Annual Financial Report

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2016

STATEMENT OF CASH FLOWS

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Africa Opportunity Fund Limited

28 April 2017

Africa Opportunity Fund Limited (AOF.L and AOFC.L)

Announcement of Annual Results for the Year ended 31 December 2016

The Board of Africa Opportunity Fund Limited ("AOF", the "Company" or the "Fund") is pleased to announce its audited results for the year ended 31 December 2016. The Company's full annual report and financial statements will shortly be sent to shareholders and will be available to view and download from the Company's website at: www.africaopportunityfund.com.

The following text and financial information does not constitute the Company's annual report but has been extracted from the annual report and financial statements for the year ended 31 December 2016.

The Company

Africa Opportunity Fund Limited is a Cayman Islands incorporated closed-end investment company traded on the Specialist Fund Segment ("SFS") of the London Stock Exchange ("LSE"). AOF's net asset value on 31 December 2016 was US$56.7 million and its market capitalisation was US$44.5 million.

Chairperson's statement

2016 Review

2016 was an eventful and at times challenging year for the Africa Opportunity Fund (the "Fund" or "AOF"), while at the same time 2016 was a decent year for world markets, and a buoyant year for emerging markets.

There were flickering signs of incipient recovery. The first sign was the deepening experience of electoral democracy spreading through the continent, as well as an appreciation of the limits of democracy. Ghana's peaceful eviction of an incumbent President in December 2016, its first since its independence in 1957, was very heartening for the democratic process. Just as noteworthy was the withdrawal of Gambia's former President Jammeh from presidential office in early 2017, after the insistence of Gambia's neighbors in West Africa and the African Union that he respect the democratic will of Gambian people. Nigeria learnt that democracy cannot exempt a country from adjusting to economic realities. Nigeria's new economic plan is a testament to the desire of its leadership to transform Nigeria into an industrial powerhouse. Of course, desire is far from destiny. South Africa, while in the midst of a heated contest to halt the cancer of corruption and raise its national economic growth rate, was skiing downhill into "junk" territory for its sovereign debt obligations. Egypt's devaluation, accompanying attempts to reduce subsidies, was a welcome acceptance of the imperative to increase national savings to fund higher domestic economic growth. There was a common thread in these superficially unrelated developments across Africa. Africans, whether voters, politicians, bureaucrats, entrepreneurs, civil society organizations, or trade unions, were beginning to embrace the need to both increase substantially increase the volume of domestic resources available to their governments and increase their national savings rate. Africans increasingly understood that neither tax collection, nor investment, nor is governmental competence likely to thrive under governments notorious for permitting unpunished corruption by senior state officials. These incidents of 2016 should not overshadow the long-term appeal of Africa.

Africa's population is young and growing when the population of almost every other continent is ageing. The productivity dividend to be harvested in Africa, in the wake of economically competent national leadership subject to the Rule of Law, is huge. Simply stated, as modern conveniences like electricity and superior building materials like cement, jostle with irrigation and other agricultural innovations like hybrid seeds, to become widely available throughout Africa, the cost of living should drop and African industries will have a better chance to become internationally competitive. Some of the Fund's investee companies are agents of these developments. Two examples should suffice to explain AOF's investment philosophy: First is Societe de Caoutchoucs de Grand-Bereby - a rubber and palm oil plantation in Cote d'Ivoire - sells hybrid seeds to small-scale farmers around its plantation to improve their productivity per hectare and shares its agronomic knowledge with them in exchange for buying their higher output to process in its mills. This symbiotic relationship leads to higher capacity utilization of the mills and higher revenues for the small scale farmers. Second is Kenya Power. By buying geothermal power from the Olkaria wells of Kengen located in Kenya's Rift Valley, Kenya Power is assisting Kenya to become a world leader in the generation and distribution of base load renewable energy.

AOF's 2016 strategy focused on expanding exposure to gold producers and upstream oil and gas companies. This expanded exposure was accomplished by buying bonds, writing put options, and acquiring equity exposure to well capitalized issuers such as Kosmos Energy. The Fund continued to accumulate the securities of electric utilities, while also selling short the securities of companies leveraged to the waning fortunes of the heavily indebted among Africa's consumers. Even though the Fund's short selling was a source of loss, as the Rand appreciated throughout 2016, it should be borne in mind that short-selling has been a net source of profits for AOF since inception and also serves to lower the volatility of AOF's returns.

An underlying cause for the poor performance of several African markets was the general pattern of declining African currencies. In 2016 the Egyptian Pound and the Nigerian Naira devalued by 57% and by 37%, against the US dollar, respectively. Liquidity was also an issue as the least liquid African markets ("frontier markets") performed worse than the more liquid markets ("emerging markets"). South Africa and Egypt are the only economies that qualify as "emerging markets" in Africa.

To provide some detail, the net asset value ("NAV") per share of the A shares, including dividends, declined by 10% while the NAV per share of the C shares declined by 4%. After excluding the provision for the Shoprite arbitral award, the NAV of the A shares rose by 3%. Prices of AOF's shares at the end of a volatile year were flat, leading to a narrowing of the discount between the share prices and net asset values. The total return for the A shares was -3%, and for the C shares it was -13%. The respective discounts to net asset value were 31% (excluding the Shoprite provision), 21% (after the Shoprite provision) and 22% for the C shares. As a basis for comparison, South Africa rose 16%, Nigeria fell 36%, Kenya fell 1%, and Egypt fell 26%.

In non-African emerging markets, China fell 15%, Brazil rose 39%, Russia rose 59% and India rose 1%. In developed markets, Japan rose 6%, the US rose 12% and both Europe and the UK were flat¹.

It would be remiss of me not to share my thought on one of AOF's major challenges - namely the Shoprite arbitral award. The Fund bought Shoprite shares on the Lusaka Stock Exchange between 2009 and 2011. Shoprite has a primary listing on the Johannesburg Stock Exchange and secondary listings on the Lusaka Stock Exchange and the Namibia Stock Exchange. Its share price on the Lusaka Stock Exchange was materially lower than its Johannesburg Stock Exchange price. The Fund bought Shoprite shares on the Lusaka exchange in regular market trades only to learn in 2011 that Shoprite itself had been the counterparty on some of those trades and, it unfortunately turned out, had not authorized its agent to enter those trades. Shoprite therefore sought to reverse them. The arbitrator concluded in January 2017 that the Fund did not obtain good title to 637,528 of the 679,145 shares of Shoprite that it believed it had purchased, and in respect of those shares, it was therefore not entitled to dividends that had accrued. The board of the Fund decided unanimously to appeal this award and we hope to have the appeal heard by the end of 2017. AOF is adamant that trades in Shoprite, conducted on an arms-length basis through ordinary anonymous market dealings between brokers and consummated on the floor of a public stock exchange, should not be reversed. Neither the Fund nor its manager had any dealings, whether direct or indirect, with the agent of Shoprite. This saga has consumed a lot of attention since 2011. Nevertheless, we expect to be vindicated and hope that it will come to an end sometime in 2017. In the interim, the board has elected to amend the 2016 financial statements in accordance with the arbitral award.

Application of consolidation exemption under IFRS 10: Consolidated financial statements

In the prior year, the Company did not meet the definition of an investment entity and therefore consolidated financial statements were issued. These were prepared under the historical cost convention except for the financial assets and liabilities at fair value through profit or loss that had been measured at fair value.

For the current year under review, the Company satisfied the criteria of an investment entity under IFRS 10: Consolidated financial statements and as such, no longer consolidates the entities it controls. Instead, its interest in the subsidiaries has been classified as fair value through profit or loss, and measured at fair value. This consolidation exemption has been applied prospectively and more details of this assessment are provided in Note 4 of the financial statements ''significant accounting judgements, estimates and assumptions.'' Please note the Board does not believe these changes make any material difference in the information provided by the financial statements to investors.

2017 Outlook

2017 promises to be an exciting year with investment bargains on offer. Undoubtedly, slow growth and rising inflation will persist. Eastern Africa is suffering from drought. Chinese GDP continues to slacken while global financial conditions continue to tighten as the US Federal Reserve raises interest rates and begins to contemplate reducing the size of its balance sheet. Nigeria continues to maintain a regime of multiple exchange rates while countries like Kenya flirt with fiscal profligacy. Against that familiar list of risks must be offset the opportunities manifest in countries that are deepening their commitment to free markets - Egypt and Ghana come to mind. The carnage as a result of currency collapses has created cheap opportunities for the Fund to exploit. The Fund is designed to weather these difficult times. A closed-end investment company, like AOF, has long-term liabilities, unlike open-ended funds which have the short-term monthly or daily redemption liability. Even if its freedom to invest without focusing on liquidity comes at the price of volatile discounts between net asset value per share and market price per share, its closed-end structure does allow it to consistently invest in high quality issuers.

Concluding Thoughts

For AOF's shareholders, 2016 marked a third consecutive year of losses. These losses must be taken in the context of AOF's long-term orientation. AOF's thesis and strategy of seeking to purchase the strong growth prospects of various African industries at discount valuations remains intact as a compelling means of creating long term value. AOF's portfolio is replete with growing enterprises that are generating profits despite the ever present challenges. The board maintains its belief that the Fund remains an excellent investment vehicle for the long term investor as witnessed by the fact that members of the board have increased their shareholding. We are optimistic that patience may soon be rewarded.

Following the Shoprite award, the Board deems that there is no further impediment to the merging of the C Share and Ordinary Share capital pools and it is therefore expected that a combination of share classes will be completed shortly. The Board believes the combination of the share classes is in the interest of all Shareholders. The benefits include having (i) a better diversified balanced portfolio of attractive African investments; (ii) a reduced total expense ratio from cost savings related to having a single line of stock trading on the London Stock Exchange; and (iii) the potential for enhanced trading liquidity in an enlarged single Ordinary Share class.

The combination of these two lines of stock is in accordance with the C Share Prospectus which estimated that it would take six months to invest the new funds and combine the share classes. The Board extended the conversion period of the C Shares due to the outstanding Shoprite litigation. Since a full provision has been made in the NAV of the A shares following the arbitration award in January there is, in our view, no reason to delay the conversion. In light of AOF's appeal against the award, however, the Board is taking steps, prior to the conversion, to provide A Share holders with a contingent rights instrument that will have value in the event AOF prevails and the right to its Shoprite holding is restored.

In closing, we extend our thanks to our shareholders for their support and partnership and look forward to continuing to work with you in the years to come.

Dr. Myma Belo-Osagie

Chairperson

April 2017

¹ Reference indices are calculated calculated in US Dollars using: Nigeria NSE Allshare Index, South Africa FTSE/JSE Africa Allshare Index, Nairobi NSE Allshare Index, Egypt Hermes Index, Russia MICEX Index, Brazil IBOV Index, the Shanghai Shenzen 300 CSI Index, the India SENSEX Index, the S&P 500, the Stoxx Europe 600 Index, the FTSE 100 and the Nikkei 225.

Manager's report

2016 Review

2016 marked the ninth full year of operation of Africa Opportunity Fund ("the Fund" or "AOF"). It marked also a second full trading year for the "C shares", until they are merged with the original issue of the Fund's shares (hereinafter referred to as "A shares" or "Ordinary shares"). Excluding the provision for Shoprite shares, the A shares had a return of 3%, including dividends, while the C shares had a return of -4%. After incorporating the provision for the January 2017 Shoprite award, the A shares had a return of -10%. The remainder of this report excludes the effect of the Shoprite arbitral award. At year-end, AOF held $43.8 million in equity securities, $16.8 million in debt securities, $1.1 million in cash; and derivative and short sale liabilities equal to $4.8 million. In class terms, the A shares held $28.1 million in equity securities; $9.9 million in debt securities; $-3.4 million in cash; and derivative and short sale liabilities equal to $2.6 million. The C shares held $15.9 million in equity securities; $6.6 million in debt securities; $4.5 million in cash; and derivative and short sale liabilities equal to $2.4 million. The Fund's underlying end-of-year holdings were in Botswana, Cote d'Ivoire, Egypt, Ghana, Kenya, Morocco, Nigeria, Senegal, South Africa, Tanzania, Uganda, Zambia, and Zimbabwe. Our lodestar for measuring the Fund's portfolio is our estimate of its appraisal value per share. That subjective estimate measures the Manager's view of the long-term attractiveness of the portfolio, which we publish quarterly in our newsletters. It was $1.17 per share at the end of 2016 versus $0.98 per share at the end of 2015 for the A Shares The appraisal value for the C shares was $1.07 per share for 2016 vs $1.03 per share at the end of 2015.

AOF's ordinary share NAV, including dividends, rose 3% in 2016. It has declined 24.1% over the last three years and risen 1.3% over the last five years. For comparative perspective, see the table below which highlights the challenges encountered by Africa and certain emerging market investors over recent years.

	Comparative Returns
Index/Security		1 Year	3 Year	5 Year

AOF NAV		3.2%	-24.1%	1.3%
Lyxor Africa ETF		31.3%	-12.8%	-26.9%
DBX MSCI Africa Top 50		8.6%	-18.2%	9.6%
VanEck Vectors Africa		14.2%	-30.9%	-11.9%
Brazil Bovespa		69.1%	-15.1%	-39.1%
Russia Micex		58.2%	-10.6%	4.8%
India Sensex		0.8%	20.1%	45.9%
China CSI 300		-15.3%	31.9%	41.6%
US S&P 500		11.8%	28.1%	93.5%

There were three main reasons for the Fund's 2016 performance. African currency movements continued to be the single most important variable for African investors like the Fund. For example, during the year Egypt's Pound depreciated by 57% and Nigeria's Naira depreciated by 37%. The Naira's devaluation proved to be a high hurdle for Nigerian manufacturing companies seeking to maintain the US Dollar value of their operating cash flows while battling unreliable gas supplies and scarce foreign exchange. For perspective, the Thai Bhat, instigator of the infamous 1997-98 Asian crisis, collapsed by 46% in 1997. Currency movements of this magnitude cause both inflation and real interest rates to explode, they spread economic disruption and, at times, ruin in their wake. A second reason for the Fund's performance was our maintenance of short positions in a year in which valuations in large and liquid markets commanded a premium. Finally, although to a lesser extent, our failure to harvest profits from our gold related holdings when prices were high also contributed.

