TIDMAOF
RNS Number : 5326X
Africa Opportunity Fund Limited
28 August 2015
28 August 2015
AFRICA OPPORTUNITY FUND LIMITED
("AOF" or "the Company")
CORRECTION - INTERIM RESULTS
The following amendment has been made to the Interim Results
announcement released on 28 August 2015 under RNS 5163X.
The Interim Results announcement incorrectly stated that the
board of directors of AOF intends to effect a merger of the
different classes of AOF shares by the end of 2016, when it should
have stated that it intends to effect a merger of the different
classes of AOF shares by the end of 2015.
All other details remain unchanged. The amended text is shown
below.
28 August 2015
AFRICA OPPORTUNITY FUND LIMITED
("AOF" or "the Company")
INTERIM RESULTS
The Board of Africa Opportunity Fund Limited is pleased to
announce its unaudited results for the 6 month period to 30 June
2015.
Highlights:
-- AOF's ordinary share net asset value per share of US$0.923 as
at 30 June 2015 decreased by 8.7% from the 31 December 2014 net
asset value per share of US$1.011.
-- AOF's ordinary share price of $0.829 was at a 10% discount to the underlying NAV.
-- AOF's Ordinary Shares net asset value per share as at 31 July 2015 was US$0.938.
-- AOF's Ordinary Shares paid an annual dividend for 2014 of US$0.0214 per share in July 2015.
-- As at 30 June 2015, AOF's investment allocation for its
Ordinary Shares was 74% equities, 17% debt and 9% cash.
-- AOF's C share net asset value per share of US$0.863 decreased
by 5.4% from the 31 December 2014 net asset value per share of
US$0.912.
-- AOFC's share price of $0.94 was at an 8.8% premium to the underlying NAV of AOFC.
-- AOF's investment allocation for its C Shares was 72% equities, 14% debt and 14% cash.
-- AOF's C Share net asset value per share as at 31 July 2015 was US$0.851.
Manager's Report
Thematic Overview: It is current investment convention that
emerging and frontier markets face tough days as the US Dollar
begins a strengthening cycle and Chinese commodity-intensive growth
wanes. Despite the pearls of truth in that convention, it is worth
reiterating that Africa's best investment days lie ahead of it. It
remains fact that Africa is the most underbanked and capital
starved continent. It remains fact that several industries like
formal grocery and clothing retailing or private education have
considerable scope for years of profitable growth in Africa. It
also remains fact that many African countries are in the early
stages of infrastructure investment. There is no doubt that Africa
will be pummelled by China's slowdown, but those very travails make
it easier for investors to identify the serious reforming African
countries in which to hunt for superb and reasonably valued
companies. Rising levels of volatility also uncover short selling
opportunities as some African companies and countries are
overwhelmed by declining commodity prices and revenues. Thus, AOF
investigates both long and short opportunities. Its record shows
that a steadfast focus on profitable companies benefiting from
unfolding long-term trends delivers positive rewards to its
shareholders. This period of declining currencies and share prices
is an excellent moment for the long-term investor to enter African
markets.
Market Conditions: AOF's Ordinary Share NAV decreased 8.7%
during H1 2015. By comparison, in US dollar terms in H1 2015 the
S&P rose 1%, South Africa rose marginally, Egypt declined 5%,
Kenya declined 6%, and Nigeria fell 9%. Three Africa-focused
exchange traded funds (the Lyxor ETF Pan Africa (PAF FP) listed on
the Euronext Paris, DBX MSCI Africa Top 50 (XMAF LN), and Market
Vectors Africa Index (AFK US) listed on the New York Stock
Exchange) fell, respectively,4%, -5%, and -6% in US Dollars.
Ordinary Share Portfolio Highlights: Plunging African currencies
are the principal reason behind the H1 decline in the net asset
value of AOF's ordinary shares. For example, Ghana's Cedi declined
by 26% against the US Dollar and Zambia's Kwacha by 15%. Behind
those currency plunges, whether of the Ghanaian Cedi or the Zambian
Kwacha in turn lie a few factors. Ghana's woes embody the ravages
of weak fiscal management. Zambia's Kwacha confirm the harsh impact
of slowing Chinese import demand on the balance of trade of many an
African country. Zambia exports more than 20% of its exports to a
China battling relatively feeble economic growth. Nigeria's
historic achievement of peaceful acceptance of defeat by a sitting
Nigerian president has been overshadowed by an ever declining oil
price. All spheres of Nigeria will suffer from the 2014-15 oil
collapse. South Africa blends the steep depreciation of the Rand
with a firm cap on economic growth imposed by its state-owned
electricity monopoly - Eskom. Consequently, consumer and business
confidence in Africa's second largest economy, as exemplified by
the -15 score (the lowest since 2001) in the latest FNB/BER
Consumer Confidence Index and the 43 score in the latest RMB/BER
Business Confidence Index , is low. Yet, not all is doom and gloom
in corporate Africa. Some good companies in the AOF portfolios
turned in good performances.
Letshego is one such company. It added 1 cent to the NAV of
AOF's ordinary shares in H1. Letshego is a consumer finance company
domiciled in Botswana and listed on the Botswana Stock Exchange.
There are only two African countries blessed by a long record of
democratic stability and an absence of sovereign debt default:
Botswana and Mauritius. Letshego has operations in several
countries in southern and eastern Africa. It had a market
capitalization of $710 million at the end of June and traded on a
Price/Book ratio of 1.85x. Letshego started life as a company which
made loans to Botswana civil servants which were repaid by payroll
deductions made by the Botswana government. In effect, a repayment
obligation was akin to monthly taxes and collections on its loans
have been strong. Letshego has enjoyed strong capital levels.
Shareholders equity, as a % of total assets, was 70% at the end of
2014; return on assets was 13%; and return on equity was 20%.
