TIDMAFMC
RNS Number : 6899N
Aberdeen Frontier Mkts Inv Co Ltd
26 September 2019
Aberdeen Frontier Markets
Investment Company Limited
A UK-listed closed-end fund, offering diversified access to
up-and-coming frontier markets
LEGAL ENTITY IDENTIFIER ('LEI'): 213800X9N731I4IPK361
ANNOUNCEMENT OF RESULTS FOR THE YEARED 30 June 2019
Financial Highlights
For the year ended 30 June 2019
Net Asset Value ('NAV') per Ordinary Share total
return (in US dollar terms)(1, 3) NAV per Ordinary Share (in US dollars)
-14.0% $0.6760
2018 -10.3% 2018 $0.8090
Ordinary Share price total return (in US dollar terms)
(2, 3) NAV per Ordinary Share (in GB pounds)
-14.4% GBP0.5325
2018 -12.0% 2018 GBP0.6127
Net Assets (in US dollars) Ordinary Share price (in GB pounds)
$48.6million GBP0.4810
2018 $68.4million 2018 GBP0.5575
(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. Definitions of these APMs together with how these
measures have been calculated can be found further below.
Dividend (in US dollars)
For the For the
year ended year ended
30 June 2019 30 June 2018
------------------------ -------------- --------------
Interim dividend paid 1 cent 1 cent
Final dividend proposed 1 cent 1 cent
(2018: paid)
------------------------ -------------- --------------
Investment objective Reference Benchmark
The investment objective of the Company is to generate MSCI Frontier Markets Index.
long-term capital growth primarily Management
from investment in equity and equity related securities The Company's Manager is Aberdeen Standard Fund Managers
of companies listed in, or operating Limited ("ASFML", the "AIFM" or the
in, Frontier Markets. "Manager") which has delegated the investment management
Frontier Market countries may include constituents of the of the Company to Aberdeen Asset
MSCI Frontier Markets Index or additional Managers Limited ("AAML" or the "Investment Manager").
countries that the Investment Manager deems to be, or Both companies are wholly owned subsidiaries
displays similar characteristics to, of Standard Life Aberdeen plc.
Frontier Market countries.
Financial Calendar
10 December 2019 Annual General Meeting ('AGM') in Guernsey
================= =======================================================================================
18 December 2019 Final dividend payable for year ended 30 June 2019
================= =======================================================================================
February 2020 Announcement of Half-Yearly Financial Report for the six months ending 31 December 2019
================= =======================================================================================
June 2020 Interim dividend payable for year ending 30 June 2020
================= =======================================================================================
30 June 2020 Discount control policy performance measurement period ends
================= =======================================================================================
September 2020 Announcement of Annual Report and Accounts for the year ending 30 June 2020
----------------- ---------------------------------------------------------------------------------------
Chairman's Statement
On behalf of your Board, I present to you the Annual Report for
Aberdeen Frontier Markets Investment Company Limited ('AFMC' or the
'Company') for the year ended 30 June 2019.
Performance
During the year under review the Company's net asset value
("NAV") per Ordinary share and share price total returns were
-14.0% and -14.4%, respectively. This compared to a gain of 5.2%
for the MSCI Frontier Markets Index (the 'Index' or the 'Reference
Benchmark'), all figures in US Dollar total return terms. The
portfolio's exposure to Pakistan, which is not included in the
Index, accounted for a significant part of the Company's
underperformance, as the local market fell 36.7% in dollar terms
with government policy taking months to define and the negotiations
with the International Monetary Fund taking almost a year to
conclude.
The year ended 30 June 2019 was particularly disappointing as
our country weightings in the second half detracted from
performance and added to initial market declines in the first half
of the year. The underweight position to stocks in Kuwait and
Bahrain where the Investment Manager continued to struggle to find
fair valued investment opportunities, a feature noted in the
Half-Yearly Report, continued to hold back relative performance
over the balance of the year. In addition, deteriorating relations
over trade and tariffs between the US and China continued to form a
difficult backdrop for all markets. The anticipated rise in
frontier markets, offering a defensive asset class if global
equities lost their appeal given their lack of correlation, was
only witnessed briefly in May which proved insufficient to reverse
the overall trend.
Tender Offer, Discount and Share Buybacks
Further to the tender offer announced on 20 September 2018, the
Company bought back and cancelled 12,689,991 Ordinary shares on 19
October 2018 resulting in issued Ordinary share capital of
71,910,117 Ordinary shares with voting rights and an additional
1,302,450 Ordinary shares held in treasury, which was unchanged at
30 June 2019. No further shares have been bought back by the
Company between 1 July 2019 and the latest practicable date prior
to the publication of this Report.
The discount to NAV at which the Company's Ordinary shares
traded widened slightly from 9.0% to 9.7% over the year. The Board
keeps the Ordinary share price discount to NAV under constant
review and the Company may purchase its own shares through the
market for cash where the Directors believe that such purchases
will enhance Shareholder value and are likely to assist in
narrowing the discount to NAV at which the Ordinary shares may
trade.
Discount Control Policy
At an Extraordinary General Meeting held on 17 October 2018,
shareholders approved a new discount control policy whereby
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 (in sterling terms) 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).
30 June 2019 marked the half-way point of the Company's two year
measurement period at which point the Company's Ordinary share
price total return was -10.6% against a gain of 11.5% for the
Reference Benchmark (in sterling terms). Although it is clear that
the Company will require to substantially outperform the Index in
the year to 30 June 2020 in order to avoid further corporate
activity, the Manager believes that the underlying portfolio
fundamentals support the case for the Company's continuing
investment strategy. The Manager's approach is bottom up,
conviction based and Benchmark agnostic, resulting in geographic
allocations significantly different to those of the MSCI Frontier
Markets Index, a key driver of the performance differential. While
the Board continues to monitor very closely the total return for
the Company's Ordinary share price, and the Index (both in sterling
terms), shareholder interests remain at the forefront of their
decision making. Accordingly, the Board will continue to gather
feedback from shareholders during the remainder of this performance
measurement period with a view to acting in the best interests of
all shareholders.