AOF's portfolio comprises four principal categories: the securities of top members of national or continental African oligopolies; the securities of companies with large assets ignored by capital markets; the securities of high yielding African corporate debt issuers; and, where cost-effective, currency hedges and short positions against over-indebted African consumers. Several AOF companies are national or continental leaders in their industries, whether measured by profitability or balance sheet quality or market position. They lead industries, such as electricity networks, cement production and long-term financial liabilities, which must grow their profits at a higher rate than African GDP growth rates for a youthful and urbanizing Africa to satisfy the urgent demands of its denizens for a better life.

Enterprise Group, a 13.9% holding of the Fund, embodies several characteristics of our preferred investment approach: a long-term concentrated holding in a sector growing at a more rapid rate than an African country's underlying GDP growth rate.

Enterprise Group is a holding company with majority and wholly-owned operating subsidiaries in six Ghanaian fields: a 51% life assurance subsidiary with the largest market share in that field; a 60% property and casualty insurance subsidiary which has the second largest market share; a 60% pensions administrator subsidiary which has the largest market share in Ghana's new private pensions industry; a 100% owned property developer subsidiary; a 60% indirect subsidiary in the funeral services field; and a majority-owned life assurance subsidiary in Gambia. Enterprise's end of 2016 market capitalization was $74.5 million, valuing it on a Price/Book ratio of 1.4x, with a return on shareholders' equity of 16% and a return on assets of 9%. The Fund's US Dollar 1, 3 and 5 year total returns for Enterprise were, respectively, -9%, -18%, and 191%. Are Enterprise's best days behind it? We believe not! Our belief is bolstered by the arrival of several major foreign insurance companies on Ghanaian shores in the last five years: Old Mutual PLC and Prudential PLC from the United Kingdom; Allianz from Germany; Liberty Group, Momentum Group and Hollard Insurance from South Africa. Enterprise's South African partner, Sanlam, is one of the oldest of the new breed of direct foreign insurance investors in Ghana, tracing its roots in Ghana to 2000 when a predecessor firm - African Life, joined forces with the International Finance Corporation and Enterprise Insurance to establish Enterprise Life Assurance Company. Ghana's Cedi has depreciated by 61% since 2011, falling from 1.64 Cedis to the Dollar at the end of 2011 to 4.23 Cedis by December 31, 2016. Despite that steep drop, Enterprise's float (investible funds owed to policyholders before receipt of claims), in US Dollars, has risen from $33 million in 2011 to $67 million in 2014, and $81 million at the end of 2016. Corresponding new written premiums rose from 2011's $50 million to $63 million in 2014, and $80 million for 2016. Indeed, Enterprise's leverage increased by 2.5x while its insurance revenues increased by 60% in Dollars between 2011 and 2016. Thus, its shareholders equity has been flat since 2014 ($55 million in December 2016 versus $56 million in December 2014), but 45% higher than its December 2011 level of $38 million, after paying $14.9 million in dividends since the end of 2011.

How has Enterprise been able to thrive amidst Ghana's macro-economic storms? With some difficulty, it must be acknowledged. Growth in commission expenses - a measure of amounts due to brokers and agents for renewing or selling new policies - climbed by only 2% in 2016 versus 20% in 2015 and 29% in 2014. Enterprise's strength, in the words of Warren Buffet, is it receives premiums upfront and pays claims later, sometimes several years after receipt of those premiums.

"This collect-now, pay-later model leaves P/C companies holding large sums of money that we call 'float'- that will eventually go to others. Meanwhile, insurers get to invest this float for their own benefit. Though individual policies and claims come and go, the amount of float an insurer holds usually remains fairly stable in relation to premium volume."¹ "..how does our float affect intrinsic value? When Berkshire's book value is calculated, the full amount of our float is deducted as a liability, just as if we had to pay it out tomorrow and could not replenish it. But to think of float as a typical liability is a major mistake. It should instead be viewed as a revolving fund. Daily, we pay old claims and related expenses - a huge $27 billion to more than six million claimants in 2016 - and that reduces float. Just as surely, we each day write new business that will soon generate its own claims, adding to float. If our revolving fund is both costless and long-enduring, which I believe it will be, the true value of this liability is dramatically less than the accounting liability. Owing $1 that in effect will never leave the premises - because new business is almost certain to deliver a substitute - is worlds different from owing $1 that will go out of the door tomorrow and not be replaced. The two types of liabilities, however, are treated as equals under GAAP."²

Caution is mandatory in applying the insights of Warren Buffet, expounded for a low-inflation continental American economy, to tiny high-inflation prone Ghana. Furthermore, most of the insurance liabilities of Berkshire Hathaway exist in the property and casualty insurance industry whereas the overwhelming majority of Enterprise's liabilities reside in the life industry. Unlike the float of a short-term property and casualty insurance company primarily composed of claims submitted or incurred in one accounting year, the float for Enterprise's life subsidiary also includes mortality claims to be incurred over several years in the future, extending any accounting profit recognition related to those future claims also for several years in the future. Enterprise, like its South African partner - Sanlam - and European insurance companies, provides actuarial estimates of the chasm between its life fund accounting liabilities and the associated economic liabilities. Forgive an example. Enterprise had a life fund liability in 2015 of 265 million Cedis ($70 million). The economic value of that liability, according to a 2015 actuarial report, called the "embedded value report", was 95 million Cedis ($25 million). Covert profit nestled in the life fund, to be unveiled slowly over several years from Enterprise's existing book of life policies (not future life policies), had a net present value of 170 million Cedis ($45 million). In other words, Enterprise's 2015 book value of 276 million Cedis ($73 million) had a much higher net present value of 446 million Cedis ($117 million), of which 293 million Cedis ($77 million) (rather than the 207 million Cedis ($54 million) of accounting-based shareholders equity stated in its accounts) was attributable to its shareholders.

It must be recognized, of course, that inexpensively priced investible funds are useful to policyholders and shareholders only if wisely invested.On that score, Enterprise's long-term record is solid. Undoubtedly, the eight-fold expansion of its real estate portfolio from $5 million in 2011 to $42 million at a time of over-supply in Ghanaian commercial office space is poorly timed today. But, the Dollar earning capacity of that asset class improves the resilience of Enterprise's balance sheet in Dollar terms, a self-evidently attractive virtue in a country with a sinking currency. Its $183 million portfolio of investment securities, comprised mainly of fixed deposits and Cedi-denominated government securities, are earning a 20% return on capital in a 15% inflation environment to deliver a respectable 5% real return. What of the future? Enterprise has strong prospects for the next decade. Its current valuation ignores existing nascent new activities like pension asset administration and property development, let alone funeral services scheduled to commence in 2017. Ghana's insurance penetration (net written premiums as a percentage of its gross domestic product) is low by comparison to other African countries like Kenya or Botswana. If Ghana's insurance penetration rate expands to match that of Kenya, for example, it could lead to a tripling of the industry's premiums (and, by virtue of solvency rules, a tripling of the industry's book value). If this sounds optimistic, consider that Enterprise's net premium earned has risen from $1.4 million in 1996 to $78 million in 2016.³ An investment in Enterprise is a stake in a high growth industry.

AOF's consumer-facing investments struggled in 2016. As African consumers battled to preserve their real disposable income, so did service providers to those consumers. Sonatel was one such service provider. Sonatel's 5% increase in 2016 revenues was less than its 9% rise in operating expenses, leading to a 4% decline in net income. Overall subscriber numbers dropped 1.4% to 26.2 million subscribers, despite a 52% increase in mobile data users to 6.3 million and a 60% rise in mobile money subscribers to 3.1 million. Senegal and Mali were the principal culprits behind this drop as their subscribers had to re-register their sim cards. Sonatel's fastest growing market - Guinea - bristled with currency and tax thorns. The Guinean franc's 18% devaluation hurt Sonatel's CFA Franc-denominated net profits, as did Guinea's extension of its telephone consumption tax to data and text messages. Sonatel's Mali operations experienced its first full year of a telecommunications network access tax and Senegal cut the termination tariff on incoming calls. The cumulative effect of those currency and tax changes was to limit Sonatel's monthly average revenue per user to $4.8 in 2016 and cut EBITDA by 1.7%. Technological changes, represented by new communication methods like WHATSAPP and Skype, are converting Sonatel's high EBITDA margin businesses like international calls into lower margin data consuming services. Sonatel will have to lower its costs and expenses to suit those growing lower margin services while striving to expand dramatically the propensities of its customers to use those services. In that regard, a value-added service like Orange money registering revenue growth rates of 82%, albeit from a minuscule base, will be key to Sonatel's future. The new Sierra Leone joint venture also adds to Sonatel's prospects of higher profits. Nevertheless, with its 6%-type dividend yield, Sonatel is akin to a convertible bond for the Fund, subject to the proviso that data consumption rises in tandem with per capita income. We expect Sonatel's valuation to improve in tandem with higher incomes in its five markets.

One of AOF's responses to the recent period of declining terms of trade of African countries has been to pivot away from the African consumer. We believe that investment to repair and expand Africa's decrepit infrastructure is more urgent than additional consumption, especially of the debt-fueled variety. Thus, the Fund has been building a portfolio of suppliers to an African infrastructure drive-cement manufacturers, electricity distributors, transmission and generating companies, and water service providers. The Fund's foray into those industries produced frustrating results this year.

AOF made the lion's share of its investment in Dangote Cement ("Dangote") in the second quarter of 2015. We paid an average price of $0.89 per share (176 Nairas per share), according Dangote a market capitalization of $15.1 billion and an enterprise value of $16.0 billion. At the time, its enterprise value had declined by 39% from its June 30, 2014 peak valuation of $26.4 billion (with a corresponding market capitalization of $25.0 billion). Dangote had started its listed existence in 2010 with a market capitalization of $12.6 billion and an enterprise value of $13.3 billion. Therefore, it was painful to contemplate its December 2016 market capitalization of $9.4 billion and related enterprise value of $10.2 billion. As the price per tonne of Nigerian cement has fallen from $167 per tonne in 2010 to $90 per tonne, Dangote's enterprise value per tonne of cement sales has dropped from $1485 to $433, relegating Dangote's unutilized capacity of 19 million tonnes (45% of Dangote's existing capacity) to the worthless bin. That market judgment seems precipitate, harsh, and an invitation to value investors to join Dangote's share register.

The largest cement producer in sub-Saharan Africa, Dangote increased its 2016 sales by 25%, but earned fewer US Dollars in profits than it had in 2015 and endured a 30% decline in the Dollar equivalent of its cash flow from operations. Similarly, another portfolio holding, Kenya Power, sold more of its produce, in the form of electricity, for fewer US Dollars.

Undoubtedly, it was impressive to raise cement volumes in the midst of Nigeria's first recession in more than a quarter of a century. It showed also the potent resilience of private Nigerian construction demand since Nigeria's state governments have little in the way of funds to implement infrastructure plans. Then, in Q4 2016, Dangote demonstrated its ability to preserve its US Dollar EBITDA per tonne of Nigerian cement sales. It reverted to a US Dollar based margin protection strategy manifest in a 9% increase in its US Dollar denominated EBITDA from $226 million in Q4 2015 to $247 million in Q4 2016 in spite of a 37% devaluation of the Naira and a 19% reduction in cement sales from 3.9 million tonnes in Q4 2015 to 3.2 million tonnes in Q4 2016. Quarter-on-quarter, Nigerian EBITDA margin per tonne rose from $56 per tonne to $77 per tonne, even though revenue per tonne was flat at $118 per tonne in Q4 2015 versus $117 in Q4 2016. In fact, Dangote's reduction in operating costs from $62 per tonne to $40 per tonne in Q4 2016, as its kiln fuel mix improved by using locally mined coal, showed its deepening cost advantage. Offsetting somewhat the tantalizing profit prospects from Nigeria's Q4 performance were the anemic results from other African markets. A 17% rise in Q4 2016 sales, over Q4 2015, was totally overshadowed by a collapse in EBITDA margin per tonne from $19 per tonne in Q4 2015 to $5 in Q4 2016. Tanzania was the big culprit as its government compelled Dangote's Tanzanian subsidiary to fire its kilns by the most expensive of all fuels-diesel. Time will tell whether the Tanzanian government's recent change of heart to allow Dangote to use coal is permanent. Fortunately, the prospect of more sales, as Dangote enters the Republic of Congo and Sierra Leone this year, plus the anchor of stronger Nigerian profits, implies materially higher group profits in 2017. In the long run, Dangote's market selection strategy reveals the reasons behind its high profitability. As enunciated in its 2016 annual report, " when we search for new opportunities, we look for several key features in the market: the availability of good limestone from which to make cement; the availability of investment incentives, usually in the form of tax holidays; a large population with a growing economy; access to good transport infrastructure; access to low-cost fuel; a cement deficit; strong commitments to investments in infrastructure and housing; and an industry that is characterized by substantial imports, as well as older, less efficient, more costly, and sub-scale plants."⁴

Two features must be present in Dangote's operations for it to maintain its current status as Africa's most profitable cement producer. The first feature is that it must remain the lowest cost producer on African soil. The second feature is it must raise its capacity utilization ratio from its current 54% to at least 70%. Yet, there can be no doubt that the manner in which Dangote overcame its challenges in Nigeria was very encouraging. Its Nigerian plants were gas-fired, dependent on pipelines. Armed groups in south-east Nigeria waged a successful campaign to block the flow of gas through those pipelines. The cement plants had to build the capacity to use coal, then imported South African coal. Dangote Industries, parent of Dangote, commenced coal mining in Nigeria so Nigerian coal could replace South African coal supplied to those cement plants. It is a notorious fact that Dollars are precious forms of money in Nigeria. How is Dangote widening its access to Dollars? By exporting Nigerian cement to limestone denuded neighbours like Ghana and Cameroon. As a fellow member of the Economic Community of West African States, Nigeria's cement attracts little to no tariffs in Ghana, displacing cement imports from other parts of the world. Ghana pays for all its imports in Dollars. Ghanaian customers get cheaper cement while Dollars that would have been sent outside West Africa circulate in Nigeria to alleviate Dangote's thirst for Dollars. Why do we remain steadfast shareholders of Dangote Cement? It has the newest fleet of cement plants in sub-Saharan Africa, typically also the lowest cost plants in the different African markets. Its Nigerian home market is a citadel of huge profits, evidenced by high EBITDA margins comfortably above 50% at this stage. As the lowest cost manufacturer of cement in Nigeria and other markets, it is able to generate profits in the most intense of price wars. We acknowledge that its cost of production is not the lowest in the world, but it is low enough for Africa. Lucky Cement of Pakistan, for example, produces cement at a cost of $40 per tonne versus Dangote's $52 per tonne in Nigeria. Measured against current market sizes, Dangote Cement appears to have far more capacity than is required today. Measured, though, against the cement demand to be satisfied as Africa's growing population enters urban areas and the deep African infrastructure needs are met, Dangote needs larger and more plants spread across Africa. Consider that Nigeria's per capita cement consumption of 121 kilograms is 42% lower than Ghana's 211 kilograms per capita. Ghana is no China, a country which, in consuming a gargantuan 6.6 billion tonnes of cement between 2011 and 2013, consumed about 1.5x the entire 4.5 billion tonnes of cement the US consumed between 1901 and 2000. Nevertheless, a Nigeria able to match Ghana's current per capita cement consumption would increase its market by 74% to 39.6 million tonnes. African governments are offering tax incentives to encourage private investment in African infrastructure. Dangote has received and continues to receive large tax incentives, lowering significantly its cost of capital. To provide one illustration, if production lines 1 to 4 at the Ibese cement plant (in Ogun State) and production lines 3 and 4 at Obajana (in Kogi State) failed to qualify for Nigeria's 5 year tax holiday, Dangote's 2016 and 2015 tax charges would have increased, respectively, by 64 billion Nairas ($203 million) and 40 billion Nairas ($201 million).

