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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Aberdeen Frontier Markets Investment Company Limited | LSE:AFMC | London | Ordinary Share | GG00B1W59J17 | ORD NPV |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 41.30 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMAFMC
RNS Number : 2938B
Aberdeen Frontier Mkts Inv Co Ltd
20 September 2018
Aberdeen Frontier Markets Investment Company Limited
LEGAL ENTITY IDENTIFIER ('LEI'): 213800X9N731I4IPK361
ANNOUNCEMENT OF RESULTS FOR THE YEARED 30 JUNE 2018
Overview
Financial Highlights
Net Asset Value ('NAV') per share total return (in US dollar terms) (1, 3) NAV per share (in US dollars) -10.3% $0.8090 2017 +13.7% 2017 $0.9295 Share price total return (in US dollar terms) (2, 3) Share price (in US dollars) -12.0% $0.7361 2017 +16.7% 2017 $0.8678 Net Assets (in US dollars) Share price (in GB pounds) $68.4million GBP0.5575 2017 $79.4million 2017 GBP0.6663 (1) Total return, NAV to NAV, gross income reinvested. (2) Share price total return is on a mid-to-mid basis. (3) These are Alternative Performance Measures ("APMs")
Alternative Performance Measures ('APMs')
The disclosures as indicated in footnote 3 above are considered to represent the Company's APMs. In addition to the above APMs, other performance measures have been used by the Company to assess its performance.
Dividend (in US dollars)
for the year for the year ended 30 June ended 30 June 2018 2017 ------------------------ --------------- --------------- Interim dividend paid 1 cent 1 cent Final dividend proposed 1 cent 1 cent (2017: paid) ------------------------ --------------- ---------------
Investment objective
The investment objective of the Company is to generate long-term capital growth primarily from investment in equity and equity related securities of companies listed in, or operating in, Frontier Markets.
Frontier Market countries may include constituents of the MSCI Frontier Markets Index or additional countries that the Investment Manager deems to be, or displays similar characteristics to, Frontier Market countries.
Reference Benchmark
MSCI Frontier Markets Index in US dollar terms.
Management
The Company is managed by Aberdeen Fund Managers Limited (the 'Manager'), which is a wholly owned subsidiary of Standard Life Aberdeen PLC and is authorised and regulated by the Financial Conduct Authority ('FCA'). The Manager has delegated day-to-day investment management services to Aberdeen Asset Managers Limited ('AAML' or the 'Investment Manager').
Financial Calendar
12 December Annual General Meeting ("AGM") in Guernsey 2018 --------------- --------------------------------------------------------- 19 December Final dividend payable for year ended 30 June 2018 2018 --------------- --------------------------------------------------------- February 2019 Announcement of Half-Yearly Financial Report for the six months ending 31 December 2018 --------------- --------------------------------------------------------- June 2019 Interim dividend payable for year ending 30 June 2019 --------------- --------------------------------------------------------- September 2019 Announcement of Annual Report and Accounts for the year ending 30 June 2019 --------------- ---------------------------------------------------------
Chairman's Statement
On behalf of your Board, I present to you the Annual Report for Aberdeen Frontier Markets Investment Company Limited (the "Company") for the year ended 30 June 2018.
Performance
Absolute and relative performance was disappointing during the year, not least following the initial, positive outlook for frontier markets more generally in 2018.
During the year under review the Company's NAV per share and share price total returns were -10.3% and -12.0%, respectively. This performance compared to a gain of 1.7% for the MSCI Frontier Markets Index (the reference "Index"), all figures in US Dollar total return terms.
The Company's investments in Pakistan, Vietnam and Sri Lanka underperformed while the underweight exposure, relative to the Index, of the Company to stocks in Kuwait was also unhelpful. Limits on foreign ownership in Vietnam and the effect of countries either leaving (Pakistan) or joining (Kuwait) the Index skewed equity flows overtaking the fundamental case supporting particular stocks in which the Company is invested. The Investment Manager's report gives a clearer insight into performance over the year and current positioning for the future.
As I have said before, fundamental stock-picking, based on research and a policy of meeting company managements before investment, remains at the core of the Manager's investment value approach and the resulting portfolios will often vary significantly from the Index. Our Investment Manager is index aware but certainly not index driven.
Tender Offer
Despite the Company's purchase into treasury of 852,500 Ordinary Shares during the year ended 30 June 2018, the Company's share price discount to NAV has at times traded wider than 10%.
In March 2017, the Company adopted a discount control policy whereby should the average Ordinary Share price discount to the underlying ex income NAV over the three month period immediately prior to the Company's year-end (30 June) exceed 10% then, at the discretion of the Board, the Company would, subject to any legal or regulatory requirements, implement a tender offer. Over the relevant period the average Ordinary Share price discount to the underlying ex income NAV was 10.47%.
Despite the Ordinary Share price trading in a relatively tight discount band below 10% prior to the three month period to 30 June 2018, dislocation in markets and negative sentiment in emerging markets generally caused by US tariff threats led to share price weakness and the discount widening through the monitoring period.
In line with stated policy the Board decided to implement a tender offer and on 2 July 2018 the Company announced its intention to implement a tender to purchase up to 15% of the Ordinary Shares currently in issue.
Having triggered the discount target set out above, the Board is aware that there exists appetite for the liquidity that can be provided by such a tender at a price close to NAV. Accordingly, and in line with the current discount control policy, Shareholders are being asked to approve the tender offer for up to 15% of the issued share capital of the Company (excluding Ordinary Shares held in treasury) at a tender price equal to 98% of the prevailing NAV (less the direct costs, including any realisation costs of underlying investments, of implementing the tender offer) on the Calculation Date.
The Board believes that the tender offer, despite causing the Company to shrink in net asset terms, strikes a fair balance between those Shareholders who wish to realise part of their investment in the Company at a value close to the NAV per Ordinary Share and those who wish to maintain their investment in the Company.
Discount Control Policy
As part of its ongoing programme of Shareholder engagement the Board has received feedback suggesting that it would be appropriate to allow the revised direct equity investment policy, which was only adopted in March 2017, a defined period of time to prove itself without being distracted by the potential for additional tenders or other discount control mechanisms. If, however, at the end of that defined period, the Company has failed to outperform its investment benchmark, the Board is mindful that Shareholders should be given the opportunity to fully exit their investment for cash.
The Board is very conscious that the revised investment policy saw the Company's portfolio only fully realigned in June 2017. In the light of the above the Board is proposing to adopt a new policy whereby discount triggered tenders or other discount control mechanisms will no longer be proposed. Instead, Shareholders will be given the opportunity to fully exit their investment in the Company for cash at the then prevailing NAV less applicable direct costs, including any realisation costs of underlying investments, in the event that the Share Price Total Return for the two year period from 1 July 2018 to 30 June 2020 fails to exceed the portfolio's reference benchmark, being the MSCI Frontier Markets Index (in sterling terms).
The Board also intends to seek annual renewal of the usual authority to buy back Ordinary shares in the market and will exercise such authority where it believes it is in the best interests of Shareholders to do so.
Ordinary resolutions seeking Shareholder approval for the proposed tender offer and this new policy, which replaces any previous discount control policy, will be put at an EGM of the Company to be held on 17 October 2018.
Ongoing Charges Ratio
Following implementation of the tender the size of the Company, in terms of its net assets, will decrease. The Board is of course very mindful of the costs incurred in managing an investment company and the fact that a fall in net assets will lead to a higher overall ongoing charges ratio ("OCR"). To that end, the Board is pleased to report that it has secured agreement from the Manager to seek to limit the Company's OCR to no more than 2% when calculated annually as at 30 June.
