TIDMAOF
RNS Number : 6878M
Africa Opportunity Fund Limited
19 September 2012
19 September 2012
Africa Opportunity Fund Limited (AOF.L)
Announcement of Unaudited Interim Results for the 6 month period
to 30 June 2012
Africa Opportunity Fund Limited ("AOF" or the "Company"), the
closed-ended investment company which aims to achieve capital
growth and income through investments in value, arbitrage, and
special opportunities derived from the continent of Africa
announces its unaudited results for the 6 month period to 30 June
2012.
Highlights:
-- AOF's net asset value per share of US$0.903 as at 30 June
2012 fell by 2.7% from the 31 December 2011 net asset value per
share of US$0.933; including dividends.
-- As at 30 June 2012, AOF's investment allocation was 74%
listed equities, 11% debt and 15% cash.
-- Dividends in the amount of $0.0026 per share were paid on 10 April 2012 and 13 July 2012.
-- AOF's net asset value per share as at 31 August 2012 was US$0.880.
Investment Manager's Statement
Market Conditions: AOF's NAV fell during the first half of 2012.
The NAV, including dividends, declined by 2.7%, and closed at
$0.903 on 30 June 2012. As a reference, in US dollar terms in the
first six months of 2012, the S&P rose 9.5%, South Africa
gained 6.0%, Egypt gained 25.5%, Kenya rose 20.9%, and Nigeria rose
6.6%.
Portfolio Highlights: AOF's portfolio fell broadly in sympathy
with declines in African and global bourses during Q2. Natural
resources suffered disproportionately as fear of a China slowdown
took hold in the minds of investors. As a fund, which has
maintained exposure to commodities almost since inception, AOF in
particular, and Africa in general, felt those disproportionate
losses. There were three identifiable reasons behind AOF's Q2
losses. First, most natural resource commodity companies, whether
producers, developers, or explorers, constituting one third of
AOF's portfolio, lost approximately 8% of their initial Q2 2012
market capitalization by the end of Q2. Admittedly, in a few of
those cases, as is all too common in the mining industry, the
primary reasons for market capitalization losses were idiosyncratic
cost overruns and scheduling delays in commencing commercial
production of a commodity. AOF's losses were somewhat tempered by
some hedges which ameliorated the impact of the resource sector
decline on our NAV. On a positive note, AOF tendered its shares of
Extract Resources, the owner of the Rossing South uranium deposit,
estimated to be the fifth largest such deposit in the world, to
China Guangdong Nuclear Power Holding Corp for a modest 11% gain.
Acquired 4 months before the occurrence of the Fukushima nuclear
tragedy, AOF's Extract shares lost 38% of their value in the wake
of that disaster. The positive outcome vindicated our conviction
that large and shallow mineral development deposits in Africa have
a calculable intrinsic value. We also reduced AOF's base metal
exposure during Q2. Second, the pattern of the Ghana Cedi
depreciating sharply in an election year, contrary to our
expectations based on Ghana's new oilfield proceeds, is repeating
itself in 2012, an election year. 6.8% of the Company's March 2012
portfolio was invested in equity securities listed on the Ghana
Stock Exchange. Their market value fell by 27.7% in Q2. Ghana's
financial authorities have attempted to maintain the external value
of the Cedi by raising interest rates sharply past the 20% level,
despite Ghana's 10% inflation rate. For example, the discount rate
for 182-day Ghana Government treasury bills on 30 March 2012 was
12.6% and 2 year fixed rate note bore an interest rate of 13.6%. By
29 June, those rates had risen respectively to 20.4% and 23% while
Ghana's inflation rate hovered around 10%. To quote from the IMF's
recent 13 July statement on Ghana: "reserve cover has fallen below
comfortable levels. Furthermore, spending overruns at the end of
2011, large public wage increases and re-emergence of energy
subsidies have created the need for corrective action to achieve
fiscal targets." Consequently, interest rate sensitive companies,
as a general proposition, suffered declines in market
capitalization. In the case of the Enterprise Group, price declines
were exacerbated by a poor set of financial results in Q1, as its
expenses grew at a rapid rate. Fortunately, Enterprise Group
continued to generate underwriting profits. Better still, with a
Price/Book ratio of 0.59X, a Price/Embedded Value ratio of 0.42X on
30 June, and the option of investing in risk-free Ghanaian debt at
a 10% real margin or yield, its valuation was a sparkling bargain.
Finally, the discount between the Lusaka Stock Exchange price of
Shoprite, where AOF holds its Shoprite shares, and its Johannesburg
Stock Exchange price widened from 28% at the beginning of 2012 to
42% by the end of Q2. As of 30 June, the book value of AOF's
financial liabilities at fair value was $5.36 million.
Portfolio Appraisal Value: As of 30 June, the Manager's
appraisal of the economic value of the portfolio was $1.22. The
market price of $0.786 on 30 June represents a 36% discount. Note
the Appraisal Value is intended to provide a measure of the
Manager's long-term view of the attractiveness of AOF's portfolio.