Ongoing Charges Ratio
The Board is very mindful of the overall size of the Company,
the costs incurred in managing such an investment company and the
impact that any share buybacks could have. I was pleased to report
at this time last year that agreement had been secured with the
Manager to seek to limit the Company's ongoing charges ratio
("OCR") to no more than 2% calculated annually as at 30 June.
This arrangement is still in place to the extent that the
Manager will rebate an amount of its fee to the Company with the
objective of bringing the OCR down to 2% in relation to any annual
period. However, this remains capped such that a rebate should not
represent more than one third of the annual management fee payable
for the relevant year in question.
Dividend
A final dividend for the year ended 30 June 2018 of 1 cent
(0.761615p pence) was paid to Ordinary shareholders on 19 December
2018.
In relation to the year ended 30 June 2019, an interim dividend
of 1 cent (0.76746953 pence) per share was paid to Ordinary
shareholders on 28 June 2019 with a record date of 7 June 2019 and
an ex-dividend date of 6 June 2019.
The Board is recommending to shareholders the payment of a final
dividend for the year end of 1 cent per Ordinary share. If approved
by shareholders at the Annual General Meeting to be held on 10
December 2019, this dividend will be paid on 18 December 2019 to
those shareholders who are on the register on 15 November 2019. The
ex-dividend date will be 14 November 2019. 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 Investment'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.
Future Prospects
In periods of market volatility, it is helpful for investors to
be able to look through short term relative performance to the
extensive due diligence undertaken by the Manager at the stock
level, driven by their focus on intrinsic value rather than a
pursuit of either fads or Index-based returns. The Manager
considers that the dislocated valuations and mispricing across the
region, including in Kuwait in particular, are deserving of
rebuttal. With macro imbalances in Pakistan now being addressed and
valuations at multi-year lows, a market recovery seems ever likely
which could quickly reverse performance.
The Board notes the Investment Manager's optimism around the
near term outlook for frontier markets. Further rate cuts by
central banks, expected to follow the lead taken by the now more
dovish US Federal Reserve in late July 2019, should cause
international investors to again consider the opportunities
available through investment in frontier market equities.
The Board recognises that there exists a level of material
uncertainty as to whether the performance of the Company will
exceed the performance of the portfolio's Reference Benchmark. In
such circumstances the Company's discount control policy will
result in an exit opportunity being presented to shareholders. This
in turn could introduce an element of uncertainty over the
continuation of the Company. As described above, the Board will
continue to monitor this situation closely.
At the portfolio level, our Investment Manager remains committed
to its quality emphasis and continues to consider stocks and
countries which are both included in and sometimes outside of the
Index, albeit continue to display characteristics of frontier
market countries. Direct engagement with investee companies through
regular country visits forms a strong element of the investment
team's fundamental analysis. The strategy continues to invest
across a diversified range of quality companies with sustainable
growth characteristics, agnostic of the geographic concentrations
of the Reference Benchmark.
I continue to value the input of my colleagues on the Board and
thank them for their diligence and professionalism, the Investment
Manager for its continued efforts and importantly our shareholders
for their continued support and belief in the long term future
prospects for frontier markets and our relative portfolio
positioning.
John Whittle
Chairman
25 September 2019
Investment Manager's Report
Market environment
The twelve months to 30 June 2019 was another challenging period
for frontier market equities. While the MSCI Frontier Markets Index
achieved a gain of 5.2% during the period, this gain was largely
attributable to surging Gulf markets, namely those of Kuwait and
Bahrain, which rose 34.2% and 36.6% respectively. Without their
contribution, the Index would have registered a decline of 4.1%
(Source, Aberdeen Standard Investments, Morningstar &
Lipper).
Indeed, outside of the Gulf and Vietnam, most other frontier
markets displayed continued weak momentum, which we believe is
primarily due to ongoing negative foreign fund flows and declining
investor activity, specifically falling average daily traded volume
('ADTV'). Figures from EPFR Global show that 2018 witnessed circa
US$1,600 million of net outflows from frontier market mutual funds,
while the five months to the end of May 2019 has shown a further
US$900m in net outflows. Many smaller frontier markets have seen
declines in ADTVs of 50% or more since 2014 in US dollar terms,
meanwhile smaller emerging markets, such as Egypt and Pakistan,
which fall within our definition of investable markets for the
Company, have suffered worse, with declines of 70% plus. In terms
of valuations, the Index trades on a forward price-to-earnings
ratio of just 9.6x if one excludes Kuwait and Vietnam from the
calculation, 10% below its five-year average.
A variety of global concerns continue to weigh on investor
appetite for more risky asset classes, not least the poor state of
US-China relations in trade and other strategic areas. But appetite
for frontier markets has remained elusive even as the Federal
Reserve (the Fed) has shifted to a more accommodative monetary
policy stance this year, which is somewhat surprising. The
softening of the monetary policy outlook might have been expected
to weigh on the US dollar and provide frontier economies with the
flexibility to reduce local rates, not to mention trigger an uptick
in foreign investor interest, but this has not played out to any
meaningful extent.
Some sceptics point to late-cycle risks to momentum in respect
of the world's largest economies, above all that of the US, as
cause for ambivalence towards riskier assets. Others contend that
this more accommodative monetary stance has underwritten a further
late-cycle advance of US equities, which remains the preferred
equity exposure for most global portfolios. Whilst recognising such
unknowns exist, the fact that most frontier markets are being given
such a wide berth seemingly regardless of events in developed
economies exemplifies just how out-of-favour this asset class has
been.
We repeat the point made previously that the low correlation of
frontier markets with global equities, as well as relatively weak
trade linkages with the developed world, should imbue the asset
class with certain defensive qualities should global equity markets
actually lose their footing, especially given the very low
valuations that most of our markets now stand at. The month of May
was a case in point as global equity markets briefly tumbled on
growth concerns, whilst most frontier markets performed somewhat
better. Early August has again seen such volatility amid global
concerns over China's attempt to counter further US tariff hikes
with a weakening of its currency.
