TIDMAOF
RNS Number : 8800N
Africa Opportunity Fund Limited
27 September 2023
27 September 2023
Africa Opportunity Fund Limited
("AOF" or the "Company", or the "Fund")
Half Yearly Report for the Six Months ended 30 June 2023
T h e Board of Direc tors of Africa O pportunity Fund Limited is
pl eased to announce its un a udit ed r e sults for the 6-month
period to 30 June 2023. T he full half yearly r e port for the
period ended 30 June 2023 will be sent to shareholders and will be
a v a ilable soon on the Company's website: www. a fricaopportunit
y fu nd.com .
Highlights :
-- AOF's Ordinary share n et asset value per s hare of U S
$0.966 as at 30 June 2023, generating a total return of 1.9% from
the 31 December 2022 net asset value per share of U S $0.948.
-- As at 30 June 2023, A O F 's investment all ocat i on for its
Ordin ary S har es was all equiti es.
-- AOF's shareholders voted on 29 June 2022 to extend the
realisation period of its portfolio from 30 June 2022 to 30 June
2024.
-- AOF's Ordinary S h a res net asset v a lue per share on 31 August 2023 was US $0.820.
-- AOF mandatorily redeemed 8.75 million shares for an aggregate
consideration of $7.6 million in June 2023.
Manager's Commentary :
Market Conditions
AOF's total return in H1 2023 was 1.9%. As a reference, during
this period in USD the S&P rose 17%, Brazil rose 19%, Russia
rose 12%, India rose 8%, and China fell 3%. In Africa, South Africa
fell 5%, Egypt fell 2%, Kenya fell 22%, and Nigeria fell 22%. Three
Africa-focused exchange traded funds - the Lyxor Pan Africa ETF
(LGQM GY), the DBX MSCI Africa Top 50 (XMAF LN), and Van Eck Africa
Index (AFK US), respectively, rose 2% and fell 8%, and 8%.
Ordinary Shares Portfolio Highlights
AOF made progress realising and distributing the proceeds from
its less liquid portfolio holdings during H1 2023. The Fund sold
its entire Copperbelt holdings stake via block trades, and more of
its African Leadership International ("ALI") and Letshego shares. O
ur total distribution since March 2020 stands at $44 million, which
is 92% of our December 2019 closing NAV of $47.7 million. The
remaining NAV of $11.1 million is concentrated in Ghana, Zimbabwe
and Mauritius.
We exited our Copperbelt Energy Corporation('CEC') investment,
selling our shares in a block trade at a 24% premium to the then
prevailing market price. The exit price (including dividends) is an
uplift of 3x on our carrying value in December 2019. Viewed over
the long term, our investment in CEC was rewarding. AOF held
Copperbelt for 15 years from January of 2008. Over that period,
revenue tripled from $131 million to $389 million while cash from
operations grew five-fold from $15 million to $77 million. Despite
political uncertainty - which threatened its business model and its
foray into Nigeria (which burdened the company with debt and
underperforming assets), CEC maintained its dividend pay-out
discipline in 13 out of the 15 years, diversified its revenue base
by wheeling and selling electricity to the Democratic Republic of
Congo, and maintained its operational and cost discipline. As a
result, we generated an IRR of 15% over the holding period.
The remaining holdings of the Fund are, as a generalization,
very illiquid. Some commentary on them is in order. We continue to
pursue a combination of block trades plus the occasional corporate
transaction to effect an orderly realisation of the remaining
portfolio.
Enterprise Group's share price, in H1, declined 25% in Cedis and
33% in Dollars. Enterprise Group released its 2022 annual report.
It continues to digitalize its operations and to service more of
its customers through mobile and online platforms. Enterprise
impaired its investment securities portfolio by $31 million or 18%,
in response to the Ghana government's domestic debt exchange offer.
Yet, despite a 40% depreciation of the Cedi against the Dollar,
Enterprise's net profits attributable to shareholders rose 29% to
$14 million. The principal source of this net increase in profits
arose from the unrealized foreign exchange gains of Enterprise's
property portfolio supported by leases denominated in Dollars.
Enterprise Life improved its persistency rate, premium collection
rates, the value of new business, and retained its no. 1 market
share in Ghana. On the negative side, Acacia Health, its most
recent acquisition, incurred an underwriting loss. Enterprise's
float, year-on-year, non-controlling interests fell 28%, and
Enterprise shareholders suffered a 25% diminution in equity value.
Enterprise's Q1 and Q2 2023 results demonstrate expenses and claims
rising at a faster rate than revenues. The increase in its life
fund liabilities, in particular, is rising rapidly. Enterprise's
shares trade on a P/E ratio of 2.75x and a P/B ratio of 0.5x, with
a return on average equity of 20%. Overall, though, Enterprise
displayed commendable resilience in a tough Ghanaian
environment.
The Fund sold 15% of its ALI holdings in H1 and, cumulatively,
39% of its initial holdings. ALI strengthened its education and
training offering by acquiring the Holberton School in 2022. The
Holberton School was founded in Silicon Valley and offers an
intense blended learning program in software engineering. Post this
acquisition, ALI has been able to reduce the unit costs per
educated student by 84% and increased significantly the number of
enrolled African students. Simultaneously, ALI is exploring fresh
revenue generating methods for hiring some of these software
engineering students. We will continue to dispose of the Fund's ALI
holdings in the private secondary market.
Tanzania Breweries Limited ("TBL") shares have been difficult to
sell in large volumes at the officially quoted prices on the Dar Es
Salaam stock exchange. Although TBL's operational fortunes have
improved in the last year and its net cash assets have quadrupled
in Dollars over the last 5 years to $134 million, its revenues and
net profits have been flat over that period. Thus, it has the
appearance of a mature business in a youthful market of rapidly
growing Tanzanian consumers. Its principal competitor-East African
Breweries Limited ('EABL')-has a stronger growth profile, higher
net debt, and a lower market capitalization than TBL. Their
respective valuations should converge over time.
Zimbabwean currency dropped sharply in the parallel market in
H1. AOF's internal estimate of Zimbabwe's currency's value
depreciated by 87% in H1. Consequently, the valuations of First
Mutual Properties and Mashonaland Holdings were very volatile in
Dollars. Mashonaland Holdings appreciated 60% and First Mutual
Properties appreciated 23%, in Dollars, as Zimbabwean investors
sought refuge in the stock market from the rapid collapse of the
Zimbabwe Dollar in Q2 2023. The Fund's property holdings are a
store of relative value amid continuing foreign currency
shortages.
Annual general meeting of the Fund's shareholders
The Fund held an inquorate annual general meeting in June 2023,
as a nominee holder of beneficial interests failed to deliver its
proxies. A fresh annual general meeting was held on 19 September
2023, with all resolutions passed.
Strategy
The Fund is in the process of realising its holdings. The
Investment Manager's approach is to combine a steadfast quest to
realise the approximate appraisal or intrinsic value of each
security together with opportunistic sales. A distribution was made
in May 2023 in the form of a compulsory share redemption worth $7.6
million. The portfolio is now comprised of illiquid holdings and we
are looking to the extension period to effectuate a realising of
the remaining portfolio.
On Beh a lf of the Investment Mana ger, Africa Opportunity
Partners LLC.
Responsibil ity Statements:
T h e Board of Direc tors confirm that, to the best of their
knowledge:
a. T he financial statements, pre pared in a c co r dance with I
nt e rnation al Financial Reporti ng Standards, give a true a nd
fair view of the assets, liabil ities, financial position and
profit or loss of the Company.
b. T he I nterim Investment Manager Report, and Condensed Notes
to the Financial Statements include:
i. a fair review of the information required by DTR 4.2.7R
(indication of import a nt eve nts that have occur red during the
first six months and their impact on the financial statements, a nd
a desc r ipti on of prin cipal risks a nd uncertainties for the rem
a ining six months of the year); and
ii. a fair review of the information required by DTR 4.2.8R
(confirmation th at no related p a r ty transactions have taken
place in the first six months of the year t h at have materially
affected the fin a nci al position or performa nce of the Company
dur i ng th at period).