Letshego resolutely reinvested more than 80% of its profits in its
operations for the better part of a decade. This May, Letshego
sought shareholder approval to buy back, and cancel, 10% of its
share capital, signifying that it had excess capital. Consequently,
its share price rose 33% (in Pula terms and 34% in US Dollars) in
Q2. Years of modest shareholder distributions appear to be coming
to an end. The largest single source of Letshego's profits is
Botswana. But, other countries like Namibia, Mozambique, and
Tanzania have grown in importance over the years. It is about to
enter Nigeria. Letshego's expansion has had its setbacks. It
entered and exited Zambia, after enduring unacceptable losses. It
has begun to introduce other collection methods besides payroll
deductions, despite the higher loss ratios which accompany other
collection methods. Quietly and steadily, AOF's stake in Letshego
has risen in value in a manner reminiscent of Botswana's own
fortunes.
Elsewhere in the portfolio, the flat prices of Shoprite
translated into a lower US Dollar price. Shoprite's share price in
Zambia suffers from the overhang of litigation. The 39% discount to
the JSE price at which it traded at the end of Q1 widened slightly
to 41% at the end of Q2. AOF and Shoprite have not been able to
agree on dates for arbitration, therefore, it seems that the
Shoprite matter will be heard only in 2016.
C Shares: The C shares had a difficult H1. The NAV of AOF's C
shares declined 5.4% during H1 2015. The C shares' portfolio has
exposure to 31 issuers, of which 10 are new issuers to AOF. In
addition to some of the currency woes identified earlier in this
statement, each of the issuers of East African shillings - Kenya,
Uganda, and Tanzania - is nursing a high current account deficit,
as a % of its gross domestic product, whether precipitated by low
tourist numbers in the case of Kenya or a low gold price in the
case of Tanzania. One illustration of the challenges faced by the C
shares is found in the tale of Kenya Power & Lighting. Kenya
Power constitutes nearly 8% of the C shares' NAV. Kenya Power
occupies a large position in the C shares' portfolio because it
provides a service in acutely short supply in Africa - electricity.
The electricity industry is one which is able to link the local
currency price of its product to US Dollars because Africa needs to
expand dramatically its energy supply industry. There is no choice
in the matter - the days of subsidy and low electricity tariffs for
all are severely numbered. Growing and profitable African
electricity companies are a sine qua non for an industrializing
Africa. AOF intends to benefit from the evolution of power
companies from somnolent state companies to engines of strong
profits. Nevertheless, it is axiomatic that a company trading on a
P/E ratio of 5x or less must be the victim of some error. In the
case of Kenya Power, an increase of 142% in its total assets to
$2.5 billion between 2010 and 2014 led to only a 29% increase in
its revenues to $1.2 billion, despite interest expense rising by
622% over that period. Kenya Power borrowed to expand its network
to connect Kenyans to its grid and to subsidize 70% of each
customer's connection costs without a material improvement in the
affordability of its connection service to the numerous unconnected
Kenyans-hence its growing debt/equity ratio of 136%. Kenya Power's
debt levels rose to the point where it breached some financial
covenants. Kenya Power, the Government of Kenya, and the World Bank
concluded a radical reshuffling of responsibilities earlier this
year under which Kenya's Rural Electrification Authority will bear
the subsidy connection burden and the World Bank will provide Kenya
Power a $200 million guarantee to enable a favourable refinancing
and extension of its current commercial debts. Through the Kenya
Government, the
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International Development Agency of the World Bank is granting
$150 million to Kenya Power to connect all households and
businesses in high density peri-urban areas to existing electricity
networks. It is intended that Kenya would have achieved universal
access to electricity by 2020, up from the current level of 35%.
AOF expects to be invested in this industry for a long period of
time.
Ordinary and C Share Portfolio Appraisal Value: As of 30 June
2015, the Manager's appraisal of the economic value of the Ordinary
Share portfolio was US$1.16 per share. The Ordinary Share market
price of US$0.828 per share at 30 June 2015 represents a 29%
discount. As of 30 June 2015, the Manager's appraisal of the
economic value of the C Share portfolio was US$1.11 per share. The
C Share market price of US$0.94 per share at 30 June 2015
represents a 16% discount. The Appraisal Value is intended to
provide a measure of the Manager's long--term view of the
attractiveness of AOF's Ordinary Share 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 undervalued companies.
The Ordinary Shares top 10 holdings combined offer a weighted
average dividend yield of 7.4%, a rolling P/E ratio of 10.6X, a
return on assets of 10.6% and a return on equity of 22%. The C
Shares top 8 equity holdings combined offer a weighted average
dividend yield of 6%, a rolling P/E ratio of 17X, a return on
assets of 4.7% and a return on equity of 13%. There are excellent
long and short opportunities to be found as African markets adjust
to the down draft of weak commodity prices and volatility stalks
those markets. Despite the difficult period experienced by the
portfolio during the first half of 2015, we are excited by these
attractive valuation metrics and remain optimistic about AOF's
prospects.
Administrative Developments
AOF will be changing its administrator from International
Proximity to SS&C Technologies, Inc. during Q3. The primary
reason for the change is to enable AOF to increase the frequency of
its NAV reporting from monthly to weekly reporting. It is
anticipated that AOF will commence weekly NAV reporting by the end
of this year. We thank International Proximity for several years of
dedicated service since the inception of AOF. Notwithstanding the
delays in the Shoprite matter, the board of directors of AOF
intends to effect a merger of the different classes of AOF shares
by the end of 2015.
