TIDMAFMC
RNS Number : 2272D
Aberdeen Frontier Mkts Inv Co Ltd
17 February 2020
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
Half-Yearly Report
31 December 2019
Financial Highlights
For the six month period ended 31 December 2019
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 Manager deems to be, or displays Both companies are wholly owned subsidiaries
similar characteristics to, Frontier Market of Standard Life Aberdeen plc.
countries.
Net Asset Value ("NAV") per Ordinary share total return NAV per Ordinary share (in US dollars)
(in US dollar terms) (1, 3)
0.4% $0.6 710
six months to 31 December 2019 As at 31 December 2019
--------------------------------------------------------- ---------------------------------------------------------
Ordinary s hare price total return (in US dollar terms) NAV per Ordinary share (in GB pounds)
(2, 3)
2.1% GBP0.5061
six months to 31 December 2019 As at 31 December 2019
--------------------------------------------------------- ---------------------------------------------------------
Net Assets (in US dollars) Ordinary s hare price (in GB pounds)
$48.2 million GBP0.4640
As at 31 December 2019 As at 31 December 2019
--------------------------------------------------------- ---------------------------------------------------------
(1) Total return, NAV to NAV, gross income reinvested.
(2) Ordinary share price total return is on a mid-to-mid
basis.
(3) These are Alternative Performance Measures ("APMs").
In addition to these APMs, details
of other performance measures used by the Company can be
found in the APMs section of this
report .
Chairman's Statement
====================
On behalf of your Board, I present to you the Half-Yearly Report
for Aberdeen Frontier Markets Investment Company Limited (the
"Company") for the six months ended 31 December 2019.
Background and Performance
During the six months ended 31 December 2019, the Company
reported net asset value ("NAV") per Ordinary share and Ordinary
share price total returns of +0.4% and +2.1%, respectively, in US
dollar terms. This compared to an increase of +5.5% for the MSCI
Frontier Markets Net Total Return Index (the "Index").
It is pleasing to observe signs of recovery over the six months
ended 31 December 2019 as both frontier markets and the Company's
portfolio delivered positive returns. Highlights included a
turnaround for Pakistan, Egypt, and Vietnam, the Company's three
largest country exposures, while it is anticipated that improved
corporate earnings will be witnessed across the portfolio's other
20+ market exposures.
The Company's under-performance against the Index resulted from
its exposure to the quite exceptional events in Argentina and, to a
lesser extent, in Lebanon. The longstanding underweight to Kuwait
detracted again as the small representation of bank stocks drove
the Index higher ahead of the country's likely elevation to
Emerging Market status later this year. Further information on the
portfolio's performance may be found in the Manager's Report.
Discount Management Policy
The discount to NAV at which the Company's shares trade narrowed
from 9.7% to 8.3% over the period. The Board keeps the share price
discount to net asset value 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 any discount to NAV at
which the Ordinary shares may trade.
The Company did not buy back any shares during the six months
ended 31 December 2019, resulting in an unchanged issued Ordinary
share capital of 71,910,117 Ordinary shares with voting rights and
an additional 1,302,450 Ordinary shares held in treasury. No shares
were bought back by the Company between 1 January 2020 and the
latest practicable date prior to the publication of this
Report.
At an Extraordinary General Meeting held on 17 October 2018,
shareholders approved a discount management policy (the "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) (the "Sterling Index"). For the 18 month period from 1 July
2018 to 31 December 2019, the Company reported a share price total
return of -12.3%, in sterling terms, as compared to +11.0% for the
Sterling Index.
The Board recognises the difficulty facing the Company of
meeting the share price total return test as set out within the
Policy and will review the future of the Company following the
conclusion of the Policy at 30 June 2020. The Board expects to
provide an update as soon as practicable in July 2020.
In the intervening period, the Board considers that,
notwithstanding the Policy, it remains appropriate to continue to
prepare the Company's Half- Yearly Report on the going concern
basis of accounting; this is explained more fully in note 3 to the
Financial Statements.
Dividend
Further to shareholder approval at the Company's Annual General
Meeting on 10 December 2019, a final dividend of 0.779313285p per
Ordinary share was paid on 18 December 2019 to shareholders on the
register on 15 November 2019. This was the sterling equivalent of a
dividend of 1.0 cent per share previously announced for the year
ended 30 June 2019 based on a USD/GBP exchange rate of 1.283181.
The Board, at this stage, expects to declare an interim dividend in
May 2020, for the year ending 30 June 2020, which will be paid in
June 2020.
Ongoing Charges Ratio
The Board remains very mindful of the costs incurred in managing
an investment company and the fact that any decrease in net assets
will lead to a higher overall ongoing charges ratio ("OCR"). The
Board previously reported that it had 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.
To the extent that the OCR exceeds 2% in any annual period, the
Manager has committed to rebating an equal amount of its management
fee to the Company with the objective of reducing the OCR to 2%.
This rebate is, however, capped such that the Manager will not
rebate more than an amount equal to one third of the Manager's
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 but the Board continues to monitor all costs on a regular
basis and seeks to reduce them wherever possible.