Tax holidays of that magnitude are large interest-free loans in a country suffering from 18%-20% inflation.⁵ Yet, those interest-rate subsidies count for nothing in Dangote's valuation. Put another way, the market does not wish to pay anything for the long-term prospects of the most profitable company in a sub-Saharan African cement industry that is essential to an urbanized Africa.

Another AOF portfolio holding which suffered from the myopia of African capital markets is Kenya Power. It is the sole wholesale bulk electricity purchaser in Kenya, responsible for transmitting and distributing electricity to various customers throughout that country. Kenya Power's ordinary shares inflicted a total unrealized loss of 35% on us in 2016. Its December 2016 market capitalization was $155 million and its enterprise value was $1.21 billion. Total debt, as a percentage of capital, was 63%, EV/EBITDA was 4.5x, Price/Trailing 12 month earnings was 2x and its Price/Book ratio was 0.29x. Kenya Power's return on equity was 12% and return on assets was 3%. By the end of March 2017, as Kenya struggled with its latest drought, Kenya Power's market capitalization had dropped by an additional 21% to $122 million and its enterprise value was $1.19 billion. Kenya Power's December 2016 combined equity and long-term debt value was $1.89 billion while its net property, plant, and equipment was $2.4 billion.

The market is skeptical about Kenya Power because it has invested a large amount of capital without any evident improvement in its profit. Furthermore, its low dividend payout ratio of 13% has led to a dividend yield of 8%, fairly close to the Kenya market's dividend yield of 6%. For comparative perspective, Kenya's 2024 Eurobond trades on a yield to maturity of 6.9% and its Kenyan shilling denominated 2041 government bond has a yield to maturity of 13.4%. Kenya's government has made it obvious, since mid-2016, that it does not want any rise in electricity tariffs before the upcoming August 2017 elections. Kenya is seeking to deliver 100% electricity connectivity to its population by 2020. Consequently, both Kenya Power and Kengen, its largest supplier of electricity, are in the midst of massive capital expenditure programs. Kenya Power's electricity sales have risen from 4,818 gigawatt hours for the 12 month period, ended June 30, 2007, to 7,639 gigawatt hours, for the 12 month period, ended December 2016. In Dollar terms, associated revenues rose from $540 million to $1.077 billion, associated profits rose from $24.5 million to $79.1 million and associated cash from operations vaulted from $17 million to $266 million. Kenya Power's capex levels climbed three-fold from $103 million to $374 million between 2007 and 2016. Based on Kenya's 2016 population estimate of 47 million people and Kenya Power's sales, Kenya's per capita annual electricity consumption is 164 kilowatt hours. Zimbabwe's grossly insufficient total installed electricity capacity, at the end of a drought, for a population of 14 million people, was 1,445 megawatts (capable of meeting a per capita demand of 904 kilowatt hours). Clearly, Kenyans have a long road to walk to decent levels of electricity consumption. Yet, the current judgment of the Kenyan market is an unequivocal affirmation that even the current electricity levels impose excessive burdens on Kenya Power's shareholders. Could that judgment be valid? Yes, if the Kenyan energy regulatory authorities expect Kenya Power's shareholders to accept sub-20% dividend payout ratios while injecting fresh capital into Kenya Power. As Graham and Dodd stated in 1951, "In past years a frequent cause of undervaluation of individual issues could be traced to a relatively low pay-out ratio which kept the market price below the level justified by earnings. In the typical case of this kind, the dividend is ultimately brought in line with earning power and the market price improves accordingly….In periods of sharply rising costs, the normal upward trend of revenue is apt to lag behind the increasing expenses. This does not necessitate, however, an experience of permanently lower earnings. If the return declines to a point where the attraction of capital is endangered, rate increases can be confidently expected."⁶

That Kenya Power's P/E ratio has collapsed from approximately 4x when the Fund invested to under 2x, in spite of flat earnings in US Dollars, is a strong indicator that the market either expects a fresh capital raise and/or seeks higher dividends. Investors in the utility industry worldwide have tended to be attracted by the income generated from its dividend yield. The Graham and Dodd quotation shows that utility shareholders have been insistent on maintaining customary dividend yields, regardless of whether utilities are engaged in maintenance or aggressive construction of new property, plant and equipment. In retrospect, we should have paid more attention to the harmful impact of Kenya Power's low dividend yields.

To finance the large capital expenditure programs of both Kenya Power and Kengen, both majority-owned listed subsidiaries of the Kenyan government, the Kenyan state has showered them with generous tax incentives, recorded in the form of high deferred tax liabilities, and sovereign guarantees to attract US Dollar denominated long-term funding from donors on cheaper terms than those available to even the Kenyan government in its own right. If the financing of power plants and transmission lines is considered to be the product of a tripartite arrangement between utility shareholders, governments, and customers, it is reasonable to assert that the Kenyan government and shareholders of Kenya Power are making substantial contributions. We believe that the Kenyan customer, as did the American customer in the 1940s when the US was expanding its electricity infrastructure, will have to accept higher electricity tariffs to pay for the large Kenyan capital expenditure program. In time, we expect that Kenya Power's dividend payout ratio will rise to match its earning power, leading to a rerating of its shares.

The stocks of the two other utility investments of the Fund delivered pleasing returns in 2016. Copperbelt delivered a total return of 65% in US Dollars and Lydec of Morocco delivered a total return of 31%. Lydec had a 2016 year-end market capitalization of $427 million and an enterprise value of $557 million. It traded on a dividend yield of 4%, a Price/Earnings ratio of 28x, a Price/Book ratio of 2.5x, and a Price/Cash flow from Operations of 6x. A subsidiary of Suez Environment of France, Lydec distributes electricity and water in, and treats the sewage of, Casablanca under a concession. Copperbelt's 2016 year-end market capitalization was $141 million and its enterprise value was $184 million. It traded on a dividend yield of 12%, an EV/EBITDA of 2x, a Price/Cash flow from Operations of 2.4x, a Price/Book ratio of 0.5x, and a Price/Earnings ratio of -1.3x on account of a $151 million impairment write-down of its Nigerian operations paid out as a dividend in specie to its shareholders. Excluding that impairment, its 2016 net profits were $38.6 million and its adjusted Price/Earnings ratio was 4x. Despite an adjusted return on equity of 11%, a dividend yield of 12% and a Price/Earnings ratio of 3.7x signify that Copperbelt was, and remains, a bargain.

At the beginning of 2016, the water levels of Zambia's largest source of power - the Kariba dam - had collapsed to 16% of capacity after two years of drought and another poor rain season. ZESCO, Copperbelt's bulk electricity supplier, had declared force majeure and reduced its electricity sales to Copperbelt and its customers by 30%. Copper, the principal commodity produced by Copperbelt's Zambian customers, was languishing around a post-2010 low of $4,200 per tonne. It was no surprise that electricity sales of 3,521 gigawatt hours in 2016 was 14% and 16% lower than the 4,092 gigawatt hours and 4,208 gigawatt hours of electricity sold, respectively, in 2015 and 2014. The political troubles of the Democratic Republic of Congo - host of the northern limb of the copperbelt - were set to deepen as its President maneuvered to remain in office beyond his final term. Elsewhere in southern Africa, major electricity producers like Eskom faced the prospect of a surfeit of electricity as the South African economy stuttered in stagnation. Copperbelt's other locus of operations - Nigeria - would experience a collapse of its power sector because of the Naira devaluation as well as frequent interruptions in the supply of gas. In short, selling the stock of Copperbelt appeared to be an astute tactical decision. Missing from this tableau is the growing need of mining companies in Katanga for reliable power. Copperbelt, with its new interconnector completed in mid-2016, was a conduit for surplus South African power to be consumed on the Congo side of the copperbelt zone. Copperbelt has become an active participant in the southern Africa regional power markets. Hence, the continuing surge in Copperbelt's power trading revenues and profits. Hence, its five year Zambian EBITDA record of steady growth: $45 million (2012); $47 million (2013); $60 million (2014); $80 million (2015); and $90 million (2016). Then, its directorate dissolved the Nigerian cloud hanging over its Zambian operating results by the expedient of distributing Copperbelt's Nigerian assets to its shareholders. The process will be completed in 2017. The outcome was a rebound in Copperbelt's market capitalization. It is obvious that there is plenty of scope for a higher market capitalization. As an entity able to maintain its Zambian profits in Dollars, despite the 42% depreciation of the Kwacha, Copperbelt can be compared with other US Dollar earning utility network companies. Capitalizing the five year average of that EBITDA ($64 million) by a multiple of 5x (half of the EV/EBITDA multiples applicable to North American utility networks) suggests its enterprise value should be at least $320 million (with a corresponding market capitalization of $277 million). Copperbelt will receive its due respect as a resilient source of rising Dollars in the southern Africa power sector.

AOF's portfolio companies owning large assets ignored by the capital markets are clustered in Africa's commodity export sector. It is time for some comments about the performance of a few of AOF's commodity investments. Commodity prices showed signs of recovery in 2016 as the benefits of curtailed production, terminated exploration, and shuttered wells and mines encountered modest signs of rising demand. For example, gold rose 8%, palm oil rose 29%, crude oil rose 52% and rubber rose 84%. Intriguingly, Bloomberg's trade-weighted US Dollar index, measuring the broad value of the US Dollar against major trading currencies, rose 2.9% in 2016 implying a strengthening global economy, especially from China, which was, probably, the primary source of rising commodity prices.

Among commodities which had experienced sharper 2015 price declines than in 2014, higher 2016 prices were evident in platinum, which rose 1.3%; copper, which rose 17%; manganese, which rose 45%; and iron ore, which rose 69%. Between December 31, 2012 and the end of 2016, the iron ore price dropped by a cumulative 46%, crude oil by 49%, rubber by 37%, platinum by 41%, copper by 31%, gold by 32%, palm oil by 2%, and polished diamond prices by 16%.⁷ The prices of debt issued by AOF's commodity producers rose substantially in sympathy with rising operating cash flows in this early recovery stage, as well as the issuance of fresh equity in favorable equity markets.

Iamgold was one such example as the price of its 6.75% bond maturing in 2020 leapt by 54% from 63% of par at the beginning of the year to 97% of par at the end of 2016. Iamgold had a December 2016 market capitalization of $1.75 billion and an enterprise value of $1.65 billion. 12 months earlier, its market capitalization and enterprise value had been, respectively $560 million and $830 million. Iamgold's 2016 proved and probable reserves were 7.8 million ounces, its measured and indicated resources were 23.3 million ounces and its inferred resources amounted to an additional 6.1 million ounces. Iamgold's 2016 attributable production of 813,000 ounces came from four mines on three continents-Africa, South America, and North America. 55% of Iamgold's output was extracted from the Essakane mine in Burkina Faso and the Sadiola mine in Mali (co-owned with Anglogold Ashanti). The balance was extracted from the Rosebel mine in Suriname and the Westwood mine in Quebec. AOF resisted invitations to tender its bonds during the year, and finally enjoyed the benefits of having them called above par in early April 2017. In deciding whether to sell or hold the Iamgold bonds, we considered the asset coverage provided by the combination of Iamgold's gold reserves and significant cash holdings. We calculated the implied debt per ounce of gold reserves by adding $70 million of current bank debt plus $650 million (face amount) of Iamgold's listed senior unsecured bonds), multiplied by the price of 63% of par, to equal $481 million, then divided by the December 2015 7.69 million proved and probable reserve ounces to get $63/ounce. In our experience this is a very reasonable level of debt, especially since the the $1,057 all-in sustaining costs per ounce was lower than the spot price during the year which was in the range of $1,120.

Clearly the market was worried that Iamgold's mining costs were near to spot gold prices but, but we were always confident that its substantial reserves would provide a means to refinance. Our confidence was further bolstered by the fact that Iamgold held

16 million-odd ounces of measured and indicated resource ounces excluded from its proved and probable reserves, giving AOF a capacious shield of safety in its assessment of Iamgold's bonds.

Furthermore, Iamgold's net debt, as a percentage of its 2015 total capitalization of $2.64 billion was a minuscule 2.8% or $74 million.⁸ Yet, in terms of cash flow there was ample support for the junk rating of Iamgold's bonds. After all, its 2015 net cash flow from operations of $5.2 million was an evanescent 0.6% of revenues, a patently and grossly inadequate quantum of operating cash for a $2 billion+ capital-intensive company. As an aside, Iamgold's corresponding EBITDA was $116 million, exposing how misleading EBITDA can be as a measure of cash flow. Our preference was for Iamgold's management to apply its cash balance to reduce its debt. Management, however, wanted to expand its mines. Iamgold, therefore, took advantage of ascending gold prices in 2016 to issue $200 million of equity to fund those expansion plans. A $284 million growth in 2016 operating cash flow assisted Iamgold to reduce its long-term debt stock through a tender offer at a price of 94 in Q3 2016. The Fund declined that tender offer invitation. The Fund's bonds were called in early April 2017 at a price of 103. Thus, the Fund benefited from the astute ability of Iamgold's treasury team to tap money from capital markets.