It is a subjective estimate, and does not tell when that value will
be realized, nor does it guarantee that any security will reach its
Appraisal Value.
Outlook: We believe that AOF's portfolio possesses deeply
undervalued companies. Given the challenges facing global markets
and in particular heavily indebted industrial economies, it is
difficult to predict when this value will express itself in AOF's
NAV, but we remain excited by the opportunities we are finding for
AOF.
Africa Opportunity Partners
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD 1 JANUARY 2012 THROUGH 30 JUNE 2012
For the For the Half
Half Year Year Ended
Note Ended 30 30 June 2011
June 2012
----------- --------------
USD USD
Revenue
Dividend revenue 1,885,893 813,018
Other income 2,119 66,345
Interest revenue 235,302 445,126
Net exchange gains on bank 100,690 26,096
Profit on financial assets at fair
value through profit or loss 5(a) - 2,202,126
------------
2,224,004 3,552,711
------------ ------------
Expenses
Losses on financial assets at fair
value through profit or loss 1,805,228 -
Losses on financial liabilities
at fair value through profit or
loss 442,561 181,018
Management fee 401,054 395,615
Custodian, secretarial and administration
fees 131,926 141,608
Dividend paid 114,980 22,474
Other operating expenses 102,526 28,416
Interest charges and other fees 98,089 27,823
Brokerage fees 96,537 50,496
Directors' fees 40,000 40,000
Audit fees 31,733 17,717
Tax incurred on dividend received 52,995 53,223
3,317,629 958,390
------------ ------------
(Loss)/ profit for the period (1,093,625) 2,594,321
Other comprehensive income - -
------------ ------------
Total comprehensive income for the
period (1,093,625) 2,594,321
============ ============
Attributable to:
Equity holders of the Company (1,090,783) 2,574,537
Non-controlling interest (2,842) 19,784
(1,093,625) 2,594,321
------------ ------------
Basic (loss)/ gain per share for
gain attributable to the equity
holders of the Company during the
period 9 (0.0256) 0.0604
The notes form an integral part of these financial
statements.
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2012
Notes As at As at
30 June 30 June
2012 2011
--------- ---------
USD USD
ASSETS
Financial assets at fair value
through profit or loss 5(a) 38,216,419 44,254,991
Trade and other receivables 6 1,157,142 566,819
Cash and cash equivalents 4,960,190 1,841,054
----------- -----------
Total assets 44,333,751 46,662,864
=========== ===========
EQUITY AND LIABILITIES
Liabilities
Financial liabilities at fair value
through profit or loss 5(b) 5,358,713 3,950,367
Trade and other payables 8 209,931 594,469
Total liabilities 5,568,644 4,544,836
----------- -----------
Equity
Share capital 7 426,303 426,303
Share premium 38,484,202 38,859,349
Retained losses (415,563) 2,552,322
----------- -----------
Equity attributable to equity holders
of the parent 38,494,942 41,837,974
Non controlling interest 270,165 280,054
Total equity 38,765,107 42,118,028
----------- -----------
Total equity and liabilities 44,333,751 46,662,864
=========== ===========
The notes form an integral part of these financial
statements.
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD 1 JANUARY 2012 THROUGH 30 JUNE 2012
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Issued Share Retained Non controlling Total
capital premium profit/(loss) Total interest equity
-------- ----------- -------------- -------------- ---------------- ------------
Notes USD USD USD USD USD USD
At 01 January 2011 426,303 39,012,818 (22,215) 39,416,906 260,270 39,677,176
Total Comprehensive
income for the period - - 697,435 697,435 12,737 710,172
Other comprehensive
income - - - - - -
Dividend (306,938) - (306,938) - (306,938)
At 31 December 2011 426,303 38,705,880 675,220 39,807,403 273,007 40,080,410
======== =========== ============== ============== ================ ============
At 01 January 2012 426,303 38,705,880 675,220 39,807,403 273,007 40,080,410
Total Comprehensive
income for the period - - (1,090,783) (1,090,783) (2,842) (1,093,625)
Other comprehensive
income - - - - - -
Dividend - (221,678) - (221,678) - (221,678)
At 30 June 2012 426,303 38,484,202 (415,563) 38,494,942 270,165 38,765,107
======== =========== ============== ============== ================ ============
The notes form an integral part of these financial
statements.
