REG - Africa OpportunityFd - Annual Results
29/04/2024 15:15
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RNS Number : 4560M Africa Opportunity Fund Limited 29 April 2024
29 April 2024
Africa Opportunity Fund Limited (AOF LN)
Announcement of Annual Results for the Year ended 31 December 2023
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 2023. The Company's full annual report and financial statements will
shortly be sent to shareholders and will be available to view and download
from the Company's website at: www.africaopportunityfund.com
(http://www.africaopportunityfund.com) .
The following text and financial information does not constitute the Company's
annual report but has been extracted from the annual report and financial
statements for the year ended 31 December 2023.
For further information please contact:
Africa Opportunity Fund Limited
Francis Daniels Tel: +2711 684 1528
Liberum (Corporate Broker)
Owen Matthews Tel: +44 20 3100 2223
Darren Vickers Tel: +44 20 3100 2218
The Company
Africa Opportunity Fund Limited ("AOF" or the "Company") is a Cayman Islands
incorporated closed-end investment company traded on the Specialist Fund
Segment ("SFS") of the London Stock Exchange ("LSE"). AOF's net asset value as
at 31 December 2023 was $9.9 million (2022: $19.2 million) and its market
capitalisation was $5.9 million (2022: $12.1 million).
Investing objective
The investing objective of the Company is to achieve capital growth and income
through investments in value, arbitrage, and special situations opportunities
derived from the continent of Africa. Therefore, the Company may invest in
securities issued by companies domiciled outside Africa which conduct
significant business activities within Africa or, if listed, listed either on
an African stock exchange or a non-African stock exchange. The Company may
invest in equity, quasi-equity or debt instruments, debt issued by African
sovereign states and government entities, and real estate interests.
The Directors and Africa Opportunity Partners Limited (the "Manager") believe
that the diversity and volatility of African economies present opportunities
to earn attractive returns when investments are made selectively, across asset
classes, and without pre-determined benchmarks or allocations.
By balancing the size and type of investment, the Directors and the Manager
believe that attractive returns may be made across asset classes. Whilst the
African capital markets can be volatile, by ensuring diversity of investment
across industries and countries, the Manager attempts to mitigate such risks.
The Company targets industries rather than countries to exploit valuation
discrepancies which can arise among African countries. The Directors and the
Manager also believe that Africa's status as a continent containing a large
number of reforming countries provides investment opportunities in those
countries.
Summary of Investment Strategy
The Company's investment strategy is opportunistic. The Company invests
primarily where and when the Manager believes that investments can be made at
a material discount to the Manager's estimate of an investment's intrinsic
value.
Company preference. The Company prefers companies which demonstrate both high
real returns on assets and earnings yields higher than the yield to maturity
of local currency denominated government debt.
Industry focus rather than country focus. The Company seeks to invest in
industries it finds attractive with little regard to national borders.
Natural resource discounts. The Company seeks natural resource companies whose
market valuations reflect a discount to the spot and future world market
prices for those natural resources.
"Turnaround" countries. The African continent is home to a large number of
reforming or "turnaround" countries. "Turnaround" countries combine secular
political reform with the opening of industries to private sector
participation.
Balkanized investment landscape. The Company seeks to invest in companies with
low valuations in relation to peers across the continent and uses an arbitrage
approach to provide attractive investment returns.
Point of entry. The Company seeks the most favourable risk adjusted point of
entry into a capital structure, whether through financing the establishment of
a new company or acquiring the debt or listed equity of an established
company.
The Company intends to be a passive investor and will generally not control or
seek to control or be actively involved in the management of any company or
business in which it invests.
Investment Policies and Restrictions
New investment policy (Effective 1 July 2019)
Consistent with the 30 June 2019 adoption of the Reorganisation plan as
approved at the Company's EGM, the Directors considered it to be in the best
interests of the Company and its shareholders that the Company's investment
policy be changed to facilitate a realisation strategy and the orderly return
of capital to shareholders. Shareholders approved the adoption of the New
Investment Policy effective 1 July 2019.
The Company will be managed with the objective of realising the value of the
assets in its portfolio in a prudent manner with a view to making an orderly
return of capital to shareholders over time.
The Company's investment objective will be undertaken with a view to realising
all of its investments in a manner that seeks to achieve a balance between
maximising the value from the Company's investments and making timely returns
of capital to shareholders.
The Company will sell or otherwise realise its investments with the objective
of achieving the best exit values reasonably available within reasonable time
scales.
The Company will cease to make any new investments (unless additional funds
are required for existing investments within the Company's portfolio) and
shall not undertake additional borrowing other than to refinance existing
borrowing or for working capital purposes.
Any cash received by the Company as part of the realisation process will be
held by the Company as cash on deposit and/or as cash equivalents.
The Manager adheres to the following policies and restrictions:
Geographical focus. The Company makes investments in companies or assets with
a material portion of their value derived from or located in Africa. The
geographic mix of investments varies over time depending on the relative
attractiveness of opportunities among countries and regions.
Type of investment. The Company may invest in real estate interests, equity,
quasi-equity or debt instruments, which may or may not represent shareholding
or management control, and debt issued by African sovereign states and
government entities. Investments may be made directly or through special
purpose vehicles, joint venture, nominee or trust structures. The Company may
utilise derivative instruments to hedge certain market or currency risks and
may from time to time engage in the short sale of securities.
Investment size. At the time of investment, no single investment may exceed 15
per cent of the Net Asset Value without the prior approval of the Board. No
single initial investment will exceed 20 per cent of the Net Asset Value at
the time of investment.
Number of investments. The Company has, and expects to maintain, a
concentrated portfolio of approximately 10 to 20 investments, excluding money
market investments.
Borrowing. The Company may use overdraft and other short-term borrowing
facilities to satisfy short-term working capital needs, including to meet any
expenses or fees payable by the Company. The Manager anticipates that
borrowings may be utilised for investment purposes with the prior approval of
the Board. There are no limits on the Company's ability to leverage itself.
Cash management. Cash will be placed in bank deposits, investment grade
commercial paper, government and corporate bonds and treasury bills, in each
case, of US and African issuers.
Distribution policy
Subject to market conditions, compliance with the UK Companies Law and having
sufficient cash resources available for the purpose, the Company intends to
pay the following dividends on the Ordinary Shares: an amount equal to the
total comprehensive income of the Company as that expression is used in
international accounting standards (excluding net capital gains/(losses) in
accordance with the Investment Management Association Statement of Recognised
Practice), such amount to be paid annually. The Company has been accepted
into the UK Reporting Fund Status regime.
Upon shareholder approval at the June 2019 EGM, the Company initiated a change
to the distribution policy. While the Company intends to continue to meet the
requirements of the UK Reporting Fund Status regime, the Company will
undertake a staged return of capital to shareholders.
The Company will undertake the return of capital by way of a compulsory
redemption of Ordinary Shares. The Articles were amended to permit the
Directors, at their sole discretion, to undertake a Compulsory Redemption of
Ordinary Shares on an ongoing basis, pro rata, to a shareholder's shareholding
in the Company, to return capital to shareholders.
The Directors continue to have the right to return cash otherwise than through
Compulsory Redemptions, such as by way of tender offers to shareholders to
purchase their Ordinary Shares. In such circumstances, a tender offer will be
made to shareholders in accordance with market practice and in compliance with
the Listing Rules (to the extent the Company voluntarily complies with these)
and applicable law. Further, the Directors may determine, in their absolute
discretion where they consider it to be in the best interests of shareholders,
to return cash from sales made pursuant to the New Investment Policy to
shareholders by way of dividend or any other distribution permitted by the
Listing Rules (to the extent the Company voluntarily complies with these) and
applicable law.
Life of the Company
The Company does not have a fixed life, but the directors consider it
desirable that its shareholders should have the opportunity to review the
future of the Company at appropriate intervals. The Directors most recently
convened an extraordinary general meeting in June 2022 where a resolution was
made regarding the continued existence of the Company. The 2022 resolution
passed, as the shareholders voted for the continuation of the Company during a
two-year period concluding on 30 June 2024 (the "Return Period"). This
resolution further extended the continuation of the Company, as the
shareholders had previously extended the Company for a three-year period in
2019. Shareholders will be provided with an opportunity to reassess the
investment policy and distribution policy at the end of the Return Period. To
that end, an ordinary resolution for the Company's continuation will be
proposed at an extraordinary general meeting to be convened at the end of the
Return Period.
CHAIRPERSON'S STATEMENT
2023 Review
Africa Opportunity Fund Limited
Chairperson's Statement
Africa Opportunity Fund (the "Fund" or "AOF") completed 48 months of its asset
realisation period as of 30 June 2023. It made five distributions to
shareholders amounting to $44 million or 92% of its December 2019 net asset
value. The Fund's total return between June 2019 and December 2023 has been
5% versus -2% for the MSCI EFM Africa index, -5% for S&P Africa Top 40
Index, and for exchange traded funds: -10% for Lyxor Pan-Africa exchange
traded fund, -17% for XMAF LN, and -20% for AFK US.
2023 was a tough year for the Fund as its net asset value (including
redemptions) fell 9%. To provide some basis for comparison, South Africa
rose 2%, Nigeria fell 21%, Kenya fell 37%, and Egypt rose 45%. In
non-African emerging markets, China fell 11%, Brazil rose 33%, Russia rose 27%
and India rose 19%. In developed markets, Japan rose 23%, the US rose 26%,
Europe rose 19%, and the UK rose 12%. 1 (#_ftn1)
Africa's macro-economy experienced signs of nascent recovery in 2023. The UN
Food and Agricultural Organization World Food Price index fell 10% in 2023.