Until further notice, to the extent that the OCR exceeds 2% in any annual period, the Manager will rebate an equal amount of its management fee to the Company with the objective of bringing the OCR down to 2%. This rebate will, however, be capped such that the Manager, will not rebate more than an amount equal to one third of the Managers management fee for the relevant year in question. There can therefore be no guarantee that the overall OCR of the Company will, even given any rebate by the Manager, be limited to 2% of net assets. However, the Board will continue to monitor all costs on a regular basis and seek to reduce them wherever possible.
Dividend
A final dividend for the year ended 30 June 2017 of 1 cent (0.761832 pence) was paid to Ordinary shareholders on 13 December 2017.
In relation to the year ended 30 June 2018, an interim dividend of 1 cent (0.749995 pence) per share was paid to Ordinary shareholders on 29 June 2018. The Board is recommending to shareholders the payment of a final dividend for the year end of 1 cent per share. If approved by shareholders at the Annual General Meeting to be held on 12 December 2018, this dividend will be paid on 19 December 2018 to those shareholders who are on the register on 16 November 2018. The ex-dividend date will be 15 November 2018. The final dividend will be paid in sterling and the sterling dividend rate will be announced in due course.
The Board considers that a sustainable dividend forms an important part of shareholders' overall return and intends to continue to pay semi-annual dividends in line with previous guidance.
Aberdeen Standard Investments savings plans
Aberdeen Standard Investments has a long history in managing closed-ended funds and provides a wealth of experience and a wide infrastructure towards their management and promotion. Investors may access low cost investment in the Company through Aberdeen Standard's Share Plan, Investment Trust ISA and Investment Plan for Children which provide full voting and other rights of share ownership.
Further details may be found via our website at: aberdeenfrontiermarkets.co.uk.
Regulatory Changes
There have been a number of regulatory changes implemented or announced, recently. Investors should be aware that the Packaged Retail and Insurance-based Investment Products (PRIIPS) Regulation requires the Manager, as the Company's PRIIP "manufacturer," to prepare a key information document ("KID") in respect of the Company. This KID must be made available by the Manager to retail investors prior to a prospective investor making any investment decision and is available via the Company's website. The Company is not responsible for the information contained in the KID and investors should note that the procedures for calculating the risks, costs and potential returns are prescribed by regulation. We recommend that all investors should note that the figures in the KID may not reflect returns expected of the Company and that anticipated performance returns cannot be guaranteed.
The Criminal Finances Act 2017 introduced a new corporate criminal offence of "failing to take reasonable steps to prevent the facilitation of tax evasion". The Board has confirmed that it is the Company's policy to conduct all of its business in an honest and ethical manner. The Board takes a zero-tolerance approach to facilitation of tax evasion, whether under UK law or under the law of any foreign country.
Data protection rights were harmonised across the European Union following the implementation of the General Data Protection Regulation ("GDPR") on 25 May 2018. The Board is taking the necessary steps to seek the appropriate assurances from its third party service providers to ensure compliance with the new regulations.
Future prospects
The Investment Manager continues to follow its fundamental stock-picking approach, focused on quality and involving considerable interaction with the management of potential and current investee companies. Aberdeen Standard Investments has a large dedicated emerging markets equity team which strongly believes that better returns can be seen over the longer term though investment in companies that it fully understands and visits on a regular basis.
As I explained in my interim report, certain of the larger weightings within the portfolio are in markets which offer limited market depth, resulting in the portfolio diverging, often markedly at times, from the reference Index and its returns.
Strong earnings growth is anticipated in key frontier markets in which the Company is invested, which should drive equity returns over the longer term, with lower overall volatility. The Board continues to remain convinced as to the merits of investing into frontier markets over the longer term and supports the Investment Manager in its efforts. The equity investing process has only been in place for what is effectively a short time period and a longer period to assess performance returns is required.
Both the Board and the Manager continue to seek ways to enhance liquidity in the shares through improving performance and a clear and focused marketing strategy.
John Whittle
19 September 2018
Investment Manager's Report
Market environment
Global equity market sentiment was constructive through most of the financial year under review, supported by firming global growth and hopes that the passage of US tax legislation would give a boost to the world's largest economy. Towards the end of the period, however, there was a marked return of volatility and renewed US dollar strength, stoked by raised expectations in respect of the Fed's withdrawal of monetary stimulus, as well as heighted risk aversion over trade tensions between the US and China. Risk assets thus witnessed a broad sell-off during the final quarter of the period, which was compounded by weakness witnessed in many frontier market currencies. The Argentinian Peso bore the brunt of the turn in market sentiment, declining 42.5% against the dollar during the reporting period, with the bulk of losses occurring in May and June.
Net fund flows into the frontier market asset class saw a stabilisation in 2017 after two years of significant outflows. Initially the outlook for 2018 was very promising, given the brighter macroeconomic backdrop globally. That outlook reverted somewhat during the first half of 2018, but in our opinion, a revival of investor interest in the asset class remains very likely once market jitters over monetary tightening in the US recede. After all, the fundamentals on the ground remain highly supportive, namely a clear improvement in macroeconomic stability and growth across most of our markets, and a visible cyclical improvement in corporate earnings, particularly in Africa.
The Company's three key exposures in Frontier Africa are Egypt, Kenya, and Nigeria. Egypt is implementing an IMF-supported structural adjustment programme that to date has delivered in-line with expectations, so business and consumer confidence is returning. Our investments in Egypt are making good operational progress, albeit the recovery remains fairly early stage and there is much further to go. Juhayna Food Industries, for instance, delivered 22% revenue growth and a 49% rise in operating profit during the first half of the current year. The positive trajectory is likely to be maintained, not least because the company's sales volumes remain materially below peak levels achieved in 2016. Meanwhile Commercial International Bank, another of the portfolio's holdings in Egypt, is on track to deliver its target of 25% earnings growth in 2018, supported by a robust recovery in lending and widening net interest margins.
Nigeria has also undergone a difficult period of transition post its series of currency devaluations, albeit without the support of the IMF. The firming oil price and more consistent oil production has brought the country's current account back into surplus and allowed the central bank to rebuild currency reserves, which reached US$48bn by the end of the period. While the economy remains sluggish in many respects (the IMF forecasts real GDP growth of just 2.1% in 2018), GDP acceleration and declining inflation has been supportive of domestic demand and corporate earnings. By way of example, Nestle Nigeria, achieved top-line growth of 12% and margin recovery (profit-after-tax expanded 30%) during the first half of 2018, and prospects are excellent for further improvement as consumer spending gathers pace next year. Zenith Bank reported a 9% improvement in profit-after-tax, despite regulatory one-off costs and a shrinkage of its loan book. The bank's annualised return on equity ("ROE") of 21.2% suggests that its valuation of 0.9x book is very attractive in the context of current returns and longer term growth prospects. Our other bank holding in Nigeria, Guaranty Trust Bank, delivered 14% growth in profit-after-tax with an annualised-ROE of 34.1%.
