TIDMAOF
RNS Number : 2512C
Africa Opportunity Fund Limited
28 September 2018
28 September 2018
Africa Opportunity Fund Limited
("AOF" or the "Company")
Half Yearly Report for the Six Months ended 30 June 2018
The Board of Directors of Africa Opportunity Fund Limited is
pleased to announce its unaudited results for the 6 month period to
30 June 2018. The full half yearly report for the period ended 30
June 2018 will be sent to shareholders and will be available soon
on the Company's website: www.africaopportunityfund.com.
Highlights:
-- AOF's ordinary share net asset value per share of US$0.879 as
at 30 June 2018 decreased by 5% from the 31 December 2017 net asset
value per share of US$0.925.
-- As at 30 June 2018, AOF's investment allocation for its
Ordinary Shares was 87% equities, 6% debt and 7% unencumbered
cash.
-- AOF's Ordinary Shares net asset value per share as at 31 August 2018 was US$0.860.
-- AOF's Ordinary Shares did not pay an annual dividend for 2017.
Manager's Commentary
Market Conditions
The Africa Opportunity Fund ("AOF" or the "Company" or the
"Fund") ordinary share NAV fell 5% in H1. As a reference, during
the quarter in USD the S&P rose 3%, Brazil fell 18%, Russia
rose 2%, India fell 2%, and China fell 14%. In Africa, South Africa
fell 11%, Egypt rose 10%, Kenya rose 6%, and Nigeria rose 3%. Three
Africa-focused exchange traded funds - the Lyxor ETF (PAF FP), the
DBX MSCI Africa Top 50 (XMAF LN), and Van Eck Africa Index (AFK
US), fell, respectively, 4%, 11%, and 6%.
Ordinary Shares Portfolio Highlights
The Fund suffered a weak half year. The single biggest source of
its woes was a 42% decline in the market capitalization of
Enterprise Group in Q2, more than reversing the 33% rise in its
share price in Q1. That loss accounted for an approximately 22%
decline in H1 or 3.8 cents per share. A 42% collapse of a company's
market capitalization, typically, is a sign of deep trouble. Is
that sign warranted in the case of Enterprise? Enterprise's end of
Q1 market capitalization of $146.4 million placed it on a P/E ratio
of 12.4x, a P/B ratio of 2.9x, without dividends for a second
straight year. Its return on invested capital hovered between 22%
and 24% for the last four years while its return on common equity
was 23%. Embedded value returns of its life subsidiary, its largest
division, at 40%, were impressive. $30.3 million was added to
Enterprise's treasury from its rights offer. Yet, its market
capitalization on June 30 was $107.8 million, implying a valuation
of $77.5 million (excluding the $30 million of cash from its rights
issue) for a P/B ratio of 1.5x based on its pre-rights offering
book value and a P/E ratio of 6.6x. To add irony to loss,
Enterprise's Q1 results were strong, as its commission expenses - a
clue to sales of insurance products - rose 29% year-on-year. It
holds the no. 1 or 2 position, in terms of market share and
profitability in Ghanaian general insurance, life assurance, and
pension asset administration. The most probable reason for the
collapse of its share price, in the wake of its rights offering,
was a decline in investor interest, as trading volumes in its
shares shrank by 2/3rds. We think that Enterprise's share price
collapse will affirm again Ben Graham's dictum that the stock
market is a voting machine in the short run and a weighting machine
in the long run. Changes made in the AOF portfolio included selling
its Steinhoff 1.875% 01/24/25 bonds and increasing its Alexandria
Containers, Letshego holdings, Stanbic Uganda, and Kosmos Energy
investments. The ordinary share portfolio had 5% of its net asset
value in gold mining equities, no exposure in gold mining debt, 3%
in oil and gas equities, and 3% in oil and gas debt. Copperbelt's
shares delivered a 52% total return, or 3.3 cents per ordinary
share, in H1. After the end of the second quarter, the market was
notified that the takeover bid of CDC Group expired because the
very last of several conditions precedent - the extension of an
existing bulk supply agreement with ZESCO, the Zambian state-owned
electricity generating company due to expire in 2020 for an
additional 20 years on existing terms, was not executed. Underlying
the failure lay a simple fact: electricity tariffs to mining
companies in Zambia's mining industry are still less than ZESCO's
cost of electricity generation in a sustainable manner. Over time,
that fact has led to inadequate power generation in Zambia and
acute power shortages. That fact has also resulted in intermittent
and intense disputes between Copperbelt and its mining companies
about electricity tariff increases necessitated by Zambia's need
for all customers to pay cost-effective electricity tariffs. Thus,
with hindsight, it is not entirely surprising that ZESCO failed to
agree to an extension of the bulk supply agreement. Meanwhile,
Copperbelt's H1 2018 results were significantly higher than its H1
2017 results. Year-on-year, in Dollars, net profits rose 13% to $25
million, revenues rose 14% on larger volumes of despatched
electricity, offset by a 22% increase in the cost of purchased
electricity and a 3% decline in operating costs. Annualized return
on average equity was 14%, an eminently respectable profitability
outcome for an electricity transmission company. We expect that
Copperbelt's share price will decline in the wake of this outcome.
Nevertheless, Copperbelt remains an excellent electricity
transmission company.
