African Rainbow Capital Investments (JSE:AIL) News - Full year financial results for the twelve-month period to 30 June 2021

AFRICAN RAINBOW CAPITAL INVESTMENTS LIMITED
Incorporated in the Republic of Mauritius
Company number: C148430
JSE share code: AIL A2X share code: AILJ
ISIN code: MU0553S00000 LEI: 378900F086B090C6FB94

FULL YEAR FINANCIAL RESULTS
for the twelve-month period to 30 June 2021

HIGHLIGHTS
Strong share price performance increases Afrimat fair value by R601 million

Intrinsic Portfolio Value increased by 16.3% to R12 275 million (30 June 2020: R10
556 million)

The R1 719 million comprised of R909 million net fair value gains and net investments
of R810 million which was funded through bank debt and capital from the rights issue.

INAV Per Share of R8.77 (30 June 2020: R9.54)

IFRS NAV Per Share of R8.85 (30 June 2020: R9.57)

TymeBank has 3.45 million customers at 30 June 2021

Successful capital raise of R750 million through a rights offer in October 2020

NATURE OF BUSINESS
African Rainbow Capital Investments Limited (ARC Investments) is incorporated in the
Republic of Mauritius, holds a Category One Global Business Licence under the
Mauritian Financial Services Act 2007 and is regulated by the Mauritian Financial
Services Commission. It is listed on the JSE Limited with a secondary listing on A2X
in South Africa.

OPERATING ENVIRONMENT
The year under review has been characterised by strained trading conditions, mainly
resulting from the contracting economy and the continued impact of the government
implemented National Lockdowns to curb the spread of the Covid-19 virus. The impact
and measures to mitigate the effects on the Company and the underlying investee
companies were fully disclosed in the Audited Financial Statements for the year ended
30 June 2020 and are ongoing. There has been some recovery from the pandemic but the
operating environment remains challenging. Market sentiment and activity in certain
sectors have also seen improvement, especially with the positive news of an ongoing,
albeit gradual, vaccine roll-out.

PERFORMANCE HIGHLIGHTS#
The Company's intrinsic investment value in the ARC Fund increased by 16.0% from R9
948 million at 30 June 2020 to R11 541 million as at 30 June 2021. Its effective
share of the invested assets (or the IPV) has increased by 16.3% from R10 556 million
at 30 June 2020 to R 12 275 million at 30 June2021, as a result of new net
investments of R 810 million and increased asset values of R909 million.

The diluted Intrinsic Net Asset Value (INAV) per share, however, decreased from R9.54
per share at 30 June 2020 to R8.77 per share at 30 June 2021. This decrease in the
diluted INAV per share is attributable to the dilutory impact of the increase in
issued shares emanating from the R750 million rights issue in October 2020. The
rights issue was done at an approximately 10% discount to the then prevailing market
price which was at a significant discount to the intrinsic share value. The impact of
the dilution was countered to some extent by the performance of the ARC Fund during
the year.

The IFRS Net Asset Value (NAV) per share decreased by 7.5% from R9.57 per share at 30
June 2020 to R8.85 at 30 June 2021.

The growth in the Company's share in the Intrinsic Portfolio Value (IPV) of the ARC
Fund before the impact of acquisitions and disposals for the year, was 8.6%. The
achieved growth is below the 10% Performance Participation hurdle and consequently no
provision has been raised in terms of IFRS 2 for the issue of Performance
participation shares to UBI Proprietary Limited. The provision that was raised at 30
December 2020 was reversed.

During the process of listing ARC Investments in 2017, the Company and the General
Partner indicated that they would review the fee structure of the ARC Fund after five
years. The global and domestic environment has changed considerably since listing and
consequently the parties have started working on a process to review the fee.

The strategic focus of the ARC Fund is on consolidating its capital in specific
businesses and working with its investment partners to unlock synergies that will
derive additional value in the underlying businesses. This, combined with the
progress being made by start-ups such as TymeBank and Rain as they move along the
maturity curve, should go some way to closing the gap between the intrinsic and
market value.