Turning to some specific markets, Vietnam remains a
high-conviction exposure for the portfolio (with a weighting of
22.6% at the end of the year) given excellent corporate earnings
delivery within the backdrop of a robust economy, which has been
underpinned by rapid investment-led industrialisation. Offshoring
from China seems to be a secular prospect given the continuing
US-China trade tensions as well as Chinese wage inflation, but
there is also a risk that the US turns its attention towards
Vietnam's own large trade surplus, which is the US's fifth-largest
trade deficit relationship. The portfolio's two largest investments
in Vietnam, Mobile World Corp (5.7% of net assets) and FPT Corp
(5.8%) have continued to show strong operational numbers. Mobile
World Corp delivered 16% growth in revenue in the first half of the
current year, driven by robust sales figures from its DMX home
appliances retail format, while net profit rose 38% on scale
benefits and improved profitability at its supermarkets division.
As at the end of June the stock was trading on 10.2x forward
earnings with a PEG ratio of 0.5x. FPT also delivered stellar
operational results with first half 2019 net profit expansion of
29%, primarily driven by its software outsourcing division
expanding into international markets.
Elsewhere, the Nigerian economy continues to struggle within a
framework of government policy continuity that is largely absent of
reforms that will meaningfully address structural constraints to
growth. Tight monetary policy and a focus on maintaining the naira
peg to the dollar has provided an aura of stability, but at the
cost of growth, with real GDP expected to advance no more than 2.0%
this year, which is a lower rate than the expansion of the
population. Still, despite the uninspiring economic backdrop, our
holdings have delivered reasonable earnings progression. Our two
core holdings, Zenith Bank and Guaranty Bank, achieved 7% and 10%
earnings growth in the first quarter, respectively, despite muted
corporate loan activity. Zenith Bank, with a capital adequacy ratio
of 22% and a dividend yield of 14%, is a solid value play with a
strong recurring yield; meanwhile Guaranty Bank maintains an
exceptional return-on-equity of over 30%, albeit with a slightly
lower dividend yield of 8%.
In Pakistan, which remains within our defined investment
universe albeit not in the benchmark, the Pakistan Tehreek-e-Insaf
(PTI) government led by Imran Khan took several months to define
key policies after its election, and almost a year to reach an
agreement with the International Monetary Fund (IMF). The
government was cajoled by the IMF to concede on several important
areas of economic policy, including allowing a major adjustment of
the currency, maintaining a suitably positive real interest rate
and devising a strategy to reign in the country's fiscal deficit.
These remedies were never avoidable, but the quantum of adjustment
ballooned with the extended delay in implementation. Facing the
prospect of a 12-24 month engineered slowdown, the local equity
market retreated to decade lows. By the end of June the Karachi All
Share Index traded on 6.4x the current year's earnings, despite
depressed corporate profits. With a now inexpensive currency and
credible reform effort in place, we believe the worst is behind the
market.
Egypt, in the third year of its IMF-supported programme, saw
real GDP growth accelerate to 5.7%, a solid number that is expected
to be maintained in the medium term given falling inflation, lower
interest rates, recovering tourism, returning consumer confidence
and what is expected to be a recovery in capital investment. Our
holdings in Egypt have made solid progress over the past twelve
months, delivering high double digit earnings growth, and this pace
should be maintained in 2019.
Indeed, most of our markets outside Argentina and Pakistan are
enjoying stable or accelerating economic activity at this juncture,
which is in contrast to a peaking economic cycle in the developed
world. The outlook for developed economies appears more fragile
than it has been for some time in many ways, but given our region's
relatively weak linkages with the global economy, idiosyncratic
drivers such as the timing of various IMF supported programmes and
moderating interest rate expectations, we see reasons to remain
bullish about the prospects for a frontier market recovery over the
coming quarters.
Performance
While the portfolio's NAV held broadly flat during the second
half of the year, , the first half of the year witnessed a 14.6%
decline, the reasons for which were outlined in the first Half
Yearly Report, resulting in an overall decline in NAV for the year
under review of 14.0% in US Dollar terms. This compares to a
benchmark return of 5.2%.
As discussed above, Gulf markets were a key driver of the
benchmark's return over the year, without which the Index would
have been negative.
The primary driver of the portfolio's poor relative performance
was its off-benchmark exposure to Pakistan, whose market retreated
36.7% in US dollar terms, largely due to the devaluation of the
rupee. However, since the portfolio's holdings were primarily in
less liquid small and mid-cap stocks in domestic-orientated
companies, the drawdown was more costly still. The portfolio today
owns a basket of six extremely undervalued yet very much
established Pakistani corporates and we have every faith that these
companies will witness a strong recovery in due course, once
liquidity conditions normalise. In the meantime, all continue to
pay dividends, ranging between 2.5% and 11.5%.
Aberdeen Frontier Markets Investment Company cumulative
performance in USD for periods ended 30 June 2019
6 months 1 year 3 years 5 years
% % % %
======================= ======== ====== ======= =======
Share Price +2.8 -14.4 -12.1 -34.2
======================== ======== ====== ======= =======
NAV +0.6 -14.0 -12.0 -32.5
======================== ======== ====== ======= =======
MSCI Frontier Markets +12.1 +5.2 +28.4 -2.0
------------------------ -------- ------ ------- -------
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 Standard Investments, Morningstar &
Lipper
Portfolio positioning
As at the end of June 2019 the portfolio had 50 investments,
providing exposure to more than 20 frontier market economies. As a
comparator, the MSCI Frontier Markets Index captures large and
mid-cap representation across 28 countries with 95
constituents.
During the year under review the Company's exposure to Frontier
Asia was broadly stable at 42.9%. A reduction in exposure to Sri
Lanka was offset by an increase to Vietnam.
The Company initiated four new investments during the second
half of the year: Arabian Centres Co, a Saudi Arabian shopping mall
developer and operator; NLB Group, a banking group with operations
across the former Yugoslavia; Grana y Montero, an infrastructure
company operating in the Andean region; as well as Adecoagro, an
Argentinian-headquartered agricultural company.
To fund these purchases, the portfolio exited BAT Bangladesh,
East African Breweries in Kenya, as well as Globant and Pampa
Energia in Argentina; the portfolio also reduced exposure to BBVA
Frances in Argentina, and John Keells in Sri Lanka.
