ABERDEEN FRONTIER MARKETS INVESTMENT COMPANY LIMITED | Regulatory Story | |||
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Aberdeen Frontier Markets
Investment Company Limited
A UK-listed closed-end fund, offering diversified access
to up-and-coming frontier markets
Legal Entity Identifier ('LEI') 213800X9N731I4IPK361
Half-Yearly Report
31 December 2019
Financial Highlights
For the six month period ended 31 December 2019
Investment Objective 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 Manager deems to be, or displays similar characteristics to, Frontier Market countries. | Reference Benchmark MSCI Frontier Markets Index. Management The Company's Manager is Aberdeen Standard Fund Managers Limited ('ASFML', the 'AIFM' or the 'Manager') which has delegated the investment management of the Company to Aberdeen Asset Managers Limited ('AAML' or the 'Investment Manager'). Both companies are wholly owned subsidiaries of Standard Life Aberdeen plc. | |
Net Asset Value ('NAV') per Ordinary share total return (in US dollar terms) 1, 3 | NAV per Ordinary share (in US dollars) | |
0.4% | $0.6710 | |
six months to 31 December 2019 | As at 31 December 2019 | |
Ordinary share price total return (in US dollar terms) 2, 3 | NAV per Ordinary share (in GB pounds) | |
2.1% | £0.5061 | |
six months to 31 December 2019 | As at 31 December 2019 | |
Net Assets (in US dollars) | Ordinary share price (in GB pounds) | |
$48.2 million | £0.4640 | |
As at 31 December 2019 | As at 31 December 2019 | |
1Total return, NAV to NAV, gross income reinvested. 2 Ordinary share price total return is on a mid-to-mid basis. 3These are Alternative Performance Measures ('APMs'). In addition to these APMs, details of other performance measures used by the Company can be found in the APMs section of this report . |
Chairman's Statement |
On behalf of your Board, I present to you the Half-Yearly Report for Aberdeen Frontier Markets Investment Company Limited (the 'Company') for the six months ended 31 December 2019.
Background and Performance
During the six months ended 31 December 2019, the Company reported net asset value ('NAV') per Ordinary share and Ordinary share price total returns of +0.4% and +2.1%, respectively, in US dollar terms. This compared to an increase of +5.5% for the MSCI Frontier Markets Net Total Return Index (the 'Index').
It is pleasing to observe signs of recovery over the six months ended 31 December 2019 as both frontier markets and the Company's portfolio delivered positive returns. Highlights included a turnaround for Pakistan, Egypt, and Vietnam, the Company's three largest country exposures, while it is anticipated that improved corporate earnings will be witnessed across the portfolio's other 20+ market exposures.
The Company's under-performance against the Index resulted from its exposure to the quite exceptional events in Argentina and, to a lesser extent, in Lebanon. The longstanding underweight to Kuwait detracted again as the small representation of bank stocks drove the Index higher ahead of the country's likely elevation to Emerging Market status later this year. Further information on the portfolio's performance may be found in the Manager's Report.
Discount Management Policy
The discount to NAV at which the Company's shares trade narrowed from 9.7% to 8.3% over the period. The Board keeps the share price discount to net asset value under constant review and the Company may purchase its own shares through the market for cash where the Directors believe that such purchases will enhance shareholder value and are likely to assist in narrowing any discount to NAV at which the Ordinary shares may trade.
The Company did not buy back any shares during the six months ended 31 December 2019, resulting in an unchanged issued Ordinary share capital of 71,910,117 Ordinary shares with voting rights and an additional 1,302,450 Ordinary shares held in treasury. No shares were bought back by the Company between 1 January 2020 and the latest practicable date prior to the publication of this Report.
At an Extraordinary General Meeting held on 17 October 2018, shareholders approved a discount management policy (the 'Policy') whereby shareholders will be given the opportunity to fully exit their investment in the Company for cash at the then prevailing NAV less applicable direct costs, including any realisation costs of underlying investments, in the event that the Share Price Total Return (in sterling terms) for the two year period from 1 July 2018 to 30 June 2020 fails to exceed the portfolio's Reference Benchmark, being the MSCI Frontier Markets Index (in sterling terms) (the 'Sterling Index'). For the 18 month period from 1 July 2018 to 31 December 2019, the Company reported a share price total return of -12.3%, in sterling terms, as compared to +11.0% for the Sterling Index.
The Board recognises the difficulty facing the Company of meeting the share price total return test as set out within the Policy and will review the future of the Company following the conclusion of the Policy at 30 June 2020. The Board expects to provide an update as soon as practicable in July 2020.
In the intervening period, the Board considers that, notwithstanding the Policy, it remains appropriate to continue to prepare the Company's Half- Yearly Report on the going concern basis of accounting; this is explained more fully in note 3 to the Financial Statements.