Our Zimbabwean property investments suffered from rising
vacancies and growing arrears in the deteriorating Zimbabwean
environment. The new administration has not been able to reflate
Zimbabwe with scarce real US Dollars. Unlike far larger companies
listed on the Zimbabwe exchange, AOF's property holdings are in
illiquid companies which do not enjoy the liquidity premium
attached to large companies like Delta Holdings, Old Mutual, and
Econet Wireless. Nevertheless, we take comfort in the ability of
our substantially unencumbered Zimbabwean property investments to
generate free cash flow in a tough setting. Unfortunately, that
capacity has not been rewarded by the markets this year. Our
property investments lost 30% in H1 inflicting a 3.4 cents per
share loss in H1. If the elections in Zimbabwe are credible and
free, then Zimbabwe should be able to attract fresh capital and
investments to alleviate its acute currency shortages.
The Fund's Kosmos Energy investment (common stock and options)
delivered gains of $1.1 per share in H1, as the Brent oil price
rose 19% in H1 to $79 per barrel and its share price rose 21% in
H1. Kosmos' producing oil wells in Ghana and Equatorial Guinea,
delivering daily production around 41,400 barrels of oil with 67%
operating margins at $60 oil, generate substantial operating cash
flows in today's environment for Kosmos to fund exploration
activities without recourse to fresh debt or equity capital. Kosmos
drilled two dry holes in Mauritania and Suriname during H1.
Offsetting those disappointments, the normal hazard of its
business, was the good news of the May commercial delivery of a
converted floating liquefied natural gas ship (FLNG) in Cameroon.
That good news confirmed the technical feasibility of that
engineering solution for the 2.3 million ton per annum Phase 1 gas
plant planned by Kosmos and BP for commercial operation in 2021 in
Mauritania/Senegal. It promised also to cut construction costs from
a range of $1,750 to $3,500 per ton for a new FLGN ship to an
average $775 per ton for converted FLNGs such as the one to be
built by Kosmos and BP. Best of all, though, is that Kosmos'
current valuation ignores the cash flows to be generated from
Kosmos' Senegal and Mauritania natural gas fields.
The short book and currency hedges gained 1.97 cents per share
in H1, with the depreciating Euro accounting for 32% of those
gains.
Portfolio Appraisal Value
As of June 30, the Manager's appraisal of the intrinsic economic
value of the Ordinary Share portfolio was $1.143 per share. The
market price of $0.760 at quarter end represented a 34% discount.
Note the Appraisal Value is intended to provide a measure of the
Manager's long-term view of the attractiveness of AOF's portfolio.
It is a subjective estimate, and does not tell when that value will
be realized, nor does it guarantee that any security will reach its
Appraisal Value.
Strategy
The long-term investment appeal of Africa remains intact. We
remain focused on investing in companies that sell goods and
services in short supply. We also invest in commodity related
companies, on a selective basis, when we can implicitly purchase
the underlying resources at a material discount to spot market
values. At 30 June 2018, AOF's ordinary share portfolio possesses
undervalued companies. Its top 9 equity holdings offer a weighted
average dividend yield of 4%, a rolling P/E ratio of 11x, a return
on assets of 7%, and a return on equity of 17%. As African markets
adjust to the darkening clouds of global trade wars and weakening
global growth prospects, we are finding excellent long
opportunities. As always, caution is necessary. It is a privilege
to have investible funds. We intend to exercise that privilege with
prudent confidence.
On Behalf of the Investment Manager, Africa Opportunity Partners
Ltd
Responsibility Statements:
The Board of Directors confirm that, to the best of their
knowledge:
a. The financial statements, prepared in accordance with
International Financial Reporting Standards, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company.
b. The Interim 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 important events that have occurred during the first
six months and their impact on the financial statements, and a
description of principal risks and uncertainties for the remaining
six months of the year); and
ii. a fair review of the information required by DTR 4.2.8R
(confirmation that no related party transactions have taken place
in the first six months of the year that have materially affected
the financial position or performance of the Company during that
period).
Per Order of the Board
27 September, 2018
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2018 TO 30 JUNE 2018
For the For the
period period
ended 30 ended 30
June June
Notes 2018 2017
------------------------------ -----------------------------
USD USD
Income
Net gains on investment in subsidiaries
at fair value
through profit or loss 5(a) - 4,330,224
- 4,330,224
------------------------------ -----------------------------
Expenses
Net losses on investment in
subsidiaries
at fair value
through profit or loss 5(a) 2,678,023 -
Management fee 612,082 536,681
Other operating expenses 39,419 35,553
Directors' fees 87,500 89,502
Audit fees 70,653 21,650
3,487,677 683,386
------------------------------ -----------------------------
Total comprehensive (loss)/income for
the period/(decrease)/increase
in net assets attributable to
shareholders
from operations (3,487,677) 3,646,838
============================== =============================
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
Notes 30 June 2018 30 June
2017
--------------- -----------
USD USD
ASSETS
Cash and cash equivalents 7 43,029 7,662
Trade and other receivables 6 - 12,870
Investment in subsidiaries 5(a) 65,849,721 60,388,664
Total assets 65,892,750 60,409,196
--------------- -----------
EQUITY AND LIABILITIES
LIABILITIES
Trade and other payables 9 132,354 97,584
Total liabilities 132,354 97,584
--------------- -----------
Net assets attributable to shareholders 65,760,396 60,311,612
=============== ===========
Net assets attributable to:
- Ordinary shares - 35,362,293
- Class C shares - 24,949,319
-----------
Net assets attributable to shareholders - 60,311,612
=============== ===========
Ordinary share capital 748,496 -
Share premium 37,921,452 -
Retained earnings 27,090,448 -
Total equity 65,760,396 -
=============== ===========
Net assets value per share:
- Ordinary shares 0.879 0.830
- Class C shares - 0.854
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2018 TO 30 JUNE 2018
Share Share Retained
Capital Premium Earnings Total
------------------------ -------------------------- ----------------- ------------------
USD USD USD USD
At 1 January
2018 748,496 37,921,452 30,578,125 69,248,073
OPERATIONS:
Loss for the
period - - (3,487,677) (3,487,677)
------------------------ -------------------------- ----------------- ------------------
At 30 June 2018 748,496 37,921,452 27,090,448 65,760,396
======================== ========================== ================= ==================
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM 1 JANUARY 2018 TO 30 JUNE 2018
For the period For the period
ended ended