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD 1 JANUARY 2012 THROUGH 30 JUNE 2012
Notes For the Period For the Period
Ended 30 Ended 30
June 2012 June 2011
--------------- ---------------
USD USD
Cash flows from operating activities
Comprehensive (loss)/ income for the
period (1,093,625) 2,594,321
Adjustment for:
Interest income (235,302) (445,126)
Dividend income (1,885,893) (759,795)
Loss/(gain) on financial assets at
fair value through profit or loss 1,805,228 (2,202,126)
Loss/(gain) on financial liabilities
at fair value through profit or loss 442,561 181,018
Tender offer pool adjustment - (1,094,591)
--------------
Operating losses before working capital
changes (967,031) (1,726,299)
Increase in other receivables and (138,256) -
prepayments
Decrease in other payables and accrued
expenses (54,673) (90,486)
------------ --------------
Net cash used in operating activities (1,159,960) (1,816,785)
------------ --------------
Interest received 169,690 635,162
Purchase of financial assets at fair
value through profit or loss (5,093,528) (5,035,141)
Disposal of financial assets at fair
value through profit or loss 7,521,595 4,305,977
Purchase of financial liabilities
at fair value through profit or loss - (3,047,258)
Disposal of financial liabilities
at fair value through profit or loss 1,503,412 765,206
Dividend received 1,456,706 695,248
--------------
Net cash generated from/ (used in)
investing activities 5,557,875 (1,680,806)
------------ --------------
Cash flows from financing activities
Dividend paid (221,678) (153,469)
--------------
Net cash flow used in financing activities (221,678) (153,469)
------------ --------------
Net increase/ (decrease) in cash and
cash equivalents 4,176,237 (3,651,060)
Cash and cash equivalents at the start
of the period 783,953 5,492,114
--------------
Cash and cash equivalents at the end
of the period 4,960,190 1,841,054
============ ==============
The notes form an integral part of these financial
statements.
AFRICA OPPORTUNITY FUND LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD 1 JANUARY 2012 THROUGH 30 JUNE 2012
1. GENERAL INFORMATION
Africa Opportunity Fund Limited (the "Company") was launched
with a listing on the AIM market of the London Stock Exchange in
July 2007.
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 and with registered
number MC-188243.
The Company aims to achieve capital growth and income through
investment in value, arbitrage, and special situations investments
in the continent of Africa. The Company therefore may invest in
securities issued by companies domiciled outside Africa which
conduct significant business activities within Africa. The Company
will have the ability to invest in a wide range of asset classes
including real estate interests, equity, quasi-equity or debt
instruments and debt issued by African sovereign states and
government entities.
The Company's investment activities are managed by Africa
Opportunity Partners Limited, a limited liability company
incorporated in the Cayman Islands and acting as the investment
manager pursuant to an Investment Management Agreement dated 18
July 2007.
To ensure that investments to be made by the Company, and the
returns generated on the realisation of investments, are both
effected in the most tax efficient manner, the Company has
established Africa Opportunity Fund L.P. as an exempted limited
partnership in the Cayman Islands. All investments made by the
Company will be 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.
Presentation currency
The consolidated financial statements are presented in the
United States dollars ("USD").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these consolidated 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 consolidated 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 consolidated financial statements have been prepared under
the historical cost convention except for the fair valuation of
financial assets and financial liabilities at fair value through
profit or loss.
The preparation of consolidated financial statements in
conformity with IFRS requires the use of certain critical
accounting estimates. It also requires the Board of Directors to
exercise its judgement in the process of applying the Company and
its subsidiaries' (referred to as the "Group") accounting policies.
The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the
consolidated financial statements, are disclosed in Note 4.
Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Group as at 30 June 2012.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control and
continued to be consolidated until the date that such control
ceases.
The financial statements of the subsidiaries are prepared for
the same reporting period as the parent company, using consistent
accounting policies.
All intra-group balances, income and expenses and unrealised
gains and losses resulting from intra-group transactions are
eliminated in full.
Non-controlling interests represent the portion of profit or
loss and net assets not held by the Group and are presented
separately in the statement of comprehensive income and within
equity in the Statement of Changes in Equity from parent
shareholders' equity.
Foreign currency translation
(a) Functional and presentation currency
The Group's consolidated financial statements are presented in
USD which is the Group's functional currency. That is the currency
of the primary economic environment in which the Company operates.
Each entity in the Group 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 entities within the Group is USD. The Group chose USD as the
presentation currency.
(b) Transactions and balances
Transactions in foreign currencies are initially recorded at the
functional currency rate prevailing at the date of transaction.
Monetary assets and liabilities denominated in foreign currencies
are retranslated at the functional currency spot rate of the
exchange ruling at the reporting date. All differences are taken to
profit or loss. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the
exchange rates as at the dates of the initial transactions.
Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value
is determined.
Financial instruments
(i) Classification
The Group classifies its financial assets and liabilities in
accordance with IAS 39.
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. The Group
policy is not to apply hedge accounting.
Financial instruments designated as 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 designated on the basis that they are part of a group of
financial assets which are managed and have their performance
evaluated on a fair value basis, in accordance with risk management
and investment strategies of the Group, as set out in the Group's
offering document. The financial information about the financial
assets is provided internally on that basis to the Investment
Manager and to the Board of Directors.
Options
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 Fund purchases and sells put and call options through
regulated exchanges and OTC markets. Options purchased by the Fund
provide the 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 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 Fund provide the purchaser the
opportunity to purchase from or sell to the 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.
