Interim Results
29 September 2008
Africa Opportunity Fund Limited (AOF.L)
Announcement of Unaudited Interim Results for the 6 month period to 30 June
2008
Africa Opportunity Fund Limited ("AOF" or the "Company"), the closed-ended
investment company which aims to achieve consistent capital growth and income
through investments in value, arbitrage, and special opportunities derived from
the continent of Africa announces its unaudited results for the 6 month period
to 30 June 2008.
For further information please contact:
Africa Opportunity Fund Limited
Francis Daniels
Tel: +2711 684 1528
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett/Cha Patel
Tel: +44 207 383 5100
LCF Edmond de Rothschild Securities Limited (Nominated Broker)
Claire Heathfield/Hiroshi Funaki
Tel: +44 020 7845 5960
LCF Edmond de Rothschild (C.I.) Limited (CISX Sponsor)
John Falla
Tel: +44 148 171 6336
Highlights:
* AOF's net asset value per share of US$0.991 increased 3% from the 31
December 2007 net asset value per share of US$0.962.
* As at 30 June 2008, AOF's investment allocation was 36% Listed Equities, 1%
Unlisted Equities, 50% Debt and 13% Cash.
* As at 30 June 2008, AOF had invested in excess of 85% of the capital.
* Dividends in the amount of $0.0113 per share were paid on 9 April 2008 and
17 July 2008.
* AOF generated basic earnings per share of US$0.0376 during the first six
months of 2008.
Investment Manager's Statement
Dear Shareholders,
AOF's investment objective is to earn consistent capital growth and income
through value, arbitrage, and special situations investments in the continent
of Africa. Portfolio investments include equity, debt, and other interests in
both listed and unlisted assets.
Traded on the AIM market of the London Stock Exchange, Africa Opportunity Fund
Limited also has a primary listing on the Channel Islands Stock Exchange and is
therefore a "qualifying investment" within a UK ISA, PEP or SIPP. The Company
currently pays a quarterly dividend that, in sum, will equal the 1 year Libor
on an annual basis.
Portfolio and Fund Developments
Africa Opportunity Fund Ltd ("AOF") was launched on AIM in July 2007 followed
by a listing on the CISX in November 2007, raising approximately $120 million.
Africa Opportunity Partners ("AOP"), the Investment Manager, has established a
presence in Johannesburg and invested approximately 85% of the capital to date.
During the first quarter of 2008 we invested in SAPH, an Ivory Coast rubber
plantation owner that is trading on a single digit PE multiple but double digit
dividend yield, while earning attractive cashflows per hectare. AOP also
increased AOF's equity investments in Sonatel, Artumas, and Copperbelt Energy,
while finding further opportunities in the credit arena such as domestic Ivory
Coast debt.
In the second quarter of 2008 AOP increased the Company's listed equity
holdings from 28% of the portfolio to 36%. Opportunities were found in the
mining and natural resources arena, as well as the South African financial
services arena. AOP also added to the fund's holding of Ghanaian government
bonds at an 18% yield, and invested in corporate debt yielding 15% that is
financing the rehabilitation of the KOV copper and cobalt mine in the
Democratic Republic of the Congo.
Economic Environment
African markets overall did not escape the impact of developed market credit
turmoil. The Nigeria, Kenya, Botswana, Namibia, Mauritius, Egyptian and South
African markets were down in US dollar terms for the first half of 2008.
Economic growth remains broadly strong, and markets such as Ghana, Ivory Coast,
Morocco, and Tunisia performed well during this period.
While AOP remains cautious towards the full valuation of many shares,
attractive opportunities are available on a selective basis and we are both
encouraged by the Company's developing deal pipeline and working to further its
equity holdings.
On behalf of the Investment Manager, thank you to the shareholders for their
continued support during the first six months of 2008.
Africa Opportunity Partners
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD FROM 1 JANUARY 2008 TO 30 JUNE 2008
(Unaudited)
From From 21 June 2007
1 January 2008 to 31 December
to 30 June 2008 2007
USD USD
Income
Bank interest 616,790 2,088,478
Interest on bonds 2,708,564 357,103
Interest on debentures 325,356 35,755
Unrealised exchange gain on 345,519 -
investment
Unrealised fair value gains 1,538,084 -
on investments
Unrealised gain on fixed 137,615 -
deposit
Realised exchange difference 5,280 -
Amount written off 4,427 -
Dividend income 1,232,947 -
6,914,582 2,481,336
Expenses
Management fee 1,224,839 1,057,414
Brokerage fees and 311,475 45,028
commissions
Custodian, secretarial and 261,091 616,912
administration fees
Audit fees 26,000 34,500
Directors' fees 59,672 54,658
Other operating expenses 62,177 186,027
Loss on sale of bonds 175,163 -
Changes in fair value of - 310,828
financial assets
Unrealised exchange losses on - 345,519
investment
Unrealised exchange loss on 54,773 -
fixed deposit
2,175,190 2,650,886
Net profit/(loss) for the 4,739,392 (169,550)
period
Attributable to:
Equity holders of the Company 4,701,070 (166,028)
Minority interest 38,322 (3,522)
4,739,392 (169,550)
The Company was formed in June 2007 and admitted to the AIM market of the
London Stock Exchange on 24 July 2007. The Company was subsequently also
admitted to the Channel Islands Stock Exchange ("CISX") on 30 November 2007.
