TIDMAFMC
RNS Number : 2938B
Aberdeen Frontier Mkts Inv Co Ltd
20 September 2018
Aberdeen Frontier Markets Investment Company Limited
LEGAL ENTITY IDENTIFIER ('LEI'): 213800X9N731I4IPK361
ANNOUNCEMENT OF RESULTS FOR THE YEARED 30 JUNE 2018
Overview
Financial Highlights
Net Asset Value ('NAV') per share total return (in US dollar terms)
(1, 3) NAV per share (in US dollars)
-10.3% $0.8090
2017 +13.7% 2017 $0.9295
Share price total return (in US dollar terms) (2, 3) Share price (in US dollars)
-12.0% $0.7361
2017 +16.7% 2017 $0.8678
Net Assets (in US dollars) Share price (in GB pounds)
$68.4million GBP0.5575
2017 $79.4million 2017 GBP0.6663
(1) Total return, NAV to NAV, gross income reinvested.
(2) Share price total return is on a mid-to-mid basis.
(3) These are Alternative Performance Measures ("APMs")
Alternative Performance Measures ('APMs')
The disclosures as indicated in footnote 3 above are considered
to represent the Company's APMs. In addition to the above APMs,
other performance measures have been used by the Company to assess
its performance.
Dividend (in US dollars)
for the year for the year
ended 30 June ended 30 June
2018 2017
------------------------ --------------- ---------------
Interim dividend paid 1 cent 1 cent
Final dividend proposed 1 cent 1 cent
(2017: paid)
------------------------ --------------- ---------------
Investment objective
The investment objective of the Company is to generate long-term
capital growth primarily from investment in equity and equity
related securities of companies listed in, or operating in,
Frontier Markets.
Frontier Market countries may include constituents of the MSCI
Frontier Markets Index or additional countries that the Investment
Manager deems to be, or displays similar characteristics to,
Frontier Market countries.
Reference Benchmark
MSCI Frontier Markets Index in US dollar terms.
Management
The Company is managed by Aberdeen Fund Managers Limited (the
'Manager'), which is a wholly owned subsidiary of Standard Life
Aberdeen PLC and is authorised and regulated by the Financial
Conduct Authority ('FCA'). The Manager has delegated day-to-day
investment management services to Aberdeen Asset Managers Limited
('AAML' or the 'Investment Manager').
Financial Calendar
12 December Annual General Meeting ("AGM") in Guernsey
2018
--------------- ---------------------------------------------------------
19 December Final dividend payable for year ended 30 June 2018
2018
--------------- ---------------------------------------------------------
February 2019 Announcement of Half-Yearly Financial Report for the six
months ending 31 December 2018
--------------- ---------------------------------------------------------
June 2019 Interim dividend payable for year ending 30 June 2019
--------------- ---------------------------------------------------------
September 2019 Announcement of Annual Report and Accounts for the year
ending 30 June 2019
--------------- ---------------------------------------------------------
Chairman's Statement
On behalf of your Board, I present to you the Annual Report for
Aberdeen Frontier Markets Investment Company Limited (the
"Company") for the year ended 30 June 2018.
Performance
Absolute and relative performance was disappointing during the
year, not least following the initial, positive outlook for
frontier markets more generally in 2018.
During the year under review the Company's NAV per share and
share price total returns were -10.3% and -12.0%, respectively.
This performance compared to a gain of 1.7% for the MSCI Frontier
Markets Index (the reference "Index"), all figures in US Dollar
total return terms.
The Company's investments in Pakistan, Vietnam and Sri Lanka
underperformed while the underweight exposure, relative to the
Index, of the Company to stocks in Kuwait was also unhelpful.
Limits on foreign ownership in Vietnam and the effect of countries
either leaving (Pakistan) or joining (Kuwait) the Index skewed
equity flows overtaking the fundamental case supporting particular
stocks in which the Company is invested. The Investment Manager's
report gives a clearer insight into performance over the year and
current positioning for the future.
As I have said before, fundamental stock-picking, based on
research and a policy of meeting company managements before
investment, remains at the core of the Manager's investment value
approach and the resulting portfolios will often vary significantly
from the Index. Our Investment Manager is index aware but certainly
not index driven.
Tender Offer
Despite the Company's purchase into treasury of 852,500 Ordinary
Shares during the year ended 30 June 2018, the Company's share
price discount to NAV has at times traded wider than 10%.
In March 2017, the Company adopted a discount control policy
whereby should the average Ordinary Share price discount to the
underlying ex income NAV over the three month period immediately
prior to the Company's year-end (30 June) exceed 10% then, at the
discretion of the Board, the Company would, subject to any legal or
regulatory requirements, implement a tender offer. Over the
relevant period the average Ordinary Share price discount to the
underlying ex income NAV was 10.47%.
Despite the Ordinary Share price trading in a relatively tight
discount band below 10% prior to the three month period to 30 June
2018, dislocation in markets and negative sentiment in emerging
markets generally caused by US tariff threats led to share price
weakness and the discount widening through the monitoring
period.
In line with stated policy the Board decided to implement a
tender offer and on 2 July 2018 the Company announced its intention
to implement a tender to purchase up to 15% of the Ordinary Shares
currently in issue.
Having triggered the discount target set out above, the Board is
aware that there exists appetite for the liquidity that can be
provided by such a tender at a price close to NAV. Accordingly, and
in line with the current discount control policy, Shareholders are
being asked to approve the tender offer for up to 15% of the issued
share capital of the Company (excluding Ordinary Shares held in
treasury) at a tender price equal to 98% of the prevailing NAV
(less the direct costs, including any realisation costs of
underlying investments, of implementing the tender offer) on the
Calculation Date.
The Board believes that the tender offer, despite causing the
Company to shrink in net asset terms, strikes a fair balance
between those Shareholders who wish to realise part of their
investment in the Company at a value close to the NAV per Ordinary
Share and those who wish to maintain their investment in the
Company.
Discount Control Policy
As part of its ongoing programme of Shareholder engagement the
Board has received feedback suggesting that it would be appropriate
to allow the revised direct equity investment policy, which was
only adopted in March 2017, a defined period of time to prove
itself without being distracted by the potential for additional
tenders or other discount control mechanisms. If, however, at the
end of that defined period, the Company has failed to outperform
its investment benchmark, the Board is mindful that Shareholders
should be given the opportunity to fully exit their investment for
cash.
The Board is very conscious that the revised investment policy
saw the Company's portfolio only fully realigned in June 2017. In
the light of the above the Board is proposing to adopt a new policy
whereby discount triggered tenders or other discount control
mechanisms will no longer be proposed. Instead, Shareholders will
be given the opportunity to fully exit their investment in the
Company for cash at the then prevailing NAV less applicable direct
costs, including any realisation costs of underlying investments,
in the event that the Share Price Total Return for the two year
period from 1 July 2018 to 30 June 2020 fails to exceed the
portfolio's reference benchmark, being the MSCI Frontier Markets
Index (in sterling terms).
The Board also intends to seek annual renewal of the usual
authority to buy back Ordinary shares in the market and will
exercise such authority where it believes it is in the best
interests of Shareholders to do so.
Ordinary resolutions seeking Shareholder approval for the
proposed tender offer and this new policy, which replaces any
previous discount control policy, will be put at an EGM of the
Company to be held on 17 October 2018.
Ongoing Charges Ratio
Following implementation of the tender the size of the Company,
in terms of its net assets, will decrease. The Board is of course
very mindful of the costs incurred in managing an investment
company and the fact that a fall in net assets will lead to a
higher overall ongoing charges ratio ("OCR"). To that end, the
Board is pleased to report that it has secured agreement from the
Manager to seek to limit the Company's OCR to no more than 2% when
calculated annually as at 30 June.
