Africa OpportunityFd - Annual Financial Report
03/05/2022 07:00
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RNS Number : 9586J Africa Opportunity Fund Limited 03 May 2022
03 May 2022
Africa Opportunity Fund Limited (AOF LN)
Announcement of Annual Results for the Year ended 31 December 2021
The Board of Africa Opportunity Fund Limited ("AOF", the "Company" or the
"Fund") is pleased to announce its audited results for the year ended 31
December 2021. The Company's full annual report and financial statements will
shortly be sent to shareholders and will be available to view and download
from the Company's website at: www.africaopportunityfund.com
(http://www.africaopportunityfund.com) .
The following text and financial information does not constitute the Company's
annual report but has been extracted from the annual report and financial
statements for the year ended 31 December 2021.
For further information please contact:
Africa Opportunity Fund Limited
Francis Daniels Tel: +2711 684 1528
Liberum (Corporate Broker)
Owen Matthews Tel: +44 20 3100 2223
Darren Vickers Tel: +44 20 3100 2218
The Company
Africa Opportunity Fund Limited ("AOF" or the "Company") is a Cayman Islands
incorporated closed-end investment company traded on the Specialist Fund
Segment ("SFS") of the London Stock Exchange ("LSE"). AOF's net asset value on
31 December 2021 was $26.1 million and its market capitalisation was $18.6
million.
Investing objective
The investing objective of the Company is to achieve capital growth and income
through investments in value, arbitrage, and special situations opportunities
derived from the continent of Africa. Therefore, the Company may invest in
securities issued by companies domiciled outside Africa which conduct
significant business activities within Africa or, if listed, listed either on
an African stock exchange or a non-African stock exchange. The Company may
invest in equity, quasi-equity or debt instruments, debt issued by African
sovereign states and government entities, and real estate interests.
The Directors and Africa Opportunity Partners Limited (the "Manager") believe
that the diversity and volatility of African economies present opportunities
to earn attractive returns when investments are made selectively, across asset
classes, and without pre-determined benchmarks or allocations.
By balancing the size and type of investment, the Directors and the Manager
believe that attractive returns may be made across asset classes. Whilst the
African capital markets can be volatile, by ensuring diversity of investment
across industries and countries, the Manager attempts to mitigate such risks.
The Company targets industries rather than countries to exploit valuation
discrepancies which can arise among African countries. The Directors and the
Manager also believe that Africa's status as a continent containing a large
number of reforming countries provides investment opportunities in those
countries.
Summary of Investment Strategy
The Company's investment strategy is opportunistic. The Company invests
primarily where and when the Manager believes that investments can be made at
a material discount to the Manager's estimate of an investment's intrinsic
value.
Company preference. The Company prefers companies which demonstrate both high
real returns on assets and an earnings yield higher than the yield to maturity
of local currency denominated government debt.
Industry focus rather than country focus. The Company seeks to invest in
industries it finds attractive with little regard to national borders.
Natural resource discounts. The Company seeks natural resource companies whose
market valuations reflect a discount to the spot and future world market
prices for those natural resources.
"Turnaround" countries. The African continent is home to a large number of
reforming or "turnaround" countries. "Turnaround" countries combine secular
political reform with the opening of industries to private sector
participation.
Balkanized investment landscape. The Company seeks to invest in companies with
low valuations in relation to peers across the continent and uses an arbitrage
approach to provide attractive investment returns.
Point of entry. The Company seeks the most favourable risk adjusted point of
entry into a capital structure, whether through financing the establishment of
a new company or acquiring the debt or listed equity of an established
company.
The Company intends to be a passive investor and will generally not control or
seek to control or be actively involved in the management of any company or
business in which it invests.
Investment Policies and Restrictions
New investment policy (Effective 1 July 2019)
Consistent with the 30 June 2019 adoption of the Reorganisation plan as
approved at the Company's EGM, the Directors considered it to be in the best
interests of the Company and its Shareholders that the Company's investment
policy be changed to facilitate a realisation strategy and the orderly return
of capital to Shareholders. Shareholders approved the adoption of the New
Investment Policy effective 1 July 2019.
The Company will be managed with the objective of realising the value of the
assets in its portfolio in a prudent manner with a view to making an orderly
return of capital to Shareholders over time.
The Company's investment objective will be undertaken with a view to realising
all of its investments in a manner that seeks to achieve a balance between
maximising the value from the Company's investments and making timely returns
of capital to Shareholders.
The Company will sell or otherwise realise its investments with the objective
of achieving the best exit values reasonably available within reasonable time
scales.
The Company will cease to make any new investments (unless additional funds
are required for existing investments within the Company's portfolio) and
shall not undertake additional borrowing other than to refinance existing
borrowing or for working capital purposes.
Any cash received by the Company as part of the realisation process will be
held by the Company as cash on deposit and/or as cash equivalents
The Manager adheres to the following policies and restrictions:
Geographical focus. The Company makes investments in companies or assets with
a material portion of their value derived from or located in Africa. The
geographic mix of investments varies over time depending on the relative
attractiveness of opportunities among countries and regions.
Type of investment. The Company may invest in real estate interests, equity,
quasi-equity or debt instruments, which may or may not represent shareholding
or management control, and debt issued by African sovereign states and
government entities. Investments may be made directly or through special
purpose vehicles, joint venture, nominee or trust structures. The Company may
utilise derivative instruments to hedge certain market or currency risks and
may from time to time engage in the short sale of securities.
Investment size. At the time of investment, no single investment may exceed 15
per cent of the Net Asset Value without the prior approval of the Board. No
one initial investment will exceed 20 per cent of the Net Asset Value at the
time of investment.
Number of investments. The Company has, and expects to maintain, a
concentrated portfolio of approximately 10 to 20 investments, excluding money
market investments.
Borrowing. The Company may use overdraft and other short-term borrowing
facilities to satisfy short-term working capital needs, including to meet any
expenses or fees payable by the Company. The Manager anticipates that
borrowings may be utilised for investment purposes with the prior approval of
the Board. There are no limits on the Company's ability to leverage itself.
Cash management. Cash will be placed in bank deposits, investment grade
commercial paper, government and corporate bonds and treasury bills, in each
case, of US and African issuers.
Distribution policy
Subject to market conditions, compliance with the Companies Law and having
sufficient cash resources available for the purpose, the Company intends to
pay the following dividends on the Ordinary Shares: an amount equal to the
total comprehensive income of the Company as that expression is used in
international accounting standard (excluding net capital gains/losses in
accordance with Investment Management Association Statement of Recognised
Practice), such amount to be paid annually. The Company has been accepted
into the UK Reporting Fund Status regime.
Upon shareholder approval at the June 2019 EGM the Company initiated a change
to the distribution policy. While the Company intends to continue to meet the
requirements of the UK Reporting Fund Status regime, the Company will
undertake a staged return of capital to Shareholders.
The Company will undertake the return of capital by way of a compulsory
redemption of Ordinary Shares. The Articles were amended to permit the
Directors, at their sole discretion, to undertake a Compulsory Redemption of
Ordinary Shares on an ongoing basis, pro rata, to a Shareholder's shareholding
in the Company, to return capital to Shareholders.
The Directors continue to have the right to return cash otherwise than through
Compulsory Redemptions, such as by way of tender offers to Shareholders to
purchase their Ordinary Shares. In such circumstances, a tender offer will be
made to Shareholders in accordance with market practice and in compliance with
the Listing Rules (to the extent the Company voluntarily complies with these)
and applicable law. Further, the Directors may determine, in their absolute
discretion where they consider it to be in the best interests of Shareholders,
to return cash from sales made pursuant to the New Investment Policy to
Shareholders by way of dividend or any other distribution permitted by the
Listing Rules (to the extent the Company voluntarily complies with these) and
applicable law.
Life of the Company
The Company does not have a fixed life, but the directors consider it
desirable that its shareholders should have the opportunity to review the
future of the Company at appropriate intervals. The Directors convened an
extraordinary general meeting in 2019 where a resolution was made regarding
the continued existence of the Company. The resolution passes, as the
shareholders voted for the continuation of the Company during a three-year
period concluding on 27 June 2022 (the "Return Period"). 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, an 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.
CHAIRPERSON'S STATEMENT
2021 Review
Africa Opportunity Fund (the "Fund" or "AOF") completed 30 months of its
three-year asset realization period at the end of 2021. It made three
distributions to shareholders amounting to $32 million or 67% of its December
2019 net asset value ("NAV"). The Fund's total return since June 2019 has
been 13% versus 1% for the MSCI EFM Africa index and 5% for S&P Africa Top
40 Index.
2021 was a respectable year for the Fund as its NAV (including redemptions)
rose 69% while its share price rose 66%. To provide some basis for
comparison, South Africa rose 19%, Nigeria rose 5%, Kenya rose 10%, and Egypt
rose 14%. In non-African emerging markets, China was flat, Brazil fell 18%,
Russia rose 22% and India rose 20%. In developed markets, Japan fell 4%, the
US rose 29%, Europe rose 16%, and the UK rose 17%.(( 1 ))
Covid-19 was the overarching theme of 2021. An accurate estimate of Africa's
Covid-19 victims is unlikely ever to be known. However, its impact on
African economies was severe. The pace of recovery from this pandemic has
been severely hobbled by the modest vaccination rates attained by most African
governments. South Africa and Nigeria, the two largest economies, grew at
mediocre rates. Worse still, national sovereign debt levels, and related
interest rates, climbed to levels indicative of debt distress. Ghana's
Eurobonds and local medium-term bonds sport yields exceeding 18%. On the
positive side, commodities seem to be in the early stages of an upswing, as is
typical of periods of rising inflation rates. Prices of major commodities
like crude oil, copper, and palm rose, respectively, 18%, 24%, and 28%.