Financial instruments designated as 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 designated on the basis that they are part of a group of
financial assets which are managed and have their performance
evaluated on a fair value basis, in accordance with risk management
and investment strategies of the Group, as set out in the Group's
offering document. The financial information about the financial
assets is provided internally on that basis to the Investment
Manager and to the Board of Directors.
The vast majority of the financial assets are expected to be
realised within the 12 months of the reporting date.
Loans and receivables
Loans and receivables are non-derivatives financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities
greater than 12 months after the reporting date. These are
classified as non-current assets. The Group's loans and receivables
comprise 'trade and other receivables' and 'cash and cash
equivalents' in the statement of financial position.
Other financial liabilities
This category includes all financial liabilities, other than
those classified as at fair value through profit or loss. The Group
includes in this category amounts relating to other short term
payables.
(ii) Recognition
The Group recognises a financial asset or a financial liability
when, and only when, it becomes a party to the contractual
provisions of the instrument.
Purchases or sales of financial assets that require delivery of
assets within the time frame generally established by regulation or
convention in the market place are recognised directly on the trade
date, i.e., the date that the Group commits to purchase or sell the
asset.
(iii) Initial measurement
Financial assets and liabilities at fair value through profit or
loss are recorded in the statement of financial position at fair
value. All transaction costs for such instruments are recognised
directly in profit or loss.
Derivatives embedded in other financial instruments are treated
as separate derivatives and recorded at fair value if their
economic characteristics and risks are not closely related to those
of the host contract, and the host contract is not itself
classified as held for trading or designated at fair value though
profit or loss. Embedded derivatives separated from the host are
carried at fair value with changes in fair value recognised in
profit or loss.
Loans and receivables and financial liabilities (other than
those classified as held for trading) are measured initially at
their fair value plus any directly attributable incremental costs
of acquisition or issue.
(iv) Subsequent measurement
After initial measurement, the Group measures financial
instruments which are classified as at fair value through profit or
loss at fair value. Subsequent changes in the fair value of those
financial instruments are recorded in 'Net gain or loss on
financial assets and liabilities at fair value through profit or
loss'. Interest earned and dividend revenue elements of such
instruments are recorded separately in 'Interest revenue' and
'Dividend revenue', respectively. Dividend expenses related to
short positions are recognised in 'Dividends on securities sold not
yet purchased'.
Loans and receivables are carried at amortised cost using the
effective interest method less any allowance for impairment. Gains
and losses are recognised in profit or loss when the loans and
receivables are derecognised or impaired, as well as through the
amortisation process.
Financial liabilities, other than those classified as at fair
value through profit or loss, are measured at amortised cost using
the effective interest method. Gains and losses are recognised in
profit or loss when the liabilities are derecognised, as well as
through the amortisation process.
The effective interest method is a method of calculating the
amortised cost of a financial asset or a financial liability and of
allocating the interest income or interest expense over the
relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts
through the expected life of the financial instrument or, when
appropriate, a shorter period to the net carrying amount of the
financial asset or financial liability. When calculating the
effective interest rate, the Group estimates cash flows considering
all contractual terms of the financial instruments, but does not
consider future credit losses. The calculation includes all fees
paid or received between parties to the contract that are an
integral part of the effective interest rate, transaction costs and
all other premiums or discounts.
v) Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
derecognised where:
-- The rights to receive cash flows from the asset have expired;
or
-- The Group 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 Group has transferred substantially all the
risks and rewards of the asset, or (b) the Group has neither
transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control of the asset.
When the Group 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 Group's continuing
involvement in the asset.
The Group derecognises a financial liability when the obligation
under the liability is discharged, cancelled or expires.
Determination of fair value
Fair value is the amount for which an asset could be exchanged,
or a liability settled, between knowledgeable, willing parties in
an arm's length transaction.
The fair value for financial instruments traded in active
markets at the reporting date is based on their quoted price or
binding dealer price quotations, 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.
Impairment of financial assets
The Group assesses at each reporting date whether a financial
asset or group of financial assets classified as loans and
receivables is impaired. Evidence of impairment may include
indications that the debtor, or a group of debtors, is experiencing
significant financial difficulty, default or delinquency in
interest or principal payments, the probability that they will
enter bankruptcy or other financial reorganisation and, where
observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
If there is objective evidence that an impairment loss has been
incurred, the amount of the loss is measured as the difference
between the asset's carrying amount and the present value of
estimated future cash flows (excluding future expected credit
losses that have not yet been incurred) discounted using the
asset's original effective interest rate. The carrying amount of
the asset is reduced through the use of an allowance account and
the amount of the loss is recognised in profit or loss.
Impaired debts, together with the associated allowance, are
written off when there is no realistic prospect of future recovery
and all collateral has been realised or has been transferred to the
Group. If, in a subsequent period, the amount of the estimated
impairment loss increases or decreases because of an event
occurring after the impairment was recognised, the previously
recognised impairment loss is increased or reduced by adjusting the
allowance account. If a previous write-off is later recovered, the
recovery is credited to profit or loss.