Brent crude oil fell 11% from $86 per barrel at the end of 2022 to $77 per
barrel at the end of 2023(( 2 (#_ftn2) )). Sovereign debt burdens, though,
remain heavy, with government interest expense as a percentage of government
revenues, exceeding 20% in several large economies. South Africa and Kenya
are examples. Other African countries suffered foreign exchange shortages,
whether overt or covert, including Nigeria, Egypt, and Zambia. Forex
transaction costs in some of those countries imposed substantial exit
penalties on the Fund. Commercial real estate in some countries is viewed as
both a hedge against high inflation and an imperfect hedge against
devaluations. Zimbabwe is a prime example. The Zimbabwe Dollar lost 95% of
its value against the Dollar precipitating, ironically, a material rise of 35%
in the Dollar value of real assets such as the Zimbabwe property companies in
which the Fund is invested. Ghana's economic growth was anemic, as the
effects of its government's default on its domestic sovereign debt reduced
national economic wealth. It has made solid progress with both its bilateral
official creditors and its multilateral creditors. The unfinished phase of
its debt default negotiations is with its Eurobond creditors. Ghana's
inflation rate has halved from 53% in early 2023 to less than 25% to date.
We remain cautiously optimistic about investment prospects in Ghana.
AOF's 2023 strategy was one of deliberate realisation to maximise the value of
the assets returned to shareholders. The Fund sold its investments through
the secondary private and public markets.
2024 Outlook
The International Monetary Fund forecasts Sub-Saharan Africa's 2024 gross
domestic product to rise by 4% while inflation continues to decline in the
region. 3 (#_ftn3) Both regional growth and inflation are trending in the
right direction. Countries like Cote d Ívoire and Kenya have regained
access to the Eurobond market while major economies like Nigeria and Egypt are
reducing their foreign exchange repatriation queues. Market valuations, as
captured by indices like the MSCI EFM Africa Index, have also begun to recover
from post Global Financial Crisis historical lows. 4 (#_ftn4) In sum, 2024
should be a year in which the market capitalisations of African companies show
signs of recovery.
AOF will hold an extraordinary general meeting to determine its future as set
out when the Company's continuation vote was passed at an EGM in June 2022.
The board believes that the low valuations and improving macro-economic trends
in Africa will lead to a significant improvement in investment conditions in
Africa in 2024, with numerous attractive opportunities available that could,
in time, deliver attractive returns to shareholders. With what amounts to a
'for sale sign' borne by the Fund's current holdings due to the realisation
process, the fund is considering the best way to achieve value for its
remaining investments and will update shareholders on this exercise in the
near future. This could include a resumption of an active investment process
if this led to greater returns to shareholder.
In closing, I wish also to extend my thanks to our shareholders for their
support.
Dr. Myma Belo-Osagie
Chairperson
29 April 2024
MANAGER'S
REPORT
2023 marked the sixteenth full year of operation of Africa Opportunity Fund
(the "Fund" or "AOF"). Its ordinary shares had an annual return of -9.2%. At
year-end, Africa Opportunity Fund LP - the investment subsidiary of AOF held
$0.1 million in cash, and $8.7 million in equity securities. The Fund's
underlying end-of-year holdings were in Ghana, Kenya, Mauritius, and
Zimbabwe.
The Fund exited Botswana, Tanzania, and Zambia. It made those disposals
via the secondary markets primarily in block trades. The balance of this
report will discuss a few of the Fund's holdings.
Enterprise Group's total return of its shares was -36% in 2023. The
unrealized loss of its -23% Cedi-denominated total return was compounded by
the 13% depreciation of the Cedi. Ghana's exchange of its domestic
government debt for lower interest and longer tenor government debt could
impose a cumulative 40% reduction in the net present value of Enterprise's
investment securities portfolio. A considerable part of that reduction will
be absorbed by its life fund policyholders. Nevertheless, Enterprise's
equity attributable to shareholders, at $78 million, at the end of 2023, was
flat when compared to $77 million of equity at the end of 2022. However, it
was down 24% when compared against the $102 million of equity at the end of
2021. That 24% decline was substantially better than the 47% collapse of the
Cedi, against the Dollar, since December 2021. Ghana's entire financial
sector has experienced liquidity challenges in response to this domestic debt
exchange. We expect the embedded value of Enterprise Life to fall because
of the domestic debt exchange. From the market share and competitive
positioning perspective, however, we expect Enterprise to increase its
relative strength. Over the last 25 years to 2023, despite the Cedi
depreciating by 98% against the Dollar, Enterprise's insurance revenues alone,
in Dollars, have climbed 60x to $108 million, its net profits attributable to
shareholders has climbed 15x to $12 million, and its net cash from operating
activities has risen 76x to $46 million. Enterprise should return, in a few
years, to growing its business in both Cedis and Dollars.
The Fund's second largest holding is in African Leadership International
("ALI"). ALI: (a) has an educational division - ALX - that uses only
student-driven and technology enabled instruction to train its students to
become software engineers or engage in other software-related activities; (b)
maintains a network for connecting talented individuals - the Room - to
economic opportunities; (c) collaborates with both charitable organizations
and companies to accelerate job creation on the African continent for its
network; and (d) employs some of its graduates in software consulting
operations. ALI renamed itself as Sand Technologies, in 2023, after acquiring
an AI consulting firm and its academy for training data scientists and data
analysts. The Fund's ALI holding, through sales in the private secondary
market, was reduced by 14% in 2021, 16% in 2022, and an additional 19% in
2023. We expect to sell down our ALI holding in the private secondary
market.
The Fund's Zimbabwean property holdings turned in solid returns. The Fund's
internal estimates of the Zimbabwe Dollar declined by 94%. This property
portfolio, however, rose by 35%, implying considerable share price
appreciation in Zimbabwe Dollars. Mashonaland Holdings' share price soared
by 1435% while FMP's share price was up by 2584%, both in Zimbabwe Dollars.
Our internally derived Zimbabwe Dollar exchanges rate continue to serve as a
realistic and conservative rate for valuing the Fund's Zimbabwean
holdings. Zimbabwe continues to suffer from hyperinflation and intense
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 as a result
of repatriation to Dollars.
Kenya Power's shares suffered a total return of -28% in Dollars, as the Kenyan
shilling depreciated 22% against the Dollar, in 2023. Since the start of 2024,
the Kenyan shilling has appreciated 18% to the end of March, as the Kenya
government has dissolved solvency doubts by raising concessional debt from the
Bretton Woods institutions and issuing Eurobonds to refinance an existing
Eurobond issue maturing in June. Yet, the Kenya government remains at high
risk of debt distress because interest expense consumes approximately 30% of
national tax revenues. The Fund's investment in Kenya Power has been deeply
disappointing. We should have considered, with an increased degree of
scepticism, the likely independence of Kenya's energy authorities to protect
Kenya Power's legislated right to fixed and adequate return on its large
investments in Kenya's distribution and transmission capacity.
Kenya Power swung from a profit of $29 million in the year ending 30 June 2022
to a loss of $25 million in 2023. The principal cause for that dramatic swing
was unrealized foreign exchange losses incurred on outstanding concessional
debt denominated in Dollars. Those losses more than doubled from $58 million
in 2022 to $133 million in 2023. It swung to a modest profit of $2 million
in H1 2024 because Kenya's energy regulatory authority approved a long-overdue
electricity tariff increase in April 2023. The delay is symptomatic of a
tendency for the Kenyan energy authorities to align their tariff decisions
with Kenya's electoral calendar and electorally pleasing promises made by its
rulers. This tendency was accentuated by two other patterns: expensive
power, denominated in Dollars, purchased from independent power producers by
Kenya Power; and the failure of government-controlled entities such as the new
Lamu port and the Standard Gauge Railway constructed by Chinese contractors to
become new consumers of that expensive power as set forth in the government's
plans. The April 2023 approved tariffs assure Kenya Power of a material
increase in its profitability until April 2026.
Furthermore, the Kenya government has announced its intention of selling Kenya
Power's transmission assets to a wholly-owned subsidiary called Kenya
Transmission Company ('Ketraco'), at market value, in exchange for Ketraco's
assumption of a principal amount of Kenya Power's concessional foreign debt
equal to the market value of those transmission assets. This restructuring is
scheduled to be completed by the end of 2024 and will reduce sharply Kenya
Power's vulnerability to depreciation of the Kenyan Shilling and reduce its
overall debt burden. At this juncture, the market accords scant credibility to
the utterances of the Kenyan government. We think its disclosed plans are
likely to be fulfilled because they create an efficient mechanism to address
both the needs of Kenya Power and serve the interests of the Kenyan
government.
We shall strive to preserve 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
29 April 2024
AFRICA OPPORTUNITY FUND LIMITED
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER
2023
Notes 2023 2022
USD USD
Expenses
Net losses on investment in subsidiaries at fair value 1,293,120 2,003,998
through profit or loss 6(a)
69,656 50,000
Management fees 5(a)
102,037 127,611
Other operating expenses
70,010 70,000
Directors' fees 12
154,453 158,261
Audit and professional fees
1,689,276 2,409,870
(1,689,276) (2,409,870)
Loss for the year attributable to equity holders*
Loss per share attributable to equity holders** (0.114) (0.107)
11
* 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.
Prior year figures have been amended to conform to the current year
presentation, refer to note 11 for additional disclosures.
