TIDMAOF
RNS Number : 4388N
Africa Opportunity Fund Limited
30 September 2021
30 September, 2021
Africa Opportunity Fund Limited
("AOF" or the "Company", or the "Fund")
Half Yearly Report for the Six Months ended 30 June 2021
T he 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 2021. T he full half yearly r e port for the
period ended 30 June 2021 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
$0.988 as at 30 June 2021, generating a total return of 59%
(including redemption proceeds) from the 31 December 2020 net asset
value per share of U S $0.622.
-- As at 30 June 2021, A O F 's investment all ocat i on for its
Ordin ary S har es was all equiti es.
-- AOF's Ordinary S h a res net asset v a lue per share as at 17
September 2021 was US $1.012.
-- AOF's Ordinary S h a res declared an annual div i dend per share of $0.0096 for 2020.
-- AOF mandatorily redeemed 39.84 million shares for an
aggregate consideration of $7.2 million in June 2021.
Manager's Commentary :
Market Conditions
AOF's total return in H1 2021 was 59%. As a reference, during
this period in USD the S&P rose 16%, Brazil rose 10%, Russia
rose 22%, India rose 9%, and China rose 4%. In Africa, South Africa
rose 15%, Egypt rose 1%, Kenya rose 19%, and Nigeria fell 5%. 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), rose, respectively, 1%, 6%, and 7%.
Ordinary Shares Portfolio Highlights
AOF made progress realizing and distributing the proceeds from
its less liquid portfolio holdings during H1 2021. The Covid-19
pandemic and the global outbreak of national lockdowns account for
the sharp market declines of H1 and the depreciation of many
African currencies. The Zambian kwacha depreciated by 23% against
the US Dollar, the Botswana Pula by 10%, and the Kenyan shilling by
5% to cite a few examples. The Fund sold its entire holdings of
Misr Duty Free Shops, Sonatel, Standard Chartered Bank Ghana's
ordinary shares, Zimplats, and debt of African Bank. Except for the
African Bank disposal pursuant to a redemption, all the disposals
were made in the market. The worst and best disposals took place in
the natural resource's portfolio, in response to the 38% fall of
Brent Crude from $66 to $41 and the 18% rise in gold to $1781 at
the end of June.
The remaining holdings of the Fund are, as a generalization,
illiquid. Three of them accounted for 68% of the Fund's H1 losses.
Some commentary on them is in order. We intend to pursue a
combination of block trades plus the occasional corporate
transaction to effect an orderly realization of the remaining
portfolio.
Enterprise Group's shares gained 26% in H1. It released its
annual report and its Q1 and Q2 2021 results. Q2 was the first full
quarter of Enterprise's Nigerian foray. As a new life assurance
operation, Enterprise Nigeria will experience much higher operating
and commission expenses and life liabilities than premium growth.
For example, the change in life fund liabilities rose 81% from Q1
to Q2 even as net investment income rose only 47% over that period.
Group returns on assets and equity will decline for the next few
years, until Nigeria's premium growth catches up with its expense
and liability growth rate. There is also the unexpected emergence
of the Delta variant of Covid-19 in Ghana impairing the ability of
its agents to write new business. Operating expenses, Q2-on-Q2,
rose 55% versus a 29% increase in net insurance premia in the same
period. From a valuation perspective, Enterprise bears all the
stigmata of a financial institution distrusted by the stock market,
its funders, and its regulators. Its equity trades on a P/B of
0.49x, a Price to Embedded Value (alone) of 0.62x, a P/E of 3.5x,
and a dividend yield of 3.5%
Letshego's H1 2021 total return was 33%. It reported respectable
results for the 2020 Covid-19 pandemic year. Its fully diluted
earnings per share declined 17% to 26 thebe, placing Letshego, at
the end of Q1, on a P/E ratio of 2.7x, a P/B ratio of 0.3x, and a
net dividend yield of 15%. The profit payout ratio corresponding to
this dividend is 44%, but the comprehensive income payout ratio
(incorporating the effects of foreign exchange translation losses)
was 68%. Crucially, though, the dividend payout for H2 2020, and
going forward, was 50% of net profit. Return on average equity was
13%, down from 17% in 2019 and return on average assets was 5%. Its
operating income before impairment and taxes fell 19% despite a 9%
rise in its gross loans book. Regrettably, its effective corporate
tax rate increased from 36.2% in 2019 to 38.9%. However, although
employee costs rose 8%, overall costs were flat, year-on-year.