Future prospects
The Board shares the Manager's positive outlook for frontier
markets, particularly as the economic preconditions for growth
appear to be in place. Added to this, a continuation of the more
dovish view from the US Federal Reserve should curb US dollar
strength and reverse investor outflows from the asset class. From a
strategic viewpoint, the low correlation both of frontier markets
to global equities and within frontier markets themselves,
underpins their attraction for international investors seeking risk
diversification and may act as a hedge against any instability
which might be witnessed in more developed market equities.
The performance of the Manager's largest country positions, in
Egypt, Pakistan and Vietnam, validates the case for divergence from
the Index, which is a mainstay of the Manager's investment
approach. Furthermore, the Manager's selection of companies with a
quality bias, following extensive due diligence undertaken by the
Manager in-country, should lead to an improvement in the Company's
prospects.
I should like to thank shareholders for their patience and
continued support of the Company.
John Whittle
Chairman
17 February 2020
Manager's Report
================
Market environment
While the period under review was volatile for a small handful
of markets in our investment universe, and the asset class
continued to suffer ongoing withdrawals by international investors,
we are pleased to report that there have been pockets of solid
progress as well, and the majority of the portfolio continues to
display good corporate earnings growth.
The MSCI Frontier Markets Index (the "Index"), which
shareholders will remember is heavily skewed towards its largest
country constituent, Kuwait (which, at the end of December, was a
37.9% weighting in the Index), achieved a 5.5% total return in US
dollars, albeit this was largely attributable to the ongoing
liquidity-driven bull market in Kuwaiti bank stocks in anticipation
of the market's upgrade to Emerging Market status by MSCI at the
end of this coming May. Without the support of Kuwait, the Index's
return would have been much lower.
In terms of asset class fund flows, figures provided by EPFR
Global indicate that the second half of 2019 witnessed slightly
over 1.0 billion US dollars of net outflows from dedicated frontier
market equity funds. This follows an equally difficult first half,
which delivered slightly under 1.0 billion US dollars of net
outflows. Thus, 2019 was the second worst year for frontier market
equity fund flows since records began, only beaten by 2015's net
outflow of 2.4 billion US dollars.
An ongoing issue for frontier markets has been the reoccurrence
of capital destructive idiosyncratic risk, a theme that again
reared its ugly head in the period under review, this time in the
form of spiralling risk in Argentina, which was then exacerbated by
the evaporating investor confidence witnessed in Lebanon.
Argentina's lurch back to Peronism briefly shook risk assets
globally, but the impact was most felt in Argentina itself whose
market suffered the second worst stock market collapse ever known -
the S&P MERVAL Index lost 48.3% in US dollar terms on 12 August
2019. The new government has since re-introduced exchange controls
and commenced talks with the IMF to restructure the largest loan
programme in the IMF's history. Lebanon's descent into the economic
quagmire was less spectacular, but nonetheless costly, with the
MSCI Lebanon Index losing 45.9% in US dollar terms over the course
of last year. Lebanon is now struggling to form a new government
whose primary purpose will be to tackle the fiscal deficit and
stabilise the country's public debt.
It is nonetheless noteworthy that both the asset class and the
portfolio delivered positive returns last year despite these
pockets of volatility. Frontier markets' intrinsic diversification,
as well as low intra-market correlations, meant heightened
volatility in Argentina and Lebanon was largely contained to those
markets. Meanwhile, other jurisdictions, such as Kenya and
Pakistan, enjoyed a substantial improvement in economic prospects
as well as investor sentiment.
With regard to Pakistan (portfolio weight 11.4%), we are very
pleased to report that the market seems to have turned a corner in
August, following the central bank's implementation of a
market-driven exchange rate policy. This was a condition stipulated
under the terms of the lending programme agreed by the IMF in June
2019. The outcome of this, as well as supporting policy moves on
the fiscal side, have so far exceeded expectations, and underscored
the credibility of Pakistan's recently appointed economic
policymakers. The rupee's final downward adjustment in June, backed
by aggressive hikes of the central bank's policy rate to 13.25%,
cemented a severe but necessary contraction of imports that
resulted in a 73% year-on-year decline of the current account
deficit during the first five months of the local fiscal year to
June 2020. Policy credibility has been restored, in our view, which
is indicated by a dramatic influx of foreign investment into local
currency treasury bills; approximately US$2.0 billion in the second
half of 2019 alone. With the sovereign bond yield now on a downward
trajectory, local investors have piled back into the equity market,
driving a 27.9% positive return in US dollar terms during the
period. We expect foreign investors will return to the equity
market in due course, supporting further market appreciation.
Egypt has also achieved a more balanced growth trajectory, with
a serious economic reform programme underpinned by funding from the
IMF. Real GDP growth is expected to accelerate to 5.9% in 2020,
driven by falling inflation, easing monetary policy, rising real
incomes and expansion of consumption. Steady growth of remittances
and rising domestic gas production, as well as a recovery in
tourism, have kept the current account in balance and in
conjunction with still elevated interest rates have supported a
steady appreciation of the Egyptian pound. The corporate earnings
cycle is yet to fully play out in Egypt but we believe it will do
so over the next two to three years.