Dividend
Further to shareholder approval at the Company's Annual General Meeting on 10 December 2019, a final dividend of 0.779313285p per Ordinary share was paid on 18 December 2019 to shareholders on the register on 15 November 2019. This was the sterling equivalent of a dividend of 1.0 cent per share previously announced for the year ended 30 June 2019 based on a USD/GBP exchange rate of 1.283181. The Board, at this stage, expects to declare an interim dividend in May 2020, for the year ending 30 June 2020, which will be paid in June 2020.
Ongoing Charges Ratio
The Board remains very mindful of the costs incurred in managing an investment company and the fact that any decrease in net assets will lead to a higher overall ongoing charges ratio (''OCR''). The Board previously reported that it had secured agreement from the Manager to seek to limit the Company's OCR to no more than 2% when calculated annually as at 30 June.
To the extent that the OCR exceeds 2% in any annual period, the Manager has committed to rebating an equal amount of its management fee to the Company with the objective of reducing the OCR to 2%. This rebate is, however, capped such that the Manager will not rebate more than an amount equal to one third of the Manager's management fee for the relevant year in question. There can, therefore, be no guarantee that the overall OCR of the Company will, even given any rebate by the Manager, be limited to 2% of net assets but the Board continues to monitor all costs on a regular basis and seeks to reduce them wherever possible.
Future prospects
The Board shares the Manager's positive outlook for frontier markets, particularly as the economic preconditions for growth appear to be in place. Added to this, a continuation of the more dovish view from the US Federal Reserve should curb US dollar strength and reverse investor outflows from the asset class. From a strategic viewpoint, the low correlation both of frontier markets to global equities and within frontier markets themselves, underpins their attraction for international investors seeking risk diversification and may act as a hedge against any instability which might be witnessed in more developed market equities.
The performance of the Manager's largest country positions, in Egypt, Pakistan and Vietnam, validates the case for divergence from the Index, which is a mainstay of the Manager's investment approach. Furthermore, the Manager's selection of companies with a quality bias, following extensive due diligence undertaken by the Manager in-country, should lead to an improvement in the Company's prospects.
I should like to thank shareholders for their patience and continued support of the Company.
John Whittle
Chairman
17 February 2020
Manager's Report |
Market environment
While the period under review was volatile for a small handful of markets in our investment universe, and the asset class continued to suffer ongoing withdrawals by international investors, we are pleased to report that there have been pockets of solid progress as well, and the majority of the portfolio continues to display good corporate earnings growth.
The MSCI Frontier Markets Index (the 'Index'), which shareholders will remember is heavily skewed towards its largest country constituent, Kuwait (which, at the end of December, was a 37.9% weighting in the Index), achieved a 5.5% total return in US dollars, albeit this was largely attributable to the ongoing liquidity-driven bull market in Kuwaiti bank stocks in anticipation of the market's upgrade to Emerging Market status by MSCI at the end of this coming May. Without the support of Kuwait, the Index's return would have been much lower.
In terms of asset class fund flows, figures provided by EPFR Global indicate that the second half of 2019 witnessed slightly over 1.0 billion US dollars of net outflows from dedicated frontier market equity funds. This follows an equally difficult first half, which delivered slightly under 1.0 billion US dollars of net outflows. Thus, 2019 was the second worst year for frontier market equity fund flows since records began, only beaten by 2015's net outflow of 2.4 billion US dollars.
An ongoing issue for frontier markets has been the reoccurrence of capital destructive idiosyncratic risk, a theme that again reared its ugly head in the period under review, this time in the form of spiralling risk in Argentina, which was then exacerbated by the evaporating investor confidence witnessed in Lebanon. Argentina's lurch back to Peronism briefly shook risk assets globally, but the impact was most felt in Argentina itself whose market suffered the second worst stock market collapse ever known - the S&P MERVAL Index lost 48.3% in US dollar terms on 12 August 2019. The new government has since re-introduced exchange controls and commenced talks with the IMF to restructure the largest loan programme in the IMF's history. Lebanon's descent into the economic quagmire was less spectacular, but nonetheless costly, with the MSCI Lebanon Index losing 45.9% in US dollar terms over the course of last year. Lebanon is now struggling to form a new government whose primary purpose will be to tackle the fiscal deficit and stabilise the country's public debt.
It is nonetheless noteworthy that both the asset class and the portfolio delivered positive returns last year despite these pockets of volatility. Frontier markets' intrinsic diversification, as well as low intra-market correlations, meant heightened volatility in Argentina and Lebanon was largely contained to those markets. Meanwhile, other jurisdictions, such as Kenya and Pakistan, enjoyed a substantial improvement in economic prospects as well as investor sentiment.