However, prices of key imports for African consumers such as white maize and
yellow maize, up 4% and 9%, were relatively flat. To offset the harsh impact
of the pandemic on poor citizens, financial conditions were loosened in
heavily indebted countries like South Africa, Ghana, and Kenya as most African
governments also increased dramatically their budget deficits
AOF's 2021 strategy was one of deliberate realization to maximize the value of
the assets returned to shareholders. In some cases, that objective inclined
the Fund towards corporate transactions to create value for the Fund. In
several other cases, the Fund exited through the secondary public
markets.
2022 Outlook
AOF's 2022 performance will be impacted by rising inflation and the outcome of
the Russian invasion of Ukraine. Regardless of the positive terms of trade
created by rising commodity prices for countries like Nigeria, South Africa,
and Ghana, the overwhelming majority of African consumers will suffer sharply
lower purchasing power from higher fertilizer, oil, and wheat prices. The UN
Food and Agricultural Organization World Food Price Index has risen 19% in the
first three months of 2022 alone, and 58% since December 2019, to hit its
highest nominal level since 1990. The slight silver lining is that new
African gas deposits, under development in countries like Egypt, Senegal,
Mauritania and Mozambique will find more markets and higher gas prices as the
world seeks substitutes for Russian fossil fuels. The International Monetary
Fund forecasts that Sub-Saharan Africa's gross domestic product should rise
3.8% in 2022 and 4% in 2023. The reality will feel a lot worse. There is
little doubt that it will take a few years for Africa to recover from this
pandemic and the Ukrainian war.
Our shareholders should rest assured that the lengthy realisation period
allows AOF to avoid involuntary or indiscriminate liquidation of its holdings
and that the Manager is working to achieve the best values possible.
In closing, I wish also to extend my thanks to our shareholders for their
support.
Dr. Myma Belo-Osagie
Chairperson
April 2022
MANAGER'S REPORT
2021 Review
Manager's Report
2021 marked the fourteenth full year of operation of Africa Opportunity Fund
(the "Fund" or "AOF"). Its ordinary shares had an annual return of 69%. At
year-end, AOF held $3.16 million in cash, and $23 million in equity
securities. The Fund's underlying end-of-year holdings were in Botswana, Cote
d'Ivoire, Ghana, Kenya, Senegal, South Africa, Tanzania, Zambia, and
Zimbabwe.
The Fund's shareholders decided in June 2019 to commence an orderly
realization of the Fund over a three-year period ending in June 2022.
Realization proceeds are to be returned to shareholders via intermittent
mandatory redemptions of the Fund's shares. The Fund liquidated five
investments in their entirety in 2021, of which, Sonatel, Standard Chartered
Bank, and Africa Bank's bonds were the most significant in size. The Fund
made those disposals via the secondary markets as well as in corporate
transactions. It also reduced its holdings in other issuers. After year
end, it completed its exit from Cote d Ívoire. The balance of this report
will discuss a few of the Fund's holdings.
The Fund's largest investment remains Enterprise Group. Enterprise Group's
total return was 90% in 2021. Its 2021 unaudited profits attributable to
shareholders declined by 20% to $11.4 million while its group net cash
generated from operating activities (after capex) rose by 61% to $67
million. Over the long term, substantial growing deferred profits in its
life operation are nestled in that cash. Those deferred profits are invested
in tax-efficient ways. In the short term, Enterprise's insurance claims and
benefits and operating expenses-rising at faster rates than its earned
premia-are disquieting trends. They were manifest in Enterprise Life's 11%
fall in its embedded value to $118 million. Enterprise's acquisition of
Ghana's third largest medical insurance provider - Acacia Health -
accomplishes the principal goals set forth in its 2018 rights circular which
included West African expansion, entry into Ghanaian healthcare and real
estate sectors. To date, Enterprise Properties has been a cash consumptive
disappointment in Ghana's office real estate downturn. It accounts for the
majority of Enterprise's $11 million increase in amounts due from related
parties. That growth is at the expense of dividends. Consequently,
Enterprise's dividend payout ratio, ranging between 0% and 15%, has been
anemic since 2016. Nigeria and real estate will continue to be drag down
profitability for the next few years. Nevertheless, after completing its
major strategic investments, we expect its dividends to climb steadily in
inflation-adjusted and US Dollar terms. A 2% dividend yield in a
jurisdiction with rising double-digit inflation is underwhelming to local
investors. A higher dividend yield would encourage a long overdue rerating
of Enterprise.
Copperbelt's total return was 246% in 2021. Copperbelt raised its dividend for
the 5(th) straight year by 3% in US Dollar terms, giving it a high 27%
dividend yield on the date of that dividend's announcement. Copperbelt's
future remains shrouded in uncertainty as it wages an arbitral battle against
a major customer - Konkola Copper Mine - seeking repayment of $168 million in
unpaid invoices. Also, a study of the cost of service for Zambia's entire
electricity industry remains incomplete. Copperbelt delivered strong results
in 2021, despite its legal battles and the Covid-19 pandemic. As is its
norm, Copperbelt completed its thirteenth fatality-free year. Its
electricity sales rose 2% to 1921GWh, a sign of Zambian power supply
recovery. Net profit rose 814% from $5.6 million to $51.2 million, as
Copperbelt did not have to write off large receivables. Free cash flow rose
4% to $57 million - the highest level since 2017. Since 2008, Copperbelt's
free cash flow margin (free cash flow/revenue) has multiplied 7.5x from 2% to
17% in 2021, even as revenues climbed by 1.93x in that period. Copperbelt's
net cash position improved by 31% in 2021 to $74 million. Copperbelt's
strong balance sheet and cash flow characteristics have emerged since 2008
because new profitable activities like power trading have been combined with
significant foreign exchange gains on cash balances, rising purchases of power
from private power generators, and tight and tough controls over expenses and
working capital management. Copperbelt's current enterprise value of $236
million (calculated on March 14, 2022 and excluding Konkola's unpaid debt) is
less than 4x operating cash flow. Despite the uncertainties, it is a deeply
undervalued holding.
Letshego enjoyed a total return of 91% in 2021. It released a strategy
update in early 2022. The key to its prospects lies in forging a digital
ecosystem with fintechs, telcos, and other nonbank financial institutions to
allow its clients, via use of Letshego's payments, lending, saving, and
insurance products, to consummate more digital transactions. It has also
introduced, with the assistance of the International Finance Corporation, a
program for financing affordable home purchases in Namibia. This type of
program is to be rolled out to Letshego's other 10 markets. These
initiatives should enable Letshego to increase rapidly its non-funded income,
especially, from earned commissions and fees. They should also enable
Letshego's non-funded income to grow more independently of its interest income
than has been the case in the past. The most exciting aspect of Letshego's
strategy update was the progress it continues to experience with its digital
platform. At the current pace of 100,000 new customers per month, Letshego
expects to have 1 million enterprise active customers by 2023. It will have
to be very careful in its use of artificial intelligence and credit scoring to
avoid rapidly deteriorating defaults. This is a danger that we will
monitor. Unlike several other companies seeking to build ecosystems,
Letshego has
built a brand of credit extension to both formally and informally employed
Africans. At the end of Q4, Letshego was valued on a P/E ratio of 5.1x, a
P/B ratio of 0.65x and a dividend yield of 10.9%. Its return on equity is
likely to hover around 14% while its operating income growth should be
marginally higher than the growth of its operating expenses. Therefore, a
rising return on equity ratio, over time, should result in increased
shareholder value. We believe Letshego deserves a rerating.
The Fund's Zimbabwean property holdings turned in respectable returns. First
Mutual posted an annual total return of 39% while Mashonaland Holdings
generated a total return of 44%. Our internally derived Zimbabwe Dollar
exchanges rates has proved to be a realistic and conservative rate for valuing
the Fund's Zimbabwean holdings. Zimbabwe continues to suffer from
hyperinflation and intense foreign currency shortages. Covid-19 lockdowns
have hurt several sectors like commercial property, as tenants are forced to
work remotely. Nevertheless, our property holdings do preserve purchasing
power in the long run. First Mutual's buildings are well located in Harare's
suburbs while those of Mashonaland suffer from their older age and location in
Harare's city centre. The commercial real estate consolidation to which we
alluded in last year's report has begun. We seek to sell our holdings in
this consolidation process. Our intent in disposing of these holdings
remains to minimize the devaluation risk facing disposal proceeds.
The Fund did not have any financial liabilities - primarily short positions
and hedges - in 2021.
2022 promises to be a year in which rising global interest rates and war
replace the pandemic as the driver of global capital markets. We shall
strive to preserve the value of the Fund in this fog of doubts and
uncertainty. Although the realization pace may slow, we continue to believe
that the Fund's holdings are undervalued. Our mission is to monetize that
undervaluation through our realization strategy.
Francis Daniels
Africa Opportunity Partners
April 2022
AFRICA OPPORTUNITY FUND LIMITED
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER
2021
Notes 2021 2020
USD USD
Income
Net gains on investment in subsidiaries at fair value
through profit or loss 6(a) 11,225,487 482,924
11,225,487 482,924
Expenses
174,395 534,637
Management fee 5(a)
139,415 107,015
Other operating expenses
70,000 70,000
Directors' fees 12
126,807 173,016
Audit and professional fees
510,617 884,668
Income/(loss) for the year attributable to equity holders 10,714,870 (401,744)
Earnings/(loss) per share attributable to equity holders
11 0.432 (0.011)
AFRICA OPPORTUNITY FUND LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
Notes 2021 2020
USD USD
ASSETS
21,469 38,965
Cash and cash equivalents 8
26,095,345 22,584,303
Investment in subsidiaries at fair value through profit or loss* 6(a)
149,552 83,329
Receivable from related party 7
7,862 7,516
Other receivables 7
26,274,228 22,714,113
Total assets
EQUITY AND LIABILITIES
LIABILITIES
197,035 147,817
Trade and other payables 10
197,035 147,817
Total liabilities
26,077,193 22,566,296
Net assets attributable to shareholders
247,878 350,062
Ordinary share capital 9(a)
6,451,469 13,553,258
Share premium 9(b)
19,377,846 8,662,976
Retained earnings
26,077,193 22,566,296
Total equity
Net assets value per share:
1.052
- Ordinary shares 9(b) 0.645
*The investment in subsidiaries at fair value through profit or loss include
the investment in the Master Fund-
Africa Opportunity Fund L.P.