The Fund's financial liabilities (written options, equities sold short, contract for differences) generated losses of that were a bit less than $1 million in 2016. Since 2009, the Fund has generated a cumulative gain of $4.1 million from its financial liabilities. Other loss-incurring years were 2009 and 2012. Our investment process, in selecting a short candidate, is the reciprocal of our investment process for buying equity or debt securities:we seek to sell securities trading on high multiples despite declining revenue growth prospects or other marks of harsh shocks.

A cursory look at the Fund's balance sheet, though, reveals a substantial"long" bias since its financial assets are more than 9x its financial liabilities. Partly this is due to the nature of investing, long opportunities are more plentiful than short, but also this is a function of the that fact that most African markets other than South Africa prohibit short selling. Yet, hard as it is to believe, this modest component of the Fund's portfolio has attenuated the Fund's losses from falling African currencies and markets and tempered the volatility of the Fund's performance. There are many investors unimpressed by smaller losses in a bad year. They tend to see Africa as a "high risk, high return" destination for investment funds. Minimizing loss, whether realized or unrealized, in our view, is just as vital to long-term superior returns in Africa as in other continents. Thus, we are grateful for the prime brokerage relationship with Credit Suisse that makes it possible for the Fund to assume these financial liabilities.

Our review of 2016 would be incomplete without an update about the Shoprite arbitration. The arbitrator delivered his award on 27 January 2017. He concluded that the Fund did not obtain good title to 637,528 of the 679,145 shares of Shoprite that it believed it had purchased on the Lusaka Stock Exchange between 2009 and 2011, and in respect of those shares, it was therefore not entitled to dividends that had accrued. Some of the Shoprite shares listed on the Lusaka Stock Exchange were treasury shares of Shoprite sold by its agent in unauthorized trades to the Company and other purchasers. We continue to believe the Fund has full and good title to all the shares in Shoprite which it purchased, primarily because the shares were sold on an internationally recognized stock exchange to numerous parties and the Fund acquired its Shoprite shares via open market purchases in accordance with the rules of that exchange.

We have appealed the arbitral award but as a prudent approach, we have amended the accounts of the fund in line with the award.

We end with a statement of our investing philosophy. The key elements of the investment strategy for the Fund are:

Material discounts to intrinsic value: The Fund invests primarily where and when an investment can be made at a material discount to the Manager's estimated intrinsic value.

Company preference: The Fund prefers companies which demonstrate both high real returns on assets and an earnings yield higher than the yield to maturity of local currency denominated government debt.

Industry focus rather than country focus: The Fund seeks to invest in industries it finds attractive with little regard to national borders.

National resource discounts: The Fund seeks natural resource companies whose market valuations reflect a discount to the spot and future world market prices for those natural resources.

"Turnaround" countries: The African continent is home to a large number of reforming or "turnaround" countries. "Turnaround" countries combine secular political reform with the opening of industries to private sector participation.

Balkanized investment landscape: The Fund seeks to invest in companies with low valuations in relation to peers across the continent and uses an arbitrage approach to provide attractive investment returns.

Point of entry: The Fund seeks the most favorable risk adjusted point of entry into a capital structure, whether through financing a new company or acquiring the debt or listed equity of an established company.

Africa offers several attractive investment opportunities, exemplified by the Fund's own portfolio of undervalued companies. We remain interested in industries which have products in short supply in Africa that rely more on domestic African demand than global growth. We are hunting in those terrains for compelling equity investments. We expect the outcome of our hunt to be a portfolio that delivers both capital growth and income into the future.

Francis Daniels

Africa Opportunity Partners

April 2017

¹ Berkshire Hathaway 2016 Annual Report, p.8

² Ibid, p.9

³ Enterprise Insurance 1996 Annual Report, p 10 and 2016 financial statements of Enterprise Group.

⁴ Dangote Cement PLC 2016 annual report, p.26.

⁵ "An area of some potential controversy is our decision to include the deferred income tax liability as a source of capital-particularly of equity capital. Although it is not "invested" capital in the usual sense, there is little doubt that when Congress creates rules that defer the payment of income taxes to a later date, the effect is the same as giving the company an interest-free loan. The absence of any capital cost (interest) causes the profits of using the assets funded by that loan to flow directly to pre-tax income, so the return on that capital is ultimately reflected as part of the return on equity." Graham and Dodd's Security Analysis, 5th edition (1988), Sidney Cottle, Roger F. Murray, and Frank E. Block, p. 354

⁶ Graham and Dodd, Security Analysis, 3rd edition (1951), p.520.

⁷ Percentage change data cited from Bloomberg Indices: BDXY Index (US Dollar trade-weighted index), CO1 Comdty (Brent Crude Oil), PLPHOAAI Index (Polished diamonds), PAL2MALY Index (Palm Oil), JN1 Comdty (Rubber), XAU Curncy (Gold spot price), XPT Curncy (Platinum spot price), HG1 Comdty (Copper), CCSMMANG Index (Manganese) and MBIO62DA Index (Iron Ore).

⁸Total Capitalization is the sum of Common Stock, Additional Paid in Capital, Preferred Stock, Long term debts, and Minority interests.

Directors' confirmation

The Directors, being the persons responsible within the Company, hereby confirm to the best of their knowledge:

· 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 and the undertakings included in the consolidation taken as a whole; and

· the Chairman's Statement and Investment Manager Report, and Condensed Notes to the Financial Statements include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

STATEMENT OF COMPREHENSIVE LOSS

FOR THE YEAR ENDED 31 DECEMBER 2016

		Company	Group
	Notes	2016	2015
		USD	USD
Income
Interest revenue	6	-	652,135
Dividend revenue		-	1,657,433
Other income		-	30,068
Net foreign exchange gain		-	514,316

		-	2,853,952
Expenses
Net losses on financial assets and liabilities at fair value through profit or loss	8 (b)	-	7,853,063
Net losses on investment in subsidiaries at fair value through profit or loss	7 (a)	2,968,932	-
Management fee	5	1,111,055	1,149,597
Custodian fees, brokerage fees and commissions		-	439,438
Secretarial and administration fees		90,497	215,661
Dividend expense on securities sold not yet purchased		-	167,103
Other operating expenses		158,860	276,742
Directors' fees		179,706	181,250
Audit fees		81,589	94,863

		4,590,639	10,377,717

Operating loss		(4,590,639)	(7,523,765)

Finance costs
Distribution to shareholders	19	-	(912,289)

Loss before tax		(4,590,639)	(8,436,054)

Less withholding tax		-	(77,544)

Decrease in net assets attributable to shareholders from operations/Total Comprehensive loss for the year		(4,590,639)	(8,513,598)


Attibutable to:
Shareholders/Equity holders of the parent			(8,479,767)
Non-controlling interest			(33,831)

			(8,513,598)

		Company	Group
	Notes	2016	2015
		USD	USD
ASSETS
Cash and cash equivalents	10	12,604	6,851,126
Trade and other receivables	9	23,545	780,973
Investment in subsidiaries	7	58,284,216	-
Financial assets at fair value through profit or loss	8(a)	-	60,819,532

Total assets		58,320,365	68,451,631

EQUITY AND LIABILITIES

LIABILITIES
Trade and other payables	12	1,655,591	443,216
Financial liabilities at fair value through profit or loss	8(b)	-	6,446,603

Total liabilities		1,655,591	6,889,819
TOTAL LIABILITIES (excluding net assets attributable to shareholders)		56,664,774	61,561,812

Equity attributable to equity holders of parent
Non-controlling interest	13	-	306,399

Total equity		-	306,399

Net assets attributable to shareholders		56,664,774	61,255,413

Total equity attributable to equity holders of parent and total net assets attributable to shareholders		56,664,774	61,561,812

Net assets attributable to:
- Ordinary shares	11(b)	33,719,116	37,287,967
- Class C shares	11(b)	22,945,658	23,967,446

Net assets attributable to shareholders		56,664,774	61,255,413

Net assets value per share:
- Ordinary shares	11(b)	0.791	0.875
- Class C shares	11(b)	0.786	0.821

STATEMENT OF CHANGES IN NET ASSETS

FOR THE YEAR ENDED 31 DECEMBER 2016

				Net assets
	Number of	Ordinary	Class C	Attributable to
	units	Shares	Shares	shareholders
	USD	USD	USD	USD
Group

At 1 January 2015	71,830,327	43,099,112	26,636,068	69,735,180

OPERATIONS:

Decrease in net assets attributable to shareholders from operations	-	(5,811,145)	(2,668,622)	(8,479,767)

At 31 December 2015	71,830,327	37,287,967	23,967,446	61,255,413

Company
At 1 January 2016	71,830,327	37,287,967	23,967,446	61,255,413

OPERATIONS:

Decrease in net assets attributable to shareholders from operations	-	(3,568,851)	(1,021,788)	(4,590,639)

At 31 December 2016	71,830,327	33,719,116	22,945,658	56,664,774

FOR THE YEAR ENDED 31 DECEMBER 2016

		Company	Group
	Notes	2016	2015
		USD	USD
Operating activities

Decrease in net assets attributable to shareholders from operations/Total Comprehensive Income for the year		(4,590,639)	(8,513,598)

Adjustment for items separately disclosed:
Dividend expense		-	912,289

Adjustments for non-cash items:

Unrealised loss on financial assets at fair value through profit or loss	8(a)	-	7,433,641
Realised loss on sale of financial assets at fair value through profit or loss	8(a)	-	2,651,638
Unrealised gain on financial liabilities held for trading	8(b)	-	(2,905,223)
Realised loss on financial liabilities held for trading	8(b)	-	673,007
Effect of exchange rate on cash and cash equivalents		-	(514,316)
Unrealised loss on investment in subsidiaries at fair value through profit or loss		2,968,932	-

Cash used in operating activities		(1,621,707)	(262,562)

Net changes in operating assets and liabilities

Purchase of financial assets at fair value through profit or loss		-	(16,586,148)
Proceeds on disposal of financial assets at fair value through profit or loss		-	9,504,026
Derecognition of financial liabilities held for trading		-	(7,888,534)
Purchase of financial liabilities held for trading		-	5,066,259
Decrease in trade and other receivables		416,553	255,829
Increase in trade and other payables		1,215,465	311,749

Net cash used in operating activities		1,632,018	(9,336,819)

Financing activities
Proceeds from issue of redeemable shares		-	-
Dividend paid		-	(912,289)

Net cash flow used in financing activities		-	(912,289)

Net decrease in cash and cash equivalents		10,311	(10,511,670)

Effect of exchange rate on cash and cash equivalents		-	514,316

Cash and cash equivalents at the start of the year		2,293	16,848,480

Cash and cash equivalents at the end of the year		12,604	6,851,126

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

1. GENERAL INFORMATION

Africa Opportunity Fund Limited (the "Company") was launched with an Alternative Market Listing "AIM" in July 2007 and moved to the Specialist Funds Segment "SFS" in April 2014.

Africa Opportunity Fund Limited is a closed-ended fund incorporated with limited liability and registered in Cayman Islands under the Companies Law on 21 June 2007, with registered number MC-188243.

The Company aims to achieve capital growth and income through investment in value, arbitrage, and special situations investments in the continent of Africa. The Company may therefore invest in securities issued by companies domiciled outside Africa which conduct significant business activities within Africa. The Company has the ability to invest in a wide range of asset classes including real estate interests, equity, quasi-equity or debt instruments and debt issued by African sovereign states and government entities.

The Company's investment activities are managed by Africa Opportunity Partners Limited, a limited liability company incorporated in the Cayman Islands and acting as the investment manager pursuant to an Amended and Restated Investment Management Agreement dated 12 February 2014.

To ensure that investments to be made by the Company and the returns generated on the realisation of investments are both effected in the most tax efficient manner, the Company has established Africa Opportunity Fund L.P. as an exempted limited partnership in the Cayman Islands. All investments made by the Company are made through the limited partnership. The limited partners of the limited partnership are the Company and AOF CarryCo Limited. The general partner of the limited partnership is Africa Opportunity Fund (GP) Limited.

The financial statements for the Company for the year ended 31 December 2016 were authorised for issue in accordance with a resolution of the Board of Directors on 28 April 2017.

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 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 financial statements.

Statement of compliance

The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Basis of preparation

In the prior year, the Company did not meet the definition of an investment entity and therefore, consolidated financial statements were issued. These were prepared under the historical cost convention except for the financial assets and liabilities at fair value through profit or loss that had been measured at fair value.

The Company satisfied the criteria of an investment entity under IFRS 10: Consolidated financial statements for the current year under review and as such, no longer consolidates the entities it controls. Instead, its interest in the subsidiaries has been classified as fair value through profit or loss, and measured at fair value as. This consolidation exemption has been applied prospectively and more details of this assessment are provided in Note 4 "significant accounting judgements, estimates and assumptions."

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Board of Directors to exercise its judgement in the process of applying the Company's 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 financial statements are disclosed in Note 4.

The Company and Group present their statement of financial position in order of liquidity. An analysis regarding recovery within 12 months (current) and more than 12 months after the reporting date (non-current) is presented in Note 17.

Basis of consolidation (prior year)

The consolidated financial statements comprise the financial statements of the Group as at 31 December 2015.

In 2015 and prior, subsidiaries were fully consolidated from the date of acquisition, being the date on which the Group obtained control and continued to be consolidated until the date that such control ceased.

The financial statements of the subsidiaries were prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, income and expenses and gains and losses resulting from intra-group transactions were eliminated in full.

Non-controlling interests represented the portion of profit or loss and net assets not held by the Group and were presented separately in the statement of comprehensive income and within equity in the statement of changes in equity from parent shareholders'.

Foreign currency translation

(i) Functional and presentation currency

The Company's and Group's financial statements are presented in USD which is their functional currency, being the currency of the primary economic environment in which both the Company and the Group operates. The Company and 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 Company and of the entities within the Group is USD. The Company and the Group chose USD as the presentation currency.

(ii) Transactions and balances

Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of the exchange ruling at the reporting date. All differences are taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

Financial instruments

(i) Classification

The Company and 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 at the master fund level.

Financial assets designated at fair value through profit or loss upon initial recognition

These include equity securities and debt instruments that are not held for trading. 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 Company and the Group, as set out in each of their offering documents. The financial information about the financial assets is provided internally on that basis to the Investment Manager and to the Board of Directors.