Per Order of t he Board
26 September 2023
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE PERIOD FROM 1 JANUARY 2023 TO 30 JUNE 2023
For the For the period
period
ended 30 ended 30
June June
Notes 2023 2022
-------------------------- --------------------------
USD USD
Expenses
Net losses on investment in subsidiaries
at fair value
through profit or loss 6(a) 296,599 1,022,622
Management fees 44,656 25,000
Other operating expenses 48,632 56,576
Directors' fees 35,000 35,000
Audit and professional fees 62,609 66,670
487,496 1,205,868
-------------------------- --------------------------
Loss for the period attributable
to equity holders* (487,496) (1,205,868)
========================== ==========================
* There is no other comprehensive income for the period.
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
Notes 30 June 30 June
2023 2022
--------------------------- -------------------
USD USD
ASSETS
Cash and cash equivalents 8 99,392 50,103
Receivable from related party 7 - 186,985
Prepayments 7 1,280 1,123
Investment in subsidiaries at fair
value through profit or loss* 6(a) 11,045,248 24,823,222
Total assets 11,145,920 25,061,433
--------------------------- -------------------
EQUITY AND LIABILITIES
LIABILITIES
Trade and other payables 10 66,093 190,108
Total liabilities 66,093 190,108
--------------------------- -------------------
Net assets attributable to shareholders 11,079,827 24,871,325
=========================== ===================
Ordinary share capital 114,689 247,878
Share premium (5,515,342) 6,451,469
Retained earnings 16,480,480 18,171,978
Total equity 11,079,827 24,871,325
=========================== ===================
Net assets value per share:
- Ordinary shares 0.966 1.003
=========================== ===================
*The investment in subsidiares at fair value through profit
or loss include the investment in the Master Fund -
Africa Opportunity Fund L.P.
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2023 TO 30 JUNE 2023
Share Share Retained
Capital Premium Earnings Total
------------------------ -------------------------- ------------------------ --------------------
USD USD USD USD
At 1 January
2023 202,146 1,997,201 16,967,976 19,167,323
CAPITAL TRANSACTIONS:
Redemption of
ordinary shares (87,457) (7,512,543) - (7,600,000)
OPERATIONS:
Total
comprehensive
loss
for the period - - (487,496) (487,496)
------------------------ -------------------------- ------------------------ --------------------
At 30 June 2023 114,689 (5,515,342) 16,480,480 11,079,827
======================== ========================== ======================== ====================
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM 1 JANUARY 2023 TO 30 JUNE 2023
For the period For the period
ended ended
30 June 2023 30 June 2022
------------------------------- ----------------------------------
USD USD
Operating activities
Loss for the period (487,496) (1,205,868)
Adjustment for non-cash items:
Net losses on investment in subsidiaries
at
fair value through profit or loss 296,599 1,022,622
------------------------------- ----------------------------------
Cash used in operating activities (190,897) (183,246)
------------------------------- ----------------------------------
Net changes in operating assets
and liabilities
Reduction in investments in subsidiaries
at fair value
through profit or loss 7,700,000 249,500
Decrease/(increase) in loan receivable
from related party 227,805 (37,433)
Increase in other receivables 7,680 6,739
Decrease in trade and other payables (87,447) (6,926)
------------------------------- ----------------------------------
Net cash generated from operating
activities 7,848,038 211,880
------------------------------- ----------------------------------
Financing activities
(7,600,000) -
Redemption of ordinary shares
------------------------------- ----------------------------------
(7,600,000) -
Cash used in/provided by financing
activities
------------------------------- ----------------------------------
Net increase in cash and cash
equivalents 57,141 28,634
Cash and cash equivalents at 1 January 42,251 21,469
------------------------------- ----------------------------------
Cash and cash equivalents at 30
June 99,392 50,103
=============================== ==================================
AFRICA OPPORTUNITY FUND LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2022 TO 30 JUNE 2023
1. GENERAL INFORMATION
Africa Opportunity Fund Limited (the "Company") was launched
with an Alternative Market Listing "AIM" in July 2007 and moved to
the Specialist Funds Segment "SFS" in April 2014.
Africa Opportunity Fund Limited is a closed-ended fund
incorporated with limited liability and registered in Cayman
Islands under the Companies Law on 21 June 2007, with registered
number MC-188243. The Company is exempted from registering with
CIMA under the Private Funds Act of the Cayman Islands given that
it is listed on the Specialist Funds Segment of the London Stock
Exchange which is approved by CIMA.
The Company aims to achieve capital growth and income through
investment in value, arbitrage, and special situations investments
in the continent of Africa. The Company may therefore invest in
securities issued by companies domiciled outside Africa which
conduct significant business activities within Africa. The Company
has the ability to invest in a wide range of asset classes
including real estate interests, equity, quasi-equity or debt
instruments and debt issued by African sovereign states and
government entities.
The Company's investment activities are managed by Africa
Opportunity Partners LLC, a limited liability company incorporated
in the Delaware, United States and acting as the investment manager
pursuant to an Amended and Restated Investment Management Agreement
dated 13 June 2022.
To ensure that investments to be made by the Company and the
returns generated on the realisation of investments are both
effected in the most tax efficient manner, the Company has
established Africa Opportunity Fund L.P. ("the Master Fund") as an
exempted limited partnership in the Cayman Islands. All investments
made by the Company are made through the limited partnership. The
limited partners of the limited partnership are the Company and AOF
CarryCo Limited. The general partner of the limited partnership is
Africa Opportunity Fund (GP) Limited. Africa Opportunity Fund
Limited includes 100% of Africa Opportunity Fund (GP) Limited.
The financial statements for the Company for the half year ended
30 June 2023 were authorised for issue in accordance with a
resolution of the Board of Directors on 26 S eptember 2023.
Presentation currency
The financial statements are presented in United States dollars
("USD"). All figures are presented to the nearest dollar.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been consistently applied from the prior year to the current year
for items which are considered material in relation to the
financial statements.
Statement of compliance
The financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
Basis of preparation
The Company satisfied the criteria of an investment entity under
IFRS 10: Consolidated Financial Statements. As such, the Company no
longer consolidates the entities it controls. Instead, its interest
in the subsidiaries has been classified as fair value through
profit or loss, and measured at fair value. This consolidation
exemption has been applied prospectively and more details of this
assessment are provided in Note 4 "significant accounting
judgements, estimates and assumptions." The financial statements
are prepared in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting
Standards Board (IASB). The financial statements have been prepared
under the historical cost convention except for financial assets
and financial liabilities measured at fair value through profit or
loss. The preparation of financial statements in accordance with
IFRS requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period.
Although these estimates are based on management's knowledge of
current events and actions, actual results ultimately may differ
from those estimates. In additional to the following: All assets
have been assessed for impairment regardless of whether any
indicators for impairment were identified; and all possible
liabilities that might arise from the winding up of the Company
have been accrued for. The preparation of financial statements in
conformity with IFRS requires the use of certain critical
accounting estimates. It also requires the Board of Directors to
exercise its judgment in the process of applying the Company's
accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements are disclosed in Note
4.
As the entity is not a going concern due to the limited life,
the directors have considered an alternative basis of preparation
but believe that IFRS as a basis for preparation best reflects the
financial position and performance of the entity. The carrying
value of the assets, which were determined in accordance with the
accounting policies, have been reviewed for possible impairment and
changes which have occurred since the year end and consideration
has been given to whether any additional provisions are necessary
as a result of the decision to deregister. It is expected that all
assets will realise at least at the amounts at which they are
included in the statement of financial position and there will be
no material additional liabilities.
The Company presents its statement of financial position in
order of liquidity.
The Company's financial statements include disclosure notes on
the Master Fund, Africa Opportunity Fund L.P. given that the net
asset value of the Master Fund is a significant component of the
Investment in subsidiaries of the Company. These additional
disclosures are made in order to provide the users of the financial
statements with an overview of the Master Fund performance.
Foreign currency translation
(i) Functional and presentation currency
The Company's financial statements are presented in USD which is
the functional currency, being the currency of the primary economic
environment in which both the Company operates. The Company
determines its own functional currency and items included in the
financial statements of each entity are measured using that
functional currency. The functional currency of the Company is USD.
The Company chooses USD as the presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded at the
functional currency rate prevailing at the date of transaction.
Monetary assets and liabilities denominated in foreign currencies
are retranslated at the functional currency spot rate of the
exchange ruling at the reporting date. All differences are taken to
profit or loss. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the
exchange rates as at the dates of the initial transactions.
Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value
is determined.
Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
(a) Classification
The Company classifies its financial assets and liabilities in
accordance with IFRS 9 into the following categories:
(i) Financial assets and liabilities at fair value through
profit or loss
For the Company, financial assets classified at fair value
through profit or loss upon initial recognition include investment
in subsidiaries.