AFRICA OPPORTUNITY FUND LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 December 2021
Share Share Retained
Capital Premium Earnings Total
USD USD USD USD
748,496 37,921,452 9,064,720 47,734,668
At 1 January 2020
CAPITAL TRANSACTIONS:
(398,434) (23,601,566) - (24,000,000)
Redemption of ordinary shares
- (766,628) - (766,628)
Dividend Payment
OPERATIONS:
Total comprehensive loss - - (401,744) (401,744)
for the year
At 31 December 2020 350,062 13,553,258 8,662,976 22,566,296
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:
(102,184) (7,101,789) - (7,203,973)
Redemption of ordinary shares
OPERATIONS:
- - 10,714,870 10,714,870
Total comprehensive income for the year
247,878 6,451,469 19,377,846 26,077,193
At 31 December 2021
AFRICA OPPORTUNITY FUND LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER
2021
2021 2020
USD USD
Operating activities
(401,744)
Income/(loss) for the year 10,714,870
Adjustment for non-cash items:
Net gains on investment in subsidiaries at (11,225,487) (482,924)
fair value through profit or loss 6(a)
Cash used in operating activities (510,617) (884,668)
Net changes in operating assets and liabilities
Reduction in investments in subsidiaries at fair value
through profit or loss 6(a) 7,714,445 25,786,628
(66,223) (13,149)
Increase in receivable from related party
(346)
(Decrease)/increase in other receivables 395
(186,680)
Increase/(decrease) in trade and other payables 49,218
Net cash generated from operating activities 7,697,094 25,587,194
Financing activities
(7,203,973) (24,000,000)
Redemption of ordinary shares
(766,628)
Divided Payment -
(7,203,973) (24,766,628)
Net cash flow used in financing activities
(17,496) (64,102)
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January 38,965 103,067
Cash and cash equivalents at 31 December 21,469 38,965
NOTES TO THE FINANCIAL STATEMENTS
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. ("the Master
Fund") as an exempted limited partnership in the Cayman Islands. All
investments made by the Company are made through the limited partnership. The
limited partners of the limited partnership are the Company and AOF CarryCo
Limited. The general partner of the limited partnership is Africa Opportunity
Fund (GP) Limited. Africa Opportunity Fund Limited includes 100% of Africa
Opportunity Fund (GP) Limited.
The financial statements for the Company for the year ended 31 December 2021
were authorised for issue in accordance with a resolution of the Board of
Directors on 29 June 2022.
Presentation currency
The financial statements are presented in United States dollars ("USD"). All
figures are presented to the nearest dollar.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these
financial statements are set out below. These policies have been consistently
applied from the prior year to the current year for items which are considered
material in relation to the financial statements.
Statement of compliance
The financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).
Basis of preparation
The Company satisfied the criteria of an investment entity under IFRS 10:
Consolidated Financial Statements. As such, the Company no longer consolidates
the entities it controls. Instead, its interest in the subsidiaries has been
classified as fair value through profit or loss, and measured at fair value.
This consolidation exemption has been applied prospectively and more details
of this assessment are provided in Note 4 "significant accounting judgements,
estimates and assumptions." The financial statements are prepared in
accordance with International Financial Reporting Standards ("IFRS") as issued
by the International Accounting Standards Board (IASB). The financial
statements have been prepared under the historical cost convention except for
financial assets and financial liabilities measured at fair value through
profit or loss. The preparation of financial statements in accordance with
IFRS requires the use of estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting year.
Although these estimates are based on management's knowledge of current events
and actions, actual results ultimately may differ from those estimates. In
additional to the following: All assets have been assessed for impairment
regardless of whether any indicators for impairment were identified; and all
possible liabilities that might arise from the winding up of the Company have
been accrued for. The preparation of financial statements in conformity with
IFRS requires the use of certain critical accounting estimates. It also
requires the Board of Directors to exercise its judgment in the process of
applying the Company's accounting policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements are disclosed in Note 4.
As the Company 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. An analysis regarding recovery within 12 months (current) and more
than 12 months after the reporting date (non-current) is presented in Note 14.
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 within 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 at fair value through profit or loss
For the Company, financial assets classified at fair value through profit or
loss upon initial recognition include investment in subsidiaries.
Investment in subsidiaries
In accordance with the exception under IFRS 10 Consolidated Financial
Statements, the Company does not consolidate subsidiaries in the financial
statements. Investments in subsidiaries are accounted for as financial
instruments at fair value through profit or loss in accordance with IRFS 9 -
Financial Instruments.
Management concluded that the Company meets the definition of an investment
entity as it invests solely for returns from capital appreciations, investment
income or both, and measures and evaluates the performance of its investments
on a fair value basis. Accordingly, consolidated financial statements have not
been prepared.
(ii) Financial assets at amortised cost
The Company measures financial assets at amortised cost if both of the
following conditions are met:
· The financial asset is held within a business model with the objective to
hold financial assets in order to collect contractual cash flows
· The contractual terms of the financial asset give rise on specified dates
to cash flows that are solely payments of principal and interest on the
principal amount outstanding
Financial assets at amortised cost are subsequently measured using the
effective interest (EIR) method and are subject to impairment. Gains and
losses are recognised in profit or loss when the asset is derecognised,
modified or impaired. The Company's financial assets at amortised cost
comprise 'other receivables, receivables from related party' and 'cash and
cash equivalents' in the statement of financial position.
(iii) Other financial liabilities
This category includes all financial liabilities, other than those classified
as fair value through profit or loss. The Company includes in this category
amounts relating to trade and other payables and dividend payable.
(a) 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.
(b) Initial measurement
Financial assets and liabilities at fair value through profit or loss are
recorded in the statement of financial position at fair value. All transaction
costs for such instruments are recognised directly in profit or loss.
Derivatives embedded in other financial instruments are treated as separate
derivatives and recorded at fair value if their economic characteristics and
risks are not closely related to those of the host contract, and the host
contract is not itself classified as held for trading or designated at fair
value though profit or loss. Embedded derivatives separated from the host are
carried at fair value.
Financial assets at amortised cost and financial liabilities (other than those
classified as held for trading) are measured initially at their fair value
plus any directly attributable incremental costs of acquisition or issue.
(c) Subsequent measurement
The 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 each reporting date.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value measured is based on the presumption that
the transaction to sell the asset or transfer the liability takes place either
in the principal market for the asset or liability or, in the absence of a
principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to the
Company. The fair value for financial instruments traded in active markets
at the reporting date is based on their quoted price without any deduction for
transaction costs.
For all other financial instruments not traded in an active market, the fair
value is determined by using appropriate valuation techniques. Valuation
techniques include: using recent arm's length market transactions; reference
to the current market value of another instrument that is substantially the
same; discounted cash flow analysis and option pricing models making as much
use of available and supportable market data as possible. An analysis of fair
values of financial instruments and further details as to how they are
measured is provided in Note 6.
The Company uses the following hierarchy for determining and disclosing the
fair value of the financial instruments by valuation technique:
· Level 1: quoted (unadjusted) market prices in
active markets for identical assets and liabilities.
· Level 2: valuation techniques for which the lowest
level input that is significant to the fair value measurement is directly or
indirectly observable.
· Level 3: valuation techniques for which the lowest
level input that is significant to the fair value measurement is unobservable.
Impairment of financial assets
The Company recognises an allowance for expected credit
losses (ECLs) for all financial assets measured at amortised cost. When
measuring ECL, the Company uses reasonable and supportable forward-looking
information, which is based on assumptions for the future movement of
different economic drivers and how these drivers will affect each other. Loss
given default is an estimate of the loss arising on default. It is based on
the difference between the contractual cash flows due and those that the
entity would expect to receive, taking into account cash flows from credit
enhancements. The Company considers a financial asset in default when
contractual payments are 90 days past due. However, in certain cases, the
Company may also consider a financial asset to be in default when internal or
external information indicates that the Company is unlikely to receive the
outstanding contractual amounts in full before taking into account any credit
enhancements held by the Company. A financial asset is written off when there
is no reasonable expectation of recovering the contractual cash flows.
At the reporting date, other receivables, loan
receivables from related party and cash and cash equivalents are de minimis.
As a result, no ECL has been recognised as any amount would have been
insignificant.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount
reported in the statement of financial position if, and only if, there is a
currently legally enforceable right to offset the recognised amounts and there
is an intention to settle on a net basis, or to realise the asset and settle
the liability simultaneously.
Net gain or loss on financial assets and liabilities at fair value through
profit or loss
This item includes changes in the fair value of financial assets and
liabilities held for trading or designated upon initial recognition as 'at
fair value through profit or loss' and excludes interest and expenses.
Unrealised gains and losses comprise changes in the fair value of financial
instruments for the year and from reversal of prior year's unrealised gains
and losses for financial instruments which were realised in the reporting
period.
Shares that impose on the Company, an obligation to deliver to shareholders a
pro-rata share of the net asset of the Company on liquidation classified as
financial liabilities
The shares are classified as equity if those shares have all the following
features:
(a) It entitles the holder to a pro rata share of the Company's net
assets in the event of the Company's liquidation.
The Company's net assets are those assets that remain after deducting all
other claims on its assets. A pro rata share is determined by:
(i) dividing the net assets of the Company on liquidation into units
of equal amount; and
(ii) multiplying that amount by the number of the shares held
by the shareholder.
(b) The shares are in the class of instruments that is subordinate
to all other classes of instruments. To be in such a class the instrument:
(i) has no priority over other claims to the assets of the
Company on liquidation, and
(ii) does not need to be converted into another instrument
before it is in the class of instruments that is subordinate to all other
classes of instruments.
(c) All shares in the class of instruments that is subordinate to all
other classes of instruments must have an identical contractual obligation for
the issuing Company to deliver a pro rata share of its net assets on
liquidation.
