REG - Africa OpportunityFd - Annual Results for the Year ended 31 December 2024
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RNS Number : 8074G Africa Opportunity Fund Limited 30 April 2025
30 April 2025
Africa Opportunity Fund Limited (AOF LN)
Annual Results for the Year ended 31 December 2024
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 2024. 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
(https://url.avanan.click/v2/___http:/www.africaopportunityfund.com___.YXAxZTpzaG9yZWNhcDphOm86NmExYzRlOTBhOTAyOGU2ZDI3ZjY2NDAzNTZkMzY5MTc6NjpkZWI1Ojg1MjRhZWQ5MjM4ZjJjYjBjOWI1ZmY0OTM2M2Y3MzdhZmMwOGZhNzlmYTMzNjkzMzhiMWI1NzMyMmIyMTJiMmQ6cDpUOk4)
.
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 2024.
For further information please contact:
Africa Opportunity Fund Limited
Francis Daniels Tel: +2711 684 1528
Shore Capital (Corporate Broker)
Gillian Martin Tel: +44 20 7408 4050
Anita Ghanekar
Sophie Collins
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 as
at 31 December 2024 was $13.8 million (2023: $9.9 million) and its market
capitalisation was $7.5 million (2023: $5.9 million).
Investing objective
The investing objective of the Company is to earn superior returns by
investing in businesses that it believes can flourish in Africa and, in doing
so, aiding capital formation and the mobilisation of savings with the
intention of growing wealth and productivity in Africa's economies. 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 LLC (the "Manager") believe in
the long-term attractiveness of investing in Africa, and that the holdings of
the Company require a long-term perspective to realise full value and that
maintaining an active investment approach will maximise long-term value.
Summary of Investment Strategy and Investment Policies and Restrictions
New investment policy (Effective 15 July 2024)
A change in investment strategy was deemed necessary due to the Directors' and
Shareholders' determination that the Company should reestablish itself as a
"going concern" with an indefinite life as opposed to the prior status during
the liquidation phase as a "not going concern" with a finite life.
Consistent with the 15 July 2024 adoption of the New Investment Policy as
approved at the Company's extraordinary general meeting ("EGM"), the Directors
considered it to be in the best interests of the Company and its shareholders
to terminate the liquidation strategy adopted effective 1 July 2019 and that
the Company's investment policy be changed to generate capital growth and
income through value investments in the continent of Africa. The Company's
investments will be focused on industries and companies that the Investment
Manager believes have scope for substantial profitable growth with the
capacity to thrive even in stressed macro-economic or macro-political
settings. Shareholders approved the adoption of the New Investment Policy
effective 15 July 2024.
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. Such
companies may be domiciled in Africa or outside Africa or, if listed, listed
either on an African stock exchange or a non-African stock exchange. The
geographic mix of investments varies over time depending on the relative
attractiveness of opportunities among countries and regions.
Type of investments. The Company may invest in equity, quasi-equity debt
instruments or real estate interests 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.
Borrowings. 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. Borrowings may be utilised for
investment purposes with the prior approval of the Board. The Company has no
borrowing or gearing limits in its Articles but gearing, represented by
borrowings as a percentage of Net Asset Value, will not exceed 30% at the time
of drawdown.
Dividend policy
The Company has been accepted into the UK Reporting Fund Status regime.
Upon shareholder approval at the 15 July 2024 EGM, the Company initiated a
change to the dividend distribution policy. While the Company intends to
continue to meet the requirements of the UK Reporting Fund Status regime, it
is the current intention of the Directors to reinvest any income received from
investee companies as well as the net proceeds of any realisations in the
Company's portfolio. However, the Directors may consider the payment of
dividends (or other methods of returning net proceeds to Shareholders in a tax
efficient manner) in the future when, in their view, the Company has
sufficient distributable profits after taking into account the working capital
needs of, and investment opportunities available to, the Company.
Life of the Company
The Company does not have a fixed life. Consistent with the 15 July 2024
adoption of the New Investment Policy as approved at the Company's EGM, the
Company will no longer propose continuation votes.
CHAIRPERSON'S STATEMENT
2024 Review
Africa Opportunity Fund Limited
Chairperson's Statement
Africa Opportunity Fund Limited (the "Fund" or "AOF"), pursuant to the votes
of a majority of its shareholders during an extraordinary general meeting in
July 2024, replaced its realisation investment strategy with a renewed active
investment strategy.
2024 was a pleasing year for the Fund as its net asset value rose 39% to
$1.201 per share. To provide some basis for comparison, South Africa rose
9%, Nigeria fell 16%, Kenya rose 76%, and Egypt fell 28%. In non-African
emerging markets, China rose 15%, Brazil fell 30% and India rose 6%. In
developed markets, Japan rose 9%, the US rose 25%, Europe rose 3%, and the UK
rose 7%. 1 African indices and exchange traded funds ('etf') rose,
respectively, by: 6% for the MSCI EFM Africa index, 5% for the S&P Africa
Top 40 Index, 5% for Amundi Pan-Africa etf, 3% for XMAF LN etf, and 12% for
AFK US etf.
Africa's macro-economy experienced subdued economic growth in 2024 as the cost
of living rose significantly for African consumers. The UN Food and
Agricultural Organization World Food Price index rose 7% in 2024. Brent crude
oil fell slightly from $77 per barrel at the end of 2023 to $75 per barrel at
the end of 2024 while the gold price rose 27% 2 . In the economies in which
the Fund is invested sovereign debt burdens remain heavy. Natural disasters
also disrupted a lot of economic activity in some of the economies. In
Kenya, for example, after the withdrawal of its original 2024 Finance Bill
induced by the June riots resulted in an increase in the domestic borrowing
needs, Kenya experienced a rise in its debt service-to-revenue and grant ratio
from 61% in December 2023 to 64% in December 2024 3 . This ratio will
remain, on average, above 60% until the end of 2028 4 . At that level, the
Kenya government's capacity to support the growth of Kenya's economy is
severely circumscribed. The recent mutual decision of the International
Monetary Fund and Kenya to replace the ninth review of Kenya's current
Extended Fund Facility with a new Fund program was a sobering sign of its
inability to meet the Facility's benchmarks. Nevertheless, the Fund's
investment - Kenya Power - benefited from a long overdue electricity tariff
increase in 2023 and an appreciation of the Kenyan shilling - illustrating the
value of government policy support for cost-reflective tariffs.
Zimbabwe, as another example, suffered intense power outages and low economic
growth from a severe El Nino-induced drought that sharply reduced the
generation capacity of the Kariba dam and constrained agricultural
production. Commercial real estate in Zimbabwe, though, remains a hedge
against high inflation and an imperfect hedge against devaluations. Most
tenants of Zimbabwean commercial real estate pay rentals in either Dollars or
their local currency equivalent. The aggregate market capitalization of the
Fund's property portfolio, in US Dollars ("Dollars"), rose 171% in spite of
the 91% official devaluation of the Zimbabwean currency against Dollars 5 .