Investment in subsidiaries
In accordance with the exception under IFRS 10 Consolidated
Financial Statements, the Company does not consolidate subsidiaries
in the financial statements. Investments in subsidiaries are
accounted for as financial instruments at fair value through profit
or loss in accordance with IRFS 9 - Financial Instruments.
Management concluded that the Company meets the definition of an
investment entity as it invests solely for returns from capital
appreciations, investment income or both, and measures and
evaluates the performance of its investments on a fair value basis.
Accordingly, consolidated financial statements have not been
prepared.
(ii) Financial assets at amortised cost
The Company measures financial assets at amortised cost if both
of the following conditions are met:
-- The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss when
the asset is derecognised, modified or impaired. The Company's
financial assets at amortised cost comprise 'other receivables,
receivables from related party' and 'cash and cash equivalents' in
the statement of financial position.
(iii) Other financial liabilities
This category includes all financial liabilities, other than
those classified as fair value through profit or loss. The Company
includes in this category amounts relating to trade and other
payables and dividend payable.
(b) Initial Recognition
The Company recognises a financial asset or a financial
liability when, and only when, it becomes a party to the
contractual provisions of the instrument.
Purchases or sales of financial assets that require delivery of
assets within the time frame generally established by regulation or
convention in the marketplace are recognised directly on the trade
date, i.e., the date that the Master Fund commits to purchase or
sell the asset.
(c) Initial measurement
Financial assets and liabilities at fair value through profit or
loss are recorded in the statement of financial position at fair
value. All transaction costs for such instruments are recognised
directly in profit or loss.
Derivatives embedded in other financial instruments are treated
as separate derivatives and recorded at fair value if their
economic characteristics and risks are not closely related to those
of the host contract, and the host contract is not itself
classified as held for trading or designated at fair value though
profit or loss. Embedded derivatives separated from the host are
carried at fair value.
Financial assets at amortised cost and financial liabilities
(other than those classified as held for trading) are measured
initially at their fair value plus any directly attributable
incremental costs of acquisition or issue.
(d) Subsequent measurement
The Company measures financial instruments which are classified
at fair value through profit or loss at fair value. Subsequent
changes in the fair value of those financial instruments are
recorded in 'Net gain or loss on financial assets and liabilities
at fair value through profit or loss. Interest earned elements of
such instruments are recorded separately in 'Interest revenue'.
Financial assets at amortised costs are subsequently measured
using the effective interest method and are subject to impairment.
Gains and losses are recognised in profit or loss when the asset is
derecognised, modified or impaired.
Financial liabilities, other than those classified as at fair
value through profit or loss, are measured at amortised cost using
the effective interest method. Gains and losses are recognised in
profit or loss when the liabilities are derecognised, as well as
through the amortisation process.
The effective interest method is a method of calculating the
amortised cost of a financial asset or a financial liability and of
allocating the interest income or interest expense over the
relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts
through the expected life of the financial instrument or, when
appropriate, a shorter period to the net carrying amount of the
financial asset or financial liability. When calculating the
effective interest rate, the Company estimates cash flows
considering all contractual terms of the financial instruments, but
does not consider future credit losses. The calculation includes
all fees paid or received between parties to the contract that are
an integral part of the effective interest rate, transaction costs
and all other premiums or discounts.
(e) Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
derecognised where:
-- The rights to receive cash flows from the asset have expired; or
-- The Company has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
'pass-through' arrangement; and
Either (a) the Company has transferred substantially all the
risks and rewards of the asset, or (b) the Company has neither
transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control of the asset. When the
Company has transferred its rights to receive cash flows from an
asset (or has entered into a pass-through arrangement), and has
neither transferred nor retained substantially all the risks and
rewards of the asset nor transferred control of the asset, the
asset is recognised to the extent of the Company's continuing
involvement in the asset.
The Company derecognises a financial liability when the
obligation under the liability is discharged, cancelled or expires.
When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange
or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in profit or
loss.
Determination of fair value
The Company measures it investments in subsidiaries at fair
value through profit or loss at fair value at each reporting
date.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value
measured is based on the presumption that the transaction to sell
the asset or transfer the liability takes place either in the
principal market for the asset or liability or, in the absence of a
principal market, in the most advantageous market for the asset or
liability. The principal or the most advantageous market must be
accessible to the Company. The fair value for financial instruments
traded in active markets at the reporting date is based on their
quoted price without any deduction for transaction costs.
For all other financial instruments not traded in an active
market, the fair value is determined by using appropriate valuation
techniques. Valuation techniques include: using recent arm's length
market transactions; reference to the current market value of
another instrument that is substantially the same; discounted cash
flow analysis and option pricing models making as much use of
available and supportable market data as possible. An analysis of
fair values of financial instruments and further details as to how
they are measured is provided in Note 6.
The Company uses the following hierarchy for determining and
disclosing the fair value of the financial instruments by valuation
technique:
-- Level 1: quoted (unadjusted) market prices in active markets
for identical assets and liabilities.
-- Level 2: valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable.
-- Level 3: valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
Impairment of financial assets
The Company recognises an allowance for expected credit losses
(ECLs) for all financial assets measured at amortised cost. When
measuring ECL, the Company uses reasonable and supportable
forward-looking information, which is based on assumptions for the
future movement of different economic drivers and how these drivers
will affect each other. Loss given default is an estimate of the
loss arising on default. It is based on the difference between the
contractual cash flows due and those that the entity would expect
to receive, taking into account cash flows from credit
enhancements. The Company considers a financial asset in default
when contractual payments are 90 days past due. However, in certain
cases, the Company may also consider a financial asset to be in
default when internal or external information indicates that the
Company is unlikely to receive the outstanding contractual amounts
in full before taking into account any credit enhancements held by
the Company. A financial asset is written off when there is no
reasonable expectation of recovering the contractual cash
flows.
At the reporting date, other receivables, loan receivables from
related party and cash and cash equivalents are de minimis. As a
result, no ECL has been recognised as any amount would have been
insignificant.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the
net amount reported in the statement of financial position if, and
only if, there is a currently legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net
basis, or to realise the asset and settle the liability
simultaneously.
Net gain or loss on financial assets and liabilities at fair
value through profit or loss
This item includes changes in the fair value of financial assets
and liabilities held for trading or designated upon initial
recognition as 'at fair value through profit or loss' and excludes
interest and expenses.
Unrealised gains and losses comprise changes in the fair value
of financial instruments for the year and from reversal of prior
year's unrealised gains and losses for financial instruments which
were realised in the reporting period.
Shares that impose on the Company, an obligation to deliver to
shareholders a pro-rata share of the net asset of the Company on
liquidation classified as financial liabilities
The shares are classified as equity if those shares have all the
following features:
(a) It entitles the holder to a pro rata share of the Company's
net assets in the event of the Company's liquidation.
The Company's net assets are those assets that remain after
deducting all other claims on its assets. A pro rata share is
determined by:
(i) dividing the net assets of the Company on liquidation into
units of equal amount; and
(ii) multiplying that amount by the number of the shares held by
the shareholder.
(b) The shares are in the class of instruments that is
subordinate to all other classes of instruments. To be in such a
class the instrument:
(i) has no priority over other claims to the assets of the
Company on liquidation, and
(ii) does not need to be converted into another instrument
before it is in the class of instruments that is subordinate to all
other classes of instruments.
(c) All shares in the class of instruments that is subordinate
to all other classes of instruments must have an identical
contractual obligation for the issuing Company to deliver a pro
rata share of its net assets on liquidation.
In addition to the above, the Company must have no other
financial instrument or contract that has:
(a) total cash flows based substantially on the profit or loss,
the change in the recognised net assets or the change in the fair
value of the recognised and unrecognised net assets of the Company
(excluding any effects of such instrument or contract) and
(b) the effect of substantially restricting or fixing the residual return to the shareholders.
The shares that meet the requirements to be classified as a
financial liability have been designated as at fair value through
profit or loss on initial recognition.
Dividend expense
Dividend expense relating to equity securities sold short is
recognised when the shareholders' right to receive the payment is
established.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank. Cash
equivalents are short term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject
to an insignificant risk of change in value.
3. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
The Company applied for the first-time certain standards and
amendments, which are effective for annual periods beginning on or
after 1 January 2023. The Company has not early adopted any other
standard, interpretation or amendment that has been issued but is
not yet effective.