In Frontier Asia, Vietnam outperformed all other markets by a large margin, rising 41.3% in US dollar terms despite a pullback in April and May. The economic backdrop was highly supportive, with GDP growth accelerating to 6.8%, its fastest annual pace in a decade, supported by sustained export growth and foreign direct investment. The pace of urbanisation and rising incomes in the cities has been a boon for corporates in the country, hence most listed companies have been delivering impressive numbers. That said, there has been a violent divergence in equity performance between those listed companies with foreign-ownership headroom available, versus those without. Those companies without foreign-ownership headroom are impractical for foreign investors to trade and are excluded from the MSCI Vietnam index. As a result, foreign investor inflows to Vietnam have been, primarily, funnelled into a narrow band of MSCI index constituents, with local investors supporting the momentum of those particular names. As a consequence, this band of stocks has been squeezed higher and are, in our view, overvalued, while the remainder of the market
has floundered. This dislocation of fundamentals from valuations has resulted in two of the portfolio's high-quality holdings, FPT Corp (FPT) and Mobile World Investment Corp (MWIC) trailing the market very significantly, despite excellent operational delivery. The portfolio held a position of 4.7% in FPT and 4.4% in MWIC at the close of the reporting period. FPT delivered 19.0% growth in profit-after-tax during the first half of the year, while MWIC grew its bottom line by 44.0%. Despite such excellent earnings results, both names currently stand at a P/E multiple discount of 50% to the that of the index. We believe that, in time, consistent earnings delivery by these two companies will entice back domestic investor interest, driving a convergence of valuations once more. It is also worth noting that, since both names are at their foreign-ownership limit, there is material hidden value to realise in the instance that the Company sells the holdings to another foreign investor.
Pakistan was a marked laggard over the period (the MSCI Pakistan index fell 33.6% in US dollar terms), despite annual GDP growth reaching a decade high as a result of the improved security situation and substantial government-backed investments in infrastructure. However, political disruption and a worsening trade balance weighed on the currency as well as equity market sentiment. The equity market retreated in anticipation of the inevitable; namely currency devaluation, monetary tightening and an external refinancing agreement. The success of Imran Khan and his Pakistan Tehreek-e-Insaf (PTI) party at the ballot box in July bodes well for Pakistan, but there will be further volatility leading up to either an IMF or other foreign funding package.
Aberdeen Frontier Markets Investment Company cumulative performance in USD for periods ended 30 June 2018 6 months 1 year 3 years 5 years % % % % -------------------------------- ------------- --------- ----------- ----------- Share Price -4.1 -12.0 -5.7 -1.7 -------------------------------- ------------- --------- ----------- ----------- NAV -11.9 -10.3 -12.0 -4.0 -------------------------------- ------------- --------- ----------- ----------- MSCI Frontier Markets -10.9 +1.7 +6.6 +24.9 -------------------------------- ------------- --------- ----------- -----------
Notes
Total return; NAV to NAV, gross income reinvested, USD.
Share price total return is on a mid-to-mid basis.
Dividends are reinvested as at the ex-dividend date.
NAV returns based on NAVs with debt valued at fair value.
Source: Aberdeen Fund Managers Limited, Bloomberg
Performance review
During the twelve months to 30 June 2018 the Company's NAV per share and share price total returns were -10.3% and
-12.0% respectively. As a point of reference, the MSCI Frontier Markets index gained 1.7% over the same period. The discount to NAV at which the Company's shares trade stood at 9.0% at the end of the year as compared from 8.0% at 30 June 2017.
The benchmark held onto material gains for most of the reporting period, before losing ground during the final quarter to finish marginally above where the reporting year started. Heightened risk aversion globally weighed on our markets, but the brunt of this turn in sentiment was felt by Argentina, where the currency collapsed at the end of the period.
Absolute and relative performance was hindered by four factors: the portfolio's exposure to Pakistan, which left the benchmark last year and suffered equity declines for the reasons outlined above; our overweight to Sri Lanka, whose market declined as a result of a poor harvest, fiscal austerity, and a rise in the tax burden; the exposure to Vietnam via off-benchmark names, which lagged the liquidity-fuelled rally of the MSCI Vietnam index due to foreign-ownership restrictions as noted above; and the Company's underweight to Kuwait, which made gains as a result of the stronger oil price and news that the market is under review by MSCI with a view to upgrading to emerging markets status. On a more positive note, our significant underweight to Argentina was a material benefit, but not nearly enough to offset the detractors mentioned above.
Relative country positions
Country Fund Benchmark Difference % % % ------------------------------- ------ ---------- ----------- Africa & Middle East 33.4 53.5 -20.1 ------------------------------- ------ ---------- ----------- Bahrain - 3.8 -3.8 Egypt 5.6 - 5.6 Ghana 1.8 - 1.8 Ivory Coast - 0.2 -0.2 Jordan - 1.4 -1.4 Kenya 9.3 5.8 3.5 Kuwait - 19.3 -19.3 Lebanon 1.2 2.0 -0.8 Mauritius - 2.2 -2.2 Morocco 0.8 8.0 -7.2 Nigeria 10.1 7.8 2.3 Oman 0.6 1.4 -0.8 Senegal - 0.8 -0.8 South Africa 1.3 - 1.3 Tanzania 1.4 - 1.4 Tunisia - 0.8 -0.8 Turkey 1.3 - 1.3 Asia Pacific Ex Japan 45.5 20.4 25.1 ------------------------------- ------ ---------- ----------- Bangladesh 7.9 2.9 5.0 Myanmar 1.8 - 1.8 Pakistan 10.3 - 10.3 Sri Lanka 7.9 1.2 6.7 Thailand 1.9 - 1.9 Vietnam 15.7 16.3 -0.6 Europe Ex UK 8.2 9.2 -1.0 ------------------------------- ------ ---------- ----------- Belarus 1.5 - 1.5 Croatia - 1.7 -1.7 Estonia - 0.3 -0.3 Georgia 2.7 - 2.7 Kazakhstan - 0.8 -0.8 Lithuania - 0.2 -0.2 Romania 4.0 4.3 -0.3 Serbia - 0.2 -0.2 Slovenia - 1.7 -1.7 UK 1.0 - 1.0 ------------------------------- ------ ---------- ----------- Latin America 9.6 16.9 -7.3 ------------------------------- ------ ---------- ----------- Argentina 7.5 16.9 -9.4 Panama 2.1 - 2.1 Cash 2.3 - 2.3 ------------------------------- ------ ---------- ----------- Total 100.0 100.0 - ------------------------------- ------ ---------- -----------
At 30 June 2018, the benchmark index had an adjusted market cap of US$121.2 bn and was composed of 115 companies across 29 countries (source MSCI).
Portfolio positioning
As at the end of June 2018 the portfolio had 54 equity investments, providing exposure to more than 21 economies. During the year the Company raised exposure to Frontier Asia to 45.5%, primarily as a result of new investments in Vietnam: FPT Corp, Vietnam's leading IT software outsourcing firm, Mobile World Investment Corp, Vietnam's leading electrical goods retailer, Masan Group, a major local consumer goods business, Nam Long Corp, a low-middle income residential real estate developer, Vincom Retail, Vietnam's leading mall developer, and TCB, a leading retail and commercial bank.
Elsewhere, we initiated two notable investments in Argentina: BBVA Frances, a leading retail and commercial bank, and IRSA Propiedades Comerciales, a shopping mall and office developer with an exceptional rental portfolio and pipeline of greenfield projects. In addition we made two new investments in Romania: Purcari Wineries, a vineyard and wine maker, and Sphera Franchise Group, a QSR operator of KFC, Pizza Hut and Taco Bell franchises in the country. Increased exposure to Asia was primarily funded by reduced exposure to the EMEA region, where we exited several names with inferior visibility with regard to earnings growth.