With regard to Pakistan (portfolio weight 11.4%), we are very pleased to report that the market seems to have turned a corner in August, following the central bank's implementation of a market-driven exchange rate policy. This was a condition stipulated under the terms of the lending programme agreed by the IMF in June 2019. The outcome of this, as well as supporting policy moves on the fiscal side, have so far exceeded expectations, and underscored the credibility of Pakistan's recently appointed economic policymakers. The rupee's final downward adjustment in June, backed by aggressive hikes of the central bank's policy rate to 13.25%, cemented a severe but necessary contraction of imports that resulted in a 73% year-on-year decline of the current account deficit during the first five months of the local fiscal year to June 2020. Policy credibility has been restored, in our view, which is indicated by a dramatic influx of foreign investment into local currency treasury bills; approximately US$2.0 billion in the second half of 2019 alone. With the sovereign bond yield now on a downward trajectory, local investors have piled back into the equity market, driving a 27.9% positive return in US dollar terms during the period. We expect foreign investors will return to the equity market in due course, supporting further market appreciation.
Egypt has also achieved a more balanced growth trajectory, with a serious economic reform programme underpinned by funding from the IMF. Real GDP growth is expected to accelerate to 5.9% in 2020, driven by falling inflation, easing monetary policy, rising real incomes and expansion of consumption. Steady growth of remittances and rising domestic gas production, as well as a recovery in tourism, have kept the current account in balance and in conjunction with still elevated interest rates have supported a steady appreciation of the Egyptian pound. The corporate earnings cycle is yet to fully play out in Egypt but we believe it will do so over the next two to three years.
Turning to Vietnam, which is the portfolio's largest exposure at 23.9%, the economy continues to chart a steady course despite the global trade headwinds, benefiting from large scale foreign direct investment ('FDI') into manufacturing and assembly. Indeed Vietnam has been a beneficiary of US-China trade tensions as manufacturers look for geographic diversification of their supply chains. That said, management of the Vietnamese dong will remain a balancing act for policy-makers, as the country will want to minimise appreciation against the US dollar given regional competitiveness concerns, whilst cogniscent of too much depreciation given the USA's sensitivity to this. FDI (which reached US$20.4 billion in 2019) and private consumption (which registered +11.8% year-on-year in 2019) should continue to support economic expansion, which is projected at 6.5% in 2020 by the IMF.
As highlighted above, the Company's three largest geographic exposures display very supportive economics as well as stable politics and our corporate earnings expectations for next year reflect that. Elsewhere, we are enthused about prospects for most of the portfolio's twenty or so other market exposures and anticipate continued improvement in corporate earnings delivery there too.
Performance
Aberdeen Frontier Markets Investment Company Limited Cumulative performance in USD for the periods ended 31 December 2019
6 Months |
1 Year |
3 Years |
3 Years | |
Share Price | +2.1 | +5.4 | -15.4 | -22.2 |
NAV | +0.4 | +1.4 | -14.5 | -25.3 |
Source: Aberdeen Standard Investments, Bloomberg Returns assume dividends are reinvested. All performance numbers are total returns with dividends reinvested as of the ex-dividend date.
The Company's NAV saw a very moderate increase during the first half of the year, rising 0.4% in US dollar total return terms. Pakistan, Vietnam, Egypt, and Kenya all contributed positively to returns, albeit partially offset by declines in Argentina, Bangladesh, and Nigeria.
In Pakistan, the star performers were Jubilee Life Insurance, Habib Bank and Packages, which delivered total returns of 90.2%, 49.2% and 39.5% respectively during the period. All three holdings rose with the tide of improving economic fundamentals in the country.
In Vietnam, FPT Corp and Mobile World made solid gains as a result of returning local investor interest in these two particular names given a series of robust quarterly earnings results. In Egypt, CIRA, the education company, and Cleopatra Hospital, performed well on excellent third quarter results. Finally in Kenya, Equity Group made a strong recovery on the repeal of interest rate caps for banks.
Negative contribution primarily derived from Argentina. Whilst the portfolio's allocation had been pared back significantly into the election to 4.5% the extent of the market and currency slump nevertheless took its toll. Elsewhere, Bangladesh and Nigeria drifted lower on investor apathy and market-unfriendly government policy action. On the flipside, valuations and dividends are very attractive and more than compensate for the difficult environment.
Portfolio positioning
As at the end of December 2019 the portfolio had 54 investments, providing exposure to more than 20 frontier market economies.