30 June 2018 30 June 2017
---------------------------------- ---------------------------------
USD USD
Operating activities
Total comprehensive (loss)/income
for the period/(decrease)/
increase in assets attributable to
shareholders from operations (3,487,677) 3,646,838
Adjustment for non-cash items:
Unrealised loss/(gain) on
investment
in subsidiaries at
fair value through profit or loss 2,678,023 (4,330,224)
---------------------------------- ---------------------------------
Cash used in operating activities (809,654) (683,386)
---------------------------------- ---------------------------------
Net changes in operating assets and
liabilities
Proceeds from investment in
subsidiaries
at fair value
through profit or loss 779,234 2,225,778
Decrease in trade and other
receivables - 10,675
Decrease in trade and other payables (18,318) (1,558,009)
---------------------------------- ---------------------------------
Net cash generated from operating
activities 760,916 678,444
---------------------------------- ---------------------------------
Net decrease in cash and cash
equivalents (48,738) (4,942)
Cash and cash equivalents at 1 January 91,767 12,604
---------------------------------- ---------------------------------
Cash and cash equivalents at 30 June 43,029 7,662
================================== =================================
AFRICA OPPORTUNITY FUND LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2018 TO 30 JUNE 2018
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 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 Limited, a limited liability company
incorporated in the Cayman Islands and acting as the investment
manager pursuant to an Amended and Restated Investment Management
Agreement dated 12 February 2014.
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. 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.
The financial statements for the Company for the half year ended
30 June 2018 were authorised for issue in accordance with a
resolution of the Board of Directors on 27 September 2018.
Presentation currency
The financial statements are presented in United States dollars
("USD").
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 period to the current
period 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
In the prior and current period, 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 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 judgement 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.
The Company presents its statement of financial position in
order of liquidity.
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
(i) Classification
The Company classifies its financial assets and liabilities in
accordance with IAS 39 into the following categories:
(a) 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 at the Africa Opportunity Fund LP (the "Master Fund")
level.
Financial assets designated at fair value through profit or loss
upon initial recognition
These include equity securities and debt instruments that are
not held for trading at the Master Fund level. These financial
assets are designated 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. For the Company,
financial assets designated 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.
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 Company 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.
Contracts for difference
Contracts for difference are derivatives that obligate either
the buyer or the seller to pay to the other the difference between
the asset's current price and its price at the time of the
contract's usage. Unrealized gains or losses are recorded at the
end of each time period that passes without the CFDs being used.
Once the CFDs are used, the difference between the opening position
and the closing position is recorded as either revenue or a loss
depending on whether the business was the buyer or the seller.
Derivatives relating to options and contracts for difference are
recorded at the level of the Master Fund. The financial statements
of the Company does not reflect the derivatives as they form part
of the net asset value (NAV.) of the Master Fund which is fair
valued.
(b) Loans and receivables
Loans and receivables are non-derivatives financial assets with
fixed or determinable payments that are not quoted in an active
market. The Company's loans and receivables comprise 'trade and
other receivables' and 'cash and cash equivalents' in the statement
of financial position.
(c) 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.
(ii) 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 market place are recognised directly on the trade
date, i.e., the date that the Master Fund commits to purchase or
sell the asset.
(iii) 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.
Loans and receivables 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.
(iv) Subsequent measurement
After initial 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 and dividend revenue elements of such
instruments are recorded separately in 'Interest revenue' and
'Dividend revenue', respectively. Dividend expenses related to
short positions are recognised in 'Dividends on securities sold not
yet purchased'.
Loans and receivables are carried at amortised cost using the
effective interest method less any allowance for impairment. Gains
and losses are recognised in profit or loss when the loans and
receivables are derecognised or impaired, as well as through the
amortisation process.
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.
(v) 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, and 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 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 5.
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 assesses at each reporting date whether a financial
asset or group of financial assets classified as loans and
receivables is impaired. A financial asset or a group of financial
assets is deemed to be impaired if, and only if, there is an
objective evidence of impairment as a result of one or more events
that have occurred after the initial recognition of the asset (an
incurred 'loss event') and that loss event has an impact on the
estimated future cash flows of the financial asset or the group of
financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtor,
or a group of debtors, is experiencing significant financial
difficulty, default or delinquency in interest or principal
payments, the probability that they will enter bankruptcy or other
financial reorganisation and, where observable data indicate that
there is a measurable decrease in the estimated future cash flows,
such as changes in arrears or economic conditions that correlate
with defaults. If there is objective evidence that an impairment
loss has been incurred, the amount of the loss is measured as the
difference between the assets' carrying amount and the present
value of estimated future cash flows (excluding future expected
credit losses that have not yet been incurred) discounted using the
asset's original effective interest rate. The carrying amount of
the asset is reduced through the use of an allowance account and
the amount of the loss is recognised in profit or loss as 'Credit
loss expense'.