                                                              Net    
                                     Net          Net       Increase       Net       Growth
                                    Asset      Investment    in Net       Asset      in Net
                                   Value 30                  Asset       Value 31    Asset       
 Investment in ARC Fund            June 20                   Value       Jun 21      Value                                    
                                                                              
                                                                                                               
 Intrinsic Portfolio Value           10 556        810        909         12 275     16.30%
 Cash in the ARC Fund                    35       -406        610            239    582.90%
 Debt the ARC Fund                     -440       -399        -30           -869     97.50%
 Other net assets/(liabilities)
 in the ARC Fund                       -203          –         99           -104    -48.80%
 UBI GP fee payable                    -194          –         94           -100    -48.50%
 Other assets/(liabilities) in
 the ARC Fund                            -9          –          5             -4    -55.60%
 Intrinsic Investment in the ARC
 Fund at FVTPL*                       9 948          5      1 588         11 541     16.00%


* FVTPL: Fair Value Through Profit or Loss
# In the current year, ARC Financial Services has been disclosed as a one-line item
in the ARC Fund segment tables with sub-notes detailing the break-down of the ARC
Financial Services Portfolio. The prior year Segment tables have also been adjusted.
This was done to improve disclosure.

SIGNIFICANT EFFECTIVE ACQUISITIONS AND DISPOSALS IN THE DIVERSIFIED INVESTMENTS
PORTFOLIO THROUGH ARC FUND
Acquisition of ARC Investments shares
During the year, the ARC Fund invested R295 million in ARC Investments at share
prices well below its intrinsic value.

Kropz Plc
A total investment of R455 million has been made. The ARC Fund subscribed for
additional shares in various tranches during the year in terms of a convertible loan
facility of up to US$ 40 million previously entered into with Kropz Plc. The funding
is required to finance the Elandsfontein mine until production commences in Q4 2021.
At 30 June 2021, R569 million of the facility had been drawn.

ARCH Emerging Market Partners Limited (ARCH EM)
During the year ARC Investments effectively invested R 155 million, consisting of
R106 million and R49 million in the ARCH Renewable Power Fund and ARCH Cold Chain
Solutions East Africa Fund respectively. Both funds are managed by ARCH EM, which is
a joint venture between JCH & Partners LLP and ARC.

Fledge Capital share buy-back
The ARC Fund sold 30% of its interest in Fledge Capital as part of Fledge Capital’s
share buy-back transaction for R 270 million, realising an internal rate of return of
15.9%. Fledge Capital furthermore issued additional shares to new shareholders during
the review period. Following these transactions, the ARC Fund’s effective interest in
Fledge reduced from 51.5% to 25.9%.

ACQUISITIONS IN THE FINANCIAL SERVICES PORTFOLIO
During the year, the Company effectively made the following significant investments
through the ARC Fund's interest in African Rainbow Capital Financial Services
Holdings (ARC FSH):
Sanlam Third Party Asset Management Business
One of the largest black-empowered asset managers was established when ARC FSH
acquired a 25% economic interest in Sanlam's South African Third Party Asset
Management Business (other than the investment management business conducted by
Sanlam Private Wealth (Pty) Ltd and the Sanlam Specialised Finance division) for R817
million in December 2020. This acquisition completes the foundational building blocks
of the financial services business, provides critical mass and the opportunity to
forge synergies between the portfolio of businesses.

TymeBank
ARC FSH injected an additional R505 million into TymeBank during the reporting period
as part of the scheduled capital requirements for the bank. At 30 June 2021, the ARC
Fund had an effective ownership interest of 28.8% in TymeBank, being 49.9% of the
57.7% interest held by ARC FSH. TymeBank and TymeGlobal have secured additional
equity funding of US$110 million from ARC FSH and two new international shareholders,
Apis Growth Fund II and JG Summit Holdings.

GROWTH IN INTRINSIC PORTFOLIO VALUE#
The Company's effective investment in the IPV of the ARC Fund increased by R1 719
million, comprising net acquisitions of R810 million (detailed above), fair value
gains including net foreign exchange movements and accrued interest on loans of R1
369 million and fair value losses of R460 million.