Therefore there are no direct comparatives for the equivalent period last year.
Comparative financial information is provided for the period from inception to
the last year end.
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2008
(Unaudited)
30 June 31 December
2008 2007
ASSETS Notes USD USD
Current assets
Held to maturity financial assets 4,730,042 4,535,754
Financial assets at fair value 102,654,956 52,632,051
through profit or loss
Other receivables 8 2,125,459 2,553,189
Cash and cash equivalents 9 16,656,293 61,827,336
Total current assets 126,166,750 121,548,330
Total assets 126,166,750 121,548,330
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 5 119,327,481 120,739,981
Retained earnings 4,535,042 (166,028)
Shareholders' interests 123,862,523 120,573,953
Minority interest in subsidiaries 784,800 746,478
Total equity 124,647,323 121,320,431
Current liabilities
Other payables 10 1,519,427 227,899
Total current liabilities 1,519,427 227,899
Total equity and liabilities 126,166,750 121,548,330
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE PERIOD FROM 1 JANUARY 2008 TO 30 JUNE 2008
The Group
Share Share Retained Total Minority Total Equity
Capital premium earnings Interest
USD USD USD USD USD USD
Issue of shares 1,250,000 123,750,000 - 125,000,000 - 125,000,000
Issue costs (4,260,019) - (4,260,019) - (4,260,019)
Minority share of net - - - - 750,000 750,000
asset
Loss for the period - - (166,028) (166,028) (3,522) (169,550)
At 31 December 2007 1,250,000 119,489,981 (166,028) 120,573,953 746,478 121,320,431
At 1 January 2008 1,250,000 119,489,981 (166,028) 120,573,953 746,478 121,320,431
Minority share of net asset - - - - - -
Gain for the period - - 4,701,070 4,701,070 38,322 4,739,392
Dividend paid - (1,412,500) - (1,412,500) - (1,412,500)
At 30 June 2008 1,250,000 118,077,481 4,535,042 123,862,523 784,800 124,647,323
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD FROM 1 JANUARY 2008 TO 30 JUNE 2008
(Unaudited) For For the period
the period ended ended 31 December
30 June 2008 2007
USD USD
Cash flows from operating
activities
Profit/(loss) before taxation 4,739,392 (169,550)
Adjustment for:
Interest income (3,650,711) (2,481,335)
Changes in fair value on financial (1,538,084) 310,828
assets
Unrealised exchange difference (345,519) 345,519
Dividend income (1,232,947) -
Exchange difference on fixed (82,842) -
deposits
Operating loss before working (2,110,711) (1,994,538)
capital changes
Decrease/(increase) in other 233,442 (2,215,921)
receivables and prepayments
Increase in other payables and 1,291,528 227,899
accrued expenses
Net cash (used in)/generated from (585,741) (3,982,560)
operating activities
Cash flows from investing
activities
Interest income 3,650,711 2,108,313
Purchase of financial assets (51,104,465) (57,788,398)
Dividend received 1,232,947 -
Proceeds from sale of bonds 2,790,000 -
Loss on disposal of bonds 175,163 -
Net cash used in investing (43,255,644) (55,680,085)
activities
Cash flows from financing
activities
Dividend paid (1,412,500) -
Proceeds from issue of shares - 120,739,981
Capital contribution by minority - 750,000
shareholder
Net cash (used in)/generated from (1,412,500) 121,489,981
financing activities
Net (decrease)/ increase in cash (45,253,885) 61,827,336
and cash equivalents
Cash and cash equivalents at the 61,827,336 -
beginning of the period
Exchange difference on fixed 82,842 -
deposits
Cash and cash equivalents at the 16,656,293 61,827,336
end of the period
The notes form an integral part of these consolidated financial statements.
AFRICA OPPORTUNITY FUND LIMITED
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD 1 JANUARY 2008 TO 30 JUNE 2008
1. GENERAL INFORMATION
Africa Opportunity Fund Limited (the "Company") was admitted to trade on the
AIM market of the London Stock Exchange in July 2007. A listing was obtained on
the Channel Islands Stock Exchange ("CISX") in November 2007.