Impaired debts, together with the associated allowance, are
written off when there is no realistic prospect of future recovery
and all collateral has been realised or has been transferred to the
Company.
Interest revenue on impaired financial assets is recognised
using the rate of interest used to discount the future cash flows
for the purpose of measuring the impairment loss.
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 dividend income and expenses.
Unrealised gains and losses comprise changes in the fair value
of financial instruments for the period and from reversal of prior
period'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 loans and receivables for recognition and
measurement.
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.
During the period, the Ordinary Shares and Class C Shares were
merged into one single class of share and classified as equity.
Distributions to shareholders whose shares are classified as
financial liabilities.
Distributions to shareholders are recognised in the statement of
comprehensive income as finance costs.
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 and expense
Dividend revenue is recognised when the Company'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. 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 accounting policies adopted are consistent with those of the
previous financial period except for the following new and amended
IFRS and IFRIC interpretations adopted in the period commencing 1
January 2017.
The following new standards and amendments became effective as
of 1 January 2017:
-- Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative
-- Annual Improvements Cycle - 2014-2016: Amendments to IFRS 12
Disclosure of Interests in Other Entities: Clarification of the
scope of disclosure requirements in IFRS 12
Amendments to IAS 7 Statement of Cash Flows: Disclosure
Initiative
The amendments require entities to provide disclosure of changes
in their liabilities arising from financing activities, including
both changes arising from cash flows and non-cash changes (such as
foreign exchange gains or losses).
Annual Improvements Cycle - 2014-2016
Amendments to IFRS 12 Disclosure of Interests in Other Entities:
Clarification of the scope of disclosure requirements in IFRS
12
The amendments clarify that the disclosure requirements in IFRS
12, other than those in paragraphs B10-B16, apply to an entity's
interest in a subsidiary, a joint venture or an associate (or a
portion of its interest in a joint venture or an associate) that is
classified (or included in a disposal group that is classified) as
held for sale.
The above amendments did not have a significant impact on the
financial statements of the Company.
Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax
Assets for Unrealised Losses
The amendments clarify that an entity needs to consider whether
tax law restricts the sources of taxable profits against which it
may make deductions on the reversal of deductible temporary
difference related to unrealised losses. Furthermore, the
amendments provide guidance on how an entity should determine
future taxable profits and explain the circumstances in which
taxable profit may include the recovery of some assets for more
than their carrying amount.
The amendment did not impact on the financial statements as the
Company does not have any income and deferred taxes.
3.1 ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
The standards and interpretations that are issued, but not yet
effective, up to the date of issuance of the Company's financial
statements are disclosed below. They are mandatory for accounting
periods beginning on the specified dates, but the Company has not
early adopted them:
New or revised standards and interpretations:
New or revised standards Effective for
accounting period
beginning on
or after
IFRS 9 Financial Instruments 1 January 2018
Sale or contribution of assets between an investor Effective date
and its associate or joint venture (Amendments to deferred indefinitely
IFRS 10 and IAS 28)
IFRS 15 Revenue from Contracts with Customers 1 January 2018
Classification and measurement of Share-Based Payment 1 January 2018
Transactions (Amendments to IFRS 2)
Transfers of Investment Property-Amendments to IAS 1 January 2018
40
IFRS 16 Leases 1 January 2019
IFRS 17 Insurance Contracts 1 January 2021
Annual improvements 2014-2016 cycle (Issued in December
2016)
IFRS 1 First-time Adoption of International Financial 1 January 2018
Reporting Standards -Deletion of short-term exemptions
for first-time adopters
IAS 28 Investments in Associates and Joint Ventures 1 January 2018
- Clarification that measuring investees at fair
value through profit or loss is an investment -
by - investment choice
Applying IFRS 9 Financial Instruments with IFRS 1 January 2018
4 Insurance Contracts - Amendments to IFRS 4
IFRIC Interpretation 22 Foreign Currency Transactions 1 January 2018
and Advance Consideration
IFRIC Interpretation 23 Uncertainty over Income 1 January 2019
Tax Treatment
Where the standards and interpretations may have an impact at a
future date, they have been described below:
IFRS 9 Financial Instruments - Classification and measurement of
nancial assets, Accounting for nancial liabilities and
derecognition - 1 January 2018
IFRS 9 introduces new requirements for classifying and measuring
nancial assets, as follows:
Classification and measurement of nancial assets
All financial assets are measured at fair value on initial
recognition, adjusted for transaction costs if the instrument is
not accounted for at fair value through pro t or loss (FVTPL). Debt
instruments are subsequently measured at FVTPL, amortised cost or
fair value through other comprehensive income (FVOCI), on the basis
of their contractual cash ows and the business model under which
the debt instruments are held. There is a fair value option (FVO)
that allows nancial assets on initial recognition to be designated
as FVTPL if that eliminates or signi cantly reduces an accounting
mismatch. Equity instruments are generally measured at FVTPL.
However, entities have an irrevocable option on an instrument by
instrument basis to present changes in the fair value of
non-trading instruments in other comprehensive income (OCI)
(without subsequent reclassi cation to pro t or loss).