Interest revenue on impaired financial assets is recognised
using the rate of interest used to discount the future cash flows
for the purpose of measuring the impairment loss.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the
net amount reported in the statement of financial position if, and
only if, there is a currently enforceable legal right to offset the
recognised amounts and there is an intention to settle on a net
basis, or to realise the asset and settle the liability
simultaneously.
Net gain or loss on financial assets and liabilities at fair
value through profit or loss
This item includes changes in the fair value of financial assets
and liabilities held for trading or designated upon initial
recognition as 'at fair value through profit or loss' and excludes
interest and dividend income and expenses.
Unrealised gains and losses comprise changes in the fair value
of financial instruments for the period and from reversal of prior
period's unrealised gains and losses for financial instruments
which were realised in the reporting period.
Realised gains and losses on disposals of financial instruments
classified as 'at fair value through profit or loss' are calculated
using the Average Cost (AVCO) method. They represent the difference
between an instrument's initial carrying amount and disposal
amount, or cash payments or receipts made on derivative contracts
(excluding payments or receipts on collateral margin accounts for
such instruments).
Due to and due from brokers
Amounts due to brokers are payables for securities purchased (in
a regular way transaction) that have been contracted for but not
yet delivered on the reporting date. Refer to the accounting policy
for 'financial liabilities, other than those classified as at fair
value through profit or loss' for recognition and measurement.
Amounts due from brokers include margin accounts and receivables
for securities sold (in a regular way transaction) that have been
contracted for but not yet delivered on the reporting date. Refer
to accounting policy for 'loans and receivables' for recognition
and measurement.
Margin accounts represent cash deposits held with brokers as
collateral against open futures contracts.
Interest revenue and expense
Interest revenue and expense are recognised in the statement of
comprehensive income for all interest-bearing financial instruments
using the effective interest method.
Dividend revenue and expense
Dividend revenue is recognised when the Group's right to receive
the payment is established. Dividend revenue is presented gross of
any non-recoverable withholding taxes, which are disclosed
separately in the statement of comprehensive income. Dividend
expense relating to equity securities sold short is recognised when
the shareholders' right to receive the payment is established.
Stated capital
Ordinary shares are classified as equity.
Provision
A provision is recognised when and only when there is a present
obligation (legal or constructive) as a result of a past event, and
it is probable that an outflow embodying economic benefits will be
required to settle that obligation and a reliable estimate can be
made of the amount of the obligation. Provisions are reviewed at
each reporting date and adjusted to reflect the current best
estimate.
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.
Related parties
For the purposes of these consolidated financial statements,
parties are considered to be related to the Group if they have the
ability, directly or indirectly, to control the Group or exercise
significant influence over the Group in making financial and
operating decisions, or vice versa, or where the Group is subject
to common control or common significant influence. Related parties
may be individuals or other entities.
3. CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
New and amended standards and interpretations
The accounting policies adopted are consistent with those of the
previous financial year, except for the following new and amended
IFRS and IFRIC interpretations effective as of 1 January 2011:
-- IAS 24 Related Party Disclosures (amendment) effective 1 January 2011
-- IAS 32 Financial Instruments: Presentation (amendment) effective 1 February 2010
-- IFRA 1 First-time Adoption of International Financial
Reporting Standards - Limited Exemption from Comparative IRFS 7
Disclosures for First-time Adopters effective 1 July 2010
-- IFRIC 14 Prepayments of a Minimum Funding Requirement (amendment) effective 1 January 2011
-- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments effective 1 July 2010
-- Improvements to IFRSs (May 2010) effective either 1 July 2010 or 1 January 2011.
The adoption of the standards or interpretations is described
below:
IAS 24 Related Party Transactions (Amendment)
The IASB issued an amendment to IAS 24 that clarifies the
definitions of a related party. The new definitions emphasise a
symmetrical view of related party relationships and clarifies the
circumstances in which persons and key management personnel affect
the related party relationships of an entity. In addition, the
amendment introduces an exemption from the general related party
disclosure requirements for transactions with government and
entities that are controlled, jointly controlled or significantly
influenced by the same government as the reporting entity. The
adoption of the amendment did not have any impact on the financial
position or performance of the Group.
IAS 32 Financial Instruments: Presentation (Amendment)
The IASB issued an amendment that alters the definition of a
financial liability in IAS 32 to enable entities to classify rights
issues and certain options or warrants as equity instruments. The
amendment is applicable if the rights are given pro rata to all of
the existing owners of the same class of an entity's non-derivative
equity instruments, to acquire a fixed number of the entity's own
equity instruments for a fixed amount in any currency. The
amendment has had no effect on the financial position or
performance of the Fund because the Fund does not have these types
of instruments.