The accounting policies adopted are consistent with those of the
previous financial year except for the following new policies and
amendments to IFRS as from 1 January 2023:
Effective for
accounting period
Amendments to IAS 8 - Accounting policies, Changes in Accounting
Estimates and Errors 1 January 2023
Amendments to IAS 12: Deferred Tax related to Assets and
Liabilities arising from a Single
Transaction 1 January 2023
Amendments to IAS 1: Disclosure of Accounting Policies 1 January
2023
Although these new standards and amendments applied for the
first time in 2023, they did not have a material impact on the
financial statements of the Company.
3.1. ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
The following standards, amendments to existing standards and
interpretations were in issue but not yet effective. The Company
would adopt these standards, if applicable, when they become
effective. No early adoption of these standards and interpretations
is intended by the Board of Directors.
Effective for
accounting period
Amendments to IAS 1: Classification of Liabilities as Current or
Non-current
1 January 2024
The Company does not expect that the adoption of these standards
will have any material impact on the financial statements.
4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Company's financial statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts recognised in the financial statements
and disclosure of contingent liabilities. However, uncertainty
about these assumptions and estimates could result in outcomes that
could require a material adjustment to the carrying amount of the
asset or liability affected in future periods.
Judgements
In the process of applying the Company's accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the financial
statements:
Going concern
At the Extraordinary General Meeting ("EGM") of the Company held
on 29 June 2022, the shareholders voted in favor of a Continuation
Resolution which extended the life of the Company, with the current
Investment Policy remaining in place, to 30 June 2024. If the
assets of the Company are not realised over the period of the
extension, the Directors will formulate and revert to Shareholders
in 2024 further proposals to continue, reorganize or reconstruct
the Company or to wind up the Company.
The Company will continue to return sums to Shareholders by way
of compulsory redemption, repurchase of Ordinary Shares in the
market or such other method as determined by the Directors.
Below is a brief synopsis of the "New Investing Policy" as
approved with the passage of the Continuation Resolution and
consistent with the Company's Circular dated 5 June 2019, updated
to reflect the two-year continuance:
For a period of up to two additional years following the 29 June
2022 Extraordinary General Meeting (the "Extended Return Period"),
the Company will make no new investments (save that it may invest
in, or advance additional funds to, existing investments within the
Company's portfolio to maximise value and assist in their eventual
realisation). The Company will continue to adopt the New Investment
Policy whereby the Company's existing portfolio of investments will
be divested in a controlled, orderly and timely manner to
facilitate a staged return of capital. It should be appreciated
that there is no time horizon in terms of the implementation of the
New Investment Policy. Although the Company's portfolio is
comprised of some liquid equity holdings, the Company's portfolio
is weighted to somewhat illiquid investments and it may take the
Investment Manager some time to realise these. Shareholders will be
provided with an opportunity to reassess the investment policy and
distribution policy if investments remain unrealised at the end of
the Extended Return Period. Subsequent to the disposal of the
investments, the Company will be liquidated, which indicates that
it will no longer be a going concern. IAS 1 - Presentation of
Financial Statements and IAS 10 - Events after the reporting period
require that the financial statements should not be prepared on a
going concern basis if management determines that it intends to
liquidate the entity. The directors have considered an alternative
basis of preparation but believe that International Financial
Reporting Standards ("IFRS"), as a basis for preparation, best
reflects the financial position and performance of the Company. The
extension of the Company through 30 June 2024 further supports this
methodology.
The carrying value of the of the assets, which were determined
in accordance with the accounting policies, have been reviewed for
possible impairment and changes which have occurred since the
half-year and consideration has been given to whether any
additional provisions are necessary as a result of the decision to
eventually deregister. It is expected that all assets are fairly
valued and will realise at, or near, the amounts at which they are
included in the statement of financial position and there will be
no material additional liabilities.
Determination of functional currency
The determination of the functional currency of the Company is
critical since recording of transactions and exchange differences
arising thereon are dependent on the functional currency selected.
As described in Note 2, the directors have considered those factors
therein and have determined that the functional currency of the
Company is the United States Dollar.
Assessment for an investment entity
An investment entity is an entity that:
(a) Obtains funds from one or more investors for the purpose of
providing those investor(s) with investment management
services;
(b) Commits to its investor(s) that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both; and
(c) Measures and evaluates the performance of substantially all
of its investments on a fair value basis.
An investment entity must demonstrate that fair value is the
primary measurement attribute used. The fair value information must
be used internally by key management personnel and must be provided
to the entity's investors. In order to meet this requirement, an
investment entity would:
-- Elect to account for investment property using the fair value
model in IAS 40 Investment Property
-- Elect the exemption from applying the equity method in IAS 28
for investments in associates and joint ventures, and
-- Measure financial assets at fair value in accordance with IFRS 9.
In addition an investment entity should consider whether it has
the following typical characteristics:
-- It has more than one investment, to diversify the risk portfolio and maximise returns;
-- It has multiple investors, who pool their funds to maximise investment opportunities;
-- It has investors that are not related parties of the entity; and
-- It has ownership interests in the form of equity or similar interests.
The Board considers that the Company continues to meet the
definition of an investment entity as it invests solely for returns
from capital appreciations, investment income or both, and measures
and evaluates the performance of its investments in subsidiaries on
a fair value basis. In addition, the Company has more than one
investors and the major investors are not related parties of the
Company. The Company also has an exit strategy given that it is a
limited life entity, realising its investments at the end of the
Return Period of 2 years as per the extended 'New Investment
Policy'. Accordingly, consolidated financial statements have not
been prepared. IFRS 10 Consolidated Financial Statements provides
"investment entities' an exemption from the consolidation of
particular subsidiaries and instead require that an investment
entity measures the investment in each eligible subsidiary at fair
value through profit or loss in accordance with IFRS 9 Financial
Instruments.
Assumptions and Estimates
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below. The Company based its assumptions and
estimates on parameters available when the financial statements
were prepared. However, existing circumstances and assumptions
about future developments may change due to market changes or
circumstances arising beyond the control of the Company. Such
changes are reflected in the assumptions when they occur. When the
fair value of financial assets and financial liabilities recorded
in the statement of financial position cannot be derived from
active markets, their fair value is determined using a variety of
valuation techniques that include the use of mathematical
models.
Fair value of financial instruments
The inputs to these models are taken from observable markets
where possible, but where this is not feasible, estimation is
required in establishing fair values. The estimates include
considerations of liquidity and model inputs such as credit risk
(both own and counterparty's), correlation and volatility. Changes
in assumptions about these factors could affect the reported fair
value of financial instruments in the statement of financial
position and the level where the instruments are disclosed in the
fair value hierarchy.
The models are calibrated regularly and tested for validity
using prices from any observable current market transactions in the
same instrument (without modification or repackaging) or based on
any available observable market data. An analysis of fair values of
financial instruments and further details as to how they are
measured is provided in Note 6.
IFRS 13 requires disclosures relating to fair value measurements
using a three-level fair value hierarchy. The level 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 as
provided in Note 6. Assessing the significance of a particular
input requires judgement, considering factors specific to the asset
or liability. To assess the significance of a particular input to
the entire measurement, the Company performs sensitivity analysis
or stress testing techniques.
5a. AGREEMENTS
Investment Management Agreement
Effective 1 July 2022, the Company and the Investment Manager
have, upon the approval of the Reorganisation Resolution at the EGM
in June 2022, entered into the Amended and Restated Investment
Management Agreement which amends the fees payable to the
Investment Manager as follows:
Management fees
There was no management fee charged during 2022 and 2023.
Pursuant Amended and Restated Investment Management Agreement,
there will be no management fees charged during the Extended Return
Period.
The Investment Manager's entitlement to future performance fees
(through CarryCo) has been cancelled and CarryCo's limited
partnership interest in the Limited Partnership will be transferred
to the Company, after return of its investment interest, for
nominal value in the last year of the Extended Return Period, that
being 2024.
Realisation fees
The Investment Manager shall be entitled to the following
realisation fees during the Return Period from the net proceeds of
all portfolio realisations (including any cash returned by way of a
Compulsory Redemption):
On distributions of cash to Shareholders: 1 per cent of the net
amounts realised.
