TIDMAOF
RNS Number : 0986O
Africa Opportunity Fund Limited
30 September 2019
Africa Opportunity Fund Limited
("AOF" or the "Company")
Half Yearly Report for the Six Months ended 30 June 2019
The Board of Directors of Africa Opportunity Fund Limited is
pleased to announce its unaudited results for the 6 month period to
30 June 2019. The full half yearly report for the period ended 30
June 2019 will be sent to shareholders and will be available soon
on the Company's website: www.africaopportunityfund.com.
Highlights:
-- AOF's ordinary share net asset value per share of US$0.689 as
at 30 June 2019 increased by 2% from the 31 December 2018 net asset
value per share of US$0.675.
-- As at 30 June 2019, AOF's investment allocation for its
Ordinary Shares was 79% equities, 5% debt and 16% unencumbered
cash.
-- AOF's Ordinary Shares net asset value per share as at 20 September 2019 was US$0.632.
-- AOF's Ordinary Shares did not pay an annual dividend for 2018.
-- AOF's shareholders adopted resolutions at an extraordinary
general meeting held on June 27, 2019 for AOF to cease to make new
investments for the next three years and to return funds to
shareholders in an orderly manner during that three year
period.
Manager's Commentary
Market Conditions
AOF's ordinary share NAV rose 2% in H1. As a reference, during
this period in USD the S&P rose 19%, Brazil rose 16%, Russia
rose 33%, India rose 10%, and China rose 21%. In Africa, South
Africa rose 14%, Egypt rose 18%, Kenya rose 8%, and Nigeria fell
1%. Three Africa-focused exchange traded funds - the Lyxor ETF (PAF
FP), the DBX MSCI Africa Top 50 (XMAF LN), and Van Eck Africa Index
(AFK US), rose, respectively, 12%, 9%, and 12%.
Ordinary Shares Portfolio Highlights
The Fund turned in an underwhelming half year. On the positive
front, its natural resources portfolio delivered strong returns of
5.5 cents per share, as the gold price rose 8%, and crude oil
prices rose by more than 20%. Crucially, our top natural resource
investments - Anglogold in gold mining and Kosmos Energy in oil and
gas - have taken deliberate corporate action to lower the average
production costs of their reserves.
The Fund's Anglogold investment (common stock and options)
delivered gains of 2.6 cents per share in H1. Anglogold's total
return of 40% can be attributed to the 2019 gold price rally, its
asset disposal program, and its stringent financial targets to
guarantee ongoing discipline in its future capital allocation
decisions. It wishes to sell its mining interests in South Africa,
Mali, and Argentina. Selling annual South African 400,000+ ounces
with an all-in sustaining cost of $1144 per ounce while building a
new mechanized mine in Ghana's Obuasi, with annual production of
400,000 ounces at a comparable cost of $800 should improve
Anglogold's cost competitiveness, allow it to retire debt, and
remove any South African mining discount hanging over Anglogold's
valuation. One measure of the significant improvements Anglogold
has effected in its mine portfolio is the 64% increase in its
all-in sustaining cost margin (average gold price minus all-in
sustaining cost per ounce) from 14% in 2013, at an average gold
price of $1412 per ounce to 23% in H1 2019 at a lower average gold
price of $1306. Complementing this encouraging margin trend is
Anglogold's new leverage target of 1X Net Debt/Adjusted EBITDA
ratio (versus its old target of 1.5X). These two measures should
enhance Anglogold Ashanti's investment appeal.
The Fund's Kosmos Energy investment increased AOF's NAV by 0.9
cents per share in in H1, as its share price rose 54% and it
declared a maiden dividend. Daily crude oil production reached a
record level of 71,100 barrels of crude oil, up 65% from Q2 2018's
daily 43,000 barrels of oil, despite operational problems at one of
its Ghana oil fields. Contributions from the Gulf of Mexico more
than offset Kosmos' Ghanaian problems, enabling Kosmos to produce
$136 million in free cash flow in Q2 alone and putting it on track
to generate close to $200 million of free cash flow in 2019. It
drilled successful wells in the Gulf of Mexico and Mauritania,
resulting in larger resources of both crude oil and natural gas.
Kosmos is lowering its lifting costs per barrel by discovering new
reserves near existing drilling infrastructure in the Gulf of
Mexico and Equatorial Guinea. The latest new discoveries in the
Gulf of Mexico enjoy lifting costs below $8 per barrel. Five more
exploration wells will be drilled in H2. Kosmos has announced that
it would sell down its stake in the Mauritania/Senegal natural gas
fields by the end of 2019. It reported considerable interest in
those assets, with the sale proceeds thereof being applied to
reduce Komsos' net debt of $1.98 billion. Best of all, though, is
that the overhang of Kosmos' founding private equity investors
selling down their stakes over several years came to an end.
Warburg Pincus and Blackstone left the share register by the end of
Q2.
The single biggest factor on the negative front is an underlying
macro-economic pattern in several African countries. Governments in
countries like Ghana, South Africa, Zambia, and Zimbabwe have
incurred large amounts of debt in recent years to pay for heavier
salary and interest-servicing obligations, and climbing contingent
liabilities. Each government faces doubts about its resolve and
ability to reduce sharply its recurrent expenditure ratios.
