinary share and the net asset values attributable to Ordinary shareholders at the period end calculated in accordance with the Articles of Association were as follows: | ||||
As at | As at | As at | ||
Basic | 28 February 2019 | 28 February 2018 | 31 August 2018 | |
Net assets attributable to Ordinary shareholders (£'000) | 46,216 | 51,598 | 42,325 | |
Number of Ordinary shares in issue | 59,085,324 | 61,085,324 | 60,175,324 | |
Net asset value per Ordinary share (p) | 78.22 | 84.47 | 70.34 | |
11. | Related party transactions and transactions with the Manager |
The management fee is payable monthly in arrears based on an annual amount of 1% of the net asset value of the Company valued monthly. During the period £260,000 (28 February 2018 - £292,000; 31 August 2018 - £555,000) of management fees were payable, of which £90,000 (28 February 2018 - £49,000; 31 August 2018 - £85,000) was outstanding at the period end. | |
During the period fees in respect of promotional activities of £12,000 (28 February 2018 - £20,000; 31 August 2018 - £41,000) were payable with £9,000 (28 February 2018 - £7,000; 31 August 2018 - £7,000) outstanding at the period end. | |
The company secretarial and administration fee is based on an annual amount of £122,000 (28 February 2018 - £118,000; 31 August 2018 - £118,000), increasing annually in line with any increases in the UK Retail Price Index, payable quarterly in arrears. During the period £36,000 (28 February 2018 - £59,000; 31 August 2018 - £96,000) was payable after deduction of a rebate of £25,000 (28 February 2018 - nil; 31 August 2018 - £22,000) to bring the OCR down to 2.0%, with £36,000 (28 February 2018 - £30,000; 31 August 2018 - 7,000) outstanding at the period end. | |
The Manager has agreed to ensure that the Company's ongoing charges ratio ("OCR") will not exceed 2.0% when calculated annually as at 31 August. Until further notice, to the extent that the OCR ever exceeds 2.0% the Manager will rebate part of its fees in order to bring that ratio down to 2.0%. | |
The Company owns 100% of the share capital of the Subsidiary. The Company receives income from the Subsidiary and there are no significant restrictions on the transfer of funds to or from the Subsidiary. During the period the Subsidiary transferred £728,000 (28 February 2018 - £1,429,000; 31 August 2018 - £1,871,000) to the Company by way of income and capital returns and at 28 February 2019 the amount due to the Company by its Subsidiary was £14,572,000 (28 February 2018 - £15,712,000; 31 August 2018 - £15,300,000), which is a loan to the Subsidiary and incorporated in the fair value of the investment in the Subsidiary as at the period end. |
12. | Half-Yearly Financial Report |
The financial information for the six months ended 28 February 2019 and for the six months ended 28 February 2018 has not been audited. | |
This Half-Yearly Financial Report was approved by the Board on 26 April 2019. |
The Half-Yearly Financial Report will be available on the Company's website, www.latamincome.co.uk, and the Half-Yearly Report will be posted to shareholders in May 2019 and copies will be available from the Investment Manager.
Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise. Investors may not get back the amount they originally invested