Aberdeen Frontier Mkts Inv Co Ltd Publication of Tender Offer circular (9272V)

TIDMAFMC

RNS Number : 9272V

Aberdeen Frontier Mkts Inv Co Ltd

03 February 2017

Aberdeen Frontier Markets Investment Company Limited

Publication of Tender Offer circular

3 February 2017

Aberdeen Frontier Markets Investment Company Limited (the "Company") has today published a circular (the "Circular") in connection with a proposed new investment objective and investment policy, revised investment management arrangements, and a Tender Offer to purchase up to 100 per cent. of the Company's Ordinary Shares in issue and provide for any or all of such Ordinary Shares tendered to be sold by Numis to Incoming Investors. Shareholders should note however that they are not obliged to tender any Ordinary Shares.

1 INTRODUCTION

In November of last year the Company proposed a tender offer which provided Shareholders with an opportunity to realise their investment in the Company at prevailing Net Asset Value ("NAV") less costs should they wish to do so. On 9 December 2016 the Company announced that, in the light of the number of Ordinary Shares tendered pursuant to the tender offer, the Board was of the view that the continuance of the Company as currently constituted was not in the best interests of the many Shareholders who had not tendered their Ordinary Shares. Accordingly, the Board exercised its right to terminate the tender offer and resolved to put alternative proposals to Shareholders.

On 22 December 2016 the Board, following consultations with the Manager, Numis and certain Shareholders, announced that it still believed that there was demand for a listed closed ended Frontier Markets vehicle managed by Aberdeen providing exposure to the Frontier Markets of Africa, the Middle East, Eastern Europe, Asia and Latin America. However, following these discussions the Board concluded that this demand would best be served by investment directly into equities rather than by way of the Company's current fund of funds proposition. At the same time the Board also announced:

-- a reduction in the management fee payable to the Manager and the removal of the performance fee;

   --      Aberdeen's conditional commitment to invest GBP10 million in the Company; 

-- a further opportunity, by way of the Tender Offer, for Shareholders to realise their investment in the Company at prevailing NAV less costs should they continue to wish to do so; and

   --      the implementation of a new discount control policy. 

As noted below, the Board and the Manager believe, that the long term prospects for Frontier Markets remain compelling and members of the Board that own Ordinary Shares do not intend to tender them under the Tender Offer.

The Circular has been posted to Shareholders to provide details of the proposals mentioned above including the formal terms of the Tender Offer. The implementation of the proposals is conditional, among other things, on Shareholder approval to be obtained at the Extraordinary General Meeting to be held on 14 March 2017, notice of which is set out at the end of the Circular.

As with the previous tender offer, if the number of Ordinary Shares tendered is such that, taking into account the proposed investment by Aberdeen, the Board is of the view that the continuance of the Company is not in the best interests of continuing Shareholders, it reserves the right to terminate the Tender Offer. If the Board exercises this right it will promptly convene an extraordinary general meeting at which a resolution will be proposed that the Company changes its Investment Policy such that it ceases to make any new investments and moves to an orderly realisation strategy with distributions being made to Shareholders as soon as practicable.

Shareholders are reminded that the Company is, and intends to remain, a closed-ended authorised collective investment scheme. The Tender Offer should not be seen as affording or implying that any Shareholder will be offered an opportunity to routinely exit by this means or otherwise.

2 PROPOSED NEW INVESTMENT OBJECTIVE AND INVESTMENT POLICY

The current Investment Objective is as follows:

The objective of the Company is to generate long-term capital growth for its Shareholders. The Manager invests predominantly in a diversified portfolio of funds and other investment products which derive their value from Frontier Markets. The proportion of the portfolio invested in each component of Frontier Markets varies according to where the Manager perceives the most attractive investment opportunities to be.

The current Investment Policy is as follows:

Investee funds may include closed-end and open-ended funds, exchange traded funds, structured products, limited partnerships and managed accounts. The number of investments in the portfolio varies depending on the availability of attractive opportunities but, under normal market conditions, falls within a range of 20 to 50. The Company does not seek to exercise control over investee companies.

The Company may, at the Manager's discretion, hold cash or cash equivalents to protect Shareholders' capital although it is envisaged that the value of these will not generally exceed 10 per cent. of Net Asset Value.

The Company may borrow up to 10 per cent. of its net assets (calculated at the time of draw down) for investment purposes. Furthermore, the Company may use an overdraft and/or other short-term borrowing facilities to meet its working capital needs, including for the payment of any expenses or fees. The same facilities may be used to take advantage of favourable investment opportunities pending the payment of proceeds from the sale or redemption of investments.

The Board is seeking Shareholder approval to adopt a new Investment Objective and Investment Policy to facilitate a direct equity investing strategy.

The proposed new Investment Objective is as follows:

The investment objective of the Company is to generate long-term capital growth primarily from investment in equity and equity related securities of companies listed in, or operating in, Frontier Markets.

Frontier Market countries may include constituents of the MSCI Frontier Markets Index or additional countries that the Investment Manager deems to be, or displays similar characteristics to, Frontier Market countries.