AFRICA OPPORTUNITY FUND LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
Notes 2023 2022
USD USD
ASSETS
Cash and cash equivalents 8 28,967 42,251
Receivable from related party 7 - 227,805
Prepayments 7 11,038 8,960
Investment in subsidiaries at fair value through profit or loss* 6(a) 9,998,727 19,041,847
19,320,863
Total assets 10,038,732
EQUITY AND LIABILITIES
LIABILITIES
Trade and other payables 10 160,685 153,540
Total liabilities 153,540
160,685
Net assets attributable to shareholders 9,878,047 19,167,323
Ordinary share capital 9(a), 9(b) 114,689 202,146
Share premium 9(b) 5,810,553 1,997,201
Retained earnings 3,952,805 16,967,976
19,167,323
Total equity 9,878,047
Net assets value per share:
- Ordinary shares 0.861 0.948
*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
2023
Share Share Retained
Capital Premium Earnings Total
USD USD USD USD
247,878 6,451,469 19,377,846 26,077,193
At 1 January 2022
CAPITAL TRANSACTIONS:
(45,732) (4,454,268) - (4,500,000)
Redemption of ordinary shares
OPERATIONS:
Loss/total comprehensive loss for the year - - (2,409,870) (2,409,870)
202,146 1,997,201 16,967,976 19,167,323
At 31 December 2022
Share Share Retained
Capital Premium Earnings Total
USD USD USD USD
202,146 1,997,201 16,967,976 19,167,323
At 1 January 2023
CAPITAL TRANSACTIONS:
(87,457) (4,430,872) (3,081,671) (7,600,000)
Redemption of ordinary shares
Re-allocation from retained earning to share premium - 8,244,224 (8,244,224) -
9(b)
OPERATIONS:
Loss/total comprehensive loss for the year - - (1,689,276) (1,689,276)
114,689 5,810,553 3,952,805 9,878,047
At 31 December 2023
AFRICA OPPORTUNITY FUND LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER
2023
2023 2022
USD USD
Operating activities
Loss for the year (1,689,276) (2,409,870)
Adjustment for non-cash items:
Net losses on investment in subsidiaries at
fair value through profit or loss 6(a) 1,293,120 2,003,998
Cash used in operating activities (396,156) (405,872)
Net changes in operating assets and liabilities
Reduction in investments in subsidiaries at fair value
through profit or loss 6(a) 7,750,000 5,049,500
Decrease/(increase) in loan receivable from related party 227,805 (78,253)
Increase in prepayments (2,078) (1,098)
Increase/(decrease) in trade and other payables 7,145 (43,495)
Net cash flow generated from operating activities 7,982,872 4,926,654
Financing activities
Redemption of ordinary shares 9(b) (7,600,000) (4,500,000)
Net cash flow used in financing activities (7,600,000) (4,500,000)
Net (decrease)/increase in cash and cash equivalents (13,284) 20,782
Cash and cash equivalents at 1 January 42,251 21,469
Cash and cash equivalents at 31 December 28,967 42,251
1. GENERAL INFORMATION
Africa Opportunity Fund Limited (the "Company") was launched with an
Alternative Market Listing "AIM" in July 2007 and moved to the Specialist
Funds Segment "SFS" in April 2014.
Africa Opportunity Fund Limited is a closed-ended fund incorporated with
limited liability and registered in Cayman Islands under the Companies Law on
21 June 2007, with registered number MC-188243. The Company is exempted from
registering with CIMA under the Private Funds Act of the Cayman Islands given
that it is listed on the Specialist Funds Segment of the London Stock Exchange
which is approved by CIMA.
The Company aims to achieve capital growth and income through investment in
value, arbitrage, and special situations investments in the continent of
Africa. The Company may therefore invest in securities issued by companies
domiciled outside Africa which conduct significant business activities within
Africa. The Company has the ability to invest in a wide range of asset classes
including real estate interests, equity, quasi-equity or debt instruments and
debt issued by African sovereign states and government entities.
The Company's investment activities are managed by Africa Opportunity Partners
LLC, a limited liability company incorporated in Delaware, United States and
acting as the investment manager pursuant to an Amended and Restated
Investment Management Agreement dated 13 June 2022.
To ensure that investments to be made by the Company and the returns generated
on the realisation of investments are both effected in the most tax efficient
manner, the Company has established Africa Opportunity Fund L.P. ("the Master
Fund") as an exempted limited partnership in the Cayman Islands. All
investments made by the Company are made through the limited partnership. The
limited partners of the limited partnership are the Company and AOF CarryCo
Limited. The general partner of the limited partnership is Africa Opportunity
Fund (GP) Limited. Africa Opportunity Fund Limited holds 100% of Africa
Opportunity Fund (GP) Limited.
The financial statements for the Company for the year ended 31 December 2023
were authorised for issue in accordance with a resolution of the Board of
Directors on 29 April 2024.
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 International
Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).
Basis of preparation
The Company satisfied the criteria of an investment entity under IFRS 10:
Consolidated Financial Statements. As such, 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
prospectively and more details of this assessment are provided in Note 4
"material accounting judgements, estimates and assumptions." The financial
statements are prepared in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting Standards Board
(IASB). The financial statements have been prepared under the historical cost
convention except for financial assets and financial liabilities measured at
fair value through profit or loss. The preparation of financial statements in
accordance with IFRS requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting year.
Although these estimates are based on management's knowledge of current events
and actions, actual results ultimately may differ from those estimates. In
additional to the following: All assets have been assessed for impairment
regardless of whether any indicators for impairment were identified; and all
possible liabilities that might arise from the winding up of the Company have
been accrued for. The preparation of financial statements in conformity with
IFRS requires the use of certain critical accounting estimates. It also
requires the Board of Directors to exercise its judgment in the process of
applying the Company's accounting policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates
are material to the financial statements are disclosed in Note 4.
As the Company is not a going concern due to the limited life, the directors
have considered an alternative basis of preparation but believe that IFRS as a
basis for preparation best reflects the financial position and performance of
the entity. The carrying value of the assets, which were determined in
accordance with the accounting policies, have been reviewed for possible
impairment and changes which have occurred since the year end and
consideration has been given to whether any additional provisions are
necessary as a result of the decision to deregister. It is expected that all
assets will realise at least at the amounts at which they are included in the
statement of financial position and there will be no material additional
liabilities.
Due to the nature of the assets and liabilities in the statement of financial
position, directors believe that the values as reported would not be
significantly different when applying another basis.
The directors consider that this revised basis of recognition and measurement
provide relevant information that faithfully represents the non-going concern
circumstances and is considered compliant with IFRS under the current
circumstances.
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.
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 Trade and 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.
Derivatives embedded in other financial instruments are treated as separate
derivatives and recorded at fair value if their economic characteristics and
risks are not closely related to those of the host contract, and the host
contract is not itself classified as held for trading or designated at fair
value though profit or loss. Embedded derivatives separated from the host are
carried at fair value. The Company had no derivatives as at 31 December
2023.
Financial assets at amortised cost and financial liabilities (other than those
classified as held for trading) are measured initially at their fair value
plus any directly attributable incremental costs of acquisition or issue.
(c) Subsequent measurement
The Company measures financial instruments which are classified at fair value
through profit or loss at fair value. Subsequent changes in the fair value of
those financial instruments are recorded in 'Net gain or loss on investment in
subsidiaries at fair value through profit or loss. Interest earned elements of
such instruments are recorded separately in 'Interest revenue'.
Financial assets at amortised costs are subsequently measured using the
effective interest method and are subject to impairment. Gains and losses are
recognised in profit or loss when the asset is derecognised, modified or
impaired.
Financial liabilities, other than those classified as at fair value through
profit or loss, are measured at amortised cost using the effective interest
method. Gains and losses are recognised in profit or loss when the liabilities
are derecognised, as well as through the amortisation process.
The effective interest method is a method of calculating the amortised cost of
a financial asset or a financial liability and of allocating the interest
income or interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of the financial instrument or, when
appropriate, a shorter period to the net carrying amount of the financial
asset or financial liability. When calculating the effective interest rate,
the Company estimates cash flows considering all contractual terms of the
financial instruments, but does not consider future credit losses. The
calculation includes all fees paid or received between parties to the contract
that are an integral part of the effective interest rate, transaction costs
and all other premiums or discounts.
(e) Derecognition
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is derecognised where:
· The rights to receive cash flows from the asset have expired; or
· The Company has transferred its rights to receive cash flows from the
asset or has assumed an obligation to pay the received cash flows in full
without material delay to a third party under a 'pass-through' arrangement;
and
Either (a) the Company has transferred substantially all the risks and rewards
of the asset, or (b) the Company has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred
control of the asset. When the Company has transferred its rights to receive
cash flows from an asset (or has entered into a pass-through arrangement), and
has neither transferred nor retained substantially all the risks and rewards
of the asset nor transferred control of the asset, the asset is recognised to
the extent of the Company's continuing involvement in the asset.
The Company derecognises a financial liability when the obligation under the
liability is discharged, cancelled or expires. When an existing financial
liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as the derecognition of
the original liability and the recognition of a new liability. The difference
in the respective carrying amounts is recognised in profit or loss.
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, receivable from related party
and cash and cash equivalents are de minimis. As a result, no ECL has been
recognised as any amount would have been insignificant.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount
reported in the statement of financial position if, and only if, there is a
currently legally enforceable right to offset the recognised amounts and there
is an intention to settle on a net basis, or to realise the asset and settle
the liability simultaneously.
Determination of fair value
The Company measures it investments in subsidiaries at fair value through
profit or loss at each reporting date.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value measured is based on the presumption that
the transaction to sell the asset or transfer the liability takes place either
in the principal market for the asset or liability or, in the absence of a
principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to the
Company. The fair value for financial instruments traded in active markets
at the reporting date is based on their quoted price without any deduction for
transaction costs.
For all other financial instruments not traded in an active market, the fair
value is determined by using appropriate valuation techniques. Valuation
techniques include: using recent arm's length market transactions; reference
to the current market value of another instrument that is substantially the
same; discounted cash flow analysis and option pricing models making as much
use of available and supportable market data as possible. An analysis of fair
values of financial instruments and further details as to how they are
measured is provided in Note 6.