AOF's 2024 modest disposals took place in the Zimbabwean property portfolio in
the public market.
Ghana experienced some progress on both its economic and debt restructuring
fronts. At 5.7%, Ghana's GDP growth rate was solid, as its construction and
mining sectors grew, 9.6% and 9.4%, respectively. The Ghana government
completed 93% of its restructuring program, leaving it with the task of
restructuring $2.7 billion of debt owed to commercial bank creditors. 6 Debt
distress stalks Ghana as it faces both large repayments and high nominal
interest rates for the balance of this decade. 7 Its inflation rate
stagnated at 23% throughout 2024. Ghana's GDP growth rate gives the Fund
sufficient terrain to hunt for ignored and profitable investment targets.
2025 Outlook
Africa faces a global economy marked by fragmenting trade relations among the
largest economies, as the United States imposes tariffs on the rest of the
world. Consequently, the Fund's outlook is shrouded in high levels of
uncertainty with significant downside risks. The International Monetary Fund
forecast Sub-Saharan Africa's 2025 gross domestic product to rise by 3.8%
while inflation continues to decline in the region. 8 Despite regional
growth and inflation trending in the right direction, growth in GDP per capita
among African countries is insufficient to stimulate a rapid decline in
poverty. A major reason for that insufficiency is the low public savings
ratios of African governments which constrain publicly funded investments.
As one example, Nigeria has not enjoyed public savings since 2014, thus
constricting the possible quantum of public investments in Africa's most
populous country. 9 In recent years, Nigeria has taken steps to boost its
public savings rate by taking the difficult action of cutting its fuel
subsidies.
Nigeria, like Benin and Senegal, has joined Cote d'Ívoire and Kenya in
regaining access to the Eurobond market, albeit at high real interest rates.
Foreign exchange liquidity continues to improve for portfolio investors across
Africa. Market valuations, as captured by indices like the MSCI EFM Africa
Index, have continued their recovery from post Global Financial Crisis
historical lows. 10 In sum, 2025 should be a year in which the market
capitalisations of African companies continue to rise. 11 The Fund will
target investments among companies that generate hard currency-denominated
revenues, raise the productivity of African consumers and producers, or
increase the stock of long-term domestic African financial capital.
In closing, I wish also to extend my thanks to our shareholders for their
support.
Dr. Myma Belo-Osagie
Chairperson
29 April 2025
MANAGER'S
REPORT
2024 marked the seventeenth full year of operation of Africa Opportunity Fund
(the "Fund" or "AOF"). The NAV of its ordinary shares had an annual return of
39%. At year-end, Africa Opportunity Fund, L.P., the investment subsidiary
of AOF, held $1.5 million in cash, and $13 million in equity securities. The
Fund's principal underlying end-of-year holdings were in Ghana, Kenya,
Mauritius, and Zimbabwe.
The balance of this report will discuss a few of the Fund's holdings.
The Fund's Zimbabwean property holdings turned in strong returns. The Fund's
internal estimates of the Zimbabwe Dollar 12 (#_ftn12) declined by 87% versus
a 91% implied fall of the official value of the Zimbabwe Dollar/Zimbabwe Gold
against the US Dollar("Dollar"). This property portfolio, however, rose by
171% (including disposals), in Dollars. Mashonaland Holdings' total return
soared by 392% while First Mutual Properties' total return was up by 28%.
The closing market capitalisations of Mashonaland Holdings ("Mash") and First
Mutual Properties ("FMP") were, respectively, $86 million and $37 million.
Mash's investment property was valued at $86 million at half-year while FMP's
investment property was valued at $125 million. Consequently, Mash's end of
year stock market capitalisation approximated its book value while FMP's
capitalisation was at a 70% discount to its book value. The shares of both
Mash and FMP trade on exceedingly thin volumes, making their share prices
susceptible to intense volatility. That volatility is transmitted to the
Fund's net asset value, which has suffered more volatility with the sharp rise
in the valuation of its Zimbabwe property portfolio. Our internally derived
Zimbabwe Gold exchange rate continues to serve as a realistic and conservative
rate for valuing the Fund's Zimbabwean holdings. Zimbabwe continues to
suffer from high inflation and foreign currency shortages. Nevertheless, our
property holdings do preserve purchasing power in the long run. Our intent
in disposing of these holdings remains to minimise the devaluation risk facing
disposal proceeds.
Enterprise Group's total return of its shares was -29% in 2024. The
unrealised loss of its -10% Cedi-denominated total return was compounded by
the 19% depreciation of the Cedi. Enterprise's equity attributable to
shareholders, at $91 million 13 , at the end of 2024, was flat when compared
to $88 14 million of equity at the end of 2023. However, it was down 13%
when compared against the $104 million of equity at the end of 2021. That
13% decline was substantially better than the 58% collapse of the Cedi,
against the Dollar, since December 2021. In 2024, despite the Cedi
depreciating by 19% against the Dollar, Enterprise's insurance revenues alone,
in Dollars, climbed 16% to $127 million, its comprehensive income attributable
to shareholders climbed 171% to $23 million, and its net cash from operating
activities rose 46% to $56 million. There were three major factors behind
these results. Firstly, in Cedis, at 40%, 2024 versus 2023 insurance
revenues grew at a higher rate than the corresponding 33% insurance expenses
increase and the corresponding 15% rise in operating expenses. Secondly,
there was a substantial decrease in reinsurance expenses, as Enterprise
retained more of its written business, and, thirdly, a material fall in
insurance finance expense as Ghana's inflation rate declined to approximately
23% in 2024. Over the last 25 years to 2024, in Dollars, Enterprise's
insurance revenues jumped 61x, net profits attributable to shareholders was up
26x, and net cash from operating activities multiplied 28x. Enterprise had a
strong year in both Cedis and Dollars. Valued on a P/E ratio of 1.15x, a
dividend yield of 4.3%, and a P/B ratio of 0.29x, Enterprise's $27 million
market capitalization is cheap 15 .
The Fund's fourth largest holding is Sand Tech Holdings ("Sand"), formerly
African Leadership International ("ALI"). Sand spun out ALI's educational
division in 2024. It intends to focus on growing globally its AI consulting
business. Several of its consultants will be recruited from its erstwhile
educational division. There was no change in the Fund's holding in Sand in
2024.
Kenya Power's shares enjoyed a total return of 371% in Dollars, as the Kenyan
shilling appreciated 18% against the Dollar, from 141 Kenyan shillings ('KES")
on June 30, 2023 to 129 KES by June 30, 2024 and the balance of 2024 16 .