Until further notice, to the extent that the OCR exceeds 2% in
any annual period, the Manager will rebate an equal amount of its
management fee to the Company with the objective of bringing the
OCR down to 2%. This rebate will, however, be capped such that the
Manager, will not rebate more than an amount equal to one third of
the Managers management fee for the relevant year in question.
There can therefore be no guarantee that the overall OCR of the
Company will, even given any rebate by the Manager, be limited to
2% of net assets. However, the Board will continue to monitor all
costs on a regular basis and seek to reduce them wherever
possible.
Dividend
A final dividend for the year ended 30 June 2017 of 1 cent
(0.761832 pence) was paid to Ordinary shareholders on 13 December
2017.
In relation to the year ended 30 June 2018, an interim dividend
of 1 cent (0.749995 pence) per share was paid to Ordinary
shareholders on 29 June 2018. The Board is recommending to
shareholders the payment of a final dividend for the year end of 1
cent per share. If approved by shareholders at the Annual General
Meeting to be held on 12 December 2018, this dividend will be paid
on 19 December 2018 to those shareholders who are on the register
on 16 November 2018. The ex-dividend date will be 15 November 2018.
The final dividend will be paid in sterling and the sterling
dividend rate will be announced in due course.
The Board considers that a sustainable dividend forms an
important part of shareholders' overall return and intends to
continue to pay semi-annual dividends in line with previous
guidance.
Aberdeen Standard Investments savings plans
Aberdeen Standard Investments has a long history in managing
closed-ended funds and provides a wealth of experience and a wide
infrastructure towards their management and promotion. Investors
may access low cost investment in the Company through Aberdeen
Standard's Share Plan, Investment Trust ISA and Investment Plan for
Children which provide full voting and other rights of share
ownership.
Further details may be found via our website at:
aberdeenfrontiermarkets.co.uk.
Regulatory Changes
There have been a number of regulatory changes implemented or
announced, recently. Investors should be aware that the Packaged
Retail and Insurance-based Investment Products (PRIIPS) Regulation
requires the Manager, as the Company's PRIIP "manufacturer," to
prepare a key information document ("KID") in respect of the
Company. This KID must be made available by the Manager to retail
investors prior to a prospective investor making any investment
decision and is available via the Company's website. The Company is
not responsible for the information contained in the KID and
investors should note that the procedures for calculating the
risks, costs and potential returns are prescribed by regulation. We
recommend that all investors should note that the figures in the
KID may not reflect returns expected of the Company and that
anticipated performance returns cannot be guaranteed.
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.
Data protection rights were harmonised across the European Union
following the implementation of the General Data Protection
Regulation ("GDPR") on 25 May 2018. The Board is taking the
necessary steps to seek the appropriate assurances from its third
party service providers to ensure compliance with the new
regulations.
Future prospects
The Investment Manager continues to follow its fundamental
stock-picking approach, focused on quality and involving
considerable interaction with the management of potential and
current investee companies. Aberdeen Standard Investments has a
large dedicated emerging markets equity team which strongly
believes that better returns can be seen over the longer term
though investment in companies that it fully understands and visits
on a regular basis.
As I explained in my interim report, certain of the larger
weightings within the portfolio are in markets which offer limited
market depth, resulting in the portfolio diverging, often markedly
at times, from the reference Index and its returns.
Strong earnings growth is anticipated in key frontier markets in
which the Company is invested, which should drive equity returns
over the longer term, with lower overall volatility. The Board
continues to remain convinced as to the merits of investing into
frontier markets over the longer term and supports the Investment
Manager in its efforts. The equity investing process has only been
in place for what is effectively a short time period and a longer
period to assess performance returns is required.
Both the Board and the Manager continue to seek ways to enhance
liquidity in the shares through improving performance and a clear
and focused marketing strategy.
John Whittle
19 September 2018
Investment Manager's Report
Market environment
Global equity market sentiment was constructive through most of
the financial year under review, supported by firming global growth
and hopes that the passage of US tax legislation would give a boost
to the world's largest economy. Towards the end of the period,
however, there was a marked return of volatility and renewed US
dollar strength, stoked by raised expectations in respect of the
Fed's withdrawal of monetary stimulus, as well as heighted risk
aversion over trade tensions between the US and China. Risk assets
thus witnessed a broad sell-off during the final quarter of the
period, which was compounded by weakness witnessed in many frontier
market currencies. The Argentinian Peso bore the brunt of the turn
in market sentiment, declining 42.5% against the dollar during the
reporting period, with the bulk of losses occurring in May and
June.
Net fund flows into the frontier market asset class saw a
stabilisation in 2017 after two years of significant outflows.
Initially the outlook for 2018 was very promising, given the
brighter macroeconomic backdrop globally. That outlook reverted
somewhat during the first half of 2018, but in our opinion, a
revival of investor interest in the asset class remains very likely
once market jitters over monetary tightening in the US recede.
After all, the fundamentals on the ground remain highly supportive,
namely a clear improvement in macroeconomic stability and growth
across most of our markets, and a visible cyclical improvement in
corporate earnings, particularly in Africa.
The Company's three key exposures in Frontier Africa are Egypt,
Kenya, and Nigeria. Egypt is implementing an IMF-supported
structural adjustment programme that to date has delivered in-line
with expectations, so business and consumer confidence is
returning. Our investments in Egypt are making good operational
progress, albeit the recovery remains fairly early stage and there
is much further to go. Juhayna Food Industries, for instance,
delivered 22% revenue growth and a 49% rise in operating profit
during the first half of the current year. The positive trajectory
is likely to be maintained, not least because the company's sales
volumes remain materially below peak levels achieved in 2016.
Meanwhile Commercial International Bank, another of the portfolio's
holdings in Egypt, is on track to deliver its target of 25%
earnings growth in 2018, supported by a robust recovery in lending
and widening net interest margins.
Nigeria has also undergone a difficult period of transition post
its series of currency devaluations, albeit without the support of
the IMF. The firming oil price and more consistent oil production
has brought the country's current account back into surplus and
allowed the central bank to rebuild currency reserves, which
reached US$48bn by the end of the period. While the economy remains
sluggish in many respects (the IMF forecasts real GDP growth of
just 2.1% in 2018), GDP acceleration and declining inflation has
been supportive of domestic demand and corporate earnings. By way
of example, Nestle Nigeria, achieved top-line growth of 12% and
margin recovery (profit-after-tax expanded 30%) during the first
half of 2018, and prospects are excellent for further improvement
as consumer spending gathers pace next year. Zenith Bank reported a
9% improvement in profit-after-tax, despite regulatory one-off
costs and a shrinkage of its loan book. The bank's annualised
return on equity ("ROE") of 21.2% suggests that its valuation of
0.9x book is very attractive in the context of current returns and
longer term growth prospects. Our other bank holding in Nigeria,
Guaranty Trust Bank, delivered 14% growth in profit-after-tax with
an annualised-ROE of 34.1%.
In Frontier Asia, Vietnam outperformed all other markets by a
large margin, rising 41.3% in US dollar terms despite a pullback in
April and May. The economic backdrop was highly supportive, with
GDP growth accelerating to 6.8%, its fastest annual pace in a
decade, supported by sustained export growth and foreign direct
investment. The pace of urbanisation and rising incomes in the
cities has been a boon for corporates in the country, hence most
listed companies have been delivering impressive numbers. That
said, there has been a violent divergence in equity performance
between those listed companies with foreign-ownership headroom
available, versus those without. Those companies without
foreign-ownership headroom are impractical for foreign investors to
trade and are excluded from the MSCI Vietnam index. As a result,
foreign investor inflows to Vietnam have been, primarily, funnelled
into a narrow band of MSCI index constituents, with local investors
supporting the momentum of those particular names. As a
consequence, this band of stocks has been squeezed higher and are,
in our view, overvalued, while the remainder of the market
has floundered. This dislocation of fundamentals from valuations
has resulted in two of the portfolio's high-quality holdings, FPT
Corp (FPT) and Mobile World Investment Corp (MWIC) trailing the
market very significantly, despite excellent operational delivery.