The Company uses the following hierarchy for determining and disclosing the
fair value of the financial instruments by valuation technique:
· Level 1: quoted (unadjusted) market prices in
active markets for identical assets and liabilities.
· Level 2: valuation techniques for which the lowest
level input that is 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 and liabilities at fair value through
profit or loss
This item includes changes in the fair value of financial assets and
liabilities held for trading or designated upon initial recognition as 'at
fair value through profit or loss' and excludes interest and expenses.
Unrealised gains and losses comprise changes in the fair value of financial
instruments for the year and from reversal of prior year's unrealised gains
and losses for financial instruments which were realised in the reporting
period.
Shares that impose on the Company, an obligation to deliver to shareholders a
pro-rata share of the net asset of the Company on liquidation classified as
financial liabilities
The shares are classified as equity if those shares have all the following
features:
(a) It entitles the holder to a pro rata share of the Company's net
assets in the event of the Company's liquidation.
The Company's net assets are those assets that remain after deducting all
other claims on its assets. A pro rata share is determined by:
(i) dividing the net assets of the Company on liquidation into units of
equal amount; and
(ii) multiplying that amount by the number of the shares held
by the shareholder.
(b) The shares are in the class of instruments that is subordinate
to all other classes of instruments. To be in such a class the instrument:
(i) has no priority over other claims to the assets of the
Company on liquidation, and
(ii) does not need to be converted into another instrument
before it is in the class of instruments that is subordinate to all
other classes of instruments.
(c) All shares in the class of instruments that is subordinate to all
other classes of instruments must have an identical contractual obligation for
the issuing Company to deliver a pro rata share of its net assets on
liquidation.
In addition to the above, the Company must have no other financial instrument
or contract that has:
(a) total cash flows based substantially on the profit or loss, the change
in the recognised net assets or the change in the fair value of the recognised
and unrecognised net assets of the Company (excluding any effects of such
instrument or contract) and
(b) the effect of substantially restricting or fixing the residual return
to the shareholders.
The shares that meet the requirements to be classified as a financial
liability have been designated as at fair value through profit or loss on
initial recognition.
Dividend 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.
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:
3. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (CONTINUED)
Effective for
accounting period
beginning on or after
Amendments to IAS 8: Definition of Accounting Estimates
1 January 2023
Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising
from a Single
Transaction
1 January 2023
Amendments to IAS 12: International Tax Reform - Pillar Two Model Rules
(Disclosure) 1 January 2023
Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting
Policies 1 January 2023
The above new standards and amendments were applied for the first time in
2023. Amendments to IAS 8 and IAS 12 did not have a material impact on the
financial statements of the Company. The amendment to IAS 1 replaced the
requirement for entities to disclose material accounting policies with a
requirement to disclose material accounting policy information. This
amendment did not have a material impact on the financial statements of the
Company for the year ended 31 December 2023.
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 1: Classification of Liabilities as Current or
Non-current
1
January 2024
The Company does not expect that the adoption of these standards will have any
material impact on the financial statements. 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. MATERIAL 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
At the Extraordinary General Meeting ("EGM") of the Company held on 29 June
2022, the shareholders voted in favor of a Continuation Resolution which
extended the life of the Company, with the current Investment Policy remaining
in place, to 30 June 2024. If the assets of the Company are not realised
over the period of the extension, the Directors will formulate and revert to
Shareholders in 2024 further proposals to continue, reorganize or reconstruct
the Company or to wind up the Company.
The Company will continue to return sums to Shareholders by way of compulsory
redemption, repurchase of Ordinary Shares in the market or such other method
as determined by the Directors.
Below is a brief synopsis of the "New Investing Policy" as approved with the
passage of the Continuation Resolution and consistent with the Company's
Circular dated 5 June 2019, updated to reflect the two-year continuance:
For a period of up to two additional years following the 29 June 2022
Extraordinary General Meeting (the "Extended Return Period"), the Company will
make no new investments (save that it may invest in, or advance additional
funds to, existing investments within the Company's portfolio to maximise
value and assist in their eventual realisation). The Company will continue to
adopt the New Investment Policy whereby the Company's existing portfolio of
investments will be divested in a controlled, orderly and timely manner to
facilitate a staged return of capital. It should be appreciated that there is
no time horizon in terms of the implementation of the New Investment Policy.
Although the Company's portfolio is comprised of some liquid equity holdings,
the Company's portfolio is weighted to somewhat illiquid investments and it
may take the Investment Manager some time to realise these. Shareholders will
be provided with an opportunity to reassess the investment policy and
distribution policy if investments remain unrealised at the end of the
Extended Return Period. Subsequent to the disposal of the investments, the
Company will be liquidated, which indicates that it will no longer be a going
concern. IAS 1 - Presentation of Financial Statements and IAS 10 - Events
after the reporting period require that the financial statements should not be
prepared on a going concern basis if management determines that it intends to
liquidate the entity. The directors have considered an alternative basis of
preparation but believe that International Financial Reporting Standards
("IFRS"), as a basis for preparation, best reflects the financial position and
performance of the Company. The extension of the Company through 30 June
2024 further supports this methodology.
The carrying value of the assets, which were determined in accordance with the
accounting policies, have been reviewed for possible impairment and changes
which have occurred since the half-year and consideration has been given to
whether any additional provisions are necessary as a result of the decision to
eventually deregister. It is expected that all assets are fairly valued and
will realise at, or near, the amounts at which they are included in the
statement of financial position and there will be no material additional
liabilities.
Determination of functional currency
The determination of the functional currency of the Company is critical since
recording of transactions and exchange differences arising thereon are
dependent on the functional currency selected. As described in Note 2, the
directors have considered those factors therein and have determined that the
functional currency of the Company is the United States Dollar.
Assessment for an investment entity
An investment entity is an entity that:
(a) Obtains funds from one or more investors for the purpose of
providing those investor(s) with investment management services;
(b) Commits to its investor(s) that its business purpose is to invest
funds solely for returns from capital appreciation, investment income, or
both; and
(c) Measures and evaluates the performance of substantially all of its
investments on a fair value basis.
An investment entity must demonstrate that fair value is the primary
measurement attribute used. The fair value information must be used internally
by key management personnel and must be provided to the entity's investors. In
order to meet this requirement, an investment entity would:
· Elect to account for investment property using the fair
value model in IAS 40 Investment Property
· Elect the exemption from applying the equity method in
IAS 28 for investments in associates and joint ventures, and
· Measure financial assets at fair value in accordance
with IFRS 9.
In addition, an investment entity should consider whether it has the following
typical characteristics:
· It has more than one investment, to diversify the risk
portfolio and maximise returns;
· It has multiple investors, who pool their funds to
maximise investment opportunities;
· It has investors that are not related parties of the
entity; and
· It has ownership interests in the form of equity or
similar interests.
The Board considers that the Company continues to meet the definition of an
investment entity as it invests solely for returns from capital appreciations,
investment income or both, and measures and evaluates the performance of its
investments in subsidiaries on a fair value basis. In addition, the Company
has more than one investors and the major investors are not related parties of
the Company. The Company also has an exit strategy given that it is a limited
life entity, realising its investments at the end of the 2 year extension of
the original Return Period of 3 years as per the 'New Investment Policy'.
Accordingly, consolidated financial statements have not been prepared. IFRS 10
Consolidated Financial Statements provides "investment entities' an exemption
from the consolidation of particular subsidiaries and instead require that an
investment entity measures the investment in each eligible subsidiary at fair
value through profit or loss in accordance with IFRS 9 Financial Instruments.
Assumptions and Estimates
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a 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 inputs to these models are taken from observable markets where possible,
but where this is not feasible, estimation is required in establishing fair
values. The estimates include considerations of liquidity and model inputs
such as credit risk (both own and counterparty's), correlation and volatility.
Changes in assumptions about these factors could affect the reported fair
value of financial instruments in the statement of financial position and the
level where the instruments are disclosed in the fair value hierarchy.
The models are calibrated regularly and tested for validity using prices from
any observable current market transactions in the same instrument (without
modification or repackaging) or based on any available observable market data.
In relation to the underlying investments held in Zimbabwe via the Master
Fund, the quoted share prices of these securities have been discounted as
explained in Note 6(d). The determination of the discount rate involves
judgement and estimation uncertainties which has a material impact on the fair
value of the investments. An analysis of fair values of financial instruments
and further details as to how they are measured are provided in Note 6.
IFRS 13 requires disclosures relating to fair value measurements using a
three-level fair value hierarchy. The level within which the fair value
measurement is categorised in its entirety is determined on the basis of the
lowest level input that is 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 1 July 2022, the Company and the Investment Manager have, upon the
approval of the Reorganisation Resolution at the EGM in June 2022, entered
into the Amended and Restated Investment Management Agreement which amends the
fees payable to the Investment Manager as follows:
Management fees
There was no management fee charged during 2023. Pursuant to the Amended and
Restated Investment Management Agreement, there will be no management fees
charged during the Extended Return Period.
The Investment Manager's entitlement to future performance fees (through
CarryCo) has been cancelled and CarryCo's limited partnership interest in the
Limited Partnership, after return of its minority interest capital balance,
will be transferred to the Company for nominal value in the last year of the
Extended Return Period, that being 2024.
Realisation fees
The Investment Manager shall be entitled to the following realisation fees
during the Return Period from the net proceeds of all portfolio realisations
(including any cash returned by way of a Compulsory Redemption):
On distributions of cash to Shareholders: 1 per cent of the net amounts
realised.