Allocation to sub-Saharan Africa was reduced further during the period with the purpose of further containing hard-to-quantify or unknown economic and policy risks. This included the disposals of MTN Group, Nestle Nigeria and Tanzanian Breweries, as well as a reduction in Zenith Bank. In a similar vein, exposure to Argentina was significantly reduced given the myriad of uncertainties there, and Blom Bank in Lebanon was exited. The Company's holding in Bank Muscat was also sold given its unexciting growth outlook and risk that the corporate tax burden in Oman could rise in the future.
The Company initiated eleven new investments in place of the above exits or reductions. Several speak to identified thematic areas that display structural growth prospects in frontier markets. In the digital payments arena, the portfolio introduced holdings in Fawry (Egypt), Hightech Payment Systems (Morocco), and Network International (UAE). In the area of financial inclusion, which can be defined as micro-finance, consumer lending and SME credit, positions were initiated in Addiko (Croatia), CI Capital (Egypt), and IDLC (Bangladesh). In education, Cairo Investment & Real Estate (Egypt) was introduced. And in healthcare, Cleopatra Hospital (Egypt) and Rameda (Egypt) were initiated. In addition, the Company purchased holdings in Halyk Bank (Kazakhstan) and Seplat Petroleum (Nigeria).
Exposure to Frontier Asia increased slightly to 49.2% (which includes UK-listed ASA International). This was driven by an increase in Pakistan and Vietnam's weights in the portfolio, primarily as a result of capital appreciation.
Market outlook
The outlook for the portfolio's major exposures both at the economy and stock level, we believe, is bright and valuations do not reflect the fundamentals of the companies that we own; nor do they reflect the benign, even supportive, economic backdrop evident across much of our universe. Vietnam, Pakistan and Egypt are particularly well positioned today from a cyclical perspective, buttressed by credible and orthodox policymaking as well as loosening monetary policy in the western world. Outside of these three markets, the Company owns a diversified pool of high quality companies playing to a range of attractive opportunities across almost two dozen economies.
While investor confidence in the asset class has taken a knock, and institutional appetite remains subdued, economic and political progress on the ground remains plain to see in the vast majority of our markets as we witness on our regular country visits, and the corporate earnings backdrop is generally very supportive.
The switch in US Federal Reserve policy from tightening to easing reflects late cycle concerns about the US economic cycle, and in normal circumstances this should herald an uptick of investor interest in riskier asset classes, of which frontier markets is perceived to be one. Indeed, at the very least, monetary easing should cap strength in the US dollar and allow frontier market central banks breathing space to moderate their own interest rates if they feel appropriate. All this should be supportive of our asset class over the coming months.
We repeat the point made previously that the very low correlation of the portfolio with global equities imbues it with defensive qualities should the major global economies and equity markets actually lose their footing, especially given the very low valuations that most of our markets now stand at. As a portfolio diversifier, an exposure to equities in frontier markets, we believe, makes utmost sense and, in time, we expect these markets to benefit as global investors rediscover the attractiveness of the asset class's idiosyncratic drivers, cyclical positioning and attractively valued companies.
As ever, the portfolio retains its clear quality bias, which is reflected in the portfolio's statistics: a high blended return-on-equity, low corporate leverage and double digit corporate earnings growth. In all, we believe these fundamentals provide cause to be optimistic about the coming year.
The management style of the portfolio is benchmark aware but importantly not benchmark driven. In this respect we look across a wide array of countries with frontier market characteristics, including outside of the Index, seeking out what we believe to be quality companies to invest in. This diversified portfolio of companies is managed with a mind to delivering strong performance over the medium to longer term at a low level of volatility. That said, there will be divergences away from the benchmark, as well as in relative performance. We remain committed to our investment approach, which entails rigorous interaction and engagement with companies with regular on the ground visits. This allows us to identify those with solid long-term prospects and progressive management teams that should be better placed to negotiate varying economic cycles and safeguard shareholder interests.