Kenya relies on renewable energy (geothermal, hydro, solar, and wind) for
approximately 80% of its national generation capacity 17 . Its baseload
capacity is powered by predictable renewable energy. Kenya Power swung from
a loss of KES 3.19 billion ($25 million) in the year ending June 30, 2023 to a
profit of $223 million in 2024. Its 2024 operating profit/average asset
ratio was 12%, as its operating profit more than doubled from KES 19.2 billion
($149 million) in 2022/23 to KES 41.4 billion ($308 million) in 2023/24. The
primary cause of this turn of fortunes was the KES' appreciation. 2023's
unrealised foreign exchange losses of $131 million were flipped into 2024's
unrealised foreign gains of $59 million, a swing of $190 million. Kenya
Power, despite high commercial and technical losses, continued to benefit from
the tariff increases approved in April 2023 by Kenya's energy authorities plus
higher amounts of sold electricity units. Power unit sales rose 2.8% 18 to
10,516 GWh while revenues climbed 21% to KES 231 billion ($1.7 billion).
Operating expenses rose 24% to KES 46 billion ($341 million). Kenya Power's
operating margin tripled from 5% in 2022/3 to 15% in 2023/4. The KES
appreciation also lowered the KES cost of Dollar-denominated power
purchases. However, Kenya Power's free cash flow fell by 80% to $27.4
million in 2023/4, as a doubling of property, plant and equipment purchases
was juxtaposed with smaller net operating cash flows (year-on-year). All of
its free cash flow was applied to reduce debt. In fact, since the 2018 debt
peak of $1.248 billion, Kenya Power has applied most of its cumulative $557
million of free cash flow to reduce its debt stock by $531 million. Its debt
stock now sits below the 2014 level of $840 million, when its market
capitalization was $296 million. The December 2024 deadline for the
Government of Kenya's undertaking to reduce the government-supported foreign
currency denominated concessional debt of Kenya Power by novating that debt to
Kenya Transmission Company ('Ketraco'), a wholly-owned subsidiary of the Kenya
Government, as consideration for Ketraco acquiring Kenya Power's transmission
assets, has been extended to June 2025.
Kenya Power continues to be hobbled by several handicaps. For example, a lot
of its equipment is old and inefficient; it is vulnerable to foreign exchange
losses arising from a depreciating Kenyan shilling; it has an 0.82x current
ratio (negative working capital) in breach of the 1x current ratio required by
its commercial bankers; and long-outstanding receivables owed by the
government and other customers amount to KES 47.2 billion ($365 million), if
written off, would cut Kenya Power's shareholders equity from $675 million to
$388 million. Yet, valued on a P/E ratio of 0.3x, a dividend yield of 3%,
and a P/B ratio of 0.13x, both Kenya Power's $98 million market capitalisation
and its EV/EBITDA ratio of 1.2 are cheap 19 .
We shall strive to enhance the value of the Fund in this fog of doubts and
uncertainty. We continue to believe that the Fund's holdings are
undervalued.
Francis Daniels
Africa Opportunity Partners
April 2025
AFRICA OPPORTUNITY FUND LIMITED
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER
2024
Notes 2024 2023
USD USD
Income
Net gains on investment in subsidiaries at fair value
through profit or loss 6(a) 4,428,175 -
4,428,175 -
Expenses
Net losses on investment in subsidiaries at fair value
through profit or loss 6(a) - 1,293,120
Management fees 5(a) 131,963 69,656
Other operating expenses 104,657 102,037
Directors' fees 12 70,001 70,010
Audit and professional fees 220,419 154,453
527,040 1,689,276
Income/(Loss) for the year attributable to equity holders* 3,901,135 (1,689,276)
Income/(Loss) per share attributable to equity holders** 11 0.340 (0.114)
* There is no other comprehensive income for the year.
** The loss per share attributable to equity holders have been calculated
based on the weighted average number of shares in accordance with IAS 33.
AFRICA OPPORTUNITY FUND LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2024
Notes 2024 2023
USD USD
ASSETS
Cash and cash equivalents 8 205,356 28,967
Prepayments 7 9,507 11,038
Investment in subsidiaries at fair value through profit or loss* 6(a) 9,998,727
13,686,902
Total assets 13,901,765 10,038,732
EQUITY AND LIABILITIES
LIABILITIES
Other payables 10 122,583 160,685
Total liabilities 122,583 160,685
Net assets attributable to shareholders 13,779,182 9,878,047
Ordinary share capital 9(a), 9(b) 114,689 114,689
Share premium 9(b) 5,810,553 5,810,553
Retained earnings 7,853,940 3,952,805
13,779,182 9,878,047
Total equity
Net assets value per share:
- Ordinary shares 1.201 0.861
*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
2024
Share Share Retained
Capital Premium Earnings Total
USD USD USD USD
At 1 January 2023 202,146 1,997,201 16,967,976 19,167,323
CAPITAL TRANSACTIONS:
Redemption of ordinary shares (87,457) (4,430,872) (3,081,671) (7,600,000)
Re-allocation from retained earning to share premium 9(b) - 8,244,224 (8,244,224) -
OPERATIONS:
Loss/total comprehensive loss for the year - - (1,689,276) (1,689,276)
At 31 December 2023 114,689 5,810,553 3,952,805 9,878,047
Share Share Retained
Capital Premium Earnings Total
USD USD USD USD
At 1 January 2024 114,689 5,810,553 3,952,805 9,878,047
OPERATIONS:
- - 3,901,135 3,901,135
Income/total comprehensive income for the year
114,689 5,810,553 7,853,940 13,779,182
At 31 December 2024
AFRICA OPPORTUNITY FUND LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER
2024
2024 2023
USD USD
Operating activities
Income/(Loss) for the year 3,901,135 (1,689,276)
Adjustment for non-cash items:
Net Gains/(losses) on investment in subsidiaries at
fair value through profit or loss 6(a) (4,428,175) 1,293,120
Cash used in operating activities (527,040) (396,156)
Net changes in operating assets and liabilities
Reduction in investments in subsidiaries at fair value
through profit or loss 6(a) 740,000 7,750,000
Decrease in receivable/payable with related party - 227,805
Decrease/(increase) in prepayments 1,531 (2,078)
(Decrease)/increase in other payables (38,102) 7,145
Net cash flows generated from operating activities 703,429 7,982,872
Financing activities
Redemption of ordinary shares 9(b) - (7,600,000)
Net cash flows used in financing activities - (7,600,000)
Net increase/(decrease) in cash and cash equivalents 176,389 (13,284)
Cash and cash equivalents at 1 January 28,967 42,251
Cash and cash equivalents at 31 December 205,356 28,967
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 had a limited life, and was not deemed a going concern, for the
2023 calendar year and the 2024 period through 14 July 2024. Shareholders
ratified the adoption of the New Investment Policy at a 15 July 2024 EGM, as
the Directors and shareholders considered it to be in the best interests of
the Company and its shareholders to terminate the liquidation strategy
previously adopted effective 1 July 2019. The shareholders also ratified
the removal of the continuation vote policy at the EGM. This ratification,
and the transition from a liquidation strategy to a continuing investment
policy, dictated that the Company be deemed to have an indefinite life and be
considered a going concern. See Note 4 for additional details regarding the
going concern status.