Key Comments: Diversified Investments (74.8% of Fund Value, 30 June 2020: 73.2%)
Rain (27.0% of Fund Value, 30 June 2020: 29.5%)
Rain continued to surpass expectations in terms of performance and has managed to
sustain its high level of customer growth throughout the reporting period. It
exceeded its subscriber targets in both the 4G and the 5G market. A key focus area of
Rain remains to improve its customer experience and it continues to make progress in
addressing customer queries and complaints. The business has been experiencing an
unprecedented surge in demand for its products and services. Rain is expected to
fully participate in the upcoming government-initiated spectrum auction. In this
regard it should be noted that a modest capital raise from Rain's shareholders is in
progress. The Company's share in the value of the investment in Rain increased from
R3 111 million at 30 June 2020 to R3 314 million at 30 June 2021, as a result of R56
million additional investment and a fair value gain of R147 million over the year.

Afrimat Plc (10.0% of Fund Value, 30 June 2020: 7.3%)
Afrimat is a leading Black-empowered supplier to the resources, industrial minerals,
mining, road, rail and construction sectors, listed on the Johannesburg Stock
Exchange, with a footprint across Southern Africa. As the company is listed, its
financial performance is publicly available. Afrimat continues to report impressive
performance, largely as a result of excellent management, as well as significant
improvements in certain commodity prices. During the year, the ARC Fund reduced its
shareholding in the business from 18.4% to 16.1%. The Company's effective share in
the fair value of the Afrimat investment amounted to R1 231 million at 30 June 2021.
The ARC Fund sold further 8.4 million Afrimat shares for a consideration of R496
million during July 2021. Following this transaction, the ARC Fund's effective
interest in Afrimat decreased to approximately 10%.

Kropz Plc (8.9% of Fund Value, 30 June 2020: 7.0%)
The Kropz Group is a nutrient producer with an advanced development stage phosphate
mine in South Africa and exploration assets in the Republic of Congo. Kropz
Elandsfontein is situated on the West Coast of South Africa. After the project
suffered initial setbacks, significant progress has been made and the construction of
the reconfigured processing plant is largely on track. It is anticipated that first
ore through the plant will be processed during December 2021. Kropz Plc is performing
an updated feasibility study regarding its asset in the Republic of the Congo. This
process is expected to be completed during October 2021. The Company effectively
invested R455 million in the Kropz Group in the year under review to fund both the
construction of the required modification of the plant at Elandsfontein as well as
the cost to complete an updated feasibility study for Hinda (Cominco). The ARC Fund
holds 82.7% of the issued share capital in the Kropz Group's holding company, Kropz
Plc, which is listed on the Alternative Investment Market stock exchange in London.
The Company's effective investment value as at 30 June 2021 amounts to R1 092
million.

Gemcap (5.3% of Fund Value, 30 June 2020: 5.2%)
Gemcap is an investment holding company. In the year under review the ARC Fund
acquired the minority interests in Gemcap resulting in the latter being wholly owned
by the ARC Fund. The Gemcap portfolio demonstrated resilience in the financial year,
and operations are recovering to pre-Covid levels in most of its portfolio companies.
These companies continue to yield significant cash and capital returns. The Company’s
effective investment in Gemcap increased by R98 million from R553 million at 30 June
2020 to R651 million at 30 June 2021, comprising of a fair value gain of R86 million
and additional investments amounting to R12 million.

Key Comments: Financial Services Portfolio (27.3% of Fund Value, 30 June 2020:26.8%)
The Company's effective interest in the gross IPV of the Financial Services Portfolio
decreased from R3 411 million at 30 June 2020 to R3 346 million at 30 June 2021,
resulting in a 2% decrease during the year. The decrease was mainly as a result of
the sale of 25% of the investment in the Financial Services Portfolio assets
(excluding banking assets) to Sanlam. The Net IPV of the Financial Services
Portfolio, taking into account ARC Investments' indirect share of the debt funding
and other assets and liabilities in the Financial Services structure, increased by
9.4% from R2 828 million at 30 June 2020 to R3 092 million at 30 June 2021. The
increase in the Net IPV resulted from a further capital contribution of R151 million
to ARC FSH and ARC Investments' share of the fair value gains in the Financial
Services Portfolio.