The proposed new Investment Policy is as follows:

The Company will seek to maximise total return and will invest globally in the securities of companies domiciled or listed or quoted in, or exercising the predominant part of their economic activity in, Frontier Markets.

A Frontier Market is defined as:

   --      any country that is a constituent of the MSCI Frontier Markets Index; or 

-- any country that in the view of the Manager shares similar characteristics to those of Frontier Markets (such as low per capita GDP, high growth potential or less developed capital markets).

The Manager may also invest in equity securities of companies that are listed or quoted in developed or emerging markets but have significant business exposure in terms of revenues, profits, assets or employees, to Frontier Markets.

No individual listed or quoted company exposure in the portfolio may exceed 10 per cent. of the Company's total assets at the time of investment. The Company may invest in exchange-traded funds provided they are listed on a recognised investment exchange.

In order to achieve the Investment Objective, the Manager selects stocks by fundamental analysis of companies, looking for long-term appreciation from mispriced value or growth. The Manager employs in actively managed bottom-up approach to investing whilst always having due regard to the requirement for portfolio diversification across sectors and countries. Risk is spread through investing in a number of holdings and, typically, it is expected that the Company will invest in between 30 to 80 holdings.

The Company has not set maximum or minimum exposures for any geographical regions or sectors and will achieve an appropriate spread of risk by investing in a diversified portfolio of securities. Where possible, investment will generally be made directly in the stock markets of Frontier Markets with a medium to long term investment horizon. Where the Manager determines appropriate, investment may be made in Frontier Markets through collective investment schemes.

No more than 10 per cent. of the Company's total assets may be invested in other listed closed ended

investment companies, provided that this restriction does not apply to investments in any such investment companies which themselves have published investment policies to invest no more than 15 per cent. of their total assets in other closed-ended investment companies.

Additionally, the Company will itself not invest more than 15 per cent. of its total assets in other investment companies or investment trusts which are listed or quoted. The Company may, at the Manager's discretion, hold cash or cash equivalents to protect Shareholders' capital although it is envisaged that the value of these will not generally exceed 10 per cent. of Net Asset Value.

It is intended that the Company will generally be invested in equity investments. However, the Manager may invest in equity related investments such as convertibles or fixed interest securities where there are perceived advantages in doing so.

The Company may use gearing, in the form of borrowings and/or derivatives, to enhance returns over the long term. The borrowings may be in sterling or other currencies. The Articles of Incorporation contain a borrowing limit equal to 10 per cent. of its Net Assets (calculated at the time of draw down). Total gearing, including any net derivative exposure, would not normally be expected to result in a net economic equity exposure in excess of 110 per cent. Furthermore, the Company may use an overdraft and/or other short-term borrowing facilities to meet its working capital needs, including for the payment of any expenses or fees. The same facility may be used to take advantage of favourable investment opportunities pending the payment of proceeds from the sale of investments.

Due to national and/or international regulation, excessive operational risk, prohibitive costs and/or the time period involved in establishing trading and custody accounts in certain of the Company's target Frontier Markets, the Company may temporarily, or, on an on-going basis, be unable to invest (whether directly or through nominees) in certain of its target Frontier Markets or, in the opinion of the Company and/or the Manager, it may not be advisable to do so. In such circumstances, the Company may gain economic exposure to such target Frontier Markets by investing indirectly through derivatives (including contracts for difference) and/or structured financial instruments, for example P-Notes. Save as provided above, there is no restriction on the Company investing in derivatives and/or structured financial instruments in such circumstances. If the Company invests in derivatives and/or structured financial instruments for investment purposes (other than to gain access to a target Frontier Market as described above) and/or for efficient portfolio management purposes it shall only hold up to, in aggregate, 10 per cent. of its Gross Assets in derivatives and/or structured financial instruments for such purposes.

No material change will be made to the Investment Policy without Shareholder approval.

3 DIVIDS AND NAV ANNOUNCEMENTS

An attractive dividend yield has been a consistent feature of the asset class over time and the Board considers that dividends are an increasingly important part of the rationale for investing in the Frontier Markets asset class. In June 2016 the Company announced the introduction of a semiannual dividend. On an annualised basis the maiden dividend, which was paid to Shareholders on 19 December 2016, equated to an approximate yield of 3.0 per cent. Looking ahead, if the change of Investment Policy to direct equity investing is approved by Shareholders, the model portfolio is currently expected to yield approximately 3.5 per cent. gross (before expenses). The Board believes that dividends are an important part of Shareholders overall return and currently intends to pay semi-annual dividends in June and December such that the current absolute level of dividends

is maintained.

The Company intends to publish NAV's on a daily basis once the Company is fully invested in accordance with the proposed new Investment Policy.

4 BENCHMARK

Currently the Company does not have an official benchmark index but the Board and the Manager recognise the requirement for investors at all levels to benchmark performance. The MSCI Frontier Markets Indexes include large-cap, mid-cap and small-cap indices, and provide broad representation of the equity opportunity set whilst taking liquidity and investability requirements into consideration within each market. The MSCI Frontier Markets Indexes can be segmented by size, sector and geography, allowing for consistent global views and cross regional comparisons. MSCI classifies 33 countries as Frontier Markets, however only 24 of these are included in the MSCI Frontier Markets Index and the Manager will not only have the opportunity to invest in these but also to invest in companies that have significant business exposure in terms of revenues, profits, assets or employees to Frontier Markets.