The portfolio held a position of 4.7% in FPT and 4.4% in MWIC at
the close of the reporting period. FPT delivered 19.0% growth in
profit-after-tax during the first half of the year, while MWIC grew
its bottom line by 44.0%. Despite such excellent earnings results,
both names currently stand at a P/E multiple discount of 50% to the
that of the index. We believe that, in time, consistent earnings
delivery by these two companies will entice back domestic investor
interest, driving a convergence of valuations once more. It is also
worth noting that, since both names are at their foreign-ownership
limit, there is material hidden value to realise in the instance
that the Company sells the holdings to another foreign
investor.
Pakistan was a marked laggard over the period (the MSCI Pakistan
index fell 33.6% in US dollar terms), despite annual GDP growth
reaching a decade high as a result of the improved security
situation and substantial government-backed investments in
infrastructure. However, political disruption and a worsening trade
balance weighed on the currency as well as equity market sentiment.
The equity market retreated in anticipation of the inevitable;
namely currency devaluation, monetary tightening and an external
refinancing agreement. The success of Imran Khan and his Pakistan
Tehreek-e-Insaf (PTI) party at the ballot box in July bodes well
for Pakistan, but there will be further volatility leading up to
either an IMF or other foreign funding package.
Aberdeen Frontier Markets Investment Company cumulative performance in USD
for periods ended 30 June 2018
6 months 1 year 3 years 5 years
% % % %
-------------------------------- ------------- --------- ----------- -----------
Share Price -4.1 -12.0 -5.7 -1.7
-------------------------------- ------------- --------- ----------- -----------
NAV -11.9 -10.3 -12.0 -4.0
-------------------------------- ------------- --------- ----------- -----------
MSCI Frontier Markets -10.9 +1.7 +6.6 +24.9
-------------------------------- ------------- --------- ----------- -----------
Notes
Total return; NAV to NAV, gross income reinvested, USD.
Share price total return is on a mid-to-mid basis.
Dividends are reinvested as at the ex-dividend date.
NAV returns based on NAVs with debt valued at fair value.
Source: Aberdeen Fund Managers Limited, Bloomberg
Performance review
During the twelve months to 30 June 2018 the Company's NAV per
share and share price total returns were -10.3% and
-12.0% respectively. As a point of reference, the MSCI Frontier
Markets index gained 1.7% over the same period. The discount to NAV
at which the Company's shares trade stood at 9.0% at the end of the
year as compared from 8.0% at 30 June 2017.
The benchmark held onto material gains for most of the reporting
period, before losing ground during the final quarter to finish
marginally above where the reporting year started. Heightened risk
aversion globally weighed on our markets, but the brunt of this
turn in sentiment was felt by Argentina, where the currency
collapsed at the end of the period.
Absolute and relative performance was hindered by four factors:
the portfolio's exposure to Pakistan, which left the benchmark last
year and suffered equity declines for the reasons outlined above;
our overweight to Sri Lanka, whose market declined as a result of a
poor harvest, fiscal austerity, and a rise in the tax burden; the
exposure to Vietnam via off-benchmark names, which lagged the
liquidity-fuelled rally of the MSCI Vietnam index due to
foreign-ownership restrictions as noted above; and the Company's
underweight to Kuwait, which made gains as a result of the stronger
oil price and news that the market is under review by MSCI with a
view to upgrading to emerging markets status. On a more positive
note, our significant underweight to Argentina was a material
benefit, but not nearly enough to offset the detractors mentioned
above.
Relative country positions
Country Fund Benchmark Difference
% % %
------------------------------- ------ ---------- -----------
Africa & Middle East 33.4 53.5 -20.1
------------------------------- ------ ---------- -----------
Bahrain - 3.8 -3.8
Egypt 5.6 - 5.6
Ghana 1.8 - 1.8
Ivory Coast - 0.2 -0.2
Jordan - 1.4 -1.4
Kenya 9.3 5.8 3.5
Kuwait - 19.3 -19.3
Lebanon 1.2 2.0 -0.8
Mauritius - 2.2 -2.2
Morocco 0.8 8.0 -7.2
Nigeria 10.1 7.8 2.3
Oman 0.6 1.4 -0.8
Senegal - 0.8 -0.8
South Africa 1.3 - 1.3
Tanzania 1.4 - 1.4
Tunisia - 0.8 -0.8
Turkey 1.3 - 1.3
Asia Pacific Ex Japan 45.5 20.4 25.1
------------------------------- ------ ---------- -----------
Bangladesh 7.9 2.9 5.0
Myanmar 1.8 - 1.8
Pakistan 10.3 - 10.3
Sri Lanka 7.9 1.2 6.7
Thailand 1.9 - 1.9
Vietnam 15.7 16.3 -0.6
Europe Ex UK 8.2 9.2 -1.0
------------------------------- ------ ---------- -----------
Belarus 1.5 - 1.5
Croatia - 1.7 -1.7
Estonia - 0.3 -0.3
Georgia 2.7 - 2.7
Kazakhstan - 0.8 -0.8
Lithuania - 0.2 -0.2
Romania 4.0 4.3 -0.3
Serbia - 0.2 -0.2
Slovenia - 1.7 -1.7
UK 1.0 - 1.0
------------------------------- ------ ---------- -----------
Latin America 9.6 16.9 -7.3
------------------------------- ------ ---------- -----------
Argentina 7.5 16.9 -9.4
Panama 2.1 - 2.1
Cash 2.3 - 2.3
------------------------------- ------ ---------- -----------
Total 100.0 100.0 -
------------------------------- ------ ---------- -----------
At 30 June 2018, the benchmark index had an adjusted market cap
of US$121.2 bn and was composed of 115 companies across 29
countries (source MSCI).
Portfolio positioning
As at the end of June 2018 the portfolio had 54 equity
investments, providing exposure to more than 21 economies. During
the year the Company raised exposure to Frontier Asia to 45.5%,
primarily as a result of new investments in Vietnam: FPT Corp,
Vietnam's leading IT software outsourcing firm, Mobile World
Investment Corp, Vietnam's leading electrical goods retailer, Masan
Group, a major local consumer goods business, Nam Long Corp, a
low-middle income residential real estate developer, Vincom Retail,
Vietnam's leading mall developer, and TCB, a leading retail and
commercial bank.
Elsewhere, we initiated two notable investments in Argentina:
BBVA Frances, a leading retail and commercial bank, and IRSA
Propiedades Comerciales, a shopping mall and office developer with
an exceptional rental portfolio and pipeline of greenfield
projects. In addition we made two new investments in Romania:
Purcari Wineries, a vineyard and wine maker, and Sphera Franchise
Group, a QSR operator of KFC, Pizza Hut and Taco Bell franchises in
the country. Increased exposure to Asia was primarily funded by
reduced exposure to the EMEA region, where we exited several names
with inferior visibility with regard to earnings growth.
Market outlook
As we said in the interim report earlier this year, we believe
corporate earnings in Frontier Africa are enjoying a cyclical
recovery. In Frontier Asia, where the Company now has significant
exposure, we expect another excellent year for corporate earnings
in Vietnam, and continued solid results from our companies in
Bangladesh, Pakistan and Sri Lanka. Pakistan and Sri Lanka have
entered deep value territory and represent an opportunity, albeit
macroeconomic challenges may linger some while longer. Turning to
Argentina, the IMF package and reform programme agreed in June
underpins an optimistic stance for the country in 2019 and we may
look to raise exposure to the country on what are now, we believe,
more palatable valuations.