In addition to the above, the Company must have no other financial instrument
or contract that has:
(a) total cash flows based substantially on the profit or loss, the change
in the recognised net assets or the change in the fair value of the recognised
and unrecognised net assets of the Company (excluding any effects of such
instrument or contract) and
(b) the effect of substantially restricting or fixing the residual return
to the shareholders.
The shares that meet the requirements to be classified as a financial
liability have been designated as at fair value through profit or loss on
initial recognition.
Dividend expense
Dividend expense relating to equity securities sold short is recognised when
the shareholders' right to receive the payment is established.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank. Cash equivalents are short
term, highly liquid investments that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of change in value.
3. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
The Company applied for the first-time certain standards and amendments, which
are effective for annual periods beginning on or after 1 January 2021. The
Company has not early adopted any other standard, interpretation or amendment
that has been issued but is not yet effective.
The accounting policies adopted are consistent with those of the previous
financial year except for the following new and amendments to IFRS as from 1
January 2021:
Effective for
accounting period
beginning on or after
Amendments to IFRS 16: Covid-19 Related Rent Concessions
1 June 2020
Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16 an IAS 39 Interest Rate
Benchmark Reform 1 January 2021
The above new standards and amendments applied for the first time in 2021.
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
Reference to the Conceptual Framework - Amendments to IFRS 3
1 January 2022
Onerous contracts - Costs of Fulfilling a Contract - Amendments to IAS 37
1
January 2022
IFRS 9 Financial Instruments - Fees in the '10 percent' test for
derecognition of financial liabilities
1 January 2022
Amendments to IAS 8 - Accounting policies, Changes in Accounting Estimates and
Errors 1 January 2023
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
1
January 2023
The Company does not expect that the adoption of these standards will have any
material impact on the financial statements.
4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Company's financial statements requires management to
make judgements, estimates and assumptions that affect the reported amounts
recognised in the financial statements and disclosure of contingent
liabilities. However, uncertainty about these assumptions and estimates could
result in outcomes that could require a material adjustment to the carrying
amount of the asset or liability affected in future periods.
Judgements
In the process of applying the Company's accounting policies, management has
made the following judgements, which have the most significant effect on the
amounts recognised in the financial statements:
Going concern
As contemplated in the 2019 EGM Circular, the Investment Manager will request
an extension of the Return Period (defined below) at the June 2022 EGM. The
Investment Manager will apply for a 2-year extension. The extension is
compatible with the investment strategy of realising the Fund's investments in
a manner that will preserve shareholder value and liquidate the Fund in an
orderly manner. Due to the prior contemplation of the extension, the Fund's
returns over the Return Period to date and the alignment of interests of the
Investment Manager and the shareholders, the Board anticipates a high
probability the extension will be granted.
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.
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. 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.
IAS 1 - Presentation of Financial Statements and IAS 10 - Events after the
reporting period require that the financial statements should not be prepared
on a going concern basis if management determines that it intends to liquidate
the entity. The directors have considered an alternative basis of preparation
but believe that International Financial Reporting Standards ("IFRS") as a
basis for preparation best reflects the financial position and performance of
the Company. The basis presumes that the Company will continue as proposed
by the shareholder's resolution, and that the realisation of assets and
settlements of liabilities will occur in the ordinary course of business.
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 investors and the major investors are not related parties of the Company.
The Company also has an exit strategy given that it is a limited life entity,
realising its investments at the end of the Return Period of 3 years as per
the 'New Investment Policy'. Accordingly, consolidated financial statements
have not been prepared. IFRS 10 Consolidated Financial Statements provides
"investment entities' an exemption from the consolidation of particular
subsidiaries and instead require that an investment entity measures the
investment in each eligible subsidiary at fair value through profit or loss in
accordance with IFRS 9 Financial Instruments.
Assumptions and Estimates
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are discussed below. The Company based its
assumptions and estimates on parameters available when the financial
statements were prepared. However, existing circumstances and assumptions
about future developments may change due to market changes or circumstances
arising beyond the control of the Company. Such changes are reflected in the
assumptions when they occur. When the fair value of financial assets and
financial liabilities recorded in the statement of financial position cannot
be derived from active markets, their fair value is determined using a variety
of valuation techniques that include the use of mathematical models.
Fair value of financial instruments
The inputs to these models are taken from observable markets where possible,
but where this is not feasible, estimation is required in establishing fair
values. The estimates include considerations of liquidity and model inputs
such as credit risk (both own and counterparty's), correlation and volatility.
Changes in assumptions about these factors could affect the reported fair
value of financial instruments in the statement of financial position and the
level where the instruments are disclosed in the fair value hierarchy.
The models are calibrated regularly and tested for validity using prices from
any observable current market transactions in the same instrument (without
modification or repackaging) or based on any available observable market data.
An analysis of fair values of financial instruments and further details as to
how they are measured is provided in Note 6.
IFRS 13 requires disclosures relating to fair value measurements using a
three-level fair value hierarchy. The level within which the fair value
measurement is categorised in its entirety is determined on the basis of the
lowest level input that is significant to the fair value measurement in its
entirety as provided in Note 6. Assessing the significance of a particular
input requires judgement, considering factors specific to the asset or
liability. To assess the significance of a particular input to the entire
measurement, the Company performs sensitivity analysis or stress testing
techniques.
5a. AGREEMENTS
Investment Management Agreement
Effective 1 July 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
CarryCo) will be cancelled and CarryCo'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 year under review amounts to USD 174,395
(2020: USD 534,637) of which USD 57,500 (2020: USD 134,585) relates to accrued
realisation fees and the performance fees for the financial year under review.
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.
5b. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AT THE MASTER FUND LEVEL
Africa Opportunity Fund LP (the "Master Fund") is incorporated in the Cayman
Islands and is not subject to regulatory review. Management has voluntarily
disclosed all the policies and notes to the accounts of the Master Fund to
provide shareholders of the Company with a better insight.
The primary accounting policies for interest revenue and expense, dividend
revenue and expense and cash and cash equivalents, are similar as in Note 2.
Those policies which only relate to the Master Fund's financial statements are
set out below. These policies have been consistently applied from the prior
year to the current year for items which are considered material in relation
to the financial statements.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
(a) Classification
The Master Fund classifies its financial assets and liabilities in accordance
with IFRS 9 into the following categories:
(i) Financial assets and liabilities at fair value through profit or loss
The category of the financial assets and liabilities at fair value through the
profit or loss is subdivided into:
Financial assets and liabilities held for trading
Financial assets are classified as held for trading if they are acquired for
the purpose of selling and repurchasing in the near term. This category
includes equity securities, investments in managed funds and debts
instruments. These assets are acquired principally for the purpose of
generating a profit from short term fluctuation in price. All derivatives and
liabilities from the short sales of financial instruments are classified as
held for trading.
Financial assets at fair value through profit or loss upon initial recognition
These include equity securities and debt instruments that are not held for
trading. These financial assets are classified at FVTPL on the basis that they
are part of a group of financial assets which are managed and have their
performance evaluated on a fair value basis, in accordance with risk
management and investment strategies of the Company, as set out in each of
their offering documents. The financial information about the financial assets
is provided internally on that basis to the Investment Manager and to the
Board of Directors.
Derivatives - Options
Derivatives are classified as held for trading (and hence measured at fair
value through profit or loss), unless they are designated as effective hedging
instruments (however the Company does not apply any hedge accounting). The
Master Fund's derivatives relate to option contracts.
Options are contractual agreements that convey the right, but not the
obligation, for the purchaser either to buy or sell a specific amount of a
financial instrument at a fixed price, either at a fixed future date or at any
time within a specified period.
The Master Fund purchases and sells put and call options through regulated
exchanges and OTC markets. Options purchased by the Master Fund provide the
Master Fund with the opportunity to purchase (call options) or sell (put
options) the underlying asset at an agreed-upon value either on or before the
expiration of the option. The Master Fund is exposed to credit risk on
purchased options only to the extent of their carrying amount, which is their
fair value.
Options written by the Master Fund provide the purchaser the opportunity to
purchase from or sell to the Master Fund the underlying asset at an
agreed-upon value either on or before the expiration of the option.
Options are generally settled on a net basis.
Derivatives relating to options are recorded at the level of the Master
Fund. The financial statements of the Company do not reflect the derivatives
as they form part of the net asset value (NAV.) of the Master Fund which is
fair valued.
(ii) Financial assets at amortised cost
The Master Fund measures financial assets at amortised cost if both of the
following conditions are met:
· The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual cash flows
· The contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding
Financial assets at amortised cost are subsequently measured using the
effective interest (EIR) method and are subject to impairment. Gains and
losses are recognised in profit or loss when the asset is derecognised,
modified or impaired. The Master Fund's financial assets at amortised cost
comprise 'trade and other receivables' and 'cash and cash equivalents in the
statement of financial position.
(iii) Other financial liabilities
This category includes all financial liabilities, other than those classified
as fair value through profit or loss. The Master Fund includes in this
category amounts relating to trade and other payables and dividend payable.
(a) Recognition
The Master Fund recognises a financial asset or a financial liability when,
and only when, it becomes a party to the contractual provisions of the
instrument.
Purchases or sales of financial assets that require delivery of assets within
the time frame generally established by regulation or convention in the market
place are recognised directly on the trade date, i.e., the date that the
Master Fund commits to purchase or sell the asset.
(b) Initial measurement
Financial assets and liabilities at fair value through profit or loss are
recorded in the statement of financial position at fair value. All transaction
costs for such instruments are recognised directly in profit or loss.
Derivatives embedded in other financial instruments are treated as separate
derivatives and recorded at fair value if their economic characteristics and
risks are not closely related to those of the host contract, and the host
contract is not itself classified as held for trading or designated at fair
value though profit or loss. Embedded derivatives separated from the host are
carried at fair value.
Financial assets at amortised cost and financial liabilities (other than those
classified as held for trading) are measured initially at their fair value
plus any directly attributable incremental costs of acquisition or issue.