IFRS 1 First-time Adoption of International Financial Reporting
Standards - Limited Exemption from Comparative IFRS 7 Disclosure
for First-time Adopters
The Standard has been amended to allow first-time adopters to
utilise the transitional provisions of IFRS 7 Financial
Instruments: Disclosures. The amendments provide relief to
first-time adopters, by reducing the costs and resources required
to provide certain comparative disclosures. The amendments may be
applied earlier than the effective date.
IFRIC 14 Prepayments of a Minimum Funding Requirement
(Amendment)
The amendment removes an unintended consequence when an entity
is subject to minimum funding requirements and makes an early
payment of contributions to cover such requirements. The amendment
permits a prepayment of future service costs by the entity to be
recognised as a pension asset. The amendment has had no effect on
the financial position or performance of the Group because the
Group does not have employee benefit schemes.
IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments
In November 2009, the IASB issued IFRIC 19 Extinguishing
Financial Liabilities with Equity. The interpretation clarifies
that equity instruments issued to a creditor to extinguish a
financial liability qualify as consideration paid. The equity
instruments issued are measured at their fair value. In cases that
this cannot be reliably measured, the instruments are measured at
the fair value of the liability extinguished. Any gain or loss is
recognised immediately in profit or loss. The adoption of this
interpretation had no effect on the financial statements of the
Group and will only affect such future transactions.
Improvements to IFRSs
In May 2010, the IASB issued its third omnibus of amendments to
its standards, primarily with a view to removing inconsistencies
and clarifying wording. There are separate transitional provisions
for each standard. The adoption of the following amendments
resulted in changes to presentation and disclosure and to
accounting policies but had no impact on the financial position or
performance of the Group.
IFRS 7 Financial Instruments - Disclosures: The amendment was
intended to simplify the disclosures provided, by reducing the
volume of disclosures around collateral held and improving
disclosures by requiring qualitative information to put the
quantitative information in context. The Group reflects the revised
disclosure requirements in Note 16.
Other amendments resulting from Improvements to IFRSs to the
following standards and interpretations did not have any impact on
the accounting policies, financial position or performance of the
Group:
-- IAS 1 Presentation of Financial Statements (Presentation of
an analysis of each component of other comprehensive income)
-- IFRS 1 First-time Adoption of International Financial Reporting Standards
-- IFRS 3 Business Combinations (Contingent consideration
arising from business combination prior to adoption of IFRS 3 (as
revised in 2008))
-- IFRS 3 Business Combinations (Un-replaced and voluntarily
replaced share-based payment awards)
-- IAS 27 Consolidated and Separate Financial Statements
-- IAS 34 Interim Financial Statement
-- IFRIC 13 Customer Loyalty Programmes (determining the fair value of award credits)
Standards issued but not yet effective
Standards issued but not yet effective up to the date of
issuance of the Company's financial statements are listed below.
The Group intends to adopt applicable standards when they become
effective.
IAS 1 Financial Statement Presentation - Presentation of Items
of Other Comprehensive Income
The amendments to IAS 1 change the grouping of items presented
in OCI. Items that could be reclassified (or 'recycled') to profit
or loss at a future point in time (for example, upon derecognition
or settlement) would be presented separately from items that will
never be reclassified. The amendment affects presentation only and
has no impact on the Company's financial position or performance.
The amendment becomes effective for annual periods beginning on or
after 1 July 2012.
IAS 12 Income Taxes (Amendments) - Deferred Taxes: Recovery of
Underlying Assets
The Standard introduces a rebuttable presumption that deferred
tax on investment properties measured at fair value will be
recognised on a sale basis, unless the entity has a business model
that would indicate the investment property will be consumed in the
business, in which case, a use basis will be adopted. The
amendments also introduce the requirement that deferred tax on
non-depreciable assets measured using the revaluation model in IAS
16 should always be measured on a sale basis. The amendment becomes
effective for annual periods beginning on or after 1 January 2012.
The amendment has no impact on the company's financial position or
performance as the Company is not subject to income or any other
Cayman Island taxes.
IAS 19 Employee Benefits (Amendment)
The IASB has issued numerous amendments to IAS 19. These range
from fundamental changes such as removing the corridor mechanism
and the concept of expected returns on plan assets to simple
clarifications and re-wording. The amendment becomes effective for
annual periods beginning on or after 1 January 2013.
The Group has no employee benefits which would be affected by
these amendments.
IAS 27 Separate Financial Statements (as revised in 2011)
As a consequence of the new IFRS 10 and IFRS 12, what remains in
IAS 27 is limited to accounting for subsidiaries, jointly
controlled entities, and associates in separate financial
statements. The amendment becomes effective for annual periods
beginning on or after 1 January 2013.
IAS 28 Investments in Associates and Joint Ventures (as revised
in 2011)
As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been
renamed IAS 28 Investments in Associates and Joint Ventures, and
describes the application of the equity method to investments in
joint ventures in addition to associates. As the Group has no
associates or joint venture investments, this amendment has no
impact on the Group's financial position or performance. The
amendment becomes effective for annual periods beginning on or
after 1 January 2013.