Aberdeen Asset Managers Limited
17 February 2020
Top Twenty Investments |
As at 31 December 2019
| Country |
Value |
Percentage of net | |||
FPT Corporation | Vietnam | 3,353 | 6.9 | |||
Mobile World Investment Corporation | Vietnam | 3,062 | 6.3 | |||
Square Pharmaceuticals | Bangladesh | 1,619 | 3.4 | |||
Guaranty Trust Bank | Nigeria | 1,483 | 3.1 | |||
Bank of Georgia Group | Georgia | 1,433 | 3.0 | |||
Arabian Centres Company* | Saudi Arabia | 1,422 | 2.9 | |||
Purcari Wineries | Romania | 1,208 | 2.5 | |||
Nova Ljubljanska Banka | Slovenia | 1,172 | 2.4 | |||
Vietnam Technological & Commercial Joint Stock Bank | Vietnam | 1,138 | 2.4 | |||
Habib Bank | Pakistan | 1,111 | 2.3 | |||
Maple Leaf Cement Factory | Pakistan | 1,067 | 2.2 | |||
Grameenphone | Bangladesh | 1,062 | 2.2 | |||
Indus Motor Company | Pakistan | 1,051 | 2.2 | |||
ASA International Group | UK | 1,025 | 2.1 | |||
Commercial International Bank Egypt | Egypt | 1,020 | 2.1 | |||
Zenith Bank | Nigeria | 1,016 | 2.1 | |||
Vincom Retail | Vietnam | 991 | 2.1 | |||
Shell Pakistan | Pakistan | 990 | 2.1 | |||
Sphera Franchise Group | Romania | 971 | 2.0 | |||
Masan Group Corporation | Vietnam | 966 | 2.0 | |||
Top twenty investments | 27,160 | 56.3 | ||||
Other holdings | 20,431 | 42.3 | ||||
Total holdings | 47,591 | 98.6 | ||||
Cash and other net assets | 657 | 1.4 | ||||
Net assets | 48,248 | 100.0 |
* Held through participatory notes issued by Morgan Stanley
Relative Country Positions | |||
Country |
Fund |
Benchmark |
Difference |
Africa & Middle East | 28.5 | 70.0 | -41.5 |
Bahrain | - | 5.7 | -5.7 |
Dubai | 1.5 | - | 1.5 |
Egypt | 10.9 | - | 10.9 |
Ghana | 0.7 | - | 0.7 |
Ivory Coast | - | 0.1 | -0.1 |
Jordan | - | 0.8 | -0.8 |
Kenya | 3.7 | 5.1 | -1.4 |
Kuwait | 1.3 | 37.9 | -36.6 |
Lebanon | - | 1.2 | -1.2 |
Mauritius | - | 2.1 | -2.1 |
Morocco | 1.3 | 9.2 | -7.9 |
Nigeria | 6.1 | 5.4 | 0.7 |
Oman | - | 1.3 | -1.3 |
Saudi Arabia | 3.0 | - | 3.0 |
Senegal | - | 0.6 | -0.6 |
Tunisia | - | 0.6 | -0.6 |
Asia Pacific ex Japan | 47.1 | 18.7 | 28.4 |
Bangladesh | 6.2 | 2.0 | 4.2 |
Pakistan | 11.4 | - | 11.4 |
Singapore | 0.8 | - | 0.8 |
Sri Lanka | 3.2 | 0.9 | 2.3 |
Thailand | 1.6 | - | 1.6 |
Vietnam | 23.9 | 15.8 | 8.1 |
Europe ex UK | 15.8 | 11.3 | 4.5 |
Croatia | 1.2 | 1.4 | -0.2 |
Estonia | - | 0.4 | -0.4 |
Georgia | 4.5 | - | 4.5 |
Kazakhstan | 1.5 | 1.6 | -0.1 |
Lithuania | - | 0.2 | -0.2 |
Romania | 6.2 | 4.8 | 1.4 |
Serbia | - | 0.2 | -0.2 |
Slovenia | 2.4 | 2.7 | -0.3 |
Latin America | 5.5 | - | 5.5 |
Argentina | 2.9 | - | 2.9 |
Peru | 1.1 | - | 1.1 |
Panama | 1.5 | - | 1.5 |
Other | 2.1 | - | 2.1 |
Cash | 1.0 | - | 1.0 |
Total | 100.0 | 100.0 | - |
At 31 December 2019, the benchmark index was composed of 92 companies across 28 countries (source MSCI).
Financial Statements Condensed Unaudited Statement of Comprehensive Income | |||||||
Six months to 31 December 2019 | Six months to 31 December 2018 | ||||||
Revenue | Capital | Total | Revenue | Capital | Total | ||
Notes | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | |
Capital gains/(losses) on investments | - | 437 | 437 | - | (9,757) | (9,757) | |
Capital gains/(losses) on currency movements | - | 4 | 4 | - | (170) | (170) | |
Net investment gains/(losses) | - | 441 | 441 | - | (9,927) | (9,927) | |
Income | 493 | - | 493 | 715 | - | 715 | |
493 | 441 | 934 | 715 | (9,927) | (9,212) | ||
Investment management fees | (80) | (160) | (240) | (97) | (195) | (292) | |
Other expenses | (299) | - | (299) | (357) | - | (357) | |
Net profit/(loss) from operations before finance costs and taxation | 114 | 281 | 395 | 261 | (10,122) | (9,861) | |
Finance costs | (2) | - | (2) | (15) | - | (15) | |
Net profit/(loss) before taxation | 112 | 281 | 393 | 246 | (10,122) | (9,876) | |
Withholding tax | 5 | (40) | - | (40) | (72) | - | (72) |
Net profit/(loss) after taxation | 72 | 281 | 353 | 174 | (10,122) | (9,948) | |
Earnings/(losses) per Ordinary share | 6 | 0.10c | 0.39c | 0.49c | 0.22c | (12.73c) | (12.51c) |
The total column of this statement represents the Company's Statement of Comprehensive Income, prepared under IFRS as adopted by the European Union. The revenue and capital columns, including the revenue and capital earnings per Ordinary share data, are supplementary information prepared under guidance published by the Association of Investment Companies.