Investment in subsidiaries

In accordance with the exception under IFRS 10 Consolidated Financial Statements, the Fund does not consolidate subsidiaries in the financial statements. Investments in subsidiaries are accounted for as financial instruments at fair value through profit or loss.

Derivatives - Options

Derivatives are classified as held for trading (and hence measured at fair value through profit or loss), unless they are designated as effective hedging instruments (however the Group does not apply any hedge accounting). The master fund's derivatives relate to option contracts.

Options are contractual agreements that convey the right, but not the obligation, for the purchaser either to buy or sell a specific amount of a financial instrument at a fixed price, either at a fixed future date or at any time within a specified period.

The master fund purchases and sells put and call options through regulated exchanges and OTC markets. Options purchased by the master fund provide the master fund with the opportunity to purchase (call options) or sell (put options) the underlying asset at an agreed-upon value either on or before the expiration of the option. The master fund is exposed to credit risk on purchased options only to the extent of their carrying amount, which is their fair value.

Options written by the master fund provide the purchaser the opportunity to purchase from or sell to the Company the underlying asset at an agreed-upon value either on or before the expiration of the option.

Options are generally settled on a net basis.

Contracts for difference

Contracts for difference are derivatives that obligate either the buyer or the seller to pay to the other the difference between the asset's current price and its price at the time of the contract's usage. Unrealized gains or losses are recorded at the end of each time period that passes without the CFDs being used. Once the CFDs are used, the difference between the opening position and the closing position is recorded as either revenue or a loss depending on whether the business was the buyer or the seller.

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 Company's and 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 Company and the Group include in this category amounts relating to trade and other payables and dividend payable.

(ii) Recognition

The Company and the Group recognise a financial asset or a financial liability when, and only when, it becomes a party to the contractual provisions of the instrument.

Purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place are recognised directly on the trade date, i.e., the date that the master fund commits to purchase or sell the asset.

(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 Company and the Group measure 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 Company and the Group estimate 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 Company or the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and

Either (a) the Company or the Group have transferred substantially all the risks and rewards of the asset, or (b) the Company and the Group have neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Company and the Group have transferred its rights to receive cash flows from an asset (or has entered into a pass-through arrangement), and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Company's and the Group's continuing involvement in the asset.

The Company and the Group derecognise a financial liability when the obligation under the liability is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss.

Determination of fair value

The Company measures it investments in subsidiaries at fair value through profit or loss, and the master fund measures its investments in financial instruments, such as equities, debentures and other interest bearing investments and derivatives, at fair value at each reporting date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measured is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to the Company and the Group. The fair value for financial instruments traded in active markets at the reporting date is based on their quoted price without any deduction for transaction costs.

For all other financial instruments not traded in an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include: using recent arm's length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible. An analysis of fair values of financial instruments and further details as to how they are measured is provided in Note 7.

The Company and the Group use 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 Company and the Group assess 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 Company and the Group.

Interest revenue on impaired financial assets is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Net gain or loss on financial assets and liabilities at fair value through profit or loss

This item includes changes in the fair value of financial assets and liabilities held for trading or designated upon initial recognition as 'at fair value through profit or loss' and excludes interest and dividend income and expenses.

Unrealised gains and losses comprise changes in the fair value of financial instruments for the year and from reversal of prior year'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 as the master fund level. 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.

(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 Company's and 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.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

3. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The accounting policies adopted are consistent with those of the previous financial year except for the following new and amended IFRS and IFRIC interpretations adopted in the year commencing 1 January 2016.

The following new standards and amendments became effective as of 1 January 2016:

• IFRS 14 Regulatory Deferral Accounts

• Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests

• Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation

• Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants

• Amendments to IAS 27: Equity Method in Separate Financial Statements

• Annual Improvements Cycle - 2012-2014 (Amendments to IFRS 5, IFRS 7, IAS 19 & IAS 34)

• Amendments to IAS 1 Disclosure Initiative

IFRS 14 Regulatory Deferral Accounts

IFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first-time adoption of IFRS. Entities that adopt IFRS 14 must present the regulatory deferral accounts as separate line items on the statement of financial position and present movements in these account balances as separate line items in the statement of profit or loss and OCI. The standard requires disclosure of the nature of, and risks associated with, the entity's rate-regulation and the effects of that rate-regulation on its financial statements. Since the Company is an existing IFRS preparer and is not involved in any rate-regulated activities, this standard does not apply.

IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests

The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation, in which the activity of the joint operation constitutes a business, must apply the relevant IFRS 3 Business Combinations principles for business combination accounting. The amendments also clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation if joint control is retained. In addition, a scope exclusion has been added to IFRS 11 to specify that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the same ultimate controlling party.

The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint operation and are applied prospectively.

These amendments do not have any impact on the Company as there has been no interest acquired in a joint operation during the period.

IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation

The amendments clarify the principle in IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is a part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets.

The amendments do not have any impact on the Company, given that it does not hold any property, plant and equipment nor any intangible asset.

IAS 16 and IAS 41 Agriculture: Bearer Plants

The amendments change the accounting requirements for biological assets that meet the definition of bearer plants. Under the amendments, biological assets that meet the definition of bearer plants will no longer be within the scope of IAS 41 Agriculture. Instead, IAS 16 will apply. After initial recognition, bearer plants will be measured under IAS 16 at accumulated cost (before maturity) and using either the cost model or revaluation model (after maturity). The amendments also require that produce that grows on bearer plants will remain in the scope of IAS 41 measured at fair value less costs to sell. For government grants related to bearer plants, IAS 20 Accounting for Government Grants and Disclosure of Government Assistance will apply. The amendments are applied retrospectively and do not have any impact on the Company as it does not have any bearer plants.

IAS 27: Equity Method in Separate Financial Statements

The amendments 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 their separate financial statements have to apply that change retrospectively.

These amendments do not have any impact on the Company's financial statements.

Annual Improvements 2012-2014 Cycle

These improvements include:

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Changes in method of disposal

Assets (or disposal groups) are generally disposed of either through sale or distribution to the owners. The amendment clarifies that changing from one of these disposal methods to the other would not be considered a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of the application of the requirements in IFRS 5. This amendment is applied prospectively.

IFRS 7 Financial Instruments: Disclosures

(i) Servicing contracts

The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and the arrangement against the guidance for continuing involvement in IFRS 7 in order to assess whether the disclosures are required. The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. However, the required disclosures need not be provided for any period beginning before the annual period in which the entity first applies the amendments.

(ii) Applicability of the amendments to IFRS 7 to condensed interim financial statements

The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report. This amendment is applied retrospectively

IAS 19 Employee Benefits

Discount rate: regional market issue

The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. This amendment is applied prospectively.

IAS 34 Interim Financial Reporting

The amendment clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report (e.g., in the management commentary or risk report).

The other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. This amendment is applied retrospectively.

These amendments do not have any impact on the Company.

Amendments to IAS 1 Disclosure Initiative

The amendments to IAS 1 clarify, rather than significantly change, existing IAS 1 requirements. The amendments clarify:

· The materiality requirements in IAS 1

· That specific line items in the statement(s) of profit or loss and other comprehensive income (OCI) and the statement of financial position may be disaggregated

· That entities have flexibility as to the order in which they present the notes to financial statements

· That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and OCI.

These amendments do not have any impact on the Company.

3.1 STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company's financial statements are disclosed below. They are mandatory for accounting periods beginning on the specified dates, but the Company has not early adopted them:

	Effective for accounting period beginning on or after

IFRS 9 Financial Instruments - Classification and measurement of financial assets, Accounting for financial liabilities and derecognition	1 January 2018
Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and IAS 28)	Effective date deferred indefinitely
IFRS 15 Revenue from Contracts with Customers	1 January 2018
IFRS 16 Leases	1 January 2019
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)	1 January 2017
Disclosure initiative (Amendments to IAS 7)	1 January 2017
Clarification to IFRS 15 'Revenue from contracts with customers'	1 January 2018
Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)	1 January 2018

Where the standards and interpretations may have an impact at a future date, they have been discussed below:

IFRS 9 Financial Instruments - Classification and measurement of financial assets, Accounting for financial liabilities and derecognition - 1 January 2018

IFRS 9 introduces new requirements for classifying and measuring financial assets, as follows:

Classification and measurement of financial assets

All financial assets are measured at fair value on initial recognition, adjusted for transaction costs if the instrument is not accounted for at fair value through profit or loss (FVTPL). Debt instruments are subsequently measured at FVTPL, amortised cost or fair value through other comprehensive income (FVOCI), on the basis of their contractual cash flows and the business model under which the debt instruments are held. There is a fair value option (FVO) that allows financial assets on initial recognition to be designated as FVTPL if that eliminates or significantly reduces an accounting mismatch. Equity instruments are generally measured at FVTPL. However, entities have an irrevocable option on an instrument-by-instrument basis to present changes in the fair value of non-trading instruments in other comprehensive income (OCI) (without subsequent reclassification to profit or loss).

Classification and measurement of financial liabilities

For financial liabilities designated as FVTPL using the FVO, the amount of change in the fair value of such financial liabilities that is attributable to changes in credit risk must be presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless presentation of the fair value change in respect of the liability's credit risk in OCI would create or enlarge an accounting mismatch in profit or loss. All other IAS 39 Financial Instruments: Recognition and Measurement classification and measurement requirements for financial liabilities have been carried forward into IFRS 9, including the embedded derivative separation rules and the criteria for using the FVO.

Impairment

The impairment requirements are based on an expected credit loss (ECL) model that replaces the IAS 39 incurred loss model. The ECL model applies to: debt instruments accounted for at amortised cost or at FVOCI; most loan commitments; financial guarantee contracts; contract assets under IFRS 15; and lease receivables under IAS 17 Leases. Entities are generally required to recognise either 12-months' or lifetime ECL, depending on whether there has been a significant increase in credit risk since initial recognition (or when the commitment or guarantee was entered into). For some trade receivables, the simplified approach may be applied whereby the lifetime expected credit losses are always recognised.

Hedge accounting

Hedge effectiveness testing is prospective, without the 80% to 125% bright line test in IAS 39, and, depending on the hedge complexity, can be qualitative. A risk component of a financial or non-financial instrument may be designated as the hedged item if the risk component is separately identifiable and reliably measureable. The time value of an option, any forward element of a forward contract and any foreign currency basis spread, can be excluded from the designation as the hedging instrument and accounted for as costs of hedging. More designations of groups of items as the hedged item are possible, including layer designations and some net positions.

The application of IFRS 9 may change the measurement and presentation of many financial instruments, depending on their contractual cash flows and business model under which they are held. The impairment requirements will generally result in earlier recognition of credit losses. The new hedging model may lead to more economic hedging strategies meeting the requirements for hedge accounting. This will however not have any impact on the financial statements of the Company.

Having completed its initial assessment, the Company has concluded that:

· Financial assets and liabilities held for trading and financial assets and liabilities designated at FVPL are expected to continue to be measured at FVPL.

· The new expected credit loss impairment model will not have any significant impact on the Company as most of its investments (both equity and debts) are quoted in an active market.

Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and IAS 28) - effective date deferred indefinitely

This amendment to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011) was made to clarify the treatment of the sale or contribution of assets from an investor to its associate or joint venture, as follows:

· it requires 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 3 Business Combinations); and

· it requires 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 directors will assess the impact of the amendments when they become effective.

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.

These amendments are not expected to have any impact on the Company.

IFRS 16 Leases - effective 1 January 2019

IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees - leases of 'low-value' assets and short-term leases. At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

This standard will not have an impact on the Company as it does not have any lease.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under IFRS 16 is substantially unchanged from today's accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases. IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17.

IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard's transition provisions permit certain reliefs.

These amendments are not expected to have any impact on the Company.

Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12) - effective 1 January 2017

Amendments to IAS 12 Income Taxes have been made to clarify the following aspects:

· Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use.

· The carrying amount of an asset does not limit the estimation of probable future taxable profits.

· Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences.

· An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.

These amendments are not expected to have any impact on the Company.

Disclosure Initiative (amendments to IAS 7) - effective 1 January 2017

Amendments to IAS 7 Statement of Cash Flows were made to clarify that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities.

Clarifications to IFRS 15 'Revenue from Contracts with Customers' - effective 1 January 2018

IASB amended IFRS 15 'Revenue from Contracts with Customers' to clarify three aspects of the standard (identifying performance obligations, principal versus agent considerations, and licensing) and to provide some transition relief for modified contracts and completed contracts. No early adoption of these standards and interpretations is intended by the Board of directors.

IFRS 2 Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2

The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled.

On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after 1 January 2018, with early application permitted.

These amendments are not expected to have any impact on the Company.

4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Company's and 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 Company's and the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

Going concern

The Company's management has made an assessment of the Company's ability to continue as a going concern and is satisfied that the Company has the resources to continue in business for the foreseeable future.

Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Company's ability to continue as a going concern. Therefore, the financial statements continue to be prepared on the going concern basis.

Determination of functional currency

The determination of the functional currency of the Company and 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 and the Group is the United States Dollar.

Assessment for an investment entity

An investment entity is an entity that:

(a) Obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services;

(b) Commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and

An investment entity must demonstrate that fair value is the primary measurement attribute used. The fair value information must be used internally by key management personnel and must be provided to the entity's investors. In order to meet this requirement, an investment entity would:

· Elect to account for investment property using the fair value model in IAS 40 Investment Property

· Elect the exemption from applying the equity method in IAS 28 for investments in associates and joint ventures, and

· Measure financial assets at fair value in accordance with IAS 39.

In addition an investment entity should consider whether it has the following typical characteristics:

· It has more than one investment, to diversify the risk portfolio and maximise returns;

· It has multiple investors, who pool their funds to maximise investment opportunities;

· It has investors that are not related parties of the entity; and

· It has ownership interests in the form of equity or similar interests.

The Company has several investors and the activities are managed by Africa Opportunity Partners Limited with the aim to achieve capital growth and income for its shareholders. However, in the prior year, the Company did not meet the definition of an investment entity as it did not measure and evaluate the performance of substantially all of its investments on a fair value basis; for example, the Company's investment in Triton Resources Inc. had been recorded at cost at year end as their fair valued cannot be measured reliably (Refer to Note 7). As such, there was a requirement to consolidate all subsidiaries into Africa Opportunity Fund Limited.

In the prior year, the Company did not meet the definition of an investment entity and therefore, consolidated financial statements were issued as one of the master fund's investments had been measured at cost.