Alexander Forbes (6.2% of Fund Value, 30 June 2020: 11.5%)
ARC Financial Services Investments (ARC FSI) holds a 35.1% interest in Alexander
Forbes Group Holdings Limited (AFGH), which is listed on the JSE. The ARC Fund
therefore has an effective shareholding of 13.1% in AFGH through its interest in ARC
FSH. The Company's effective investment in AFGH decreased from R1 218 million at 30
June 2020 to R767 million at 30 June 2021, mainly as a result of the AFGH share price
being impacted by the payment of special dividends as well as the effective impact of
the transaction with Sanlam. The Company's indirect share of dividends received from
AFGH during the year amounted to R184 million.

TymeBank (9.6% of Fund Value, 30 June 2020: 8.8%)
TymeBank is a digital bank that leverages the use of digital technology to make
banking simple and affordable. The business managed to achieve its revenue and cost
targets, despite experiencing some significant headwinds during this financial year.
TymeBank forecasts to break even in 2022. It successfully onboarded 3.45 million
customers in just over two years since launching. TymeBank management enhanced their
value proposition to consumers by adding insurance, as well as a buy-now-pay-later
product called MoreTyme. The progress on strategy implementation to date, combined
with the additional capital that has been injected up to 30 June 2021, results in the
Company's share in the fair value of TymeBank amounting to R1 173 million at 30 June
2021. The Company's effective additional investment in TymeBank during the year under
review amounted to R232 million.

MAJOR EVENTS SUBSEQUENT TO REPORTING PERIOD
Sales of Afrimat shares
The ARC Fund sold 8.4 million Afrimat shares for a consideration of R496 million
after the reporting date.

Kropz Elandsfontein
On 6 September 2021 the appeal against the Water Use Licence which was issued to
Elandsfontein during April 2017, was dismissed by The Water Tribunal.

LEVEL OF ASSURANCE
The annual results have been audited by the Company's auditors,
PricewaterhouseCoopers Inc. who expressed an unmodified audit opinion thereon. Their
report also includes communication of key audit matters. This opinion is available,
along with the annual financial statements on the Company’s website at
https://arci.mu/investor-relations/#sens on
14 September 2021 and available for inspection at the Company's registered office1.

GOVERNANCE & LEADERSHIP
ARC Investments is managed and controlled in Mauritius by an experienced,
multinational Board of Directors (the Board) of which the majority is independent.
The Board has final oversight and responsibility in respect of ARC Investments'
business, strategy and key policies. This includes the investment in the ARC Fund.
There are no executive directors on the Board of ARC Investments.

Mark Cyril Olivier
Chairman of the Board

Clive Msipha
Chairman of the Audit and Risk Committee

Karen Bodenstein
Chief Financial Officer

ABOUT THIS ANNOUNCEMENT
This short form announcement is the responsibility of the directors and the
information contained herein is only a summary of the information in the full
Financial Results announcement and does not contain full or complete details. Any
investment decision by investors and/or shareholders should be based on consideration
of the full announcement that was released on
https://senspdf.jse.co.za/documents/2021/JSE/ISSE/AILE/FResults21.pdf and on the ARC
Investments' website https://arci.mu/investor-relations/#sens on 14 September 2021.
This short-form announcement does not contain any additional information not
appearing in the full Financial Results released on SENS. The full announcement is
available for inspection at the registered office1 and designated office2 of ARC
Investments and the offices of the Sponsor3 at no charge during normal business
hours. Copies of the full announcement may be requested by email from
investors@arci.mu. Ebene, Mauritius (with simultaneous circulation in Johannesburg)
14 September 2021.

SPONSOR
RAND MERCHANT BANK (A division of FirstRand Bank Limited)

1The registered office: Level 3, Alexander House, 35 Cybercity, Ebene, 72201,
Mauritius 2 Designated Office: 6th Floor, Phase 3, 11 Alice Lane, Sandhurst, Gauteng
3 The offices of the sponsor: Rand Merchant Bank, a division of FirstRand Bank
Limited, 1 Merchant Place Cnr Fredman Drive and Rivonia Road, Sandton, Johannesburg,
2196

Date: 14-09-2021 08:30:00
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