On Behalf of the Investment Manager, Africa Opportunity Partners
Ltd,
Africa Opportunity Fund Limited
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
26 August 2015
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2015 TO 30 JUNE 2015
For the period For the period
ended 30 ended 30
Note June 2015 June 2014
--------------- ---------------
USD USD
Revenue
Dividend income 1,012,058 995,397
Interest income 214,297 722,152
Other income 12,948 331,193
Profit on financial liabilities at
fair value through profit or loss 5(b) - 71,392
1,239,303 2,120,134
------------ ------------
Expenses
Losses on financial assets at fair
value through profit or loss 5(a) 4,300,605 5,068,917
Losses on financial liabilities at
fair value through profit or loss 5(b) 841,636 -
Management fee 585,458 573,403
Custodian, secretarial and administration
fees 179,264 136,917
Interest Charges 145,363 145,103
Directors' fees 87,500 56,922
Operating expenses 87,336 86,111
Dividend paid 85,382 86,475
Brokerage fees 68,556 64,156
Audit fees 54,934 21,120
Net exchange losses on bank - 290,869
Placing and admission fees - 1,075,141
6,436,033 7,605,134
------------ ------------
Profit/(loss) for the period (5,196,730) (5,485,000)
Tax incurred on dividend received (39,557) (104,758)
------------ ------------
(5,236,287) (5,589,758)
Other comprehensive income - -
------------ ------------
Total comprehensive income for the
period (5,236,287) (5,589,758)
============ ============
Attributable to:
Shareholders/ Equity holders of the
parent (5,210,471) (5,559,277)
Non-controlling interest (25,816) (30,481)
(5,236,287) (5,589,758)
------------ ------------
Basic gains/(loss) per share for gain
attributable to the equity holders
of the Company during the period 10 (0.0725) (0.0774)
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2015
Notes 30 June 2015 30 June 2014
------------- -------------
USD USD
ASSETS
Cash and cash equivalents 7,506,157 22,818,766
Trade and other receivables 6 1,396,871 1,691,088
Financial assets at fair value through
profit or loss 5(a) 63,977,956 65,669,485
Total assets 72,880,984 90,179,339
============= =============
EQUITY AND LIABILITIES
LIABILITIES
Trade and other payables 8 303,848 2,506,619
Financial liabilities at fair value
through profit or loss 5(b) 7,738,011 11,684,689
------------- -------------
Total Liabilities 8,041,859 14,191,308
------------- -------------
Total liabilities excluding net assets
attributable to shareholders 8,041,859 14,191,308
------------- -------------
Equity attributable to equity holders
of parent
Non-controlling interest 314,414 375,216
------------- -------------
Total equity 314,414 375,216
------------- -------------
Net assets attributable to shareholders 64,524,711 75,612,815
============= =============
Net assets attributable to:
- Ordinary shares 7 39,338,023 47,243,855
- Class C shares 7 25,186,688 28,368,960
----------- -----------
Net assets attributable to shareholders 64,524,711 75,612,815
=========== ===========
Net assets value per share:
- Ordinary shares 0.9228 1.1082
- Class C shares 0.8626 0.9715
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
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FOR THE PERIOD FROM 1 JANUARY 2015 TO 30 JUNE 2015
Net assets
Number of Ordinary Class C attributable
units Share shares to shareholders
------------ -------------- -------------- -----------------
USD USD USD USD
At 1 January 2015 71,830,327 43,099,112 26,636,068 69,735,180
CAPITAL TRANSACTIONS:
Issue of C shares - - - -
OPERATIONS:
Decrease in net assets
attributable to shareholders
from operations for
the period - (3,761,091) (1,449,380) (5,210,471)
At 30 June 2015 71,830,327 39,338,023 25,186,688 64,524,711
============ ============== ============== =================
Net assets
Number of Ordinary Class C attributable
units Share shares to shareholders
------------- -------------- ------------ -----------------
USD USD USD USD
At 17 April 2014 -
transfer from equity
(refer to note 7) 42,630,327 52,254,245 - 52,254,245
CAPITAL TRANSACTIONS:
Issue of C shares 29,200,000 29,200,000 29,200,000
OPERATIONS:
Decrease in net assets
attributable to shareholders
from operations for
the period - (5,010,390) (831,040) (5,841,430)
At 30 June 2014 71,830,327 47,243,855 28,368,960 75,612,815
============= ============== ============ =================
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2015 TO 30 JUNE 2015
Share Share Retained Non-controlling Total
capital premium earnings Total interest equity
-------- ----------- ----------- ----------- ---------------- -----------
USD USD USD USD USD USD
At 1 January 2014 426,303 37,921,452 13,701,196 52,048,951 405,697 52,454,648
Profit for the period - - 282,153 282,153 1,711 283,864
Dividend - (76,859) - (76,859) - (76,859)
At 17 April 2014 426,303 37,844,593 13,983,349 52,254,245 407,408 52,661,653
Transfer to consolidated
statement
of changes in net
assets (note
10) (426,303) (37,844,593) (13,983,349) (52,254,245) - (52,254,245)
Loss for the period - - - - (32,192) (32,192)
At 30 June 2014 - - - - 375,216 375,216
========== ============= ============= ============= ========= =============
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM 1 JANUARY 2015 TO 30 JUNE 2015
Notes For the Period For the Period
Ended 30 Ended 30
June 2015 June 2014
--------------- ---------------
USD USD
Cash flows from operating activities
Comprehensive income/ (loss) for the
period (5,236,287) (5,589,758)
Adjustment for:
Interest income (214,297) (722,152)
Dividend income (1,012,058) (995,397)
(Gain)/ loss on financial assets at fair
value through profit or loss 5(a) 4,300,605 5,068,917
(Gain)/ loss on financial liabilities
at fair value through profit or loss 5(b) 841,636 (71,392)
Operating gains/(losses) before working
capital changes (1,320,402) (2,309,782)
Increase in other receivables and prepayments 151,898 (83,777)
Increase in other payables and accrued
expenses 172,382 9,385
-------------- -------------
Net cash generated/ (used in) operating
activities (996,122) (2,384,174)
-------------- -------------
Investing activities
Net Purchases in financial assets at
fair value through profit or loss 5(a) (4,455,872) (15,264,471)
Net (Purchases)/proceeds of financial
liabilities at fair value through profit
or loss 5(b) (4,604,718) 6,792,217
Interest received 427,818 453,743
Dividend received 286,571 770,496
-------------
Net cash generated from investing activities (8,346,201) (7,248,015)
-------------- -------------
Financing activities
Dividend paid - (162,149)
C Share Placing - 29,200,000
-------------- -------------
Net cash flow used in financing activities - 29,037,851
-------------- -------------
Net (decrease)/ increase in cash and
cash equivalents (9,342,323) 19,405,662
Cash and cash equivalents at 1 January 16,848,480 3,413,104
-------------
Cash and cash equivalents at 30 June 7,506,157 22,818,766
============== =============
AFRICA OPPORTUNITY FUND LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2015 TO 30 JUNE 2015
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 Market "SFM" on 17 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 consolidated financial statements for the Company for the
half-year ended 30 June 2015 were authorised for issue in
accordance with a resolution of the Board of Directors on 26 August
2015.
