  This paper deals with the balanced truncation model reduction of
discrete-time, linear time-varying, heterogeneous subsystems interconnected
over finite arbitrary directed graphs. The information transfer between the
subsystems is subject to a communication latency of one time-step. The
presented method guarantees the preservation of the interconnection structure
and further allows for its simplification. In addition to truncating temporal
states associated with the subsystems, the method allows for the order
reduction of spatial states associated with the interconnections between the
subsystems and even the removal of whole interconnections. Upper bounds on the
l2-induced norm of the resulting error system are derived. The proposed method
is illustrated through an example.
