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 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.
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 financial assets and
financial liabilities at fair value through profit or loss that
have been measured at fair value.
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's 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 2014.
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 Group 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.
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 Group purchases and sells put and call options through
regulated exchanges and OTC markets. Options purchased by the Group
provide the Group 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 Group 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 Group provide the purchaser the
opportunity to purchase from or sell to the Group 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
of the Company.
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 profit 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 income' and
'Dividend income', respectively. Dividend expenses related to short
positions are recognised in 'Dividends paid'.
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