The Company aims to earn superior returns by investing in businesses that it
believes can flourish in Africa and, in doing so, aiding capital formation and
the mobilisation of savings with the intention of growing wealth and
productivity in Africa's economies. The Company has the ability to invest in a
wide range of asset classes including real estate interests, equity,
quasi-equity or debt instruments and debt issued by African sovereign states
and government entities.
The Company's investment activities are managed by Africa Opportunity Partners
LLC, a limited liability company incorporated in Delaware, United States and
acting as the investment manager pursuant to an Amended and Restated
Investment Management Agreement dated 21 June 2024.
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 holds 100% of Africa
Opportunity Fund (GP) Limited.
The financial statements for the Company for the year ended 31 December 2024
were authorised for issue in accordance with a resolution of the Board of
Directors on 29 April 2025.
Presentation currency
The financial statements are presented in United States dollars ("USD"). All
figures are presented to the nearest dollar.
2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
The material 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 IFRS Accounting
Standards 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, its interest in the subsidiaries
has been classified as financial assets at fair value through profit or loss,
and measured at fair value. This consolidation exemption has been applied and
more details of this assessment are provided in Note 4 "critical accounting
judgements, estimates and assumptions." 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.
Although these estimates are based on management's knowledge of current events
and actions, actual results ultimately may differ from those estimates. 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 material to the
financial statements are disclosed in Note 4.
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 at
fair value through profit or loss, 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.
Please refer to Note 1 and Note 4 for additional details regarding the going
concern status of the Company.
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 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.
Classification
(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 of '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 other payables.
(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
marketplace are recognised directly on the trade date, i.e., the date that the
Master Fund commits to purchase or sell the asset.
(b) Initial measurement
Financial assets and liabilities at fair value through profit or loss are
recorded in the statement of financial position at fair value. All transaction
costs for such instruments are recognised directly in profit or loss.
(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 investment in
subsidiaries 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.
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. 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.
The Company derecognises a financial liability when the obligation under the
liability is discharged, cancelled or expires.
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, there was no receivable from
related party. As a result, no ECL has been recognised.
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.
Determination of fair value
The Company, at the feeder level, measures it investments in subsidiaries at
net asset value (NAV) at each reporting date. Please refer to Note 6 for
additional details.
For investments at the master fund level, 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 at the master level that are 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 material to the fair value measurement is directly or
indirectly observable.
· Level 3: valuation techniques for which the lowest
level input that is material to the fair value measurement is unobservable.
Net gain or loss on financial assets at fair value through profit or loss
This item includes changes in the fair value of financial assets held for
trading or 'at fair value through profit or loss' and excludes 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.
Classification of financial instruments, liabilities and equity.
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 satisfy the above conditions and thus meet the requirements to be
classified as equity. Movement in fair value is shown in the Statement of
Profit or Loss and Other Comprehensive Income as an 'income/(loss) for the
year attributable to equity holders'.
Dividend income
Dividend revenue is recognised when the Company's 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 2024. The
Company has not early adopted any other standard, interpretation or amendment
that has been issued but is not yet effective. Other standards have been
considered but have no impact on the financials. Only those standards
relevant to the financials have been disclosed herein.
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 2024:
Effective for
accounting period
beginning on or after
Amendments to IAS 1: Classification of Liabilities as Current or
Non-current
1
January 2024
Although this new standard and amendment applied for the first time in 2024,
it 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 relevant standards, amendments to existing standards and
interpretations were in issue but not yet effective. The Company will adopt
these standards, if applicable, when they become effective. No early adoption
of these standards and interpretations is intended by the Board of directors.
Effective for
accounting period
Amendments to IAS 21: Lack of
Exchangeability
1 January 2025
Amendments to IFRS 9 and IFRS 7: Classification and Measurement of Financial
Instruments 1 January 2026
Amendments to IFRS 9 and IFRS 7: Disclosures - Contracts Referencing
Nature-dependent Electricity 1 January 2026
Amendments to IFRS 18: Presentation and Disclosure in Financial
Statements
1 January 2027
Amendments to IFRS 19: Subsidiaries without Public Accountability:
Disclosures
1 January 2027
The Company does not expect that the adoption of these standards will have any
material impact on the financial statements. No other standards and
interpretations that have been issued but not yet effective, that are not
included above, are expected to have any material impact on the financial
statements.
4. CRITICAL 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 material effect on the
amounts recognised in the financial statements:
Going concern
The Company had a limited life, and was not deemed a going concern, for the
2023 calendar year and the 2024 period through 14 July 2024. At the
Extraordinary General Meeting ("EGM") of the Company held on 15 July 2024, the
shareholders voted in favor of a New Investment Policy which ended the
liquidation strategy and the process of periodic shareholder continuation
votes. The shareholders also ratified the removal of the continuation vote
policy at the EGM. This ratification, and the transition from a liquidation
strategy to a continuing investment policy, dictated that the Company be
deemed to have an indefinite life and be considered a going concern.
Below is a brief synopsis of the investment strategy as approved with the
adoption of the New Investment Policy and consistent with the Company's
Circular dated 24 June 2024:
The Investment Manager, relying on the extensive experience of the management
team, selects a limited number of investment opportunities. In selecting those
investment opportunities, the Investment Manager will adhere to an analytical
process, elements of which include: classifying each investment opportunity in
the appropriate categories of an asset-based equity opportunity, an
earnings-based equity opportunity, distressed debt, corporate debt, African
sovereign debt, arbitrage, or special situations.
The Company will screen potential investee companies according to its value
investing principles. It will seek to invest in investee companies valued at
substantial discounts to their intrinsic value. In terms of industries, the
Company's search will include companies with a record of profitable exports
from Africa, catalysts for productivity growth in Africa, companies
participating in the growth of long-term real savings, companies managing the
growth, and operations, of African infrastructure and networks, and companies
able to lower profitably the real prices of goods and services consumed by
African consumers.
The assessment of equity investment opportunities involves:
· in the case of an asset-based equity opportunity, determining whether
the equity securities of the company or entity under consideration commands a
valuation which is materially lower than the Investment Manager's estimate of
that company's or entity's intrinsic value. The determination of a company's
or entity's intrinsic value is based on a variety of standards such as
comparing the book value of the assets of the company or entity against the
price the Investment Manager believes would be paid for a similar asset in a
private transaction, or the valuations of listed peers of that company or
entity;
· in the case of an earnings-based equity opportunity, determining
whether the equity securities of the company or entity under consideration
possesses both a high real return on assets and an earnings yield higher than
the local currency denominated government debt of the country in which the
assets of that company are located;
· comparing the valuation of the company or entity in question against
valuations of its listed and private peers (where possible) in different parts
of Africa, non-African emerging markets and developed markets;
· understanding the industry in which the company or entity under
consideration operates, the prospects of that industry and the prospects of
competitors of the company or entity in question. This aspect will frequently
require discussions with industry participants;
· comparing each security issued by the relevant company or entity
against its other classes of issued securities to determine which security
offers the best risk-reward ratio to the Group; and
· estimating the product of the probability of loss and the quantum of
loss of an investment opportunity to set off against the product of the
probability of gain and the quantum of gain of that investment to determine
the risk-adjusted potential return on that investment opportunity. As a
general proposition, the higher the anticipated probability of loss of an
investment, the smaller the likely investment.