Market outlook
While news flow continues to be mixed and liquidity conditions
an ongoing challenge, we see reason to be optimistic about the near
future. Firstly, from an economic as well as political point of
view, many of our core markets continue to progress various
structural reforms, several under the direct auspices of the IMF,
which is very encouraging. This provides an element of policy
clarity to the cyclical recovery that is underway across a number
of our markets. Pakistan is the latest to join this group, which
bodes well for the future of that economy. Secondly, while foreign
investor participation in most of our markets has fallen to
extremely low levels, such a lack of engagement we believe will
revert in due course and in the meantime valuations are at highly
attractive levels in absolute terms, underpinned by a still
reasonable corporate earnings outlook.
As discussed above, uncertainty with regard to the outlook of
developed economies, matched by increasing dovish tones from
central banks, could provide a more conducive environment for
frontier markets as investors seek uncorrelated and absolute return
opportunities. In time we expect the frontier region to be
rediscovered as global investors recognise the attractiveness of
the asset class's idiosyncratic drivers, cyclical positioning and
attractively valued markets.
The portfolio as a whole is expected to deliver 12.3% earnings
growth in local currency terms in 2019 according to consensus
estimates, with a blended return-on-equity of 25.7% and a dividend
yield of 4.1%, which is supportive of the Company's own dividend
policy.
As ever, the portfolio retains its clear quality bias, which is
reflected in the portfolio's statistics: a high blended
return-on-equity, low corporate leverage and double digit corporate
earnings growth. In all, we believe these fundamentals provide
cause to be optimistic about the coming year.
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 what we believe to be
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 with regular on the ground visits. This allows us to
identify those with solid long-term prospects and progressive
management teams that should negotiate economic cycles and
safeguard shareholder interests.
Aberdeen Standard Fund Managers Limited
25 September 2019
Relative country positions Country Fund Benchmark Difference
======================
% % %
====================== ====== ========== ===========
Africa & Middle East 29.3 68.2 -38.9
====================== ====== ========== ===========
Bahrain - 5.5 -5.5
Egypt 5.5 - 5.5
Ghana 0.8 - 0.8
Ivory Coast - 0.1 -0.1
Jordan - 1.1 -1.1
Kenya 6.1 5.9 0.2
Kuwait 2.8 31.4 -28.6
Lebanon 0.6 2.6 -2.0
Mauritius - 2.2 -2.2
Morocco - 10.1 -10.1
Nigeria 8.0 6.5 1.5
Oman 1.4 1.4 -
Saudi Arabia 1.0 - 1.0
Senegal - 0.7 -0.7
South Africa 1.9 - 1.9
Tanzania 1.2 - 1.2
Tunisia - 0.7 -0.7
====================== ====== ========== ===========
Asia 42.9 21.2 21.7
====================== ====== ========== ===========
Bangladesh 6.9 2.9 4.0
Myanmar 0.8 - 0.8
Pakistan 6.9 - 6.9
Sri Lanka 3.7 0.7 3.0
Thailand 1.6 - 1.6
Vietnam 23.0 17.6 5.4
====================== ====== ========== ===========
Europe ex UK 12.4 10.6 1.8
====================== ====== ========== ===========
Croatia - 1.5 -1.5
Estonia - 0.5 -0.5
Georgia 4.3 - 4.3
Kazakhstan - 1.4 -1.4
Lithuania - 0.2 -0.2
Romania 6.0 4.9 1.1
Serbia - 0.2 -0.2
Slovenia 2.1 1.9 0.2
====================== ====== ========== ===========
UK* 2.8 - 2.8
====================== ====== ========== ===========
Latin America 8.6 - 8.6
====================== ====== ========== ===========
Argentina 4.3 - 4.3
Peru 1.3 - 1.3
Panama 3.0 - 3.0
====================== ====== ========== ===========
Cash 4.0 - 4.0
====================== ====== ========== ===========
Total 100.0 100.0 -
---------------------- ------ ---------- -----------
At 30 June 2019, the benchmark index had an adjusted market cap of US$102.4bn and was composed
of 95 companies across 28 countries (source MSCI).
* ASA International Group UK listed
Top 20 Investments
As at 30 June 2019
------------------------------------------- ----------------- ------------------------------ ----------------
Value Percentage of
Company Country $'000 net assets (%)
===================================== ================== =============================== =================
FPT Corporation Vietnam 2,838 5.8
===================================== ================== =============================== =================
Mobile World Investment Corporation Vietnam 2,752 5.7
===================================== ================== =============================== =================
Square Pharmaceuticals Bangladesh 1,969 4.1
===================================== ================== =============================== =================
Safaricom Kenya 1,537 3.2
===================================== ================== =============================== =================
Zenith Bank Nigeria 1,486 3.1
===================================== ================== =============================== =================
Copa Holdings Panama 1,453 3.0
===================================== ================== =============================== =================
Masan Group Corporation Vietnam 1,411 2.9
===================================== ================== =============================== =================
Guaranty Trust Bank Nigeria 1,389 2.9
===================================== ================== =============================== =================
Equity Group Holdings Kenya 1,385 2.8
===================================== ================== =============================== =================
Grameenphone Bangladesh 1,361 2.8
===================================== ================== =============================== =================
Humansoft Holding Company Kuwait 1,341 2.8
===================================== ================== =============================== =================
ASA International Group United Kingdom 1,325 2.7
===================================== ================== =============================== =================
Purcari Wineries Romania 1,314 2.7
===================================== ================== =============================== =================
BGEO Georgia 1,278 2.6
===================================== ================== =============================== =================
Juhayna Food Industries Egypt 1,102 2.3
===================================== ================== =============================== =================
IRSA Propiedades Argentina 1,069 2.2
===================================== ================== =============================== =================
Sphera Franchise Romania 1,051 2.2
===================================== ================== =============================== =================
Nova Ljubljanska Slovenia 987 2.0
===================================== ================== =============================== =================
Saigon Beer Alcohol Beverage Vietnam 924 1.9
===================================== ================== =============================== =================
MTN Group Ltd South Africa 904 1.9
------------------------------------- ------------------ ------------------------------- -----------------
Top twenty holdings 28,876 59.6
========================================================= =============================== =================
Other holdings 17,312 35.4
--------------------------------------------------------- ------------------------------- -----------------
Total holdings 46,188 95.0
========================================================= =============================== =================
Cash and other net assets 2,426 5.0
--------------------------------------------------------- ------------------------------- -----------------
Net assets 48,614 100.0
--------------------------------------------------------- ------------------------------- -----------------
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.