The Manager is benchmark aware but not benchmark driven and seeks to minimise risk by its indepth Company research. It does not view divergence from a benchmark as risk but rather views investment in poorly-run expensive companies that it does not understand as risk. Where risk parameters are expressed in benchmark relative terms, asset (including sector) allocation constitutes a significant constraint on stock selection. Hence diversification of stocks provides the Manager's main control.

Following Shareholder approval of the proposed new Investment Policy, the Company will use the MSCI Frontier Markets Index as a Reference Benchmark for performance comparison. However, it is likely that performance will diverge at times, possibly quite significantly in either direction and for long periods of time, from this Index.

5 PROSPECTS FOR FRONTIER MARKETS

5.1 An increasingly relevant asset class

The rationale for investing in Frontier Markets today is little changed from when the Company was launched in 2007. Frontier Markets represent fast growing economies with many opportunities for active stock pickers. Strong economic growth in these vibrant economies continues to be driven by attractive long-term trends in demographics and consumption, creating a favourable environment for many companies operating in Frontier Market countries. The proliferation of modern technology and communications is lowering the cost of, and speeding up, the development of various industries and services, helping to drive a higher and more sustainable levels of growth. Most of the major Frontier Markets have experienced significant real economic growth, measured in US dollar terms, in the years since the Company's launch.

Despite positive fundamentals, Frontier equity markets remain underrepresented in global indices relative to their economic significance. Frontier Markets are, in aggregate, home to 31 per cent. of the world's population and account for 9 per cent. of global GDP but have a market capitalisation that is equivalent to just 0.2 per cent. of the global total. From such a low base, the Manager believes there is scope for the asset class to grow significantly over the long term. Until this happens, Frontier Markets will remain an under-researched asset class, providing opportunities for active stock pickers to identify mispriced companies.

5.2 Attractive valuations

Frontier Markets are lowly valued. At the end of June 2016, the Company's portfolio (on a look through basis) traded on median trailing valuations of 11.8x Price to Earnings, 1.4x Price to Book, with a 3.4 per cent. dividend yield and return on equity of 14.0 per cent. In US Dollar terms at 31 December 2016 the MSCI Frontier Markets Index traded at 1.6 x Price to Book, a 4.3 per cent. dividend yield and a return on equity of 11.95 per cent. The Manager believes that valuations are attractive with the market substantially below previous peak levels, which has been the result of commodity and currency pressures and an overflow of negative sentiment from emerging markets generally.

6 CHANGES TO THE INVESTMENT MANAGEMENT ARRANGEMENTS

6.1 Recent Developments

At the end of 2015 Aberdeen Asset Management acquired 100 per cent. ownership of the Company's previous investment manager, Advance Emerging Capital Limited. The Board was supportive of this transaction as it was felt that it would bring benefits to investors. These included the increased resources that would be at the disposal of the Manager, particularly with regard to investment management, marketing, compliance and administration. The Board is satisfied that these benefits are being delivered.

In April 2016, Shareholders approved the change of the Company's name to Aberdeen Frontier Markets Investment Company Limited, a measure that the Board believes will assist in the ongoing marketing of the Company to a wider audience. In addition, the Company now participates in Aberdeen's direct marketing activities, with investors being afforded a low cost route to investing in

the Company through Aberdeen's Share Plan, Investment Trust ISA and Investment Plan for Children.

6.2 Manager

The Company is managed by Aberdeen Fund Managers Limited which is a wholly owned subsidiary of Aberdeen Asset Management PLC and is authorised and regulated by the FCA. The Manager has delegated day-to-day investment management services to Aberdeen Asset Managers Limited ("AAML").

The Manager currently receives a basic management fee payable by the Company monthly in arrears equal to one twelfth of 1.25 per cent. of the lower of Market Capitalisation and Net Asset Value. The Manager may also receive, in addition to the basic management fee, a performance fee in respect of a performance period equal to 12 per cent. of the excess of the Net Asset Value per Ordinary Share over a target Net Asset Value per Ordinary Share which includes a 12 per cent. hurdle rate and high watermark. Any such fee is paid annually in arrears out of the assets of the Company. The performance fee in respect of a particular performance period will not exceed 3 per cent. of the Company's Net Asset Value, before the deduction of any performance fee, at the end of that performance period.

Under the proposals being put forward by the Board, and subject to the passing of the Resolutions, the Manager has agreed to a new management fee at the rate of 1.0 per cent. per annum of the Company's Net Asset Value payable monthly in arrears. In addition, the performance fee will be removed.

The Manager is responsible for all fees payable to AAML.

The Management Agreement is terminable by either party giving to the other not less than six months' written notice and this term will remain unchanged.

For the purposes of the AIM Rules the proposed new fee arrangements between the Company and the Manager constitute a related party transaction. In this regard, the Board consider, having consulted with Grant Thornton, the Company's nominated adviser, that the proposed new fee arrangements are fair and reasonable insofar as Shareholders are concerned.