Presentation currency
The consolidated 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 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
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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 2015.
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 into the following categories:
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.
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 Group does
not apply any hedge accounting). The Group'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 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 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.
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.
Loans and receivables
Loans and receivables are non-derivatives financial assets with
fixed or determinable payments that are not quoted in an active
market. 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 fair value through profit or loss. The Group
includes in this category amounts relating to trade and other
payables and dividend payable.
(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.
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
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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. 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 Group measures its investments in financial instruments 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 Group.
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.
Where the Group has assets and liabilities with offsetting
market risks, it uses mid-market prices as a basis for establishing
fair values for the offsetting risk positions and applies the bid
or ask price to the net open position as appropriate.
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 Group 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
The Group assesses at each reporting date whether a financial
asset or group of financial assets classified as loans and
receivables is impaired. A financial asset or a group of financial
assets is deemed to be impaired if, and only if, there is an
objective evidence of impairment as a result of one or more events
that have occurred after the initial recognition of the asset (an
incurred 'loss event') and that loss event has an impact on the
estimated future cash flows of the financial asset or the group of
financial assets that can be reliably estimated.
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 as 'Credit
loss expense'. 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.
Interest revenue on impaired financial assets is recognised
using the rate of interest used to discount the future cashflows
for the purpose of measuring the impairment loss.
Investment Management Agreement
Following the Admission of Ordinary Shares and C Shares to the
Specialist Fund Market of the London Stock Exchange on 17 April
2014, the Company entered into an Amended and Restated Investment
Management Agreement with Africa Opportunity Partners (the
"Investment Manager"), an investment management company
incorporated in the Cayman Islands, to manage the operations of the
Group subject to the overall supervision of the Group's board as
specified in the SFM Admission document of the Company.
Under the Amended and Restated Investment Management Agreement,
the Investment Manager receives a management fee equal to the
aggregate of: (i) two per cent of the Net Asset Value per annum up
to US$50 million; and (ii) one per cent of the Net Asset Value per
annum in excess of US$50 million, payable in US$ quarterly in
advance.
In addition, the principals (directors) of the Investment
Manager are beneficially interested in CarryCo, which under the
terms of the Amended and Restated Limited Partnership Agreement, is
entitled to share an aggregate annual carried interest (the
"Performance Allocation") from the Limited Partnership equivalent
to 20 per cent of the
excess of the Net Asset Value (as at 31 December in each year)
over the sum of (i) the annual management fee for that year end
(ii) a non-compounding annual hurdle amount equal to the Net Asset
Value as at 31 December in the previous year, as increased by 5 per
cent. The Performance Allocation is subject to a "high watermark"
requirement. The Performance Allocation accrues monthly and is
calculated as at 31 December in each year and is allocated
following the publication of the NAV for such date.
The management fee for the half-year under review amounts to USD
585,458 (2014: USD 573,403) and the performance fees earned for the
half-year under review was nil (2014: nil).
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.
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.
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 (Continued)
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(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.
The movement in fair value is shown in the statement of
comprehensive income as an 'Increase or decrease in net assets
attributable to shareholders'.
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 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 profit or loss. Dividend expense relating to equity
securities sold short is recognised when the shareholders' right to
receive the payment is established.
Share capital
Ordinary and C shares were reclassified as liabilities in the
prior year; this has been explained further in note 7.
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 POLICY AND DISCLOSURES
The accounting policies adopted are consistent with those of the
previous financial year which included the following new and
amended IFRS and IFRIC interpretations adopted in the year
commencing 1 January 2014:
Effective for
accounting
Amendments period beginning
on or after
Offsetting Financial Assets and Financial Liabilities (Amendments 1 January 2014
to IAS 32)
Investment Entities (Amendments to IRFS 10, IFRS 12 and 1 January 2014
IAS 27)
Recoverable amount disclosures for non- financial assets 1 January 2014
(Amendments to IAS 36)
Novation of Derivatives and Continuation of Hedge Accounting 1 January 2014
(Amendments to IAS 39)
IFRIC 21 Levies 1 January 2014
There were no instances where the adoption of the standard or
interpretation or improvement was deemed to have an impact on the
financial statements or performance of the Group.
STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
The following standards, amendments to existing standards and
interpretations were in issue but not yet effective. They are
mandatory for accounting periods beginning on the specified dates,
but the Company has not early adopted them:
New or revised standards and interpretations:
Effective for
accounting period
beginning on
or after
New or revised standards
IFRS 9 Financial Instruments 1 January 2018
IFRS 14 Regulatory Deferral Accounts 1 January 2016
IFRS 15 Revenue from Contracts with Customers 1 January 2017
Amendments
Defined Benefit Plans: Employee Contributions (Amendments 1 July 2014
to IAS 19)
Annual Improvements 2010-2012 Cycle 1 July 2014
Annual Improvements 2011-2013 Cycle 1 July 2014
Disclosure Initiative (Amendments to IAS 1) 1 January 2016
Accounting for Acquisitions of Interests in Joint Operations 1 January 2016
(Amendments to IFRS 11)
Investment entities consolidation exemption ... (Amendments 1 January 2016
to IFRS 10, IFRS 12 and IAS 28)
Clarification of Acceptable Methods of Depreciation 1 January 2016
and Amortisation (Amendments to IAS 16 and IAS 38)
Agriculture: Bearer Plants (Amendments to IAS 16 and 1 January 2016
IAS 41)
Equity Method in Separate Financial Statements (Amendments 1 January 2016
to IAS 27)
Sale or Contribution of Assets between an Investor and
its Associate or Joint Venture (Amendments to IFRS 10 1 January 2016
and IAS 28)
Annual Improvements 2012 - 2014 Cycle 1 January 2016
IFRS 9 Financial Instruments
IFRS 9, as issued in July 2014, reflects the completion of all
the phases of the IASB's work on the replacement of IAS 39 and
applies to the classification and measurement of financial assets
and financial liabilities, impairment as well as hedge
accounting.
Classification and measurement of financial instruments
Financial Assets
Financial assets are measured at amortised cost, fair value
through profit or loss, or fair value through other comprehensive
income, based on both the entity's business model for managing the
financial assets and the financial asset's contractual cash flow
characteristics.
