ANNUAL REPORT 2012 Table of Contents

About Venture Capital Trust Fund 1

Chairman’s Statement 2

Chief Executive’s Operational Report 4

Trustees, Official and Registered Office 13

Report of the Trustees 14

Statement of Trustees' Responsibilities 15

Independent Auditor's Report 16

Statement of Comprehensive Income 18

Statement of Financial Position 19

Statement of changes in Net Assets attributable to Fund Investors 20

Statement of Cash Flows 21

Notes to the Financial Statements 22 - 39 ANNUAL REPORT 2012

About Venture Capital Trust Fund

The Venture Capital Trust Fund (VCTF) was established by VISION Venture Capital Trust Fund ACT, 2004, an Act of Parliament, (ACT 680, as a Government of Ghana initiative to provide Our vision is to create a vibrant and well structured venture finance to Small and Medium Enterprises (SMEs). capital industry boasting of investments in various sectors, Operations of the Trust Fund begun in January 2006. leading to poverty reduction through job and wealth The Government's objective in establishing the VCTF is to creation with a collateral growth in government revenues. promote and support the private sector as an equal partner in achieving the country's developmental goals. FORMAT OF OPERATIONS

OUR MANDATE Our financing are undertaken through Venture Capital Finance Companies (VCFCs), which are managed by Fund In accordance with the VCTF ACT 680, 2004 the VCTF is to: Managers, licensed as Investment Advisors by the “Provide financial resources for the development and Securities and Exchange Commission (SEC). VCFCs are the promotion of venture capital financing for SMEs in Ghana intermediaries between SMEs requiring funds for by; operations and the VCTF. The maximum funding limit in an i. Providing financing to eligible Venture Capital investee company is 15% of total capitalization of a VCFC. Finance Companies (VCFCs) to support SMEs; and The Trust Fund also invests in Value Chain Projects under our Special Purpose Vehicle Structure. These investments ii. The provision of monies to support other are undertaken with the primary objective to produce activities and programs for the promotion of critical raw materials locally, to feed our industries. venture capital financing” In 2010, the Trust Fund piloted a Soybean Value Chain Project in partnership with other stakeholders to provide MISSION for the edible oil industry, the paint industry and as a sustainable source of feed ingredient for the multimillion dollar poultry industry. To provide low cost alternative source of funding to SMEs that will lead to efficient and profitable operations to create jobs and wealth.

Venture Capita Trust Fund 1 ANNUAL REPORT 2012 Chairman’s Statement

I have the pleasure as Chairman of the Board to present the growth recorded in 2011. The Country's GDP expanded by Annual Report on the operations of the Venture Capital 7.9% during the year on the back of high prices for the Trust Fund on behalf of the Board of Trustees for the year Country's major export earners including cocoa and gold, ended December 2012. I wish to congratulate the Board of and steady support from international and bilateral Trustees, the Chief Executive Officer, the Management donors. A deeper look at this growth reveals that the and the Staff of the Trust Fund for a successful and fruitful Services Sector, which experienced a 10.2% expansion year in deepening the Venture Capital Industry in Ghana followed by the Industry Sector with 7% growth, largely and establishing a global presence. I would also like to drove the growth. The agricultural sector recorded the extend my deepest gratitude and felicitations to our major lowest growth rate of 1.3%. stakeholders the Government of Ghana through the Ministry of In the export sector, weak Finance and Economic Planning, export growth combined with investment partners and our rising imports and short-term fund managers. capital inflows delivered a huge impact on the Country's balance ECONOMIC OVERVIEW of payments, leading to a deficit of US$2.3 billion in the first nine months of the year as against a A fall in the value of the Ghana deficit of US$288 million for the Cedi against major foreign same period in 2011. currencies, particularly the US dollar, marked the opening of Ghana continues to enjoy a 2012. Within the first six months favourable preference as a of the year, the cedi lost about 20% of its value against the viable investment destination for foreign investors and in US Dollar in the foreign exchange markets. This resulted 2012, the Ghana Investment Promotion Centre (GIPC) from the combined pressures of large public expenditures recorded an amount of US$5.6 billion in investments from accrued from the previous year and investor repatriation various foreign sources. This was lower than the US$7.68 of capital due largely to an uncertain political future in the billion recorded in 2011 and is attributed mainly to run up to the December 7 general elections. The steep investor's reluctance to deploy funds into various drop in the value of the cedi translated into an appreciable investments due to apprehension about the anticipated rise in the Country's inflation rate, pushing it from 8.6% in outcome of the 2012 election and its associated uncertain January to 9.5% in April. However, in response to the political future. Government's fiscal measures to stem the tide of rising inflation and stabilize the cedi, inflation settled at 8.8% at For the domestic economy, businesses continued to the end December 2012, lower than it had been during the complain about interest rates and the stiff access to long- year. term capital to pursue business expansion. The AGI for example noted in its Business Barometer for the fourth Despite these domestic challenges, Ghana's GDP growth quarter of 2012 that access to credit remains the number remained strong when ranked among the fastest growing one impediment to business growth. This creates a economies in the world although not as high as the 14.4%