Turning to Vietnam, which is the portfolio's largest exposure at
23.9%, the economy continues to chart a steady course despite the
global trade headwinds, benefiting from large scale foreign direct
investment ("FDI") into manufacturing and assembly. Indeed Vietnam
has been a beneficiary of US-China trade tensions as manufacturers
look for geographic diversification of their supply chains. That
said, management of the Vietnamese dong will remain a balancing act
for policy-makers, as the country will want to minimise
appreciation against the US dollar given regional competitiveness
concerns, whilst cogniscent of too much depreciation given the
USA's sensitivity to this. FDI (which reached US$20.4 billion in
2019) and private consumption (which registered +11.8% year-on-year
in 2019) should continue to support economic expansion, which is
projected at 6.5% in 2020 by the IMF.
As highlighted above, the Company's three largest geographic
exposures display very supportive economics as well as stable
politics and our corporate earnings expectations for next year
reflect that. Elsewhere, we are enthused about prospects for most
of the portfolio's twenty or so other market exposures and
anticipate continued improvement in corporate earnings delivery
there too.
Performance
Aberdeen Frontier Markets Investment Company Limited Cumulative
performance in USD for the periods ended 31 December 2019
6 Months 1 Year 3 Years 3 Years
% % % %
------------- -------- ------ ------- -------
Share Price +2.1 +5.4 -15.4 -22.2
------------- -------- ------ ------- -------
NAV +0.4 +1.4 -14.5 -25.3
------------- -------- ------ ------- -------
Source: Aberdeen Standard Investments, Bloomberg Returns assume
dividends are reinvested. All performance numbers are total returns
with dividends reinvested as of the ex-dividend date.
The Company's NAV saw a very moderate increase during the first
half of the year, rising 0.4% in US dollar total return terms.
Pakistan, Vietnam, Egypt, and Kenya all contributed positively to
returns, albeit partially offset by declines in Argentina,
Bangladesh, and Nigeria.
In Pakistan, the star performers were Jubilee Life Insurance,
Habib Bank and Packages, which delivered total returns of 90.2%,
49.2% and 39.5% respectively during the period. All three holdings
rose with the tide of improving economic fundamentals in the
country.
In Vietnam, FPT Corp and Mobile World made solid gains as a
result of returning local investor interest in these two particular
names given a series of robust quarterly earnings results. In
Egypt, CIRA, the education company, and Cleopatra Hospital,
performed well on excellent third quarter results. Finally in
Kenya, Equity Group made a strong recovery on the repeal of
interest rate caps for banks.
Negative contribution primarily derived from Argentina. Whilst
the portfolio's allocation had been pared back significantly into
the election to 4.5% the extent of the market and currency slump
nevertheless took its toll. Elsewhere, Bangladesh and Nigeria
drifted lower on investor apathy and market-unfriendly government
policy action. On the flipside, valuations and dividends are very
attractive and more than compensate for the difficult
environment.
Portfolio positioning
As at the end of December 2019 the portfolio had 54 investments,
providing exposure to more than 20 frontier market economies.
Allocation to sub-Saharan Africa was reduced further during the
period with the purpose of further containing hard-to-quantify or
unknown economic and policy risks. This included the disposals of
MTN Group, Nestle Nigeria and Tanzanian Breweries, as well as a
reduction in Zenith Bank. In a similar vein, exposure to Argentina
was significantly reduced given the myriad of uncertainties there,
and Blom Bank in Lebanon was exited. The Company's holding in Bank
Muscat was also sold given its unexciting growth outlook and risk
that the corporate tax burden in Oman could rise in the future.
The Company initiated eleven new investments in place of the
above exits or reductions. Several speak to identified thematic
areas that display structural growth prospects in frontier markets.
In the digital payments arena, the portfolio introduced holdings in
Fawry (Egypt), Hightech Payment Systems (Morocco), and Network
International (UAE). In the area of financial inclusion, which can
be defined as micro-finance, consumer lending and SME credit,
positions were initiated in Addiko (Croatia), CI Capital (Egypt),
and IDLC (Bangladesh). In education, Cairo Investment & Real
Estate (Egypt) was introduced. And in healthcare, Cleopatra
Hospital (Egypt) and Rameda (Egypt) were initiated. In addition,
the Company purchased holdings in Halyk Bank (Kazakhstan) and
Seplat Petroleum (Nigeria).
Exposure to Frontier Asia increased slightly to 49.2% (which
includes UK-listed ASA International). This was driven by an
increase in Pakistan and Vietnam's weights in the portfolio,
primarily as a result of capital appreciation.