Equity securities are measured at fair value through profit or
loss unless the entity chooses, on initial recognition, to present
fair value changes in other comprehensive income (OCI). This option
is irrevocable and applies only to equity instruments, which are
not held for trading. Unlike debt instruments, gains and losses in
OCI are not recycled on sale and there is no impairment accounting.
Derivatives are also measured at fair value through profit or loss.
In comparison to IAS 39, there is no bifurcation of embedded
derivatives for financial assets recorded at amortised cost or
FVOCI.
The derecognition principles in terms of IAS 39 remain the same
in IFRS 9.
Financial Liabilities
For liabilities designated at fair value through profit and
loss, the change in the fair value of the liability attributable to
changes in credit risk is presented in OCI. All other
classification and measurement requirements in IAS 39 have been
carried forward into IFRS 9.
Impairment of financial assets
The expected credit loss model applies to debt instruments
recorded at amortised cost or at fair value through other
comprehensive income (such as loans, debt securities and trade
receivables), lease receivables and most loan commitments and
financial guarantee contracts.
Entities are required to recognise either 12-month or lifetime
expected credit losses, depending on whether there has been a
significant increase in credit risk since initial recognition.
The measurement of expected credit losses would reflect a
probability-weighted outcome, the time value of money and
reasonable and supportable information.
Hedge accounting
There are significant changes with regards to hedge accounting
including the following:
- Assessment of hedge effectiveness is an objectives-based test
that focuses on the economic relationship between the hedged item
and the hedging instrument, and the effect of credit risk on that
economic relationship
- Risk components of financial and non-financial items can be
designated as hedged items provided the risk component is
separately identifiable and reliably measureable
- Certain costs of hedging can be excluded from the designation
of a financial instrument as the hedging instrument and accounted
for as costs of hedging in profit or loss
- Designation of groups of items as the hedged item is possible,
including layer designations and some net positions
- There are more extensive disclosure requirements
Effective date and transition
The standard applies to annual periods beginning on or after 1
January 2018, although early application is permitted.
Retrospective application is required, however, transition reliefs
are provided (including no restatement of comparative period
information). Entities will only be permitted to early apply a
previous version of IFRS 9 if their date of initial application is
before 1 February 2015. However, if an entity has early applied a
previous version of IFRS 9 before 1 February 2015, the entity is
permitted to continue to apply that version until IFRS 9 becomes
mandatorily effective in 1 January 2018.
Moreover, it will be possible to apply early just the new
accounting treatment of fair value gains and losses arising from
own credit risk on liabilities designated at fair value through
profit or loss without applying the other requirements of IFRS 9,
until IFRS 9 becomes mandatorily effective.
Impact
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The Group is in the process of assessing the impact of the
standard.
IFRS 14 Regulatory Deferral Accounts - effective 1 January
2016
IFRS 14 permits an entity which is a first-time adopter of
International Financial Reporting Standards to continue to account,
with some limited changes, for 'regulatory deferral account
balances' in accordance with its previous GAAP, both on initial
adoption of IFRS and in subsequent financial statements.
This new standard will not have an impact, as the Company is not
a first time adopter of IFRS.
IFRS 15 Revenue from Contracts with Customers - effective 1
January 2017
IFRS 15 provides a single, principles based five-step model to
be applied to all contracts with customers.
The five steps in the model are as follows:
-- Identify the contract with the customer;
-- Identify the performance obligations in the contract;
-- Determine the transaction price;
-- Allocate the transaction price to the performance obligations in the contracts; and
-- Recognise revenue when (or as) the entity satisfies a performance obligation.
Guidance is provided on topics such as the point in which
revenue is recognised, accounting for variable consideration, costs
of fulfilling and obtaining a contract and various related matters.
New disclosures about revenue are also introduced.
The Company is still assessing the impact of this new standard,
but it is not expected to have a significant effect on financial
position of the Company. There may be an impact on the level of
disclosure provided.
Annual Improvements 2010-2012 Cycle - effective 1 July 2014
The annual improvements 2010-2012 Cycle make amendments to the
following standards:
-- IFRS 2 - Amends the definitions of 'vesting condition' and
'market condition' and adds definitions for 'performance condition'
and 'service condition';
-- IFRS 3 - Require contingent consideration that is classified
as an asset or a liability to be measured at fair value at each
reporting date;
-- IFRS 8 - Requires disclosure of the judgements made by
management in applying the aggregation criteria to operating
segments, clarify reconciliations of segment assets only required
if segment assets are reported regularly;
-- IAS 16 and IAS 38 - Clarify that the gross amount of
property, plant and equipment is adjusted in a manner consistent
with a revaluation of the carrying amount; and
-- IAS 24 - Clarify how payments to entities providing
management services are to be disclosed.
Annual Improvements 2011-2013 Cycle - effective 1 July 2014
The annual improvements 2011-2013 Cycle make amendments to the
following standards:
-- IFRS 3 - Clarify that IFRS 3 excludes from its scope the
accounting for the formation of a joint arrangement in the
financial statements of the joint arrangement itself;
-- IFRS 13 - Clarify the scope of the portfolio exception in paragraph 52; and
-- IAS 40 - Clarifying the interrelationship of IFRS 3 and IAS
40 when determining whether a transaction is a business combination
or the purchase of an asset.
The directors are assessing the impact of the standard
adjustments.
Accounting for Acquisitions of Interests in Joint Operations
(Amendments to IFRS 11) - effective 1 January 2016
Amends IFRS 11 Joint Arrangements to require an acquirer of an
interest in a joint operation in which the activity constitutes a
business (as defined in IFRS 3 Business Combinations) to:
-- Apply all of the business combinations accounting principles
in IFRS 3 and other IFRSs, except for those principles that
conflict with the guidance in IFRS 11; and
-- Disclose the information required by IFRS 3 and other IFRSs for business combinations.
The amendments apply both to the initial acquisition of an
interest in a joint operation, and the acquisition of an additional
interest in a joint operation (in the latter case, previously held
interests are not re-measured).
The amendment will not have an impact since the Company does not
have any interests in joint operations.