The revisions to the arrangements with the Investment Manager, constitute a
related party transaction under the Company's related party policy, and in
accordance with that policy, the Company was required to obtain: (i) the
approval of a majority of the Directors who are independent of the Investment
Manager; and (ii) a fairness opinion or third-party valuation in respect of
such related party transaction from an appropriately qualified independent
adviser.
The realisation fees for the financial period under review amounts to USD
69,656 (2022: USD 50,000) of which USD 31,050 relates to accrued realisation
fees; management and performance fees for the financial year under review were
nil (2022: USD 32,511 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 Agreement
A Custodian Agreement has been entered into by the Master Fund and Standard
Chartered Bank (Mauritius) Ltd, whereby Standard Chartered Bank (Mauritius)
Ltd would provide custodian services to the Master Fund and would be entitled
to a custody fee of between 18 and 25 basis points per annum of the value of
the assets held by the custodian and a tariff of between 10 and 45 basis
points per annum of the value of assets held by the custodian. The custodian
fees are expensed at the Master Fund level and have been included in the NAV
of the subsidiary.
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, investments in managed funds and debts
instruments. These assets are acquired principally for the purpose of
generating a profit from short term fluctuation in price. All derivatives and
liabilities from the short sales of financial instruments are classified as
held for trading.
Financial assets at fair value through profit or loss upon initial recognition
These include equity securities and debt instruments that are not held for
trading. These financial assets are classified at FVTPL on the basis that they
are part of a group of financial assets which are managed and have their
performance evaluated on a fair value basis, in accordance with risk
management and investment strategies of the Company, as set out in each of
their offering documents. The financial information about the financial assets
is provided internally on that basis to the Investment Manager and to the
Board of Directors.
Derivatives - Options
Derivatives are classified as held for trading (and hence measured at fair
value through profit or loss) unless they are designated as effective hedging
instruments (however the Company does not apply any hedge accounting). The
Master Fund's derivatives relate to option contracts.
Options are contractual agreements that convey the right, but not the
obligation, for the purchaser either to buy or sell a specific amount of a
financial instrument at a fixed price, either at a fixed future date or at any
time within a specified period.
The Master Fund purchases and sells put and call options through regulated
exchanges and OTC markets. Options purchased by the Master Fund provide the
Master Fund with the opportunity to purchase (call options) or sell (put
options) the underlying asset at an agreed-upon value either on or before the
expiration of the option. The Master Fund is exposed to credit risk on
purchased options only to the extent of their carrying amount, which is their
fair value.
Options written by the Master Fund provide the purchaser the opportunity to
purchase from or sell to the Master Fund the underlying asset at an
agreed-upon value either on or before the expiration of the option.
Options are generally settled on a net basis.
Derivatives relating to options are recorded at the level of the Master
Fund. The financial statements of the Company do not reflect the derivatives
as they form part of the net asset value (NAV) of the Master Fund which is
fair valued.
(ii) Financial assets at amortised cost
The Master Fund measures financial assets at amortised cost if both of the
following conditions are met:
· The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual cash flows
· The contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding
Financial assets at amortised cost are subsequently measured using the
effective interest (EIR) method and are subject to impairment. Gains and
losses are recognised in profit or loss when the asset is derecognised,
modified or impaired. The Master Fund's financial assets at amortised cost
comprise 'trade and other receivables' and 'cash and cash equivalents in the
statement of financial position.
(iii) Other financial liabilities
This category includes all financial liabilities, other than those classified
as fair value through profit or loss. The Master Fund includes in this
category amounts relating to trade and other payables and dividend payable.
(a) Recognition
The Master Fund recognises a financial asset or a financial liability when,
and only when, it becomes a party to the contractual provisions of the
instrument.
Purchases or sales of financial assets that require delivery of assets within
the time frame generally established by regulation or convention in the
marketplace are recognised directly on the trade date, i.e., the date that the
Master Fund commits to purchase or sell the asset.
(b) Initial measurement
Financial assets and liabilities at fair value through profit or loss are
recorded in the statement of financial position at fair value. All transaction
costs for such instruments are recognised directly in profit or loss.
Derivatives embedded in other financial instruments are treated as separate
derivatives and recorded at fair value if their economic characteristics and
risks are not closely related to those of the host contract, and the host
contract is not itself classified as held for trading or designated at fair
value though profit or loss. Embedded derivatives separated from the host are
carried at fair value.
Financial assets at amortised cost and financial liabilities (other than those
classified as held for trading) are measured initially at their fair value
plus any directly attributable incremental costs of acquisition or issue.
(c) Subsequent measurement
The Master Fund measures financial instruments which are classified at fair
value through profit or loss at fair value. Subsequent changes in the fair
value of those financial instruments are recorded in 'Net gain or loss on
financial assets and liabilities at fair value through profit or loss.
Interest earned elements of such instruments are recorded separately in
'Interest revenue'. Dividend expenses related to short positions are
recognised in 'Dividends on securities sold not yet purchased'. Dividend
income/distributions received on investments at FVTPL is recorded in "Net gain
or loss on financial assets at fair value through profit or loss".
Financial assets at amortised costs are subsequently measured using the
effective interest method and are subject to impairment. Gains and losses are
recognised in profit or loss when the asset is derecognised, modified or
impaired.
(iii) Other financial liabilities
(d) Subsequent measurement
Financial liabilities, other than those classified as at fair value through
profit or loss, are measured at amortised cost using the effective interest
method. Gains and losses are recognised in profit or loss when the liabilities
are derecognised, as well as through the amortisation process.
The effective interest method is a method of calculating the amortised cost of
a financial asset or a financial liability and of allocating the interest
income or interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of the financial instrument or, when
appropriate, a shorter period to the net carrying amount of the financial
asset or financial liability. When calculating the effective interest rate,
the Master Fund estimates cash flows considering all contractual terms of the
financial instruments but does not consider future credit losses. The
calculation includes all fees paid or received between parties to the contract
that are an integral part of the effective interest rate, transaction costs
and all other premiums or discounts.
(e) Derecognition
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is derecognised where:
· The rights to receive cash flows from the
asset have expired; or
· The Company has transferred its rights to
receive cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party under a
'pass-through' arrangement; and
Either (a) the Master Fund has transferred substantially all the risks and
rewards of the asset, or (b) the Master Fund has neither transferred nor
retained substantially all the risks and rewards of the asset but has
transferred control of the asset. When the Master Fund has transferred its
rights to receive cash flows from an asset (or has entered into a pass-through
arrangement) and has neither transferred nor retained substantially all the
risks and rewards of the asset nor transferred control of the asset, the asset
is recognised to the extent of the Master Fund's continuing involvement in the
asset.
The Master Fund derecognises a financial liability when the obligation under
the liability is discharged, cancelled or expires. When an existing financial
liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as the derecognition of
the original liability and the recognition of a new liability. The difference
in the respective carrying amounts is recognised in profit or loss.
Determination of fair value
The Master Fund measures its investments in financial instruments, such as
equities, debentures and other interest-bearing investments and derivatives,
at fair value at each reporting date.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value measured is based on the presumption that
the transaction to sell the asset or transfer the liability takes place either
in the principal market for the asset or liability or, in the absence of a
principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to the Master
Fund. The fair value for financial instruments traded in active markets at
the reporting date is based on their quoted price without any deduction for
transaction costs.
For all other financial instruments not traded in an active market, the fair
value is determined by using appropriate valuation techniques. Valuation
techniques include: using recent arm's length market transactions; reference
to the current market value of another instrument that is substantially the
same; discounted cash flow analysis and option pricing models making as much
use of available and supportable market data as possible. An analysis of fair
values of financial instruments and further details as to how they are
measured is provided in Note 6.
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 trade and other receivables and cash and cash
equivalents were considered as de minimis. As a result, no ECL has been
recognised as any amount would have been insignificant.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount
reported in the statement of financial position if, and only if, there is a
currently legally enforceable right to offset the recognised amounts and there
is an intention to settle on a net basis, or to realise the asset and settle
the liability simultaneously.
Net gain or loss on financial assets and liabilities at fair value through
profit or loss
This item includes changes in the fair value of financial assets and
liabilities held for trading or designated upon initial recognition as 'at
fair value through profit or loss' and excludes interest and expenses. At
the Master Fund Level, the fair value gains and losses exclude interest and
dividend income.
Unrealised gains and losses comprise changes in the fair value of financial
instruments for the year and from reversal of prior year's unrealised gains
and losses for financial instruments which were realised in the reporting
period.
Realised gains and losses on disposals of financial instruments classified as
'at fair value through profit or loss' are calculated using the Average Cost
(AVCO) method. They represent the difference between an instrument's initial
carrying amount and disposal amount, or cash payments or receipts made on
derivative contracts (excluding payments or receipts on collateral margin
accounts for such instruments).
Due to and due from brokers
Amounts due to brokers are payables for securities purchased (in a regular way
transaction) that have been contracted for but not yet delivered on the
reporting date at the Master Fund level. Refer to the accounting policy for
financial liabilities, other than those classified at fair value through
profit or loss for recognition and measurement.
Amounts due from brokers include margin accounts and receivables for
securities sold (in a regular way transaction) that have been contracted for
but not yet delivered on the reporting date. Refer to accounting policy for
financial assets at amortised cost for recognition and measurement.
Interest revenue and expense
Interest revenue and expense are recognised in profit or loss for all
interest-bearing financial instruments using the effective interest method.
Dividend revenue
Dividend revenue is recognised when the Master Fund's right to receive the
payment is established. Dividend revenue is presented gross of any
non-recoverable withholding taxes, which are disclosed separately in profit or
loss of the Master Fund.
6. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH
PROFIT OR LOSS
6(a). Investment in subsidiaries at fair value
The Company has established Africa Opportunity Fund L.P., an exempted limited
partnership in the Cayman Islands to ensure that the investments made and
returns generated on the realisation of the investments made and returns
generated on the realisation of the investments are both effected in the most
tax efficient manner. All investments made by the Company are made through the
limited partner which acts as the master fund. At 31 December 2023, the
limited partners of the limited partnership are the Company (96.0%) and AOF
CarryCo Limited (4.0%). 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.
2023 2022
USD USD
9,995,466 19,038,376
Investment in Africa Opportunity Fund L.P.
3,261 3,471
Investment in Africa Opportunity Fund (GP) Limited
Total investment in subsidiaries at fair value 9,998,727 19,041,847
19,041,847 26,095,345
Fair value at 01 January
(7,750,000) (5,049,500)
Reduction in investment in subsidiaries*
Net (loss)/gain on investment in subsidiaries at fair value (1,293,120) (2,003,998)
9,998,727 19,041,847
Fair value at 31 December
* The reduction in investment in subsidiaries relates to capital withdrawn
from the Master Fund by the Company.
6(b). Fair value hierarchy
The Company uses the following hierarchy for determining and disclosing the
fair value of the financial instruments by valuation technique:
Level 1: quoted (unadjusted) market prices in active markets for identical
assets and liabilities.
Level 2: valuation techniques for which the lowest level input that is
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
2023 Level 1 Level 2 Level 3
COMPANY USD USD USD USD
- -
Investment in subsidiaries 9,998,727 9,998,727
31 December
2022 Level 1 Level 2 Level 3
COMPANY USD USD USD USD
19,041,847 - 19,041,847 -
Investment in subsidiaries
· Fair value hierarchy of the Master Fund.
The Company has investment in Africa Opportunity Fund L.P., the Master Fund,
amounting to USD 9,995,466. The underlying investments of the Master Fund
amounts to USD 8,727,712. Details on the financial assets and liabilities of
the Master Fund and fair value hierarchy are as follows:
31 December
2023 Level 1 Level 2 Level 3
MASTER FUND USD USD USD USD
Financial assets at fair value through profit or loss
8,727,712 3,706,700 5,021,012 -
Equity securities
5,021,012 -
8,727,712 3,706,700
31 December
2022 Level 1 Level 2 Level 3
MASTER FUND USD USD USD USD
Financial assets at fair value through profit or loss
18,634,833 13,859,649 4,775,184 -
Equity securities
18,634,833 13,859,649 4,775,184 -
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 and debt securities
These pertain to equity and debt instruments which are quoted for which there
is a market price. As a result, they are classified within level 1 of the
hierarchy except for the valuation of listed on the Zimbabwe Stock Exchange
which have been classified as level 2 given that their quoted share price has
been discounted as at 31 December 2023 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 8,727,712 as at 31 December 2023 (Note 6(b)), of which USD 2,895,212
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 6,568,413. However, owing to the ongoing market
instability, hyperinflationary economy and difficulty repatriation ZIM
currency to USD, a discount has been applied to the market price to arrive at
the fair value of USD 2,895,212.
Beginning in June 2020, the Zimbabwe authorities suspended Old Mutual shares
from the Zimbabwe Stock Exchange, necessitating the Company to devise an
alternative transparent discount factor. The new discount factor is based on
the official Zimbabwe Dollar exchange rate at the end of June 2019, when the
Zimbabwe Dollar, became the sole legal tender in Zimbabwe, modified by the
inflation differential between Zimbabwe and the United States captured in
their respective monthly Consumer Price Indices (the US Consumer Price Index
is that for urban consumers), then adjusted by the proportion of export
proceeds that must be surrendered by Zimbabwean exporters to the Zimbabwe
Reserve Bank. In May 2022, the Zimbabwe government imposed a ban on bank
lending services so as to stop currency speculation and in June 2022 the RBZ
monetary policy committee increased the policy rate 12,000 basis points to
200% so as to control rising inflation. The Company adjusted its model to
reflect a 20% surrender requirement on the basis that the reported CPI
captured only 80% of actual inflation, a position supported by the government
actions. Over time, the official exchange rate has converged towards our
in-house exchange rate. In May 2023, the Reserve Bank Governor along with
the Minister of Finance stated that the Official Exchange Rate should converge
toward the parallel rate, and trade at a discount that is lower than 20%.
This statement partly led to a devaluation of the official rate and initially
closed the gap on the parallel rate, however, the gap widened by year-end.
This discount factor changes every month. The consequence of applying this
discount factor is that the Zimbabwe Dollar prices of the Company's
investments listed on the Zimbabwe Stock Exchange were converted into US
Dollars, as at 31 December 2023 at a discount rate of 55.9% (the discount rate
was 25.4% as at 31 December 2022). The value of the Zimbabwe investments
recorded in the books of the Company, after applying this discount factor, was
USD 2,895,212 (2022: USD 2,149,384).
Written put options
These are traded on an active market and have a quoted market price. They have
therefore been classified in level 1 of the hierarchy.
Unquoted equity investments
African Leadership University ("ALU") is a network of tertiary institutions,
currently with operations in both Mauritius and Rwanda. The Investment
Manager valued ALU on the basis of an observable arms-length transaction
between existing shareholders selling a portion of their shares and an
unaffiliated third party. The transactions were agreed via an omnibus share
purchase agreement dated 28 September 2022 with dates of the agreements
evidencing the first, second, third, and fourth tranches, respectively, 30
September 2022, 5 December 2022, 6 March 2023 and 5 June 2023 (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 2023. At 31 December 2023, the
investment in ALU has been classified under level 2 because the value of the
investment utilises the recent transaction.
Unquoted debt and equity investments
2023 2022
USD USD
2,625,800
Investment in ALU 2,125,800
Financial asset and liabilities at fair value through profit or loss
2023 2022
USD USD
Investment in ALU:
3,125,800
At 1 January 2,625,800
(500,000)
Disposal (500,000)
2,625,800
At 31 December 2,125,800
Total gain included in the statement of profit or loss and other comprehensive
income of Africa Opportunity Fund L.P. for asset held at the end of the
reporting period. - -
6(e). Statement of profit or loss and other comprehensive income of the
Master Fund for the year ended 31 December 2023.
The net loss on financial assets at fair value through profit or loss
amounting to USD 1,293,120 (2022: net loss of USD 2,003,998) is due to the
loss arising at the Master Fund level and can be analysed as follows:
2023 2022
USD USD
Income
Interest revenue - 14,100
Dividend revenue 202,176 1,267,116
202,176 1,281,216
Expenses
Net losses on financial assets and liabilities at fair value
through profit or loss 1,005,287 2,780,643
Net foreign exchange loss 336,198 159,000
Custodian fees, brokerage fees and commission 162,396 165,427
Other operating expenses 4,239 12,840
1,508,120 3,117,910
Operating losses before tax (1,305,944) (1,836,694)
Less withholding tax (14,043) (209,150)
Total comprehensive losses for the year (1,319,987) (2,045,844)
Attributable to:
AOF Limited (direct interests) (1,292,909) (2,003,670)
AOF Limited (indirect interests through AOF (GP) (328)
Ltd)
(211)
(1,293,120) (2,003,998)
AOF CarryCo Limited (NCI) (26,867) (41,846)
(1,319,987) (2,045,844)
The financial assets and liabilities of the Master Fund are analysed as
follows:
(i) Net losses on financial assets and liabilities at fair value
through profit or loss held by Africa Opportunity Fund L.P.
2022 2022
USD USD
Net losses on fair value of financial assets at fair value through profit or (1,005,287) (2,780,643)
loss
Net losses (1,005,287) (2,780,643)
(ii) Financial asset and liabilities at fair value through profit
or loss held by Africa Opportunity Fund L.P.
2022 2022
USD USD
Held for trading assets:
24,015,367
At 1 January 18,634,833
(2,599,891)
Disposal (8,901,834)
Net losses on financial assets at fair value through profit or loss (2,780,643)
(1,005,287)
At 31 December (at fair value) 8,727,712 18,634,833
Analysed as follows:
16,009,033
- Listed equity securities 6,601,912
2,625,800
- Unquoted equity securities 2,125,800
18,634,833
8,727,712
(iii) Net changes on fair value of financial assets at fair value
through profit or loss
2023 2022
USD USD
Realised 2,048,903 37,447
Unrealised (3,054,190) (2,818,090)
Total losses (1,005,287) (2,780,643)
7. RECEIVABLES
2023 2022
USD USD
Amount due from Africa Opportunity Fund L.P. (Note 12) - 227,805
Prepayments 11,038 8,960
236,765
11,038
8. CASH AND CASH EQUIVALENTS
2023 2022
USD USD
28,967 42,251
Cash at bank
9(a). ORDINARY SHARE CAPITAL
Company
2023 2023 2022 2022
Number USD Number USD
Authorised share capital
Ordinary shares with a par value of
USD 0.01 1,000,000,000 10,000,000 1,000,000,000 10,000,000
Issued share capital
Ordinary shares with a par value of
USD 0.01 11,468,907 114,689 20,214,590 202,146
The directors have the general authority to repurchase the ordinary shares in
issue subject to the Company having funds lawfully available for the purpose.
However, if the market price of the ordinary shares falls below the Net Asset
Value, the directors will consult with the Investment Manager as to whether it
is appropriate to instigate a repurchase of the ordinary shares.
The Company intends to pay or report dividends in order to remain an UK
Reporting Fund, however, there is no assurance that the Company will be able
to pay dividends. In compliance with the current investment strategy,
Directors have the right to return cash through compulsory redemptions, by way
of dividend or any other distribution as permitted by the Listing Rules.