Market outlook
As we said in the interim report earlier this year, we believe corporate earnings in Frontier Africa are enjoying a cyclical recovery. In Frontier Asia, where the Company now has significant exposure, we expect another excellent year for corporate earnings in Vietnam, and continued solid results from our companies in Bangladesh, Pakistan and Sri Lanka. Pakistan and Sri Lanka have entered deep value territory and represent an opportunity, albeit macroeconomic challenges may linger some while longer. Turning to Argentina, the IMF package and reform programme agreed in June underpins an optimistic stance for the country in 2019 and we may look to raise exposure to the country on what are now, we believe, more palatable valuations.
For us, the outlook for frontier markets provides plenty of cause for optimism. Operational results from our investee companies, together with conversations on the ground, indicate that the corporate earnings recovery is set to continue. While volatility across various markets and some currencies have undermined the positives we are seeing in the short term, we expect these positive fundamentals to reflect in performance in the not too distant future.
The management style of the portfolio is benchmark aware but importantly not benchmark driven. In this respect we look across a wide array of countries with frontier market characteristics, including outside of the index, seeking out quality companies to invest in. This diversified portfolio of companies is managed with a mind to delivering strong performance over the medium to longer term at a low level of volatility. That said, there will be divergences away from the benchmark, as well as in relative performance. We remain committed to our investment approach, which entails rigorous interaction and engagement with companies. This allows us to identify those with solid long-term prospects and progressive management teams that will negotiate cycles and safeguard shareholder interests.
Aberdeen Fund Managers Limited
19 September 2018
Top 20 Investments
as at 30 June 2018 --------------------------------------------------------------------------- Percentage Value of net Company Country $'000 assets(%) ------------------------------------ ----------- ------ ---------- FPT Corporation Vietnam 2,713 4.0 ------------------------------------- ---------------- ------ ---------- Guaranty Trust Bank Nigeria 2,534 3.7 ------------------------------------- ---------------- ------ ---------- John Keells Sri Lanka 2,517 3.7 ------------------------------------- ---------------- ------ ---------- Mobile World Investment Corporation Vietnam 2,427 3.6 ------------------------------------- ---------------- ------ ---------- Vietnam Dairy Products ('Vinamilk') Vietnam 2,262 3.3 ------------------------------------- ---------------- ------ ---------- Safaricom Kenya 2,137 3.1 ------------------------------------- ---------------- ------ ---------- BBVA Banco Frances Argentina 2,087 3.0 ------------------------------------- ---------------- ------ ---------- Square Pharmaceuticals Bangladesh 1,891 2.8 ------------------------------------- ---------------- ------ ---------- Grameenphone Bangladesh 1,790 2.6 ------------------------------------- ---------------- ------ ---------- Commercial International Bank Egypt 1,752 2.6 ------------------------------------- ---------------- ------ ---------- Equity Group Holdings Kenya 1,742 2.5 ------------------------------------- ---------------- ------ ---------- IRSA Propiedades Argentina 1,617 2.4 ------------------------------------- ---------------- ------ ---------- Shell Pakistan Pakistan 1,456 2.1 ------------------------------------- ---------------- ------ ---------- Packages Pakistan 1,442 2.1 ------------------------------------- ---------------- ------ ---------- Juhayna Food Industries Egypt 1,442 2.1 ------------------------------------- ---------------- ------ ---------- Globant Argentina 1,436 2.1 ------------------------------------- ---------------- ------ ---------- Copa Holdings Panama 1,419 2.1 ------------------------------------- ---------------- ------ ---------- Commercial Bank of Ceylon Sri Lanka 1,388 2.0 ------------------------------------- ---------------- ------ ---------- Zenith Bank Nigeria 1,355 2.0 ------------------------------------- ---------------- ------ ---------- Fan Milk Ghana 1,333 1.9 ------------------------------------- ---------------- ------ ---------- Top twenty holdings 36,740 53.7 ------------------------------------------------------- ------ ---------- Other holdings 30,191 44.1 ------------------------------------------------------- ------ ---------- Total holdings 66,931 97.8 ------------------------------------------------------- ------ ---------- Cash and other net assets 1,509 2.2 ------------------------------------------------------- ------ ---------- Net assets 68,440 100.0 ------------------------------------------------------- ------ ----------
Principal risks and uncertainties
There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The principal risks associated with an investment in the Company's shares are published monthly on the Company's factsheet or they can be found in the pre-investment disclosure document published by the Manager, both of which are on the Company's website. The Board reviews the risks and uncertainties faced by the Company in the form of a risk matrix and heat map which is reviewed regularly by the Audit and Risk Committee. The Board has identified the principal risks and uncertainties facing the Company at the current time in the table below together with a description of the mitigating actions taken by the Board.
Description Mitigating action --------------------------------------------------------- --------------------------------------------------------- Investment strategy and objectives - the setting of an The Board keeps the investment objective and policy as unattractive strategic proposition well as the level of discount at which to the market and the failure to adapt to changes in the Company's Ordinary Shares trade under review and the investor demand may lead to the Company Board is updated at each Board meeting becoming unattractive to investors, a decreased demand on the makeup of, and any movements in, the Shareholder for Ordinary Shares and a widening register. discount at which the Ordinary Shares trade relative to their NAV. --------------------------------------------------------- --------------------------------------------------------- Investment portfolio, investment management - investing The Board sets, and monitors, its investment restrictions outside of the investment restrictions and guidelines, and receives regular and guidelines set by the Board could result in poor reports which include performance reporting on the performance and inability to meet the implementation of the investment policy, Company's objectives. the investment process and application of the guidelines. --------------------------------------------------------- --------------------------------------------------------- Financial and regulatory - the financial risks The financial risks associated with the Company include associated with the portfolio could result market risk, liquidity risk and credit in losses to the Company. In addition, failure to comply risk, all of which are managed by the Investment Manager. with relevant regulation (including Further details of the steps taken the Companies (Guernsey) Law, the Financial Services and to mitigate the financial risks associated with the Markets Act, the Alternative Investment portfolio are set out within the notes Fund Managers Directive, Accounting Standards and the contained in the Annual Report. The Board relies upon the AIM listing rules, disclosure and prospectus Manager to ensure the Company's rules) may have a negative impact on the Company. compliance with applicable regulations and from time to time employs external advisers to advise on specific concerns. --------------------------------------------------------- --------------------------------------------------------- Operational - the Company is dependent on third parties The Board receives regular reports from the Manager on for the provision of all systems and internal controls and risk management services (in particular, those of the Manager) and any and receives assurances from its significant service control failures and gaps in these providers. Further details of the internal systems and services could result in a loss or damage to controls which are in place are set out in the Directors' the Company. Report contained within the Annual Report.