6.3 Aberdeen Group

Both the Manager and AAML are wholly-owned subsidiaries of Aberdeen Asset Management PLC. At 30 September 2016 (the latest practicable date for such information), the Aberdeen Group had approximately GBP312 billion of assets under management.

The Aberdeen Group has its headquarters in Aberdeen and invests globally, operating from 39 offices in 26 countries, including investment centres in London, Philadelphia, Singapore, Bangkok, Hong Kong, Jakarta, Kuala Lumpur and Sao Paulo. It employs over 2,700 people worldwide. It manages assets on behalf of a wide range of clients, including 19 UK-listed closed ended investment companies, representing approximately GBP6.7 billion of assets under management. The Aberdeen Group has been investing in emerging equity markets, including Frontier Markets, since the 1980s. At 30 September 2016, Aberdeen's Global emerging market equities team managed over GBP34 billion of assets, including approximately GBP450 million invested in Frontier Markets equities.

Should Shareholders approve the adoption of the new Investment Objective and Investment Policy the Manager will select securities for the Company's portfolio using an investment philosophy which focuses on careful stock selection based on proprietary research and the application of a highly disciplined investment process. The Manager's process is not benchmark driven. The Manager has a proven track record of investing in emerging markets, including Frontier Markets, through a number of market cycles.

6.4 Investment Philosophy and Approach

Although the Manager is an active long-only manager, its investment philosophy and approach has absolute return characteristics. Its investment process is robust and characterised by its discipline, consistency and independence. The Manager is not benchmark-driven and, accordingly, its fund managers do not invest in stocks that fail to meet its investment criteria.

Portfolios are managed by the Manager on a team basis, with individual fund managers doing their own research and analysis. Each asset class has a model portfolio that contains the team's best ideas for that asset class and forms the basis for constructing individual portfolios focused on that asset class.

The Manager selects securities for the Company's portfolio employing the investment strategies established by Aberdeen's Global emerging market equity team. The investment team regularly monitors and makes allocation decisions to determine the Company's portfolio weightings in equity and equity-related investments. Allocations vary according to relative value and opportunities identified by the team. Whilst the Investment Policy permits it to invest across a wide region, investment opportunities in the region are such that the geographic exposure of the Company's portfolio may be concentrated on a relatively small number of countries from time to time. The Company's proposed new Investment Policy envisages holding between 30 and 80 securities at any point in time.

6.5 Management team

Devan Kaloo, Aberdeen's Head of Global emerging markets, leads the well-resourced and stable team that will be responsible for the Company's portfolio under the proposed new Investment Policy. Team members travel to meet companies in Frontier Market countries on a regular basis and no investment is ever made before fund managers have visited several times to meet management and written up detailed research notes. Each company that Aberdeen invests in is generally visited twice a year. The Manager believes that there is no substitute for first-hand research and undertook almost 1,000 company visits in 2016 across emerging and Frontier Markets.

The Manager believes that stock selection is crucial and:

   --      Implements intensive company reviews 
   --      Believes proprietary research gives deeper insight 
   --      Always meets & interviews a company before investing 
   --      Believes in quality and price criteria 
   --      Is independent - and not benchmark driven 

The Manager is a long term investor using a buy-and-hold strategy which should result in low portfolio turnover. Its average holding period for emerging and Frontier Market stocks is over eight years and it uses market volatility to trade often using unrelated market sell-offs to buy or add to positions.

The Manager also sees engagement with the companies that it invests in as a normal part of its relationship with companies. Fund managers vote at general meetings and are supported by governance specialists.

6.6 Indicative Model Portfolio

A model portfolio is detailed in the Circular which is indicative of the positions that the Company will hold under the proposed new Investment Policy. The benchmark is the MSCI Frontier Markets Index, (the "Reference Benchmark") with all figures as at 31 December 2016. The model portfolio shows the wide range of countries, including certain non-index constituents, that the Investment Manager invests in.

The Manager's geographic and sector allocations are a function of their bottom-up selection process and the Manager's positioning of the Company will likely differ significantly when compared to the Reference Benchmark. Shareholders should note therefore that returns may differ materially, both positively and negatively at times, from those of the Reference Benchmark over shorter periods of time. Shareholders should have an investment horizon of at least five years.

6.7 Performance

The Aberdeen Global - Frontier Markets Equity Fund is used as a representative account managed by the Aberdeen Global emerging markets equity team. This fund is not currently open to retail investors. It uses a similar portfolio model to that which the team will invest in on behalf of the Company if the proposals are approved by shareholders. Shareholders should note that performance can be markedly different over different time frames to that of the Representative Benchmark MSCI Frontier Markets Index.