Consequently, in those countries with shallow savings pools, high
domestic real interest rates (20% in the case of Zambia, for
example, and 10% in the case of Ghana) exert immense downward
pressure on local stock exchanges, regardless of whether listed
companies report growing profits. Its specific victim was a 14%
decline in the Dollar market capitalization of Enterprise Group in
H1. That loss accounted for approximately 34% of the Fund's losses
or 1.4 cents per share. Insofar as the Ghana Stock Exchange
Composite Index lost 14% in Dollars in H1 and the price movements
of insurance stocks tend to be correlated with general stock market
performance, Enterprise's return appears to be typical. Yet, one
source of solace was that Enterprise's H1 2019 earnings per share
increased by 140%, its operating cash flow rose at an annualized
24% rate, and its cost of float was 4%. Enterprise's profitability
strengthened even as its valuation fell to a 26% discount to book
value and a 40% discount to embedded value. Yet, in contrast to
developed countries, Ghana's population is growing and it has high
real risk-free interest rates - both desirable attributes for the
profitability of an insurance sector. But, it is those high real
interest rates that suppress Enterprise's valuation because future
cash flows are discounted with those higher rates. Is Enterprise's
June 30 market capitalization of $65.3 million warranted? That
capitalization placed it on a P/E ratio of 10.6x, a P/B ratio of
0.74x, and a dividend yield of 2.14%.
Copperbelt's shares lost 25% in Q2 and 8% overall in H1 or 0.5
cents per ordinary share. As a supplier to copper mines,
Copperbelt's share price in Dollars tends to move in sympathy with
the copper price. Furthermore, the 34% rise in 10 year Zambian
interest rates to 22.5% during this period more than neutralized
the appeal of Copperbelt's 15%+ dividend yield. Zambia and Zimbabwe
are in the throes of a severe drought. The usable storage level of
their largest single source of electricity - the Kariba dam dropped
from being 85% full at the end of July 2018 to 24% full on July 31,
2019. Copperbelt was granted permission by the Zambian government
in early June to import electricity from South Africa to satisfy
the unmet power needs of its mining customers. We expect that, as
occurred in 2016, Copperbelt's power imports will insulate its
revenues and profitability from the harmful effects of the latest
drought. A more troubling development, though, is a request to
Zambia's Energy Regulatory Board by ZESCO, the bulk electricity
supplier to Copperbelt and its customers, in Q1 2019 to raise
electricity tariffs (other than tariffs for mining and exports) by
a weighted average rate of 113%. That request signifies that the
renegotiation of Copperbelt's bulk supply agreement in 2020 will be
difficult since Copperbelt's customers oppose an increase in their
tariffs. As a transmission company, Copperbelt's economic function
is to move electricity between electricity sellers and electricity
buyers. One favourable development is that Copperbelt has been
shortlisted for the award of solar energy projects under Zambia's
GETFIT program. Despite these darkening clouds of uncertainty, we
think that commercial logic should prevail.
Our Zimbabwean property investments suffered a 30% loss equal to
0.7 cents per share from the Zimbabwe government's reintroduction
of the Zimbabwe Dollar in February 2019 and making it the principal
medium of exchange in June 2019. Hyperinflation has reemerged in
Zimbabwe and economic activity has collapsed, as the supply of
foreign exchange contracted sharply, and the new Zimbabwe Dollar
has depreciated by 70% since inception. Despite the current poor
economic conditions, Mashonaland Holdings, for example, continued
to generate modest levels of free cash flow, remains completely
ungeared, and experienced rising occupancy levels. Zimbabwe's
outlook is grim because its economy is forecast to contract this
year in a hyperinflationary environment. The US Dollar value of our
Zimbabwean holdings is likely to weaken as Zimbabwe's GDP shrinks
in H2.
Changes made in the AOF portfolio during H1 included selling
down our equity holdings in Anglogold Ashanti, Goldfields, Dangote
Cement, Naspers, Stanbic Bank Uganda, Standard Chartered Bank
Ghana, and Letshego. The ordinary share portfolio had 14% of its
net asset value in gold mining equities, 3% in oil and gas
equities, and no exposure to gold mining or oil and gas debt.
Portfolio Appraisal Value
As of June 30, the Manager's appraisal of the intrinsic economic
value of the Ordinary Share portfolio was $0.977 per share. The
market price of $0.585 on June 28 represented a 40% 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.
Strategy
The Fund has begun the process of realizing its holdings, but we
believe the long-term investment appeal of Africa remains
intact.
On Behalf of the Investment Manager, Africa Opportunity Partners
Ltd
Responsibility Statements:
The Board of Directors confirm that, to the best of their
knowledge:
a. The financial statements, prepared in accordance with
International Financial Reporting Standards, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company.
b. The Interim Investment Manager Report, and Condensed Notes to
the Financial Statements include:
i. a fair review of the information required by DTR 4.2.7R
(indication of important events that have occurred during the first
six months and their impact on the financial statements, and a
description of principal risks and uncertainties for the remaining
six months of the year); and
ii. a fair review of the information required by DTR 4.2.8R
(confirmation that no related party transactions have taken place
in the first six months of the year that have materially affected
the financial position or performance of the Company during that
period).