Market outlook
The outlook for the portfolio's major exposures both at the
economy and stock level, we believe, is bright and valuations do
not reflect the fundamentals of the companies that we own; nor do
they reflect the benign, even supportive, economic backdrop evident
across much of our universe. Vietnam, Pakistan and Egypt are
particularly well positioned today from a cyclical perspective,
buttressed by credible and orthodox policymaking as well as
loosening monetary policy in the western world. Outside of these
three markets, the Company owns a diversified pool of high quality
companies playing to a range of attractive opportunities across
almost two dozen economies.
While investor confidence in the asset class has taken a knock,
and institutional appetite remains subdued, economic and political
progress on the ground remains plain to see in the vast majority of
our markets as we witness on our regular country visits, and the
corporate earnings backdrop is generally very supportive.
The switch in US Federal Reserve policy from tightening to
easing reflects late cycle concerns about the US economic cycle,
and in normal circumstances this should herald an uptick of
investor interest in riskier asset classes, of which frontier
markets is perceived to be one. Indeed, at the very least, monetary
easing should cap strength in the US dollar and allow frontier
market central banks breathing space to moderate their own interest
rates if they feel appropriate. All this should be supportive of
our asset class over the coming months.
We repeat the point made previously that the very low
correlation of the portfolio with global equities imbues it with
defensive qualities should the major global economies and equity
markets actually lose their footing, especially given the very low
valuations that most of our markets now stand at. As a portfolio
diversifier, an exposure to equities in frontier markets, we
believe, makes utmost sense and, in time, we expect these markets
to benefit as global investors rediscover the attractiveness of the
asset class's idiosyncratic drivers, cyclical positioning and
attractively valued companies.
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 be better placed to negotiate varying
economic cycles and safeguard shareholder interests.
Aberdeen Asset Managers Limited
17 February 2020
Top Twenty Investments
======================
As at 31 December 2019
Value Percentage of net
Company Country (GBP'000) assets (%)
------------------------------------------------ ------------- -------------------------- -----------------
FPT Corporation Vietnam 3,353 6.9
------------------------------------------------- -------------- -------------------------- -----------------
Mobile World Investment Corporation Vietnam 3,062 6.3
------------------------------------------------- -------------- -------------------------- -----------------
Square Pharmaceuticals Bangladesh 1,619 3.4
------------------------------------------------- -------------- -------------------------- -----------------
Guaranty Trust Bank Nigeria 1,483 3.1
------------------------------------------------- -------------- -------------------------- -----------------
Bank of Georgia Group Georgia 1,433 3.0
------------------------------------------------- -------------- -------------------------- -----------------
Arabian Centres Company* Saudi Arabia 1,422 2.9
------------------------------------------------- -------------- -------------------------- -----------------
Purcari Wineries Romania 1,208 2.5
------------------------------------------------- -------------- -------------------------- -----------------
Nova Ljubljanska Banka Slovenia 1,172 2.4
------------------------------------------------- -------------- -------------------------- -----------------
Vietnam Technological & Commercial Joint Stock
Bank Vietnam 1,138 2.4
------------------------------------------------- -------------- -------------------------- -----------------
Habib Bank Pakistan 1,111 2.3
------------------------------------------------- -------------- -------------------------- -----------------
Maple Leaf Cement Factory Pakistan 1,067 2.2
------------------------------------------------- -------------- -------------------------- -----------------
Grameenphone Bangladesh 1,062 2.2
------------------------------------------------- -------------- -------------------------- -----------------
Indus Motor Company Pakistan 1,051 2.2
------------------------------------------------- -------------- -------------------------- -----------------
ASA International Group UK 1,025 2.1
------------------------------------------------- -------------- -------------------------- -----------------
Commercial International Bank Egypt Egypt 1,020 2.1
------------------------------------------------- -------------- -------------------------- -----------------
Zenith Bank Nigeria 1,016 2.1
------------------------------------------------- -------------- -------------------------- -----------------
Vincom Retail Vietnam 991 2.1
------------------------------------------------- -------------- -------------------------- -----------------
Shell Pakistan Pakistan 990 2.1
------------------------------------------------- -------------- -------------------------- -----------------
Sphera Franchise Group Romania 971 2.0
------------------------------------------------- -------------- -------------------------- -----------------
Masan Group Corporation Vietnam 966 2.0
------------------------------------------------- -------------- -------------------------- -----------------
Top twenty investments 27,160 56.3
----------------------------------------------------------------- -------------------------- -----------------
Other holdings 20,431 42.3
----------------------------------------------------------------- -------------------------- -----------------
Total holdings 47,591 98.6
----------------------------------------------------------------- -------------------------- -----------------