Aberdeen Global - Frontier Markets Equity Fund

Performance to 31 December 2016

 
 Performance                                   Annualised 
  (%) 
                           -------  --------  -----------  ------- 
                            1 year   3 years      5 years   Launch 
                           -------  --------  -----------  ------- 
 Dealing NAV 
  (USD)                      -2.84     -4.83         4.82     2.04 
 MSCI Frontier 
  Markets Index 
  (USD)                       3.16     -1.68         5.57     2.63 
 Difference 
  dealing NAV 
  vs benchmark               -6.00     -3.15        -0.74    -0.60 
 
 Discrete annual returns (%) 
  - years to 31 December 
                     2016     2015      2014         2013     2012 
                   ------  -------  --------  -----------  ------- 
 Dealing NAV 
  (USD)             -2.84    -4.87     -6.75        17.77    24.73 
 MSCI Frontier 
  Markets Index 
  (USD)              3.16   -14.07      7.21        26.32     9.25 
 Difference 
  dealing NAV 
  vs benchmark      -6.00     9.20    -13.96        -8.55    15.48 
 

Performance Data: Share Class I - 2 Acc

Dealing NAVs: (Source: Aberdeen, Lipper), Basis - Total Return, NAV to NAV dealing prices, net of annual charges, gross Income reinvested, (USD). The total return is calculated based on the dealing days, which falls on the 15th and last Business Day of each calendar month other than days during a period of suspension of dealing in shares in that fund.

Benchmark: the return of benchmark is calculated based on the monthly end business day of each calendar month and it is for comparison purpose only. This fund is not managed against a specific benchmark. Past performance is not a guide to future results.

7 INVESTMENT BY ABERDEEN

Aberdeen has agreed with the Company that subject to the passing of the Resolutions and the Tender Offer proceeding, it will invest GBP10 million (inclusive of any transfer taxes and costs) in the Company provided this investment does not represent more than 20 per cent. of the issued share capital of the Company immediately following the Tender Offer. This commitment shall be satisfied by Aberdeen either purchasing On-sale Shares from Numis or by purchasing Ordinary Shares from Shareholders who it is believed would otherwise tender such Ordinary Shares pursuant to the Tender Offer.

For the purposes of the AIM Rules, the agreement with Aberdeen outlined above constitutes a related party transaction. In this regard, the Board considers, having consulted with Grant Thornton, the Company's nominated adviser that the agreement with Aberdeen in respect of its purchase of Ordinary Shares is fair and reasonable insofar as Shareholders are concerned.

8 DISCOUNT CONTROL

The Board recognises the importance to investors of the Ordinary Shares not trading at a significant discount to the prevailing Net Asset Value. Accordingly, the Board intends to operate a policy whereby should the average Ordinary Share price discount to the underlying ex income NAV over the three month period immediately prior to the Company's year end (currently 30 June) exceed ten per cent. then, at the discretion of the Board, the Company will, subject to any legal or regulatory requirements, implement a tender offer. Such tender offer will be for up to 15 per cent. of the issued share capital of the Company (excluding Ordinary Shares held in treasury) at a tender price equal to 98 per cent. of the prevailing NAV (less the direct costs, including any realisation costs of underlying investments, of implementing the tender offer). Shareholders will be entitled to tender a number of Ordinary Shares in excess of 15 per cent. of the Ordinary Shares held by them (the "Basic Entitlement"). However, the extent

to which any such excess will be satisfied will be dependent on the extent to which other Shareholders have tendered less than their Basic Entitlement.

9 TER OFFER

9.1 Key Points of the Tender Offer

The key points of the current Tender Offer are as follows:

-- the Tender Offer is for up to 100 per cent. of the Company's issued Ordinary Share capital (excluding treasury shares, if any) as at the Record Date of 2 March 2017 provided that at least one Ordinary Share remains held by a person other than the Company;

-- Shareholders (other than Restricted Shareholders) will be able to decide whether to tender none, some or all of their Ordinary Shares;

-- Incoming Investors will be sought to acquire Ordinary Shares which have been tendered by Shareholders, through Numis at the Investment Price;

-- after accounting for the sale of the On-sale Shares and the realisation of the Tender Pool, Tendering Shareholders shall receive the Tender Price in cash in consideration of the purchase of Ordinary Shares tendered by them; and

-- the Tender Price shall be the Final Tender Offer Asset Value of the Tender Pool divided by the total number of Exit Shares expressed in sterling and in pence, rounded down to two decimal places. Shareholders should note that the Tender Price will not be known and will not be paid until realisation of all the assets in the Tender Pool.

If the number of Ordinary Shares tendered is such that the Board is of the view that the continuance of the Company is not in the best interests of the continuing Shareholders, it reserves the right to terminate the Tender Offer and in such circumstances the Tender Offer will not proceed and instead the Company will promptly convene an extraordinary general meeting at which a resolution will be proposed that the Company changes its investment policy such that it ceases to make any new investments and moves to an orderly realisation strategy with distributions being made to Shareholders as soon as practicable.

Shareholders (other than Restricted Shareholders) on the Register on the Record Date will be invited to tender for sale some or all of their Ordinary Shares held on the Record Date to Numis who will, as principal, purchase at the Tender Price the Ordinary Shares validly tendered.

Numis may seek to sell some or all of such tendered Ordinary Shares to Incoming Investors at the

Investment Price. The aggregate Investment Price for such number of Ordinary Shares as Incoming Investors agree to acquire will be deemed to form part of the Tender Pool and will be paid to Tendering Shareholders for their Exit Shares once the Tender Price has been determined. Any Ordinary Shares not sold by Numis to Incoming Investors will be repurchased by the Company. Tendering Shareholders will receive the full Tender Price in cash for the Exit Shares (including the On-sale Shares) only once all of the assets in the Tender Pool have been fully realised. However, if and when an interim distribution from the Tender Pool is made the amount received by Tendering Shareholders will include an amount in respect of their pro rata proportion of any On-sale Shares.