There are disturbing trends in Letshego's costs that bear close
scrutiny. Its operating costs, as a % of average gross advances,
need to be reduced from the current 10%. Letshego's cost to income
ratio of 50% is a harbinger of higher cost to income ratios in the
next few years. In fact, management expressed the view on its
results call that Letshego's cost to income ratio would top out
around 52% before declining to the mid-40s range. The ostensible
reason is a 5-year $50 million digital capex program. Previous
management justified rising cost to income ratios on the grounds of
expanding across Africa and described those costs also as
"investment". If a snapshot is taken of Letshego's 2020 gross loan
book, interest revenue per loan was 23.6%, non-funded revenue per
loan was 1.9%, interest expense per loan was 6.5% (while interest
expense per deposit and borrowings was 11.4%), and operating
expenses per loan was 10% to give a net pre-credit loss and tax
surplus per loan of 9%.
Letshego faces the challenges of lowering expenses, credit
costs, and taxes over the next few years so it can pass some of
those savings to its customers by slashing the revenue per loan.
Currently, Letshego remains vulnerable to lower cost competitors,
and, worse, a high-cost structure also limits its capacity to
shield borrowers from the scourge of financial distress. Reports
have begun to emerge of competitors in markets like Kenya, aided by
artificial intelligence-informed algorithms, plunging their
borrowers into practical insolvency. We shall be monitoring these
trends.
On the positive side, Letshego's grant of loans via the digital
route (principally WhatsApp) soared from 1% at the beginning of
2020 to 69% at the end of December. Ghana became the first market
outside Southern Africa to earn more than 100 million Pula in
profit before tax and grant more than 1 billion Pula of gross
loans. Its new digital platform is being tested in pilot in Nigeria
and Botswana. Development financial institutions and depositors
continued to increase their share of Letshego's funding, thus
extending the term of its funding and lowering slightly its cost of
borrowed funds. Importantly, Letshego's liquidity and capital
positions remain strong. The efficiency of its digital investment
program will have to be scrutinized. Nevertheless, its rapid effort
to become a digital first financial institution is in the right
direction. The troubling trends notwithstanding, we believe that
Letshego's results do not justify its low valuation. It deserves a
rerating.
First Mutual Properties garnered a lot of interest in Q2.
Average daily trading volume rose 640% from Q1 to Q2. Perspective
is in order, though, since average daily value traded remained less
than $100,000. First Mutual went from a deeply illiquid share to a
less illiquid share. The Fund's property holdings preserve
purchasing power in the long run in an economy suffering from
foreign currency shortages and hyperinflation. 2021 is a relatively
decent year for the Zimbabwean economy. Hyperinflation is receding
as annual inflation declined from 349% in January to 107% in June.
In the wake of good rains, Zimbabwe expects to be self-sufficient
in maize, curbing its import needs. However, Zimbabwe's economy
remains in distress, as evidenced by the widening gap between the
official exchange rate and its so-called "parallel rate". To
account conservatively for this widening trend in the valuation of
our Zimbabwe holdings, we use an internally calculated Dollar
exchange rate based on the inflation rate differentials between the
USA and Zimbabwe. Our methodology implied an exchange rate of ZWL
156/$ versus an official exchange rate of ZWL 85/$ and parallel
rates that ranged between ZWL 120/$ and ZWL 142/$ at the end of
June 2021.