Cash and other net assets 657 1.4
----------------------------------------------------------------- -------------------------- -----------------
Net assets 48,248 100.0
----------------------------------------------------------------- -------------------------- -----------------
* Held through participatory notes issued by Morgan Stanley
Relative Country Positions
Fund Benchmark Difference
Country % % %
----------------------- ----- --------- ----------
Africa & Middle East 28.5 70.0 -41.5
----------------------- ----- --------- ----------
Bahrain - 5.7 -5.7
----------------------- ----- --------- ----------
Dubai 1.5 - 1.5
----------------------- ----- --------- ----------
Egypt 10.9 - 10.9
----------------------- ----- --------- ----------
Ghana 0.7 - 0.7
----------------------- ----- --------- ----------
Ivory Coast - 0.1 -0.1
----------------------- ----- --------- ----------
Jordan - 0.8 -0.8
----------------------- ----- --------- ----------
Kenya 3.7 5.1 -1.4
----------------------- ----- --------- ----------
Kuwait 1.3 37.9 -36.6
----------------------- ----- --------- ----------
Lebanon - 1.2 -1.2
----------------------- ----- --------- ----------
Mauritius - 2.1 -2.1
----------------------- ----- --------- ----------
Morocco 1.3 9.2 -7.9
----------------------- ----- --------- ----------
Nigeria 6.1 5.4 0.7
----------------------- ----- --------- ----------
Oman - 1.3 -1.3
----------------------- ----- --------- ----------
Saudi Arabia 3.0 - 3.0
----------------------- ----- --------- ----------
Senegal - 0.6 -0.6
----------------------- ----- --------- ----------
Tunisia - 0.6 -0.6
----------------------- ----- --------- ----------
Asia Pacific ex Japan 47.1 18.7 28.4
----------------------- ----- --------- ----------
Bangladesh 6.2 2.0 4.2
----------------------- ----- --------- ----------
Pakistan 11.4 - 11.4
----------------------- ----- --------- ----------
Singapore 0.8 - 0.8
----------------------- ----- --------- ----------
Sri Lanka 3.2 0.9 2.3
----------------------- ----- --------- ----------
Thailand 1.6 - 1.6
----------------------- ----- --------- ----------
Vietnam 23.9 15.8 8.1
----------------------- ----- --------- ----------
Europe ex UK 15.8 11.3 4.5
----------------------- ----- --------- ----------
Croatia 1.2 1.4 -0.2
----------------------- ----- --------- ----------
Estonia - 0.4 -0.4
----------------------- ----- --------- ----------
Georgia 4.5 - 4.5
----------------------- ----- --------- ----------
Kazakhstan 1.5 1.6 -0.1
----------------------- ----- --------- ----------
Lithuania - 0.2 -0.2
----------------------- ----- --------- ----------
Romania 6.2 4.8 1.4
----------------------- ----- --------- ----------
Serbia - 0.2 -0.2
----------------------- ----- --------- ----------
Slovenia 2.4 2.7 -0.3
----------------------- ----- --------- ----------
Latin America 5.5 - 5.5
----------------------- ----- --------- ----------
Argentina 2.9 - 2.9
----------------------- ----- --------- ----------
Peru 1.1 - 1.1
----------------------- ----- --------- ----------
Panama 1.5 - 1.5
----------------------- ----- --------- ----------
Other 2.1 - 2.1
----------------------- ----- --------- ----------
Cash 1.0 - 1.0
----------------------- ----- --------- ----------
Total 100.0 100.0 -
----------------------- ----- --------- ----------
At 31 December 2019, the benchmark index was composed of 92
companies across 28 countries (source MSCI).
Financial Statements
Condensed Unaudited Statement of Comprehensive Income
---
Six months to 31 December Six months to 31 December
2019 2018
------ ------------------------------ ---------------------------------
Revenue Capital Total Revenue Capital Total
Notes $'000 $'000 $'000 $'000 $'000 $'000
------------------------------- ------ ---------- --------- ------- -------- --------- ------------
Capital gains/(losses)
on investments - 437 437 - (9,757) (9,757)
Capital gains/(losses)
on currency movements - 4 4 - (170) (170)
------------------------------- ------ ---------- --------- ------- -------- --------- ------------
Net investment gains/(losses) - 441 441 - (9,927) (9,927)
------------------------------- ------ ---------- --------- ------- -------- --------- ------------
Income 493 - 493 715 - 715
------------------------------- ------ ---------- --------- ------- -------- --------- ------------
493 441 934 715 (9,927) (9,212)
------------------------------- ------ ---------- --------- ------- -------- --------- ------------
Investment management
fees (80) (160) (240) (97) (195) (292)
Other expenses (299) - (299) (357) - (357)
------------------------------- ------ ---------- --------- ------- -------- --------- ------------
Net profit/(loss) from
operations before finance
costs and taxation 114 281 395 261 (10,122) (9,861)
------------------------------- ------ ---------- --------- ------- -------- --------- ------------
Finance costs (2) - (2) (15) - (15)
------------------------------- ------ ---------- --------- ------- -------- --------- ------------
Net profit/(loss) before
taxation 112 281 393 246 (10,122) (9,876)
------------------------------- ------ ---------- --------- ------- -------- --------- ------------
Withholding tax 5 (40) - (40) (72) - (72)
------------------------------- ------ ---------- --------- ------- -------- --------- ------------
Net profit/(loss) after
taxation 72 281 353 174 (10,122) (9,948)
------------------------------- ------ ---------- --------- ------- -------- --------- ------------
Earnings/(losses) per
Ordinary share 6 0.10c 0.39c 0.49c 0.22c (12.73c) (12.51c)
------------------------------- ------ ---------- --------- ------- -------- --------- ------------
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 Ordinary 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 profit/(loss) for the period and therefore the 'Net
profit/(loss) after taxation' is also the total comprehensive
income for the period.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the period.