In current year, the Board concluded that the Company meets the definition of an investment entity as all investments have been measured on a fair value basis. IFRS 10 allows the application of this change to be made prospectively in the period in which the definition is met. IFRS 10 Consolidated Financial Statements provides 'investment entities' an exemption from the consolidation of particular subsidiaries and instead require that an investment entity measures the investment in each eligible subsidiary at fair value through profit or loss in accordance with IAS 39 Financial Instruments: Recognition and Measurement.

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 Company and 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 Company and the Group. Such changes are reflected in the assumptions when they occur. When the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using a variety of valuation techniques that include the use of mathematical models.

Fair value of financial instruments

The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. The estimates include considerations of liquidity and model inputs such as credit risk (both own and counterparty's), correlation and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments in the statement of financial position and the level where the instruments are disclosed in the fair value hierarchy. The models are calibrated regularly and tested for validity using prices from any observable current market transactions in the same instrument (without modification or repackaging) or based on any available observable market data. An analysis of fair values of financial instruments and further details as to how they are measured is provided in Note 7.

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 7. Assessing the significance of a particular input requires judgement, considering factors specific to the asset or liability. To assess the significance of a particular input to the entire measurement, the Group performs sensitivity analysis or stress testing techniques.

5. AGREEMENTS

Investment Management Agreement

Following the Admission of Ordinary Shares and C Shares to the Specialist Fund Market (SFM) 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 SFS 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 financial year under review amounts to USD 1,111,055 (2015: USD 1,149,597) and the performance fees for the financial year under review was nil (2015: nil).

Administrative Agreement

Prior to 01 September 2015, International Proximity provided various administrative services to the Company and received an aggregate fee of USD 61,778 for services rendered in 2015. On 01 September 2015, SS&C Technologies was appointed as the new administrator and received an aggregate fee of USD 23,425 for services rendered in 2015. For the year ended 31 December 2016, administrative fees totalled USD 90,497 (This is classified under "Secretarial and administration fees'' in the statement of comprehensive income.

Custodian Agreement

A Custodian Agreement has been entered into by the master fund and Standard Chartered Bank (Mauritius) Ltd, whereby Standard Chartered Bank (Mauritius) Ltd would provide custodian services to the master fund and would be entitled to a custody fee of between 18 and 25 basis points per annum of the value of the assets held by the custodian and a tariff of between 10 and 45 basis points per annum of the value of assets held by the custodian. The custodian fees for the financial year under review amounts to USD 128,334 (2015: USD 141,025). In prior year, the custodian fees were included in 'Custodian fees, brokerage fees and commissions' in the Group's statement of comprehensive income. In current year, the custodian fees has been expensed at the master fund level and has been included in the NAV of the subsidiary.

Prime Brokerage Agreement

Under the Prime Brokerage Agreement, the master fund appointed Credit Suisse Securities (USA) LLC as its prime broker for the purpose of carrying out the master fund's instructions with respect to the purchase, sale and settlement of securities. The fees charged for the financial year under review amounts to USD 297,229 (2015: 223,720). In prior year, the brokerage fees were included in 'Custodian fees, brokerage fees and commissions' in the Group's statement of comprehensive income. In current year, the custodian fees has been expensed at the master fund level and has been included in the NAV of the subsidiary.

Broker Agreement

Under the Broker Agreement, during 2016, the master fund appointed Liberum, a company incorporated in England to act as Broker to the Group, replacing LCF Edmond Rothschild Securities Limited ("LCFR"). Under the Broker Agreement, the master fund paid to Liberum a fee of USD 16,173 and paid to LCFR a fee of USD 35,769 (2015: USD 29,547) for the financial year under review. The broker fee is payable in advance at six month intervals. In prior year, the broker fees were included in 'Custodian fees, brokerage fees and commissions' in the Group's statement of comprehensive income. In current year, the broker fees has been expensed at the master fund level and has been included in the NAV of the subsidiary.

6. INTEREST REVENUE

	Company	Group
	2016	2015
	USD	USD

Interest on deposits	-	41,499
Interest on bonds	-	610,636

Total interest revenue	-	652,135

7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

7(a). Investment in subsidiaries at fair value

		2016
		USD

Investment in Africa Opportunity Fund (GP) Limited		145,404
Investment in Africa Opportunity Fund L.P.		58,138,812

Total investment in subsidiaries at fair value		58,284,216

Fair value at 01 January		61,253,148
Net loss on financial assets at fair value through profit or loss		(2,968,932)

Fair value at 31 December		58,284,216

The Company has established Africa Opportunity Fund L.P., an exempted limited partnership in the Cayman Islands to ensure that the investments made and returns generated on the realisation of the investments made and returns generated on the realisation of the investments are both effected in the most tax efficient manner. All investments made by the Company are made through the limited partner which acts as the master fund. The limited partners of the limited partnership are the Company (99.09%) and AOF CarryCo Limited (0.67%). The general partner of the limited partnership is Africa Opportunity Fund (GP) Limited (0.24%). Africa Opportunity Fund Limited hold 100% of the Africa Opportunity Fund (GP) Limited.

7(b). Fair value hierarchy

The Company uses the following hierarchy for determining and disclosing the fair value of the financial instruments by valuation technique:

Level 1: quoted (unadjusted) market prices in active markets for identical assets and liabilities.

Level 2: valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3: valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

Company

Investment in subsidiaries at fair value through profit or loss:

	31 December
	2016	Level 1	Level 2	Level 3
COMPANY	USD	USD	USD	USD

Investment in subsidiaries	58,284,216	-	58,284,216	-

MASTER FUND

Equities	43,893,055	41,091,429	1,950,376	851,250
Debt securities	16,715,885	16,465,885	-	250,000
Contract for Difference	113,459	-	113,459	-

	60,722,399	57,557,314	2,063,835	1,101,250
Financial liabilities at fair value through profit or loss

Shortsellings	4,518,185	4,518,185	-	-
Written put options	415,250	415,250	-	-
Contract for Difference	30,672	-	30,672	-

	4,964,107	4,933,435	30,672	-

The valuation technique of the investment in subsidiaries at Company level is as follow:

The Company's investment manager considers the valuation techniques and inputs used in valuing these funds as part of its due diligence, to ensure they are reasonable and appropriate and therefore the NAV of these funds may be used as an input into measuring their fair value. In measuring this fair value, the NAV of the funds is adjusted, as necessary, to reflect restrictions on redemptions, future commitments, and other specific factors of the fund and fund manager. In measuring fair value, consideration is also paid to any transactions in the shares of the fund. Given that there has been no such adjustments made to the NAV of the underlying subsidiaries and given the simple structure of the subsidiaries investing over 98% in quoted funds, the Company classifies these investment in subsidiaries as Level 2.

The valuation techniques of the investments at master fund level are as follows:

Debt securities

The investment manager calculates an average price from various quotes received from brokers, who makes use of observable data in order to determine the fair value, as it represents the most appropriate estimate of fair value of the debt securities.

Contract for difference (CFD)

The prices for CFD are calculated based on average prices from various quotes received from brokers.

Unlisted debt and equity investments

In 2014, Triton Resources Inc. underwent a reorganisation that resulted in the Group owning one million Triton Class A preferred shares valued at USD1.00 each and a promissory note in the amount of US$250,000. In 2014 a significant portion of the balance sheet related to Goodwill as a result of the acquisition/reorganisation event. The Group subscribed for another promissory note in the amount of US$100,000 in 2016.

Triton concluded a binding agreement in 2016 to sell its African underwater logging harvesting assets and its lead investor has executed a letter of intent for the sale of Triton itself. The Investment Manager, based on its own sensitivity analysis, and in part due to these third party contemporaneous recognitions of Triton's balance sheet and off-balance sheet assets, believed that its Triton investment could not be measured reliably at that time. The range of fair values measurements was significant and the probabilities of the various estimates were difficult to assess; hence due to the "hard to value" nature of the off-balance sheet assets, and the difficulty in valuing the investment by observable measures, the Investment Manager has determined these investments to be classified as Level 3 assets for valuation purposes. Due to the ongoing nature of the sale negotiations, the Investment Manager deemed it prudent, at the end of 2016, to apply a 15% discount (or reserve) to the original subscription cost of the Triton Class A preferred shares. That reserve was calculated on the basis of a reduction in the present value of the Triton sales proceeds arising from a hypothetical 5 month delay in the receipt of those proceeds, and discounting those proceeds at an annualized discount rate of 30%. Additional material factors considered in determining this reserve were the existing pattern in the receipt of payments from the purchasers, the prior receipt of non-refundable amounts from the purchasers, the current state of negotiations and the probabilities of various outcomes.

	2016	2015
	USD	USD

Investment in Triton	1,101,250	1,251,250

Financial assets at fair value through profit or loss	2016	2015
	USD	USD

At 1 January	1,251,250	1,251,250
Total loss in profit or loss	(150,000)	-

At 31 December	1,101,250	1,251,250

Total loss included in the profit or loss of Africa Opportunity Fund L.P. for asset held at the end of the reporting period	(150,000)	-

Investment in Shoprite Holdings (SHP ZL)

The Company (through its subsidiary Africa Opportunity Fund L.P), on the basis of an arbitral award made in January 2017, has made a provision against 637,528 ordinary shares of Shoprite Holdings (SHP ZL "Shoprite") on the Zambian register for which the arbitrator determined the Company did not have good title. The value of the 41,617 Shoprite shares to which the Company had good title, according to the arbitrator, investment as at 31 December 2016 amounted to USD 263,836. The value of the entire 679,145 Shoprite shares in 2015 was USD 3,889,649 and the original cost of those 679,145 Shoprite shares was USD 3,639,685. The write-off of Shoprite shares amounted to $3,865,119. Additionally, Shoprite has been placing dividend payments into escrow rather than distributing these amounts to shareholders. These dividends pertaining to 41,617 Shoprite shares are reflected as a receivable amounting to USD 45,418 (2015: USD 478,676) in the master fund's assets. The write-off of Shoprite dividends amounted to $665,411. Africa Opportunity Fund, L.P. has filed a notice of its intention to appeal the arbitrator's award. It is expected that this appeal will be heard later this year.

7(c). Statement of Comprehensive Income of the Master Fund for the year ended 31 December 2016

The net loss on financial assets at fair value through profit or loss amounting to USD 2,968,932 is due to the loss arising at the master fund level and can be analysed as follows:

Africa Opportunity Fund LP
Statement of Comprehensive Income
For the year ended 31 December 2016

	Notes	2016	2015
		USD	USD
Income
Interest revenue		1,232,894	652,135
Dividend revenue		1,251,816	1,657,433
Other income		18,310	30,068
Net foreign exchange gain		237,604	514,316

		2,740,624	2,853,952
Expenses
Net losses on financial assets and liabilities at fair value through profit or loss	7(c-i), 8(b)	4,829,304	7,853,063
Custodian fees, Brokerage fees and commission		507,723	439,438
Dividend expense on securities sold not yet purchased		147,356	167,103
Other operating expenses		178,385	276,742
Directors' fees		907	-
Audit fees		23,381	21,130

		5,687,056	8,757,476

Operating loss before tax		(2,946,432)	(5,903,524)

Less withholding tax		(42,526)	(77,544)
Decrease in net assets attributable to shareholder from operations/Total Comprehensive Income for the year		(2,988,958)	(5,981,068)

Attributable to:
AOF Limited (direct interest)		(2,961,759)	(5,932867)
AOF Limited (indirect interest through AOF (GP) Ltd)		(7,173)	(14,370)
		(2,968,932)	(5,947,237)
AOF CarryCo Limited (minority interests)		(20,026)	(33,831)

		(2,988,958)	(5,981,068)

(i) Net losses on financial assets and liabilities at fair value through profit or loss held by Africa Opportunity Fund L.P.

		2016
		USD

Net losses on fair value of financial assets at fair value through profit or loss		(3,900,496)
Net losses on fair value of financial liabilities at fair value through profit or loss		(928,808)

Net losses		(4,829,304)

(ii) Financial asset and liabilities at fair value through profit or loss held by Africa Opportunity Fund L.P.

		2016
		USD

Held for trading assets:
At 1 January		60,819,532
Additions		10,772,699
Disposals		(6,969,336)
Net losses on financial assets at fair value through profit or loss		(3,900,496)

At 31 December (at fair value)		60,722,399

Analysed as follows:
- Listed equity securities		41,355,252
- Listed debt securities		16,465,885
- Unlisted equity securities		2,537,803
- Unlisted debt securities		250,000
- Contract for difference		113,459

		60,722,399

(iii) Net changes on fair value of financial assets at fair value through profit or loss

		2016
		USD

Realised		(4,496,993)
Unrealised		596,497

Total losses		(3,900,496)

(iv) Financial liabilities at fair value through profit or loss held by Africa Opportunity Fund L.P.

		2016
		USD
Held for trading financial liabilities
Contract for difference		30,672
Written put options		415,250
Listed equity securities sold short		4,518,185

Financial liabilities at fair value through profit or loss		4,964,107

(v) Net changes on fair value of financial liabilities at fair value through profit or loss

		2016
		USD

Realised		2,895,865
Unrealised		(3,824,673)

Total losses		(928,808)

8. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

(a) Financial asset and liabilities at fair value through profit or loss

				2015
				USD
Held for trading assets:

At 1 January				63,822,689
Additions				16,586,148
Disposals				(9,504,026)
Net losses on financial assets at fair value through profit or loss				(10,085,279)

At 31 December (at fair value)				60,819,532


Analysed as follows:

- Listed equity securities				48,963,914
- Listed debt securities				9,002,913
- Unlisted equity securities				1,001,250
- Unlisted debt securities				1,696,823
- Contract for difference				154,632

				60,819,532

Net changes on fair value of financial assets at fair value through profit or loss

				2015
				USD

Realised				(2,651,638)
Unrealised				(7,433,641)

Total losses				(10,085,279)

(b) Financial liabilities at fair value through profit or loss

				2015
				USD
Held for trading financial liabilities
Contract for difference				134,396
Written put options				-
Listed equity securities sold short				6,312,207

Financial liabilities at fair value through profit or loss				6,446,603

				2015
				USD
Net changes on fair value of financial liabilities at fair value through profit or loss

Realised				(673,007)
Unrealised				2,905,223

Total gains				2,232,216

				2015
				USD

Net losses on fair value of financial assets at fair value through profit or loss				(10,085,279)
Net gain on fair value of financial liabilities at fair value through profit or loss				2,232,216

Net losses				(7,853,063)

Group

Financial assets at fair value through profit or loss:

	31 December
	2015	Level 1	Level 2	Level 3
	USD	USD	USD	USD

Equities	49,965,164	45,074,265	3,889,649	1,001,250
Debt securities	10,699,736	10,649,736	-	250,000
Contract for Difference	154,632	-	154,632	-

	60,819,532	55,524,001	4,044,281	1,251,250
Financial liabilities at fair value through profit or loss

Shortsellings	6,312,207	6,312,207	-	-
Contract for Difference	134,396	-	134,396	-

	6,446,603	6,312,207	134,396	-

9. OTHER RECEIVABLES

	Company	Group
	2016	2015
	USD	USD

Interest receivable on bonds*	-	239,201
Dividend receivable*	-	478,676
Other receivable	18,032	63,096
Prepayments	5,513	-

	23,545	780,973

* In current year, these have been recorded as receivable at master fund level and is included in the investments in subsidiaries at fair value through profit or loss

10. CASH AND CASH EQUIVALENTS

	Company	Group
	2016	2015
	USD	USD

Account with Custodian	-	486,634
Call deposit accounts	-	2,450
Other bank accounts	12,604	6,362,042

	12,604	6,851,126

Other bank accounts are non-interest bearing.