Strategy
The Fund is in the process of realizing its holdings. One
distribution wase made during H1 2021 in the form of compulsory
share redemptions worth a total of $7.2 million. The portfolio is
now comprised of less liquid holdings and we are looking to the
next 1 year to effectuate a realizing 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
30 September, 2021
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE PERIOD FROM 1 JANUARY 2021 TO 30 JUNE 2021
For the For the
period period
ended 30 ended 30
June June
Notes 2021 2020
------------------------ -----------------------
USD USD
Income
Net gains on investment in subsidiaries
at fair value
through profit or loss 6(a) 9,437,363 -
9,437,363 -
------------------------ -----------------------
Expenses
Net losses on investment in subsidiaries
at fair value
through profit or loss 6(a) - 3,149,501
Management fee 149,395 405,569
Custodian fees, brokerage fees
and commissions - 18,900
Other operating expenses 44,590 78,111
Directors' fees 35,000 8,750
Audit and professional fees 67,228 34,433
296,213 3,695,264
------------------------ -----------------------
Total comprehensive income/(loss)
for the period 9,141,150 (3,695,264)
======================== =======================
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2021
Notes 30 June 30 June
2021 2020
--------------------- ---------------
USD USD
ASSETS
Cash and cash equivalents 8 39,604 31,057
Other receivables and prepaids 7 1,257 70,180
Loan receivable from related party 7 116,675 11,387
Investment in subsidiaries 6(a) 24,557,221 19,271,879
Total assets 24,714,757 19,384,503
--------------------- ---------------
EQUITY AND LIABILITIES
LIABILITIES
Trade and other payables 10 221,833 111,726
Total liabilities 221,833 111,726
--------------------- ---------------
Net assets attributable to shareholders 24,492,924 19,272,777
===================== ===============
Ordinary share capital 247,878 350,062
Share premium 6,440,920 13,553,259
Retained earnings 17,804,126 5,369,456
Total equity 24,492,924 19,272,777
===================== ===============
Net assets value per share:
- Ordinary shares 0.988 0.551
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2021 TO 30 JUNE 2021
Share Share Retained
Capital Premium Earnings Total
---------------------- ------------------------ ---------------------- -----------------
USD USD USD USD
At 1 January
2021 350,062 13,553,258 8,662,976 22,566,296
CAPITAL TRANSACTIONS:
Redemption of
ordinary shares (102,184) (7,112,338) - (7,214,522)
OPERATIONS:
Total
comprehensive
income
for the period - - 9,141,150 9,141,150
---------------------- ------------------------ ---------------------- -----------------
At 30 June 2021 247,878 6,440,920 17,804,126 24,492,924
====================== ======================== ====================== =================
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM 1 JANUARY 2021 TO 30 JUNE 2021
For the period For the period
ended ended
30 June 2021 30 June 2020
---------------------------- ----------------------------
USD USD
Operating activities
Total comprehensive income/(loss0
for the period 9,141,150 (3,695,264)
Adjustment for non-cash items:
Unrealised (gain)/loss on investment
in subsidiaries at
fair value through profit or loss (9,437,363) 3,149,501
---------------------------- ----------------------------
Cash used in operating activities (296,213) (545,763)
---------------------------- ----------------------------
Net changes in operating assets and
liabilities
Proceeds from investment in subsidiaries
at fair value
through profit or loss 7,453,896 25,466,628
Repayment of loan receivable from (33,346) -
related party
Increase/(decrease) in trade and
other receivables 6,259 (3,476)
Decrease/(increase) in trade and
other payables 74,016 (222,772)
---------------------------- ----------------------------
Net cash generated from operating
activities 7,500,825 25,240,380
---------------------------- ----------------------------
Financing activities
Redemption of ordinary shares (7,203,973) (24,000,000)
Dividend Payment - (766,627)
---------------------------- ----------------------------
Cash used in financing activities (7,203,973) (24,766,627)
---------------------------- ----------------------------
Net increase/(decrease) in cash and
cash equivalents 639 (72,010)
Cash and cash equivalents at 1 January 38,965 103,067
---------------------------- ----------------------------
Cash and cash equivalents at 30 June 39,604 31,057
============================ ============================
AFRICA OPPORTUNITY FUND LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2021 TO 30 JUNE 2021
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 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. 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 2021 were authorised for issue in accordance with a
resolution of the Board of Directors on 27 September 2021.
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 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
The Company satisfies the criteria of an investment entity under
IFRS 10: Consolidated Financial Statements. As such, the Company
does not consolidate 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
including the investment in subsidiaries 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. Following the
assessment, no assets were identified which were subject to
impairment. 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 assets at fair value through profit or
loss in accordance with IFRS 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 '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 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 market place 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 or minus 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, the trade and other receivables 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 2021. The Company has not early adopted any other
standard, interpretation or amendment that has been issued but is
not yet effective.