The revisions to the arrangements with the Investment Manager,
constitute a related party transaction under the Company's related
party policy, and in accordance with that policy, the Company was
required to obtain: (i) the approval of a majority of the Directors
who are independent of the Investment Manager; and (ii) a fairness
opinion or third-party valuation in respect of such related party
transaction from an appropriately qualified independent
adviser.
The realisation fee for the financial period under review
amounts to USD 44,656 (2022: USD 25,000) of which USD 6,050 (2022:
USD 25,000) relates to accrued realisation fees; management and
performance fees for the financial period under review were nil
(2022: nil).
Administrative Agreement
SS&C Technologies is the Administrator for the Company.
Administrative fees are expensed at the Master Fund level and have
been included in the NAV of the subsidiary.
Custodian Agreement
A Custodian Agreement has been entered into by the Master Fund
and Standard Chartered Bank (Mauritius) Ltd, whereby Standard
Chartered Bank (Mauritius) Ltd would provide custodian services to
the Master Fund and would be entitled to a custody fee of between
18 and 25 basis points per annum of the value of the assets held by
the custodian and a tariff of between 10 and 45 basis points per
annum of the value of assets held by the custodian. The custodian
fees are expensed at the Master Fund level and have been included
in the NAV of the subsidiary.
Prime Brokerage Agreement
A Prime Brokerage agreement between the Master Fund and Credit
Suisse Securities (USA) LLC terminated in the first half of 2022,
as Credit Suisse exited the Prime Brokerage business. Custodian
fees had been expensed at the Master Fund level and had been
included in the NAV of the subsidiary.
5b. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AT THE MASTER FUND LEVEL
Africa Opportunity Fund LP (the "Master Fund") is incorporated
in the Cayman Islands and is not subject to regulatory review.
Management has voluntarily disclosed all the policies and notes to
the accounts of the Master Fund to provide shareholders of the
Company with a better insight.
The primary accounting policies for interest revenue and
expense, dividend revenue and expense and cash and cash
equivalents, are similar as in Note 2. Those policies which only
relate to the Master Fund's financial statements are set out below.
These policies have been consistently applied from the prior year
to the current year for items which are considered material in
relation to the financial statements.
Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
(a) Classification
The Master Fund classifies its financial assets and liabilities
in accordance with IFRS 9 into the following categories:
(i) Financial assets and liabilities at fair value through
profit or loss
The category of the financial assets and liabilities at fair
value through the profit or loss is subdivided into:
Financial assets and liabilities held for trading
Financial assets are classified as held for trading if they are
acquired for the purpose of selling and repurchasing in the near
term. This category includes equity securities, investments in
managed funds and debts instruments. These assets are acquired
principally for the purpose of generating a profit from short term
fluctuation in price. All derivatives and liabilities from the
short sales of financial instruments are classified as held for
trading.
Financial assets at fair value through profit or loss upon
initial recognition
These include equity securities and debt instruments that are
not held for trading. These financial assets are classified at
FVTPL on the basis that they are part of a group of financial
assets which are managed and have their performance evaluated on a
fair value basis, in accordance with risk management and investment
strategies of the Company, as set out in each of their offering
documents. The financial information about the financial assets is
provided internally on that basis to the Investment Manager and to
the Board of Directors.
Derivatives - Options
Derivatives are classified as held for trading (and hence
measured at fair value through profit or loss), unless they are
designated as effective hedging instruments (however the Company
does not apply any hedge accounting). The Master Fund's derivatives
relate to option contracts.
Options are contractual agreements that convey the right, but
not the obligation, for the purchaser either to buy or sell a
specific amount of a financial instrument at a fixed price, either
at a fixed future date or at any time within a specified
period.
The Master Fund purchases and sells put and call options through
regulated exchanges and OTC markets. Options purchased by the
Master Fund provide the Master Fund with the opportunity to
purchase (call options) or sell (put options) the underlying asset
at an agreed-upon value either on or before the expiration of the
option. The Master Fund is exposed to credit risk on purchased
options only to the extent of their carrying amount, which is their
fair value.
Options written by the Master Fund provide the purchaser the
opportunity to purchase from or sell to the Master Fund the
underlying asset at an agreed-upon value either on or before the
expiration of the option.
Options are generally settled on a net basis .
Derivatives relating to options are recorded at the level of the
Master Fund. The financial statements of the Company do not reflect
the derivatives as they form part of the net asset value (NAV) of
the Master Fund which is fair valued.
(ii) Financial assets at amortised cost
The Master Fund measures financial assets at amortised cost if
both of the following conditions are met:
-- The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss when
the asset is derecognised, modified or impaired. The Master Fund's
financial assets at amortised cost comprise 'trade and other
receivables' and 'cash and cash equivalents in the statement of
financial position.
(iii) Other financial liabilities
This category includes all financial liabilities, other than
those classified as fair value through profit or loss. The Master
Fund includes in this category amounts relating to trade and other
payables and dividend payable.
(a) Recognition
The Master Fund recognises a financial asset or a financial
liability when, and only when, it becomes a party to the
contractual provisions of the instrument.
Purchases or sales of financial assets that require delivery of
assets within the time frame generally established by regulation or
convention in the marketplace are recognised directly on the trade
date, i.e., the date that the Master Fund commits to purchase or
sell the asset.
(b) Initial measurement
Financial assets and liabilities at fair value through profit or
loss are recorded in the statement of financial position at fair
value. All transaction costs for such instruments are recognised
directly in profit or loss.
Derivatives embedded in other financial instruments are treated
as separate derivatives and recorded at fair value if their
economic characteristics and risks are not closely related to those
of the host contract, and the host contract is not itself
classified as held for trading or designated at fair value though
profit or loss. Embedded derivatives separated from the host are
carried at fair value.
Financial assets at amortised cost and financial liabilities
(other than those classified as held for trading) are measured
initially at their fair value plus any directly attributable
incremental costs of acquisition or issue.
(c) Subsequent measurement
The Master Fund measures financial instruments which are
classified at fair value through profit or loss at fair value.
Subsequent changes in the fair value of those financial instruments
are recorded in 'Net gain or loss on financial assets and
liabilities at fair value through profit or loss. Interest earned
elements of such instruments are recorded separately in 'Interest
revenue'. Dividend expenses related to short positions are
recognised in 'Dividends on securities sold not yet purchased'.
Dividend income/distributions received on investments at FVTPL is
recorded in "Net gain or loss on financial assets at fair value
through profit or loss".
Financial assets at amortised costs are subsequently measured
using the effective interest method and are subject to impairment.
Gains and losses are recognised in profit or loss when the asset is
derecognised, modified or impaired.
(iii) Other financial liabilities
(d) Subsequent measurement
Financial liabilities, other than those classified as at fair
value through profit or loss, are measured at amortised cost using
the effective interest method. Gains and losses are recognised in
profit or loss when the liabilities are derecognised, as well as
through the amortisation process.
The effective interest method is a method of calculating the
amortised cost of a financial asset or a financial liability and of
allocating the interest income or interest expense over the
relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts
through the expected life of the financial instrument or, when
appropriate, a shorter period to the net carrying amount of the
financial asset or financial liability. When calculating the
effective interest rate, the Master Fund estimates cash flows
considering all contractual terms of the financial instruments, but
does not consider future credit losses. The calculation includes
all fees paid or received between parties to the contract that are
an integral part of the effective interest rate, transaction costs
and all other premiums or discounts.
(e) Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
derecognised where:
-- The rights to receive cash flows from the asset have expired; or
-- The Company has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
'pass-through' arrangement; and
Either (a) the Master Fund has transferred substantially all the
risks and rewards of the asset, or (b) the Master Fund has neither
transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control of the asset. When the
Master Fund has transferred its rights to receive cash flows from
an asset (or has entered into a pass-through arrangement), and has
neither transferred nor retained substantially all the risks and
rewards of the asset nor transferred control of the asset, the
asset is recognised to the extent of the Master Fund's continuing
involvement in the asset.
The Master Fund derecognises a financial liability when the
obligation under the liability is discharged, cancelled or expires.
When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange
or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in profit or
loss.
Determination of fair value
The Master Fund measures its investments in financial
instruments, such as equities, debentures and other
interest-bearing investments and derivatives, at fair value at each
reporting date.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value
measured is based on the presumption that the transaction to sell
the asset or transfer the liability takes place either in the
principal market for the asset or liability or, in the absence of a
principal market, in the most advantageous market for the asset or
liability. The principal or the most advantageous market must be
accessible to the Master Fund. The fair value for financial
instruments traded in active markets at the reporting date is based
on their quoted price without any deduction for transaction
costs.