The Company plans to adopt the new standard on its effective
date. No significant impact is expected on the classification of
financial assets given that the investment in subsidiaries will
continue to be measured at fair value through profit or loss. At
the level of the Master Fund, quoted equity shares and debt
securities will continue to be measured at fair value through
profit or loss. This preliminary assessment is based on currently
available information and may be subject to changes arising from
further information being available to the Company.
Classi cation and measurement of nancial liabilities
For nancial liabilities designated as FVTPL using the FVO, the
amount of change in the fair value of such nancial liabilities that
is attributable to changes in credit risk must be presented in OCI.
The remainder of the change in fair value is presented in pro t or
loss, unless presentation of the fair value change in respect of
the liability's credit risk in OCI would create or enlarge an
accounting mismatch in pro t or loss. All other IAS 39 Financial
Instruments: Recognition and Measurement classi cation and
measurement requirements for nancial liabilities have been carried
forward into IFRS 9, including the embedded derivative separation
rules and the criteria for using the FVO.
No significant impact is expected on this side due to the
insignificance of the Company's financial liabilities. At the
Master Fund's level, financial liabilities will continue to be
measured at fair value through profit or loss.
Impairment
The impairment requirements are based on an expected credit loss
(ECL) model that replaces the IAS 39 incurred loss model. The ECL
model applies to: debt instruments accounted for at amortised cost
or at FVOCI; most loan commitments; nancial guarantee contracts;
contract assets under IFRS 15; and lease receivables under IAS 17
Leases, entities are generally required to recognise either 12
months or lifetime ECL, depending on whether there has been a signi
cant increase in credit risk since initial recognition (or when the
commitment or guarantee was entered into). For some trade
receivables, the simpli ed approach may be applied whereby the
lifetime expected credit losses are always recognised.
This is not expected to have a significant impact on the Company
and at the Master Fund level given the investments will be measured
at fair value through profit or loss.
Hedge accounting
Hedge effectiveness testing is prospective, without the 80% to
125% bright line test in IAS 39, and, depending on the hedge
complexity, can be qualitative. A risk component of a nancial or
non- nancial instrument may be designated as the hedged item if the
risk component is separately identi able and reliably measureable.
The time value of an option, any forward element of a forward
contract and any foreign currency basis spread, can be excluded
from the designation as the hedging instrument and accounted for as
costs of hedging. More designations of groups of items as the
hedged item are possible, including layer designations and some net
positions.
The application of IFRS 9 may change the measurement and
presentation of many financial instruments, depending on their
contractual cash ows and business model under which they are held.
The impairment requirements will generally result in earlier
recognition of credit losses. The new hedging model may lead to
more economic hedging strategies meeting the requirements for hedge
accounting.
No impact is expected on the Company as it does not deal in
derivatives. At the Master Fund level, the derivatives have quoted
market prices and no significant impact is anticipated.
IFRS 15 Revenue from Contracts with Customers - effective 1
January 2018
IFRS 15 provides a single, principles based ve-step model to be
applied to all contracts with customers.
The five steps in the model are as follows:
- Identify the contract with the customer;
- Identify the performance obligations in the contract;
- Determine the transaction price;
- Allocate the transaction price to the performance obligations in the contracts; and
- Recognise revenue when (or as) the entity satisfies a performance obligation.
Guidance is provided on topics such as the point in which
revenue is recognised, accounting for variable consideration, costs
of ful lling and obtaining a contract and various related matters.
New disclosures about revenue are also introduced.
The directors do not expect the standard to have a significant
impact on the Company, all income will be recognised under IFRS 9.
The Company intends to adopt the new standard on its effective
date.
IFRIC Interpretation 22 Foreign Currency Transactions and
Advance Consideration - effective 1 January 2018
The Interpretation clarifies that, in determining the spot
exchange rate to use on initial recognition of the related asset,
expense or income (or part of it) on the derecognition of a
non-monetary asset or non-monetary liability relating to advance
consideration, the date of the transaction is the date on which an
entity initially recognises the non-monetary asset or non-monetary
liability arising from the advance consideration. If there are
multiple payments or receipts in advance, then the entity must
determine the transaction date for each payment or receipt of
advance consideration. Entities may apply the amendments on a fully
retrospective basis.
Alternatively, an entity may apply the Interpretation
prospectively to all assets, expenses and income in its scope that
are initially recognised on or after:
(i) The beginning of the reporting period in which the entity
first applies the interpretation
Or
(ii) The beginning of a prior reporting period presented as
comparative information in the financial statements of the
reporting period in which the entity first applies the
interpretation.
The Interpretation is effective for annual periods beginning on
or after 1 January 2018. Early application of the interpretation is
permitted and must be disclosed. The interpretation is not expected
to have a significant impact on the Company's 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
The Company does not have a fixed life but, as stated in the
Company's admission document published in 2007, the 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 continue in existence.
In 2019, the Directors will convene another general meeting
where an ordinary resolution will be proposed that the Company will
continue in existence. If the resolution is not passed, the
Directors will be required to formulate proposals to be put to
Shareholders to reorganise, reconstruct or wind up the Company. If
the resolution is passed, the Company will continue its operations
and a similar resolution will be put to Shareholders every five
years thereafter.
At the same time as the continuation vote in 2019, the Company
will provide Shareholders with, without first requiring a
Shareholder vote to implement this policy, an opportunity to
realise all or part of their shareholding in the Company for a net
realised pro rata share of the Company's investment portfolio.