Although these new standards and amendments applied for the
first time in 2020, 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
beginning on
or after
IFRS 17 Insurance Contracts 1 January 2023
Amendments to IAS 1: Classification of Liabilities 1 January 2023
as Current or Non-current
Reference to the Conceptual Framework - Amendments 1 January 2022
to IFRS 3
Property, Plant and Equipment: Proceeds before 1 January 2022
intended use - Amendments to IAS 16
Onerous Contracts - Costs of Fulfilling a Contract 1 January 2022
- Amendments to IAS 37
IFRS 1 First-time Adoption of International Financial 1 January 2022
Reporting Standards - Subsidiary as a first-time
adopter
IFRS 9 Financial Instruments - Fees in the '10 1 January 2022
per cent' test for derecognition of financial liabilities
IAS 41 Agriculture - Taxation in fair value measurements 1 January 2022
Amendments to IFRS 16 Covid-19 Related Rent Concessions 1 June 2020
The above standards and interpretations issued but not effective
are not expected to have material impact on the Company.
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
In June 2019, the Directors convened an Annual General Meeting
and an Extraordinary General Meeting where the following was
passed:
-- Ordinary resolution that the requirement of the Company to
propose the realisation opportunity be and is hereby waived.
-- 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") be and is hereby adopted as the new
investment policy of the Company;
-- 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.
Below is a brief synopsis of the "New Investing Policy" as per
the Company's Circular dated 5 June 2019:
For a period of up to three years following the Extraordinary
General Meeting (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. Shareholders will be
provided with an opportunity to reassess the investment policy and
distribution policy at the end of the Return Period. To that end, a
further ordinary resolution for the Company's continuation will be
proposed at an extraordinary general meeting to be convened at the
end of the Return Period (the "Second Continuation Vote").
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.
Other than financial assets at fair value through profit or
loss, the carrying value of the remaining assets, which were
determined in accordance with the accounting policies, have been
reviewed for any possible impairment, and consideration has been
given to whether any additional provision is necessary as a result
of the Directors' intention to wind up the Company at the end of
the Return Period that is in June 2022. It is expected that all
assets will realise at least at the amounts at which they are
presented in the statement of financial position and that there
will be no material additional liabilities. It should be noted that
due to events after finalisation of the interim financials, the
final amounts to be received could vary from the amount shown in
the statement of financial position due to circumstances which
arise subsequent to preparation of the financial statement and
these variations could be material.
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 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 in subsidiaries on a
fair value basis. In addition, the Company has more than one
investor 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 3 years as per the 'New Investment Policy'.
Accordingly, consolidated financial statements have not been
prepared. 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 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.
5. AGREEMENTS
Investment Management Agreement
Effective 1 July 2019, the Company and the Investment Manager
have, upon the approval of the Reorganisation Resolution at the EGM
in June 2019, entered into the Amended and Restated Investment
Management Agreement which amends the fees payable to the
Investment Manager as follows:
Management fees
The management fee shall be reduced to 1 per cent of the Net
Asset Value per annum for the first two years of the Return Period
(the period of up to three years following the EGM held in June
2019) and then further reduced to 0 per cent in the last year of
the Return Period.
The Investment Manager's entitlement to future performance fees
(through AOF CarryCo Limited) will be cancelled and AOF CarryCo
Limited's limited partnership interest in the Limited Partnership
will be transferred to the Company for nominal value in the last
year of the Return Period, that being 2022.
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 where the applicable
payment date is on or prior to 30 June 2020: 2 per cent of the net
amounts realised.
On distributions of cash to Shareholders where the applicable
payment date is 1 July 2020 or later: 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 management fee for the financial period under review amounts
to USD 149,395 (2020: USD 405,569) of which USD 32,500 (2020: USD
99,585) relates to accrued realisation fees and the performance
fees for the financial period under review was nil (2020: 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
Under the Prime Brokerage Agreement, the Master Fund appointed
Credit Suisse Securities (USA) LLC as its prime broker for the
purpose of carrying out the Master Fund's instructions with respect
to the purchase, sale and settlement of securities. Custodian fees
are expensed at the Master Fund level and have been included in the
NAV of the subsidiary.
Brokerage Agreement
Under the Broker Agreement revised during 2016, the Master Fund
appointed Liberum, a company incorporated in England to act as
Broker to the Company. The broker fee is payable in advance at
six-month intervals. The broker fees are expensed at the Master
Fund level and have been included in the NAV of the subsidiary.