Further information on interest rate risk, foreign currency risk and other price risk, liquidity
risk, credit risk, gearing risk and how these risks are managed is contained in the Annual
Report.
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 in the Annual Report.
Fund Managers Directive, Accounting Standards and the The Board relies upon the Manager to ensure the Company's
AIM listing rules, disclosure and prospectus compliance with applicable regulations
rules) may have a negative impact on the Company. 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
John Whittle
Director
The Directors are responsible for ensuring that proper David Warr
accounting records are kept which disclose Director
with reasonable accuracy at any time the financial position 25 September 2019
of the Company and enable them
to ensure that the accounts have been properly prepared in
accordance with The Companies (Guernsey)
Law, 2008. They are also responsible for safeguarding the
assets of the Company and hence
for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
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
2019 2018
------------------------------ -----------------------------
Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
---------------------------- -------- --------- --------- -------- --------- --------
Losses on investments - (10,151) (10,151) - (8,780) (8,780)
Capital (losses)/gains on
currency movements - (180) (180) - 244 244
----------------------------- -------- --------- --------- -------- --------- --------
Net investment losses - (10,331) (10,331) - (8,536) (8,536)
----------------------------- -------- --------- --------- -------- --------- --------
Income 2,006 - 2,006 2,329 - 2,329
----------------------------- -------- --------- --------- -------- --------- --------
2,006 (10,331) (8,325) 2,329 (8,536) (6,207)
---------------------------- -------- --------- --------- -------- --------- --------
Investment management fees (148) (295) (443) (260) (519) (779)
Other expenses (660) - (660) (794) - (794)
----------------------------- -------- --------- --------- -------- --------- --------
Net loss from operations
before finance costs and
taxation 1,198 (10,626) (9,428) 1,275 (9,055) (7,780)
----------------------------- -------- --------- --------- -------- --------- --------
Finance costs (25) - (25) (26) - (26)
----------------------------- -------- --------- --------- -------- --------- --------
Net loss before taxation 1,173 (10,626) (9,453) 1,249 (9,055) (7,806)
----------------------------- -------- --------- --------- -------- --------- --------
Withholding tax (189) - (189) (233) - (233)
----------------------------- -------- --------- --------- -------- --------- --------
Net loss after taxation 984 (10,626) (9,642) 1,016 (9,055) (8,039)
----------------------------- -------- --------- --------- -------- --------- --------
Losses per Ordinary Share 1.30c (14.03c) (12.73c) 1.19c (10.61c) (9.42c)
----------------------------- -------- --------- --------- -------- --------- --------
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 for the year and therefore the 'Net loss 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 results.
Statement of Financial Position
As at As at
30 June 2019 30 June 2018
$'000 $'000
--------------------------------------------------- --------- ------------- ------------------
Non-current assets
Investments at fair value through profit or loss 46,188 66,931
-------------------------------------------------------------- ------------- ------------------
Current assets
Cash and cash equivalents 1,939 719
Sales for future settlement 800 855
Other receivables 401 76
-------------------------------------------------------------- ------------- ------------------
3,140 1,650
--------- ------------- ------------------
Total assets 49,328 68,581
-------------------------------------------------------------- ------------- ------------------
Current liabilities
Purchases for future settlement 593 -
Other payables 121 141
-------------------------------------------------------------- ------------- ------------------
714 141
Net assets 48,614 68,440
-------------------------------------------------------------- ------------- ------------------
Capital and reserves attributable to equity
holders
Share capital and Share premium account 3,798 12,543
Capital reserve 44,551 55,546
Revenue reserve 265 351
Total equity 48,614 68,440
-------------------------------------------------------------- ------------- ------------------
Net assets per Ordinary Share (US cents) 67.60c 80.90c
Exchange rate GBP/USD (mid market) 0.78770 0.75735
Net assets per Ordinary Share (pence) 53.25p 61.27p
-------------------------------------------------------------- ------------- ------------------
Approved and authorised for issue by the Board of Directors on
25 September 2019 and signed on their behalf by:
John Whittle
Director
David Warr
Director
The notes form an integral part of these financial results.
Statement of Changes in Equity
Share capital and
Share premium
For the year ended 30 June account Capital reserve Revenue reserve Total
2019 $'000 $'000 $'000 $'000
------------------------------ ----- ------------------ -------------------------- ---------------------- ---------
Balance at 1 July 2018 12,543 55,546 351 68,440
Tender offer (8,745) - - (8,745)
(Loss)/profit for the year - (10,626) 984 (9,642)
Equity dividends paid - (369) (1,070) (1,439)
------------------------------------- ------------------ -------------------------- ---------------------- ---------
Balance at 30 June 2019 3,798 44,551 265 48,614
------------------------------------- ------------------ -------------------------- ---------------------- ---------
Share capital and
Share premium
For the year ended 30 June account Capital reserve Revenue reserve Total
2018 $'000 $'000 $'000 $'000
------------------------------ ----- ------------------ -------------------------- ---------------------- ---------
Balance at 1 July 2017 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)
------------------------------------- ------------------ -------------------------- ---------------------- ---------
Balance at 30 June 2018 12,543 55,546 351 68,440
------------------------------------- ------------------ -------------------------- ---------------------- ---------
The notes form an integral part of these financial results.