IAS 32 Financial Instruments: Presentation - Offsetting
Financial Assets and Financial Liabilities
The amendments clarify the meaning of 'currently has a legally
enforceable right of set-off'; and that some gross settlement
systems may be considered equivalent to net settlement. The
amendments are effective for annual periods beginning on or after 1
January 2014 and are required to be applied retrospectively.
IFRS 1 First-time Adoption of International Financial Reporting
Standards (Amendment) - Severe Hyperinflation and Removal of Fixed
Dates for First-time Adopters
The amendment provides that, when an entity's date of transition
to IFRS is on, or after, the date its functional currency ceases to
be subject to hyperinflation, the entity may elect to measure all
assets and liabilities held before the functional currency
normalisation date that were subject to severe hyperinflation, at
fair value, on the date of transition to IFRS. This fair value may
be deemed cost of those assets and liabilities in the opening IFRS
statement of financial position.
A further amendment to the Standard is the removal of the legacy
fixed dates in IFRS 1 relating to derecognition and day one gain or
loss transactions have also been removed. The standard now has
these dates coinciding with the date of transition to IFRS.
The amendments may be applied earlier than the effective
date.
IFRS 7 Financial Instruments: Disclosures - Enhanced
Derecognition Disclosure Requirements
The amendment requires additional disclosure about financial
assets that have been transferred but not derecognised to enable
the user of the financial statements to understand the relationship
with those assets that have not been derecognised and their
associated liabilities. In addition, the amendment requires
disclosures about continuing involvement in derecognised assets to
enable the user to evaluate the nature of, and risks associated
with, the entity's continuing involvement in those derecognised
assets. The amendment becomes effective for annual periods
beginning on or after 1 July 2011. The amendment affects disclosure
only and has no impact on the Group's financial position or
performance.
IFRS 7 Financial Instruments: Disclosures
Common disclosure requirements were issued that are intended to
help investors and other users to better assess the effect or
potential effect of offsetting arrangements on a company's
financial position. The new requirements are set out in
Disclosures-Offsetting Financial Assets and Financial Liabilities
(Amendments to IFRS 7). As part of that project the IASB also
clarified aspects of IAS 32 Financial Instruments: Presentation.
The amendments address consistencies in current practice when
applying the requirements.
IFRS 9 Financial Instruments
The Standard covers the classification and measurement of
financial assets, as the first part of its project to replace IAS
39. It is effective as from 1 January 2013.
IFRS 9 Financial Instruments - Classification and measurement of
financial assets, Accounting for financial liabilities and
derecognition
The mandatory effective date of IFRS 9 has been deferred to 1
January 2015. The amendments also provide relief from restating
comparative information and require disclosures (in IFRS 7) to
enable users of financial statements to understand the effect of
beginning to apply IFRS 9.
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 9 as issued reflects the first phase of the IASB's work on
the replacement of IAS 39 and applies to classification and
measurement of financial assets and financial liabilities as
defined in IAS 39. The standard is effective for annual periods
beginning on or after 1 January 2013. In subsequent phases, the
IASB will address hedge accounting and impairment of financial
assets. The completion of this project is expected over the course
of 2011 or the first half of 2012. The adoption of the first phase
of IFRS 9 will have an effect on the classification and measurement
of the Group's financial assets but will potentially have no impact
on classification and measurements of financial liabilities. The
Group will quantify the effect in conjunction with the other
phases, when issued, to present a comprehensive picture.
IFRS 10 Consolidated Financial Statements
IFRS 10 replaces the portion of IAS 27 Consolidated and Separate
Financial Statements that addresses the accounting for consolidated
financial statements. It also replaces SIC-12 Consolidation -
Special Purpose Entities. IFRS 10 establishes a single control
model that applies to all entities including 'special purpose
entities'.
The changes introduced by IFRS 10 will require management to
exercise significant judgement to determine which entities are
controlled, and therefore required to be consolidated by a parent,
compared with the requirements that were in IAS 27. This standard
becomes effective for annual periods beginning on or after 1
January 2013. This amendment will have an impact as the Company
prepares consolidated Financial Statements.
IFRS 11 Joint Arrangements
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13
Jointly-controlled Entities - Non-monetary Contributions by
Venturers. IFRS 11 removes the option to account for jointly
controlled entities (JCEs) using proportionate consolidation.
Instead, JCEs that meet the definition of a joint venture must be
accounted for using the equity method. The application of this new
standard will not impact the financial position and performance of
the Group.
This standard becomes effective for annual periods beginning on
or after 1 January 2013.
IFRS 12 Disclosure of Involvement with Other Entities
IFRS 12 includes all of the disclosures that were previously in
IAS 27 related to consolidated financial statements, as well as all
of the disclosures that were previously included in IAS 31 and IAS
28. These disclosures relate to an entity's interests in
subsidiaries, joint arrangements, associates and structured
entities.
A number of new disclosures are also required. This standard
becomes effective for annual periods beginning on or after 1
January 2013.