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 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.
2021
---------------------------------
USD
Investment in Africa Opportunity
Fund L.P. 24,553,680
Investment in Africa Opportunity
Fund (GP) Limited 3,541
---------------------------------
Total investment in subsidiaries
at fair value 24,557,221
=================================
Fair value at 01 January 22,584,303
Distribution income* (7,464,445)
Net gain on investment in subsidiaries
at fair value 9,437,363
---------------------------------
Fair value at 30 June 2021 24,557,221
=================================
*"Distribution income" relates to the distribution of cash to
the Company from Africa Opportunity Fund L.P. in order to enable
the Company to pay expenses, compulsory redemptions and
dividends.
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.
30 June
2021 Level 1 Level 2 Level
3
----------------------- -------------------- --------------------- --------------
COMPANY USD USD USD
I
nvestment in
subsidiaries 24,557,221 - 24,557,221 -
======================= ==================== ===================== ==============
MASTER FUND
Financial assets at fair value
through profit or loss
Equities 24,360,497 10,771,030 13,589,467 -
Debt securities 161,102 161,102 - -
----------------------- -------------------- --------------------- --------------
24,521,599 10,932,132 13,589,467 -
======================= ==================== ===================== ==============
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 principally 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:
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 2021 as follows:
Valuation of investments listed on the Zimbabwe Stock
Exchange
Since June 2020, the Zimbabwe authorities suspended Old Mutual
shares from the Zimbabwe Stock Exchange, necessitating the Company
to devise an alternative transparent discount factor rather than
continuing the Old Mutual Implied rate. 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. The initial surrender requirement was 20% of
export proceeds, but the Company uses a 5% surrender requirement to
reflect subsequent exemptions from this surrender requirement
granted to some export industries. 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, on
June 30, 2021 at a rate of ZWL 156.81 versus an official Zimbabwe
exchange rate of ZWL 85.42. The discount rate applied at June 30,
2021 was 45.53% and the fair value of the Zimbabwe investments
recorded in the books of the Master Fund was USD 9,963,667.
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 an existing shareholder
selling a portion of their shares and an unaffiliated third party.
The economics of this transaction were agreed to in December 2020,
and thus were utilized as the basis of the valuation as at 30 June
2021.
6(c). Statement of Comprehensive Income of the Master Fund for
the period from 1 January 2021 to 30 June 2021
The net gains on investments in subsidiaries at fair value
through profit or loss for the period from 1 January 2021 to 30
June 2021 amounted to USD 9,437,363, and net losses on investments
in subsidiaries at fair value through profit or loss for the period
from 1 January 2020 to 30 June 2020 amounted to USD 3,149,501
arising at the Master Fund and can be analysed as follows:
For the period
ended 30 June
2021
-------------------------
USD
Income
Interest revenue 39,820
Dividend revenue 306,306
Other income -
Net gains on financial assets and
liabilities at fair value
through profit or loss 9,289,279
Net foreign exchange gain 48,475
-------------------------
9,683,880
-------------------------
Expenses
Custodian fees, brokerage fees and
commission 38,056
Other operating expenses 49,869
-------------------------
87,925
-------------------------
Operating gain before tax 9,595,955
Less withholding tax (17,976)
-------------------------
Total Comprehensive gain for the period 9,577,979
=========================
Attributable to:
AOF Limited (direct interests) 9,436,261
AOF Limited (indirect interests through
AOF (GP) Ltd) 1,102
9,437,363
AOF CarryCo Limited (minority interests) 140,616
9,577,979
=========================
AFRICA OPPORTUNITY FUND LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2021 TO 30 JUNE 2021
6. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
(i) Net gains/(losses) on financial assets and liabilities at
fair value through profit or loss held by Africa Opportunity Fund
L.P.