--------------------------------------------------------- --------------------------------------------------------- Discount - factors which affect the discount to NAV at The Board keeps under review the discount and may which the Ordinary Shares of the Company consider selective buyback of shares where trade. These may include the popularity of the to do so would be in the best interests of shareholders, investment objective of the Company, the popularity balanced against reducing the overall of investment trust shares in general and the ease with size of the Company. Any shares bought back would be which the Company's Ordinary Shares either cancelled or held in treasury. can be traded on the London Stock Exchange. --------------------------------------------------------- --------------------------------------------------------- Political risk and exchange controls - investments in Given the nature of the risks to which the Company's less developed markets are subject to investments are subject, which are those a greater degree of political risk than that with which inherently associated with less developed markets, there investors might be familiar. are limited options available to In addition, investments purchased by the Company may be the Board for mitigating these risks. The Board believes subject, in the future, to exchange that mitigation is best effected controls or withholding taxes. In the event that by careful selection of the constituents of the Company's exchange controls or withholding taxes are portfolio with high-calibre, financially-sound imposed with respect to any of the Company's companies, with good management and excellent growth investments, the effect will generally be to potential. reduce both the income received by the Company from its Investment in Frontier Markets involves a greater degree investments and/or the capital value of risk than that usually associated of the affected investments. with investment in major securities markets. Through regular interaction with the Manager and other commentators, the Board stays up-to-date with the latest political and economic news in these markets. --------------------------------------------------------- --------------------------------------------------------- Market risk - being the risk that the portfolio, managed The Investment Manager seeks to diversify market risk by by the Investment Manager, suffers investing in a wide variety of companies a fall in its market value which would have an adverse with strong balance sheets and the earnings power to pay effect on shareholders' funds. The increasing dividends. In addition, Company's investments are subject to normal market investments are made across various countries in order to fluctuations and the risks inherent in reduce the risk of a single concentrated the purchase, holding or selling of equity securities exposure; at present the Investment Manager may not and there can be no assurance that appreciation invest more than 10% of the Company's in the value of those investments will occur. total assets in any single stock at the time of The Investment Manager's investment process concentrates investment and the Company will invest in on a company's business strategy, between 30 to 80 holdings. management, financial strength, ownership structure as The Investment Manager believes that diversification well as corporate governance, with should be looked at in absolute terms a view to seeking companies that it can invest in for rather than relative to an index. The performance of the the long term. This quality test means portfolio relative to the MSCI Frontier that there may be stocks which the Investment Manager Markets Index and the underlying stock weightings in the will not invest in due to a perceived portfolio against their index weightings lack of transparency or poor corporate governance. are monitored closely by the Board. --------------------------------------------------------- --------------------------------------------------------- Liquidity risk - the Company, and/or its Investment Liquidity risk is not considered to be significant as, Manager may accumulate investment positions whilst liquidity is limited in certain which represent more than normal daily trading volumes stocks which the Company holds, the majority of the which may make it difficult to realise Company's assets comprise readily realisable investments quickly. securities which can be sold to meet funding requirements if necessary. The Board reviews the liquidity profile of the Company's investment portfolio at each quarterly Board meeting. --------------------------------------------------------- ---------------------------------------------------------
Statement of Directors' Responsibilities
The Directors are responsible for preparing financial The financial statements are published on the Company's statements for each financial year which website (website address: give a true and fair view of the state of affairs of the www.aberdeenfrontiermarkets.co.uk) Company as at the end of the year and on the Investment Manager's website (website and of the profit or loss for the year and are in address: www.aberdeenstandard.com). The maintenance accordance with The Companies (Guernsey) and integrity of the Investment Manager's website, so Law, 2008. In preparing these accounts, the Directors are far as it relates to the Company, is required to: the responsibility of the Investment Manager. The work * Select suitable accounting policies and then apply carried out by the auditor does not them consistently; involve consideration of the maintenance and integrity of these websites and accordingly, the auditor accepts no responsibility for any changes * Make judgements and estimates which are reasonable that have occurred to the financial and prudent; statements since they were initially presented on these websites. Visitors to the websites need to be aware that legislation in Guernsey governing * State whether applicable International Financial the preparation and dissemination Reporting Standards ('IFRS') as adopted by the of the financial statements may differ from legislation European Union have been followed, subject to any in their jurisdiction. material departures disclosed and explained in the The Directors confirm that to the best of their financial statements; and knowledge and belief the annual report and accounts taken as a whole, is fair, balanced and understandable and provides the information * Prepare the financial statements on the going concern necessary to assess the Company's position and basis unless it is inappropriate to presume that the performance, business model and strategy. Company will continue in business. For and on behalf of the Board The Directors are responsible for ensuring that proper accounting records are kept which disclose John Whittle with reasonable accuracy at any time the financial position Director of the Company and enable them to ensure that the accounts have been properly prepared in David Warr accordance with The Companies (Guernsey) Director Law, 2008. They are also responsible for safeguarding the assets of the Company and hence 19 September 2018 for taking reasonable steps for the prevention and detection of fraud and other irregularities. In accordance with The Companies (Guernsey) Law, 2008, there is no relevant audit information of which the Company's auditor is unaware. The Directors also confirm that they have taken all steps they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
Statement of Comprehensive Income
Year ended 30 June Year ended 30 June 2018 2017 ----------------------------- ---------------------------- Revenue Capital Total Revenue Capital Total $'000 $'000 $'000 $'000 $'000 $'000 ------------------------------- -------- --------- -------- -------- -------- -------- (Losses)/gains on investments - (8,780) (8,780) - 16,695 16,695 Capital gains on currency movements - 244 244 - 1,973 1,973 -------------------------------- -------- --------- -------- -------- -------- -------- Net investment (losses)/gains - (8,536) (8,536) - 18,668 18,668 -------------------------------- -------- --------- -------- -------- -------- -------- Investment income 2,329 - 2,329 1,573 - 1,573 -------------------------------- -------- --------- -------- -------- -------- -------- Total (losses)/gains 2,329 (8,536) (6,207) 1,573 18,668 20,241 -------------------------------- -------- --------- -------- -------- -------- -------- Investment management fees (260) (519) (779) (476) (952) (1,428) Other expenses (794) - (794) (754) - (754) -------------------------------- -------- --------- -------- -------- -------- -------- Net (loss)/profit from operations before finance costs and taxation 1,275 (9,055) (7,780) 343 17,716 18,059 -------------------------------- -------- --------- -------- -------- -------- -------- Finance costs (26) - (26) (47) (94) (141) -------------------------------- -------- --------- -------- -------- -------- -------- Net (loss)/profit before taxation 1,249 (9,055) (7,806) 296 17,622 17,918 -------------------------------- -------- --------- -------- -------- -------- -------- Withholding tax (233) - (233) (91) - (91) -------------------------------- -------- --------- -------- -------- -------- -------- Net (loss)/profit after taxation 1,016 (9,055) (8,039) 205 17,622 17,827 -------------------------------- -------- --------- -------- -------- -------- -------- (Losses)/earnings per ordinary share 1.19c (10.61c) (9.42c) 0.14c 12.16c 12.30c -------------------------------- -------- --------- -------- -------- -------- --------
The total column of this statement represents the Company's Statement of Comprehensive Income, prepared under IFRS as adopted by the European Union. The revenue and capital columns, including the revenue and capital earnings per share data, are supplementary information prepared under guidance published by the Association of Investment Companies.
The Company does not have any income or expenses that are not included in the (loss)/profit for the year and therefore the 'Net (loss)/profit after taxation' is also the total comprehensive income for the year.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year.
The notes form an integral part of these financial statements.
Statement of Financial Position
As at 30 As at 30 June 2018 June 2017 $'000 $'000 ------------------------------------------ ------------------ ----------- Non-current assets Investments at fair value through profit or loss 66,931 74,872 ------------------------------------------- ------------------ ----------- Current assets Cash and cash equivalents 719 4,847 Sales for future settlement 855 7,313 Other receivables 76 390 ------------------------------------------- ------------------ ----------- 1,650 12,550 ------------------------------------------ ------------------ ----------- Total assets 68,581 87,422 ------------------------------------------- ------------------ ----------- Current liabilities Purchases for future settlement - 7,112 Other payables 141 158 Tender offer liabilities - 726 ------------------------------------------- ------------------ ----------- 141 7,996 Total assets less current liabilities 68,440 79,426 ------------------------------------------- ------------------ ----------- Capital and reserves attributable to equity holders Share capital and Share premium account 12,543 12,254 Capital reserve 55,546 66,135 Revenue reserve 351 1,037 Total equity 68,440 79,426 ------------------------------------------- ------------------ ----------- Net assets per Ordinary Share (US cents) 80.90c 92.95c Exchange rate GBP/USD (mid market) 0.75735 0.76780 Net assets per Ordinary Share (pence) 61.27p 71.37p ------------------------------------------- ------------------ -----------
Approved and authorised for issue by the Board of Directors on 19 September 2018:
The notes form an integral part of these financial statements.