11(a). ORDINARY SHARE CAPITAL

Group and Company

	2016	2016	2015	2015
	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	-	-	-	-

At 31 December	-	-	-	-

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.

11(b). NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS

	Ordinary	Class C
	Shares	Shares	Total
	USD	USD	USD

At 1 January 2016	37,287,967	23,967,446	61,255,413

Changes during the year:
Loss for the period	(3,568,851)	(1,021,788)	(4,590,639)

At 31 December 2016	33,719,116	22,945,658	56,664,774

Net assets value per share in 2016	0.791	0.786

Net assets value per share in 2015 (Group)	0.875	0.821

C shares

In 2014, 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 Segment ("SFS") effective 17 April 2014.

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 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 reporting date, 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 2014 upon issuance of the Class C shares.

12. TRADE AND OTHER PAYABLES

	Company	Group
	2016	2015
	USD	USD

Due to Africa Opportunity Fund L.P.	1,259,047	-
Management Fee Payable	280,439	277,868
Directors Fees Payable	43,531	64,387
Other Payables	59,700	100,961
Other Accruals	12,874	-

	1,655,591	443,216

Other payables and accrued expenses are non-interest bearing and have an average term of six months.

13. NON-CONTROLLING INTEREST

Proportion of equity interest held by non-controlling interests is provided below:

Name	Country of incorporation and operation	2015

Africa Opportunity Fund L.P.	Cayman Islands	0.7%

Accumulated balances of non-controlling interest:		USD

Africa Opportunity Fund L.P.		306,399

Profit and other comprehensive income allocated to non-controlling interest:

Africa Opportunity Fund L.P.		(33,831)

The summarised information of the subsidiary has not been disclosed as it does not have material non-controlling interests.

14. EARNING PER SHARE

The ordinary and C shares are classified as financial liabilities and therefore the disclosure of the earning per share on the face of the consolidated statement of comprehensive is not required in terms of IAS 33. However, the Company has voluntarily disclosed the earnings per share as per below.

The earnings per share is calculated by dividing the decrease in net assets attributable to shareholders by the weighted average number of ordinary and C shares in issue during the year excluding ordinary shares purchased by the Company and held as treasury shares.

The Company's diluted earnings per share are the same as basic earnings per share, since the Company has not issued any instrument with dilutive potential.

Company
		2016
		Ordinary shares	C shares

Decrease in net assets attributable to shareholders	USD	(3,568,851)	(1,021,788)

Number of shares in issue		42,630,327	29,200,000

Change in net assets attributable to shareholders per share	USD	(0.084)	(0.035)

Group
		2015
		Ordinary shares	C shares

Decrease in net assets attributable to shareholders	USD	(5,811,145)	(2,668,622)

Number of shares in issue		42,630,327	29,200,000

Change in net assets attributable to shareholders per share	USD	(0.136)	(0.091)

15. RELATED PARTY DISCLOSURES

The Directors consider Africa Opportunity Fund Limited (the "Company") as the ultimate holding company of Africa Opportunity Fund (GP) Limited and Africa Opportunity Fund L.P.

		% equity	% equity
	Country of	interest	interest
Name	incorporation	2016	2015

Africa Opportunity Fund (GP) Limited	Cayman Islands	100	100

Africa Opportunity Fund L.P.	Cayman Islands	99.09	99.09

During the year ended 31 December 2016, the Company transacted with related entities. The nature, volume and type of transactions with the entities are as follows:

Company
	Type of	Nature of		Balance at
Name of related parties	relationship	transaction	Volume	31 Dec 2016
			USD	USD

Africa Opportunity Partners Limited	Investment Manager	Management fee expense	1,111,055	280,439

Africa Opportunity Fund LP	Subsidiary	Payable	-	1,259,047

SS&C Technologies	Administrator	Administration fees	90,954	-

During the year ended 31 December 2015, the Company transacted with related entities. The nature, volume and type of transactions with the entities are as follows:

Group
	Type of	Nature of		Balance at
Name of related parties	relationship	transaction	Volume	31 Dec 2015
			USD	USD

Africa Opportunity Partners Limited	Investment Manager	Management fee expense	1,149,597	277,868

International Proximity	Administrator	Administration fees	61,778	-

SS&C Technologies	Administrator	Administration fees	23,435	23,435

The Investment Manager is considered to be key management personnel as it plans, directs and controls the operations of the fund.

Key Management Personnel (Directors' fee)

Except for Robert Knapp who has waived his fees, each director has been paid a fee of USD 35,000 per annum plus reimbursement for out-of pocket expenses for during both 2016 and 2015.

Robert Knapp, who is a director of the Company, also forms part of the executive team of the Investment Manager. Details of the agreement with the Investment Manager are disclosed in Note 5. He has a beneficiary interest in AOF CarryCo Limited. The latter is entitled to carry interest computed in accordance with the rules set out in the Admission Document (refer to note 5 - 'Investment management agreement' for further detail of the performance fee paid to the director).

Details of investments in the Company by the Directors are set out below:

The increase in director shares in 2016 is a result of Robert Knapp and Peter Mombaur purchasing additional shares during the year.

16. 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.

Dividend revenue is presented gross of any non-recoverable withholding taxes, which are disclosed separately in the statement of comprehensive income. Withholding taxes are not separately disclosed in statement of cash flows as they are deducted at the source of the income.

A reconciliation between tax expense and the product of accounting profit multiplied by the applicable tax rate is as follows:

	Company	Group
	2016	2015
	USD	USD

Decrease in net assets attributable to shareholder from operations	(4,590,639)	(8,436,054)

Income tax expense calculated at 0%	-	-

Withholding tax suffered outside Mauritius*	-	77,544

Income tax expense recognized in profit or loss*	-	77,544

* Withholding taxes are born at the master fund level and amounted to USD 42,526 for the financial year ended 31 December 2016. These have been included in the NAV of the subsidiary.

17. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Introduction

The Company's and Group's objective in managing risk is the creation and protection of shareholder value. Risk is inherent in the Company's and Group's activities. It is managed through a process of ongoing identification, measurement and monitoring, subject to risks limits and other controls. The process of risk management is critical to the Company's and Group's continuing profitability. The Company and the Group are exposed to market risk (which includes currency risk, interest rate risk and price risk), credit risk and liquidity risk arising from the financial instruments it holds.

Risk management structure

The Investment Manager is responsible for identifying and controlling risks. The Board of Directors supervises the Investment Manager and is ultimately responsible for the overall risk management approach of the Company.

Fair value

The carrying amount of financial assets and liabilities at fair value through profit or loss are restated to fair value at the reporting date. The carrying amount of trade and other receivables, cash and cash equivalents other payables and accrued expenses approximates their fair value due to their short term nature.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices and includes interest rate risk, foreign currency risk and equity price risk.

Short selling involves borrowing securities and selling them to a broker-dealer. The Master Fund has an obligation to replace the borrowed securities at a later date. Short selling allows the Master Fund to profit from a decline in market price to the extent that such decline exceeds the transaction costs and the costs of borrowing the securities, while the gain is limited to the price at which the Fund sold the security short.

Possible losses from short sales may be unlimited as the Master Fund has an obligation to repurchase the security in the market at prevailing prices at the date of acquisition.

With written options, the Master Fund bears the market risk of an unfavourable change in the price of the security underlying the option. Exercise of an option written by the Master Fund could result in the Master Fund selling or buying a security at a price significantly different from its fair value.

A contract for difference creates, as its name suggests, a contract between two parties speculating on the movement of an asset price. The term 'CFD' which stands for 'contract for difference' consists of an agreement (contract) to exchange the difference in value of a particular currency, commodity share or index between the time at which a contract is opened and the time at which it is closed. The contract payout will amount to the difference in the price of the asset between the time the contract is opened and the time it is closed. If the asset rises in price, the buyer receives cash from the seller, and vice versa. The Master Fund bears the risk of an unfavourable change on the fair value of the CFD. The risk arises mainly from changes in the equity and foreign exchange rates of the underlying security.

The Master Fund's financial assets are susceptible to market risk arising from uncertainties about future prices of the instruments. Since all securities investments present a risk of loss of capital, the Investment Manager moderates this risk through a careful selection of securities and other financial instruments. The Master Fund's overall market positions are monitored on a daily basis by the Investment Manager.

The directors have based themselves on past and current performance of the investments and future economic conditions in determining the best estimate of the effect of a reasonable change in equity prices, currency rate and interest rate.

Equity price risk

Equity price risk is the risk that the fair value of equities decreases as a result of changes in the levels of the equity indices and the values of individual stocks. The trading equity risk arises from the Master Fund's investment portfolio.

The equity price risk exposure arises from the Master Fund's investments in equity securities, from equity securities sold short and from equity-linked derivatives (the written options). The Master Fund manages this risk by investing in a variety of stock exchanges and by generally limiting exposure to a single industry sector to 15% of NAV.

Management's best estimate of the effect on the profit or loss for a year due to a reasonably possible change in equity indices, with all other variables held constant is indicated in the table below. There is no effect on 'other comprehensive income' as the Company and the Group has no assets classified as 'available-for-sale' or designated hedging instruments.

In practice, the actual trading results may differ from the sensitivity analysis below and the difference could be material. An equivalent decrease in each of the indices shown below would have resulted in an equivalent, but opposite impact.

Equity

Company	Change in	Effect on net assets attributable to shareholders
	NAV price	2016
		USD

Investment in subsidiaries at fair value through profit or loss	10%	5,828,422
	-10%	(5,828,422)

Master Fund	Change in	Effect on net assets attributable to shareholders
	equity price	2016
		USD

Financial assets at fair value through profit or loss	10%	6,072,240
	-10%	(6,072,240)

Financial liabilities at fair value through profit or loss	10%	496,411
	-10%	(496,411)

Group	Change in	Effect on net assets attributable to shareholders s
	equity price	2015
		USD

Financial assets at fair value through profit or loss	10%	6,081,953
	-10%	(6,081,953)

Financial liabilities at fair value through profit or loss	10%	644,660
	-10%	(644,660)

Currency risk

The Master Fund's investments are denominated in various currencies as shown in the currency profile below. Consequently, the Company and the Group is exposed to the risk that the exchange rate of the United States Dollar (USD) relative to these various currencies may change in a manner which has a material effect on the reported values of its assets denominated in those currencies. To manage its risks, the Master Fund may enter into currency arrangements to hedge currency risk if such arrangements are desirable and practicable. The following table shows the offsetting of financial assets:

As at 31 December 2016

Company

	Gross amounts of recognised financial assets	Gross amounts of recognised financial liabilities set off in the statement of financial position	Net amount of financial assets presented in the statement of financial position	Financial instruments	Cash collateral	Net amount
	USD	USD	USD	USD	USD	USD

Cash and cash equivalents	1,136,171	(1,123,567)	12,604	-	-	12,604

Total	1,136,171	(1,123,567)	12,604	-	-	12,604

As at 31 December 2015

Group

	Gross amounts of recognised financial assets	Gross amounts of recognised financial liabilities set off in the statement of financial position	Net amount of financial assets presented in the statement of financial position	Financial instruments	Cash collateral	Net amount
	USD	USD	USD	USD	USD	USD

Cash and cash equivalents	34,542,608	(27,691,482)	6,851,126	-	-	6,851,126

Total	34,542,608	(27,691,482)	6,851,126	-	-	6,851,126

Cash and cash equivalents are offset as the Company has current bank balances and bank overdraft with the same counterparty which the Company has the current legally enforceable right to set off the recognised amounts and the intention to settle on a net basis or realise the asset and settle the liability simultaneously.

The currency profile of the Company's financial assets and liabilities in current year and the Group's financial assets and liabilities for prior year is summarised as follows:

	Company		Group
	2016	2016	2015	2015
	Financial	Financial	Financial	Financial
	assets	liabilities	assets	liabilities
	USD	USD	USD	USD

Australian Dollar	-	-	223,631	-
Botswana Pula	-	-	2,522,469	-
Swiss Franc	-	-	(1,648,149)	-
CFA Franc	-	-	8,328,710	-
Euro	-	-	(7,444,619)	-
Egyptian Pound	-	-	803,141	-
Ghanaian Cedi	-	-	11,600,631	-
Great Britain Pound	-	-	124,487	398,697
Hong Kong Dollar	-	-	11	-
Kenyan Shilling	-	-	1,920,232	-
Moroccan Dirhams	-	-	427,936	-
Nigerian Naira	-	-	4,691,694	-
Norwegian Kroner	-	-	(191,530)	-
South African Rand	-	-	1,963,026	6,047,906
Swedish Kroner	-	-	2,342,980	-
Tanzanian Shilling	-	-	1,623,756	-
Uganda Shilling	-	-	1,828,741	-
United States Dollar	58,314,852	1,655,591	33,414,273	443,216
Zambian Kwacha	-	-	5,857,113	-

	58,314,852	1,655,591	68,388,533	6,889,819

Prepayments are typically excluded as these are not financial assets; prepayments as at 31 December 2016 and 2015 amounted to USD 5,513 and to USD 63,098 respectively.