For us, the outlook for frontier markets provides plenty of
cause for optimism. Operational results from our investee
companies, together with conversations on the ground, indicate that
the corporate earnings recovery is set to continue. While
volatility across various markets and some currencies have
undermined the positives we are seeing in the short term, we expect
these positive fundamentals to reflect in performance in the not
too distant future.
The management style of the portfolio is benchmark aware but
importantly not benchmark driven. In this respect we look across a
wide array of countries with frontier market characteristics,
including outside of the index, seeking out quality companies to
invest in. This diversified portfolio of companies is managed with
a mind to delivering strong performance over the medium to longer
term at a low level of volatility. That said, there will be
divergences away from the benchmark, as well as in relative
performance. We remain committed to our investment approach, which
entails rigorous interaction and engagement with companies. This
allows us to identify those with solid long-term prospects and
progressive management teams that will negotiate cycles and
safeguard shareholder interests.
Aberdeen Fund Managers Limited
19 September 2018
Top 20 Investments
as at 30 June 2018
---------------------------------------------------------------------------
Percentage
Value of net
Company Country $'000 assets(%)
------------------------------------ ----------- ------ ----------
FPT Corporation Vietnam 2,713 4.0
------------------------------------- ---------------- ------ ----------
Guaranty Trust Bank Nigeria 2,534 3.7
------------------------------------- ---------------- ------ ----------
John Keells Sri Lanka 2,517 3.7
------------------------------------- ---------------- ------ ----------
Mobile World Investment Corporation Vietnam 2,427 3.6
------------------------------------- ---------------- ------ ----------
Vietnam Dairy Products ('Vinamilk') Vietnam 2,262 3.3
------------------------------------- ---------------- ------ ----------
Safaricom Kenya 2,137 3.1
------------------------------------- ---------------- ------ ----------
BBVA Banco Frances Argentina 2,087 3.0
------------------------------------- ---------------- ------ ----------
Square Pharmaceuticals Bangladesh 1,891 2.8
------------------------------------- ---------------- ------ ----------
Grameenphone Bangladesh 1,790 2.6
------------------------------------- ---------------- ------ ----------
Commercial International Bank Egypt 1,752 2.6
------------------------------------- ---------------- ------ ----------
Equity Group Holdings Kenya 1,742 2.5
------------------------------------- ---------------- ------ ----------
IRSA Propiedades Argentina 1,617 2.4
------------------------------------- ---------------- ------ ----------
Shell Pakistan Pakistan 1,456 2.1
------------------------------------- ---------------- ------ ----------
Packages Pakistan 1,442 2.1
------------------------------------- ---------------- ------ ----------
Juhayna Food Industries Egypt 1,442 2.1
------------------------------------- ---------------- ------ ----------
Globant Argentina 1,436 2.1
------------------------------------- ---------------- ------ ----------
Copa Holdings Panama 1,419 2.1
------------------------------------- ---------------- ------ ----------
Commercial Bank of Ceylon Sri Lanka 1,388 2.0
------------------------------------- ---------------- ------ ----------
Zenith Bank Nigeria 1,355 2.0
------------------------------------- ---------------- ------ ----------
Fan Milk Ghana 1,333 1.9
------------------------------------- ---------------- ------ ----------
Top twenty holdings 36,740 53.7
------------------------------------------------------- ------ ----------
Other holdings 30,191 44.1
------------------------------------------------------- ------ ----------
Total holdings 66,931 97.8
------------------------------------------------------- ------ ----------
Cash and other net assets 1,509 2.2
------------------------------------------------------- ------ ----------
Net assets 68,440 100.0
------------------------------------------------------- ------ ----------
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 principal risks associated with an
investment in the Company's shares are published monthly on the
Company's factsheet or 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 which is reviewed regularly by the Audit and Risk
Committee. The Board has identified the principal 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.
Description Mitigating action
--------------------------------------------------------- ---------------------------------------------------------
Investment strategy and objectives - the setting of an The Board keeps the investment objective and policy as
unattractive strategic proposition well as the level of discount at which
to the market and the failure to adapt to changes in the Company's Ordinary Shares trade under review and the
investor demand may lead to the Company Board is updated at each Board meeting
becoming unattractive to investors, a decreased demand on the makeup of, and any movements in, the Shareholder
for Ordinary Shares and a widening register.
discount at which the Ordinary Shares trade relative to
their NAV.
--------------------------------------------------------- ---------------------------------------------------------
Investment portfolio, investment management - investing The Board sets, and monitors, its investment restrictions
outside of the investment restrictions and guidelines, and receives regular
and guidelines set by the Board could result in poor reports which include performance reporting on the
performance and inability to meet the implementation of the investment policy,
Company's objectives. the investment process and application of the guidelines.
--------------------------------------------------------- ---------------------------------------------------------
Financial and regulatory - the financial risks The financial risks associated with the Company include
associated with the portfolio could result market risk, liquidity risk and credit
in losses to the Company. In addition, failure to comply risk, all of which are managed by the Investment Manager.
with relevant regulation (including Further details of the steps taken
the Companies (Guernsey) Law, the Financial Services and to mitigate the financial risks associated with the
Markets Act, the Alternative Investment portfolio are set out within the notes
Fund Managers Directive, Accounting Standards and the contained in the Annual Report. The Board relies upon the
AIM listing rules, disclosure and prospectus Manager to ensure the Company's
rules) may have a negative impact on the Company. compliance with applicable regulations and from time to
time employs external advisers to
advise on specific concerns.
--------------------------------------------------------- ---------------------------------------------------------
Operational - the Company is dependent on third parties The Board receives regular reports from the Manager on
for the provision of all systems and internal controls and risk management
services (in particular, those of the Manager) and any and receives assurances from its significant service
control failures and gaps in these providers. Further details of the internal
systems and services could result in a loss or damage to controls which are in place are set out in the Directors'
the Company. Report contained within the Annual
Report.
--------------------------------------------------------- ---------------------------------------------------------
Discount - factors which affect the discount to NAV at The Board keeps under review the discount and may
which the Ordinary Shares of the Company consider selective buyback of shares where
trade. These may include the popularity of the to do so would be in the best interests of shareholders,
investment objective of the Company, the popularity balanced against reducing the overall
of investment trust shares in general and the ease with size of the Company. Any shares bought back would be
which the Company's Ordinary Shares either cancelled or held in treasury.
can be traded on the London Stock Exchange.
--------------------------------------------------------- ---------------------------------------------------------
Political risk and exchange controls - investments in Given the nature of the risks to which the Company's
less developed markets are subject to investments are subject, which are those
a greater degree of political risk than that with which inherently associated with less developed markets, there
investors might be familiar. are limited options available to
In addition, investments purchased by the Company may be the Board for mitigating these risks. The Board believes
subject, in the future, to exchange that mitigation is best effected
controls or withholding taxes. In the event that by careful selection of the constituents of the Company's
exchange controls or withholding taxes are portfolio with high-calibre, financially-sound
imposed with respect to any of the Company's companies, with good management and excellent growth
investments, the effect will generally be to potential.
reduce both the income received by the Company from its Investment in Frontier Markets involves a greater degree
investments and/or the capital value of risk than that usually associated
of the affected investments. with investment in major securities markets. Through
regular interaction with the Manager
and other commentators, the Board stays up-to-date with
the latest political and economic
news in these markets.