The above conditions give rise to a material uncertainty about
the entity's ability to continue as a going concern as it is
dependent on the voting of the shareholders in 2019. However,
management is of the belief that the likelihood of the continuation
of the Company is more probable than not, and that any required
liquidation would result in a realisation of investments over a
period of time, as possible, to maximize investor returns. It is
therefore unlikely that the Company would not continue in existence
beyond 2019, regardless of the outcome of the Shareholder vote.
If a liquidation was required, 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. Carried interest is considered as a share
of profit realised on disposal of investments by the Company and
has therefore not been accrued as it will only be recognised upon
the exit of investments after shareholders have received
distribution of entire capital and preferred return.
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 IAS 39.
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.
As from the previous period, the Board concluded that the
Company meets the definition of an investment entity as all
investments have been measured on a fair value basis. IFRS 10
allows the application of this change to be made prospectively in
the period in which the definition is met. 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 IAS 39 Financial Instruments: Recognition and
Measurement.
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 5.
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 5. 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.
5. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
5(a). Investment in subsidiaries at fair value
2018
-----------------------------------
USD
Investment in Africa Opportunity Fund
L.P. 65,846,851
Investment in Africa Opportunity Fund
(GP) Limited 2,870
-----------------------------------
Total investment in subsidiaries at
fair value 65,849,721
===================================
Fair value at 01 January 69,306,978
Net disposal of investment in subsidiaries (779,234)
Net loss on investment in subsidiaries
at fair value (2,678,023)
-----------------------------------
Fair value at 30 June 2018 65,849,721
===================================
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 and AOF CarryCo Limited. 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.
5(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.
30 June
2018 Level 1 Level 2 Level
3
-------------------------- ------------------------- --------------------------- -------------------
USD USD USD USD
Investment in
subsidiaries 65,849,721 - 65,849,721 -
========================== ========================= =========================== ===================
MASTER FUND
Financial assets at fair value
through profit or loss
Equities 60,587,154 58,225,961 2,361,193 -
Debt securities 4,533,859 4,183,859 - 350,000
Contract for
Difference 103,639 - 103,639 -
-------------------------- ------------------------- --------------------------- -------------------
65,224,652 62,409,820 2,464,832 350,000
========================== ========================= =========================== ===================
Financial liabilities at fair
value through profit or loss
Shortsellings 2,191,053 2,191,053 - -
Written put
options 1,631,525 1,631,525 - -
Contract for
Difference 24,873 - 24,873 -
-------------------------- ------------------------- --------------------------- -------------------
3,847,451 3,822,578 24,873 -
========================== ========================= =========================== ===================
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 98% in quoted funds, the Company
classifies these investment in subsidiaries as Level 2.
The valuation techniques of the investments at master fund level
are as follows:
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
Contract for difference (CFD)
The prices for CFD are calculated based on average prices from
various quotes received from brokers.
Unlisted debt and equity investments
Triton Resources Inc. concluded a binding agreement in 2016 to
sell its African underwater logging harvesting assets and its Volta
Lake concession in Ghana. To date, the purchaser has not completed
obligatory payments and as such ownership of the harvesting assets
has not changed. These assets will be operational in 2018 and
Triton will be the lessor of these assets until outstanding
payments are made. Negotiations concluded in 2017 for the delivery
of logs to a biomass power plant in French Guiana from 2020,
subject to completion of the permitting process. Negotiations for
the harvesting of underwater logs in Surinam, ongoing in 2017, were
completed in early 2018. Negotiations with a lead investor who
executed a letter of intent for the sale of Triton itself have been
suspended as the investor failed to raise the necessary funds.
Efforts to sell Triton are ongoing in 2018.
The Investment Manager, based on its own sensitivity analysis,
and in conjunction with its analysis of the operational challenges
and opportunities for Triton, adjusted the valuation of the
preference shares at the end of 2017. Delays in selling the South
American concessions during 2018 have diluted AOF's position and
the Investment Manager wrote down the value of the preferred shares
effective 30 June 2018. Consistent with the prior year's treatment,
the Investment Manager has determined the promissory note
investments to be classified as Level 3 assets for valuation
purposes.
African Leadership University ("ALU") is a network of tertiary
institutions, currently with operations in both Mauritius and
Rwanda. The Investment Manager continues to value ALU on the basis
of the post-money valuation of ALU's Series B financing round as of
May 2018.
Investment in Shoprite Holdings (SHP ZL)
On 22 August 2017, as a condition precedent to the merger of the
C shares and the ordinary shares, the 637,528 ordinary shares of
Shoprite Holdings (SHP ZL "Shoprite") affected by the terms of the
Shoprite arbitral award, plus estimates of associated legal costs,
were excluded from the assets of Africa Opportunity Fund, and
securities called Contingent Value Rights ("CVR"s) were issued to
the ordinary shareholders of record. As such, the outcome of the
Shoprite arbitration is separate and independent of the net asset
value of the ordinary shares of Africa Opportunity Fund.
Consequently, neither the C shareholders nor the ordinary
shareholders are affected by the outcome of the Shoprite
arbitration and any appeals. The contingent value rights holders
will be responsible for the losses or benefits associated with the
Shoprite arbitration appeal, which is expected to be held later in
2018. The full terms and conditions attaching to the CVRs are
contained in the instrument by which they are constituted that can
be inspected at the Fund's website.