For all other financial instruments not traded in an active
market, the fair value is determined by using appropriate valuation
techniques. Valuation techniques include: using recent arm's length
market transactions; reference to the current market value of
another instrument that is substantially the same; discounted cash
flow analysis and option pricing models making as much use of
available and supportable market data as possible. An analysis of
fair values of financial instruments and further details as to how
they are measured is provided in Note 6.
Impairment of financial assets
The Master Fund uses the following hierarchy for determining and
disclosing the fair value of the financial instruments by valuation
technique:
-- Level 1: quoted (unadjusted) market prices in active markets
for identical assets and liabilities.
-- Level 2: valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable.
-- Level 3: valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
The Master Fund recognises an allowance for expected credit
losses (ECLs) for all financial assets measured at amortised cost.
ECLs are based on the difference between the contractual cash flows
due in accordance with the contract and all the cash flows that the
Master Fund expects to receive, discounted at an approximation of
the original effective interest rate. The expected cash flows will
include cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms .
ECLs are recognised either on a 12-month or lifetime basis. For
credit exposures for which there has not been a significant
increase in credit risk since initial recognition, ECLs are
provided for credit losses that result from default events that are
possible within the next 12-months (a 12-month ECL). For those
credit exposures for which there has been a significant increase in
credit risk since initial recognition, a loss allowance is required
for credit losses expected over the remaining life of the exposure,
irrespective of the timing of the default (a lifetime ECL).
The Master Fund considers a financial asset in default when
contractual payments are 90 days past due. However, in certain
cases, the Master fund may also consider a financial asset to be in
default when internal or external information indicates that the
Master fund is unlikely to receive the outstanding contractual
amounts in full before taking into account any credit enhancements
held by the Master fund. A financial asset is written off when
there is no reasonable expectation of recovering the contractual
cash flows.
For trade receivables, the Master Fund applies a simplified
approach in calculating ECLs. Therefore, the Master Fund does not
track changes in credit risk, but instead recognises a loss
allowance based on lifetime ECLs at each reporting date. At the
reporting date, the assessment of the Master Fund's debt
instruments which include trade and other receivables and cash and
cash equivalents were considered as de minimis. As a result, no ECL
has been recognised as any amount would have been
insignificant.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the
net amount reported in the statement of financial position if, and
only if, there is a currently legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net
basis, or to realise the asset and settle the liability
simultaneously.
Net gain or loss on financial assets and liabilities at fair
value through profit or loss
This item includes changes in the fair value of financial assets
and liabilities held for trading or designated upon initial
recognition as 'at fair value through profit or loss' and excludes
interest and expenses. At the Master Fund Level, the fair value
gains and losses exclude interest and dividend income.
Unrealised gains and losses comprise changes in the fair value
of financial instruments for the year and from reversal of prior
year's unrealised gains and losses for financial instruments which
were realised in the reporting period.
Realised gains and losses on disposals of financial instruments
classified as 'at fair value through profit or loss' are calculated
using the Average Cost (AVCO) method. They represent the difference
between an instrument's initial carrying amount and disposal
amount, or cash payments or receipts made on derivative contracts
(excluding payments or receipts on collateral margin accounts for
such instruments).
Due to and due from brokers
Amounts due to brokers are payables for securities purchased (in
a regular way transaction) that have been contracted for but not
yet delivered on the reporting date at the Master Fund level. Refer
to the accounting policy for financial liabilities, other than
those classified at fair value through profit or loss for
recognition and measurement.
Amounts due from brokers include margin accounts and receivables
for securities sold (in a regular way transaction) that have been
contracted for but not yet delivered on the reporting date. Refer
to accounting policy for financial assets at amortised cost for
recognition and measurement.
Interest revenue and expense
Interest revenue and expense are recognised in profit or loss
for all interest-bearing financial instruments using the effective
interest method.
Dividend revenue
Dividend revenue is recognised when the Master Fund's right to
receive the payment is established. Dividend revenue is presented
gross of any non-recoverable withholding taxes, which are disclosed
separately in profit or loss of the Master Fund.
6. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
6(a). Investment in subsidiaries at fair value
The Company has established Africa Opportunity Fund L.P., an
exempted limited partnership in the Cayman Islands to ensure that
the investments made and returns generated on the realisation of
the investments made and returns generated on the realisation of
the investments are both effected in the most tax efficient manner.
All investments made by the Company are made through the limited
partner which acts as the master fund. The limited partners of the
limited partnership are the Company (96%) and AOF CarryCo Limited
(4%). The general partner of the limited partnership is Africa
Opportunity Fund (GP) Limited. Africa Opportunity Fund Limited hold
100% of the Africa Opportunity Fund (GP) Limited.
2023
-----------------------------------
USD
Investment in Africa Opportunity
Fund L.P. 11,041,665
Investment in Africa Opportunity
Fund (GP) Limited 3,583
-----------------------------------
Total investment in subsidiaries
at fair value 11,045,248
===================================
Fair value at 01 January 19,041,847
Reduction in investment in subsidiaries* (7,700,000)
Net loss on investment in subsidiaries
at fair value (296,599)
-----------------------------------
Fair value at 30 June 2023 11,045,248
===================================
* The reduction in investment in subsidiaries relates to capital
withdrawn from the Master Fund by the Company.
6(b). Fair value hierarchy
The Company uses the following hierarchy for determining and
disclosing the fair value of the financial instruments by valuation
technique:
Level 1: quoted (unadjusted) market prices in active markets for
identical assets and liabilities.
Level 2: valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable.
Level 3: valuation techniques for which the lowest level input
that is significant to the fair value measurement is
unobservable.
Note: The assets and liabilities of the Master Fund have been
presented but do not represent the assets and liabilities of the
Company as the Master Fund has not been consolidated.
-- Fair value hierarchy of the Company
30 June
2023 Level 1 Level 2 Level
3
----------------------- ------------------------- ---------------------- -------------------
COMPANY USD USD USD
Investment in
subsidiaries 11,045,248 - 11,045,248 -
======================= ========================= ====================== ===================
30 June
2022 Level 1 Level 2 Level
3
----------------------- ------------------------- ---------------------- -------------------
COMPANY USD USD USD
Investment in
subsidiaries 24,823,222 - 24,823,222 -
======================= ========================= ====================== ===================
Fair value hierarchy of the Master Fund.
The Company has investment in Africa Opportunity Fund L.P., the
Master Fund, amounting to USD 11,045,248. The underlying
investments of the Master Fund amounts to USD 10,678,239. Details
on the financial assets and liabilities of the Master Fund and fair
value hierarchy are as follows:
30 June
2023 Level 1 Level 2 Level
3
------------------------- --------------------- --------------------------- -------------------
USD USD USD
MASTER FUND
Financial assets at fair value
through profit or loss
Equities 10,678,239 5,226,107 5,452,132 -
------------------------- --------------------- --------------------------- -------------------
10,678,239 5,226,107 5,452,132 -
========================= ===================== =========================== ===================
30 June
2022 Level 1 Level 2 Level
3
------------------------- --------------------- --------------------------- -------------------
USD USD USD
MASTER FUND
Financial assets at fair value
through profit or loss
Equities 20,793,464 14,958,151 5,835,313 -
Debt
securities 123,926 123,926 - -
------------------------- --------------------- --------------------------- -------------------
20,917,390 15,082,077 5,835,313 -
========================= ===================== =========================== ===================
6(c). The valuation technique of the investment in subsidiaries at Company level is as follow:
The Company's investment manager considers the valuation
techniques and inputs used in valuing these funds as part of its
due diligence, to ensure they are reasonable and appropriate and
therefore the NAV of these funds may be used as an input into
measuring their fair value. In measuring this fair value, the NAV
of the funds is adjusted, as necessary, to reflect restrictions on
redemptions, future commitments, and other specific factors of the
fund and fund manager. In measuring fair value, consideration is
also paid to any transactions in the shares of the fund. Given that
there has been no such adjustments made to the NAV of the
underlying subsidiaries and given the simple structure of the
subsidiaries investing over 95% in quoted funds, the Company
classifies these investment in subsidiaries as Level 2.