Per Order of the Board
30 September, 2019
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019
For the For the
period period
ended 30 ended 30
June June
Notes 2019 2018
------------------------------ -----------------------------
USD USD
Income
Net gains on investment in subsidiaries
at fair value
through profit or loss 5(a) 2,085,851 -
2,085,851 -
------------------------------ -----------------------------
Expenses
Net losses on investment in
subsidiaries
at fair value
through profit or loss 5(a) - 2,678,023
Management fee 505,744 612,082
Other operating expenses 105,959 39,419
Directors' fees 87,500 87,500
Audit fees 46,180 70,653
745,383 3,487,677
------------------------------ -----------------------------
Total comprehensive income/(loss)
for the period
(decrease)/increase in net assets
attributable to
shareholders from operations 1,340,468 (3,487,677)
============================== =============================
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
Notes 30 June 2019 30 June
2018
------------------------ ----------------------
USD USD
ASSETS
Cash and cash equivalents 7 115,532 43,029
Trade and other receivables 6 20,823 -
Investment in subsidiaries 5(a) 51,521,749 65,849,721
Total assets 51,658,104 65,892,750
------------------------ ----------------------
EQUITY AND LIABILITIES
LIABILITIES
Trade and other payables 9 79,354 132,354
Total liabilities 79,354 132,354
------------------------ ----------------------
Net assets attributable to shareholders 51,578,750 65,760,396
======================== ======================
Ordinary share capital 748,496 748,496
Share premium 37,921,452 37,921,452
Retained earnings 12,908,802 27,090,448
Total equity 51,578,750 65,760,396
======================== ======================
Net assets value per share:
- Ordinary shares 0.689 0.879
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019
Share Share Retained
Capital Premium Earnings Total
------------------------ -------------------------- ------------------- ------------------
USD USD USD USD
At 1 January 2019 748,496 37,921,452 11,568,334 50,238,282
OPERATIONS:
Total
comprehensive
income
for the period - - 1,340,468 1,340,468
------------------------ -------------------------- ------------------- ------------------
At 30 June 2019 748,496 37,921,452 12,908,802 51,578,750
======================== ========================== =================== ==================
AFRICA OPPORTUNITY FUND LIMITED
UNAUDITED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019
For the period For the period
ended ended
30 June 2019 30 June 2018
------------------------------- ----------------------------------
USD USD
Operating activities
Total comprehensive income/(loss)
for the period 1,340,468 (3,487,677)
Adjustment for non-cash items:
Unrealised (gain)/loss on investments
in subsidiaries
at fair value through profit or loss (2,085,851) 2,678,023
------------------------------- ----------------------------------
Cash used in operating activities (745,383) (809,654)
------------------------------- ----------------------------------
Net changes in operating assets and
liabilities
Proceeds from investment in subsidiaries
at fair value
through profit or loss 950,000 779,234
(15,874) -
Increase in trade and other
receivables
Decrease in trade and other payables (77,587) (18,318)
------------------------------- ----------------------------------
Net cash generated from operating
activities 856,539 760,916
------------------------------- ----------------------------------
Net increase/(decrease) in cash and
cash equivalents 111,156 (48,738)
Cash and cash equivalents at 1 January 4,376 91,767
------------------------------- ----------------------------------
Cash and cash equivalents at 30 June 115,532 43,029
=============================== ==================================
AFRICA OPPORTUNITY FUND LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019
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 aims to achieve capital growth and income through
investment in value, arbitrage, and special situations investments
in the continent of Africa. The Company may therefore invest in
securities issued by companies domiciled outside Africa which
conduct significant business activities within Africa. The Company
has the ability to invest in a wide range of asset classes
including real estate interests, equity, quasi-equity or debt
instruments and debt issued by African sovereign states and
government entities.
The Company's investment activities are managed by Africa
Opportunity Partners Limited, a limited liability company
incorporated in the Cayman Islands and acting as the investment
manager pursuant to an Amended and Restated Investment Management
Agreement dated 12 February 2014.
To ensure that investments to be made by the Company and the
returns generated on the realisation of investments are both
effected in the most tax efficient manner, the Company has
established Africa Opportunity Fund L.P. 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.
The financial statements for the Company for the half year ended
30 June 2019 were authorised for issue in accordance with a
resolution of the Board of Directors on 30 September 2019.
Presentation currency
The financial statements are presented in United States dollars
("USD").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been consistently applied from the prior period to the current
period 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
In the prior and current period, the Company satisfied the
criteria of an investment entity under IFRS 10: Consolidated
Financial Statements. As such, the Company no longer consolidates
the entities it controls. Instead, its interest in the subsidiaries
has been classified as fair value through profit or loss, and
measured at fair value. This consolidation exemption has been
applied prospectively and more details of this assessment are
provided in Note 4 "significant accounting judgements, estimates
and assumptions."
The 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 judgement in the
process of applying the Company's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the financial
statements are disclosed in Note 4.
The Company presents its statement of financial position in
order of liquidity.
Foreign currency translation
(i) Functional and presentation currency
The Company's financial statements are presented in USD which is
the functional currency, being the currency of the primary economic
environment in which both the Company operates. The Company
determines its own functional currency and items included in the
financial statements of each entity are measured using that
functional currency. The functional currency of the Company is USD.
The Company chooses USD as the presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded at the
functional currency rate prevailing at the date of transaction.
Monetary assets and liabilities denominated in foreign currencies
are retranslated at the functional currency spot rate of the
exchange ruling at the reporting date. All differences are taken to
profit or loss. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the
exchange rates as at the dates of the initial transactions.
Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value
is determined.
Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another equity.
(a) Classification
The Company classifies its financial assets and liabilities in
accordance with IAS 39 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 at the Africa Opportunity Fund LP (the "Master Fund")
level.