For the period For the period
ended 30 ended 30
June June
2021 2020
--------------------------- ------------------------
USD USD
Net gains/(losses) on fair value of financial
assets at fair value through profit or
loss 9,289,279 (4,741,144)
Net gains on fair value of financial
liabilities at fair value through
profit or loss - 1,172,214
--------------------------- ------------------------
Net (losses)/gains 9,289,279 (3,568,930)
=========================== ========================
(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
2021 2020
--------------------------- -----------------------
USD USD
Held for trading assets:
At 1 January 19,480,476 38,372,508
Additions - 212,755
Disposal (4,248,156) (15,760,495)
Net (losses)/gains on financial
assets at fair value through
profit or loss 9,289,279 (4,741,144)
--------------------------- -----------------------
At 30 June (at fair value) 24,521,599 18,083,624
=========================== =======================
Analysed as follows:
- Listed equity securities 20,734,697 14,778,432
- Listed debt securities 161,102 155,590
- Unlisted equity securities 3,625,800 2,361,193
- Unlisted debt securities - 788,409
--------------------------- -----------------------
24,521,599 18,083,624
=========================== =======================
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
2021 2020
------------------------ ------------------------
USD USD
Realised (1,295,832) (3,230,197)
Unrealised 10,585,111 (1,510,947)
------------------------ ------------------------
Total gains/(losses) 9,289,279 (4,741,144)
======================== ========================
(iv) Net changes on fair value of financial liabilities at fair value through profit or loss
For the period For the
period
ended 30 ended 30
June June
2021 2020
---------------------------- ------------------------
USD USD
Realised - 1,209,326
Unrealised - (37,112)
------------------------ ------------------------
- 1,172,214
============================= ========================
7. OTHER RECEIVABLES
30 June 2021 30 June
2020
------------------------- --------------------
USD USD
Amounts due from Africa Opportunity
Fund L.P. 116,675 78,930
183
Other receivables -
Prepayments 1,074 2,637
------------------------- --------------------
117,932 81,567
========================= ====================
8. CASH AND CASH EQUIVALENTS
30 June 30 June
2021 2020
-------------------- --------------------
USD USD
Other bank accounts 39,604 31,057
==================== ====================
AFRICA OPPORTUNITY FUND LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2021 TO 30 JUNE 2021
9(a). ORDINARY SHARE CAPITAL
30 June 2021 30 June 30 June 30 June
2021 2020 2020
------------------------ ---------------------- -------------------- ----------------------
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 24,787,758 247,878 35,006,160 350,062
======================== ====================== ==================== ======================
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.
9(b). NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS
Ordinary
Shares
----------------------------
USD
At 1 January 2021 22,566,296
Changes during the period:
Total comprehensive income for
the period 9,141,150
Redemption of ordinary
shares (7,214,522)
----------------------------
At 30 June 2021 24,492,924
============================
Net asset value per share at
30 June 2021 0.988
============================
10. TRADE AND OTHER PAYABLES
30 June 2021 30 June
2020
------------------- ----------------------
USD USD
Directors Fees Payable 17,500 -
Other Payables 204,333 111,726
------------------- ----------------------
221,833 111,726
=================== ======================
Other payables are non-interest bearing and have an average term
of six months.
AFRICA OPPORTUNITY FUND LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2021 TO 30 JUNE 2021
11. EARNING PER SHARE
The earnings per share is calculated by dividing the decrease in
net assets attributable to shareholders by number of ordinary
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 Period from
1 1
January 2021 January 2020
to 30 June to 30 June
2021 2020
---------------------------- ------------------------------
Ordinary Ordinary
shares shares
---------------------------- ------------------------------
Change in net assets attributable
to shareholders USD 9,141,150 (3,695,264)
============================ ==============================
Number of shares in issue 24,787,758 35,006,160
============================ ==============================
Change in net assets attributable
to shareholders
per share USD 0.369 (0.106)
============================ ==============================
12. ANALYSIS OF NAV OF MASTER FUND ATTRIBUTABLE TO ORDINARY SHARES
12(a). STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021
30 June 2021
-----------------------
ASSETS
Cash and cash equivalents 853,233
Trade and other receivables 225,154
Financial assets at fair value through
profit or loss 24,521,599
Total assets 25,599,986
-----------------------
EQUITY AND LIABILITIES
Liabilities
Trade and other payables 474,296
Due to AOF Ltd 116,675
Total liabilities 590,971
-----------------------
Net assets attributable to shareholders 25,009,015
=======================
The earnings per share is calculated by dividing the decrease in
net assets attributable to shareholders by number of shares
outstanding
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.
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
(2018: the same).