Clarification of Acceptable Methods of Depreciation and
Amortisation (Amendments to IAS 16 and IAS 38) - effective 1
January 2016
Amends IAS 16 Property, Plant and Equipment and IAS 38
Intangible Assets to:
-- Clarify that a depreciation method that is based on revenue
that is generated by an activity that includes the use of an asset
is not appropriate for property, plant and equipment;
-- Introduce a rebuttable presumption that an amortisation
method that is based on the revenue generated by an activity that
includes the use of an intangible asset is inappropriate, which can
only be overcome in limited circumstances where the intangible
asset is expressed as a measure of revenue, or when it can be
demonstrated that revenue and the consumption of the economic
benefits of the intangible asset are highly correlated; and
-- Add guidance that expected future reductions in the selling
price of an item that was produced using an asset could indicate
the expectation of technological or commercial obsolescence of the
asset, which, in turn, might reflect a reduction of the future
economic benefits embodied in the asset.
The amendment will not have an impact since the Company does not
hold any property, plant and equipment.
Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) -
effective 1 January 2016
Amends IAS 16 Property, Plant and Equipment and IAS 41
Agriculture to:
-- Include 'bearer plants' within the scope of IAS 16 rather
than IAS 41, allowing such assets to be accounted for a property,
plant and equipment and measured after initial recognition on a
cost or revaluation basis in accordance with IAS 16;
-- Introduce a definition of 'bearer plants' as a living plant
that is used in the production or supply of agricultural produce,
is expected to bear produce for more than one period and has a
remote likelihood of being sold as agricultural produce, except for
incidental scrap sales; and
-- Clarify that produce growing on bearer plants remains within the scope of IAS 41.
The amendment will not have an impact as the Company does not
hold any property, plant and equipment.
Amendments to IAS 27: Equity Method in Separate Financial
Statements - 1 January 2016
The amendments will allow entities to use the equity method to
account for investments in subsidiaries, joint ventures and
associates in their separate financial statements. Entities already
applying IFRS and electing to change to the equity method in its
separate financial statements will have to apply that change
retrospectively.
For first-time adopters of IFRS electing to use the equity
method in its separate financial statements, they will be required
to apply this method from the date of transition to IFRS. The
amendments are effective for annual periods beginning on or after 1
January 2016, with early adoption permitted.
This amendment will not have an impact on the Company as it does
not hold investment in subsidiaries.
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) - 1
January 2016
This standard clarifies the treatment of the sale or
contribution of assets from an investor to its associate or joint
venture, as follows:
-- require full recognition in the investor's financial
statements of gains and losses arising on the sale or contribution
of assets that constitute a business (as defined in IFRS 3Business
Combinations)
-- require the partial recognition of gains and losses where the
assets do not constitute a business, i.e. a gain or loss is
recognised only to the extent of the unrelated investors' interests
in that associate or joint venture.
These requirements apply regardless of the legal form of the
transaction, e.g. whether the sale or contribution of assets occurs
by an investor transferring shares in a subsidiary that holds the
assets (resulting in loss of control of the subsidiary), or by the
direct sale of the assets themselves.
The following amendments were made to these standards:
-- IFRS 5 - Adds specific guidance in IFRS 5 for cases in which
an entity reclassifies an asset from held for sale to held for
distribution or vice versa and cases in which held-for-distribution
accounting is discontinued
-- IFRS 7 - Additional guidance to clarify whether a servicing
contract is continuing involvement in a transferred asset, and
clarification on offsetting disclosures in condensed interim
financial statements
-- IAS 19 - Clarify that the high quality corporate bonds used
in estimating the discount rate for post-employment benefits should
be denominated in the same currency as the benefits to be paid
-- IAS 34 - Clarify the meaning of 'elsewhere in the interim
report' and require a cross-reference
The Company is still assessing the impact of these new or
revised standards and interpretations on the presentation of its
financial statements.
No early adoption is intended by the Board of directors.
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
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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
Group'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. 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 Group performs sensitivity analysis or stress
testing techniques.
Investment in Shoprite Holdings (SHP ZL)
The Company (through its subsidiary Africa Opportunity Fund L.P)
has a significant position of 8.8% of NAV (30 June 2014: 9.0%) in
Shoprite Holdings (SHP ZL) ("Shoprite") on the Zambian Register.
The value of the investment as at 30 June 2015 amounted to USD
5,696,008 (30 June 2014: USD 6,786,064) and the original cost of
the investment was USD 3,639,685 (2014: USD 3,639,685). Shoprite
has conveyed its intention to seek to reverse certain trades made
on the Lusaka Stock Exchange. To date, the filing to the courts
made by Shoprite against the Company (through the custodian as
nominee on behalf of the fund) has been dismissed as an abuse of
Process of Court on account of multiplicity of action with costs
awarded to the defendants. The multiplicity of action refers to an
existing case in a separate jurisdiction that has been filed by
Shoprite against its agent and transfer agent Messrs Lewis Nathan
Advocates. Shoprite appealed the decision. A consent court order
was issued in October 2014 consolidating all the actions. Shoprite
issued a consolidated writ of summons in March 2015 seeking to
reverse trades for 438,743 Shoprite shares out of AOF's holding of
679,145 Shoprite shares. Management has fair valued the investment
in Shoprite at the price prevailing on the Lusaka stock exchange.
Additionally, Shoprite has been placing dividend payments into
escrow rather than distributing these amounts to shareholders.
These dividends are reflected as a receivable amounting to USD
608,819 (2014: USD 428,473) in the Group's assets.
Management has assessed these facts and consulted with their
legal advisors, who consider such action by Shoprite to be devoid
of merit. Therefore, management believe that the correct judgement
is to continue to account for the investment at fair value and
accrue for the dividends on this investment.
5. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
5(a). FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
30 June 2015 30 June 2014
------------- -------------
USD USD
Designated at fair value through profit
or loss:
At start of year 63,822,689 55,473,931
Additions 11,868,641 16,679,578
Disposals (7,412,769) (1,415,107)
Net (losses)/ gains on financial assets
at fair value through profit or loss (4,300,605) (5,068,917)
63,977,956 65,669,485
============ ============
Analysis of portfolio:
- Listed equity securities 51,923,304 46,818,244
- Unlisted equity securities 1,000,012 -
- Listed debt securities 10,804,640 17,901,241
- Unlisted debt securities 250,000 950,000
-----------
63,977,956 65,669,485
=========== ===========
Net gains/(losses) on fair value of financial assets at fair
value through profit or loss
30 June 2015 30 June 2014
------------- -------------
USD USD
Realised (1,593,187) (500,903)
Unrealised (2,707,418) (4,568,014)
-------------
Net gains/(losses) (4,300,605) (5,068,917)
============= =============
5(b). FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR
LOSS
30 June 2015 30 June 2014
------------- -------------
USD USD
Written put option - 66,713
Listed securities sold short 7,738,011 11,617,976
-------------
7,738,011 11,684,689
============= =============
5(b). FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
(CONTINUED)
30 June 2015 30 June 2015
------------- -------------
USD USD
Realised (745,482) 284,315
Unrealised (96,153) (212,923)
-------------
Net gains/ (losses) (841,635) 71,392
============= =============
5 (c) Fair value hierarchy
The Group 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.
Recurring fair value measurement of assets and liabilities -
2015
30 June Level 1 Level 2 Level 3
2015
-------- -------- -------- --------
USD USD USD USD
Financial assets at fair value through profit or loss:
Equities 52,923,316 46,227,296 6,696,020 -
Debt securities 11,054,640 - 11,054,640 -
------------- -------------- ----------- ----
63,977,956 46,227,296 17,750,660 -
============= ============== =========== ====
Financial liabilities
at fair value through
profit or loss (7,738,011) (7,738,011) - -
============= ============== =========== ====
Recurring fair value measurement of assets and liabilities -
2014
30 June Level 1 Level 2 Level 3
2014
---------- ---------- ---------- ----------
USD USD USD USD
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 12:24 ET (16:24 GMT)
Financial assets at fair value through profit or loss:
Equities 46,818,244 40,032,180 6,786,064 -
Debt securities 18,851,241 - 18,851,241 -
------------- ------------- ----------- ----
65,669,485 40,032,180 25,637,305 -
============= ============= =========== ====
Financial liabilities
at fair value through
profit or loss 11,684,689 11,684,689 - -
============= ============= =========== ====
6. TRADE AND OTHER RECEIVABLES
30 June 2015 30 June 2014
------------- -------------
USD USD
Interest receivable on bonds 177,715 729,280
Dividend receivable 727,479 691,290
Other receivables 491,677 270,518
1,396,871 1,691,088
============= =============
The receivables include dividends receivable from Shoprite
Holdings, see note 4. Interests receivable on bonds are due within
six months.
7. NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS
30 June 30 June 30 June
30 June 2015 2015 2014 2014
-------------- ----------- -------------- -----------
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
Reclassification (42,630,327) (426,303) - -
-------------- ----------- -------------- -----------
At 30 June - - 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 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.
YEAR 2015 Number of Ordinary Class C
units Shares Shares Total
----------- ------------ ------------ ------------
USD USD USD
At 1 January 2015 71,830,327 43,099,112 26,636,068 69,735,180
Changes during the year:
Issue of shares - - - -
Redemption of shares - - - -
Loss for the period - (3,761,091) (1,449,380) (5,210,471)
At 30 June 2015 71,830,327 39,338,023 25,186,688 64,524,711
=========== ============ ============ ============
Net assets value per
share in 2015 0.9228 0.8626
YEAR 2014 Ordinary Class C
Shares Shares Total
------------- ------------ ----------- -------------
USD USD USD
Reclassification from
equity at 17 April 2014 42,630,327 52,254,245 - 52,254,245
Changes during the year:
Issue of shares 29,200,000 - 29,200,000 29,200,000
Redemption of shares - - - -
Loss for the period - (5,010,390) (831,040) (5,841,430)
At 30 June 2014 71,830,327 47,243,855 28,368,960 75,612,815
============= ============ =========== =============
Net assets value per
share in 2014 1.1082 0.9715
C shares
AOF closed a Placing of 29.2 million C shares of US$0.10 each at
a placing price of US$1.00 per C share, raising a total of $29.2
million before the expenses of the Issue. The placing was closed on
11 April 2014 with the shares commencing trading on 17 April
2014.
AOF's Ordinary Shares and the C Shares from the April placing
were admitted to trading on the LSE's Specialist Fund Market
("SFM") effective 17 April 2014. Simultaneous with the listing on
the SFM, the Ordinary shares were cancelled from admission to
trading on the AIM.
C Shares are a transient class of shares: the assets
representing the net proceeds of any issue of C Shares will be
maintained, managed and accounted for as a separate pool of capital
of the Company until those C Shares convert into Ordinary Shares
(which will occur once 85 per cent. of all of the assets
representing the Net Placing Proceeds (aggregate Placing Price less
the applicable fees and expenses of the Placing) have been invested
in accordance with the Company's existing investment policy (or, if
earlier, six months after the date of issue of the C Shares)).
Under the Articles the Directors have discretion to make such
adjustments to the timing of Conversion as they consider reasonable
having regard to the interests of all Shareholders. In this regard,
although Conversion was anticipated to occur no later than six
months after Admission, the Directors considered it is in the best
interests of all Shareholders (being at that time Ordinary
Shareholders and C Shareholders) to extend the Conversion Date
beyond the six month period as the Shoprite case was still
unresolved as at year end. On such conversion, each holder of C
Shares will receive such number of Ordinary Shares as equals the
number of C Shares held by them multiplied by the Net Asset Value
per C Share and divided by the Net Asset Value per Ordinary Share
(subject to a discount of 5 per cent.), in each case as at a date
shortly prior to Conversion. As at 30 June 2015, the dispute with
Shoprite is still unresolved and the Conversion has not yet been
made.
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 2019, the Directors will convene another general meeting
where an ordinary resolution will be proposed that the Company will
continue in existence. If the resolution is not passed, the
Directors will be required to formulate proposals to be put to
Shareholders to reorganise, reconstruct or wind up the Company. If
the resolution is passed, the Company will continue its operations
and a similar resolution will be put to Shareholders every five
years thereafter.