9(b). SHARE CAPITAL AND SHARE PREMIUM
Share Share Ordinary
Capital Premium Shares
USD USD Number
At 1 January 2022 247,878 6,451,469 24,787,758
Changes during the period:
Redemption of ordinary shares (45,732) (4,454,268) (4,573,168)
At 31 December 2022 202,146 1,997,201 20,214,590
Changes during the period:
Adjustment for prior year* - 8,244,224 -
Redemption of ordinary shares (87,457) (4,430,872) (8,745,683)
At 31 December 2023 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 will therefore undertake a staged
return of capital to shareholders. During the year ended 31 December 2023, the
Directors approved a partial mandatory redemption of the Company's Ordinary
Shares. In 15 May 2023, the Board of Directors of Africa Opportunity Fund
Limited approved the mandatory redemption of 8,745,683 Ordinary shares. On 23
May, the mandatory redemption was completed and AOF redeemed the 8,745,683
Ordinary Shares, on a pro rata basis, at the prevailing NAV per Ordinary Share
of $0.869 as at 30 April 2023, in the aggregate of $7.6 million. Such shares
were cancelled automatically following their redemption. Fractions of shares
produced by the applicable redemption ratios have not been redeemed and so the
number of shares redeemed in respect of each shareholder has been rounded down
to the nearest whole number of shares. Payments of redemption proceeds were
effected either through Euroclear or Clearstream (in the case of shares held
in uncertificated form) or by cheque (in the case of shares held in
certificated form) on or around 31 May 2023. Following the Mandatory
Redemption, the Company has 11,468,907 Ordinary Shares in issue. As a result
of the Mandatory Redemption described above, Robert Knapp and Myma
Belo-Osagie, Directors of the Company held 1,851,485 and 15,234 Ordinary
Shares, respectively. The Company benefitted from a strong level of
realisations from its underlying portfolio. The redemptions during the year
were funded through proceeds received from realising the assets of the
Company.
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. TRADE AND OTHER PAYABLES
Notes 2023 2022
USD USD
Directors Fees Payable 12 17,500 17,500
Other Payables 143,185 136,040
160,685 153,540
Other payables are non-interest bearing and have an average term of six
months. The carrying amount of trade and other payables approximates their
fair value.
11. EARNINGS PER SHARE
The earnings per share (EPS) is calculated by dividing the decrease in net
assets attributable to shareholders by number of ordinary shares. The EPS
for 2023 and 2022 represent both the basic and diluted EPS.
2023 2022
Ordinary shares Ordinary shares
Net loss attributable to equity holders USD (1,689,276) (2,409,870)
Number of shares in issue 11,468,907 20,214,590
Change in net assets attributable to shareholders
per share
(based on number of shares outstanding at year end) USD (0.147) (0.119)
Weighted Average number of shares in issue 14,880.684 22,563.992
Change in net assets attributable to shareholders
per share
(based on average number of shares in issue) USD (0.114) (0.107)
Pursuant to IAS 33 'Earnings per share', the change in net assets attributable
to shareholders per share should be presented on a weighted average basis. The
prior year change in net assets attributable to shareholders per share was
provided on the basis of shares outstanding as at year-end. In accordance with
IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors', the
prior year figure has been corrected on the face of the statement of profit or
loss and other comprehensive income (SOCI) to comply with IAS 33.
As previously reported in SOCI USD (0.119)
As restated in SOCI USD
(0.107)
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 2023 2022
Africa Opportunity Fund (GP) Limited
Cayman Islands 100.00 100.00
Africa Opportunity Fund L.P. Cayman Islands 96.00 97.73
Type of Nature of Volume Balance at
Name of related parties relationship transaction USD 31 Dec 2023
USD
Africa Opportunity Partners Limited Investment Manager Management fee expense - -
SS&C Technologies Administrator Administration fees - -
Directors Directors Directors' fees 70,010 -
Type of Nature of Volume Balance at
Name of related parties relationship transaction USD 31 Dec 2022
USD
Africa Opportunity Partners Limited Investment Manager Management fee expense 50,000 32,511
Africa Opportunity Fund LP Subsidiary Receivable - 227,805
SS&C Technologies Administrator Administration fees 90,437 -
Directors Directors Directors' fees 70,000 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 2023 and 2022.
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 %
2023 6,254,094 54.53
2022 3,290,354 16.28
13. TAXATION
Under the current laws of Cayman Islands, there is no income, estate, transfer
sales or other Cayman Islands taxes payable by the Company. As a result, no
provision for income taxes has been made in the financial statements.
Dividend revenue is presented gross of any non-recoverable withholding taxes,
which are disclosed separately in the statement of comprehensive income.
Withholding taxes are not separately disclosed in 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:
2023 2022
USD USD
Total comprehensive (loss)/gain (1,689,276) (2,409,870)
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 14,043 (2022: USD 209,150). These have been included in the NAV of the
subsidiary.
14. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
14(a). AT THE COMPANY'S LEVEL
Introduction
The Company's objective in managing risk is the creation and protection of
shareholder value. Risk is inherent in the Company's activities. It is
managed through a process of ongoing identification, measurement, and
monitoring, subject to risks limits and other controls. The process of risk
management is critical to the Company's continuing profitability. The Company
is exposed to market risk (which includes currency risk, interest rate risk
and price risk), credit risk and liquidity risk arising from the financial
instruments it holds.
Risk management structure
The Investment Manager is responsible for identifying and controlling risks.
The Board of Directors supervises the Investment Manager and is ultimately
responsible for the overall risk management approach of the Company.
Fair value
The carrying amount of financial assets and liabilities at fair value through
profit or loss are measured at fair value at the reporting date. The carrying
amount of trade and other receivables, cash and cash equivalents trade and
other payables approximates their fair value due to their short-term nature.
Market risk
Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices and
includes interest rate risk, foreign currency risk and equity price risk. The
Company is not directly exposed to market risk. The Company holds investments
in subsidiaries, Africa Opportunity Fund L.P. (Master Fund) and Africa
Opportunity Fund (G.P.) Limited which are valued at their net asset value. The
Company is thus exposed to market risk indirectly through investments held by
the Master Fund.
Equity price risk
Equity price risk is the risk that the fair value of equities decreases as a
result of changes in the levels of the equity indices and the values of
individual stocks. The equity price risk of the Company arises from the net
asset value (NAV) of the underlying funds, the Master Fund and AOF G.P. The
equity price risk at Company level is analysed as follows:
Equity
Effect on
Company Change in Equity
NAV price 2023
USD
Investment in subsidiaries at fair value through profit or loss 10% 999,873
-10% (999,873)
Effect on
Company Change in Equity
NAV price 2022
USD
Investment in subsidiaries at fair value through profit or loss 10% 1,904,185
-10% (1,904,185)
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:
2023 2023 2022 2022
Financial Financial Financial Financial
assets liabilities assets liabilities
USD USD USD USD
10,027,694 19,311,903
United States Dollar 160,685 153,540
10,027,694 19,311,903
160,685 153,540
Prepayments are typically excluded as these are not financial assets;
prepayments as at 31 December 2023 and 2022 amounted to USD 11,038 and USD
8,960, respectively.
As at 31 December 2023
Company Gross amounts
of recognised Net amount of
Gross financial financial assets
amounts of liabilities set off presented in
recognised in the statement the statement
financial of financial of financial Financial Cash
assets position position instruments collateral Net amount
USD USD USD USD USD USD
Cash and cash equivalents
28,967 - 28,967 - - 28,967
Total 28,967
- 28,967 - - 28,967
As at 31 December 2022
Company Gross amounts
of recognised Net amount of
Gross financial financial assets
amounts of liabilities set off presented in
recognised in the statement the statement
financial of financial of financial Financial Cash
assets position position instruments collateral Net amount
USD USD USD USD USD USD
Cash and cash equivalents
42,251 - 42,251 - - 42,251
Total 42,251
- 42,251 - - 42,251
Cash and cash equivalents are offset as the Company has current bank balances
and bank overdrafts with the same counterparty which the Company has current
legally enforceable right to set off the recognised amounts and the intention
to settle on a net basis or realise the asset and settle the liability
simultaneously.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates
will affect future cash flows or the fair values of financial instruments. The
Company's financial assets and liabilities are non-interest bearing;
therefore, the Company is not exposed to interest rate risk and thus, no
sensitivity analysis has been presented.
Credit risk
The Company takes on exposure to credit risk, which is the risk that a
counterparty will be unable to pay amounts in full when due. Financial assets
that potentially expose the Company to credit risk consist principally of cash
and cash equivalent balances and trade and other receivables, comprising of an
intercompany balance with the Master Fund. The extent of the Company's
exposure to credit risk in respect of these financial assets approximates
their carrying values as recorded in the Company's statement of financial
position.
The carrying amount of financial assets represents the maximum credit
exposure. The maximum exposure to credit risk at the reporting date was:
2023 2022
Company Company
Carrying Carrying
amount amount
Notes USD USD
Other receivables, excluding
prepayments 7 - 227,805
Cash and cash equivalents 8 28,967 42,251
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
Baa2Subordinated 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 2023. 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 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
- - - -
Year 2022 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 153,540 153,540
- - - -
Total liabilities 153,540 153,540
- - - -
Capital Management
Total capital is considered to be the total equity as shown in the statement
of financial position.
The Company is a closed-end fund and repurchase of shares in issue can be done
with the consent of the Board of Directors. The Company is not subject to
externally imposed capital requirements.
The objectives for managing capital are:
· To invest the capital in investment meeting the description,
risk exposure and expected return indicated in the Admission document.
· To achieve consistent capital growth and income through
investment in value, arbitrage and special situations opportunities derived
from the African continent.
· To maintain sufficient size to make the operation of the
Company cost effective.
The primary objective of the Company's capital management is to ensure that it
maintains a strong credit rating and healthy capital ratios in order to
support its business and maximise shareholder value.
