KEY FACTS

1. INVESTMENT OBJECTIVE AND MANDATE

The Company’s objective is to generate above average investment returns from the investment opportunities the Directors introduce through their involvement with various investment structures and/or corporate networks, mainly in Africa. The Company evaluates investment decisions with the aim to deliver a total USD portfolio return of at least 12,5% per annum above the annual change in the United States Consumer Price Index over the lifetime of the investment.

The Company may invest in any asset class, listed or unlisted, in any investment market and in any currency provided 75% of its effective investment exposure (other than cash) is in PE Assets. Any individual investment (at cost) may not comprise more than 30% of the total portfolio value at the time, or USD 8.0 million whichever is the greater.

2. HISTORICAL PERFORMANCE RECORD SINCE INCEPTION

3. GEOGRAPHIC ASSET ANALYSIS

4. INDUSTRY ASSET ANALYSIS

5. PORTFOLIO COMMENT FOR QUARTER

The portfolio recorded an unrealised surplus of 13.5% in the past quarter before costs and interest income following strong performances by Alphamin and Hastings. An additional USD 43K was invested into Novare II after a capital call to reduce debt in their portfolio, and our investment in Hastings was sold following a proposal to delist it, realising a profit of USD 146k. A summary of developments in each investment is set out below:

6. NOVARE AFRICA PROPERTY FUND II (“Novare II”)

Novare II develops retail and commercial developments in major African cities, comprising of nine projects in Abuja, Lagos, Lusaka and Maputo with total capital invested of USD 320 million. Eighty one percent of the investment commitment towards the fund had been drawn down by quarter end. With seven of the eight building projects operational, and with the fund investment period for new investments having expired, the remainder of the undrawn commitments can only be called for to retire the debt or to fund extensions to existing properties.

COVID-19 had a major impact across the portfolio, with reduced trading taking place in their malls across the portfolio. The duration and longer term impact is still not clear. The recent riots that broke out in Nigeria has had a direct impact on the Lekki Mall in Lagos, with the extent of damage not yet determined. The debt profile of the portfolio was further reduced during the quarter under review to facilitate the servicing of existing debt facilities. Novare II has very low gearing, sufficient cash resources to retire most debt if required, and adequate time to manage its assets until there is a step change in demand for them.

7. ALPHAMIN RESOURCES CORP. (“Alphamin”)

Alphamin owns the richest known orebody of tin in the world, situated in North Kivu Province, DRC. The company drilled out and proved only a small portion of its prospecting licensed area, large enough to start a small mine and prove the concept. The mine commenced mining operations in August 2019 and is now producing 3% of global tin production.

We are excited by the financial prospects of the mine, more information is available at https://alphaminresources.com/

Alphamin share price (and our valuation) increased 73% in the quarter under review, recovering from previously depressed levels due to pressure to complete the capital raise to build the mine. We believe there is considerable upside left for investors, with the current market capitalisation only approximating the cost to build the mine.

8. ADDIS PHARMACEUTICAL FACTORY SHARE COMPANY (“Addis Pharma”)

Addis Pharma manufactures a broad range of pharmaceuticals at good EBITDA margins for the Ethiopian public and private sector, in a country with over 100 million people. Only 20% of Ethiopia’s pharmaceuticals are manufactured in Ethiopia, with the balance being imported.

Revenue and profitability continued to grow albeit at a low rate. COVID–19 is not expected to have a negative impact on operations. Our investor consortium’s offer to take control of Addis Pharma from the Ethiopian NGO which owns 51%, is still not implemented, but there is a marked improvement in cooperation between our investor consortium and management. Because of the delay in effecting a change in control, the valuation remains at a marked down level which is supported by current results, and 8% below original cost.

9. AFRICAN ALPHA FMCG GROUP (“African Alpha”)

The company offers Fast Moving Consumable Good (“FMCG”) exposure to the high growth Ethiopian economy (8% plus economic growth p.a.) through an investment in a number of businesses including Bluebird Holdings. We backed a strong private equity team on the ground against FMCG competition which is generally undercapitalised and fragmented, in addition to a lack of committed international FMCG competitors. The strategy is to aggressively grow revenue and profits by extracting economies of scale through combining management resources in procurement, marketing, administration and sales across the various businesses, before selling the business as a unit to an international FMCG business wishing to enter Ethiopia.

Strong growth in revenue and profitability continued, driven by the Edible Oil and Soap divisions. The valuation increased slightly to reflect the latest capital raise valuations, and we expect strong performance in the share price over the next two years.

10. BETPAWA GROUP HOLDINGS LIMITED (“betPawa”)

Established in late 2013, betPawa is a UK registered holding company with licensed African online (smart phone) sports betting subsidiaries. betPawa was established by a Danish entrepreneur who applied or acquired betting licenses in - country over the past five years, and the software was acquired via an acquisition it made in Estonia. Currently it is operational in Kenya, Uganda, Nigeria, Ghana, Tanzania and Zambia. We invested in order to get exposure to a fast-growing consumer business in Africa with a strong technology platform and limited physical footprint, managed by a dynamic management team.

The group managed to restore vigorous growth in revenue and profitability in the past quarter as international sport and specifically football restarted. The outlook to year end is looking very positive, causing the group to declare a maiden dividend of USD 7.5 million.

The valuation was performed using a conservative EBITDA multiple, and strong share price performance is expected over the next 18 months off the back of management’s forecast growth in profits.

11. HASTINGS GROUP (“HASTINGS”)

Minority shareholders in Hastings are about to receive an offer for their shares as part of a delisting at a substantial premium to the historical share price. We decided to sell our shareholding at the indicated offer price during the quarter under review, realising an IRR of 22% over the investment period.

12. CASH

After providing for future draw-downs from Novare, APEO has USD 600k in free cash available for future investment.

13. PROSPECTS

We expect strong performance from the portfolio over the next 2 years, and we remain on track to better our underwriting criteria of US inflation plus 12.5% per annum, which we expect to be principally driven by Alphamin, African Alpha and betPawa. We continue to search for attractively priced investment opportunities where we have good insight into the potential risks and rewards.

DIRECTORATE AND INVESTMENT COMMITTEE MEMBERS

Rudolf Pretorius

Brendon Jones

Brett Childs

Adriaan van Wyk

James Henry

Disclaimer

This document is intended to be utilised for information purposes only. Should you choose to use this document for any other purposes other than information, you should do so with the assistance of professional advice. APEO not is acting or purporting to act in any way as an advisor. If you rely on this information for any purpose whatsoever, you do so at your own risk. APEO does not accept any liability of whatever nature and howsoever arising in respect of any claim, damage, loss or expense, whether caused directly or indirectly including consequential loss or loss of profit, arising out of or in connection with you, the user, on the contents of this document, or the user of the information products and services described in this document. This document is for information purposes only and does not constitute or form part of any offer to the public to issue or sell, or any solicitation of any offer to subscribe for or purchase an investment, nor shall it or the fact of its distribution form the basis of or be relied upon in connection with any contract for investment. Investors should take cognisance of the fact that there are risks involved in buying or selling any financial product. Illustrations, forecasts or hypothetical data are not guaranteed and are provided for illustrative purposes only. The value of financial products can increase as well as decrease over time, depending on the value of the underlying securities and market conditions. Past performance is not necessarily a guide to future performance and no guarantees are provided. The user agrees to submit exclusively to the law of the Republic of Mauritius and the jurisdiction of the courts of the Republic of Mauritius in respect of any disputes arising out of use of this document.