5(c). Statement of Comprehensive Income of the Master Fund for
the period from 1 January 2018 to 30 June 2018
The net losses on investment in subsidiaries at fair value
through profit or loss amounting to USD 2,678,023 is due to the
losses arising at the master fund level and can be analysed as
follows:
For the period
ended 30 June
2018
-------------------------
USD
Income
Interest revenue 268,686
Dividend revenue 1,531,161
Other income 12,397
Net foreign exchange gain 350,077
-------------------------
2,162,321
-------------------------
Expenses
Net losses on financial assets and liabilities at fair value
through profit or loss 4,434,140
Custodian fees, Brokerage fees and
commission 195,637
Dividend expense on securities sold not yet purchased
Other operating expenses 24,905
Audit fees 24,300
-------------------------
4,727,056
-------------------------
Operating loss before tax (2,564,735)
Less withholding tax (128,027)
-------------------------
Decrease in net assets attributable to shareholder from
operations/Total Comprehensive Loss for the period
Attributable to:
AOF Limited (direct interests) (2,677,908)
AOF Limited ( indirect interests through AOF (GP) Ltd) (115)
(2,678,023)
AOF CarryCo Limited (minority interests) (14,739)
(2,692,762)
=========================
(i) Net losses 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
2018 2017
---------------------- ----------------------
USD USD
Net (losses)/gains on fair value of financial
assets at fair value through profit or loss (5,239,777) 3,370,922
Net gains on fair value of financial liabilities
at fair value through profit or loss 805,637 591,862
---------------------- ----------------------
Net (losses)/gains (4,434,140) 3,962,784
====================== ======================
(ii) Financial asset and liabilities at fair value through
profit or loss held by Africa Opportunity Fund L.P.
For the period For the period
ended 30 June ended 30 June
2018 2017
-------------------- -----------------------
USD USD
Held for trading assets:
At 1 January 69,163,219 60,722,399
Additions 2,802,453 4,527,590
Disposal (1,501,243) (6,964,882)
Net (losses)/gains on financial assets at
fair value through profit or loss (5,239,777) 3,370,922
-------------------- -----------------------
At 30 June (at fair value) 65,224,652 61,656,029
==================== =======================
Analysed as follows:
- Listed equity securities 58,211,528 48,009,863
- Listed debt securities 4,183,859 9,441,447
- Unlisted equity securities 2,375,626 2,550,986
- Unlisted debt securities 350,000 1,595,242
- Contract for difference 103,639 58,491
-------------------- -----------------------
65,224,652 61,656,029
==================== =======================
Other receivables, cash at bank and other payables are not
included above.
(iii) Net changes on fair value of financial assets at fair value through profit or loss
For the period For the period
ended 30 ended 30
June June
2018 2017
---------------------- ----------------------
USD USD
Realised 331,771 309,406
Unrealised (5,571,548) 3,061,516
---------------------- ----------------------
Total (losses)/gains (5,239,777) 3,370,922
====================== ======================
(iv) Financial liabilities at fair value through profit or loss
held by Africa Opportunity Fund L.P.
30 June 30 June
2018 2017
---------------------- ----------------------
USD USD
Held for trading financial liabilities
Contract for difference 24,873 87,560
Written put options 1,631,525 1,204,625
Listed equity securities sold
short 2,191,053 2,149,406
---------------------- ----------------------
Financial liabilities at fair
value through profit or loss 3,847,451 3,441,591
====================== ======================
(v) Net changes on fair value of financial liabilities at fair value through profit or loss
For the For the
period period
ended 30 ended 30
June June
2018 2017
-------------------- ----------------------
USD USD
Realised 304,197 1,397,407
Unrealised 501,440 (805,545)
-------------------- ----------------------
805,637 591,862
==================== ======================
6. OTHER RECEIVABLES
30 June 2018 30 June
2017
---------------------------- -----------------------
USD USD
Other receivable - 11,940
Prepayments - 930
-------------------------- -----------------------
- 12,870
============================= =======================
7. CASH AND CASH EQUIVALENTS
30 June 2018 30 June 2017
-------------------- -----------------------
USD USD
Other bank accounts 43,029 7,662
==================== =======================
8(a). ORDINARY SHARE CAPITAL
30 June 2018 30 June 30 June 30 June
2018 2017 2017
--------------------- ------------------- ------------------- ---------------------
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
===================== =================== =================== =====================
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.
8(b). NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS
Ordinary
Shares
----------------------
USD
At 1 January 2018 69,248,073
Changes during the period:
Loss for the period (3,487,677)
----------------------
At 30 June 2018 65,760,396
======================
Net asset value per share at
30 June 2018 0.879
======================
Ordinary and C share Merger, Issuance of Contingent Value
Rights
In 2014, AOF closed a Placing of 29.2 million C shares of
US$0.10 each, at a placing price of US$1.00 per C share, raising a
total of $29.2 million before the expenses of the Issue. The
placing was closed on 11 April 2014 with the shares commencing
trading on 17 April 2014. AOF's Ordinary Shares and the C Shares
from the April placing were admitted to trading on the LSE's
Specialist Fund Segment ("SFS") effective 17 April 2014.
The C Shares were a transient class of shares: the assets
representing the net proceeds of any issue of C Shares were
maintained, managed and accounted for as a separate pool of capital
of the Company until those C Shares converted into Ordinary Shares.
In this regard, although Conversion was anticipated to occur no
later than six months after Admission, the Directors considered it
in the best interests of all Shareholders (being at that time
Ordinary Shareholders and C Shareholders) to extend the Conversion
Date beyond the six month period until the Shoprite case would be
resolved.