Statement of Cash Flow
Year ended Year ended
30 June 2019 30 June 2018
$'000 $'000
------------------------------------------- -------- ------------ -----------------------
Operating activities
Cash inflow from investment income and bank interest 2,035 2,671
Cash outflow from management expenses (1,217) (1,601)
Cash (outflow)/inflow from foreign exchange movements (440) 228
Cash outflow from taxation (189) (233)
----------------------------------------------------- ------------ -----------------------
Net cash flow from operating activities 189 1,065
----------------------------------------------------- ------------ -----------------------
Investing activities
Cash inflow from disposal of investments 29,864 39,869
Cash outflow from purchase of investments (18,467) (41,355)
----------------------------------------------------- ------------ -----------------------
Net cash flow from/(used in) investing activities 11,397 (1,486)
----------------------------------------------------- ------------ -----------------------
Financing activities
Finance charges and interest paid (25) (26)
Purchase of own shares - (679)
Tender offer costs (158) (8)
Tender offer distributions paid (8,745) (437)
Equity dividends paid (1,438) (2,557)
----------------------------------------------------- ------------ -----------------------
Net cash flow used in financing activities (10,366) (3,707)
----------------------------------------------------- ------------ -----------------------
Net increase/(decrease) in cash and cash equivalents 1,220 (4,128)
----------------------------------------------------- ------------ -----------------------
Cash and cash equivalents opening balance 719 4,847
Cash and cash equivalents balance at 30 June 1,939 719
----------------------------------------------------- ------------ -----------------------
The notes form an integral part of these financial results.
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
IFRS 9. 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 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
The Company has adopted IFRS 9 Financial Instruments, which
became effective on 1 January 2018. IFRS 9 replaces IAS 39,
'Financial Instruments: Recognition and measurement'. It includes
revised guidance on the classification and measurement of financial
instruments; a new expected credit loss model for calculating
impairment of financial assets and new general hedge accounting
requirements. It also carries forward the guidance from IAS 39
regarding recognition and derecognition of financial instruments.
Adoption of this standard did not have a material impact on the
classification of financial assets and liabilities of the Company,
because the financial instruments, measured at fair value through
profit or loss ("FVTPL") under IAS 39, are managed on a fair value
basis in accordance with a documented investment strategy.
Accordingly, these financial instruments have been mandatorily
measured at FVTPL under IFRS 9. There has been no restatement in
the comparative figures for the period ended 30 June 2018 as a
result of adopting IFRS 9.
There are no other 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.
(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 notes 1(b)
and 15).
(o) Going concern
The Directors have adopted the going concern basis of accounting
in preparing these financial statements. The Directors formally
considered the Company's going concern status at the time of the
publication of these financial statements and a summary of their
assessment is provided below.
The Directors have a reasonable expectation that the Company has
adequate operational resources to continue in existence for at
least twelve months from the date of approval of the Annual Report.
In reaching this conclusion, the Directors have considered the
liquidity of the Company's portfolio of investments as well as its
cash position, income, expenses and other outflows. The Company has
substantial operating expenses cover.
In light of the discount control policy approved by shareholders
on 17 October 2018 and disclosed in the Chairman's Statement, the
Board recognises that, although the Company has substantial
resources to cover the Company's expenses and other costs likely to
be faced by the Company for at least 12 months from the date of
approval of this Annual Report, there exists a level of material
uncertainty as to whether the performance of the Company will
exceed the performance of the portfolio's Reference Benchmark.
Based on the above assessment, the Directors are satisfied that
it is appropriate to adopt the going concern basis of accounting in
preparing these financial statements.
2 Investments at fair value through profit or loss
2019 2018
------------------------------------------------------
$'000 $'000
------------------------------------------------------ --------- ---------
Quoted direct equity investments 46,188 66,295
Open-ended fund and limited liability partnership
investments - 636
------------------------------------------------------ --------- ---------
Total fixed asset investments at fair value 46,188 66,931
------------------------------------------------------ --------- ---------
Investments at cost
Opening balance of investments at cost 77,793 76,320
Additions at cost 19,059 34,243
Disposals at cost (34,455) (32,770)
------------------------------------------------------ --------- ---------
Cost of investments at 30 June 62,397 77,793
------------------------------------------------------ --------- ---------
Revaluation of investments to fair value
Opening balance (10,862) (1,448)
Unrealised losses taken to Capital reserve (5,347) (9,414)
------------------------------------------------------ --------- ---------
Balance at 30 June (16,209) (10,862)
------------------------------------------------------ --------- ---------
Fair value of investments at 30 June 46,188 66,931
------------------------------------------------------ --------- ---------
Losses on investments per Statement of Comprehensive
Income
(Losses)/gains on disposal of investments (4,804) 634
Movement on revaluation of investments held (5,347) (9,414)
(10,151) (8,780)
------------------------------------------------------ --------- ---------
Fair value estimation
The Company complies with IFRS 13. The Company's investments are
valued at fair value.
IFRS 13 requires the Company to classify its investments in a
fair value hierarchy that reflects the significance of the inputs
used in making the measurements. IFRS 13 establishes a fair value
hierarchy that prioritises the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements). The three levels of
fair value hierarchy under IFRS 13 are as follows:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
-- Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level
3).
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers
observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
The classification of the Company's investments at fair value
through profit or loss as at 30 June 2019 is detailed in the table
below:
30 June 2019 2018
Investment at fair value through profit or loss: $'000 $'000
=================================================== ====== ======
Level 1 46,188 66,295
Level 2 - -
Level 3 - 636
=================================================== ====== ======
Total 46,188 66,931
--------------------------------------------------- ------ ------
Investments whose values are based on quoted market prices in
active markets, and therefore classified within Level 1, include
active listed equities. The Company does not adjust the quoted
price for these instruments.
Investments that trade in markets that are not considered to be
active but are valued based on quoted market prices, dealer
quotations or alternative pricing sources supported by observable
inputs are classified within Level 2. These include monthly priced
funds.
Investments classified within Level 3 have significant
unobservable inputs as they trade infrequently. As at the year end,
there were no level 3 classified investments. Sustainable Capital
Africa Consumer Fund ('SCACF') was redeemed during the year. There
remained a residual value being due to the Company equivalent to
the value of SCACF's underlying holding in Delta Corporation
Limited. As at 30 June 2019 the residual value due to the Company
stood at $275,000.
Reconciliation of the Level 3 classification investments during
the year to 30 June 2019 is shown below:
2019 2018
$'000 $'000
============================================ ====== ======
Opening balance at beginning of year 636 786
Level 2 securities reclassified to level 3 - 636
Level 3 securities sold during the year (379) (920)
Revaluation adjustments* (257) 134
============================================ ====== ======
Closing balance at end of year - 636
-------------------------------------------- ------ ------
* These adjustments form part of the '(Losses)/gains on
Investments' figure in the Statement of Comprehensive Income.