The notes form an integral part of these financial
statements.
Condensed Unaudited Statement of Financial Position
As at 31 As at 31 As at
December December 30 June
2019 2018 2019
Notes $'000 $'000 $'000
----------------------------------------- ------ ---------- ---------- ---------
Non-current assets
Investments at fair value through
profit or loss 4 47,591 48,034 46,188
----------------------------------------- ------ ---------- ---------- ---------
Current assets
Cash and cash equivalents 502 1,107 1,939
Sales for future settlement 132 74 800
Other receivables 157 37 401
----------------------------------------- ------ ---------- ---------- ---------
791 1,218 3,140
----------------------------------------- ------ ---------- ---------- ---------
Total assets 48,382 49,252 49,328
----------------------------------------- ------ ---------- ---------- ---------
Current liabilities
Purchases for future settlement 12 - 593
Other payables 122 224 121
----------------------------------------- ------ ---------- ---------- ---------
134 224 714
Net assets 48,248 49,028 48,614
----------------------------------------- ------ ---------- ---------- ---------
Capital and reserves attributable
to equity holders
Share capital and Share premium account 3,798 3,798 3,798
Capital reserve 44,377 45,056 44,551
Revenue reserve 73 174 265
----------------------------------------- ------ ---------- ---------- ---------
Total equity 48,248 49,028 48,614
----------------------------------------- ------ ---------- ---------- ---------
Net assets per Ordinary share (US
cents) 8 67.10c 68.18c 67.60c
Exchange rate GBP/USD (mid market) 0.75425 0.78380 0.78770
Net assets per Ordinary share (pence) 50.61p 53.44p 53.25p
----------------------------------------- ------ ---------- ---------- ---------
The notes form an integral part of these financial
statements.
Condensed Unaudited Statement of Changes in Equity
Share capital
and share Capital Revenue
premium account reserve reserve Total
Six months to 31 December 2019 Note $'000 $'000 $'000 $'000
--------------------------------- ----- ------------------- ------------------- ------------------- ----------
Balance at 1 July 2019 3,798 44,551 265 48,614
Profit for the period - 281 72 353
Equity dividends paid 9 - (455) (264) (719)
--------------------------------- ----- ------------------- ------------------- ------------------- ----------
Balance at 31 December 2019 3,798 44,377 73 48,248
--------------------------------- ----- ------------------- ------------------- ------------------- ----------
Share capital
and share Capital Revenue
premium account reserve reserve Total
Six months to 31 December 2018 $'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 period - (10,122) 174 (9,948)
Equity dividends paid 9 - (368) (351) (719)
--------------------------------- ----- ------------------- ------------------- ------------------- ----------
Balance at 31 December 2018 3,798 45,056 174 49,028
--------------------------------- ----- ------------------- ------------------- ------------------- ----------
Share capital
and share Capital Revenue
premium account reserve reserve Total
Year ended 30 June 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 9 - (369) (1,070) (1,439)
--------------------------------- ----- ------------------- ------------------- ------------------- ----------
Balance at 30 June 2019 3,798 44,551 265 48,614
--------------------------------- ----- ------------------- ------------------- ------------------- ----------
The notes form an integral part of these financial
statements.
Condensed Unaudited Statement of Cash Flow
Six months Six months Year ended
to 31 December to 31 December 30 June
2019 2018 2019
Notes $'000 $'000 $'000
--------------------------------------------- ------ ---------------- ---------------- -----------
Operating activities
Cash inflow from investment income
and bank interest 473 731 2,035
Cash outflow from management expenses (456) (543) (1,217)
Cash inflow/(outflow) from foreign
exchange movements 185 (170) (440)
Cash outflow from taxation 5 (40) (72) (189)
--------------------------------------------- ------ ---------------- ---------------- -----------
Net cash flow from/(used in) operating
activities 162 (54) 189
--------------------------------------------- ------ ---------------- ---------------- -----------
Investing activities
Cash inflow from disposal of investments 10,543 21,016 29,864
Cash outflow from purchase of investments (11,421) (10,937) (18,467)
--------------------------------------------- ------ ---------------- ---------------- -----------
Net cash flow (used in)/from investing
activities (878) 10,079 11,397
--------------------------------------------- ------ ---------------- ---------------- -----------
Financing activities
Finance charges and interest paid (2) (15) (25)
Tender offer costs - (158) (158)
Tender offer distributions paid - (8,745) (8,745)
Equity dividends paid 9 (719) (719) (1,438)
--------------------------------------------- ------ ---------------- ---------------- -----------
Net cash flow used in financing activities (721) (9,637) (10,366)
--------------------------------------------- ------ ---------------- ---------------- -----------
Net (decrease)/increase in cash and
cash equivalents (1,437) 388 1,220
--------------------------------------------- ------ ---------------- ---------------- -----------
Cash and cash equivalents opening balance 1,939 719 719
Cash and cash equivalents balance at
closing balance 502 1,107 1,939
--------------------------------------------- ------ ---------------- ---------------- -----------
The notes form an integral part of these financial
statements.