IFRS 13 Fair Value Measurement
IFRS 13 establishes a single source of guidance under IFRS for
all fair value measurements. IFRS 13 does not change when an entity
is required to use fair value, but rather provides guidance on how
to measure fair value under IFRS when fair value is required or
permitted. The Group is currently assessing the impact that this
standard will have on the financial position and performance. This
standard becomes effective for annual periods beginning on or after
1 January 2013.
4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Group'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 Group's accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the financial
statements:
Going Concern
The Group's management has made an assessment of the Group's
ability to continue as a going concern and is satisfied that the
Company has the resources to continue in business for the
foreseeable future. Furthermore, management is not aware of any
material uncertainties that may cast significant doubt upon the
Company's ability to continue as a going concern. Therefore, the
financial statements continue to be prepared on the going concern
basis.
Determination of functional currency
The determination of the functional currency of the Group 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.
Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below. The Group 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 Group. Such changes
are reflected in the assumptions when they occur.
Fair value of financial instruments
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. 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. IFRS 7 requires disclosures relating to fair value
measurements using a three-level fair value hierarchy. The level
within which the fair value measurement is categorised in its
entirety is determined on the basis of the lowest level input that
is significant to the fair value measurement in its entirety.
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 Group performs sensitivity analysis or stress
testing techniques.
5(a). FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
30 June 2012 30 June 2011
------------- -------------
USD USD
Designated at fair value through profit
or loss:
At start of year 42,449,714 41,323,702
Additions 5,093,528 5,035,140
Disposals (7,521,595) (4,305,977)
Net gain on financial assets at fair value
through profit or loss (1,805,228) 2,202,126
38,216,419 44,254,991
============= ============
Analysis of portfolio:
- Listed equity securities 33,556,997 32,795,193
- Unlisted equity securities 2,305,499 46,469
- Listed debt securities 2,153,923 10,418,386
- Unlisted debt securities 200,000 994,943
-----------
38,216,419 44,254,991
=========== ===========
5(b). FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
30 June 2012 30 June 2011
USD USD
Written put option 481,090 98,750
Written call option and short position - 3,851,617
Listed securities sold short 4,877,623 -
-------------
5,358,713 3,950,367
============= =============
6. TRADE AND OTHER RECEIVABLES
30 June 2012 30 June 2011
------------- -------------
USD USD
Interest receivable on bonds 209,254 481,634
Dividend receivable 631,905 85,185
Other receivables 315,983 -
1,157,142 566,819
============= =============
The receivables are neither past due nor impaired. Interests
receivable on bonds are due within six months.
7. SHARE CAPITAL
2012 2012 2011 2011
-------------- ----------- -------------- -----------
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
Share capital
At 1 January 42,630,327 426,303 42,630,327 426,303
At 31 December 42,630,327 426,303 42,630,327 426,303
=========== ======== =========== ========
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 to a discount to the Net Asset Value, the
directors will consult with the Investment Manager as to whether it
is appropriate to instigate a repurchase of ordinary shares.
8. TRADE AND OTHER PAYABLES
30 June 2012 30 June 2011
------------- -------------
USD USD
Accrued expenses 58,423 50,480
Dividend payable 110,839 76,735
Other payables 40,669 467,254
-------- --------
209,931 594,469
======== ========
Other payables are non-interest bearing and are due on
demand.
9. GAIN/ (LOSS) PER SHARE
Basic gain/ (loss) per share is calculated by dividing the gain/
(loss) attributable to equity holders by the weighted average
number of ordinary shares in issue during the period excluding
ordinary shares purchased by the Company (including those
repurchased in accordance with the Tender Offer) and held as
treasury shares.
The Company's diluted gain/ (loss) per share is the same as
basic gain/ (loss) per share, since the Company has not issued any
instrument with dilutive potential.
2012 2011
------------ -----------
Gain/(loss) attributable to equity
holders of the Company USD (1,090,783) 2,574,537
Weighted average number of ordinary
share in issue 42,630,327 42,630,327
Basic (loss)/ gain per share USD (0.0256) 0.0604
============ ===========
10. TAXATION
Under the current laws of Cayman Islands, there is no income,
estate, transfer sales or other Cayman Islands taxes payable by the
Fund. As a result, no provision for income taxes has been made in
the financial statements.
11. SEGMENT INFORMATION
For management purposes, the Group is organised in one main
operating segment, which invests in equity securities, debt
instruments and relative derivatives. All of the Group's activities
are interrelated, and each activity is dependent on the others.
Accordingly, all significant operating decisions are based upon
analysis of the Group as one segment. The financial results from
this segment are equivalent to the financial statements of the
Group as a whole.
12. PERSONNEL
The Group did not employ any personnel during the half year
period ended 30 June 2012 (2011: the same).
Website: www.africaopportunityfund.com
For further information please contact:
Africa Opportunity Fund Limited
Francis Daniels Tel: +2711 684 1528
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett/David Hignell Tel: +44 207 383 5100
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QKLFFLKFXBBZ
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