Monthly Report

Deutsche Latin American Cos Tst PLC 20 November 2003 Deutsche Latin American Companies Trust PLC REPORT FOR THE MONTH OF OCTOBER 2003 SUMMARY The Latin American benchmark was up 5.1% in October, staging its best performance in six months. This was led by healthy gains in Brazil, Chile, Peru and Venezuela. Mexico remained the regional laggard, as it has for most of the year. Year to date, Latin America continues to outperform both the U.S. markets and its emerging market peers. Our NAV was up 3.0% for the month, again underperforming the index due to the surge in several Brazilian stocks not owned in the portfolio (Eletrobras, Embraer and the cellular companies) due to their balance sheet considerations or other risk factors. In addition, our overweight Mexico position continued to hamper performance. For the year to date, our NAV is up 32.8% versus an increase in the index of 39.0%. BRAZIL The Brazilian MSCI rose 7.8% for the month despite the currency weakening by 0.9% against sterling. As expected, the Brazilian Central Bank cut its benchmark Select rate by 100 basis points at the October Monetary Policy Committee meeting. On the macro side, reports of a better than expected growth in industrial production for August, and stronger than expected current account balance gave an added push to the market. The Central government's fiscal surplus reached a higher than expected balance for September and Brazil is now ahead of the IMF's targets. Brazil successfully issued US $1.5 billion of 2010 bonds at a spread of 561 basis points over US Treasuries, the country's lowest borrowing cost ever. The market was led higher by several stocks in the index, namely Eletrobras, the aircraft producer Embraer and several small cap cellular companies. The biggest detractors included Ambev, Gerdau, Brazil Telecom, Petrobras, Aracuz and VCP, all strong franchises owned in the portfolio. MEXICO The Mexican market was the laggard again for the month, up only 0.4%. The Mexican peso again detracted, down 2.3% against sterling. The country underperformed despite more positive noise concerning the approval of meaningful electricity reform. The PRI leadership also appeared committed to the approval of meaningful fiscal reform. Industrial production continued to show weak results, with the worst performing sector manufacturing. Economic activity declined much worse in August than expectations with a seasonally adjusted GDP decline of 0.5%. The peso weakened to an all time low of MX 11.30 to the USD early in the month, recovering slightly by month end. The Finance Ministry lowered GDP forecasts for the year to 1.5%, which is still higher than most economists' projections. Stock wise, Mexican third quarter corporate results were mixed. In general, revenues were up slightly, while net income was down largely driven by Peso weakness. The best performing stocks were Alfa, Elektra, Grupo Carso and Comermex, while Telmex and Televisa also outperformed the Mexican index. While the country continues to exhibit sound macro fundamentals, excluding growth, we are still waiting for confirmation of an upturn before the equity market will respond. CHILE The Chilean MSCI again outperformed the regional index for the month, up 8.7% in sterling terms with the peso strengthening nearly 3.5% against the pound. This, despite lower than expected economic figures for the month. The strength of international copper prices did help bolster the currency. We have added to Chile recently and our exposure is currently 8% versus the benchmark of 11.3% at month end. The manager is concerned about valuations, which have reached historic peaks in some cases, and lack of liquidity, however is seeking exceptions to this trend. ARGENTINA The Argentine MSCI rose 3.0% for the month, with the peso down 0.7% against sterling. September industrial production grew nearly 15% but declined versus May. The government announced terms of the proposed debt restructuring, which were much worse than market expectations. In a political defeat, several of President Kirchner's candidates lost their gubernatorial elections to political adversaries, spelling problems for passage of Kirchner's