Provided the investment opportunity falls within the investment policy of the
Group, the Investment Manager will have, on behalf of the Group, the
discretion to make and dispose of investments. However, in the event that an
investment will constitute more than 20% of Net Asset Value at the time of
investment the prior approval of the Board will be required. Before any
investment is undertaken by the Group, all appropriate due diligence will be
undertaken, and this will include checking the United States's sanctions list.
Special consideration will also be given to money laundering and terrorist
financing risks and any and all politically exposed persons who may be a part
of, or have close links with, any target company.
Determination of functional currency
The determination of the functional currency of the Company is critical since
recording of transactions and exchange differences arising thereon are
dependent on the functional currency selected. As described in Note 2, the
directors have considered those factors therein and have determined that the
functional currency of the Company is the United States Dollar.
Assessment for an investment entity
An investment entity is an entity that:
(a) Obtains funds from one or more investors for the purpose of
providing those investor(s) with investment management services;
(b) Commits to its investor(s) that its business purpose is to invest
funds solely for returns from capital appreciation, investment income, or
both; and
(c) Measures and evaluates the performance of substantially all of its
investments on a fair value basis.
An investment entity must demonstrate that fair value is the primary
measurement attribute used. The fair value information must be used internally
by key management personnel and must be provided to the entity's investors. In
order to meet this requirement, an investment entity would:
· Elect to account for investment property using the fair
value model in IAS 40 Investment Property
· Elect the exemption from applying the equity method in
IAS 28 for investments in associates and joint ventures, and
· Measure financial assets at fair value in accordance
with IFRS 9.
In addition, an investment entity should consider whether it has the following
typical characteristics:
· It has more than one investment, to diversify the risk
portfolio and maximise returns;
· It has multiple investors, who pool their funds to
maximise investment opportunities;
· It has investors that are not related parties of the
entity; and
· It has ownership interests in the form of equity or
similar interests.
The Board considers that the Company continues to meet the definition of an
investment entity as it invests solely for returns from capital appreciations,
investment income or both, and measures and evaluates the performance of its
investments in subsidiaries on a fair value basis. In addition, the Company
has more than one investors and the major investors are not related parties of
the Company. 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 material 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 Company's investment manager considers the valuation techniques and inputs
used in valuing the subsidiaries 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.
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 material 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 15 July 2024, the Company and the Investment Manager have, upon the
approval of the Reorganisation Resolution at the EGM in July 2024, entered
into the Amended and Restated Investment Management Agreement which amends the
fees payable to the Investment Manager as follows:
Management fees
A fixed management fee equal to USD$350,000 per annum. The management fee
charged during 2024 was for the period beginning 15 July 2024. No fee was
charged for the period prior to the ratification of the amended agreement.
The Investment Manager's entitlement to future performance fees (through
CarryCo) has been cancelled.
Realisation fees
The Investment Manager was entitled to the following realisation fees during
the period of 1 January 2024 to 15 July 2024 from the net proceeds of all
portfolio realisations (including any cash returned by way of a Compulsory
Redemption):
On distributions of cash to Shareholders: 1 per cent of the net amounts
realised.
Effective 15 July 2024, with the adoption of the New Investment Policy at the
July 2024 EGM, the realization fee was terminated.
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 aggregate realisation, management and performance fees for the financial
year under review amount to USD 131,963 (2023: USD 69,656), The realisation
fees for the financial year under review consist of a reversal of accrued
realisation fees in the amount of USD 31,050 (2023 fees: USD 69,656);
management and performance fees for the financial year under review were USD
163,013 of which USD 163,013 relates to management fees (2023: USD Nil for
management fees and USD Nil for performance fees).
Administrative Agreement
SS&C Technologies Inc. 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 Agreements
A Custodian Agreement has been entered into by the Master Fund and Standard
Chartered Bank (Mauritius) Ltd, whereby Standard Chartered Bank (Mauritius)
Ltd ("SCB") 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.
Following the exit of SCB from the Zimbabwe market in 2024, Custodial
Agreements were entered into by the Master Fund and FBC Bank Limited ("FBC"),
whereby FBC would provide custodian services and hold direct custody of
Zimbabwe securities and would be entitled to a custody fee of 10 basis points
per annum on the market value of the 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.
5b. SUMMARY OF MATERIAL 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 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. These assets are acquired principally for the
purpose of generating a profit from short term fluctuation in price.
Financial assets at fair value through profit or loss upon initial recognition
These include equity securities 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.
(a) Recognition
The Master Fund recognises a financial asset or a financial liability when,
and only when, it becomes a party to the contractual provisions of the
instrument.
Purchases or sales of financial assets that require delivery of assets within
the time frame generally established by regulation or convention in the
marketplace are recognised directly on the trade date, i.e., the date that the
Master Fund commits to purchase or sell the asset.
(b) Initial measurement
Financial assets and liabilities at fair value through profit or loss are
recorded in the statement of financial position at fair value. All transaction
costs for such instruments are recognised directly in profit or loss.
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 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.
Determination of fair value
The Master Fund measures its investments in financial instruments,
specifically equities, 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.
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 material to the fair value measurement is directly or
indirectly observable.
· Level 3: valuation techniques for which the lowest
level input that is material to the fair value measurement is unobservable.
Impairment of financial assets
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 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 2024, the
limited partners of the limited partnership are the Company (96%) and AOF
CarryCo Limited (4%). The general partner of the limited partnership is Africa
Opportunity Fund (GP) Limited. Africa Opportunity Fund Limited holds 100% of
Africa Opportunity Fund (GP) Limited.
2024 2023
USD USD
Investment in Africa Opportunity Fund L.P. 13,682,218 9,995,466
Investment in Africa Opportunity Fund (GP) Limited 4,684 3,261
Total investment in subsidiaries at fair value 13,686,902 9,998,727
Fair value at 01 January 9,998,727 19,041,847
Reduction in investment in subsidiaries* (740,000) (7,750,000)
Net gain/(loss) on investment in subsidiaries at fair value 4,428,175 (1,293,120)
Fair value at 31 December 13,686,902 9,998,727
* 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
material to the fair value measurement is directly or indirectly observable.