The valuation policies used by the Company are explained in the
Accounting Policies Note 1(b).
3 Income
2019 2018
----------------------------
$'000 $'000
---------------------------- ------ ------
Dividends from investments 2,004 2,329
Other income 2 -
---------------------------- ------ ------
Total investment income 2,006 2,329
---------------------------- ------ ------
4 Investment management fees and other expenses
2019 2018
-------------------------------- ----------------------------------------------
Revenue Capital Total Revenue Capital Total
-----------------------------
$'000 $'000 $'000 $'000 $'000 $'000
----------------------------- -------- -------------- ------ -------------- -------------- --------------
Investment management fees 181 361 542 260 519 779
Investment management fees
rebates * (33) (66) (99) - - -
----------------------------- -------- -------------- ------ -------------- -------------- --------------
Total investment management
fees 148 295 443 260 519 779
----------------------------- -------- -------------- ------ -------------- -------------- --------------
Administration fees 124 - 124 145 - 145
Directors' fees 116 - 116 122 - 122
Depository and custody fees 197 - 197 301 - 301
Broker fees 29 - 29 33 - 33
Registrar's fees 37 - 37 38 - 38
Auditor's fees 28 - 28 28 - 28
Nominated adviser fees 22 - 22 27 - 27
Promotion 31 - 31 36 - 36
Other expenses 76 - 76 64 - 64
----------------------------- -------- -------------- ------ -------------- -------------- --------------
Total other expenses 660 - 660 794 - 794
----------------------------- -------- -------------- ------ -------------- -------------- --------------
Total expenses 808 295 1,103 1,054 519 1,573
----------------------------- -------- -------------- ------ -------------- -------------- --------------
* The Manager has agreed to reduce the management fee to the
extent necessary in an attempt to ensure that the Company's Ongoing
Charge Ratio ('OCR'), as calculated in accordance with the guidance
issued by the Association of Investment Companies does not exceed
2.00%, but such rebate to be capped at a level of one third of the
Manager's annual fee. There can, therefore, be no guarantee that
the overall OCR of the Company will, even given any rebate by the
Manager, be limited to 2.00%.
The Company's ongoing charges for the year ended 30 June 2019
calculated in accordance with the AIC methodology was capped at
2.00% (2018: 2.01%). The ongoing charges figure does not include
finance costs.
Further details on the management agreement are provided in the
Directors' Report contained within the Annual Report. The Company
has agreed to pay a fee to Aberdeen Asset Managers Limited for the
provision of promotional activities at an annual rate of GBP22,000
with effect from July 2018 (prior to that, the fee was at an annual
rate of GBP26,600).
5 Finance costs
2019 2018
-------------------------------- --------------------------------
Revenue Capital Total Revenue Capital Total
---------------------
$'000 $'000 $'000 $'000 $'000 $'000
--------------------- -------- -------------- ------ -------- -------------- ------
Bank charges 25 - 25 26 - 26
--------------------- -------- -------------- ------ -------- -------------- ------
Total finance costs 25 - 25 26 - 26
--------------------- -------- -------------- ------ -------- -------------- ------
6 Directors' fees
The fees paid or accrued were $116,000 (2018: $122,000). There
were no other emoluments. Full details of the fees of each
Director are given in the Directors' Remuneration Report
contained within the Annual Report.
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 (2018: GBP1,200) during
the year.
During the year, the Company suffered foreign withholding tax on
income from investments totalling in aggregate $189,000 (2018:
$233,000).
8 Losses per Ordinary Share
Losses per Ordinary Share is based on the net loss of $9,642,000
(2018: loss of $8,039,000) attributable to the weighted average of
75,734,498 (2018: 85,316,533) Ordinary Shares of no par value in
issue during the year to 30 June 2019.
Supplementary information is provided as follows:
Revenue reserve per Ordinary Share for the year is based on the
net revenue reserve profit of $984,000 (2018: revenue reserve
profit of $1,016,000) attributable to the weighted average of
75,734,498 (2018: 85,316,533) Ordinary Shares of no par value in
issue during the year to 30 June 2019.
Capital reserve per Ordinary Share for the year is based on the
net capital reserve loss of $10,620,000 (2018: capital reserve loss
of $9,055,000) attributable to the weighted average of 75,734,498
(2018: 85,316,533) Ordinary Shares of no par value in issue during
the year to 30 June 2019.
9 Loans and overdraft facility payable
During the year, the Company had a $600,000 temporary overdraft
facility with Northern Trust (Guernsey) Limited ('NT') from 24 May
2019 to 14 June 2019 (2018: $5,000,000 temporary overdraft facility
with NT from 17 March 2017 to 6 July 2017).
10 Share capital
Movement in Ordinary Shares of no par value
Allotted,
issued
----------------------------- ------------ ------------------------------
For the year ended 30 June and fully Treasury
2019 Authorised paid shares
----------------------------- ------------ ------------- ------------------------------
Opening number of shares as
at 1 July 2018 Unlimited 84,600,108 1,302,500
Validly tendered shares for (12,689,991) -
cancellation
----------------------------- ------------ ------------- ------------------------------
Closing number of shares as
at 30 June 2019 Unlimited 71,910,117 1,302,500
----------------------------- ------------ ------------- ------------------------------
Allotted,
issued
----------------------------- ------------ ------------------------------
For the year ended 30 June and fully Treasury
2018 Authorised paid shares
----------------------------- ------------ ------------- ------------------------------
Opening number of shares as
at 1 July 2017 Unlimited 85,452,608 450,000
Purchase of own shares - (852,500) 852,500
----------------------------- ------------ ------------- ------------------------------
Closing number of shares as
at 30 June 2018 Unlimited 84,600,108 1,302,500
----------------------------- ------------ ------------- ------------------------------
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
On 17 October 2018, the Company received valid tenders for
12,689,991 Ordinary Shares.