platform. Tariff revisions have been under attack by Kirchner, adding further concern that the utilities (electric and telephone) will be able to recoup losses. The manager feels the risk is too high at present to invest in Argentine companies. PERU / VENEZUELA The Peruvian market had another great month, up 11.0% in sterling terms however the New Sol weakened again against the pound. Our sole holding, Buenaventura, contributed positively to performance as we have an overweight position and it was up over 20% for the month. The Peruvian economy continues to post decent growth figures this year on the back of strong mining activity. Venezuela was also up strongly for the month, also over 11%, however its representation in the index continues to be negligible. Finance Minister Nobrega stated the Venezuelan economy is likely to have contracted over 9% for the third quarter, worse than expectations. High oil prices are the only factor keeping the economy afloat in the manager's opinion, and the risk of political upheaval, combined with the lack of investment opportunities keeps the manager from acquiring any positions in the country. BORROWINGS We currently intend to increase our borrowings modestly towards the 10% level in anticipation of a year-end rally. NET ASSET VALUE Fully diluted 31/10/03 30/09/03 31/10/03 30/09/03 75.3p 73.1p 80.5p 78.8p MID-MARKET SHARE PRICE 31/10/03 30/09/03 Ordinary Shares 65.00p 64.00p Warrants 14.25p 12.30p Discount/(Premium) % 13.7 12.4 NAV based on total assets less current liabilities of £36.0 million (£35.0 million). Market exposure 31/10/03 30/09/03 % % EQUITIES Brazil 51.2 50.3 Chile 7.9 4.6 Mexico 37.9 41.8 Peru 2.5 2.2 TOTAL PORTFOLIO 99.5 98.9 Net Current Assets 0.5 1.1 -------- -------- TOTAL 100.0 100.0 -------- -------- Based on total assets of £38.9 million (£38.0 million). GEARING Gearing at 31/10/03 30/09/03 8.2% 8.6% ==== ==== LARGEST HOLDINGS (market value £36.4 million equal to 94.1% of total portfolio) Country £000's % of portfolio Petrobras Brazil 4,328 11.2 Vale do Rio Doce Brazil 3,526 9.1 America Movil Mexico 3,072 7.9 Wal-Mart de Mexico Mexico 2,712 7.0 Telmex Mexico 2,330 6.0 Banco Itau Brazil 2,026 5.2 Ambev Brazil 1,924 5.0 Grupo Televisa Mexico 1,811 4.7 Tele Norte Leste Brazil 1,723 4.5 G.F BBVA-Bancomer Mexico 1,566 4.0 Cemex Mexico 1,527 3.9 Minas Buenaventura Peru 982 2.6 Enersis Chile 938 2.4 Sider Nacional Brazil 912 2.4 Brasil Telecom Brazil 899 2.3 Cemig Cia Brazil 896 2.3 Femsa Mexico 866 2.2 Unibanco Brazil 717 1.9 Gerdau Brazil 667 1.7 Bco Santander Chile 631 1.6 Telecom de Chile Chile 609 1.6 Bco Bradesco Brazil 468 1.2 Quimica Chile 443 1.2 Pao de Acucar Brazil 432 1.1 Aracruz Celulose Brazil 426 1.1 For further information, contact Mark Pope at Deutsche Investment Trust Managers Limited on 020-7545-0520. For additional copies, changes of address or details of our Private Investors' Plan, low cost ISA and Dividend Reinvestment Plan (a plan through which shareholders, who hold their shares on the Company's main register, can use their dividends to purchase further shares) contact Mark Pope on 020-7545-0520, e-mail address: mark.pope@db.com. Further details of Deutsche Latin American Companies Trust including the latest annual, interim and monthly reports can be found on the Deutsche Investment Trust Managers website located at www.deutsche-its.co.uk. Issued by Deutsche Latin American Companies Trust PLC and approved by Deutsche Investment Trust Managers Limited, authorised and regulated by the Financial Services Authority and manager of Deutsche Latin American Companies Trust PLC. Investors should be aware that past performance is not necessarily a guide to future returns, the price of shares and the income from them may fall as well as rise and investors may not get back the amount they invested. Fluctuations in exchange rates may also affect the value of your investment. Investment in Deutsche Latin American Companies Trust PLC presents those risks associated with emerging markets which may at times be illiquid and/or volatile. This information is provided by RNS The company news service from the London Stock Exchange
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