Statement of Changes in Equity
Share capital and Share premium Capital Revenue For the year ended 30 June account reserve reserve Total 2018 $'000 $'000 $'000 $'000 ----------------------------- ------------------- ------------------- ------------------- --------- Opening equity 12,254 66,135 1,037 79,426 Revaluation on Tender offer 289 - - 289 Purchase of own shares - (679) - (679) (Loss)/profit for the year - (9,055) 1,016 (8,039) Equity dividends paid - (855) (1,702) (2,557) ------------------------------ ------------------- ------------------- ------------------- --------- Closing equity 12,543 55,546 351 68,440 ------------------------------ ------------------- ------------------- ------------------- --------- Share capital and Share premium Capital Revenue For the year ended 30 June account reserve reserve Total 2017 $'000 $'000 $'000 $'000 ----------------------------- ------------------- ------------------- ------------------- --------- Opening equity 88,788 50,854 832 140,474 Tender offer (76,534) - - (76,534) Purchase of own shares - (310) - (310) Profit for the year - 17,622 205 17,827 Equity dividends paid - (2,031) - (2,031) ------------------------------ ------------------- ------------------- ------------------- --------- Closing equity 12,254 66,135 1,037 79,426 ------------------------------ ------------------- ------------------- ------------------- ---------
The notes form an integral part of these financial statements.
Statement of Cash Flow
Year ended Year ended 30 June 30 June 2018 2017 $'000 $'000 ------------------------------------------------------ ----------- ----------- Operating activities Cash inflow from investment income and bank interest 2,671 1,900 Cash outflow from management expenses (1,601) (2,273) Cash inflow/(outflow) from foreign exchange movements 228 (363) Cash outflow from taxation (233) (91) ------------------------------------------------------ ----------- ----------- Net cash flow from/(used in) operating activities 1,065 (827) ------------------------------------------------------ ----------- ----------- Investing activities Cash inflow from disposal of investments 39,869 176,972 Cash outflow from purchase of investments (41,355) (89,796) ------------------------------------------------------ ----------- ----------- Net cash flow (used in)/from investing activities (1,486) 87,176 ------------------------------------------------------ ----------- ----------- Net cash flow (used in)/from operating and investing activities (421) 86,349 ------------------------------------------------------ ----------- ----------- Financing activities Repayments of bank borrowings - (4,500) Finance charges and interest paid (26) (150) Equity dividends paid (2,557) (2,031) Purchase of own shares (679) (310) Proceeds from on-sale shares - 12,129 Tender offer costs (8) (228) Tender offer distributions paid (437) (87,936) ------------------------------------------------------ ----------- ----------- Net cash flow used in financing activities (3,707) (83,026) ------------------------------------------------------ ----------- ----------- Net (decrease)/increase in cash and cash equivalents (4,128) 3,323 ------------------------------------------------------ ----------- ----------- Cash and cash equivalents opening balance 4,847 1,524 Cash (outflow)/inflow (4,128) 3,323 ------------------------------------------------------ ----------- ----------- Cash and cash equivalents balance at 30 June 719 4,847 ------------------------------------------------------ ----------- -----------
The notes form an integral part of these financial statements.
Notes to the Financial Statements
1 Accounting policies
Basis of preparation
The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ('IFRS'), approved by the International Accounting Standards Board and as adopted by the European Union.
The financial statements give a true and fair view of the state of affairs of the Company as at the end of the year and of the profit or loss for the year and are in accordance with The Companies (Guernsey) Law, 2008.
Under IFRS, the Statement of Recommended Practice ('SORP') issued by the Association of Investment Companies has no formal status, but the Company has taken the guidance of the SORP into account to the extent that it is deemed appropriate and compatible with IFRS and the Company's circumstances.
The particular accounting policies adopted are described below:
(a) Accounting convention
The financial statements are prepared under the historical cost convention, except for the measurement of investments at fair value.
(b) Investments
As the Company's business is investing in financial assets with a view to profiting from their total return in the form of increases in fair value, financial assets are held at fair value through profit or loss on initial recognition in accordance with International Accounting Standard ('IAS') 39. These investments are recognised on the trade date of their acquisition. At this time, fair value is the cost of investment.
After initial recognition such investments are valued at fair value which is determined by reference to:
(i) primarily market bid price for investments quoted on recognised stock exchanges (market mid or last trade price will be used where deemed to more appropriately reflect fair value);
(ii) NAV per individual investee funds' administrators for unquoted open-ended funds; and
(iii) by using other valuation techniques to establish fair value for any other unquoted investments.
Investments are derecognised on the trade date of their disposal. Gains or losses are recognised in the capital column of the Statement of Comprehensive Income.
Transaction costs incurred on the acquisition and disposal of investments are charged to capital and included in the '(losses)/gains on investments' on the Statement of Comprehensive Income.
(c) Income from investments
Dividend income from Ordinary Shares is accounted for on the basis of ex-dividend dates. Income from fixed interest shares and securities is accounted for on an accruals basis using the effective interest method. Special dividends are assessed on their individual merits and are credited to the capital column of the Statement of Comprehensive Income if the substance of the payment is a return of capital; with this exception all other investment income is taken to the revenue column of the Statement of Comprehensive Income. Bank interest receivable is accounted for on a time apportionment basis.
(d) Capital reserves
Profits and losses on disposals of investments and gains and losses on revaluation of investments held are allocated to the capital reserve via the capital column of the Statement of Comprehensive Income. Dividends may be distributed from Capital reserves.
(e) Revenue reserves
The balance of all items allocated to the revenue column of the Statement of Comprehensive Income in each year is transferred to the Company's Revenue reserves. Dividends may be distributed from Revenue reserves.
(f) Investment management fees
Two thirds of the basic investment management fee is allocated to the capital column of the Statement of Comprehensive Income. Fees allocated to the capital column are taken to the Capital reserve.
(g) Foreign currency
The Company's shares were issued in US dollars and the majority of the Company's investments are priced in US dollars and this is considered to be the functional currency of the Company. Therefore, it is the Company's policy to present the accounts in US dollars. The Company's shares are traded in sterling on the Alternative Investment Market ('AIM').
Assets and liabilities held in currencies other than US dollars are translated into US dollars at the official market rates of exchange prevailing at the reporting date. Currency gains and losses arising on retranslating investments are allocated to the capital column of the Statement of Comprehensive Income. All other currency gains and losses are allocated to the capital or revenue columns of the Statement of Comprehensive Income depending on the nature of the transaction.
(h) Finance costs
Finance costs include interest payable and direct loan costs. In line with the Company's policy for investment management fees, two thirds of finance costs are allocated to the capital column of the Statement of Comprehensive Income. Fees allocated to the capital column are taken to the capital reserve. Loan arrangement costs are amortised over the term of the loan on an effective interest rate basis.