--------------------------------------------------------- ---------------------------------------------------------
Market risk - being the risk that the portfolio, managed The Investment Manager seeks to diversify market risk by
by the Investment Manager, suffers investing in a wide variety of companies
a fall in its market value which would have an adverse with strong balance sheets and the earnings power to pay
effect on shareholders' funds. The increasing dividends. In addition,
Company's investments are subject to normal market investments are made across various countries in order to
fluctuations and the risks inherent in reduce the risk of a single concentrated
the purchase, holding or selling of equity securities exposure; at present the Investment Manager may not
and there can be no assurance that appreciation invest more than 10% of the Company's
in the value of those investments will occur. total assets in any single stock at the time of
The Investment Manager's investment process concentrates investment and the Company will invest in
on a company's business strategy, between 30 to 80 holdings.
management, financial strength, ownership structure as The Investment Manager believes that diversification
well as corporate governance, with should be looked at in absolute terms
a view to seeking companies that it can invest in for rather than relative to an index. The performance of the
the long term. This quality test means portfolio relative to the MSCI Frontier
that there may be stocks which the Investment Manager Markets Index and the underlying stock weightings in the
will not invest in due to a perceived portfolio against their index weightings
lack of transparency or poor corporate governance. are monitored closely by the Board.
--------------------------------------------------------- ---------------------------------------------------------
Liquidity risk - the Company, and/or its Investment Liquidity risk is not considered to be significant as,
Manager may accumulate investment positions whilst liquidity is limited in certain
which represent more than normal daily trading volumes stocks which the Company holds, the majority of the
which may make it difficult to realise Company's assets comprise readily realisable
investments quickly. securities which can be sold to meet funding requirements
if necessary.
The Board reviews the liquidity profile of the Company's
investment portfolio at each quarterly
Board meeting.
--------------------------------------------------------- ---------------------------------------------------------
Statement of Directors' Responsibilities
The Directors are responsible for preparing financial The financial statements are published on the Company's
statements for each financial year which website (website address:
give a true and fair view of the state of affairs of the www.aberdeenfrontiermarkets.co.uk)
Company as at the end of the year and on the Investment Manager's website (website
and of the profit or loss for the year and are in address: www.aberdeenstandard.com). The maintenance
accordance with The Companies (Guernsey) and integrity of the Investment Manager's website, so
Law, 2008. In preparing these accounts, the Directors are far as it relates to the Company, is
required to: the responsibility of the Investment Manager. The work
* Select suitable accounting policies and then apply carried out by the auditor does not
them consistently; involve consideration of the maintenance and integrity
of these websites and accordingly,
the auditor accepts no responsibility for any changes
* Make judgements and estimates which are reasonable that have occurred to the financial
and prudent; statements since they were initially presented on these
websites. Visitors to the websites
need to be aware that legislation in Guernsey governing
* State whether applicable International Financial the preparation and dissemination
Reporting Standards ('IFRS') as adopted by the of the financial statements may differ from legislation
European Union have been followed, subject to any in their jurisdiction.
material departures disclosed and explained in the The Directors confirm that to the best of their
financial statements; and knowledge and belief the annual report and
accounts taken as a whole, is fair, balanced and
understandable and provides the information
* Prepare the financial statements on the going concern necessary to assess the Company's position and
basis unless it is inappropriate to presume that the performance, business model and strategy.
Company will continue in business.
For and on behalf of the Board
The Directors are responsible for ensuring that proper
accounting records are kept which disclose John Whittle
with reasonable accuracy at any time the financial position Director
of the Company and enable them
to ensure that the accounts have been properly prepared in David Warr
accordance with The Companies (Guernsey) Director
Law, 2008. They are also responsible for safeguarding the
assets of the Company and hence 19 September 2018
for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
In accordance with The Companies (Guernsey) Law, 2008,
there is no relevant audit information
of which the Company's auditor is unaware. The Directors
also confirm that they have taken
all steps they ought to have taken as Directors to make
themselves aware of any relevant audit
information and to establish that the Company's auditor is
aware of that information.
Statement of Comprehensive Income
Year ended 30 June Year ended 30 June
2018 2017
----------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
------------------------------- -------- --------- -------- -------- -------- --------
(Losses)/gains on investments - (8,780) (8,780) - 16,695 16,695
Capital gains on currency
movements - 244 244 - 1,973 1,973
-------------------------------- -------- --------- -------- -------- -------- --------
Net investment (losses)/gains - (8,536) (8,536) - 18,668 18,668
-------------------------------- -------- --------- -------- -------- -------- --------
Investment income 2,329 - 2,329 1,573 - 1,573
-------------------------------- -------- --------- -------- -------- -------- --------
Total (losses)/gains 2,329 (8,536) (6,207) 1,573 18,668 20,241
-------------------------------- -------- --------- -------- -------- -------- --------
Investment management
fees (260) (519) (779) (476) (952) (1,428)
Other expenses (794) - (794) (754) - (754)
-------------------------------- -------- --------- -------- -------- -------- --------
Net (loss)/profit from
operations before finance
costs and taxation 1,275 (9,055) (7,780) 343 17,716 18,059
-------------------------------- -------- --------- -------- -------- -------- --------
Finance costs (26) - (26) (47) (94) (141)
-------------------------------- -------- --------- -------- -------- -------- --------
Net (loss)/profit before
taxation 1,249 (9,055) (7,806) 296 17,622 17,918
-------------------------------- -------- --------- -------- -------- -------- --------
Withholding tax (233) - (233) (91) - (91)
-------------------------------- -------- --------- -------- -------- -------- --------
Net (loss)/profit after
taxation 1,016 (9,055) (8,039) 205 17,622 17,827
-------------------------------- -------- --------- -------- -------- -------- --------
(Losses)/earnings per
ordinary share 1.19c (10.61c) (9.42c) 0.14c 12.16c 12.30c
-------------------------------- -------- --------- -------- -------- -------- --------
The total column of this statement represents the Company's
Statement of Comprehensive Income, prepared under IFRS as adopted
by the European Union. The revenue and capital columns, including
the revenue and capital earnings per share data, are supplementary
information prepared under guidance published by the Association of
Investment Companies.
The Company does not have any income or expenses that are not
included in the (loss)/profit for the year and therefore the 'Net
(loss)/profit after taxation' is also the total comprehensive
income for the year.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the year.
The notes form an integral part of these financial
statements.
Statement of Financial Position
As at 30 As at 30
June 2018 June 2017
$'000 $'000
------------------------------------------ ------------------ -----------
Non-current assets
Investments at fair value through profit
or loss 66,931 74,872
------------------------------------------- ------------------ -----------
Current assets
Cash and cash equivalents 719 4,847
Sales for future settlement 855 7,313
Other receivables 76 390
------------------------------------------- ------------------ -----------
1,650 12,550
------------------------------------------ ------------------ -----------
Total assets 68,581 87,422
------------------------------------------- ------------------ -----------
Current liabilities
Purchases for future settlement - 7,112
Other payables 141 158
Tender offer liabilities - 726
------------------------------------------- ------------------ -----------
141 7,996
Total assets less current liabilities 68,440 79,426
------------------------------------------- ------------------ -----------
Capital and reserves attributable to
equity holders
Share capital and Share premium account 12,543 12,254
Capital reserve 55,546 66,135
Revenue reserve 351 1,037
Total equity 68,440 79,426
------------------------------------------- ------------------ -----------
Net assets per Ordinary Share (US cents) 80.90c 92.95c
Exchange rate GBP/USD (mid market) 0.75735 0.76780
Net assets per Ordinary Share (pence) 61.27p 71.37p
------------------------------------------- ------------------ -----------
Approved and authorised for issue by the Board of Directors on
19 September 2018:
The notes form an integral part of these financial
statements.