The Company does not have any income or expenses that are not included in the profit/(loss) for the period and therefore the 'Net profit/(loss) after taxation' is also the total comprehensive income for the period.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.
The notes form an integral part of these financial statements.
Condensed Unaudited Statement of Financial Position | |||||
As at 31 December 2019 | As at 31 December 2018 | As at 30 June 2019 | |||
Notes | $'000 | $'000 | $'000 | ||
Non-current assets | |||||
Investments at fair value through profit or loss | 4 | 47,591 | 48,034 | 46,188 | |
Current assets | |||||
Cash and cash equivalents | 502 | 1,107 | 1,939 | ||
Sales for future settlement | 132 | 74 | 800 | ||
Other receivables | 157 | 37 | 401 | ||
791 | 1,218 | 3,140 | |||
Total assets | 48,382 | 49,252 | 49,328 | ||
Current liabilities | |||||
Purchases for future settlement | 12 | - | 593 | ||
Other payables | 122 | 224 | 121 | ||
134 | 224 | 714 | |||
Net assets | 48,248 | 49,028 | 48,614 | ||
Capital and reserves attributable to equity holders | |||||
Share capital and Share premium account | 3,798 | 3,798 | 3,798 | ||
Capital reserve | 44,377 | 45,056 | 44,551 | ||
Revenue reserve | 73 | 174 | 265 | ||
Total equity | 48,248 | 49,028 | 48,614 | ||
Net assets per Ordinary share (US cents) | 8 | 67.10c | 68.18c | 67.60c | |
Exchange rate GBP/USD (mid market) | 0.75425 | 0.78380 | 0.78770 | ||
Net assets per Ordinary share (pence) | 50.61p | 53.44p | 53.25p |
The notes form an integral part of these financial statements.
Condensed Unaudited Statement of Changes in Equity | |||||
Six months to 31 December 2019 | Note |
Share capital and share premium account |
Capital reserve |
Revenue reserve |
Total |
Balance at 1 July 2019 | 3,798 | 44,551 | 265 | 48,614 | |
Profit for the period | - | 281 | 72 | 353 | |
Equity dividends paid | 9 | - | (455) | (264) | (719) |
Balance at 31 December 2019 | 3,798 | 44,377 | 73 | 48,248 | |
Six months to 31 December 2018 | Share capital and share premium account |
Capital reserve |
Revenue reserve |
Total | |
Balance at 1 July 2018 | 12,543 | 55,546 | 351 | 68,440 | |
Tender offer | (8,745) | - | - | (8,745) | |
(Loss)/profit for the period | - | (10,122) | 174 | (9,948) | |
Equity dividends paid | 9 | - | (368) | (351) | (719) |
Balance at 31 December 2018 | 3,798 | 45,056 | 174 | 49,028 | |
Year ended 30 June 2019 | Share capital and share premium account |
Capital reserve |
Revenue reserve |
Total | |
Balance at 1 July 2018 | 12,543 | 55,546 | 351 | 68,440 | |
Tender offer | (8,745) | - | - | (8,745) | |
(Loss)/profit for the year | - | (10,626) | 984 | (9,642) | |
Equity dividends paid | 9 | - | (369) | (1,070) | (1,439) |
Balance at 30 June 2019 | 3,798 | 44,551 | 265 | 48,614 | |
The notes form an integral part of these financial statements.
Condensed Unaudited Statement of Cash Flow | |||||
Six months to 31 December 2019 | Six months to 31 December 2018 | Year ended 30 June 2019 | |||
Notes | $'000 | $'000 | $'000 | ||
Operating activities | |||||
Cash inflow from investment income and bank interest | 473 | 731 | 2,035 | ||
Cash outflow from management expenses | (456) | (543) | (1,217) | ||
Cash inflow/(outflow) from foreign exchange movements | 185 | (170) | (440) | ||
Cash outflow from taxation | 5 | (40) | (72) | (189) | |
Net cash flow from/(used in) operating activities | 162 | (54) | 189 | ||
Investing activities | |||||
Cash inflow from disposal of investments | 10,543 | 21,016 | 29,864 | ||
Cash outflow from purchase of investments | (11,421) | (10,937) | (18,467) | ||
Net cash flow (used in)/from investing activities | (878) | 10,079 | 11,397 | ||
Financing activities | |||||
Finance charges and interest paid | (2) | (15) | (25) | ||
Tender offer costs | - | (158) | (158) | ||
Tender offer distributions paid | - | (8,745) | (8,745) | ||
Equity dividends paid | 9 | (719) | (719) | (1,438) | |
Net cash flow used in financing activities | (721) | (9,637) | (10,366) | ||
Net (decrease)/increase in cash and cash equivalents | (1,437) | 388 | 1,220 | ||
Cash and cash equivalents opening balance | 1,939 | 719 | 719 | ||
Cash and cash equivalents balance at closing balance | 502 | 1,107 | 1,939 | ||
The notes form an integral part of these financial statements.