(i) Financial liabilities
The Company's financial liabilities include borrowings and other payables. Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial instrument, and are measured initially at fair value adjusted for transaction costs. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Financial liabilities are measured subsequently at amortised cost using the effective interest method. At the year end and at the date of this report, the Company did not have any borrowings.
(j) Cash and cash equivalents
Cash and cash equivalents in the financial statements comprise cash held at the bank or by the custodian.
(k) Operating segments
IFRS 8, 'Operating segments' requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. The Board, as a whole, has been determined as constituting the chief operating decision maker of the Company. The Board has considered the requirements of the standard and is of the view that the Company is engaged in a single segment of business, which is to generate long-term capital growth for its shareholders by investing in a diversified portfolio of funds and other investment products which derive their value from Frontier Markets.
The Board of Directors is responsible for ensuring that the Company's investment objective is followed. The day-to-day implementation of this has been delegated to the Investment Manager but the Board retains responsibility for the overall direction of the Company. The Board reviews the investment decisions of the Investment Manager at regular Board meetings. The Investment Manager has been given full authority to make investment decisions on behalf of the Company in accordance with the investment objective.
(l) Unconsolidated structured entities
Changes in fair value of investments, including structured entities, are included in the Statement of Comprehensive Income.
(m) New standards, interpretations and amendments
There are no new standards, interpretations or amendments, which have been endorsed by the EU and became effective during the year that have had a material impact on the Company.
At the date of approval of these financial statements, the following standard, which has not been applied in these financial statements, was in issue and endorsed by the EU but not yet effective during the year:
-- IFRS 9, 'Financial instruments', effective for annual periods beginning on or after 1 January 2018, specifies how an entity should classify and measure financial assets and liabilities, including some hybrid contracts. The standard improves and simplifies the approach for classification and measurement of financial assets compared with the requirements of IAS 39. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged. The standard applies a consistent approach to classifying financial assets and replaces the numerous categories of financial assets in IAS 39, each of which had its own classification criteria.
The Board is has considered the impact of the above standard. Based on their assessment, the standard is not expected to have a material impact on the Company's financial statements.
(n) Critical accounting estimates and judgements in applying accounting policies
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results could differ from such estimates. These financial statements have been prepared on a going concern basis which the Directors of the Company believe to be appropriate.
The most critical judgements and estimates that management have made in the process of applying the Company's accounting policies and that have the most significant effect on the amounts recognised in the financial statements are the functional currency of the Company (see note 1(g)) and the fair value estimation of financial assets held at fair value through profit or loss (see note 1(b)).
(o) Going concern
As discribed in the Directors' Report in the Annual Report, the Directors have adopted the going-concern basis in preparing the financial statements.
2 Investments at fair value through profit or loss 2018 2017 ---------------------------------------------------- $'000 $'000 ---------------------------------------------------- --------- ---------- Quoted closed-end fund shares and warrants - 1,699 Quoted direct equity investments 66,295 69,900 Quoted open-ended fund holdings - 1,624 Open-ended fund and limited liability partnership investments 636 1,649 ---------------------------------------------------- --------- ---------- Total fixed asset investments at fair value 66,931 74,872 ---------------------------------------------------- --------- ---------- Investments at cost Opening balance of investments at cost 76,320 149,508 Additions at cost 34,243 96,909 Disposals at cost (32,770) (170,097) ---------------------------------------------------- --------- ---------- Cost of investments at 30 June 77,793 76,320 ---------------------------------------------------- --------- ---------- Revaluation of investments to fair value Opening balance (1,448) (6,518) Unrealised (losses)/gains taken to Capital reserve (9,414) 5,070 ---------------------------------------------------- --------- ---------- Balance at 30 June (10,862) (1,448) ---------------------------------------------------- --------- ---------- Fair value of investments at 30 June 66,931 74,872 ---------------------------------------------------- --------- ---------- (Losses)/gains on investments per Statement of Comprehensive Income Gains on disposal of investments 634 11,625 Movement on valuation of investments held (9,414) 5,070 (8,780) 16,695 ---------------------------------------------------- --------- ---------- 3 Investment income 2018 2017 ---------------------------- $'000 $'000 ---------------------------- ------ ------ Dividends from investments 2,329 1,573 ---------------------------- ------ ------ Total investment income 2,329 1,573 ---------------------------- ------ ------ 4 Investment management fees and other expenses 2018 2017 -------------------------- -------------------------- Revenue Capital Total Revenue Capital Total ---------------------------------- $'000 $'000 $'000 $'000 $'000 $'000 ---------------------------------- -------- -------- ------ -------- -------- ------ Investment management fees 260 519 779 476 952 1,428 ---------------------------------- -------- -------- ------ -------- -------- ------ Total investment management fees 260 519 779 476 952 1,428 ---------------------------------- -------- -------- ------ -------- -------- ------ Administration fees 145 - 145 198 - 198 Directors' fees 122 - 122 162 - 162 Depository and custody fees 301 - 301 172 - 172 Legal fees - - - 2 - 2 Broker fees 33 - 33 32 - 32 Registrar's fees 38 - 38 32 - 32 Auditor's fees 28 - 28 27 - 27 Nominated adviser fees 27 - 27 26 - 26 Promotion 36 - 36 56 - 56 Other expenses 64 - 64 47 - 47 ---------------------------------- -------- -------- ------ -------- -------- ------ Total other expenses 794 - 794 754 - 754 ---------------------------------- -------- -------- ------ -------- -------- ------ Total expenses 1,054 519 1,573 1,230 952 2,182 ---------------------------------- -------- -------- ------ -------- -------- ------
The Company has agreed to pay a fee to Aberdeen Asset Managers Limited for the provision of promotional activities at an annual rate of GBP26,600 with effect from July 2017 (prior to that, the fee was at an annual rate of GBP43,000).
The Company's ongoing charges for the year ended 30 June 2018 calculated in accordance with the AIC methodology were 2.01% (2017: 1.66%). The ongoing charges figure does not include finance costs.
5 Finance costs
In accordance with Directors' expectations of the split of future returns being mostly of a capital nature, two thirds of finance costs are charged as capital items in the Statement of Comprehensive Income.
2018 2017 ---------------------------------------------- -------------------------- Revenue Capital Total Revenue Capital Total -------------------------------- $'000 $'000 $'000 $'000 $'000 $'000 -------------------------------- -------------- -------------- -------------- -------- -------- ------ Facility costs and arrangement fees - - - 15 30 45 Interest charges 26 - 26 32 64 96 -------------------------------- -------------- -------------- -------------- -------- -------- ------ Total finance costs 26 - 26 47 94 141
-------------------------------- -------------- -------------- -------------- -------- -------- ------ 6 Directors' fees
The fees paid or accrued were $122,000 (2017: $161,910). There were no other emoluments.
7 Taxation
The Company is resident for tax purposes in Guernsey.
The Company is exempt from Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinances 1989 and 1992 and was charged an annual exemption fee of GBP1,200 (2017: GBP1,200) during the year.
During the year, the Company suffered foreign withholding tax on income from investments totalling in aggregate $233,000 (2017: $91,256 ).
8 Earnings per Ordinary Share
Earnings per Ordinary Share is based on the net loss of $8,039,000 (2017: profit of $17,827,000) attributable to the weighted average of 85,316,533 (2017: 144,898,182) Ordinary Shares of no par value in issue during the year to 30 June 2018.
Supplementary information is provided as follows: revenue per Ordinary Share is based on the net revenue profit of GBP1,016,000 (2017: profit of GBP205,000) and capital loss per Ordinary Share is based on the net capital loss of GBP9,055,000 (2017: profit of GBP17,622,000) attributable to the Ordinary Shares.