Notes to the Financial Statements
For the six month period ended 31 December 2019
================================================
1. Company information
Aberdeen Frontier Markets Investment Company Limited (the
"Company") is a UK-listed closed-ended investment company
incorporated and resident in Guernsey, offering diversified access
to up-and-coming frontier markets. Its Ordinary shares are quoted
on AIM. The Company's registered office is 11 New Street, St Peter
Port, Guernsey, GY1 2PF.
Manager
The investment activities of the Company were managed by
Aberdeen Standard Fund Managers Limited ("ASFML") during the six
month period ended 31 December 2019.
Non-mainstream pooled investments ("NMPIs")
The Company currently conducts its affairs so that the shares
issued by the Company can be recommended by Independent Financial
Advisers to ordinary retail investors in accordance with the
Financial Conduct Authority's rules in relation to NMPIs and
intends to continue to do so for the foreseeable future.
2. Basis of preparation
The interim financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting. They are
unaudited and do not include all of the information required for
full annual financial statements. These interim financial
statements should be read in conjunction with the financial
statements of the Company as at and for the year ended 30 June
2019. The financial statements of the Company as at and for the
year ended 30 June 2019 were prepared in accordance with
International Financial Reporting Standards ("IFRS") and received
an unqualified audit report. The accounting policies used by the
Company are the same as those applied by the Company in its
financial statements for the year ended 30 June 2019.
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.
Investments have been classified as "fair value through profit
and loss".
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) net asset value per individual investee funds'
administrators for unquoted open-end funds; and
(iii) by using other valuation techniques to establish fair
value for any other unquoted investments.
The Company's shares were issued 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 AIM.
Unless otherwise stated the comparative figures for the prior
year stated in these notes are in respect of the six months ended
31 December 2018.
3. Going concern status
The directors have adopted the going-concern basis of accounting
in preparing these interim financial statements. The directors
formally considered the Company's going concern status at the time
of the publication of these interim financial statements and a
summary of the 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 interim
financial statements. 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.
The directors are also mindful of the material uncertainty which
the Company may face following the conclusion of its discount
management policy measured over the two years ending 30 June
2020.
The directors are satisfied that it is appropriate to adopt the
going concern basis of accounting in preparing these interim
financial statements.
4. Fair value estimation
IFRS 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 are as follows:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2: 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 3: Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs).
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 is detailed below:
31 December 2019 31 December 2018 30 June 2019
Investment at fair value through profit or loss: $'000 $'000 $'000
-------------------------------------------------- ----------------- ----------------- -------------
Level 1 47,591 47,590 46,188
Level 2 - 444 -
Level 3 - - -
-------------------------------------------------- ----------------- ----------------- -------------
Total 47,591 48,034 46,188
-------------------------------------------------- ----------------- ----------------- -------------
There were no transfers between levels during the period.
Level 1 classification basis
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.
Level 2 classification basis
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.
Level 3 classification basis
Investments classified within Level 3 have significant
unobservable inputs as they trade infrequently. As at the period
end, there were no level 3 classified investments.
5. Taxation
The charge for taxation relates to tax suffered on dividends
received from overseas investments.
6. Earnings per Ordinary share
Earnings per Ordinary share is based on the profit of $353,000
(2018: loss of $9,948,000) attributable to the weighted average of
71,910,117 Ordinary shares in issue during the six months to 31
December 2019 (2018: 79,496,525).
7. Share capital
Allotted, issued
Six months to 31 December 2019 Authorised and fully paid Treasury shares
------------------------------------------------- ------------ ----------------- ----------------
Opening number of shares as at 1 July 2019 Unlimited 71,910.117 1,302,500
Closing number of shares as at 31 December 2019 Unlimited 71,910,117 1,302,500
-------------------------------------------------- ------------- ----------------- ----------------
Allotted, issued
Six months to 31 December 2018 Authorised and fully paid Treasury shares
------------------------------------------------- ------------ ----------------- ----------------
Opening number of shares as at 1 July 2018 Unlimited 84,600,108 1,302,500
Validly tendered shares cancelled - (12,689,991) -
-------------------------------------------------- ------------- ----------------- ----------------
Closing number of shares as at 31 December 2018 Unlimited 71,910,117 1,302,500
-------------------------------------------------- ------------- ----------------- ----------------
Allotted, issued
Year ended 30 June 2019 Authorised and fully paid Treasury shares
------------------------------------------------- ------------ ----------------- ----------------
Opening number of shares as at 1 July 2018 Unlimited 84,600,108 1,302,500
Validly tendered shares cancelled - (12,689,991) -
-------------------------------------------------- ------------- ----------------- ----------------
Closing number of shares as at 30 June 2019 Unlimited 71,910,117 1,302,500
-------------------------------------------------- ------------- ----------------- ----------------
Voting rights
At General Meetings of the Company, every member present in
person or by proxy shall have one vote for every Ordinary share of
which they are the registered holder.