The Tender Offer is subject to certain conditions and may be terminated in certain circumstances

as set out in paragraph 7 of Part 3 of the Circular.

The Tender Offer is not conditional on Ordinary Shares trading at a discount to the Net Asset Value per Ordinary Share as at the Calculation Date (i.e. the share price per Ordinary Share being less than the Net Asset Value per Ordinary Share). In the event that Ordinary Shares are trading at a premium to the Net Asset Value per Ordinary Share as at the Calculation Date (i.e. the share price per Ordinary Share is higher than the Net Asset Value per Ordinary Share), Shareholders who tender Ordinary Shares may receive less than they could otherwise be able to realise in the market.

Shareholders' (other than Restricted Shareholders) attention is drawn to the letter from Numis set out in Part 1 of the Circular and to Part 3 of the Circular which, in the case of certificated Ordinary Shares, together with the Tender Form or the Savings Schemes Tender Form, where applicable, constitute the terms and conditions of the Tender Offer. Details of how Shareholders will be able to tender Ordinary Shares can be found in paragraph 3 of Part 3 of the Circular. Shareholders should note that, once tendered, Ordinary Shares may not be sold, transferred, charged or otherwise disposed of other than in accordance with the Tender Offer.

Shareholders who are in any doubt as to the contents of the Circular or as to the action to be taken should immediately consult a suitably qualified independent financial adviser authorised under the FSMA if in the United Kingdom, or from another appropriately authorised independent financial adviser if in a territory outside of the United Kingdom.

9.2 Restricted Shareholders and Other Overseas Shareholders

The Tender Offer is not being made to Shareholders who are resident in, or citizens of, Restricted Territories. Restricted Shareholders are being excluded from the Tender Offer in order to avoid offending applicable local laws relating to the implementation of the Tender Offer. It is the responsibility of all Overseas Shareholders to satisfy themselves as to the observance of any legal

requirements in their jurisdiction, including, without limitation, any relevant requirements in relation

to the ability of such holders to participate in the Tender Offer.

9.3 Tender Pool

Save as set out below, all of the Company's assets and liabilities will, following valuation on the Calculation Date, be allocated between the Continuing Pool and the Tender Pool on the basis set out under paragraph 10 of Part 1 of the Circular. The net value of the assets and liabilities allocated to the Tender Pool on its establishment will equal the Tender Offer FAV (calculated in accordance with paragraph 8 of Part 1 of the Circular). The Tender Pool assets (other than cash) will be realised and the liabilities settled and the net cash proceeds paid in sterling to Shareholders who successfully tendered their Ordinary Shares in satisfaction of the Tender Price.

The Tender Pool will bear the costs of realising the assets in the Tender Pool. Shareholders who successfully tender their Ordinary Shares will receive a pro rata share of the net proceeds of the Tender Pool (including the proceeds of sale of any On-sale Shares), less associated costs. The assets of the Tender Pool will be fully realised as soon as practicable after the commencement of the realisation of the Tender Pool such that final cash payments can be made to the Tendering Shareholders as soon as practicable thereafter. The Board may at its discretion make interim distributions from the Tender Pool. However, under the Tender Offer the Company reserves the right to defer the Tender Pool realisations and/or cash payments if the Board believes this to be in the best interests of Shareholders as a whole.

Shareholders should note that the Tender Price will only be determined finally once all the assets

in the Tender Pool have been realised.

The Board retains the discretion to allocate only cash and near cash assets of the Company to the Tender Pool. In such circumstances there will be no or minimal costs of realising the assets in the Tender Pool and it is expected that payment for Ordinary Shares (including any On-sale Shares) will be made to Tendering Shareholders in the week commencing 20 March 2017. It is the Board's current intention only to exercise such discretion where the number of Ordinary Shares that the Company is required to repurchase pursuant to the Tender Offer is such that allocating only cash and near cash to the Tender Pool is considered by the Board to be in the best interests of Shareholders as a whole.

9.4 Conditions of the Tender Offer

The Tender Offer is conditional on the following (together the "Conditions"):

a) the passing of Resolutions by not later than twenty Business Days after the date of the Extraordinary General Meeting;

b) the Directors and Numis being satisfied that, immediately after the Tender Offer takes place, the Company is able to pass the Guernsey statutory solvency test pursuant to the Companies Law, being that the Company is able to pay its debts as they become due, the value of the Company's assets is greater than the value of its liabilities and the Company satisfies any applicable solvency requirements imposed pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987 and thereby effect the purchase of all the Exit Shares (other than the On-sale Shares) pursuant to the Repurchase Agreement;

c) the Tender Offer not having been terminated in accordance with paragraph 7 of Part 3 of the Circular prior to the fulfilment of the conditions referred to in sub-paragraphs 4.4(a) and (b) above; and

d) Numis being satisfied, acting in good faith, that at all times up to and immediately prior to the announcement of the results of the Tender Offer, the Company has complied with its obligations and is not in breach of any of the representations and warranties given by it under the Repurchase Agreement.