6(d). The valuation technique of the investments at Master Fund level are as follows:
Equity and debt securities
These pertain to equity and debt instruments which are quoted
for which there is a market price. As a result, they are classified
within level 1 of the hierarchy except for the valuation of listed
on the Zimbabwe Stock Exchange which have been classified as level
2 given that their quoted share price has been discounted as at 30
June 2023 as follows:
Valuation of investments listed on the Zimbabwe Stock
Exchange
Beginning in June 2020, the Zimbabwe authorities suspended Old
Mutual shares from the Zimbabwe Stock Exchange, necessitating the
Company to devise an alternative transparent discount factor. The
new discount factor is based on the official Zimbabwe Dollar
exchange rate at the end of June 2019, when the Zimbabwe Dollar,
became the sole legal tender in Zimbabwe, modified by the inflation
differential between Zimbabwe and the United States captured in
their respective monthly Consumer Price Indices (the US Consumer
Price Index is that for urban consumers), then adjusted by the
proportion of export proceeds that must be surrendered by
Zimbabwean exporters to the Zimbabwe Reserve Bank. In May 2022, the
Zimbabwe government imposed a ban on bank lending services so as to
stop currency speculation and in June 2022 the RBZ monetary policy
committee increased the policy rate 12,000 basis points to 200% so
as to control rising inflation. The Company adjusted its model to
reflect a 20% surrender requirement on the basis that the reported
CPI captured only 80% of actual inflation, a position supported by
the government actions. Over time, the official exchange rate has
converged towards our in-house exchange rate. In May 2023, the
Reserve Bank Governor along with the Minister of Finance stated
that the Official Exchange Rate should converge toward the parallel
rate, and trade at a discount that is lower than 20%. That
statement partly led to the devaluation of the official rate and
closed the gap on the parallel rate. This discount factor changes
every month. The consequence of applying this discount factor is
that the Zimbabwe Dollar prices of the Company's investments listed
on the Zimbabwe Stock Exchange were converted into US Dollars, as
at 30 June 2023 at a discount rate of 14.2% (the discount rate was
36.8% as at 30 June 2022). The value of the Zimbabwe investments
recorded in the books of the Company, after applying this discount
factor, was USD 3,076,332 (2022: USD 2,709,513).
Written put options
These are traded on an active market and have a quoted market
price. They have therefore been classified in level 1 of the
hierarchy. As of 30 June 2023, the Company had no options
outstanding.
Unquoted debt and equity investments
African Leadership University ("ALU") is a network of tertiary
institutions, currently with operations in both Mauritius and
Rwanda. The Investment Manager valued ALU on the basis of an
observable arms-length transaction between existing shareholders
selling a portion of their shares and an unaffiliated third party.
The transactions were agreed via an omnibus share purchase
agreement dated 28 September 2022 with dates of the agreements
evidencing the first, second, third, and fourth tranches,
respectively, 30 September 2022, 5 December 2022, 6 March 2023 and
5 June 2023 (amended to 28 June 2023 and 28 September 2023), and
thus were utilized as the basis of the valuation as at 30 June
2023. At 30 June 2023, the investment in ALU has been classified
under level 2 because the value of the investment utilizes the
recent transaction.
6(e). Statement of profit or loss and other comprehensive Income
of the Master Fund for the period from 1 January to 30 June
2023
The net losses on investments in subsidiaries at fair value
through profit or loss for the period from 1 January 2023 to 30
June 2023 amounted to USD 296,599, and net losses on investments in
subsidiaries at fair value through profit or loss for the period
from 1 January 2022 to 30 June 2022 amounted to USD 1,022,622
arising at the Master Fund and can be analysed as follows:
For the For the
period period
ended 30 ended 30
June June
2023 2022
--------------------------------------- -------------------------------
USD USD
Income
Dividend revenue 174,156 212,234
--------------------------------------- -------------------------------
174,156 (898,346)
--------------------------------------- -------------------------------
Expenses
Net losses on financial assets
and liabilities at fair value
through profit or loss 36,999 -
Net foreign exchange loss 328,217 52,175
Custodian fees, brokerage fees
and commission 84,761 87,309
Other operating expenses 4,270 2,473
--------------------------------------- -------------------------------
454,247 141,957
--------------------------------------- -------------------------------
Operating loss before tax (280,091) (1,040,303)
Less withholding tax (2,278) (1,570)
--------------------------------------- -------------------------------
Total Comprehensive loss for the
period (282,369) (1,041,873)
======================================= ===============================
Attributable to:
AOF Limited (direct interests) (296,711) (1,022,472)
AOF Limited (indirect interests
through AOF (GP) Ltd) 112 (150)
(296,599) (1,022,622)
AOF CarryCo Limited (NCI) 14,230 (19,251)
(282,369) (1,041,873)
======================================= ===============================
The financial assets and liabilities of the Master Fund are
analysed as follows:
(i) Net (losses)/gains on financial assets and liabilities at
fair value through profit or loss held by Africa Opportunity Fund
L.P.
For the For the period
period
ended 30 ended 30
June June
2023 2022
------------------------- -----------------------
USD USD
Net losses on fair value of financial
assets at fair value through profit or
loss (36,999) (1,116,210)
------------------------- -----------------------
Net losses (36,999) (1,116,210)
========================= =======================
(ii) Financial asset and liabilities at fair value through
profit or loss held by Africa Opportunity Fund L.P.
For the For the
period period
ended 30 ended 30
June June
2023 2022
------------------------ ----------------------
USD USD
Held for trading assets:
At 1 January 18,634,833 24,015,367
Disposal (7,919,595) (1,981,767)
Net losses on financial assets at fair
value through profit or loss (36,999) (1,116,210)
------------------------ ----------------------
At 30 June (at fair value) 10,678,239 20,917,390
======================== ======================
Analysed as follows:
- Listed equity securities 8,302,439 17,667,664
- Listed debt securities - 123,926
- Unlisted equity securities 2,375,800 3,125,800
------------------------ ----------------------
10,678,239 20,917,390
======================== ======================
(iii) Net changes on fair value of financial assets at fair value through profit or loss
For the For the period
period
ended 30 ended 30
June June
2023 2022
------------------------- ------------------------
USD USD
Realised 1,989,464 (406,986)
Unrealised (2,026,463) (709,224)
------------------------- ------------------------
Total losses (36,999) (1,116,210)
========================= ========================
7. RECEIVABLES
30 June 30 June
2023 2022
--------------------------- ----------------------
USD USD
Amounts due from Africa Opportunity
Fund L.P. - 186,985
Prepayments 1,280 1,123
--------------------------- ----------------------
1,280 188,108
=========================== ======================
8. CASH AND CASH EQUIVALENTS
30 June 30 June
2023 2022
-------------------- ----------------------
USD USD
Cash at bank 99,392 50,103
==================== ======================
9(a). ORDINARY SHARE CAPITAL
30 June 30 June 30 June 2022 30 June
2023 2023 2022
------------------- ------------------ -------------------------- ----------
Number USD Number USD
Authorised share capital
Ordinary shares with
a par value of
USD 0.01 1,000,000,000 10,000,000 1,000,000,000 10,000,000
=================== ================= ================= ====================
Issued share
capital
Ordinary shares with
a par value of
USD 0.01 11,468,907 114,689 24,787,758 247,878
=================== ================= ================= ====================
The directors have the general authority to repurchase the
ordinary shares in issue subject to the Company having funds
lawfully available for the purpose. However, if the market price of
the ordinary shares falls below the Net Asset Value, the directors
will consult with the Investment Manager as to whether it is
appropriate to instigate a repurchase of the ordinary shares.
The Company intends to pay or report dividends in order to
remain an UK Reporting Fund, however, there is no assurance that
the Company will be able to pay dividends. In compliance with the
current investment strategy, Directors have the right to return
cash through compulsory redemptions, by way of dividend or any
other distribution as permitted by the Listing Rules.
9(b). NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS
Ordinary
Shares
-----------------------
USD
At 1 January 2023 19,167,323
Changes during the period:
Total comprehensive loss for
the period (487,496)
Redemption of ordinary
shares (7,600,000)
-----------------------
At 30 June 2023 11,079,827
=======================
Net asset value per share at
30 June 2023 0.966
=======================
10. TRADE AND OTHER PAYABLES
30 June 2023 30 June
2022
------------------ --------------------
USD USD
Directors Fees Payable 17,500 17,500
Other Payables 48,593 172,608
------------------ --------------------
66,093 190,108
================== ====================
Other payables are non-interest bearing and have an average term
of six months. T he carrying amount of trade and other payables
approximates their fair value.