Africa Opportunity Fund Limited is a closed-ended fund incorporated with
limited liability and registered in Cayman Islands under the Companies Law on
21 June 2007 and with registered number MC-188243.
The Fund aims to achieve capital growth and income through investment in value,
arbitrage, and special situations investments in the continent of Africa. The
Company therefore may invest in securities issued by companies domiciled
outside Africa which conduct significant business activities within Africa. The
Company will have the ability to invest in a wide range of asset classes
including real estate interests, equity, quasi-equity or debt instruments and
debt issued by African sovereign states and government entities.
The Company's investment activities are managed by Africa Opportunity Partners
Limited, a limited liability company incorporated in the Cayman Islands and
acting as the investment manager pursuant to an Investment Management Agreement
dated 18 July 2007.
To ensure that investments to be made by the Company, and the returns generated
on the realisation of investments, are both effected in the most tax efficient
manner, the Company has established Africa Opportunity Fund L.P as an exempted
limited partnership in the Cayman Islands. All investments made by the Company
will be made through the limited partnership. The limited partners of the
limited partnership are the Company, AOF CarryCo Limited and Millennium Special
Opportunities Holdings Ltd. The general partner of the limited partnership is
Africa Opportunity Fund (GP) Limited.
Presentation currency
The unaudited interim consolidated financial statements are presented in United
States dollars (or "USD").
Comparatives
The Company was formed in June 2007 and admitted to the AIM market of the
London Stock Exchange on 24 July 2007. The Company was subsequently also
admitted to the Channel Islands Stock Exchange ("CISX") on 30 November 2007.
Therefore there are no direct comparatives for the equivalent period last year.
Comparative financial information is provided for the period from Inception (21
June 2007) through 31 December 2007.
Net Asset Value
Net asset value as at 30 June 2008 is calculated at US$0.991.
Dividend Payments
Dividends in the amount of US$0.0113 per share were paid on 9 April 2008 and 17
July 2008.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these unaudited
interim financial statements are set out below. These policies have been
consistently applied in dealing with items which are considered material in
relation to the consolidated financial statements.
Statement of compliance
The unaudited interim financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS).
Basis of preparation
The unaudited interim financial statements have been prepared under the
historical cost convention, as modified by the fair valuation of financial
assets and financial liabilities at fair value through profit or loss.
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 Group'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 3.
Basis of consolidation
The unaudited interim consolidated financial statements comprise the financial
statements of the Company and its subsidiaries (referred to as the "Group") as
at 30 June 2008.
The financial statements of the subsidiaries are prepared for the same
reporting period as the parent company, using consistent accounting policies.
Minority interests represent the portion of profit or loss and net assets not
held by the Group and are presented separately in the Income Statement and
within equity in the Statement of Changes in Equity from parent shareholders'
equity.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements are measured using the currency of
the primary economic environment in which the entity operates ('the functional
currency'). The Board of Directors considers USD as the currency that most
faithfully represents the economic effects of the underlying transactions,
events and conditions.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the income
statement.
Financial assets
The Group classifies its financial assets in the following categories: at fair
value through profit or loss, loans and receivables and held-to-maturity
financial assets. The classification depends on the purpose for which the
financial assets were acquired. Management determines the classification of its
financial assets at initial recognition.
Financial assets at fair value through profit or loss
Financial assets designated at fair value through profit or loss at inception
are those that are managed and their performance evaluated on a fair value
basis in accordance with the Group's documented investment strategy. The
Group's policy is for the Investment Manager and the partners to evaluate the
information about these financial assets on a fair value basis together with
other related financial information. These financial assets are expected to be
realised within 12 months of the balance sheet date and are therefore
classified under current assets.
Fair value estimation
The fair value of investments that are actively traded in organised financial
markets is determined by reference to quoted market bid prices at the close of
business on the balance sheet date. For investments where there is no active
market, fair value is determined using valuation techniques. Such techniques
include using recent arm's length transactions; reference to the current market
value of another instrument which is substantially the same; discounted cash
flow analysis or other valuation models.
Impairment of financial assets
The Group assesses at each balance sheet date whether a financial asset is
impaired.
Share capital
Ordinary shares are classified as equity.
Revenue recognition
Interest income is recognised using the effective interest method.
Interest on bonds and debentures are recorded when right to receive payment is
established.
Other payables
Other payables are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest method.