10 TAKEOVER CODE

Following discussions between the Company and the Takeover Panel, the Takeover Panel has confirmed that, under Rule 37.1 of the Takeover Code and the notes to that Rule, Lazard is not connected, nor acting in concert, with the Company or any of its Directors and accordingly Lazard should be treated as an "innocent bystander" in relation to any increase in its holding of Ordinary Shares as a result of the Tender Offer and therefore will not be required to make an offer under Rule 9 of the Takeover Code as a result of any increase in its holding caused by the Tender Offer.

In addition, under the Tender Offer, Numis will purchase, as principal, vo ting shares in the Company which could result in Numis coming to have an interest in such Ordinary Shares carrying 30 per cent. or more of the Voting Rights of the Company. Numis has unconditionally undertaken that, promptly following such purchase, it will sell all those Ordinary Shares, acquired pursuant to the Tender Offer, to Incoming Investors or to the Company for cancellation or to hold in treasury and the Company has unconditionally undertaken to buy all such Ordinary Shares to the extent not sold to Incoming Investors. Numis has undertaken that so far as it is interested in the tendered Ordinary Shares that it will not exercise any rights attached to those Ordinary Shares. Accordingly, a waiver has been obtained from the Takeover Panel in respect of the application of Rule 9 of the Takeover Code to the purchase by Numis of the Ordinary Shares under the Tender Offer.

11 EXPENSES AND FOREIGN EXCHANGE MOVEMENTS

The costs and expenses incurred in relation to the Tender Offer, including financial advice and other professional advice, are expected to be approximately GBP88,000 including any applicable VAT. Such costs will be borne by Shareholders as a whole. The costs of realising the assets in the Tender Pool will be borne by the Tendering Shareholders.

Shareholders should note that the Tender Offer FAV to be announced by the Company on 16 March 2017 may be impacted positively or negatively as the assets in the Tender Pool are realised and will be particularly exposed to foreign exchange movements as assets denominated in foreign currencies are realised and the proceeds converted into sterling in order to pay the Tender Price which is payable in sterling.

12 TREASURY SHARES

Ordinary Shares repurchased by the Company pursuant to the Tender Offer or the general authority to buy back Ordinary Shares referred to below may be held in treasury or cancelled. At the Annual General Meeting of the Company held on 12 December 2016, a resolution was passed, in accordance with section 315 of the Companies Law, authorising the Directors to make market purchases of its Ordinary Shares (either for retention as treasury shares for future reissue and resale or transfer, or cancellation) provided that the maximum number of Ordinary Shares authorised to be purchased will be 25,402,054 (subject to a maximum of 14.99 per cent. of the issued share capital of the Company at the time of the annual general meeting). This authority will expire at the conclusion of the Annual General Meeting of the Company to be held in 2017 or, if earlier, on 12 December 2017. The Company currently intends to limit the number of Ordinary Shares held in treasury to no greater than 10 per cent. of the issued share capital of the Company from time to time.

Both the repurchase for cancellation and the use of treasury shares should assist the Board in the objective of providing a discount management mechanism and provide the Board with additional flexibility to manage the Company's capital base. The Board currently intends only to authorise the sale of Ordinary Shares from treasury, subject to having Shareholder authority to sell the Ordinary Shares from treasury, at prices at or above the prevailing Net Asset Value per Ordinary Share (plus costs of the relevant sale) unless they are first offered pro rata to existing holders of Ordinary Shares.

13 TAXATION

Shareholders who sell Ordinary Shares in the Tender Offer may, depending on their individual circumstances, incur a liability to taxation. UK individual Shareholders and trustee Shareholders should be aware that HMRC may seek to treat part of the disposal proceeds of their Ordinary Shares as income.

The attention of Shareholders is drawn to Part 4 of the Circular which sets out a general guide to certain aspects of current UK law and HMRC practice.

Shareholders who are in any doubt as to their tax position or who are subject to tax in a jurisdiction other than the UK should consult an appropriate professional adviser.

14 RISK FACTORS

Before deciding whether or not to tender all or any Ordinary Shares, Shareholders should read the Circular in its entirety and particularly the Risk Factors set out in Part 6 of the Circular.

15 EXTRAORDINARY GENERAL MEETING

The proposed adoption of a new Investment Objective and Investment Policy and implementation of the Tender Offer is subject to Shareholder approval. A notice convening the Extraordinary General Meeting to be held at 2.30 p.m. on 14 March 2017 at 11 New Street, St Peter Port, Guernsey GY1 2PF is set out on pages 55 to 57 of the Circular.

At the Extraordinary General Meeting Resolutions to approve the adoption of a new Investment Objective and Investment Policy and to give the Company authority to make market acquisitions pursuant to the Tender Offer will be proposed.

All the proposals outlined in the Circular are conditional upon the Resolutions being passed. Furthermore, by virtue of the Resolutions being inter-conditional, if the Resolution to approve the adoption of a new Investment Objective and Investment Policy is not passed the Tender Offer will not proceed. Likewise, if the Resolution to grant all the necessary authorities to implement the Tender Offer is not passed the Company will not adopt the proposed new Investment Objective and Investment Policy.