The directors had the discretion to defer the conversion
indefinitely. Hence, there was two classes of shares (the Ordinary
and the C Class shares) that could be realised in a forced
liquidation by the shareholders, and then the requirements of IAS
32.16C and 16D would need to be applied to both classes. Due to the
fact that there are two separate pools of assets and liabilities
attributable to the C Class and Ordinary shareholders respectively,
the requirements of IAS 32.16C(a) would not be met. Therefore both
the classes were classified as financial liabilities as from April
17, 2014 upon issuance of a Class C shares.
The Shoprite arbitral award was issued in 2016 and on 23 August
2017, upon the consent of the Board of Directors, the Fund merged
the C share class and the ordinary shares as contemplated in the
April 2014 issuance of the C share class. The C Class shares were
converted into ordinary shares. Each holder of C Shares received
such number of Ordinary Shares as equals the number of C Shares
held by them multiplied by the Net Asset Value per C Share and
divided by the Net Asset Value per Ordinary Share (subject to a
discount of 5 per cent). Based on a conversion ratio of 1.1034,
29,200,000 C Shares were delisted and cancelled and 32,219,279
Ordinary Shares were admitted to trading on the Specialist Fund
Segment of the London Stock Exchange. The new ordinary shares rank
pari passu with the Fund's ordinary shares prior to the conversion.
Subsequent to the merger, the total number of ordinary shares is
74,849,606.
To effectuate this merger, Contingent Value Rights certificates
were issued to the ordinary shareholders of record on 21 August
2017. The Board and the Investment Manager are currently appealing
the earlier arbitral award relating to the Shoprite shares and are
anticipating the appeal to be heard during 2018. From the Shoprite
arbitral award issued in 2016 and resulted in AOF not being
considered legal owner of the specific Shoprite Holdings, the
Shoprite investment was written off. Should AOF be successful in
any appeal against the earlier arbitral award, then the proceeds
received after any finding, net of expenses, will be disbursed
solely to the holders of the CVRs.
Subsequent to the merger, one class of ordinary shares exists
for all investors and all financial and return information
presented reflects the existing ordinary share class. Upon
conversion of the C Class shares into Ordinary shares, the
remaining shares in AOF are classified as equity. Information
regarding the merger was distributed and released to the market
prior to, and upon execution of, the merger. This information and
information relative to the CVRs can be found on the Fund's
website.
9. TRADE AND OTHER PAYABLES
30 June 30 June
2018 2017
------------------ ---------------------
USD USD
Due to Africa Opportunity Fund
L.P. 43,029 7,762
Directors Fees
Payable 43,750 61,250
Other Payables 45,575 28,572
------------------ ---------------------
132,354 97,584
================== =====================
Other payables are non-interest bearing and have an average term
of six months.
10. EARNING PER SHARE
The earnings per share is calculated by dividing the decrease in
net assets attributable to shareholders by number of ordinary and C
shares in issue during the period excluding ordinary shares
purchased by the Company and held as treasury shares.
The Company's diluted earnings per share are the same as basic
earnings per share, since the Company has not issued any instrument
with dilutive potential.
Period from
1 January
2018
to 30 June
2018
------------------------------
Ordinary shares
------------------------------
Increase in net assets attributable
to shareholders USD (3,487,677)
==============================
Number of shares in issue 74,849,606
==============================
Change in net assets attributable
to shareholders
per share USD (0.047)
==============================
Period from 1 January 2017
to 30 June 2017
-----------------------------------------------------------------
Ordinary shares C shares
--------------------------------- ------------------------------
Increase in net assets attributable
to shareholders USD 1,643,177 2,003,661
================================= ==============================
Number of shares in issue 42,630,327 29,200,000
Change in net assets attributable
to shareholders per share USD 0.039 0.069
================================= ==============================
11. ANALYSIS OF NAV OF MASTER FUND ATTRIBUTABLE TO ORDINARY SHARES
11(a). STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018
30 June 2018
-------------------------
USD
ASSETS
Cash and cash equivalents 5,180,427
Trade and other receivables 323,378
Receivable from AOF Ltd 43,029
Financial assets at fair value through
profit or loss 65,224,652
Total assets 70,771,486
-------------------------
EQUITY AND LIABILITIES
Liabilities
Trade and other payables 708,103
Financial liabilities at fair value through
profit or loss 3,847,451
Total liabilities 4,555,554
-------------------------
Net assets attributable to shareholders 66,215,932
=========================
12. 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.
13. 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.
14. PERSONNEL
The Company did not employ any personnel during the period
(2017: the same).
15. COMMITMENTS AND CONTINGENCIES
There are no commitments or contingencies at the reporting
date.
16. LIFE OF THE COMPANY
The Company does not have a fixed life but, as stated in the
Company's admission document published in 2007, the 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.
In 2019, the Directors will convene another general meeting
where an ordinary resolution will be proposed that the Company will
continue in existence. If the resolution is not passed, the
Directors will be required to formulate proposals to be put to
Shareholders to reorganise, reconstruct or wind up the Company. If
the resolution is passed, the Company will continue its operations
and a similar resolution will be put to Shareholders every five
years thereafter.
At the same time as the continuation vote in 2019, the Company
will provide Shareholders with, without first requiring a
Shareholder vote to implement this policy, an opportunity to
realise all or part of their shareholding in the Company for a net
realised pro rata share of the Company's investment portfolio.
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.
END
IR GMGZLLNGGRZM
(END) Dow Jones Newswires
September 28, 2018 02:01 ET (06:01 GMT)
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