9 Loans and overdraft facility payable
During the year, the Company had a $5,000,000 temporary overdraft facility with Northern Trust (Guernsey) Limited ('NT') from 17 March 2017 to 6 July 2017. As at 30 June 2018, the Company did not have an overdraft facility (2017: the Company had a $6,000,000 revolving loan facility with Investec Bank Plc which was fully repaid and the agreement terminated in January 2017).
10 Share capital
Movement in Ordinary Shares of no par value
Allotted, issued ----------------------------------------- ---------- --------------- For the year ended 30 June 2018 Authorised and fully paid Treasury shares ----------------------------------------- ---------- ---------------- --------------- Opening number of shares Unlimited 85,452,608 450,000 Purchase of own shares - (852,500) 852,500 ----------------------------------------- ---------- ---------------- --------------- Closing number of shares Unlimited 84,600,108 1,302,500 ----------------------------------------- ---------- ---------------- --------------- Allotted, issued ----------------------------------------- ---------- --------------- For the year ended 30 June 2017 Authorised and fully paid Treasury shares ----------------------------------------- ---------- ---------------- --------------- Opening number of shares Unlimited 169,460,000 - Purchase of own shares - (450,000) 450,000 Validly tendered shares for cancellation - (97,307,392) - On-sale shares - 13,750,000 - ----------------------------------------- ---------- ---------------- --------------- Closing number of shares Unlimited 85,452,608 450,000 ----------------------------------------- ---------- ---------------- ---------------
Voting rights
At General Meetings of the Company, every member present in person or proxy shall have one vote for every Ordinary Share of which they are the registered holder.
Tender offer (2017)
A third and final distribution was made to Ordinary Shareholders for validly tendered shares, returning an aggregate amount equivalent to $437,000 in February 2018.
Other purchases of own shares
There were 852,500 (2017: 450,000) Ordinary Shares re-purchased during the year at an aggregate cost to the Company of $679,000 (2017: $310,000), all of which are held in treasury.
11 Net Assets Value ("NAV") per Ordinary Share
NAV per Ordinary Share of $0.8090 (2017: $0.9295) is based on NAV of $68,440,000 (2017: $79,426,000) divided by 84,600,108 (2017: 85,452,608) Ordinary Shares in issue (excluding shares held in treasury) as at the year end date.
12 Related party transactions
Details of the management contract can be found in the Directors' Report contained within the Annual Report. Fees payable to the Investment Manager are detailed in note 4 above. Other payables include accruals of basic management fees of $57,033 (2017: $66,284).
Aberdeen Asset Management PLC shareholding in the Company as at year end stood at 13,750,000 Ordinary Shares.
The Directors' shareholdings in the Company as at year end are disclosed in the Corporate Governance Statement contained within the Annual Report.
13 Dividends paid
Dividends paid during the year Dividends paid during the year ended 30 June 2018 ended 30 June 2017 -------------------------------------------------------- --------------------------------------------------- Dividend Dividend Dividend paid out Dividend paid out paid out the paid out the Capital the Revenue Capital the Revenue reserve reserve reserve reserve Cents Pence (1) , (1) , Cents Pence 1, (1) , per per US Dollar US Dollar per per US Dollar US Dollar Ordinary Ordinary equivalent equivalent Ordinary Ordinary equivalent equivalent Share Share $'000 $'000 Share Share $'000 $'000 ---------- --------- --------- ---------------- ---------------- --------- --------- ----------- ---------------- Final dividend in respect of the year ended 30 June 2016 paid on 19 December 2016 1.200 0.964320 2,031 - Interim dividend in respect of the year ended 30 June 2017 paid on 11 August 2017 1.000 0.766947 855 - Final dividend in respect of the year ended 30 June 2017 paid on 13 December 2017 1.000 0.761832 - 855 Interim dividend in respect of the year ended 30 June 2018 paid on 29 June 2018 1.000 0.766947 - 847 855 1,702 2,031 - ---------- --------- --------- ---------------- ---------------- --------- --------- ----------- ---------------- (1) Dividends are paid in sterling The Board is recommending to shareholders the payment of a final dividend for the year end of 1 cent per share. If approved by shareholders at the Annual General Meeting on 12 December 2018, this dividend will be paid on 19 December 2018 to those shareholders who are on the register on 16 November 2018. The ex-dividend date will be 15 November 2018. The final dividend will be paid in sterling and the sterling dividend rate will be announced in due course.
14 Subsequent events
Tender Offer (2018)
As described in the circular dated 17 September 2018, the Company put forward proposals for a tender offer under which shareholders have the ability to tender up to 15% of their Ordinary Shares held.
15 Financial information
The financial information in this announcement is derived from the audited financial statements for the year ended 30 June 2018.
The Annual Report for the year ended 30 June 2018 was approved by the Board of Directors on 19 September 2018. It will be made available on the Company's website aberdeenfrontiermarkets.co.uk and will be posted to Shareholders. It will also be available from the registered office of the Company.
16 Annual General Meeting
The Annual General Meeting of Aberdeen Frontier Markets Investment Company Limited will be held at 11 New Street, St Peter Port, Guernsey at 11:00 a.m. on 12 December 2018.
Alternative Performance Measures ('APMs') ------------------------------------------ Discount The amount, expressed as a percentage, by which the share price is less that the NAV per Ordinary Share. --------------------------------------------------------------------------------------------------- As at 30 June 2018 ----------------------------------------------- -------------- -------------- ------- --------- NAV per Ordinary Share (GB Pounds equivalent) a 0.6127 Share price (in GB Pounds) b 0.5575 Discount (b÷a)-1 9.0% --------------------------------------------------------------- ------------- ------- --------- Ongoing charges
A measure, expressed as a percentage of average NAV, of the regular, recurring annual costs of running an investment company. --------------------------------------------------------------------------------------------------- Year end 30 June 2018 $'000 ----------------------------------------------- -------------- -------------- ------- --------- Average NAV a 78,345 Annualised expenses b 1,573 Ongoing charges b÷a 2.01% --------------------------------------------------------------- ------------- ------- --------- Premium The amount, expressed as a percentage, by which the share price is more than the Net Asset Value per share. There is no calculation of premium shown as the Company's Ordinary Shares were trading at a discount of 9.0% at the period end. Total return A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of dividends paid out by the Company into its Ordinary Shares on the ex-dividend date. --------------------------------------------------------------------------------------------------- Share Year end 30 June 2018 price NAV ----------------------------------------------- -------------- -------------- ------- --------- Opening at 1 July 2017 (in US dollars) a 0.8678 0.9295 Closing at 30 June 2018 (in US dollars) b 0.7361 0.8090 Dividend adjustment factor c 1.0375 1.0303 Adjusted closing (d = b x c) d 0.7637 0.8335 Total return (d÷a)-1 -12.0% -10.3% ----------------------------------------------- ------------------------------ ------- --------- n/a = not applicable
Registered office
11 New Street
St Peter Port
Guernsey
GY1 2PF
Enquiries:
Aberdeen Fund Managers Limited (Investment Manager to Aberdeen Frontier Markets Investment Company Limited)
William Hemmings / Gary Jones
Tel: +44 (0)20 7463 6000
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett
Tel: +44 (0)20 7383 5100
Numis Securities Limited (Nominated Broker)
David Benda
Tel: +44 (0) 20 7260 1275
19 September 2018
END
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