Financial assets designated at fair value through profit or loss
upon initial recognition
These include equity securities and debt instruments that are
not held for trading at the Master Fund level. 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. For the
Company, financial assets classified at fair value through profit
or loss upon initial recognition include investment in
subsidiaries.
Under IAS 39, the investment in subsidiaries were designated at
FVTPL.
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.
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 Company 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.
Contracts for difference
Contracts for difference are derivatives that obligate either
the buyer or the seller to pay to the other the difference between
the asset's current price and its price at the time of the
contract's usage. Unrealized gains or losses are recorded at the
end of each time period that passes without the CFDs being used.
Once the CFDs are used, the difference between the opening position
and the closing position is recorded as either revenue or a loss
depending on whether the business was the buyer or the seller.
Derivatives relating to options and contracts for difference are
recorded at the level of the Master Fund. The financial statements
of the Company does not reflect the derivatives as they form part
of the net asset value (NAV.) of the Master Fund which is fair
valued.
(i) Financial assets at amortised cost
The Company measures financial assets at amortised cost if both
of the following conditions are met:
-- The financial assets 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 'trade and other
receivables' and 'cash and cash equivalents' in the statement of
financial position.
Previously under IAS 39, the Company classified these financial
assets as loans and receivables.
(ii) Other financial liabilities
This category includes all financial liabilities, other than
those classified as fair value through profit or loss. The Company
includes in this category amounts relating to trade and other
payables and dividend payable.
(b) Recognition
The Company recognises a financial asset or a financial
liability when, and only when, it becomes a party to the
contractual provisions of the instrument.
Purchases or sales of financial assets that require delivery of
assets within the time frame generally established by regulation or
convention in the market place are recognised directly on the trade
date, i.e., the date that the Master Fund commits to purchase or
sell the asset.
(c) 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.
(d) Subsequent measurement
The Company measures financial instruments which are classified
at fair value through profit or loss at fair value. Subsequent
changes in the fair value of those financial instruments are
recorded in 'Net gain or loss on financial assets and liabilities
at fair value through profit or loss'. Interest earned elements of
such instruments are recorded separately in 'Interest revenue'.
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
derecognise, modified or impaired. Under IAS 39, loans and
receivables were carried at amortised cost using the effective
interest method less any allowance for impairment. Gains and losses
were recognised in profit or loss when the loans and receivables
were derecognised or impaired.
Financial liabilities, other than those classified as at fair
value through profit or loss, are measured at amortised cost using
the effective interest method. Gains and losses are recognised in
profit or loss when the liabilities are derecognised, as well as
through the amortisation process.
The effective interest method is a method of calculating the
amortised cost of a financial asset or a financial liability and of
allocating the interest income or interest expense over the
relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts
through the expected life of the financial instrument or, when
appropriate, a shorter period to the net carrying amount of the
financial asset or financial liability. When calculating the
effective interest rate, the Company estimates cash flows
considering all contractual terms of the financial instruments, but
does not consider future credit losses. The calculation includes
all fees paid or received between parties to the contract that are
an integral part of the effective interest rate, transaction costs
and all other premiums or discounts.
(e) Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
derecognised where:
-- The rights to receive cash flows from the asset have expired; or
-- The Company has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
'pass-through' arrangement; and
Either (a) the Company has transferred substantially all the
risks and rewards of the asset, or (b) the Company has neither
transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control of the asset. When the
Company has transferred its rights to receive cash flows from an
asset (or has entered into a pass-through arrangement), and has
neither transferred nor retained substantially all the risks and
rewards of the asset nor transferred control of the asset, the
asset is recognised to the extent of the Company's continuing
involvement in the asset.
The Company derecognises a financial liability when the
obligation under the liability is discharged, cancelled or expires.
When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange
or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in profit or
loss.
Determination of fair value
The Company measures it investments in subsidiaries at fair
value through profit or loss, and 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 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 5.
The Company uses the following hierarchy for determining and
disclosing the fair value of the financial instruments by valuation
technique:
-- Level 1: quoted (unadjusted) market prices in active markets
for identical assets and liabilities.
-- Level 2: valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable.
-- Level 3: valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
Impairment of financial assets
As from the financial year 2018, the Company recognises an
allowance for expected credit losses (ECLs) for all debt
instruments not held at fair value through profit or loss. ECLs are
based on the difference between the contractual cash flows due in
accordance with the contract and all the cash flows that the
Company 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 in two stages. 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).
For trade receivables, the Company applies a simplified approach
in calculating ECLs. Therefore, the Company 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 majority of the Company's debt
instruments were held at fair value through profit or loss with the
exception of trade and other receivables and cash and cash
equivalents which are de minimis. As a result, no
ECL has been recognised as any amount would have been
insignificant. Previously under IAS 39, the Company assessed for
impairment when there was an objective evidence of impairment as a
result of one or more events that have occurred after the initial
recognition of an asset (an "incurred" loss event) and that loss
has an impact on the estimated future cash flows of the financial
asset or group of financial assets that can be reliably
estimated.
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 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 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 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 loans and receivables for recognition and
measurement.
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.
Distributions to shareholders whose shares are classified as
financial liabilities.
Distributions to shareholders are recognised in the statement of
comprehensive income as finance costs.
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 and expense
Dividend revenue is recognised when the Company'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. Dividend expense relating to equity
securities sold short is recognised when the shareholders' right to
receive the payment is established.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank. Cash
equivalents are short term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject
to an insignificant risk of change in value.
3. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
The Company applied for the first time certain standards and
amendments, which are effective for annual periods beginning on or
after 1 January 2019. The Company has not early adopted any other
standard, interpretation or amendment that has been issued but is
not yet effective.
The nature and the effect of these changes for accounting
standards and interpretations relevant to the Company's operations
are disclosed below. Although these new standards and amendments
applied for the first time in 2018, they did not have a material
impact on the financial statements of the Company.
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 2019:
Effective for accounting
period beginning on or
after
Standards and Amendments:
Amendments to IFRS 10 and IAS 28: Sale or Contribution of assets
between an investor and Effective date deferred
its associate or joint venture
indefinitely
Long-term Interests in Associates and Joint Ventures (Amendments
to IAS 28)
1 January 2019
Amendments to IFRS 9 Prepayment features with negative
compensation
1 January 2019
Amendments to IAS 28: Long-term interests in associates and
joint ventures
1 January 2019
Annual improvements 2015-2017 cycle 1 January 2019
Amendments to IAS 19: Plan amendment, curtailment or
settlement
1 January 2019
IFRS 16 Leases
1 January 2019
IFRIC Interpretation 23 Uncertainty over Income Tax
Treatments
1 January 2019
Where the adoption of the standards or amendments or
improvements is deemed to have an impact on the financial
statements or performance of the Company, their impact is described
below.
IFRS 15- Revenue from Contracts with Customers
The adoption of IFRS 15 did not have a significant impact on the
Company. At the Master Fund's level, income comprises mainly
interest revenue and dividend income which are scoped out of IFRS
15.
3.1. ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
The following standards, amendments to existing standards and
interpretations were in issue but not yet effective. The company
would adopt these standards, if applicable, when they become
effective. No early adoption of these standards and interpretations
is intended by the Board of directors.
Effective for accounting
period beginning on or
after
New or revised standards and interpretation:
IFRS 3 Business Combinations 1 January 2020
IFRS 17 Insurance Contracts 1 January 2022
Amendments:
The following table set out the impact of the adoption of IFRS 9
on the statement of financial position, retained earnings including
the effects of Expected Credit Loss, if any.
3.2. TRANSITION DISCLOSURES
In USD IAS 39 Measurement Remeasurement IFRS 9 measurement
(ECL)
Financial assets Category Amount Amount Category
----------- ---------------- ------------------------------- ------------------- ----------
Listed equity and
debt
securities (at
Master
Fund Level) FVTPL 39,899,084 - 39,899,084 FVTPL
----------- ---------------- ------------------------------- ------------------- ----------
Unlisted equity and
debt
securities (at
Master
Fund Level) FVTPL 3,472,417 - 3,472,417 FVTPL
----------- ---------------- ------------------------------- ------------------- ----------
Cash and cash
equivalent Amortised Amortised
(at Company level) cost 115,532 - 115,532 cost
----------- ---------------- ------------------------------- ------------------- ----------
4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Company's financial statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts recognised in the financial statements
and disclosure of contingent liabilities. However, uncertainty
about these assumptions and estimates could result in outcomes that
could require a material adjustment to the carrying amount of the
asset or liability affected in future periods.
Judgements
In the process of applying the Company's accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the financial
statements:
Going concern
The Company does not have a fixed life but, as stated in the
Company's admission document published in 2007, the 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 continue in existence.
In June 2019, the Directors convened an Annual General Meeting
and an Extraordinary General Meeting where the following was
passed:
-- Ordinary resolution that the requirement of the Company to
propose the realisation opportunity be and is hereby waived.
-- Ordinary resolution that the continuation of the existence of
the Company be and is hereby approved.
-- The text set out under "New Investing Policy" in paragraph 2
of Part III of the Company's circular to Shareholders dated 5 June
2019 (the "Circular") be and is hereby adopted as the new
investment policy of the Company;
-- The terms of the Amended and Restated Investment Management
Agreement (as defined in the Circular) be and are hereby
approved;
-- The memorandum and the articles of association in the form
initialled by the Chair of the meeting be adopted as the memorandum
and articles of association of the Company in substitution for and
to the exclusion of the existing memorandum and articles of
association; and
-- Any variation to the rights attaching to the Ordinary Shares
in the Company pursuant to the adoption of the new memorandum and
articles of association, and in particular the right for the
Company to redeem the Ordinary Shares (including any redemptions
made of 15 per cent. or more of the Company's issued share
capital), be and is hereby approved.
In summary, shareholders voted to give AOF three years during
which the Investment Manager will realize the portfolio in an
orderly manner and distribute the proceeds to the shareholders.
A brief synopsis of the "New Investing Policy" is below: (Please
review the Company's Circular dated 5 June 2019 for a detailed and
comprehensive description of the Policy):
For a period of up to three years following the EGM (the "Return
Period"), the Company will make no new investments (save that it
may invest in, or advance additional funds to, existing investments
within the Company's portfolio to maximise value and assist in
their eventual realisation). The Company will adopt the New
Investment Policy whereby the Company's existing portfolio of
investments will be divested in a controlled, orderly and timely
manner to facilitate a staged return of capital.
It should be appreciated that there is no time horizon in terms
of the implementation of the New Investment Policy. Although the
Company's portfolio is comprised of largely liquid equity holdings,
the Company has some illiquid investments and it may take the
Investment Manager some time to realise these.
Shareholders will be provided with an opportunity to reassess
the investment policy and distribution policy at the end of the
Return Period. To that end, a further ordinary resolution for the
Company's continuation will be proposed at an extraordinary general
meeting to be convened at the end of the Return Period (the "Second
Continuation Vote").