(c) Subsequent measurement
The Master Fund measures financial instruments which are classified at fair
value through profit or loss at fair value. Subsequent changes in the fair
value of those financial instruments are recorded in 'Net gain or loss on
financial assets and liabilities at fair value through profit or loss.
Interest earned elements of such instruments are recorded separately in
'Interest revenue'. Dividend expenses related to short positions are
recognised in 'Dividends on securities sold not yet purchased'. Dividend
income/distributions received on investments at FVTPL is recorded in "Net gain
or loss on financial assets at fair value through profit or loss".
Financial assets at amortised costs are subsequently measured using the
effective interest method and are subject to impairment. Gains and losses are
recognised in profit or loss when the asset is derecognised, modified or
impaired.
(iii) Other financial liabilities
(d) Subsequent measurement
Financial liabilities, other than those classified as at fair value through
profit or loss, are measured at amortised cost using the effective interest
method. Gains and losses are recognised in profit or loss when the liabilities
are derecognised, as well as through the amortisation process.
The effective interest method is a method of calculating the amortised cost of
a financial asset or a financial liability and of allocating the interest
income or interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of the financial instrument or, when
appropriate, a shorter period to the net carrying amount of the financial
asset or financial liability. When calculating the effective interest rate,
the Master Fund estimates cash flows considering all contractual terms of the
financial instruments, but does not consider future credit losses. The
calculation includes all fees paid or received between parties to the contract
that are an integral part of the effective interest rate, transaction costs
and all other premiums or discounts.
(e) Derecognition
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is derecognised where:
· The rights to receive cash flows from the
asset have expired; or
· The Company has transferred its rights to
receive cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party under a
'pass-through' arrangement; and
Either (a) the Master Fund has transferred substantially all the risks and
rewards of the asset, or (b) the Master Fund has neither transferred nor
retained substantially all the risks and rewards of the asset, but has
transferred control of the asset. When the Master Fund has transferred its
rights to receive cash flows from an asset (or has entered into a pass-through
arrangement), and has neither transferred nor retained substantially all the
risks and rewards of the asset nor transferred control of the asset, the asset
is recognised to the extent of the Master Fund's continuing involvement in the
asset.
The Master Fund derecognises a financial liability when the obligation under
the liability is discharged, cancelled or expires. When an existing financial
liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as the derecognition of
the original liability and the recognition of a new liability. The difference
in the respective carrying amounts is recognised in profit or loss.
Determination of fair value
The Master Fund measures its investments in financial instruments, such as
equities, debentures and other interest-bearing investments and derivatives,
at fair value at each reporting date.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value measured is based on the presumption that
the transaction to sell the asset or transfer the liability takes place either
in the principal market for the asset or liability or, in the absence of a
principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to the Master
Fund. The fair value for financial instruments traded in active markets at
the reporting date is based on their quoted price without any deduction for
transaction costs.
For all other financial instruments not traded in an active market, the fair
value is determined by using appropriate valuation techniques. Valuation
techniques include: using recent arm's length market transactions; reference
to the current market value of another instrument that is substantially the
same; discounted cash flow analysis and option pricing models making as much
use of available and supportable market data as possible. An analysis of fair
values of financial instruments and further details as to how they are
measured is provided in Note 6.
Impairment of financial assets
The Master Fund uses the following hierarchy for determining and disclosing
the fair value of the financial instruments by valuation technique:
· Level 1: quoted (unadjusted) market prices in
active markets for identical assets and liabilities.
· Level 2: valuation techniques for which the lowest
level input that is significant to the fair value measurement is directly or
indirectly observable.
· Level 3: valuation techniques for which the lowest
level input that is significant to the fair value measurement is unobservable.
The Master Fund recognises an allowance for expected
credit losses (ECLs) for all financial assets measured at amortised cost. ECLs
are based on the difference between the contractual cash flows due in
accordance with the contract and all the cash flows that the Master Fund
expects to receive, discounted at an approximation of the original effective
interest rate. The expected cash flows will include cash flows from the sale
of collateral held or other credit enhancements that are integral to the
contractual terms.
ECLs are recognised either on a 12-month or lifetime basis. For credit
exposures for which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses that result
from default events that are possible within the next 12-months (a 12-month
ECL). For those credit exposures for which there has been a significant
increase in credit risk since initial recognition, a loss allowance is
required for credit losses expected over the remaining life of the exposure,
irrespective of the timing of the default (a lifetime ECL).
The Master Fund considers a financial asset in default when contractual
payments are 90 days past due. However, in certain cases, the Master fund may
also consider a financial asset to be in default when internal or external
information indicates that the Master fund is unlikely to receive the
outstanding contractual amounts in full before taking into account any credit
enhancements held by the Master fund. A financial asset is written off when
there is no reasonable expectation of recovering the contractual cash flows.
For trade receivables, the Master Fund applies a simplified approach in
calculating ECLs. Therefore, the Master Fund does not track changes in credit
risk, but instead recognises a loss allowance based on lifetime ECLs at each
reporting date. At the reporting date, the assessment of the Master Fund's
debt instruments which include trade and other receivables and cash and cash
equivalents were considered as de minimis. As a result, no ECL has been
recognised as any amount would have been insignificant.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount
reported in the statement of financial position if, and only if, there is a
currently legally enforceable right to offset the recognised amounts and there
is an intention to settle on a net basis, or to realise the asset and settle
the liability simultaneously.
Net gain or loss on financial assets and liabilities at fair value through
profit or loss
This item includes changes in the fair value of financial assets and
liabilities held for trading or designated upon initial recognition as 'at
fair value through profit or loss' and excludes interest and expenses. At
the Master Fund Level, the fair value gains and losses exclude interest and
dividend income.
Unrealised gains and losses comprise changes in the fair value of financial
instruments for the year and from reversal of prior year's unrealised gains
and losses for financial instruments which were realised in the reporting
period.
Realised gains and losses on disposals of financial instruments classified as
'at fair value through profit or loss' are calculated using the Average Cost
(AVCO) method. They represent the difference between an instrument's initial
carrying amount and disposal amount, or cash payments or receipts made on
derivative contracts (excluding payments or receipts on collateral margin
accounts for such instruments).
Due to and due from brokers
Amounts due to brokers are payables for securities purchased (in a regular way
transaction) that have been contracted for but not yet delivered on the
reporting date at the Master Fund level. Refer to the accounting policy for
financial liabilities, other than those classified at fair value through
profit or loss for recognition and measurement.
Amounts due from brokers include margin accounts and receivables for
securities sold (in a regular way transaction) that have been contracted for
but not yet delivered on the reporting date. Refer to accounting policy for
financial assets at amortised cost for recognition and measurement.
Interest revenue and expense
Interest revenue and expense are recognised in profit or loss for all
interest-bearing financial instruments using the effective interest method.
Dividend revenue
Dividend revenue is recognised when the Master Fund's right to receive the
payment is established. Dividend revenue is presented gross of any
non-recoverable withholding taxes, which are disclosed separately in profit or
loss of the Master Fund.
6. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH
PROFIT OR LOSS
6(a). Investment in subsidiaries at fair value
The Company has established Africa Opportunity Fund L.P., an exempted limited
partnership in the Cayman Islands to ensure that the investments made and
returns generated on the realisation of the investments made and returns
generated on the realisation of the investments are both effected in the most
tax efficient manner. All investments made by the Company are made through the
limited partner which acts as the master fund. At 31 December 2021, the
limited partners of the limited partnership are the Company (99.45%) and AOF
CarryCo Limited (0.55%). The general partner of the limited partnership is
Africa Opportunity Fund (GP) Limited. Africa Opportunity Fund Limited holds
100% of Africa Opportunity Fund (GP) Limited.
2021 2020
USD USD
26,091,546 22,581,947
Investment in Africa Opportunity Fund L.P.
3,799 2,356
Investment in Africa Opportunity Fund (GP) Limited
26,095,345 22,584,303
Total investment in subsidiaries at fair value
22,584,303 47,888,007
Fair value at 01 January
(7,714,445) (25,786,628)
Reduction in investment in subsidiaries*
11,225,487 482,924
Net gain on investment in subsidiaries at fair value
26,095,345 22,584,303
Fair value at 31 December
* The reduction in investment in subsidiaries relates to capital withdrawn
from the Master Fund by the Company.
6(b). Fair value hierarchy
The Company uses the following hierarchy for determining and disclosing the
fair value of the financial instruments by valuation technique:
Level 1: quoted (unadjusted) market prices in active markets for identical
assets and liabilities.
Level 2: valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable.
Level 3: valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
Note: The assets and liabilities of the Master Fund have been presented but do
not represent the assets and liabilities of the Company as the Master Fund has
not been consolidated.
· Fair value hierarchy of the Company
31 December
2021 Level 1 Level 2 Level 3
COMPANY USD USD USD USD
26,095,345 26,095,345
Investment in subsidiaries - -
31 December
2020 Level 1 Level 2 Level 3
COMPANY USD USD USD USD
22,584,303 22,584,303
Investment in subsidiaries - -
· Fair value hierarchy of the Master Fund.
The Company has investment in Africa Opportunity Fund L.P., the Master Fund,
amounting to USD 26,091,546. The underlying investments of the Master Fund
amounts to USD 24,015,367. Details on the financial assets and liabilities of
the Master Fund and fair value hierarchy are as follows:
31 December
2021 Level 1 Level 2 Level 3
MASTER FUND USD USD USD USD
Financial assets at fair value through profit or loss
23,885,626 16,463,988 7,421,638 -
Equities
129,741 129,741 - -
Debt securities
24,015,367 16,593,729 7,421,638 -
31 December
2020 Level 1 Level 2 Level 3
MASTER FUND USD USD USD USD
Financial assets at fair value through profit or loss
18,351,992 12,139,382 6,212,610
Equities -
1,128,484 1,128,484
Debt securities - -
19,480,476 13,267,866 6,212,610
-
6(c). The valuation technique of the investment in subsidiaries at
Company level is as follow:
The Company's investment manager considers the valuation techniques and inputs
used in valuing these funds as part of its due diligence, to ensure they are
reasonable and appropriate and therefore the NAV of these funds may be used as
an input into measuring their fair value. In measuring this fair value, the
NAV of the funds is adjusted, as necessary, to reflect restrictions on
redemptions, future commitments, and other specific factors of the fund and
fund manager. In measuring fair value, consideration is also paid to any
transactions in the shares of the fund. Given that there has been no such
adjustments made to the NAV of the underlying subsidiaries and given the
simple structure of the subsidiaries investing over 95% in quoted funds, the
Company classifies these investment in subsidiaries as Level 2.