Statement of Changes in Equity
Share capital
and Share
premium Capital Revenue
For the year ended 30 June account reserve reserve Total
2018 $'000 $'000 $'000 $'000
----------------------------- ------------------- ------------------- ------------------- ---------
Opening equity 12,254 66,135 1,037 79,426
Revaluation on Tender offer 289 - - 289
Purchase of own shares - (679) - (679)
(Loss)/profit for the year - (9,055) 1,016 (8,039)
Equity dividends paid - (855) (1,702) (2,557)
------------------------------ ------------------- ------------------- ------------------- ---------
Closing equity 12,543 55,546 351 68,440
------------------------------ ------------------- ------------------- ------------------- ---------
Share capital
and Share
premium Capital Revenue
For the year ended 30 June account reserve reserve Total
2017 $'000 $'000 $'000 $'000
----------------------------- ------------------- ------------------- ------------------- ---------
Opening equity 88,788 50,854 832 140,474
Tender offer (76,534) - - (76,534)
Purchase of own shares - (310) - (310)
Profit for the year - 17,622 205 17,827
Equity dividends paid - (2,031) - (2,031)
------------------------------ ------------------- ------------------- ------------------- ---------
Closing equity 12,254 66,135 1,037 79,426
------------------------------ ------------------- ------------------- ------------------- ---------
The notes form an integral part of these financial
statements.
Statement of Cash Flow
Year ended Year ended
30 June 30 June
2018 2017
$'000 $'000
------------------------------------------------------ ----------- -----------
Operating activities
Cash inflow from investment income and bank
interest 2,671 1,900
Cash outflow from management expenses (1,601) (2,273)
Cash inflow/(outflow) from foreign exchange
movements 228 (363)
Cash outflow from taxation (233) (91)
------------------------------------------------------ ----------- -----------
Net cash flow from/(used in) operating activities 1,065 (827)
------------------------------------------------------ ----------- -----------
Investing activities
Cash inflow from disposal of investments 39,869 176,972
Cash outflow from purchase of investments (41,355) (89,796)
------------------------------------------------------ ----------- -----------
Net cash flow (used in)/from investing activities (1,486) 87,176
------------------------------------------------------ ----------- -----------
Net cash flow (used in)/from operating and
investing activities (421) 86,349
------------------------------------------------------ ----------- -----------
Financing activities
Repayments of bank borrowings - (4,500)
Finance charges and interest paid (26) (150)
Equity dividends paid (2,557) (2,031)
Purchase of own shares (679) (310)
Proceeds from on-sale shares - 12,129
Tender offer costs (8) (228)
Tender offer distributions paid (437) (87,936)
------------------------------------------------------ ----------- -----------
Net cash flow used in financing activities (3,707) (83,026)
------------------------------------------------------ ----------- -----------
Net (decrease)/increase in cash and cash equivalents (4,128) 3,323
------------------------------------------------------ ----------- -----------
Cash and cash equivalents opening balance 4,847 1,524
Cash (outflow)/inflow (4,128) 3,323
------------------------------------------------------ ----------- -----------
Cash and cash equivalents balance at 30 June 719 4,847
------------------------------------------------------ ----------- -----------
The notes form an integral part of these financial
statements.
Notes to the Financial Statements
1 Accounting policies
Basis of preparation
The financial statements of the Company have been prepared in
accordance with International Financial Reporting Standards
('IFRS'), approved by the International Accounting Standards Board
and as adopted by the European Union.
The financial statements give a true and fair view of the state
of affairs of the Company as at the end of the year and of the
profit or loss for the year and are in accordance with The
Companies (Guernsey) Law, 2008.
Under IFRS, the Statement of Recommended Practice ('SORP')
issued by the Association of Investment Companies has no formal
status, but the Company has taken the guidance of the SORP into
account to the extent that it is deemed appropriate and compatible
with IFRS and the Company's circumstances.
The particular accounting policies adopted are described
below:
(a) Accounting convention
The financial statements are prepared under the historical cost
convention, except for the measurement of investments at fair
value.
(b) Investments
As the Company's business is investing in financial assets with
a view to profiting from their total return in the form of
increases in fair value, financial assets are held at fair value
through profit or loss on initial recognition in accordance with
International Accounting Standard ('IAS') 39. These investments are
recognised on the trade date of their acquisition. At this time,
fair value is the cost of investment.
After initial recognition such investments are valued at fair
value which is determined by reference to:
(i) primarily market bid price for investments quoted on
recognised stock exchanges (market mid or last trade price will be
used where deemed to more appropriately reflect fair value);
(ii) NAV per individual investee funds' administrators for
unquoted open-ended funds; and
(iii) by using other valuation techniques to establish fair
value for any other unquoted investments.
Investments are derecognised on the trade date of their
disposal. Gains or losses are recognised in the capital column of
the Statement of Comprehensive Income.
Transaction costs incurred on the acquisition and disposal of
investments are charged to capital and included in the
'(losses)/gains on investments' on the Statement of Comprehensive
Income.
(c) Income from investments
Dividend income from Ordinary Shares is accounted for on the
basis of ex-dividend dates. Income from fixed interest shares and
securities is accounted for on an accruals basis using the
effective interest method. Special dividends are assessed on their
individual merits and are credited to the capital column of the
Statement of Comprehensive Income if the substance of the payment
is a return of capital; with this exception all other investment
income is taken to the revenue column of the Statement of
Comprehensive Income. Bank interest receivable is accounted for on
a time apportionment basis.
(d) Capital reserves
Profits and losses on disposals of investments and gains and
losses on revaluation of investments held are allocated to the
capital reserve via the capital column of the Statement of
Comprehensive Income. Dividends may be distributed from Capital
reserves.
(e) Revenue reserves
The balance of all items allocated to the revenue column of the
Statement of Comprehensive Income in each year is transferred to
the Company's Revenue reserves. Dividends may be distributed from
Revenue reserves.
(f) Investment management fees
Two thirds of the basic investment management fee is allocated
to the capital column of the Statement of Comprehensive Income.
Fees allocated to the capital column are taken to the Capital
reserve.
(g) Foreign currency
The Company's shares were issued in US dollars and the majority
of the Company's investments are priced in US dollars and this is
considered to be the functional currency of the Company. Therefore,
it is the Company's policy to present the accounts in US dollars.
The Company's shares are traded in sterling on the Alternative
Investment Market ('AIM').
Assets and liabilities held in currencies other than US dollars
are translated into US dollars at the official market rates of
exchange prevailing at the reporting date. Currency gains and
losses arising on retranslating investments are allocated to the
capital column of the Statement of Comprehensive Income. All other
currency gains and losses are allocated to the capital or revenue
columns of the Statement of Comprehensive Income depending on the
nature of the transaction.
(h) Finance costs
Finance costs include interest payable and direct loan costs. In
line with the Company's policy for investment management fees, two
thirds of finance costs are allocated to the capital column of the
Statement of Comprehensive Income. Fees allocated to the capital
column are taken to the capital reserve. Loan arrangement costs are
amortised over the term of the loan on an effective interest rate
basis.
(i) Financial liabilities
The Company's financial liabilities include borrowings and other
payables. Financial liabilities are recognised when the Company
becomes a party to the contractual provisions of the financial
instrument, and are measured initially at fair value adjusted for
transaction costs. A financial liability is derecognised when it is
extinguished, discharged, cancelled or expires. Financial
liabilities are measured subsequently at amortised cost using the
effective interest method. At the year end and at the date of this
report, the Company did not have any borrowings.
(j) Cash and cash equivalents
Cash and cash equivalents in the financial statements comprise
cash held at the bank or by the custodian.