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.
As from the previous period, the Board concluded that the
Company meets the definition of an investment entity as all
investments have been measured on a fair value basis. IFRS 10
allows the application of this change to be made prospectively in
the period in which the definition is met. 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.
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below. The Company based its assumptions and
estimates on parameters available when the financial statements
were prepared. However, existing circumstances and assumptions
about future developments may change due to market changes or
circumstances arising beyond the control of the Company. Such
changes are reflected in the assumptions when they occur. When the
fair value of financial assets and financial liabilities recorded
in the statement of financial position cannot be derived from
active markets, their fair value is determined using a variety of
valuation techniques that include the use of mathematical
models.
Fair value of financial instruments
The inputs to these models are taken from observable markets
where possible, but where this is not feasible, estimation is
required in establishing fair values. The estimates include
considerations of liquidity and model inputs such as credit risk
(both own and counterparty's), correlation and volatility. Changes
in assumptions about these factors could affect the reported fair
value of financial instruments in the statement of financial
position and the level where the instruments are disclosed in the
fair value hierarchy. The models are calibrated regularly and
tested for validity using prices from any observable current market
transactions in the same instrument (without modification or
repackaging) or based on any available observable market data. An
analysis of fair values of financial instruments and further
details as to how they are measured is provided in Note 5.
IFRS 13 requires disclosures relating to fair value measurements
using a three-level fair value hierarchy. The level within which
the fair value measurement is categorised in its entirety is
determined on the basis of the lowest level input that is
significant to the fair value measurement in its entirety as
provided in Note 5. 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.
5. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
5(a). Investment in subsidiaries at fair value
2019
-----------------------------------
USD
Investment in Africa Opportunity
Fund L.P. 51,519,434
Investment in Africa Opportunity
Fund (GP) Limited 2,315
-----------------------------------
Total investment in subsidiaries
at fair value 51,521,749
===================================
Fair value at 01 January 50,385,898
Net disposal of investment in subsidiaries (950,000)
Net loss on investment in subsidiaries
at fair value 2,085,851
-----------------------------------
Fair value at 30 June 2019 51,521,749
===================================
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. 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 hold 100% of the
Africa Opportunity Fund (GP) Limited.
5(b). Fair value hierarchy
The Company uses the following hierarchy for determining and
disclosing the fair value of the financial instruments by valuation
technique:
Level 1: quoted (unadjusted) market prices in active markets for
identical assets and liabilities.
Level 2: valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable.
Level 3: valuation techniques for which the lowest level input
that is significant to the fair value measurement is
unobservable.
Note: The assets and liabilities of the Master Fund have been
presented but do not represent the assets and liabilities of the
Company as the Master Fund has not been consolidated.
30 June
2019 Level 1 Level 2 Level
3
-------------------------- ------------------------- --------------------------- -------------------
USD USD USD USD
Investment in
subsidiaries 51,521,749 - 51,521,749 -
========================== ========================= =========================== ===================
MASTER FUND
Financial assets at fair value
through profit or loss
Equities 40,965,760 38,603,317 2,361,193 1,250
Debt
securities 2,405,741 2,230,741 - 175,000
-------------------------- ------------------------- --------------------------- -------------------
43,371,501 40,834,058 2,361,193 176,250
========================== ========================= =========================== ===================
Financial liabilities at fair
value through profit or loss
Written put
options 16,875 16,875 - -
-------------------------- ------------------------- --------------------------- -------------------
16,875 16,875 - -
========================== ========================= =========================== ===================
The valuation technique of the investment in subsidiaries at
Company level is as follow:
The Company's investment manager considers the valuation
techniques and inputs used in valuing these funds as part of its
due diligence, to ensure they are reasonable and appropriate and
therefore the NAV of these funds may be used as an input into
measuring their fair value. In measuring this fair value, the NAV
of the funds is adjusted, as necessary, to reflect restrictions on
redemptions, future commitments, and other specific factors of the
fund and fund manager. In measuring fair value, consideration is
also paid to any transactions in the shares of the fund. Given that
there have been no such adjustments made to the NAV of the
underlying subsidiaries and given the simple structure of the
subsidiaries investing over 98% in quoted funds, the Company
classifies these investment in subsidiaries as Level 2.
5(b). Fair value hierarchy
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
Contract for difference (CFD)
The prices for CFD are calculated based on average prices from
various quotes received from brokers.
Written put options
These are traded on an active market and have a quote market
price. They have therefore been classified in level 1 of the
hierarchy.
Unlisted debt and equity investments
Triton Resources Inc. concluded a binding agreement in 2016 to
sell its African underwater logging harvesting assets and its Volta
Lake concession in Ghana. To date, the purchaser has not completed
obligatory payments and as such ownership of the harvesting assets
has not changed, with Triton remaining the lessor of these assets
until outstanding payments are made. Negotiations concluded in 2017
for the delivery of logs to a biomass power plant in French Guiana
from 2020, subject to completion of the permitting process.
Negotiations for the harvesting of underwater logs in Surinam,
ongoing in 2017, were completed in early 2018. Negotiations with a
lead investor who executed a letter of intent for the sale of
Triton itself were suspended as the investor failed to raise the
necessary funds. A new letter of Intent with a new potential buyer
of Triton was executed in December 2018.