6(d). The valuation technique of the investments at Master Fund level
are as follows:
Equity and debt securities
These pertain to equity and debt instruments which are quoted for which there
is a market price. As a result, they are classified within level 1 of the
hierarchy except for the valuation of listed on the Zimbabwe Stock Exchange
which have been classified as level 2 given that their quoted share price has
been discounted as at 31 December 2021 as follows:
Valuation of investments listed on the Zimbabwe Stock Exchange
Beginning in June 2020, the Zimbabwe authorities suspended Old Mutual shares
from the Zimbabwe Stock Exchange, necessitating the Company to devise an
alternative transparent discount factor. The new discount factor is based on
the official Zimbabwe Dollar exchange rate at the end of June 2019, when the
Zimbabwe Dollar, became the sole legal tender in Zimbabwe, modified by the
inflation differential between Zimbabwe and the United States captured in
their respective monthly Consumer Price Indices (the US Consumer Price Index
is that for urban consumers), then adjusted by the proportion of export
proceeds that must be surrendered by Zimbabwean exporters to the Zimbabwe
Reserve Bank. 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, as at 31 December 2021 at a discount rate of 48.20% (the
discount rate was 31.58% as at 31 December 2020). The value of the Zimbabwe
investments recorded in the books of the Company, after applying this discount
factor, was USD 4,295,838 (2020: USD 2,586,810).
Written put options
These are traded on an active market and have a quoted market price. They have
therefore been classified in level 1 of the hierarchy.
Unquoted debt and equity investments
African Leadership University ("ALU") is a network of tertiary institutions,
currently with operations in both Mauritius and Rwanda. The Investment
Manager valued ALU on the basis of an observable arms-length transaction
between existing shareholders selling a portion of their shares and an
unaffiliated third party. The transactions were ratified at a Board meeting
in June 2021, and thus were utilized as the basis of the valuation as at 31
December 2021. At 31 December 2021, the investment in ALU has been
classified under level 2 because the value of the investment utilizes the
recent transaction.
6(d). The valuation technique of the investments at Master Fund level
are as follows:
Unquoted debt and equity investments
2021 2020
USD USD
3,125,800 3,625,800
Investment in ALU
Financial asset and liabilities at fair value through profit or loss
2021 2020
USD USD
Investment in ALU:
3,625,800 2,361,193
At 1 January
(500,000)
Disposal -
1,264,607
Total gain in profit or loss -
3,125,800 3,625,800
At 31 December
Total gain included in the statement of profit or loss and other comprehensive
income of Africa Opportunity Fund L.P. for asset held at the end of the - 1,264,607
reporting period.
6(e). Statement of profit or loss and other comprehensive Income of the
Master Fund for the year ended 31 December 2021.
The net gain on financial assets at fair value through profit or loss
amounting to USD 11,225,487 (2020: net gain USD 482,924 is due to the gain
arising at the Master Fund level and can be analysed as follows:
2021 2020
USD USD
Income
Interest revenue 46,216 209,116
Dividend revenue 1,281,589 1,487,564
Other income - 348
Net gains on financial assets and liabilities at fair value
through profit or loss 10,519,619 -
1,697,028
11,847,424
Expenses
Net losses on financial assets and liabilities at fair value
through profit or loss - 672,958
Net foreign exchange loss 21,228 45,542
Custodian fees, Brokerage fees and commission 243,377 195,736
Other operating expenses 24,306 71,107
985,343
288,911
Operating gains before tax 11,558,513 711,685
(169,947) (205,367)
Less withholding tax
Total comprehensive gains for the year 506,318
11,388,566
Attributable to:
AOF Limited (direct interests) 11,224,044 482,741
AOF Limited (indirect interests through AOF (GP) 183
Ltd)
1,443
11,225,487 482,924
AOF CarryCo Limited (NCI) 163,079 23,394
506,318
11,388,566
The financial assets and liabilities of the Master Fund are analysed as
follows:
(i) Net gains on financial assets and liabilities at fair value
through profit or loss held by Africa Opportunity Fund L.P.
2021 2020
USD USD
Net gains/(losses) on fair value of financial assets at fair value through 10,519,619 (1,846,446)
profit or loss
Net gains on fair value of financial liabilities at fair value through profit - 1,173,488
or loss
10,519,619 (672,958)
Net gains/(losses)
(ii) Financial asset and liabilities at fair value through profit
or loss held by Africa Opportunity Fund L.P.
2021 2020
USD USD
Held for trading assets:
19,480,476 38,372,509
At 1 January
19,968
Additions -
(6,004,696) (17,045,587)
Disposal
Net gains/(losses) on financial assets at fair value through profit or loss
10,519,619 (1,846,446)
24,015,367 19,480,476
At 31 December (at fair value)
Analysed as follows:
14,726,191
- Listed equity securities 20,759,826
129,741 1,128,485
- Listed debt securities
3,125,800 3,625,800
- Unquoted equity securities
24,015,367 19,480,476
(iii) Net changes on fair value of financial assets at fair value
through profit or loss
2021 2020
USD USD
(569,441) (4,368,072)
Realised
11,089,060 2,521,626
Unrealised
10,519,619 (1,846,446)
Total losses
(iv) Net changes on fair value of financial liabilities at fair
value through profit or loss
2021 2020
USD USD
1,210,600
Realised -
(37,112)
Unrealised -
1,173,488
-
7. RECEIVABLES
2021 2020
USD USD
Amount due from Africa Opportunity Fund L.P. (Note 12) 149,552 83,329
7,862 7,516
Prepayments
157,414 90,845
8. CASH AND CASH EQUIVALENTS
2021 2020
USD USD
21,469 38,965
Other bank accounts
9(a). ORDINARY SHARE CAPITAL
Company
2021 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.
The Company intends to pay or report dividends in order to remain an UK
Reporting Fund, however, there is no assurance that the Company will be able
to pay dividends. In compliance with the current investment strategy,
Directors have the right to return cash through compulsory redemptions, by way
of dividend or any other distribution as permitted by the Listing Rules.
9(b). SHARE CAPITAL AND SHARE PREMIUM
Ordinary Ordinary
Shares Shares
USD Number
38,669,948 74,849,606
At 1 January 2020
Changes during the period:
(24,000,000) (39,843,446)
Redemption of ordinary shares
(766,628) -
Dividend Payment
13,903,320 35,006,160
At 31 December 2020
Changes during the period:
(7,203,973) (10,218,402)
Redemption of ordinary shares
6,699,347 24,787,758
At 31 December 2021
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 Fund merged the C share class and the ordinary shares as contemplated in
the April 2014 issuance of the C share class, and with the consent of the
Board of Directors, on 23 August 2017. The C Class shares were converted into
ordinary shares.
The Shoprite arbitral award issued in 2016. The arbitral award resulted in AOF
not being considered legal owner of the specific Shoprite Holdings;(eps) is
therefore, the Shoprite investment was written off. To effectuate this
merger, Contingent Value Rights certificates for any residual rights with
respect to Shoprite shares listed on the Lusaka Stock Exchange were issued to
the ordinary shareholders of record on 21 August 2017.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.
10. TRADE AND OTHER PAYABLES
Notes 2021 2020
USD USD
17,500 17,500
Directors Fees Payable 12
179,535 130,317
Other Payables
197,035 147,817
Other payables and accrued expenses are non-interest bearing and have an
average term of six months. The carrying amount of trade and other payables
approximates their fair value.
11. EARNING PER SHARE
The earnings per share (EPS) is calculated by dividing the decrease in net
assets attributable to shareholders by number of ordinary shares. The EPS
for 2021 and 2020 represent both the basic and diluted EPS.
2021 2020
Ordinary shares Ordinary shares
10,714,870 (401,744)
Total Comprehensive gain/(loss) USD
24,787,758 35,006,160
Number of shares in issue
Change in net assets attributable to shareholders 0.432 (0.011)
per share USD
12. RELATED PARTY DISCLOSURES
The Directors consider Africa Opportunity Fund Limited (the "Company") as the
ultimate holding company of Africa Opportunity Fund (GP) Limited and Africa
Opportunity Fund L.P.
% equity % equity
Country of interest interest
Name incorporation 2021 2020
Africa Opportunity Fund (GP) Limited Cayman Islands 100 100
Africa Opportunity Fund L.P. Cayman Islands 98.19 98.66
Type of Nature of Volume Balance at
Name of related parties relationship transaction USD 31 Dec 2021
USD
Africa Opportunity Partners Limited 174,395 95,417
Investment Manager Management fee expense
Africa Opportunity Fund LP Subsidiary Receivable - 149,552
SS&C Technologies Administrator Administration fees 26,163 -
Directors Directors Directors' fees 70,000 17,500
Type of Nature of Volume Balance at
Name of related parties relationship transaction USD 31 Dec 2020
USD
Africa Opportunity Partners Limited 534,637 35,000
Investment Manager Management fee expense
Africa Opportunity Fund LP Subsidiary Receivable - 83,329
SS&C Technologies Administrator Administration fees 18,900 -
Directors Directors Directors' fees 70,000 17,500
Key Management Personnel (Directors' fee)
Except for Robert Knapp who has waived his fees, each director has been paid a
fee of USD 35,000 per annum plus reimbursement for out-of pocket expenses
during both 2021 and 2020.
