Aberdeen Standard has announced on Wednesday 1st July that it will be voluntarily winding-up its Aberdeen Frontier Markets investment trust (AIM: AFMC) and cancellation of admissions of Ordinary Shares trading on the UK AIM Market. 

AFMC, which has an AUM of £32m, confirmed that the wind-up will be implemented due after it failed to beat its benchmark, the MSCI Frontier Markets Index, over the two year period ending 30th June 2020.

This is in line with its discount control policy introduced by the Board in October 2018 which stated that if the trust under-performs its benchmark between 1st July 2018 and 30th June 2020 then it will offer its shareholders the opportunity to exit the trust at the prevailing net asset value (NAV) less any applicable direct costs (including realisation costs of the underlying investments).

Aberdeen also cited the prospects for frontier markets, size of the Company and operational costs as additional reasons to close the investment trust. An option to rollover has been deemed as not a viable option due to the size of its NAV.

The upcoming closure means that there will only be three Global Frontier Market Investment Trusts: Blackrock Frontiers (BRFI), Jupiter Emerging and Frontier Income Trust (JEFI) and Mobius Investment Trust (MMIT). A full list of Frontier Market Investment Trusts can be found here.

As of 31st May 2020, Vietnam had the largest position in the investment trust (24.5%), exceed the MSCI Frontier Markets Index’s allocation of 18.5%. Other notable positions were Egypt (11.1% vs 0% in benchmark), Pakistan (10.6% vs 0% in benchmark), Romania (9.1% vs 4.8% in benchmark) and Bangladesh (7% vs 2% in benchmark).

The full announcement is below:

Aberdeen Frontier Markets Investment Company Limited (“AFMC“ or the “Company”) (AIM: AFMC), the closed-end investment company admitted to trading on AIM, announces that in line with the Company’s discount control policy adopted in October 2018, the Company’s Share Price Total Return has failed to exceed the Company’s reference benchmark being the Morgan Stanley Capital International Frontier Markets Index (the “Benchmark”), in sterling terms over the period from 1 July 2018 to 30 June 2020. 

In October 2018, the Board, with the consent of shareholders, resolved to adopt a new discount control policy, amending its historic policy of entitling investors to tender a number of Ordinary Shares in excess of 15 per cent. of the number of Ordinary Shares held by them at that point in time, to instead providing its shareholders at the end of the period from 1 July 2018 to 30 June 2020 with the opportunity to fully exit their investment in the Company for cash, at the then prevailing net asset value less any applicable direct costs including any realisation costs of underlying investments, should the Share Price Total Return for this two year period fail to exceed the Portfolio’s reference Benchmark (in sterling terms). Full details regarding the amendment to the discount control policy can be found in the circular dated 19 September 2018 which is available on the Company’s website at aberdeenfrontiermarkets.co.uk

Therefore, following careful consideration of the amended discount control policy, the requirement to offer shareholders a cash exit, the prospects for frontier markets and the current size and operational costs of the Company, the Board believe that it is in the best interests of the Company and its shareholders to seek the proposed Cancellation and commence an orderly winding-up of the Company.

Having taken into consideration the costs of providing any possible rollover option and indications received from shareholders representing a large number of the Company’s Ordinary Shares seeking cash, the Board has concluded that the possible value of net assets that might seek such a rollover would be insufficient to make this a viable option.

The Company will issue further updates relating to the detailed timetable for the Cancellation and the winding-up of the Company and will be posting a circular to shareholders to convene an extraordinary general meeting of the Company for shareholders to vote on such proposals in due course.