The Investment Manager, based on its own sensitivity analysis,
and in conjunction with its analysis of the operational challenges
and opportunities for Triton, including the delays in selling the
South American concessions, adjusted the valuation of the
preference shares at the end of 2018. Consistent with the prior
year's treatment, the Investment Manager has determined the
promissory note investments to be classified as Level 3 assets for
valuation purposes.
African Leadership University ("ALU") is a network of tertiary
institutions, currently with operations in both Mauritius and
Rwanda. A review of this position as at 30 June 2019 concluded this
investment remains fairly valued at its existing level. The
Investment Manager continues to value ALU on the basis of the
post-money valuation of ALU's Series B financing round as of May
2018 using observables prices based from the last round of external
financing.
5(c). Statement of Comprehensive Income of the Master Fund for
the period from 1 January 2019 to 30 June 2019
The net gains on investments in subsidiaries at fair value
through profit or loss for the period from 1 January 2019 to 30
June 2019 amounted to USD 2,085,851, and net losses on investments
in subsidiaries at fair value through profit or loss for the period
from 1 January 2018 to 30 June 2018 amounted to USD 2,678,023 is
due to gains/(losses) arising at the Master Fund and can be
analysed as follows:
For the period
ended 30 June
2019
--------------------------
USD
Income
Interest revenue 291,732
Dividend revenue 1,716,770
Other income 12,404
Net gains on financial assets and liabilities
at fair value
through profit or loss 783,790
--------------------------
2,804,696
--------------------------
Expenses
Net foreign exchange loss 216,279
Custodian fees, brokerage fees and
commission 241,744
Other operating expenses 24,440
Audit fees 10,737
--------------------------
493,200
--------------------------
Operating loss before tax 2,311,496
Less withholding tax (213,778)
--------------------------
Total Comprehensive income for the
period 2,097,718
==========================
Attributable to:
AOF Limited (direct interests) 2,085,758
AOF Limited ( indirect interests through
AOF (GP) Ltd) 93
2,085,851
AOF CarryCo Limited (minority interests) 11,867
2,097,718
==========================
(i) Net gains/(losses) on financial assets and liabilities at
fair value through profit or loss held by Africa Opportunity Fund
L.P.
For the For the
period period
ended 30 ended 30
June June
2019 2018
----------------------- ----------------------
USD USD
Net gains/(losses) on fair value of financial
assets at fair value through profit or loss 3,477 (5,239,777)
Net gains on fair value of financial liabilities
at fair value through profit or loss 780,313 805,637
----------------------- ----------------------
Net gains/(losses) 783,790 (4,434,140)
======================= ======================
(ii) Financial asset and liabilities at fair value through
profit or loss held by Africa Opportunity Fund L.P.
For the For the
period period
ended 30 ended 30
June June
2019 2018
------------------------ ----------------------
USD USD
Held for trading assets:
At 1 January 49,278,324 69,163,219
Additions - 2,802,453
Disposal (5,910,300) (1,501,243)
Net (losses)/gains on financial assets
at fair
value through profit or loss 3,477 (5,239,777)
------------------------ ----------------------
At 30 June (at fair value) 43,371,501 65,224,652
======================== ======================
Analysed as follows:
- Listed equity securities 38,603,318 58,211,528
- Listed debt securities 1,295,766 4,183,859
- Unlisted equity securities 2,362,443 2,375,626
- Unlisted debt securities 1,109,974 350,000
- Contract for difference - 103,639
------------------------ ----------------------
43,371,501 65,224,652
======================== ======================
Other receivables, cash at bank and other payables are not
included above.
(iii) Net changes on fair value of financial assets at fair value through profit or loss
For the For the
period period
ended 30 ended 30
June June
2019 2018
----------------------- ----------------------
USD USD
Realised (2,167,773) 331,771
Unrealised 2,171,250 (5,571,548)
----------------------- ----------------------
Total gains/(losses) 3,477 (5,239,777)
======================= ======================
(iv) Financial liabilities at fair value through profit or loss
held by Africa Opportunity Fund L.P.
30 June 30 June
2019 2018
------------------------ ---------------------
USD USD
Held for trading financial
liabilities
Contract for difference - 24,873
Written put options 16,875 1,631,525
Listed equity securities
sold short - 2,191,053
------------------------ ---------------------
Financial liabilities at fair
value through profit or loss 16,875 3,847,451
======================== =====================
(v) Net changes on fair value of financial liabilities at fair value through profit or loss
For the For the
period period
ended 30 ended
June 30 June
2019 2018
-------------------- ----------------------
USD USD
Realised 349,152 304,197
Unrealised 431,161 501,440
-------------------- ----------------------
780,313 805,637
==================== ======================
6. OTHER RECEIVABLES
30 June 2019 30 June
2018
-------------------------- -----------------------
USD USD
Other receivable 20,116 -
707
Prepayments -
-------------------------- -----------------------
20,823 -
========================== =======================
7. CASH AND CASH EQUIVALENTS
30 June 30 June
2019 2018
------------------- ----------------------
USD USD
Other bank accounts 115,532 43,029
=================== ======================
8(a). ORDINARY SHARE CAPITAL
30 June 30 June 30 June 30 June
2019 2019 2018 2018
---------------- -------------- -------------- --------------
Number USD Number USD
Authorised share capital
Ordinary shares with
par value
of USD 0.01 1,000,000,000 10,000,000 1,000,000,000 10,000,000
================ ============== ============== ==============
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.