Robert Knapp, who is a director of the Company, also forms part of the
executive team of the Investment Manager. Details of the agreement with the
Investment Manager are disclosed in Note 5. He has a beneficiary interest in
AOF CarryCo Limited. The latter is entitled to carry interest computed in
accordance with the rules set out in the Admission Document (refer to Note 5 -
'Investment management agreement' for further detail of the performance fee
paid to the director).
Details of investments in the Company by the Directors are set out below:
No of shares held Direct interest held %
2021 4,034,732 16.28
2020 5,697,994 16.28
13. TAXATION
Under the current laws of Cayman Islands, there is no income, estate, transfer
sales or other Cayman Islands taxes payable by the Company. As a result, no
provision for income taxes has been made in the financial statements.
Dividend revenue is presented gross of any non-recoverable withholding taxes,
which are disclosed separately in the statement of comprehensive income.
Withholding taxes are not separately disclosed in statement of cash flows as
they are deducted at the source of the income.
A reconciliation between tax expense and the product of accounting profit
multiplied by the applicable tax rate is as follows:
2021 2020
USD USD
10,714,870 (401,744)
Total comprehensive gain/(loss)
Income tax expense calculated at 0% - -
Withholding tax suffered outside Cayman Islands - -
Income tax expense recognized in profit or loss - -
* Withholding taxes are borne at the master fund level and amounted to
USD 169,947 (2020: USD 205,367). These have been included in the NAV of the
subsidiary.
14. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
14(a). AT THE COMPANY'S LEVEL
Introduction
The Company's objective in managing risk is the creation and protection of
shareholder value. Risk is inherent in the Company's activities. It is
managed through a process of ongoing identification, measurement and
monitoring, subject to risks limits and other controls. The process of risk
management is critical to the Company's continuing profitability. The Company
is exposed to market risk (which includes currency risk, interest rate risk
and price risk), credit risk and liquidity risk arising from the financial
instruments it holds.
Risk management structure
The Investment Manager is responsible for identifying and controlling risks.
The Board of Directors supervises the Investment Manager and is ultimately
responsible for the overall risk management approach of the Company.
Fair value
The carrying amount of financial assets and liabilities at fair value through
profit or loss are measured at fair value at the reporting date. The carrying
amount of trade and other receivables, cash and cash equivalents trade and
other payables approximates their fair value due to their short-term nature.
Market risk
Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices and
includes interest rate risk, foreign currency risk and equity price risk. The
Company is not directly exposed to market risk. The Company holds investments
in subsidiaries, Africa Opportunity Fund L.P. (Master Fund) and Africa
Opportunity Fund (G.P.) Limited which are valued at their net asset value. The
Company is thus exposed to market risk indirectly through investments held by
the Master Fund.
Equity price risk
Equity price risk is the risk that the fair value of equities decreases as a
result of changes in the levels of the equity indices and the values of
individual stocks. The equity price risk of the Company arises from the net
asset value (NAV) of the underlying funds, the Master Fund and AOF G.P. The
equity price risk at Company level is analysed as follows:
Equity
Effect on
Company Change in Equity
NAV price 2021
USD
Investment in subsidiaries at fair value through profit or loss
10% 2,609,535
-10% (2,609,535)
Effect on
Company Change in Equity
NAV price 2020
USD
Investment in subsidiaries at fair value through profit or loss
10% 2,258,430
-10% (2,258,430)
Currency risk
All of the Company's financial assets and financial liabilities are
denominated in its functional currency. The Master Fund's investments are
denominated in various currencies. The effect of a change in USD against other
currencies at the Master Fund level will have the same impact at the Company
level and will form part of the NAV of the subsidiary (refer to note 14(b)).
The currency profile of the Company's financial assets and liabilities is
therefore summarised as follows:
2021 2021 2020 2020
Financial Financial Financial Financial
assets liabilities assets liabilities
USD USD USD USD
26,266,366 22,706,597
United States Dollar 197,035 147,817
26,266,366 22,706,597
197,035 147,817
Prepayments are typically excluded as these are not financial assets;
prepayments as at 31 December 2021 and 2020 amounted to USD 7,862 and USD
7,516, respectively.
As at 31 December 2021
Company Gross amounts
of recognised Net amount of
Gross financial financial assets
amounts of liabilities set off presented in
recognised in the statement the statement
financial of financial of financial Financial Cash Net
assets position position instruments collateral amount t
USD USD USD USD USD USD
Cash and cash equivalents 21,469 - 21,469 - - 21,469
21,469 - 21,469 - - 21,469
Total
As at 31 December 2020
Company Gross amounts
of recognised Net amount of
Gross financial financial assets
amounts of liabilities set off presented in
recognised in the statement the statement
financial of financial of financial Financial Cash Net
assets position position instruments collateral amount
USD USD USD USD USD USD
Cash and cash equivalents 38,965 - 38,965 - - 38,965
38,965 - 38,965 - - 38,965
Total
Cash and cash equivalents are offset as the Company has current bank balances
and bank overdrafts with the same counterparty which the Company has current
legally enforceable right to set off the recognised amounts and the intention
to settle on a net basis or realise the asset and settle the liability
simultaneously.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates
will affect future cash flows or the fair values of financial instruments. The
Company's financial assets and liabilities are non-interest bearing;
therefore, the Company is not exposed to interest rate risk and thus, no
sensitivity analysis has been presented.
Credit risk
The Company takes on exposure to credit risk, which is the risk that a
counterparty will be unable to pay amounts in full when due. Financial assets
that potentially expose the Company to credit risk consist principally of cash
and cash equivalent balances and trade and other receivables, comprising of an
intercompany balance with the Master Fund. The extent of the Company's
exposure to credit risk in respect of these financial assets approximates
their carrying values as recorded in the Company's statement of financial
position.
The carrying amount of financial assets represents the maximum credit
exposure. The maximum exposure to credit risk at the reporting date was:
2021 2020
Company Company
Carrying Carrying
amount amount
Notes USD USD
Other receivables, excluding
prepayments 7 149,552 83,329
Cash and cash equivalents 8 21,469 38,965
The cash and cash equivalent assets of the Company are maintained with
Standard Chartered Bank (Mauritius) Ltd. Standard Chartered Bank has an A1-
issuer rating from Moody's long term rating agency, a P-1 short term rating
from Moody's rating agency, an AA- issuer rating from Standard and Poor's
rating agency, and an A-1+ short term rating from Standard and Poor's rating
agency.
Concentration risk
The Company does not have any concentration risk as at 31 December 2021. Given
that the Company has invested in Africa Opportunity Fund L.P (the Master Fund)
which holds investments in various countries in Africa, the concentration risk
therefore arises primarily at the Master Fund Level.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its
financial obligations as they fall due. The Company's approach to managing
liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage
to the Company's reputation.
The Company manages liquidity risk by maintaining adequate reserves, by
continuously monitoring forecast and actual cash flows. The table below
illustrates the maturity profile of the Company's financial liabilities based
on undiscounted payments.
Year 2021 Due Due Due
Due Between 3 Between 1 greater
Due on within 3 and 12 and 5 than 5
demand Months Months years years Total
USD USD USD USD USD USD
Financial liabilities
Other payables - - -
197,035 - 197,035
Total liabilities - - -
197,035 - 197,035
Year 2020 Due Due Due
Due Between 3 Between 1 greater
Due on within 3 and 12 and 5 than 5
demand Months Months years years Total
USD USD USD USD USD USD
Financial liabilities
Other payables - - -
147,817 - 147,817
Total liabilities - - -
147,817 - 147,817
Capital Management
Total capital is considered to be the total equity as shown in the statement
of financial position.
The Company is a closed end fund and repurchase of shares in issue can be done
with the consent of the Board of Directors. The Company is not subject to
externally imposed capital requirements.
The objectives for managing capital are:
· To invest the capital in investment meeting the description,
risk exposure and expected return indicated in the Admission document.
· To achieve consistent capital growth and income through
investment in value, arbitrage and special situations opportunities derived
from the African continent.
· To maintain sufficient size to make the operation of the
Company cost effective.
The primary objective of the Company's capital management is to ensure that it
maintains a strong credit rating and healthy capital ratios in order to
support its business and maximise shareholder value.
14(b). AT THE MASTER FUND'S LEVEL
The financial risks at Master Fund Level are described as follows:
Fair value
The carrying amount of financial assets and liabilities at fair value through
profit or loss held at Master Fund level are measured at fair value at the
reporting date. The carrying amount of other receivables, cash and cash
equivalents, trade and other payables and amount payable to related party at
Master Fund levels approximates their fair value due to their short-term
nature.
Market risk
The market risk lies primarily at the Master Fund level. Short selling
involves borrowing securities and selling them to a broker-dealer. The Master
Fund has an obligation to replace the borrowed securities at a later date.
Short selling allows the Master Fund to profit from a decline in market price
to the extent that such decline exceeds the transaction costs and the costs of
borrowing the securities, while the gain is limited to the price at which the
Fund sold the security short. Possible losses from short sales may be
unlimited as the Master Fund has an obligation to repurchase the security in
the market at prevailing prices at the date of acquisition.
With written options, the Master Fund bears the market risk of an unfavourable
change in the price of the security underlying the option. Exercise of an
option written by the Master Fund could result in the Master Fund selling or
buying a security at a price significantly different from its fair value.
A contract for difference creates, as its name suggests, a contract between
two parties speculating on the movement of an asset price. The term 'CFD'
which stands for 'contract for difference' consists of an agreement (contract)
to exchange the difference in value of a particular currency, commodity share
or index between the time at which a contract is opened and the time at which
it is closed. The contract payout will amount to the difference in the price
of the asset between the time the contract is opened and the time it is
closed. If the asset rises in price, the buyer receives cash from the seller,
and vice versa. The Master Fund bears the risk of an unfavourable change on
the fair value of the CFD. The risk arises mainly from changes in the equity
and foreign exchange rates of the underlying security.