The sensitivity analysis shows how the value of a financial instrument will fluctuate due to changes in foreign exchange rates against the US Dollar, the functional currency of the Company and the Group.

Currency risk at master fund level

The following table details the master fund's and the Group's sensitivity to a possible change in the USD against other currencies. The percentage applied as sensitivity represents management's assessment of a reasonably possible change in foreign currency denominated monetary items by adjusting the translation at the year-end for the change in currency rates at the Master Fund level. A positive number below indicates an increase in profit where the USD weakens against the other currencies. In practice, actual results may differ from estimates and the difference can be material. The effect of a change in USD against other currencies at the master fund level as per the table below will have the same impact at the company level and will form part of the NAV of the subsidiary.

Currency Risk - Year 2016

Master Fund	Currency	Effect on net assets attributable to shareholders in (USD)

Change:		30%	-30%
	Botswana Pula	(627,744)	627,744
	Ghana Cedi	(2,988,373)	2,988,373
	Kenyan Shilling	(388,343)	388,343
	Moroccan Dirham	(159,972)	159,972
	Nigerian Naira	(814,574)	814,574
	South African Rand	992,805	(992,805)
	Tanzanian Shilling	(389,232)	389,232
	Uganda Shilling	(514,466)	514,466
	Zambian Kwacha	(943,531)	943,531

Change:		10%	-10%
	CFA Franc	(839,251)	839,251
	Egyptian Pound	(43,549)	43,549

Change:		5%	-5%
	Australian Dollar	(31,225)	31,225
	Great British Pound	(1,579)	1,579

Currency Risk - Year 2015

Group	Currency	Effect on net assets attributable to shareholders in (USD)

Change:		30%	-30%
	Botswana Pula	(756,741)	756,741
	Ghana Cedi	(3,480,189)	3,480,189
	Kenyan Shilling	(576,070)	576,070
	Moroccan Dirham	(128,381)	128,381
	Nigerian Naira	(1,407,508)	1,407,508
	South African Rand	1,418,055	(1,418,055)
	Tanzanian Shilling	(487,127)	487,127
	Uganda Shilling	(548,622)	548,622
	Zambian Kwacha	(1,757,134)	1,757,134

Change:		10%	-10%
	CFA Franc	(832,827)	832,827
	Egyptian Pound	(80,314)	80,314

Change:		5%	-5%
	Australian Dollar	(11,182)	11,182
	Euro	372,231	(372,231)
	Great British Pound	13,710	(13,710)
	Norwegian Kroner	9,576	(9,576)
	Swiss Franc	82,407	(82,407)
	Swedish Kroner	(117,149)	117149

Interest rate risk

Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The fair values of the Company's and the Group's debt securities fluctuate in response to changes in market interest rates. Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of those instruments.

The investments in debt securities have fixed interest rate and the income and operating cash flows are not exposed to interest rate risk. The change in fair value of investments based on a change in market interest rate (a 50 basis points change) is not significant and has not been disclosed.

Credit risk

Financial assets that potentially expose the Company and the Group to credit risk consist principally of investments in debt securities, cash balances and interest receivable. The extent of the Company's and the Group's exposure to credit risk in respect of these financial assets approximates their carrying values as recorded in the Group's statement of financial position.

The Company and the Group take on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. The Company's and Group's main credit risk concentration is its debt securities which are classified as financial assets at fair value through profit or loss.

With respect to credit risk arising from financial assets which comprise of financial assets at fair value through profit or loss, other receivables and cash and cash equivalents, the Company's and the Group's exposure to credit risk arises from the default of the counterparty, with a maximum exposure equal to the carrying amount of these financial assets.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

		2016	2016	2015
		Company	Master Fund	Group
	Notes	Carrying amount	Carrying amount	Carrying amount
		USD	USD	USD

Financial assets at fair value through profit or loss	7(c)(ii), 8(a)	-	60,722,399	10,699,736

Other receivables	9	23,545	1,773,876	780,973
Cash and cash equivalents	10	12,604	1,052,042	6,851,126

The financial assets are neither past due nor impaired at reporting date except for dividend receivable from Shoprite which is past due by more than three years. The cash and cash equivalent assets of the Company and the Group are maintained with Standard Chartered Bank (Mauritius) Ltd. Standard Chartered Bank has an A1- issuer rating from Moody's long term rating agency, a P-1 short term rating from Moody's rating agency, an AA- issuer rating from Standard and Poor's rating agency, and an A-1+ short term rating from Standard and Poor's rating agency. All other issuers of debt instruments owned by the Company and the Group are unrated. The issuers of the unrated debt instruments owned by the Company and the Group are reputable companies which do not envisage obtaining ratings, and have the ability to repay any debt or redeem any security as it falls due or when required.

Concentration risk

At 31 December 2016 the Master Fund held investments in Africa which involves certain considerations and risks not typically associated with investments in other developed countries. Future economic and political developments in Africa could affect the operations of the investee companies.

Analysed by geographical distribution of underlying assets:

	Master Fund	Group
	2016	2015
Bond & Notes	USD	USD

Senegal	3,036,000	3,173,000
Burkina Faso	-	2,702,381
Mauritius	-	1,446,823
Morocco	-	651,552
Ghana	7,055,593	383,000
Other	4,173,975	-
South Africa	1,738,415	2,342,980

Total	16,003,983	10,699,736



	Master Fund	Group
	2016	2015
Equity Securities and Short sellings	USD	USD

Ghana	10,757,184	13,573,563
Zambia	3,145,104	6,642,475
Senegal	6,746,764	6,871,271
South Africa	(2,585,832)	(4,064,548)
Zimbabwe	5,261,153	4,481,674
Ivory Coast	-	1,457,439
Botswana	2,092,481	2,522,469
Nigeria	2,715,246	4,452,476
Tanzania	1,297,442	1,623,755
Egypt	-	803,141
Democratic Republic of Congo	-	1,412,966
Morocco	533,239	147,538
Burkina Faso	-	1,920,232
Cote D'Ivoire	1,645,742	-
Kenya	1,294,475	-
Other	3,771,212	-
Uganda	3,080,099	1,828,742

Total	39,754,309	43,673,193

Analysed by industry of underlying assets:

	Master Fund	Group
	2016	2015
Bond & Notes	USD	USD

Consumer Finance	24,440	2,342,980
Mining Industry	7,929,975	5,875,381
Oil Exploration & Production	6,705,593	133,000
Telecommunications	993,975	946,823
Forestry	-	250,000
Plantations	350,000	-
Agricultural Chemicals	-	651,552
Consumer Products and Services	-	500,000

Total	16,003,983	10,699,736

Equity Securities and Shortsellings

	Master Fund	Group
	2016	2015
	USD	USD

Consumer Finance	5,177,780	6,390,167
Mining Industry	4,051,636	2,738,413
Oil Exploration & Production	1,309,903	971,682
Telecommunications	6,746,764	7,856,302
Plantations	2,211,207	1,074,467
Beverages	1,297,442	1,623,756
Consumer Products & Services	(2,530,915)	666,606
Financial Services	9,530,108	12,448,644
Materials	814,737	414,660
Other	2,094,402	-
Real Estate	4,342,250	3,833,423
Utilities	4,708,995	-
Electric Transmission and Generation	-	4,315,632
Forestry	-	1,001,250
Agricultural chemicals	-	338,191

Total	39,754,309	43,673,193

Liquidity risk

Liquidity risk is the risk that the Company and the Group will not be able to meet its financial obligations as they fall due. The Company's and the Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's and the Group's reputation.

The Company and the Group manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and actual cash flows. The table below illustrates the maturity profile of the Company's and the Group's financial liabilities based on undiscounted payments.

Year 2016

Company	Due on demand	Due within 3Months	Due Between 3 and 12 Months	Due Between 1 and 5 years	Due greater than 5 years	Total
Financial liabilities	USD	USD	USD	USD	USD	USD

Other payables	-	1,655,591	-	-	-	1,655,591
Net assets attributable to shareholders	-	-	-	56,664,774	-	56,664,774

Total liabilities	-	1,655,591	-	56,664,774	-	58,320,365

Year 2015

Group	Due on demand	Due within 3Months	Due Between 3 and 12 Months	Due Between 1 and 5 years	Due greater than 5 years	Total
Financial liabilities	USD	USD	USD	USD	USD	USD

Other payables	-	443,216	-	-	-	443,216
Financial liabilities at fair value through profit or loss	-	-	6,350,144	-	96,459	6,446,603
Net assets attributable to shareholders	-	-	-	61,255,413	-	61,255,413

Total liabilities	-	443,216.00	6,350,144	61,255,413	96,459	68,145,232

Capital management

Total capital is considered to be the non-controlling interests and net assets attributable to shareholders as shown in the consolidated statement of financial position.

The Company is a closed end fund and repurchase of shares in issue can be done with the consent of the Board of Directors. The Company is not subject to externally imposed capital requirements.

The objectives for managing capital are:

· To invest the capital in investment meeting the description, risk exposure and expected return indicated in the Admission document.

· To achieve consistent capital growth and income through investment in value, arbitrage and special situations opportunities derived from the African continent.

· To maintain sufficient size to make the operation of the Company cost effective.

The primary objective of the Company's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

18. ANALYSIS OF NAV & SHARE OF PROFIT AND LOSSES OF MASTER FUND ATTRIBUTABLE TO ORDINARY SHARE AND C SHARES

18(a). STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016

	Ordinary shares	C shares
	USD	USD
ASSETS
Cash and cash equivalents	(3,483,116)	4,535,001
Trade and other receivables	378,964	235,865
Receivable from AOF Ltd	776,042	483,005
Financial assets at fair value through profit or loss	38,127,974	22,594,424

Total assets	35,799,864	27,848,295

EQUITY AND LIABILITIES
Liabilities
Trade and other payables	6,976	4,342
Financial assets at fair value through profit or loss	2,603,732	2,360,375

Total liabilities	2,610,708	2,364,717

Net assets attributable to shareholders	33,189,156	25,483,578

18(b). STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 2016

	Ordinary shares	C shares
	USD	USD

Income	1,425,156	1,315,468

Expenses
Net losses on investment in financial assets and liabilities at fair value through profit or loss	(3,124,992)	(1,704,312)
Custodian, brokerage fees and commission	(312,946)	(194,777)
Dividend expense on securities sold not yet purchased	(80,964)	(66,392)
Other operating expenses	(124,922)	(77,751)

	(3,643,824)	(2,043,232)

Operating Loss before taxation	(2,218,668)	(727,764)

Decrease in net assets attributable to shareholders per share attributable to the equity holders of the parent during the year	(0.052)	(0.025)

19. DIVIDEND PAYMENT

The Amended Private Placement Memorandum states that subject to market conditions, compliance with the Companies Law and having sufficient cash resources available for the purpose, the Company intends to pay the following dividends on the Ordinary Shares at an amount equal to the total comprehensive income of the Company as that expression is used in international accounting standard (excluding net capital gains/losses in accordance with Investment Management Association Statement of Recognised Practice), such amount to be paid annually.

The Company, in compliance with the UK Reporting Fund Status regime, has an annual requirement to calculate and report to the UK investors and HMRC the reportable income per share and distributions made for each share class. Based on these calculations, no dividends related to the 2015 calendar year were paid in 2016 to the Ordinary Shareholders. No dividends were distributed to the C Share Shareholders.

Investors in C Shares should note that it is not currently envisaged that any dividend will be paid on the C Shares, which were issued pursuant to the placing in 2014, prior to their Conversion into Ordinary Shares.

	2016	2015
Dividend - payable	USD	USD

Dividend declared and paid	-	76,859

Dividend per share	-	US cents 2.14

Opening balance - dividend payable	-	85,291
Additions	-	912,289
Payment	-	(912,289)

Closing balance	-	-

20. SEGMENT INFORMATION

For management purposes, the Çompany is organised in one main operating segment, which invests in equity securities, debt instruments and relative derivatives. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon analysis of the Company as one segment. The financial results from this segment are equivalent to the financial statements of the Company as a whole.

For geographical segmentation, please refer to note 17.

21. PERSONNEL

The Company did not employ any personnel during the year (2015: the same).

22. COMMITMENTS AND CONTINGENCIES

There are no commitments or contingencies at the reporting date.

23. EVENTS AFTER REPORTING DATE

Based on an arbitration award delivered on 27 January 2017, it was awarded that the Company was deemed to have title to 41,617 ordinary shares and that Shoprite is to pay the Company dividends in respect of only the 41,617 ordinary shares held. These were treated as adjusting events and the financial statements have been amended accordingly.

Except as stated above, there are no other events after the reporting date which require amendments to and/or disclosure in these financial statements.

24. 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.

Company

	Level 1	Level 2	Level 3
	USD	USD	USD

Ordinary shares	-	33,719,116	-
C Class shares	-	22,945,658	-

At 31 December 2016	-	56,664,774	-

Group

	Level 1	Level 2	Level 3
	USD	USD	USD

Ordinary shares	-	37,287,966	-
C Class shares	-	23,967,447	-

At 31 December 2015	-	61,255,413	-

The Ordinary and C Class shares are quoted on the SFS 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

Therefore, the Directors have concluded that the most appropriate estimate of fair value of both classes of shares is their net asset value per share, without adjustment, at the reporting date. This price is calculated by taking the net assets attributable to shareholders and dividing by the number of shares in issue. The Net Assets Value is published on a monthly basis. Therefore, the fair value of the Net assets attributable to shareholders has been classified as level 2 as the NAV is an input that is observable.

The Ordinary and C shares are quoted on the London Stock Exchange for informational purposes only. Moreover, as per the Private Placement Memorandum, once the Shoprite case is resolved, the basis upon which the C Shares will convert into Ordinary Shares is such that the number of Ordinary Shares to which the C Shareholders will become entitled will reflect the relative Net Asset Value per Share 0f the assets attributable to the C Shares and the Ordinary Shares (subject to a discount of 5 per cent.).

Shareholder information

Share price

Prices of Africa Opportunity Fund Limited are published daily in the Daily Official List of the London Stock Exchange. The shares trade under Reuters symbol "AOF.L" and Bloomberg symbol "AOF LN". C share class shares began trading 17 April 2014 and trade under Reuters symbol "AOFC.L" and Bloomberg symbol "AOFC LN".

Manager

Africa Opportunity Partners Limited.

Africa Opportunity Fund Limited (AOF)

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