8. Net asset value ('NAV') per Ordinary share
Undiluted NAV per Ordinary share is based on net assets of
$48,248,000 (31 December 2018: $49,028,000 and 30 June 2019:
$48,614,000) divided by 71,910,117 Ordinary shares in issue
(excluding shares held in treasury) at the period end (31 December
2018: 71,910,117 and 30 June 2019: 71,910,117).
9. Dividends
A final dividend for the year ended 30 June 2019 of 1 cent
(2018: 1 cent), sterling equivalent of 0.779313285 pence (2018:
0.761615 pence), per Ordinary share was paid on 18 December 2019 to
shareholders on the register at the close of business on 15
November 2019.
Dividends are paid in sterling from the Company's distributable
reserves.
10. Investment management fees
Fees payable to the Manager are shown in the Unaudited Statement
of Comprehensive Income. At 31 December 2019, Manager's fees of
$41,884 (2018: $40,856) were accrued in the Statement of Financial
Position.
11. Post balance sheet events
There are no post balance sheet events other than as disclosed
in these financial statements.
12. Status of this report
These interim financial statements are not the Company's
statutory accounts. They are unaudited. This report will be sent to
shareholders and copies will be made available to the public at the
registered office of the Company. It is also available on the
Company's website, aberdeenfrontiermarkets.co.uk.
This Half-yearly Financial Report was approved by the Board of
directors on 17 February 2020.
Alternative Performance Measures ("APMs")
===========================================
Discount
The amount, expressed as a percentage, by which the Ordinary
share price is less than NAV per Ordinary Share.
--------------------------------------------------------------------------------------
As at 31 As at 31
December December
2019 2019
(GB pounds (US dollar
equivalent) equivalent)
----------------------------- -------------- --- ----------------- -----------------
NAV per Ordinary share a 0.5061 0.6710
Ordinary share price b 0.4640 0.6152
Discount (b÷a)-1 8.3% 8.3%
----------------------------- ------------------- ------------- -------------------
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.
--------------------------------------------------------------------------------------
Six months to 31 December Ordinary NAV per Ordinary
2019 share price share
----------------------------- -------------- --- ------------- -------------------
Opening at 1 July 2019 (in
US dollars) a 0.6106 0.6760
Closing at 31 December 2019
(in US dollars) b 0.6152 0.6710
Price movement (b÷a)-1 c 0.7% -0.7%
Dividend reinvestment d 1.4% 1.1%
Total return (c+d) 2.1% 0.4%
----------------------------- ------------------- ------------- -------------------
Directors, Manager and Advisers
===============================
Directors Alternative Investment Fund Manager
John Whittle (Chairman) Aberdeen Standard Fund Managers Limited
David Warr Bow Bells House
Lynne Duquemin 1 Bread Street
London EC4M 9HH
Company secretary and Administrator www.aberdeenstandard.com
Vistra Fund Services (Guernsey) Limited
11 New Street Investment Manager
St Peter Port Aberdeen Asset Managers Limited
Guernsey GY1 2PF Bow Bells House
1 Bread Street
Nominated adviser London EC4M 9HH
Grant Thornton UK LLP
30 Finsbury Square UK administration agent
London EC2P 2YU PraxisIFM Fund Services (UK) Limited
3rd Floor, Mermaid House
Broker 2 Puddle Dock
Numis Securities Limited London, EC4V 3DB
The London Stock Exchange Building
10 Paternoster Square Solicitors as to English law
London EC4M 7LT Gowling WLG
4 More London Riverside
Auditor London SE1 2AU
Grant Thornton Limited
Lefebvre House Advisers as to Guernsey law
Lefebvre Street Mourant
St Peter Port Royal Chambers
Guernsey GY1 3TF St Julian's Avenue
St Peter Port
Registrar Guernsey GY1 4HP
Link Market Services Limited
Mont Crevelt House Depositary services and custodian
Bulwer Avenue Northern Trust (Guernsey) Limited
St Sampson Trafalgar Court
Guernsey GY2 4LH Les Banques
St Peter Port
Registered office* Guernsey GY1 3DA
11 New Street
St Peter Port United States Internal Revenue Service FATCA
Guernsey GY1 2PF Registration Number ("GIIN")
35VBTN.99999.SL.831
Company registration number
* Incorporated in Guernsey with registered number 46809 Legal Entity Identifier ("LEI")
213800X9N731I4IPK361
Website
www.aberdeenfrontiermarkets.co.uk
Enquiries:
Aberdeen Standard 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
17 February 2020
END
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BBGDDIUBDGGR
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February 17, 2020 07:00 ET (12:00 GMT)
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