In order to be passed the Resolutions, which are to be proposed as an ordinary resolutions, will require the approval of Shareholders representing at least a simple majority of the votes cast at the Extraordinary General Meeting.

The Articles provide that at the Extraordinary General Meeting each Shareholder present in person or by proxy or who (being a corporation) is present by a representative shall on a show of hands have one vote and on a poll shall have one vote for each Ordinary Share of which he is a holder. The quorum for the Extraordinary General Meeting shall be two persons entitled to attend and to vote, each being a Shareholder or a proxy of a Shareholder or a duly authorised representative of a corporation which is a Shareholder. In the event that the Extraordinary General Meeting is adjourned and the above-mentioned quorum is not present, at such adjourned Extraordinary General Meeting the quorum shall be one person entitled to attend and vote.

16 CONCLUSION

The Company continues to provide access to an attractive asset class, through an appropriate structure and strategy that delivered attractive risk adjusted returns since the Company's inception. The Board believe that the proposed changes to the Investment Policy to facilitate direct equity investment together with the associated management fee reduction and move away from certain double charging concerns arising from the fund of funds investing process together with the other proposals set out in the Circular bodes well for the future of the Company. This combination of factors should enable the Company to continue to deliver absolute long-term returns over the coming years to Shareholders who wish to remain invested in the Company.

17 RECOMMATION

The Board considers that the adoption of the proposed new Investment Objective and Investment Policy and the Tender Offer are fair and reasonable and in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board recommends unanimously that Shareholders vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting. The Directors intend to vote in favour, or procure the vote in favour, of the Resolutions at the Extraordinary General Meeting in respect of their beneficial holdings of Ordinary Shares which, in aggregate, amount to 91,000 Ordinary Shares representing approximately 0.5 per cent. of the issued Ordinary Share capital of the Company as at the date of the Circular.

The Directors do not intend to tender any of their own Ordinary Shares under the Tender Offer. The Directors make no recommendation to Shareholders as to whether or not they should tender all or any of their Ordinary Shares in the Tender Offer. Whether or not Shareholders decide to tender their Ordinary Shares will depend, amongst other factors, on their view of the Company's prospects and their own individual circumstances, including their own tax position.

A timetable for the implementation of the Tender Offer is set out below.

Terms used and not defined in this announcement shall have the meaning given to them in the Circular.

Enquiries:

Aberdeen Fund Managers Limited

(Manager to Aberdeen Frontier Markets Investment Company Limited)

Andrew Lister / Bernard Moody

Tel: [phone]

Grant Thornton UK LLP

(Nominated Adviser)

Philip Secrett

Tel: [phone]

Numis Securities Limited

(Nominated Broker)

David Benda

Tel: [phone]

Expected Timetable

 
 Posting of the Circular, Tender         3 February 2017 
  Form, Savings Schemes 
  Tender Form, Form of Proxy and 
  Form of Direction 
-----------------------------------  ------------------- 
 Latest time and date for receipt        1.00 p.m. on 23 
  of Savings Schemes Tender                February 2017 
  Forms 
-----------------------------------  ------------------- 
 Tender Closing Date: latest time         1.00 p.m. on 2 
  and date for receipt of                     March 2017 
  Tender Forms and TTE Instructions 
  in CREST 
-----------------------------------  ------------------- 
 Record Date for participation            5.00 p.m. on 2 
  in the Tender Offer                         March 2017 
-----------------------------------  ------------------- 
 Latest time and date for receipt         2.30 p.m. on 7 
  of Forms of Direction for the               March 2017 
  Extraordinary General Meeting 
-----------------------------------  ------------------- 
 Latest time and date for receipt        2.30 p.m. on 12 
  of Forms of Proxy for the                   March 2017 
  Extraordinary General Meeting 
-----------------------------------  ------------------- 

 Extraordinary General Meeting           2.30 p.m. on 14 
                                              March 2017 
-----------------------------------  ------------------- 
 Results of Extraordinary General          14 March 2017 
  Meeting and Tender Offer 
  announced 
-----------------------------------  ------------------- 
 Calculation Date close of business        14 March 2017 
  on 
-----------------------------------  ------------------- 
 Purchase of Exit Shares and sale          16 March 2017 
  of On-sale Shares 
-----------------------------------  ------------------- 
 Tender Offer FAV and number of            16 March 2017 
  On-sale Shares announced 
-----------------------------------  ------------------- 
 Establishment of Tender Pool              16 March 2017 
  and Continuing Pool 
-----------------------------------  ------------------- 
 Realisation of the Tender Pool            16 March 2017 
  commences 
-----------------------------------  ------------------- 
 Tender Price announced; final           made as soon as 
  distribution under the Tender        practicable after 
  Offer of assets in the Tender          the realisation 
  Pool announced; cheques                  of the Tender 
  despatched and payments through                   Pool 
  CREST 
-----------------------------------  ------------------- 
 

All references are to London time unless otherwise stated.

Dates and times are indicative only and may be subject to change. Any changes will be notified

via an RIS.

This information is provided by RNS

The company news service from the London Stock Exchange

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February 03, 2017 02:00 ET (07:00 GMT)