Notes to the Financial Statements For the six month period ended 31 December 2019 |
1. Company information
Aberdeen Frontier Markets Investment Company Limited (the 'Company') is a UK-listed closed-ended investment company incorporated and resident in Guernsey, offering diversified access to up-and-coming frontier markets. Its Ordinary shares are quoted on AIM. The Company's registered office is 11 New Street, St Peter Port, Guernsey, GY1 2PF.
Manager
The investment activities of the Company were managed by Aberdeen Standard Fund Managers Limited ('ASFML') during the six month period ended 31 December 2019.
Non-mainstream pooled investments ('NMPIs')
The Company currently conducts its affairs so that the shares issued by the Company can be recommended by Independent Financial Advisers to ordinary retail investors in accordance with the Financial Conduct Authority's rules in relation to NMPIs and intends to continue to do so for the foreseeable future.
2. Basis of preparation
The interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They are unaudited and do not include all of the information required for full annual financial statements. These interim financial statements should be read in conjunction with the financial statements of the Company as at and for the year ended 30 June 2019. The financial statements of the Company as at and for the year ended 30 June 2019 were prepared in accordance with International Financial Reporting Standards ('IFRS') and received an unqualified audit report. The accounting policies used by the Company are the same as those applied by the Company in its financial statements for the year ended 30 June 2019.
Under IFRS, the Statement of Recommended Practice (SORP) issued by the Association of Investment Companies has no formal status, but the Company has taken the guidance of the SORP into account to the extent that it is deemed appropriate and compatible with IFRS and the Company's circumstances.
Investments have been classified as 'fair value through profit and loss'.
After initial recognition, such investments are valued at fair value which is determined by reference to:
(i) primarily market bid price for investments quoted on recognised stock exchanges (market mid or last trade price will be used where deemed to more appropriately reflect fair value);
(ii) net asset value per individual investee funds' administrators for unquoted open-end funds; and
(iii) by using other valuation techniques to establish fair value for any other unquoted investments.
The Company's shares were issued in US dollars and this is considered to be the functional currency of the Company. Therefore, it is the Company's policy to present the accounts in US dollars. The Company's shares are traded in sterling on AIM.
Unless otherwise stated the comparative figures for the prior year stated in these notes are in respect of the six months ended 31 December 2018.
3. Going concern status
The directors have adopted the going-concern basis of accounting in preparing these interim financial statements. The directors formally considered the Company's going concern status at the time of the publication of these interim financial statements and a summary of the assessment is provided below.
The directors have a reasonable expectation that the Company has adequate operational resources to continue in existence for at least twelve months from the date of approval of the interim financial statements. In reaching this conclusion, the directors have considered the liquidity of the Company's portfolio of investments as well as its cash position, income, expenses and other outflows. The Company has substantial operating expenses cover.
The directors are also mindful of the material uncertainty which the Company may face following the conclusion of its discount management policy measured over the two years ending 30 June 2020.
The directors are satisfied that it is appropriate to adopt the going concern basis of accounting in preparing these interim financial statements.
4. Fair value estimation
IFRS requires the Company to classify its investments in a fair value hierarchy that reflects the significance of the inputs used in making the measurements. IFRS 13 establishes a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy under IFRS are as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.
The determination of what constitutes 'observable' requires significant judgement by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The classification of the Company's investments at fair value through profit or loss is detailed below:
Investment at fair value through profit or loss: |
31 December 2019 |
31 December 2018 |
30 June 2019 |
Level 1 | 47,591 | 47,590 | 46,188 |
Level 2 | - | 444 | - |
Level 3 | - | - | - |
Total | 47,591 | 48,034 | 46,188 |
There were no transfers between levels during the period.
Level 1 classification basis
Investments whose values are based on quoted market prices in active markets, and therefore classified within Level 1, include active listed equities. The Company does not adjust the quoted price for these instruments.
Level 2 classification basis
Investments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include monthly priced funds.