11. EARNING PER SHARE
The earnings per share (EPS) is calculated by dividing the
decrease in net assets attributable to shareholders by number of
ordinary shares. The EPS for the period ended 30 June 2023 and 2022
represent both the basic and diluted EPS.
Period from 1
January 2023
to 30 June 2023
----------------------------------------------------------------
Ordinary Ordinary
shares shares
------------------------------- -------------------------------
Change in net assets attributable
to shareholders USD (487,496) (1,205,868)
=============================== ===============================
Number of shares in issue 11,468,907 24,787,758
=============================== ===============================
Change in net assets attributable
to shareholders
per share USD (0.043) (0.049)
=============================== ===============================
12. ANALYSIS OF NAV OF MASTER FUND ATTRIBUTABLE TO ORDINARY SHARES
30 June 30 June 2022
2023
---------------------------- ------------------------
ASSETS
Cash and cash equivalents 1,147,534 4,842,108
Trade and other receivables 139,875 185,473
Financial assets at fair value
through profit or loss 10,678,239 20,917,390
Total assets 11,965,648 25,944,971
---------------------------- ------------------------
EQUITY AND LIABILITIES
Liabilities
Trade and other payables 463,208 469,208
Amount payable to related party
- AOF Ltd - 186,985
Total liabilities 463,208 656,193
---------------------------- ------------------------
Net assets attributable to members'
account 11,502,440 25,288,778
============================ ========================
13. TAXATION
Under the current laws of Cayman Islands, there is no income,
estate, transfer sales or other Cayman Islands taxes payable by the
Company. As a result, no provision for income taxes has been made
in the financial statements.
Dividend revenue is presented gross of any non-recoverable
withholding taxes, which are disclosed separately in the statement
of comprehensive income. Withholding taxes are not separately
disclosed in statement of cash flows as they are deducted at the
source of the income.
14. SEGMENT INFORMATION
For management purposes, the Çompany is organised in one main
operating segment, which invests in equity securities, debt
instruments and relative derivatives. All of the Company's
activities are interrelated, and each activity is dependent on the
others. Accordingly, all significant operating decisions are based
upon analysis of the Company as one segment. The financial results
from this segment are equivalent to the financial statements of the
Company as a whole.
15. PERSONNEL
The Company did not employ any personnel during the period
(2022: the same).
16. COMMITMENTS AND CONTINGENCIES
There are no commitments or contingencies at the reporting
date.
17. SIGNIFICANT EVENTS
COVID-19 PANDEMIC AND UKRAINE-RUSSIA CONFLICT
The Board of Directors and Investment Manager continue to assess
the impact of both the continued presence of a novel and highly
contagious form of coronavirus ("Covid-19"), which the World Health
Organization has officially declared a pandemic, and the
geopolitical unrest in the form of the Ukraine and Russia conflict.
Covid-19, has resulted in numerous deaths across the globe,
adversely impacted global commercial activity, interrupted normal
business and social activities, and contributed to significant
volatility in certain equity and debt markets. The global impact of
the outbreak continues to evolve, as new strains of the coronavirus
develop. Public health emergencies, including outbreaks of new
strains of Covid-19 or other existing or new epidemic diseases, or
the threat thereof, and the resulting financial and economic market
uncertainty could have a significant adverse impact on the Company,
including the fair value of its investments.
The Directors and Investment Manager continue to assess the
impact of the geopolitical unrest affecting the Russia, Belarus,
and Ukraine regions. While the Company has no direct exposure to
investments in, or traded in, these regions, the potential for
supply chain disruptions as well as cybersecurity related risks and
adverse impacts on general economic activity is elevated and
continues to be monitored. Sanctions, high inflation, rapid
increases in food prices, currency exchange limitations, heightened
volatility of currencies, export or capital controls, sovereign
debt distress or sovereign debt default, or civil or political
unrest appear to have limited direct impact on the Company at this
time, however, the impact of an expansion of any or all of these
consequences of the conflict may indirectly have material impacts
on investments of the Company. An expansion of hostilities could
have adverse impacts, including a potential global, regional or
other economic recession, which remain uncertain and difficult to
assess.
The current investment strategy and distribution policy, while
mitigating some operational risks due to the enhanced levels of
cash and cash equivalents as a consequence of the realisation
efforts, does pose other challenges as the Investment Manager
continues to attempt to maximise value while realising investments
during this volatile environment. The Company and the Master fund
will continue to meet their working capital requirements and other
obligations through utilisation of existing cash resources.
The Directors consider the continuation of the Covid-19 pandemic
and the Ukraine-Russia conflict to be non-adjusting post balance
sheet events and hence any future impacts are likely to be in
connection with the assessment of the fair value of investments at
future valuation dates. The Fund's portfolio of investments may see
a range of impacts due to these events, the specifics of which will
depend on a variety of factors, including geographic location,
industry sector and the effectiveness of governmental actions,
amongst others. The Board and the Investment Manager are actively
working towards assessing and minimizing risks to the Fund's
portfolio, however, given the degree of uncertainty around the
potential future course of Covid-19 and the Ukraine-Russia
conflict, it is not possible to accurately quantify the future
impact on the portfolio at this.
18. SUBSEQUENT EVENTS
The June 2023 Annual General Meeting (AGM) was deemed inquorate
as, despite beneficial owners of the Company's shares submitting
their instructions on time, an insufficient number of registered
nominees (through which the Company's shares are held
electronically) submitted their proxy forms on time. The Directors
convened a new AGM on 19 September 2023, having proposed the same
resolutions as proposed at the June AGM. All resolutions passed at
the September 2023 AGM.
19. LIFE OF THE COMPANY
Directors consider it desirable that Shareholders should have
the opportunity to review the future of the Company at appropriate
intervals. Accordingly, Shareholders passed an ordinary resolution
at an extraordinary general meeting of the Company on 28 February
2014 that the Company continues in existence. On June 27, 2019, the
Shareholders passed a further ordinary resolution at an
extraordinary general meeting of the Company on that the Company
continues in existence through 30 June 2022.
In June 2022, the Directors convened an Annual General Meeting
and an Extraordinary General Meeting where the following was
passed:
-- Ordinary resolution that the continuation of the existence of
the Company be and is hereby approved.
-- The text set out under "New Investing Policy" in paragraph 2
of Part III of the Company's circular to Shareholders dated 5 June
2019 (the "Circular") adopted as the new investment policy of the
Company continues;
-- The terms of the Amended and Restated Investment Management
Agreement (as defined in the Circular) be and are hereby
approved;
-- The memorandum and the articles of association in the form
initialled by the Chair of the meeting be adopted as the memorandum
and articles of association of the Company in substitution for and
to the exclusion of the existing memorandum and articles of
association; and
-- Any variation to the rights attaching to the Ordinary Shares
in the Company pursuant to the adoption of the new memorandum and
articles of association, and in particular the right for the
Company to redeem the Ordinary Shares (including any redemptions
made of 15 per cent. or more of the Company's issued share
capital), be and is hereby approved.
In summary, shareholders voted to give AOF two years during
which the Investment Manager will realize the portfolio in an
orderly manner and distribute the proceeds to the shareholders.
(Please review the Company's Circular dated 13 June 2022 for a
detailed and comprehensive description of the Continuation
Vote)
A brief synopsis of the "New Investing Policy" which shall
remain in force through 30 June 2024 is below: (Please review the
Company's Circular dated 5 June 2019 for a detailed and
comprehensive description of the Policy):
For a period of up to three years following the EGM (the "Return
Period"), the Company will make no new investments (save that it
may invest in, or advance additional funds to, existing investments
within the Company's portfolio to maximise value and assist in
their eventual realisation). The Company will adopt the New
Investment Policy whereby the Company's existing portfolio of
investments will be divested in a controlled, orderly and timely
manner to facilitate a staged return of capital.
It should be appreciated that there is no time horizon in terms
of the implementation of the New Investment Policy. Although the
Company's portfolio is comprised of largely liquid equity holdings,
the Company has some illiquid investments, and it may take the
Investment Manager some time to realise these.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR BSGDCCGDDGXR
(END) Dow Jones Newswires
September 27, 2023 10:30 ET (14:30 GMT)
Africa Opportunity (LSE:AOF)
Historical Stock Chart
From Apr 2024 to May 2024
Africa Opportunity (LSE:AOF)
Historical Stock Chart
From May 2023 to May 2024