Provision
A provision is recognised when and only when there is a present obligation
(legal or constructive) as a result of a past event, and it is probable that an
outflow embodying economic benefits will be required to settle that obligation
and a reliable estimate can be made of the amount of the obligation. Provisions
are reviewed at each balance sheet date and adjusted to reflect the current
best estimate.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank. Cash equivalents are short
term, highly liquid investments that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of change in value.
Related parties
For the purposes of these financial statements, parties are considered to be
related to the Group if they have the ability, directly or indirectly, to
control the Group or exercise significant influence over the Group in making
financial and operating decisions, or vice versa, or where the Fund is subject
to common control or common significant influence. Related parties may be
individuals or other entities.
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Critical accounting judgements in applying the Group's accounting policies
In the process of applying the Group's accounting policies, which are described
in Note 2, the directors have made the following judgements that have the most
effect on the amounts recognised in the financial statements:
(i) 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.
(ii) Fair value of other financial instruments
The fair value of financial instruments that are not traded in an active market
is determined by using valuation techniques. The Group uses its judgement to
select a variety of methods and make assumptions that are mainly based on
market conditions existing at each balance sheet date.
(iii) Impairment of financial assets
The Group follows the guidance of IAS 39 to determine when held-to-maturity
financial assets and receivables are impaired.
4. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
1 January 17 June 2007
2008 through 31
through 30 December 2007
June 2008
USD USD
Designated at fair value
through profit or loss:
At start of period 52,632,051 -
Addition 51,104,465 53,288,398
Disposal (2,790,000) -
At 30 June (at cost) 100,946,516 53,288,398
Changes in fair value of 1,538,084 (310,828)
financial assets
Unrealised gain on exchange 345,519 (345,519)
Loss on disposal of (175,163) -
investments
At 30 June (at fair value) 102,654,956 52,632,051
Analysed as follows:
- Listed equity securities 45,338,089 16,342,572
- Listed debt securities 57,316,867 36,289,479
102,654,956 52,632,051
5. STATED CAPITAL
Number USD
Authorised share capital
Ordinary shares with a par value of US$ 0.01 1,000,000,000 10,000,000
Share capital
125,000,000 Ordinary shares at USD 0.01 1,250,000
Share premium
125,000,000 shares at premium of USD 0.99 net of 118,077,481
issue costs for admission on markets
119,327,481
Share premium and stated capital as at 31 December 2007 were 119,489,981 and
120,739,981, respectively.
6. EARNINGS PER SHARE
Basis earnings per share is calculated by dividing the earnings attributable to
equity holders of the Company by the number of ordinary shares in issue during
the period excluding ordinary shares purchased by the Company and held as
treasury shares.
Earnings attributable to equity holders of USD 4,701,070
the Fund
Number of ordinary share in issue 125,000,000
Basic Earnings per share US cents 3.76
7. TAXATION
Under the current laws of Cayman Islands, there is no income, estate, transfer
sales or other Cayman Islands taxes payable by the Fund. As a result, no
provision for income taxes has been made in the financial statements.
8. OTHER RECEIVABLES
2008 2007
USD USD
Interest income 2,125,459 520,321
receivable
Receivable from third - 1,800,000
party
Due from broker - 232,868
2,125,459 2,553,189
9. CASH AND CASH EQUIVALENTS
For the purposes of the cash flow statement, cash and cash equivalents
comprise the following balances:
2008 2007
USD USD
Fixed deposits held with Barclays 9,240,516 60,562,888
Bank Plc
Cash accounts with Barclays Bank 2,470,550 1,264,448
Plc
Fixed deposits held with WestLB AG 4,945,227 -
16,656,293 61,827,336
The fixed deposit held with WestLB AG carries an interest of 11% per annum and
the maturity date is 25 September 2008.
10. OTHER PAYABLES 2008 2007
USD USD
Accrued expenses 195,203 173,243
Other payables 1,324,224 54,656
1,519,427 227,899
Out of USD 1,324,224, USD 1,302,685 represents liabilities in respect of trades
contracted for as at 30 June 2008.
Electronic copies of the report have been emailed to shareholders. Copies of
the report will be available, free of charge, from the offices of Grant
Thornton UK LLP, 30 Finsbury Square, London EC2P 2YU or the offices of Africa
Opportunity Partners, PO Box 309 GT, Ugland House, South Church Street, George
Town, Grand Cayman, Cayman Islands for a period of 30 days from the date of
this announcement and available from the Company's website,
www.africaopportunityfund.com.
Notes to Editors
Africa Opportunity Fund Limited ("AOF" or the "Company") is a Cayman Islands
incorporated closed-end investment company traded on the AIM market of the
London Stock Exchange and is also listed and traded on the Channel Islands
Stock Exchange ("CISX").
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