Level 3: valuation techniques for which the lowest level input that is
material 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
2024 Level 1 Level 2 Level 3
COMPANY USD USD USD USD
Investment in subsidiaries 13,686,902 - 13,686,902 -
31 December
2023 Level 1 Level 2 Level 3
COMPANY USD USD USD USD
Investment in subsidiaries 9,998,727 - 9,998,727 -
· Fair value hierarchy of the Master Fund
The Company has investment in Africa Opportunity Fund L.P., the Master Fund,
amounting to USD 13,682,218. The underlying investments of the Master Fund
amounts to USD 13,031,892. Details on the financial assets of the Master Fund
and fair value hierarchy are as follows:
31 December
2024 Level 1 Level 2 Level 3
MASTER FUND USD USD USD USD
Financial assets at fair value through profit or loss
Equity securities 13,031,893 3,302,361 9,729,532 -
13,031,893 3,302,361 9,729,532 -
31 December
2023 Level 1 Level 2 Level 3
MASTER FUND USD USD USD USD
Financial assets at fair value through profit or loss
Equity securities 8,727,712 3,706,700 5,021,012 -
8,727,712 3,706,700 5,021,012 -
6(c). The valuation technique of the investment in subsidiaries at
Company level is as follows:
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 have been no such
adjustments made to the NAV of the underlying subsidiaries and given the
simple structure of the subsidiaries investing over 75% in quoted funds, the
Company classifies these investments in subsidiaries as Level 2.
6(d). The valuation techniques of the investments at Master Fund level
are as follows:
Equity investments
These pertain to equity investments 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 2024 as follows:
Valuation of investments listed on the Zimbabwe Stock Exchange
The total carrying value of the investments held by the Master Fund amounted
to USD 13,031,893 as at 31 December 2024 (Note 6(b)), of which USD 7,603,652
represents investments listed on the Zimbabwe Stock Exchange. Based on
quoted prices on the Zimbabwe Stock Exchange, these investments would have
been valued at USD 12,170,608. However, owing to the ongoing market
instability, hyperinflationary economy and difficulty repatriating ZiG
currency to USD, a discount has been applied to the market price to arrive at
the fair value of USD 7,603,652.
In April 2024, the Governor of the Reserve Bank of Zimbabwe introduced the
Zimbabwe Gold Notes and Coins ("ZiG") as the new currency of Zimbabwe. The
intent of the recalibrated monetary policy is to address the state of price
and exchange rate instability in the economy. The structured currency
introduced is anchored by a composite basket of foreign currency and precious
metals (primarily gold) held as reserves by the Reserve Bank. The starting
exchange rate was determined by the prevailing closing interbank exchange rate
as at 5 April and the London PM Fix price of gold as at 4 April 2024. The
intervening exchange rate is determined by the inflation differential between
ZiG and the USD inflation rates and the movement in the price of the basket of
precious minerals held as reserves.
By August it was apparent that the Company would need to begin discounting the
ZiG, as it had previously done with the ZWL, due to the perceived inability to
repatriate funds at, or close to, the official rate. In fact, many investor
attempts to repatriate funds were addressed by the govt. through the issuance
of T-Bills.
Similar to our ZWL discount, the Company adjusted the official exchange rate
by utilising the inflation differential with the US Dollar. The Company
continued to adjust its model to reflect a 20% surrender requirement on the
basis that the reported CPI captured only 80% of actual inflation, as it had
done with the ZWL discount. 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 in
ZiG were converted into US Dollars, as at 31 December 2024 at a discount rate
of 37.5% (the discount rate on the ZWL currency was 55.9% as at 31 December
2023). The value of the Zimbabwe investments recorded in the books of the
Company, after applying this discount factor, was USD 7,603,652 (2023: USD
2,895,212).
Sand Technology Holdings ("Sand Tech") (formerly known as African Leadership
University) is a global solutions company with expertise in enterprise and
industrial artificial intelligence. The Investment Manager valued Sand Tech on
the basis of an observable arms-length transaction between existing
shareholders selling a portion of their shares and an unaffiliated third
party. The transactions were agreed via an omnibus share purchase agreement
dated 28 September 2022 with dates of the agreements evidencing the first,
second, third, and fourth tranches, respectively, 30 September 2022, 5
December 2022, 6 March 2023 and 5 June 2023 (the fourth tranche was converted
to partial purchases in June and September 2023, the overall number of shares
remaining consistent), and thus were utilised as the basis of the valuation as
at 31 December 2024. At 31 December 2024, the investment in Sand Tech has been
classified under level 2 because the value of the investment utilises the
recent transaction.
Unquoted equity investments
2024 2023
USD USD
Investment in ALU 2,125,800 2,125,800
Financial asset and liabilities at fair value
through profit or loss
2024 2023
USD USD
Investment in ALU:
At 1 January 2,125,800 2,625,800
Disposal - (500,000)
At 31 December 2,125,800 2,125,800
Total loss 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 reporting
reporting period. - -
6(e). Statement of profit or loss and other comprehensive income of the
Master Fund for the year ended 31 December 2024.
The net gain on financial assets at fair value through profit or loss
amounting to USD 4,428,175 (2023: net loss of USD 1,293,120) is due to the
gains arising at the Master Fund level and can be analysed as follows:
2024 2023
USD USD
Income
Dividend revenue 257,104 202,176
Net gains on financial assets and liabilities at fair value
through profit or loss 4,550,614 -
4,807,718 202,176
Expenses
Net losses on financial assets and liabilities at fair value
through profit or loss - 1,005,287
Net foreign exchange loss 10,654 336,198
Custodian fees, brokerage fees, commission
and administration 167,905 162,396
Other operating expenses 9,433 4,239
187,992 1,508,120
Operating profit/(loss) before tax 4,619,726 (1,305,944)
Less withholding tax (9,840) (14,043)
Total comprehensive profit/(loss) for the year 4,609,886 (1,319,987)
Attributable to:
AOF Limited (direct interests) 4,426,751 (1,292,909)
AOF Limited (indirect interests through AOF (GP) (211)
Ltd)
-
4,428,175 (1,293,120)
AOF CarryCo Limited (NCI) 181,711 (26,867)
(1,319,987)
4,609,886
The financial assets and liabilities of the Master Fund are analysed as
follows:
(i) Net gains/(losses) on financial assets and liabilities at
fair value through profit or loss held by Africa Opportunity Fund L.P.
2024 2023
USD USD
Net gains/(losses) on fair value of financial assets at
fair value through profit or loss 4,550,614 (1,005,287)
Net gains (losses) 4,550,614 (1,005,287)
(ii) Financial asset and liabilities at fair value through profit
or loss held by Africa Opportunity Fund L.P.