Following the implementation of the Tender Offer, the Company
has 73,212,617 Ordinary Shares in issue (including 1,302,500 Shares
of which will be held in treasury and for which the exercise of
voting rights will be suspended). The total number of Ordinary
Shares with voting rights in the Company is 71,910,117 and this
figure may be used by shareholders as the denominator for the
calculations by which they will determine if they are required to
notify their interest in, or a change to their interest in, the
Company.
The total value of validly tendered Ordinary Shares in the
period was $8,745,000. The distribution to shareholders who had
validly tendered shares took place during the week commencing 29
October 2018.
Other purchases of own shares
There were no other Ordinary Shares re-purchased during the year
ended 30 June 2019 (2018: 852,500 Ordinary Shares re-purchased
during the year at an aggregate cost to the Company of $679,000,
all of which are held in treasury).
11 Net Assets Value ('NAV') per Ordinary Share
Net assets per Ordinary Share of $0.6760 (2018: $0.8090) is
based on net assets of $48,6154,000 (2018: $68,440,000) divided by
71,910,117 (2018: 84,600,108) Ordinary Shares in issue (excluding
shares held in treasury) as at the year end date.
The below table is a reconciliation between the NAV per Ordinary Share
announced on the London Stock Exchange and the NAV per share disclosed
in these financial statements.
2019 2018
----------------------------- -----------------------------------
NAV per
Ordinary NAV per
Share Ordinary
NAV (including (including NAV (including Share (including
income) income) income) income)
$'000 $' $'000 $'
---------------------------------------- --------------- ------------ --------------- ------------------
NAV as published on 1 July 2019 (2018:
as published on 2 July 2018) 48,505 0.6745 68,440 0.8090
Adjustments - Management fee rebate
and other expenses 109 0.0015 - -
---------------------------------------- --------------- ------------ --------------- ------------------
NAV per Ordinary Share as disclosed
in these financial statements 48,614 0.6760 68,440 0.8090
---------------------------------------- --------------- ------------ --------------- ------------------
12 Related party transactions
Details of the management contract can be found in the
Directors' Report on contained in the Annual Report. Fees payable
to the Investment Manager are detailed in note 4. Other payables
include accruals of basic management fees of $40,421 (2018:
$57,033).
Aberdeen Asset Management PLC shareholding in the Company as at
year end stood at 13,750,000 (2018: 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 ended 30 June 2019
are detailed below:
Dividend Dividend
paid out paid out
the Capital the Revenue
reserve reserve
(1) , (1) ,
In respect Cents per Pence equivalent US Dollar US Dollar
of the Ordinary per Ordinary equivalent equivalent
year ended Date Paid Share Share $'000 $'000
------------------ ------------- -------------- ---------- ----------------- ------------------ -------------
30 June 19 December
Final dividend 2018 2018 1.0000 0.76161500 369 351
30 June
Interim dividend 2019 28 June 2019 1.0000 0.76746953 - 719
369 1,070
----------------------------------------------- ---------- ----------------- ------------------ -------------
(1) Dividends are
paid in sterling
Dividends paid during the year ended 30 June 2018
are detailed below:
Dividend Dividend
paid out paid out
the Capital the Revenue
reserve reserve
(1) , (1) ,
In respect Cents per Pence equivalent US Dollar US Dollar
of the Ordinary per Ordinary equivalent equivalent
year ended Date Paid Share Share $'000 $'000
------------------ ------------- -------------- ---------- ----------------- ------------------ -------------
30 June 11 August
Interim dividend 2017 2017 1.0000 0.76694700 855 -
30 June 19 December
Final dividend 2017 2017 1.0000 0.76183200 - 855
30 June
Interim dividend 2018 29 June 2018 1.0000 0.76694700 - 847
855 1,702
----------------------------------------------- ---------- ----------------- ------------------ -------------
(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 Ordinary Share. If approved
by shareholders at the Annual General Meeting on 10 December 2019,
this dividend will be paid on 18 December 2019 to those
shareholders on the register on 15 November 2019. The ex-dividend
date will be 14 November 2019. The final dividend will be paid in
sterling and the sterling dividend rate will be announced in due
course.
14 Subsequent events
There are no subsequent events related to the Company since the
year ended 30 June 2019 and up to the date of this report.
15 Financial information
The financial information in this announcement is derived from
the audited financial statements for the year ended 30 June
2019.
The Annual Report for the year ended 30 June 2019 was approved
by the Board of Directors on 25 September 2019. 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 10 December 2019.
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 2019 As at 30 June 2019
(GB Pounds equivalent) (US Dollar equivalent)
----------------------------------------- ----------------- -------- --------------------------- -----------------------------
NAV per Ordinary Share a 0.5325 0.6760
Ordinary Share price b 0.4810 0.6106
Discount (b÷a)-1 9.7% 9.7%
----------------------------------------- ----------------- -------- --------------------------- -----------------------------
Ongoing charges
A measure, expressed as a percentage of average NAV, of the regular, recurring annual costs
of running an investment company.
--------------------------------------------------------------------------------------------------------------------------------
As at 30 June 2019
Year ended 30 June 2019 GBP'000
----------------------------------------------- ----------- ----------------- ------------------ ---------------------------
Average NAV a 55,089
Annualised expenses b 1,103
Ongoing charges b÷a 2.00%
----------------------------------------------- ----------------------------- ------------------ ---------------------------
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 9.7% 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.
--------------------------------------------------------------------------------------------------------------------------------
Ordinary Share
Year ended 30 June 2019 price NAV per Ordinary Share
----------------------------------------------- ----------- ----------------- ------------------ ---------------------------
Opening at 1 July 2018 (in US dollars) a 0.7361 0.8090
Closing at 30 June 2019 (in US dollars) b 0.6106 0.6760
Price movement (b÷a)-1 c -17.0% -16.4%
Dividend reinvestment d 2.6% 2.4%
Total return (c+d) -14.4% -14.0%
----------------------------------------------- --------------------- ------- ------------------ ---------------------------
www.aberdeenfrontiermarkets.co.uk
Registered office
11 New Street
St Peter Port
Guernsey
GY1 2PF
Enquiries:
Aberdeen Standard Fund Managers Limited (Alternative Investment
Fund 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
25 September 2019
END
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SELFWIFUSESU
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