14(b). AT THE MASTER FUND'S LEVEL
The financial risks at Master Fund Level are described as follows:
Fair value
The carrying amount of financial assets and liabilities at fair value through
profit or loss held at Master Fund level are measured at fair value at the
reporting date. The carrying amount of other receivables, cash and cash
equivalents, trade and other payables and amount payable to related party at
Master Fund levels approximates their fair value due to their short-term
nature.
Market risk
The market risk lies primarily at the Master Fund level. Short selling
involves borrowing securities and selling them to a broker-dealer. The Master
Fund has an obligation to replace the borrowed securities at a later date.
Short selling allows the Master Fund to profit from a decline in market price
to the extent that such decline exceeds the transaction costs and the costs of
borrowing the securities, while the gain is limited to the price at which the
Fund sold the security short. Possible losses from short sales may be
unlimited as the Master Fund has an obligation to repurchase the security in
the market at prevailing prices at the date of acquisition.
With written options, the Master Fund bears the market risk of an unfavourable
change in the price of the security underlying the option. Exercise of an
option written by the Master Fund could result in the Master Fund selling or
buying a security at a price significantly different from its fair value.
A contract for difference creates, as its name suggests, a contract between
two parties speculating on the movement of an asset price. The term 'CFD'
which stands for 'contract for difference' consists of an agreement (contract)
to exchange the difference in value of a particular currency, commodity share
or index between the time at which a contract is opened and the time at which
it is closed. The contract payout will amount to the difference in the price
of the asset between the time the contract is opened and the time it is
closed. If the asset rises in price, the buyer receives cash from the seller,
and vice versa. The Master Fund bears the risk of an unfavourable change on
the fair value of the CFD. The risk arises mainly from changes in the equity
and foreign exchange rates of the underlying security.
The Master Fund's financial assets are susceptible to market risk arising from
uncertainties about future prices of the instruments. Since all securities
investments present a risk of loss of capital, the Investment Manager
moderates this risk through a careful selection of securities and other
financial instruments. The Master Fund's overall market positions are
monitored on a daily basis by the Investment Manager.
The directors have based themselves on past and current performance of the
investments and future economic conditions in determining the best estimate of
the effect of a reasonable change in equity prices, currency rate and interest
rate.
Equity price risk
Equity price risk is the risk that the fair value of equities decreases as a
result of changes in the levels of the equity indices and the values of
individual stocks.
The equity price risk exposure arises from the Master Fund's investments in
equity securities, from equity securities sold short and from equity-linked
derivatives (the written options). The Master Fund manages this risk by
investing in a variety of stock exchanges and by generally limiting exposure
to a single industry sector to 15% of NAV.
Management's best estimate of the effect on the profit or loss for a year due
to a reasonably possible change in equity indices, with all other variables
held constant is indicated in the table below. There is no effect on 'other
comprehensive income' as the Master Fund have no assets classified as
'available-for-sale' or designated hedging instruments.
In practice, the actual trading results may differ from the sensitivity
analysis below and the difference could be material. An equivalent decrease in
each of the indices shown below would have resulted in an equivalent, but
opposite impact.
Equity
Effect on net assets
attributable to
Master Fund Change in Shareholders
NAV price 2023
USD
Financial assets at fair value through profit or loss 10% 872,771
-10% (872,771)
Effect on net assets
attributable to
Master Fund Change in Shareholders
NAV price 2022
USD
Financial assets at fair value through profit or loss 10% 1,863,483
-10% (1,863,483)
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 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
Currency Risk - Year 2022
Effect on net assets attributable to
Currency shareholders in (USD)
Master Fund
Change: 30% -30%
Botswana Pula (95,224) 95,224
Ghana Cedi (1,605,354) 1,605,354
Kenyan Shilling (91,305) 91,305
South African Rand (26,315) 26,315
Tanzanian Shilling (331,067) 331,067
Zambian Kwacha (2,005,894) 2,005,894
Change: 5% -5%
Great British Pound (329) 329
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:
2023 2022
Master Fund Master Fund
Carrying Carrying
amount amount
USD USD
Other receivables, excluding
prepayments 28,700 28,700
Cash and cash equivalents 2,113,625 1,516,490
Concentration risk
At 31 December 2023 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
2023 2022
USD USD
Equity Securities
Ghana 3,397,990 5,351,179
Zimbabwe 2,895,212 2,149,384
Other 2,125,800 2,625,800
Kenya 217,987 304,350
South Africa 90,723 96,833
Zambia - 6,686,314
Tanzania - 1,103,558
Botswana - 317,415
Total 8,727,712 18,634,833
Analysed by industry of underlying assets:
Master Fund Master Fund
2023 2022
USD USD
Equity Securities
Financial Services 3,488,714 5,448,012
Real Estate 2,895,211 2,149,384
Other 2,125,800 2,625,800
Utilities 217,987 6,990,664
Beverages - 1,103,558
Consumer Finance - 317,415
Total 8,727,712 18,634,833
Maturity Analysis
All figures are expressed in USD.
As at 31 December 2023 Within 12 Months After 12 Months Total
ASSETS
Cash and cash equivalents 2,113,625 - 2,113,625
Trade and 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
All figures are expressed in USD.
As at 31 December 2022 Within 12 Months After 12 Months Total
ASSETS
Cash and cash equivalents 1,516,490 - 1,516,490
Trade and other receivables 28,700 - 28,700
Equity securities 6,539,674 9,469,359 16,009,033
Unquoted equity securities 488,633 2,137,167 2,625,800
8,573,497 11,606,526 20,180,023
Total assets
LIABILITIES
Trade and other payables 467,410 - 467,410
Amount payable to related party - AOF Ltd 227,805
227,805 -
Total liabilities 695,215 695,215
-
15. ANALYSIS OF NAV OF MASTER FUND ATTRIBUTABLE TO ORDINARY SHARES
2023 2022
USD USD
ASSETS
Cash and cash equivalents 2,113,625 1,516,490
Trade and other receivables 28,700 28,700
Financial assets at fair value through profit or loss 8,727,712 18,634,833
Total assets 10,870,037 20,180,023
EQUITY AND LIABILITIES
Liabilities
Trade and other payables 455,217 467,410
Amount payable to related party - AOF Ltd - 227,805
Total liabilities 455,217 695,215
Net assets attributable to members' account 10,414,820 19,484,808
16. SEGMENT INFORMATION
For management purposes, the Company is organised in one main operating
segment, which invests in equity securities, debt instruments and relative
derivatives. All of the Company's activities are interrelated, and each
activity is dependent on the others. Accordingly, all 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 (2022: nil).
18. COMMITMENTS AND CONTINGENCIES
There are no commitments or contingencies at the reporting date.
19. EVENTS AFTER REPORTING DATE
Other than described above, 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 2023.
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.
LIFE OF THE COMPANY
Directors consider it desirable that Shareholders should have the opportunity
to review the future of the Company at appropriate intervals. Accordingly,
Shareholders passed an ordinary resolution at an extraordinary general meeting
of the Company on 28 February 2014 that the Company continues in existence. On
June 27, 2019, the Shareholders passed a further ordinary resolution at an
extraordinary general meeting of the Company on that the Company continues in
existence through 30 June 2022.
In June 2022, the Directors convened an Annual General Meeting and an
Extraordinary General Meeting where the following was passed:
· Ordinary resolution that the continuation of the existence of the
Company be and is hereby approved.
· The text set out under "New Investing Policy" in paragraph 2 of
Part III of the Company's circular to Shareholders dated 5 June 2019 (the
"Circular") adopted as the new investment policy of the Company continues;
· The terms of the Amended and Restated Investment Management
Agreement (as defined in the Circular) be and are hereby approved;
· The memorandum and the articles of association in the form
initialled by the Chair of the meeting be adopted as the memorandum and
articles of association of the Company in substitution for and to the
exclusion of the existing memorandum and articles of association; and
· Any variation to the rights attaching to the Ordinary Shares in
the Company pursuant to the adoption of the new memorandum and articles of
association, and in particular the right for the Company to redeem the
Ordinary Shares (including any redemptions made of 15 per cent. or more of the
Company's issued share capital), be and is hereby approved.
In summary, shareholders voted to give AOF two years during which the
Investment Manager will realize the portfolio in an orderly manner and
distribute the proceeds to the shareholders. (Please review the Company's
Circular dated 13 June 2022 for a detailed and comprehensive description of
the Continuation Vote).
A brief synopsis of the "New Investing Policy" which shall remain in force
through 30 June 2024 is below: (Please review the Company's Circular dated 5
June 2019 for a detailed and comprehensive description of the Policy):
For a period of up to three years following the EGM (the "Return Period"), the
Company will make no new investments (save that it may invest in, or advance
additional funds to, existing investments within the Company's portfolio to
maximise value and assist in their eventual realisation). The Company will
adopt the New Investment Policy whereby the Company's existing portfolio of
investments will be divested in a controlled, orderly and timely manner to
facilitate a staged return of capital.
It should be appreciated that there is no time horizon in terms of the
implementation of the New Investment Policy. Although the Company's portfolio
is comprised of largely liquid equity holdings, the Company has some illiquid
investments, and it may take the Investment Manager some time to realise
these.
REGISTERED NUMBER
Registered in the Cayman Islands number MC-188243.
Website
www.africaopportunityfund.com
1 (#_ftnref1) 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 (#_ftnref2) Bloomberg.
3 (#_ftnref3) International Monetary Fund, Regional Economic Outlook
Sub-Saharan Africa, October 2023, page 10.
4 (#_ftnref4) Bloomberg, MSCI EFM Africa Index (MXFMEAF Index) Price/Cash
Flow multiples of 7.33x (2022) and 7.73x (2023).
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