16. COMMITMENTS AND CONTINGENCIES
There are no commitments or contingencies at the reporting
date.
17. SIGNIFICANT EVENTS
MANDATORY REDEMPTION
The Directors, at their sole discretion, can effect a compulsory
redemption of the Ordinary Shares on an ongoing basis and will
therefore undertake a staged return of capital to shareholders. On
24 May 2021, the Board of Directors of Africa Opportunity Fund
Limited approved the mandatory redemption of 10,218,402 Ordinary
shares. On 1 June 2021, the mandatory redemption was completed and
AOF redeemed the 10,218,402 Ordinary Shares, on a pro rata basis,
at the prevailing NAV per Ordinary Share of $0.705 as at 30 April
2021. Such shares were cancelled automatically following their
redemption. Fractions of shares produced by the applicable
redemption ratios have not been redeemed and so the number of
shares redeemed in respect of each shareholder has been rounded
down to the nearest whole number of shares. Payments of redemption
proceeds were effected either through Euroclear or Clearstream (in
the case of shares held in uncertificated form) or by cheque (in
the case of shares held in certificated form) on or around 7 June
2021. Following the Mandatory Redemption, the Company has
24,787,758 Ordinary Shares in issue. As a result of the Mandatory
Redemption described above, Robert Knapp and Myma Belo-Osagie,
Directors of the Company now hold 4,001,616 and 33,117 Ordinary
Shares, respectively. The redemption was funded through proceeds
received from realising the assets of the Company.
During the year ended 31 December 2020, the Directors approved 2
partial mandatory redemptions of the Company's Ordinary Shares. On
10 March 2020, the Board of Directors of Africa Opportunity Fund
Limited approved the mandatory redemption of 30,278,230 Ordinary
shares. On 16 March 2020, the mandatory redemption was completed
and AOF redeemed the 30,278,230 Ordinary Shares, on a pro rata
basis, at the prevailing NAV per Ordinary Share of $0.611 as at 29
February 2020. On 22 June 2020, the Company redeemed another
9,565,216 ordinary shares, on a pro rata basis, at the prevailing
NAV per Ordinary Share of $0.5750 as at 31 May 2020.
COVID-19 PANDEMIC
The Board of Directors and Investment Manager continue to assess
the impact of the recent outbreak of a novel and highly contagious
form of coronavirus ("Covid-19"), which the World Health
Organization has officially declared a pandemic. 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 is
rapidly evolving, and many countries have reacted by instituting
quarantines, prohibitions on travel, restrictions on imports and
exports, and the closure of offices, businesses, schools, retail
stores and other public venues. Businesses, including the
Investment Manager and key vendors of the Company are also
implementing similar precautionary measures. Such measures, as well
as the general uncertainty surrounding the dangers and impact of
Covid-19, are creating significant disruption in supply chains and
economic activity and are having a particularly adverse impact on
transportation, hospitality, tourism, entertainment and other
industries. The impact of Covid-19 has led to significant
volatility and declines in the global public equity markets and it
is uncertain how long this volatility will continue. As Covid-19
continues to spread, the impacts, including a potential global,
regional or other economic recession, are increasingly uncertain
and difficult to assess. Public health emergencies, including
outbreaks 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 consider the emergence of the Covid-19 pandemic to
be a non-adjusting post balance sheet event and hence any future
impact is 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
Covid-19, the specifics of which will depend on a variety of
factors, including geographic location, industry sector, the
effectiveness of governmental actions and country specific
infection rates, 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, it is not possible
to accurately quantify the future impact on the portfolio at
this.
Except as stated above, there are no other events after the
reporting date which require amendments to and/or disclosure in
these financial statements.
18. 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 June 2019, the Directors convened an Annual General Meeting
and an Extraordinary General Meeting where the following was
passed:
Ordinary resolution that the requirement of the Company to
propose the realisation opportunity be and is hereby waived.
-- 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") be and is hereby adopted as the new
investment policy of the Company;
-- 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 three years during
which the Investment Manager will realize the portfolio in an
orderly manner and distribute the proceeds to the shareholders.
A brief synopsis of the "New Investing Policy" 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.
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END
IR BLGDCGGDDGBC
(END) Dow Jones Newswires
September 30, 2021 02:00 ET (06:00 GMT)
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