Level 3 classification basis
Investments classified within Level 3 have significant unobservable inputs as they trade infrequently. As at the period end, there were no level 3 classified investments.
5. Taxation
The charge for taxation relates to tax suffered on dividends received from overseas investments.
6. Earnings per Ordinary share
Earnings per Ordinary share is based on the profit of $353,000 (2018: loss of $9,948,000) attributable to the weighted average of 71,910,117 Ordinary shares in issue during the six months to 31 December 2019 (2018: 79,496,525).
7. Share capital
Six months to 31 December 2019 | Authorised | Allotted, issued | Treasury shares | ||||
Opening number of shares as at 1 July 2019 | Unlimited | 71,910.117 | 1,302,500 | ||||
Closing number of shares as at 31 December 2019 | Unlimited | 71,910,117 | 1,302,500 | ||||
Six months to 31 December 2018 | Authorised | Allotted, issued | Treasury shares | ||||
Opening number of shares as at 1 July 2018 | Unlimited | 84,600,108 | 1,302,500 | ||||
Validly tendered shares cancelled | - | (12,689,991 | ) | - | |||
Closing number of shares as at 31 December 2018 | Unlimited | 71,910,117 | 1,302,500 | ||||
Year ended 30 June 2019 | Authorised | Allotted, issued | Treasury shares | ||||
Opening number of shares as at 1 July 2018 | Unlimited | 84,600,108 | 1,302,500 | ||||
Validly tendered shares cancelled | - | (12,689,991 | ) | - | |||
Closing number of shares as at 30 June 2019 | Unlimited | 71,910,117 | 1,302,500 |
Voting rights
At General Meetings of the Company, every member present in person or by proxy shall have one vote for every Ordinary share of which they are the registered holder.
8. Net asset value ('NAV') per Ordinary share
Undiluted NAV per Ordinary share is based on net assets of $48,248,000 (31 December 2018: $49,028,000 and 30 June 2019: $48,614,000) divided by 71,910,117 Ordinary shares in issue (excluding shares held in treasury) at the period end (31 December 2018: 71,910,117 and 30 June 2019: 71,910,117).
9. Dividends
A final dividend for the year ended 30 June 2019 of 1 cent (2018: 1 cent), sterling equivalent of 0.779313285 pence (2018: 0.761615 pence), per Ordinary share was paid on 18 December 2019 to shareholders on the register at the close of business on 15 November 2019.
Dividends are paid in sterling from the Company's distributable reserves.
10. Investment management fees
Fees payable to the Manager are shown in the Unaudited Statement of Comprehensive Income. At 31 December 2019, Manager's fees of $41,884 (2018: $40,856) were accrued in the Statement of Financial Position.
11. Post balance sheet events
There are no post balance sheet events other than as disclosed in these financial statements.
12. Status of this report
These interim financial statements are not the Company's statutory accounts. They are unaudited. This report will be sent to shareholders and copies will be made available to the public at the registered office of the Company. It is also available on the Company's website, aberdeenfrontiermarkets.co.uk.This Half-yearly Financial Report was approved by the Board of directors on 17 February 2020.
Alternative Performance Measures ('APMs') |
Discount | |||||
The amount, expressed as a percentage, by which the Ordinary share price is less than NAV per Ordinary Share. | |||||
As at 31 December 2019 |
As at 31 December 2019 | ||||
NAV per Ordinary share | a | 0.5061 | 0.6710 | ||
Ordinary share price | b | 0.4640 | 0.6152 | ||
Discount | (b÷a)-1 | 8.3% | 8.3% | ||
Total return | |||||
A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of dividends paid out by the Company into its Ordinary shares on the ex-dividend date. | |||||
Six months to 31 December 2019 | Ordinary share price | NAV per Ordinary share | |||
Opening at 1 July 2019 (in US dollars) | a | 0.6106 | 0.6760 | ||
Closing at 31 December 2019 (in US dollars) | b | 0.6152 | 0.6710 | ||
Price movement (b÷a)-1 | c | 0.7% | -0.7% | ||
Dividend reinvestment | d | 1.4% | 1.1% | ||
Total return | (c+d) | 2.1% | 0.4% | ||
Directors, Manager and Advisers |
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Enquiries:
Aberdeen Standard Fund Managers Limited (Investment Manager to Aberdeen Frontier Markets Investment Company Limited)
William Hemmings / Gary Jones
Tel: +44 (0)20 7463 6000
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett
Tel: +44 (0)20 7383 5100
Numis Securities Limited (Nominated Broker)
David Benda
Tel: +44 (0) 20 7260 1275
17 February 2020
END
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Half-year Report - RNS
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Aberdeen Frontier Markets Investment Company Limited published this content on 17 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 February 2020 12:06:05 UTC