Venture Capita Trust Fund 2 ANNUAL REPORT 2012 greater imperative for expansion of venture capital Corporate Governance investing to fill the gap in funding for SMEs. To ensure that the Board of Trustees operates at its maximum capacity, a new member Mr. Laud Baadoo, was The world economy in 2012 remained fragile and appointed. However, we had the unfortunate loss of Mr. precarious following four years of weak economic and Alex Tetteh, another member of the board, who was uneven recovery from the persistent Euro-zone debt representing the Ministry of Finance. Alex Asiedu also crises. As the pace of growth for Brazil, China, and India resigned from the board. slowed within the year, forecast for emerging economies were reduced in the face of declining global demand for goods. This decline also impacted several Sub Saharan SOURCE OF FUNDING economies forcing a similar downward revision in growth forecasts. The Government of Ghana continues to be our only source Ghana, although having a relatively weak integration into of funds through the national reconstruction levy and an the global economy, was not spared the brunt of the additional budgetary allocation of GHC10.0 million, which Eurozone Debt crises and its negative impact on was disbursed in 2012. As the Fund strives to implement economies round the world. As a result of the crises, new initiatives and expand the available pool of funds for Ghana's non-traditional exports and timber exports took a SMEs, it is impeded by the increasing dwindling of its funds. significant downward dip, which, as mentioned earlier Various approaches have been made to the Ministry of accounted for the deterioration in the Country's balance of Finance and Economic Planning (MOFEP) for a permanent payments in 2012. source of funding. It is hoped that we shall have a favourable response for the coming year. The Trust has also made significant progress in the sourcing of a $150 COLLABORATION million loan funding from the China Exim Bank. It is hoped that MOFEP will bring closure to this undertaken very soon. In our quest to establish stronger collaboration with regional and international bodies, The Trust Fund co- hosted a high level global African Venture Capital Fund NEW INITIATIVES Association (AVCA) Conference on Private Equity/Venture Capital at Movenpick Hotel in Accra. Over 350 industry In our quest for continued perfection we introduced the players attended the Conference, putting Ghana on the Ghana Angel Investment Network (GAIN) and have Global Private Equity/Venture Capital market. initiated the concept of Impact Investing in Ghana. These The Collaboration with the Rockefeller Foundation to initiatives will be given the needed push to have the establish Impact Investing in Ghana yielded good necessary social impact expected. dividends with the approval of a $150,000.00 grant for the project. On the local front we continued to engage our partners Thank you. and investors to tap into their resources and build a stronger and inclusive Venture Capital eco-system.

Hon J. Owusu Acheampong,

Venture Capita Trust Fund 3 ANNUAL REPORT 2012 Chief Executive's Operational Report

Government endowment since inception to GH¢32.4 million. Additionally, the Trust Fund successfully negotiated a $150 million loan from the China EXIM Bank. The loan was fully approved by executives of China EXIM bank, however, the Ministry of Finance is yet to grant assent for the loan documentation to be completed and the funds disbursed to the Trust Fund via MoFEP. During the year, the Trust Fund disbursed a total of US$1,257,545 to VCFCs in response to capital calls bringing the total amount disbursed to US$10,110,408 as of the report date. This represents 59.5% of total committed capital. No realizations or distributions were made during the year; however, the minimum expected return computed for all funds under management amounted to $2.9 million.

At the beginning of the year, a comprehensive review was completed for portfolio companies of Bedrock Venture Finance Company Limited (“Bedrock”). In response to this, INTRODUCTION the Board of Trustees directed that the Fund Manager (SIC- FSL) be replaced. Further, in December 2012, the Trust I deem it an honour to present the Chief Executive's Fund with the support of the Economic Management and Operation Report for the Year 2012. Capacity Building Project of the Ministry of Finance, In 2012 many activities and programs were initiated by the commissioned a consultant to conduct a similar review for Trust Fund. Though some of these programs remain to be the portfolio companies of Activity Venture Fund Limited rolled over in 2013, several other targets were achieved, (“Activity”). The assignment is expected to begin in especially in the areas that required the Trust Fund's direct January 2013. level of effort. Fidelity and Ebankese were on normal operations OVERVIEW OF INVESTMENT ACTIVITIES throughout the year, however, Fidelity Capital Partners (Fund Manager of Fidelity Equity Fund II) changed its name to Jacana Partners following a change in ownership. As a means of procuring additional funding for the Trust Besides fund investments, VCTF's portfolio of risk assets Fund's operations, several high-level consultations were increased with more disbursements to the Special Purpose undertaken between Ministry of Finance and Economic Vehicle (SPV) and the Development Assistance (DAF) Planning (MoFEP) and the Trust Fund. As a result, MoFEP program. The SPV portfolio increased by an amount of disbursed an amount of GH¢10 million to augment the GH¢3,492,600 while the DAF portfolio increased by an Trust Fund's initial endowment, bringing the total amount of GH¢1,395,000.