The Master Fund's financial assets are susceptible to market risk arising from
uncertainties about future prices of the instruments. Since all securities
investments present a risk of loss of capital, the Investment Manager
moderates this risk through a careful selection of securities and other
financial instruments. The Master Fund's overall market positions are
monitored on a daily basis by the Investment Manager.
The directors have based themselves on past and current performance of the
investments and future economic conditions in determining the best estimate of
the effect of a reasonable change in equity prices, currency rate and interest
rate.
Equity price risk
Equity price risk is the risk that the fair value of equities decreases as a
result of changes in the levels of the equity indices and the values of
individual stocks.
The equity price risk exposure arises from the Master Fund's investments in
equity securities, from equity securities sold short and from equity-linked
derivatives (the written options). The Master Fund manages this risk by
investing in a variety of stock exchanges and by generally limiting exposure
to a single industry sector to 15% of NAV.
Management's best estimate of the effect on the profit or loss for a year due
to a reasonably possible change in equity indices, with all other variables
held constant is indicated in the table below. There is no effect on 'other
comprehensive income' as the Master Fund have no assets classified as
'available-for-sale' or designated hedging instruments.
In practice, the actual trading results may differ from the sensitivity
analysis below and the difference could be material. An equivalent decrease in
each of the indices shown below would have resulted in an equivalent, but
opposite impact.
Equity
Effect on net assets
attributable to
Master Fund Change in Shareholders
NAV price 2021
USD
Financial assets at fair value through profit or loss 10% 2,401,537
-10% (2,401,537)
Effect on net assets
attributable to
Master Fund Change in Shareholders
NAV price 2020
USD
Financial assets at fair value through profit or loss 10% 1,948,048
-10% (1,948,048)
Currency risk
The Master Fund's investments are denominated in various currencies as shown
in the currency profile below. Consequently, the Company is exposed to the
risk that the exchange rate of the United States Dollar (USD) relative to
these various currencies may change in a manner which has a material effect on
the reported values of its assets denominated in those currencies. To manage
its risks, the Master Fund may enter into currency arrangements to hedge
currency risk if such arrangements are desirable and practicable.
The following table details the Master Fund's sensitivity to a possible change
in the USD against other currencies. The percentage applied as sensitivity
represents management's assessment of a reasonably possible change in foreign
currency denominated monetary items by adjusting the translation at the
year-end for the change in currency rates at the Master Fund level. A positive
number below indicates an increase in profit where the USD weakens against the
other currencies. In practice, actual results may differ from estimates and
the difference can be material. The effect of a change in USD against other
currencies at the Master Fund level as per the table below will have the same
impact at the company level and will form part of the NAV of the subsidiary.
The sensitivity analysis shows how the value of a financial instrument will
fluctuate due to changes in foreign exchange rates against the US Dollar, the
functional currency of the Company.
Currency Risk - Year 2021
Effect on net assets attributable to
Currency shareholders in (USD)
Master Fund
Change: 30% -30%
Botswana Pula (437,444) 437,444
Ghana Cedi (2,299,289) 2,299,289
Kenyan Shilling (111,723) 111,723
South African Rand (62,083) 62,083
Tanzanian Shilling (334,588) 334,588
Zambian Kwacha (1,640,378) 1,640,378
Change: 10% -10%
CFA Franc (27,952) 27,952
Change: 5% -5%
Great British Pound 687 (687)
Currency Risk - Year 2020
Effect on net assets attributable to
Currency shareholders in (USD)
Master Fund
Change: 30% -30%
Botswana Pula (244,269) 244,269
Ghana Cedi (1,241,371) 1,241,371
Kenyan Shilling (113,067) 113,067
South African Rand (356,415) 356,415
Tanzanian Shilling (332,521) 332,521
Zambian Kwacha (536,326) 536,326
Change: 10% -10%
CFA Franc (329,555) 329,555
Egyptian Pound (33,629) 33,629
Change: 5% -5%
Australian Dollar (9,395) 9,395
Great British Pound 717 (717)
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates
will affect future cash flows or the fair values of financial instruments. The
fair values of the Master Fund's debt securities fluctuate in response to
changes in market interest rates. Increases and decreases in prevailing
interest rates generally translate into decreases and increases in fair values
of those instruments.
The investments in debt securities have fixed interest rate and the income and
operating cash flows are not exposed to interest rate risk. The change in fair
value of investments based on a change in market interest rate (a 50 basis
points change) is not significant and has not been disclosed.
Credit risk
Financial assets that potentially expose the Master Fund to credit risk
consist principally cash balances and interest receivable. The extent of the
Master Fund's exposure to credit risk in respect of these financial assets
approximates their carrying values as recorded in the Master Fund's statement
of financial position (note 15). The Master Fund takes on exposure to credit
risk, which is the risk that a counterparty will be unable to pay amounts in
full when due.
The carrying amount of financial assets represents the maximum credit
exposure. The maximum exposure to credit risk at the reporting date was:
2021 2020
Master Fund Master Fund
Carrying Carrying
amount amount
USD USD
Other receivables, excluding
prepayments 28,700 62,221
Cash and cash equivalents 3,159,934 3,899,860
Concentration risk
At 31 December 2021 the Master Fund held investments in Africa which involves
certain considerations and risks not typically associated with investments in
other developed countries. Future economic and political developments in
Africa could affect the operations of the investee companies.
Analysed by geographical distribution of underlying assets:
Master Fund Master Fund
2021 2020
USD USD
Bond & Notes
South Africa 129,741 1,128,484
129,741 1,128,484
Master Fund Master Fund
2021 2020
USD USD
Equity Securities
Ghana 7,664,295 4,137,903
Zambia 5,467,927 1,787,754
Zimbabwe 4,295,838 2,774,717
Other 3,125,800 3,625,800
Botswana 1,458,146 814,231
Tanzania 1,115,294 1,108,402
Kenya 372,409 376,888
Cote D'Ivoire 279,516 1,077,896
South Africa 106,401 94,463
Senegal - 2,217,651
Egypt - 336,287
23,885,626 18,351,992
Total 24,015,367 19,480,476
Analysed by industry of underlying assets:
Master Fund Master Fund
2021 2020
USD USD
Bond & Notes
Consumer Product & Services 129,741 171,877
Consumer Finance - 956,607
129,741 1,128,484
Master Fund Master Fund
2021 2020
USD USD
Equity Securities
Financial Services 7,770,696 4,232,365
Utilities 5,840,336 2,164,642
Real Estate 4,295,838 2,586,810
Other 3,125,800 3,962,087
Consumer Finance 1,458,146 814,231
Beverages 1,115,294 1,108,402
Plantations 279,516 1,077,896
Telecommunications - 2,217,651
Mining Industry - 187,908
23,885,626 18,351,992
Total 24,015,367 19,480,476
15. ANALYSIS OF NAV OF MASTER FUND ATTRIBUTABLE TO ORDINARY SHARES
31.12.2021 31.12.2020
USD USD
ASSETS
Cash and cash equivalents 3,159,934 3,899,860
Trade and other receivables 28,700 62,221
Financial assets at fair value through profit or loss 24,015,367 19,480,476
Total assets 27,204,001 23,442,557
EQUITY AND LIABILITIES
Liabilities
Trade and other payables 474,296 474,296
Amount payable to related party - AOF Ltd 149,552 83,329
Total liabilities 623,848 557,625
Net assets attributable to members' account 26,580,153 22,884,932
16. 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.
For geographical segmentation at the Master Fund level, please refer to Note
14.
17. PERSONNEL
The Company did not employ any personnel during the year (2020: the same).
18. COMMITMENTS AND CONTINGENCIES
There are no commitments or contingencies at the reporting date.
19. 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. During the year ended 31 December 2021, the
Directors approved a partial mandatory redemption of the Company's Ordinary
Shares. 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
Company benefitted from a strong level of realisations from its underlying
portfolio. The redemptions during the year were funded through proceeds
received from realising the assets of the Company.
20. COVID-19 PANDEMIC
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 current investment strategy and distribution policy, while mitigating some
operational risks due to the enhanced levels of cash and cash equivalents as a
consequence of the realisation efforts, does pose other challenges as the
Investment Manager continues to attempt to maximise value while realising
investments during this volatile environment. The Company and the Master
Fund will continue to meet their working capital requirements and other
obligations through utilisation of existing cash resources.
The Board and the Investment Manager are actively working towards assessing
and minimising 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 time.
21. EVENTS AFTER REPORTING DATE
There are no other events after the reporting date which require amendments to
and/or disclosure in these financial statements.
SHARE PRICE
Prices of Africa Opportunity Fund Limited are published daily in the Daily
Official List of the London Stock Exchange. The shares trade under Reuters
symbol "AOF.L" and Bloomberg symbol "AOF LN".
MANAGER
Africa Opportunity Partners LLC.
COMPANY INFORMATION
Africa Opportunity Fund Limited is a Cayman Islands incorporated closed-end
investment company admitted to trading on the SFS operated by the London Stock
Exchange.
CAPITAL STRUCTURE
The Company has an authorized share capital of 1,000,000,000 ordinary shares
of US$0.01 each of which 24,787,758 are issued and fully paid.
LIFE OF THE COMPANY
Directors consider it desirable that Shareholders should have the opportunity
to review the future of the Company at appropriate intervals. Accordingly,
Shareholders passed an ordinary resolution at an extraordinary general meeting
of the Company on 28 February 2014 that the Company continues in existence.
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.
REGISTERED NUMBER
Registered in the Cayman Islands number MC-188243.
Website
www.africaopportunityfund.com
1 Reference indices are calculated in US Dollars using: Nigeria NSE Allshare
Index, South Africa FTSE/JSE Africa Allshare Index, Nairobi NSE Allshare
Index, Egypt Hermes Index, Moex Russia Index, previously known as Russia MICEX
Index, Brazil IBOV Index, the Shanghai Shenzen 300 CSI Index, the India SENSEX
Index, the S&P 500, the Stoxx Europe 600 Index, the FTSE 100 and the
Nikkei 225.
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