(k) Operating segments
IFRS 8, 'Operating segments' requires a 'management approach',
under which segment information is presented on the same basis as
that used for internal reporting purposes. The Board, as a whole,
has been determined as constituting the chief operating decision
maker of the Company. The Board has considered the requirements of
the standard and is of the view that the Company is engaged in a
single segment of business, which is to generate long-term capital
growth for its shareholders by investing in a diversified portfolio
of funds and other investment products which derive their value
from Frontier Markets.
The Board of Directors is responsible for ensuring that the
Company's investment objective is followed. The day-to-day
implementation of this has been delegated to the Investment Manager
but the Board retains responsibility for the overall direction of
the Company. The Board reviews the investment decisions of the
Investment Manager at regular Board meetings. The Investment
Manager has been given full authority to make investment decisions
on behalf of the Company in accordance with the investment
objective.
(l) Unconsolidated structured entities
Changes in fair value of investments, including structured
entities, are included in the Statement of Comprehensive
Income.
(m) New standards, interpretations and amendments
There are no new standards, interpretations or amendments, which
have been endorsed by the EU and became effective during the year
that have had a material impact on the Company.
At the date of approval of these financial statements, the
following standard, which has not been applied in these financial
statements, was in issue and endorsed by the EU but not yet
effective during the year:
-- IFRS 9, 'Financial instruments', effective for annual periods
beginning on or after 1 January 2018, specifies how an entity
should classify and measure financial assets and liabilities,
including some hybrid contracts. The standard improves and
simplifies the approach for classification and measurement of
financial assets compared with the requirements of IAS 39. Most of
the requirements in IAS 39 for classification and measurement of
financial liabilities were carried forward unchanged. The standard
applies a consistent approach to classifying financial assets and
replaces the numerous categories of financial assets in IAS 39,
each of which had its own classification criteria.
The Board is has considered the impact of the above standard.
Based on their assessment, the standard is not expected to have a
material impact on the Company's financial statements.
(n) Critical accounting estimates and judgements in applying
accounting policies
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Estimates are continually
evaluated and based on historical experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances. Actual results could differ
from such estimates. These financial statements have been prepared
on a going concern basis which the Directors of the Company believe
to be appropriate.
The most critical judgements and estimates that management have
made in the process of applying the Company's accounting policies
and that have the most significant effect on the amounts recognised
in the financial statements are the functional currency of the
Company (see note 1(g)) and the fair value estimation of financial
assets held at fair value through profit or loss (see note
1(b)).
(o) Going concern
As discribed in the Directors' Report in the Annual Report, the
Directors have adopted the going-concern basis in preparing the
financial statements.
2 Investments at fair value through profit or loss
2018 2017
----------------------------------------------------
$'000 $'000
---------------------------------------------------- --------- ----------
Quoted closed-end fund shares and warrants - 1,699
Quoted direct equity investments 66,295 69,900
Quoted open-ended fund holdings - 1,624
Open-ended fund and limited liability partnership
investments 636 1,649
---------------------------------------------------- --------- ----------
Total fixed asset investments at fair value 66,931 74,872
---------------------------------------------------- --------- ----------
Investments at cost
Opening balance of investments at cost 76,320 149,508
Additions at cost 34,243 96,909
Disposals at cost (32,770) (170,097)
---------------------------------------------------- --------- ----------
Cost of investments at 30 June 77,793 76,320
---------------------------------------------------- --------- ----------
Revaluation of investments to fair value
Opening balance (1,448) (6,518)
Unrealised (losses)/gains taken to Capital reserve (9,414) 5,070
---------------------------------------------------- --------- ----------
Balance at 30 June (10,862) (1,448)
---------------------------------------------------- --------- ----------
Fair value of investments at 30 June 66,931 74,872
---------------------------------------------------- --------- ----------
(Losses)/gains on investments per Statement of
Comprehensive Income
Gains on disposal of investments 634 11,625
Movement on valuation of investments held (9,414) 5,070
(8,780) 16,695
---------------------------------------------------- --------- ----------
3 Investment income
2018 2017
----------------------------
$'000 $'000
---------------------------- ------ ------
Dividends from investments 2,329 1,573
---------------------------- ------ ------
Total investment income 2,329 1,573
---------------------------- ------ ------
4 Investment management fees and other expenses
2018 2017
-------------------------- --------------------------
Revenue Capital Total Revenue Capital Total
----------------------------------
$'000 $'000 $'000 $'000 $'000 $'000
---------------------------------- -------- -------- ------ -------- -------- ------
Investment management fees 260 519 779 476 952 1,428
---------------------------------- -------- -------- ------ -------- -------- ------
Total investment management fees 260 519 779 476 952 1,428
---------------------------------- -------- -------- ------ -------- -------- ------
Administration fees 145 - 145 198 - 198
Directors' fees 122 - 122 162 - 162
Depository and custody fees 301 - 301 172 - 172
Legal fees - - - 2 - 2
Broker fees 33 - 33 32 - 32
Registrar's fees 38 - 38 32 - 32
Auditor's fees 28 - 28 27 - 27
Nominated adviser fees 27 - 27 26 - 26
Promotion 36 - 36 56 - 56
Other expenses 64 - 64 47 - 47
---------------------------------- -------- -------- ------ -------- -------- ------
Total other expenses 794 - 794 754 - 754
---------------------------------- -------- -------- ------ -------- -------- ------
Total expenses 1,054 519 1,573 1,230 952 2,182
---------------------------------- -------- -------- ------ -------- -------- ------
The Company has agreed to pay a fee to Aberdeen Asset Managers
Limited for the provision of promotional activities at an annual
rate of GBP26,600 with effect from July 2017 (prior to that, the
fee was at an annual rate of GBP43,000).
The Company's ongoing charges for the year ended 30 June 2018
calculated in accordance with the AIC methodology were 2.01% (2017:
1.66%). The ongoing charges figure does not include finance
costs.
5 Finance costs
In accordance with Directors' expectations of the split of
future returns being mostly of a capital nature, two thirds of
finance costs are charged as capital items in the Statement of
Comprehensive Income.
2018 2017
---------------------------------------------- --------------------------
Revenue Capital Total Revenue Capital Total
--------------------------------
$'000 $'000 $'000 $'000 $'000 $'000
-------------------------------- -------------- -------------- -------------- -------- -------- ------
Facility costs and arrangement
fees - - - 15 30 45
Interest charges 26 - 26 32 64 96
-------------------------------- -------------- -------------- -------------- -------- -------- ------
Total finance costs 26 - 26 47 94 141
-------------------------------- -------------- -------------- -------------- -------- -------- ------
6 Directors' fees
The fees paid or accrued were $122,000 (2017: $161,910). There
were no other emoluments.
7 Taxation
The Company is resident for tax purposes in Guernsey.
The Company is exempt from Guernsey income tax under the Income
Tax (Exempt Bodies) (Guernsey) Ordinances 1989 and 1992 and was
charged an annual exemption fee of GBP1,200 (2017: GBP1,200) during
the year.
During the year, the Company suffered foreign withholding tax on
income from investments totalling in aggregate $233,000 (2017:
$91,256 ).
8 Earnings per Ordinary Share
Earnings per Ordinary Share is based on the net loss of
$8,039,000 (2017: profit of $17,827,000) attributable to the
weighted average of 85,316,533 (2017: 144,898,182) Ordinary Shares
of no par value in issue during the year to 30 June 2018.
Supplementary information is provided as follows: revenue per
Ordinary Share is based on the net revenue profit of GBP1,016,000
(2017: profit of GBP205,000) and capital loss per Ordinary Share is
based on the net capital loss of GBP9,055,000 (2017: profit of
GBP17,622,000) attributable to the Ordinary Shares.