2024 2023
USD USD
Held for trading assets:
At 1 January 8,727,712 18,634,833
Additions 1,475 -
Disposal (247,908) (8,901,834)
Net gains/(losses) on financial assets at fair value
through profit or loss 4,550,614 (1,005,287)
At 31 December (at fair value) 13,031,893 8,727,712
Analysed as follows:
- Listed equity securities 10,906,093 6,601,912
- Unquoted equity securities 2,125,800 2,125,800
13,031,893 8,727,712
(iii) Net changes on fair value of financial assets at fair value
through profit or loss
2024 2023
USD USD
Realised 88,877 2,048,903
Unrealised 4,461,737 (3,054,190)
Total gains/(losses) 4,550,614 (1,005,287)
7. RECEIVABLES
2024 2023
USD USD
Prepayments 9,507 11,038
9,507 11,038
8. CASH AND CASH EQUIVALENTS
2024 2023
USD USD
Cash at bank 205,356 28,967
9(a). ORDINARY SHARE CAPITAL
Company
2024 2024 2023 2023
Number USD Number USD
Authorised share capital
Ordinary shares with a par value of
USD 0.01 1,000,000,000 10,000,000 1,000,000,000 10,000,000
Issued share capital
Ordinary shares with a par value of
USD 0.01 11,468,907 114,689 11,468,907 114,689
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 report or pay 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, which
does not anticipate the payment of dividends, Directors retain 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
Share Share Ordinary
Capital Premium Shares
USD USD Number
At 1 January 2023 202,146 1,997,201 20,214,590
Changes during the period:
Redemption of ordinary shares (87,457) (4,430,872) (8,745,683)
Re-allocation from retained earnings to share
premium* - 8,244,224 -
114,689 5,810,553 11,468,907
At 31 December 2023
Changes during the period:
Redemption of ordinary shares - - -
At 31 December 2024 114,689 5,810,553 11,468,907
* The re-allocation relates to transfer from retained earnings to share
premium following distributions made.
Mandatory Redemption
The Directors, at their sole discretion, can effect a compulsory redemption of
the Ordinary Shares on an ongoing basis and can therefore undertake a staged
return of capital to shareholders. During the year ended 31 December 2024,
there were no redemptions. During the year ended 31 December 2023, under the
prior realisation strategy, the Directors approved a partial mandatory
redemption of 8,745,683 Ordinary Shares at the prevailing NAV per Ordinary
Share of $0.869 as at 30 April 2023, in the aggregate of $7.6 million. As at
31 December 2024 and 31 December 2023 the Company had 11,468,907 Ordinary
Shares in issue.
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, 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. OTHER PAYABLES
Notes 2024 2023
USD USD
Management Fee Payable 241 -
Directors Fees Payable 12 17,501 17,500
Other Payables 104,841 143,185
122,583 160,685
Other payables are non-interest bearing and have an average term of six
months. The carrying amount of other payables approximates their fair value.
11. EARNINGS PER SHARE
The earnings per share (EPS) is calculated by dividing the increase or
decrease in net assets attributable to shareholders by the number of ordinary
shares. The EPS for 2024 and 2023 represent both the basic and diluted EPS.
2024 2023
Ordinary shares Ordinary shares
Net income/(loss) attributable to equity holders USD 3,901,135 (1,689,276)
Number of shares in issue 11,468,907 11,468,907
Change in net assets attributable to shareholders
per share USD 0.340 (0.147)
Weighted Average number of shares in issue 11,468,907 14,880,684
Change in net assets attributable to shareholders 0.340
per share USD (0.114)
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 2024 2023
Africa Opportunity Fund (GP) Limited Cayman Islands 100.00 100.00
Africa Opportunity Fund L.P. Cayman Islands 96.00 96.00
Type of Nature of Volume Balance at
Name of related parties relationship transaction USD 31 Dec 2024
USD
Africa Opportunity Partners LLC Investment Manager Management fee expense 131,963 -
SS&C Technologies Administrator Administration fees 75,413 -
Directors Directors Directors' fees 70,001 17,501
Type of Nature of Volume Balance at
Name of related parties relationship transaction USD 31 Dec 2023
USD
Africa Opportunity Partners LLC Investment Manager Management fee expense 69,656 32,511
SS&C Technologies Administrator Administration fees 72,795 -
Directors Directors Directors' fees 70,010 17,500
The terms and conditions of the amount with related parties are as
follows:
(i) Unsecured interest free and settlement occurs in
cash;
(ii) No guarantees have been given or received on these
balances; and
(iii) No provision has been recognized in relation to
outstanding balances from related party.
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 2024 and 2023.
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 5a. He has a beneficiary interest in
AOF CarryCo Limited.
Details of investments in the Company by the Directors are set out below:
No of shares held Direct interest held %
2024 6,254,094 54.53
2023 6,254,094 54.53
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 the 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:
2024 2023
USD USD
Total comprehensive gain/(loss) 3,901,135 (1,689,276)
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 9,840 (2023: USD 14,043). 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 cash and cash equivalents 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
effect on equity would have the same impact on the profit/(loss) for the
year. The equity price risk at Company level is analysed as follows:
Equity
Effect on
Company Change in Equity
NAV price 2024
USD
Investment in subsidiaries at fair value through profit or loss 10% 1,368,690
-10% (1,368,690)
Effect on
Company Change in Equity
NAV price 2023
USD
Investment in subsidiaries at fair value through profit or loss 10% 999,873
-10% (999,873)
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:
2024 2024 2023 2023
Financial Financial Financial Financial
assets liabilities assets liabilities
USD USD USD USD
United States Dollar 13,892,258 122,583 10,027,694 160,685
13,892,258 122,583 10,027,694 160,685
Prepayments are typically excluded as these are not financial assets;
prepayments as at 31 December 2024 and 2023 amounted to USD 9,507 and USD
11,038, respectively.
As at 31 December 2024
Company
Net amount of
Gross financial assets
amounts of presented in
recognised the statement
financial of financial
assets position Net amount
USD USD USD
Cash and cash equivalents 205,356 205,356 205,356
Total 205,356 205,356 205,356
As at 31 December 2023
Company
Net amount of
Gross financial assets
amounts of presented in
recognised the statement
financial of financial
assets position Net amount
USD USD USD
Cash and cash equivalents 28,967 28,967 28,967
Total 28,967 28,967 28,967
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.. 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:
2024 2023
Company Company
Carrying Carrying
amount amount
Notes USD USD
Cash and cash equivalents 8 205,356 28,967
The cash and cash equivalents assets of the Company are maintained with
Standard Chartered Bank (Mauritius) Ltd. Standard Chartered Bank has an A3
Senior Unsecured Debt issuer rating from Moody's rating agency, a Baa2
Subordinated Debt rating from Moody's rating agency, a BBB+ long-term issuer
credit rating from Standard and Poor's rating agency, and an A-2 short-term
credit rating from Standard and Poor's rating agency.
Concentration risk
The Company does not have any concentration risk as at 31 December 2024. 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 2024 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 - 122,583 - - - 122,583
Total liabilities - 122,583 - - - 122,583
Year 2023 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 - 160,685 - - - 160,685
Total liabilities - 160,685 - - - 160,685
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 single investments and to industry sectors, as possible.