8(b). NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS
Ordinary
Shares
-----------------------
USD
At 1 January 2019 50,238,282
Changes during the period:
Total comprehensive loss
for the period 1,340,468
-----------------------
At 30 June 2019 51,578,750
=======================
Net asset value per share at 30
June 2019 0.689
=======================
9. TRADE AND OTHER PAYABLES
30 June 30 June
2019 2018
------------------- --------------------
USD USD
Due to Africa Opportunity
Fund L.P. - 43,029
Directors Fees
Payable 43,750 43,750
Other Payables 35,604 45,575
------------------- --------------------
79,354 132,354
=================== ====================
Other payables are non-interest bearing and have an average term
of six months.
10. EARNING PER SHARE
The earnings per share is calculated by dividing the decrease in
net assets attributable to shareholders by number of ordinary
shares in issue during the period excluding ordinary shares
purchased by the Company and held as treasury shares.
The Company's diluted earnings per share are the same as basic
earnings per share, since the Company has not issued any instrument
with dilutive potential.
Period from Period from
1 January 1
2019 January
to 30 June 2018
2019 to 30 June
2018
------------------------------- -------------------------------
Ordinary Ordinary
shares shares
------------------------------- -------------------------------
Increase in net assets
attributable
to shareholders USD 1,340,468 (3,487,677)
=============================== ===============================
Number of shares in issue 74,849,606 74,849,606
=============================== ===============================
Change in net assets
attributable
to shareholders
per share USD 0.018 (0.047)
=============================== ===============================
11. ANALYSIS OF NAV OF MASTER FUND ATTRIBUTABLE TO ORDINARY SHARES
11(a). STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2019
ASSETS
Cash and cash equivalents 8,607,057
Trade and other receivables 435,798
Financial assets at fair value through
profit or loss 43,371,501
Total assets 52,414,356
-------------------------
EQUITY AND LIABILITIES
Liabilities
Trade and other payables 560,304
Due to AOF Ltd 20,116
Financial liabilities at fair value
through profit or loss 16,875
Total liabilities 597,295
-------------------------
Net assets attributable to shareholders 51,817,061
=========================
The earnings per share is calculated by dividing the decrease in
net assets attributable to shareholders by number of shares
outstanding.
12. 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.
13. SEGMENT INFORMATION
For management purposes, the Çompany is organised in one main
operating segment, which invests in equity securities, debt
instruments and relative derivatives. All of the Company's
activities are interrelated, and each activity is dependent on the
others. Accordingly, all significant operating decisions are based
upon analysis of the Company as one segment. The financial results
from this segment are equivalent to the financial statements of the
Company as a whole.
14. PERSONNEL
The Company did not employ any personnel during the period
(2018: the same).
15. COMMITMENTS AND CONTINGENCIES
There are no commitments or contingencies at the reporting
date.
16. LIFE OF THE COMPANY
The Company does not have a fixed life but, as stated in the
Company's admission document published in 2007, the Directors
consider it desirable that Shareholders should have the opportunity
to review the future of the Company at appropriate intervals.
Accordingly, Shareholders passed an ordinary resolution at an
extraordinary general meeting of the Company on 28 February 2014
that the Company continues in existence.
In June 2019, the Directors convened an Annual General Meeting
and an Extraordinary General Meeting where the following was
passed:
-- Ordinary resolution that the requirement of the Company to
propose the realisation opportunity be and is hereby waived.
-- Ordinary resolution that the continuation of the existence of
the Company be and is hereby approved.
-- The text set out under "New Investing Policy" in paragraph 2
of Part III of the Company's circular to Shareholders dated 5 June
2019 (the "Circular") be and is hereby adopted as the new
investment policy of the Company;
-- The terms of the Amended and Restated Investment Management
Agreement (as defined in the Circular) be and are hereby
approved;
-- The memorandum and the articles of association in the form
initialled by the Chair of the meeting be adopted as the memorandum
and articles of association of the Company in substitution for and
to the exclusion of the existing memorandum and articles of
association; and
-- Any variation to the rights attaching to the Ordinary Shares
in the Company pursuant to the adoption of the new memorandum and
articles of association, and in particular the right for the
Company to redeem the Ordinary Shares (including any redemptions
made of 15 per cent. or more of the Company's issued share
capital), be and is hereby approved.
A brief synopsis of the "New Investing Policy" is below: (Please
review the Company's Circular dated 5 June 2019 for a detailed and
comprehensive description of the Policy):
For a period of up to three years following the EGM (the "Return
Period"), the Company will make no new investments (save that it
may invest in, or advance additional funds to, existing investments
within the Company's portfolio to maximise value and assist in
their eventual realisation). The Company will adopt the New
Investment Policy whereby the Company's existing portfolio of
investments will be divested in a controlled, orderly and timely
manner to facilitate a staged return of capital.
It should be appreciated that there is no time horizon in terms
of the implementation of the New Investment Policy. Although the
Company's portfolio is comprised of largely liquid equity holdings,
the Company has some illiquid investments and it may take the
Investment Manager some time to realise these.
Shareholders will be provided with an opportunity to reassess
the investment policy and distribution policy at the end of the
Return Period. To that end, a further ordinary resolution for the
Company's continuation will be proposed at an extraordinary general
meeting to be convened at the end of the Return Period (the "Second
Continuation Vote"). This vote is anticipated to be a final
liquidation vote post the distribution of all assets.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR GLGDCXUXBGCG
(END) Dow Jones Newswires
September 30, 2019 03:16 ET (07:16 GMT)
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