9 Loans and overdraft facility payable
During the year, the Company had a $5,000,000 temporary
overdraft facility with Northern Trust (Guernsey) Limited ('NT')
from 17 March 2017 to 6 July 2017. As at 30 June 2018, the Company
did not have an overdraft facility (2017: the Company had a
$6,000,000 revolving loan facility with Investec Bank Plc which was
fully repaid and the agreement terminated in January 2017).
10 Share capital
Movement in Ordinary Shares of no par value
Allotted, issued
----------------------------------------- ---------- ---------------
For the year ended 30 June 2018 Authorised and fully paid Treasury shares
----------------------------------------- ---------- ---------------- ---------------
Opening number of shares Unlimited 85,452,608 450,000
Purchase of own shares - (852,500) 852,500
----------------------------------------- ---------- ---------------- ---------------
Closing number of shares Unlimited 84,600,108 1,302,500
----------------------------------------- ---------- ---------------- ---------------
Allotted, issued
----------------------------------------- ---------- ---------------
For the year ended 30 June 2017 Authorised and fully paid Treasury shares
----------------------------------------- ---------- ---------------- ---------------
Opening number of shares Unlimited 169,460,000 -
Purchase of own shares - (450,000) 450,000
Validly tendered shares for cancellation - (97,307,392) -
On-sale shares - 13,750,000 -
----------------------------------------- ---------- ---------------- ---------------
Closing number of shares Unlimited 85,452,608 450,000
----------------------------------------- ---------- ---------------- ---------------
Voting rights
At General Meetings of the Company, every member present in
person or proxy shall have one vote for every Ordinary Share of
which they are the registered holder.
Tender offer (2017)
A third and final distribution was made to Ordinary Shareholders
for validly tendered shares, returning an aggregate amount
equivalent to $437,000 in February 2018.
Other purchases of own shares
There were 852,500 (2017: 450,000) Ordinary Shares re-purchased
during the year at an aggregate cost to the Company of $679,000
(2017: $310,000), all of which are held in treasury.
11 Net Assets Value ("NAV") per Ordinary Share
NAV per Ordinary Share of $0.8090 (2017: $0.9295) is based on
NAV of $68,440,000 (2017: $79,426,000) divided by 84,600,108 (2017:
85,452,608) Ordinary Shares in issue (excluding shares held in
treasury) as at the year end date.
12 Related party transactions
Details of the management contract can be found in the
Directors' Report contained within the Annual Report. Fees payable
to the Investment Manager are detailed in note 4 above. Other
payables include accruals of basic management fees of $57,033
(2017: $66,284).
Aberdeen Asset Management PLC shareholding in the Company as at
year end stood at 13,750,000 Ordinary Shares.
The Directors' shareholdings in the Company as at year end are
disclosed in the Corporate Governance Statement contained within
the Annual Report.
13 Dividends paid
Dividends paid during the year Dividends paid during the year
ended 30 June 2018 ended 30 June 2017
-------------------------------------------------------- ---------------------------------------------------
Dividend
Dividend Dividend paid out Dividend
paid out paid out the paid out
the Capital the Revenue Capital the Revenue
reserve reserve reserve reserve
Cents Pence (1) , (1) , Cents Pence 1, (1) ,
per per US Dollar US Dollar per per US Dollar US Dollar
Ordinary Ordinary equivalent equivalent Ordinary Ordinary equivalent equivalent
Share Share $'000 $'000 Share Share $'000 $'000
---------- --------- --------- ---------------- ---------------- --------- --------- ----------- ----------------
Final
dividend
in
respect
of
the year
ended
30 June
2016
paid on
19
December
2016 1.200 0.964320 2,031 -
Interim
dividend
in
respect
of
the year
ended
30 June
2017
paid on
11
August
2017 1.000 0.766947 855 -
Final
dividend
in
respect
of
the year
ended
30 June
2017
paid on
13
December
2017 1.000 0.761832 - 855
Interim
dividend
in
respect
of
the year
ended
30 June
2018
paid on
29 June
2018 1.000 0.766947 - 847
855 1,702 2,031 -
---------- --------- --------- ---------------- ---------------- --------- --------- ----------- ----------------
(1) Dividends are
paid
in sterling
The Board is recommending to shareholders the payment of a final dividend
for the year end of 1 cent per share. If approved by shareholders at the Annual
General Meeting on 12 December 2018, this dividend will be paid on 19 December
2018 to those shareholders who are on the register on 16 November 2018. The
ex-dividend date will be 15 November 2018. The final dividend will be paid
in sterling and the sterling dividend rate will be announced in due course.
14 Subsequent events
Tender Offer (2018)
As described in the circular dated 17 September 2018, the
Company put forward proposals for a tender offer under which
shareholders have the ability to tender up to 15% of their Ordinary
Shares held.
15 Financial information
The financial information in this announcement is derived from
the audited financial statements for the year ended 30 June
2018.
The Annual Report for the year ended 30 June 2018 was approved
by the Board of Directors on 19 September 2018. It will be made
available on the Company's website aberdeenfrontiermarkets.co.uk
and will be posted to Shareholders. It will also be available from
the registered office of the Company.
16 Annual General Meeting
The Annual General Meeting of Aberdeen Frontier Markets
Investment Company Limited will be held at 11 New Street, St Peter
Port, Guernsey at 11:00 a.m. on 12 December 2018.
Alternative Performance Measures ('APMs')
------------------------------------------
Discount
The amount, expressed as a percentage, by which the share price is
less that the NAV per Ordinary Share.
---------------------------------------------------------------------------------------------------
As at
30 June
2018
----------------------------------------------- -------------- -------------- ------- ---------
NAV per Ordinary Share (GB Pounds equivalent) a 0.6127
Share price (in GB Pounds) b 0.5575
Discount (b÷a)-1 9.0%
--------------------------------------------------------------- ------------- ------- ---------
Ongoing charges
A measure, expressed as a percentage of average NAV, of the regular,
recurring annual costs of running an investment company.
---------------------------------------------------------------------------------------------------
Year end 30 June 2018 $'000
----------------------------------------------- -------------- -------------- ------- ---------
Average NAV a 78,345
Annualised expenses b 1,573
Ongoing charges b÷a 2.01%
--------------------------------------------------------------- ------------- ------- ---------
Premium
The amount, expressed as a percentage, by which the share price is
more than the Net Asset Value per share.
There is no calculation of premium shown as the Company's Ordinary
Shares were trading at a discount of 9.0% at the period end.
Total return
A measure of performance that includes both income and capital returns.
This takes into account capital gains and reinvestment of dividends
paid out by the Company into its Ordinary Shares on the ex-dividend
date.
---------------------------------------------------------------------------------------------------
Share
Year end 30 June 2018 price NAV
----------------------------------------------- -------------- -------------- ------- ---------
Opening at 1 July 2017 (in US dollars) a 0.8678 0.9295
Closing at 30 June 2018 (in US dollars) b 0.7361 0.8090
Dividend adjustment factor c 1.0375 1.0303
Adjusted closing (d = b x c) d 0.7637 0.8335
Total return (d÷a)-1 -12.0% -10.3%
----------------------------------------------- ------------------------------ ------- ---------
n/a = not applicable
Registered office
11 New Street
St Peter Port
Guernsey
GY1 2PF
Enquiries:
Aberdeen Fund Managers Limited (Investment Manager to Aberdeen
Frontier Markets Investment Company Limited)
William Hemmings / Gary Jones
Tel: +44 (0)20 7463 6000
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett
Tel: +44 (0)20 7383 5100
Numis Securities Limited (Nominated Broker)
David Benda
Tel: +44 (0) 20 7260 1275
19 September 2018
END
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Authority to act as a Primary Information Provider in the United
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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