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 2024
USD
Financial assets at fair value through profit or loss 10% 1,303,189
-10% (1,303,189)
Effect on net assets
attributable to
Master Fund Change in Shareholders
NAV price 2023
USD
Financial assets at fair value through profit or loss 10% 872,771
-10% (872,771)
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 2024
Effect on net assets attributable to
Currency shareholders in (USD)
Master Fund
Change: 30% -30%
Ghana Cedi (686,086) 686,086
Kenyan Shilling (268,720) 268,720
South African Rand (31,530) 31,530
Change: 5% -5%
Great British Pound (565) 565
Currency Risk - Year 2023
Effect on net assets attributable to
Currency shareholders in (USD)
Master Fund
Change: 30% -30%
Ghana Cedi (1,019,397) 1,019,397
Kenyan Shilling (65,396) 65,396
South African Rand (24,835) 24,835
Change: 5% -5%
Great British Pound (383) 383
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 material and has not been disclosed.
Credit risk
Financial assets that potentially expose the Master Fund to credit risk
consist principally of 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:
2024 2023
Master Fund Master Fund
Carrying Carrying
amount amount
USD USD
Other receivables, excluding
prepayments 159,056 28,700
Cash and cash equivalents 1,522,662 2,113,625
Concentration risk
At 31 December 2024 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
2024 2023
USD USD
Equity Securities
Zimbabwe 7,605,127 2,895,212
Ghana 2,288,751 3,397,990
Other 2,125,800 2,125,800
Kenya 895,734 217,987
South Africa 116,481 90,723
Total 13,031,893 8,727,712
Analysed by industry of underlying assets:
Master Fund Master Fund
2024 2023
USD USD
Equity Securities
Real Estate 7,603,651 2,895,211
Financial Services 2,406,708 3,488,714
Other 2,125,800 2,125,800
Utilities 895,734 217,987
Total 13,031,893 8,727,712
Maturity Analysis
All figures are expressed in USD.
As at 31 December 2024 Within 12 Months After 12 Months Total
ASSETS
Cash and cash equivalents 1,522,662 - 1,522,662
Other receivables 159,056 - 159,056
Equity securities 10,906,093 - 10,906,093
Unquoted equity securities - 2,125,800 2,125,800
Total assets 12,587,811 2,125,800 14,713,611
LIABILITIES
Traded and other payables 428,904 - 428,904
Total liabilities 428,904 - 428,904
Master Fund
As at 31 December 2023 Within 12 Months After 12 Months Total
ASSETS
Cash and cash equivalents 2,113,625 - 2,113,625
Other receivables 28,700 - 28,700
Equity securities 6,601,912 - 6,601,912
Unquoted equity securities - 2,125,800 2,125,800
Total assets 8,744,237 2,125,800 10,870,037
LIABILITIES
Trade and other payables 455,217 - 455,217
Total liabilities 455,217 - 455,217
15. ANALYSIS OF NAV OF MASTER FUND ATTRIBUTABLE TO ORDINARY SHARES
2024 2023
USD USD
ASSETS
Cash and cash equivalents 1,522,662 2,113,625
Other receivables 159,056 28,700
Financial assets at fair value through profit or loss 13,031,893 8,727,712
Total assets 14,713,611 10,870,037
EQUITY AND LIABILITIES
Liabilities
Trade and other payables 428,904 455,217
Total liabilities 428,904 455,217
Net assets attributable to members' account 14,284,707 10,414,820
16. SEGMENT INFORMATION
For management purposes, the Company is organised in one main operating
segment, which invests in equity securities, principally via the Master Fund.
All of the Company's activities are interrelated, and each activity is
dependent on the others. Accordingly, all material 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 (2023: nil).
18. COMMITMENTS AND CONTINGENCIES
There are no commitments or contingencies at the reporting date.
19. EVENTS AFTER REPORTING DATE
There were no other material events after the reporting date up to the date
that these financial statements were authorised for issue that warrant
adjustments or disclosures in the financial statements for the year ended 31
December 2024.
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 11,468,907 are issued and fully paid.
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.
2 Bloomberg.
3 Republic of Kenya, Medium Term 2025 Budget Policy Statement. Table 2,
p.111,
4 IMF Kenya Country Report No. 24/316-November 2024, p. 22.
5 Zimbabwe had two local currencies in 2024. The first one was the
Zimbabwe Dollar ("ZWL"). It was replaced in April by the Zimbabwe investment
Gold currency (known as the "ZiG"). 6104.59 ZWL=$1 on December 31, 2023;
2498.72 ZWL=1ZiG in April 2024. 25.8ZiG=$1 on December 31, 2024; therefore
$1=25.82*2498.72=64467.08ZWL=$1.
6 Ghana 2025 Budget Speech, by Dr. Cassiel Ato Forson, MP Minister for
Finance, para. 102, p. 24.
7 For example, Ghana must repay 150.3 billion Cedis representing 11.6% of
its GDP in the next four years-Ghana 2025 Budget Speech, para. 64, p.15.
8 World Bank, Global Economic Prospects, January 2025, p.116; International
Monetary Fund, Regional Economic Outlook Sub-Saharan Africa, October 2024,
page 19.
9 International Monetary Fund, 2016 Article IV Staff Report on Nigeria,
Table 2, p.32, 2019 Article IV Staff Report on Nigeria, Table 1, p.41, 2021
Article IV Staff Report on Nigeria, Table 1, P36 and 2024 Article IV Staff
Report on Nigeria, Table 1, p.25
10 Bloomberg, MSCI EFM Africa Index (MXFMEAF Index) Price/Cash Flow
multiples of 7.33x (2022), 7.73x (2023),and 9.64 (2024) .
11 Bloomberg, in Dollars: Nigeria NSE Allshare Index flat at -0.7%, South
Africa FTSE/JSE Africa Allshare Index up 7%, Nairobi NSE Allshare Index up 4%,
and Egypt Hermes Index up 6%.
12 The Zimbabwe Dollar ("ZWL") was withdrawn in early April 2024 and
replaced by a new currency called the Zimbabwe Gold ("ZiG"), so the change in
value of the ZWL entails conversion into ZIG.
13 The Cedi's value against the Dollar on 31 December 2024, 31 December
2023, 31 December 2022, 31 December 2021, and 31 December 2020 were,
respectively, 14.7 Cedis, 11.95 Cedis, 10.15 Cedis, 6.18 Cedis, and 5.87
Cedis.
14 This figure was erroneously reported as "$78 million" in the AOF 2023
annual report
15 Bloomberg, March 19 is the date of valuation of Enterprise
16 Bloomberg
17 The Electricity Hub, Kenya Hits Pause on Renewable Energy, 15 November
2025
18 Kenya Power 2023/24 Annual Report, pages 62-63.
19 Bloomberg, March 24 is the date of valuation of Kenya Power.
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