At the same time as the continuation vote in 2019, the Company
will provide Shareholders with, without first requiring a
Shareholder vote to implement this policy, an opportunity to
realise all or part of their shareholding in the Company for a net
realised pro rata share of the Company's investment portfolio.
The directors have the discretion to defer the conversion
indefinitely. Hence, there could be two classes of shares (the
Ordinary and the C Class shares) that could be realised in a forced
liquidation by the shareholders, and then the requirements of IAS
32.16C and 16D would need to be applied to both classes. Due to the
fact that there are two separate pools of assets and liabilities
attributable to the C Class and Ordinary shareholders respectively,
the requirements of IAS 32.16C(a) would not be met. Therefore both
the classes have been classified as financial liabilities as from
April 17, 2014 upon issuance of a Class C shares.
The equity attributable to ordinary shareholders (classified as
equity) amounting to USD 52,254,245 have been reclassified to "net
assets attributable to shareholders" as from 17 April 2014
(reclassified now as "financial liabilities" under IAS 32) upon
issue of C shares where two separate pools are now being
managed.
8. TRADE AND OTHER PAYABLES
30 June 2015 30 June 2014
------------- -------------
USD USD
Performance fee - 2,141,871
Accrued expenses 107,568 208,144
Other payables 196,280 156,604
-------- ----------
303,848 2,506,619
======== ==========
Other payables are non-interest bearing and are due on demand.
Other payables consisted of trades not yet settled as at 30 June
2015 and amounted to USD 198,280 (2014: USD 156,604).
9. ANALYSIS OF SHARE OF PROFIT AND LOSSES ATTRIBUTABLE TO ORDINARY SHARE AND
C SHARES
9 (a) STATEMENT OF FINANCIAL POSITION
STATEMENT OF FINANCIAL POSITION
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 12:24 ET (16:24 GMT)
AS AT 30 JUNE 2015
Ordinary shares C shares
USD USD
ASSETS
Financial assets at fair value through
profit or loss 39,091,093 24,886,864
Trade and other receivables 1,126,947 269,924
Cash and cash equivalents 3,818,319 3,687,838
---------------- -----------
Total assets 44,036,359 28,844,626
================ ===========
EQUITY AND LIABILITIES
Liabilities
Financial liabilities at fair value
through profit or loss 4,363,343 3,374,668
Trade and other payables 20,579 283,270
Total liabilities 4,383,922 3,657,938
---------------- -----------
Equity
Non-controlling interest 314,414 -
Total equity 314,414 -
---------------- -----------
Total equity and liabilities 39,338,023 25,188,688
================ ===========
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2014
Ordinary shares C shares
USD USD
ASSETS
Financial assets at fair value through
profit or loss 56,576,965 9,092,521
Trade and other receivables 1,612,275 78,813
Cash and cash equivalents 2,300,681 20,518,085
---------------- -----------
Total assets 60,489,921 29,689,419
================ ===========
EQUITY AND LIABILITIES
Liabilities
Financial liabilities at fair value
through profit or loss 10,769,640 915,050
Trade and other payables 2,101,210 405,409
Total liabilities 12,870,850 1,320,459
---------------- -----------
Equity
Non-controlling interest 375,216 -
Total equity 375,216 -
---------------- -----------
Net assets attributable to shareholders 47,243,855 28,368,960
================ ===========
9 (b) STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2015
Ordinary
shares C shares
USD USD
Revenue
Income 1,095,430 143,893
Net gains on financial assets at fair
value through profit or loss - -
Net gains on financial liabilities at
fair value through profit or loss - -
1,095,430 143,893
------------ ------------
Expenses
Management fees 371,443 214,015
Net losses on financial assets at fair
value through profit or loss 3,301,668 998,937
Net losses on financial liabilities at
fair value through profit or loss 786,446 55,189
Other expenses 411,573 296,782
4,871,130 1,564,923
------------ ------------
Loss before taxation (3,775,700) (1,421,030)
Taxation (11,206) (28,351)
Total comprehensive income for the period (3,786,906) (1,449,381)
============ ============
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2014
Ordinary
shares C shares
USD USD
Revenue
Income 1,984,350 64,392
Net gains on financial assets at fair
value through profit or loss - 95,431
Net gains on financial liabilities at
fair value through profit or loss 137,031 -
2,121,381 159,823
------------ ----------
Expenses
Management fees 476,874 96,529
Net losses on financial assets at fair
value through profit or loss 5,164,348 -
Net losses on financial liabilities at
fair value through profit or loss - 65,639
Other expenses 1,134,120 828,695
6,775,342 990,863
------------ ----------
Loss before taxation (4,653,961) (831,040)
Taxation (104,757) -
Total comprehensive income for the period (4,758,718) (831,040)
============ ==========
10. 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.
30 June 2015 30 June 2014
-------------
Decrease in net assets attributable
to shareholders USD (3,786,906) (4,728,238)
=============
Weighted average number of ordinary
share in issue 42,630,327 42,630,327
Basic gain/ (loss) per share USD (0.0888) (0.1109)
============= =============
30 June 2015 30 June 2014
-------------
Decrease in net assets attributable
to shareholders USD (1,449,381) (831,039)
============= =============
Weighted average number of C share
in issue 29,200,000 29,200,000
Basic gain/ (loss) per share USD (0.0496) (0.0285)
============= =============
11. 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.
12. 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.
13. PERSONNEL
The Group did not employ any personnel during the half year
period ended 30 June 2015 (2014: the same).
14. FAIR VALUE OF NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS
Recurring fair value measurement of financial liabilities
The below table shows the fair value hierarchy of the Net assets
attributable to shareholders.
Level 1 Level 2 Level 3
USD USD USD
Ordinary shares - 39,338,023 -
C Class shares - 25,186,688 -
At 30 June 2015 - 64,524,711 -
=============
The Ordinary and C Class shares are quoted on the SFM of the
London Stock Exchange ("LSE").
The shares are traded on the exchange at the quoted price as
determined by the participants on the LSE. In a liquidation
scenario or if investors elect to initiate their opportunity to
realise all or part of the shareholding at the time of the
continuation vote in 2019, the proceeds to the shareholders would
be determined by the net realisation of the net asset value.
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