Venture Capita Trust Fund 4 ANNUAL REPORT 2012

In order to establish a presence in the Northern belt of the country, a new office was acquired in Kumasi during the third quarter of the year. It is expected that full operations at the Kumasi office will begin in the first quarter of 2013. In the meantime preparations have begun to move the field office from Techiman to Kumasi. In 2012, the Trust spear-headed several programs aimed at promoting the Venture Capital Industry and improving access to finance. Among these programs were the Ninth African Venture Capital Association Conference held in Accra Ghana, which brought more than 350 private equity and venture capital players across the globe to Accra, placing Ghana's nascent private equity industry firmly on the global map and exposing fund managers to a myriad of fund raising opportunities. A seminar to demystify PE/VC The Trust Fund also received a grant of $150,000 from The for local policy makers and regulators was also organized, Rockefeller Foundation, which it committed to mainly to encourage those with the power to influence the researching the policy environment for impact investing in flow of capital to direct local capital at the Private Equity Ghana leading to the establishment of the Ghana Institute Asset class. In response to this seminar the Securities and for Responsible Investing. The research assignment was Exchange Commission (SEC) engaged the Trust Fund on a completed in December 2012 and it is expected that GIRI project aimed at providing relevant rules and guidelines to will be launched before the end of first quarter of 2013. regulate the Venture Capital and Private Equity Industry. SEC currently has a bill in Parliament to regulate the industry and the Investment Team is working closely with the Industry to develop an appropriate document for discussions with SEC. In the second quarter of the year, the Trust Fund signed an MOU with Ghana Stock Exchange (GSE) to promote the SME Listing Project and to establish the SME Listing support fund. It is expected that these two innovations will be instrumental in providing viable exit routes for Venture Capital Finance Company’s (VCFC) fund managers.

The Ghana Angel Investor Network, launched in September 2011, was also active during the year, organizing a business pitch session in the first half of the year and a successful entrepreneur forum during the second half of the year. GAIN operations remained rather low due to challenges with available human capacity to man the

Venture Capita Trust Fund 5 ANNUAL REPORT 2012 affairs of the Network. It is expected that this will be FUND OF FUNDS ACTIVITIES resolved early in 2013 to put GAIN on the growth path. In keeping with the aim to build capacity for portfolio Commitments and Drawdown companies, the Trust organized an IFRS training for During 2012, a total of US$1,257,545 was disbursed to VCFCs portfolio companies, which attracted more than 25 in response to capital calls, which increased the total participants. The Trust Fund also took part in several amount disbursed as at December 31, 2012 to industry related conferences around the world including US$10,110,408 representing 59.5% of total committed the Diversified Asset Show in South Africa and the capital to all VCFCs. SuperReturn Conference in Morocco. Realizations and Distributions ADMINISTRATION, IT, None of the VCFCs have made any distributions to Investors since establishment. This is attributed to the AND INTERNAL AUDIT relatively young life of the various Funds. As 10-year life Funds, distributions are expected from Year In 2012, VCTF's media presence, public education and five (5). awareness were promoted. This is demonstrated by the coverage given by the print and electronic media during Fund Monitoring Activities the execution of the various activities such as AVCA Monitoring is one of the requisite tools to enforce Conference, signing of MOU between GSE and VCTF, compliance and enhance performance of the VCFCs. To Regional Roundtable Conferences among others. fulfill this, a number of measures were put in place in 2012 to monitor the operations of venture capital funds under In the area of public education, the execution of phase the VCTF umbrella. These include: three and four of the Regional Roundtable Conferences a. Replacement of Board Representations helped in build brand recognition among business In December 2012, VCTF replaced one of its board communities, giving them a better understanding and representative of Gold Venture Fund Limited nd appreciation of the operations of the Trust Fund. (“GVFC”), at the 2 Annual General Meeting held on th Furthermore, the production and airing of a deco drama on 17 December 2012. the investments made by Fund managers gave VCTF top- of–mind awareness among policy makers and b. Quarterly Meetings with Board Reps and Fund Managers stakeholders and also gave a greater insight into the The Trust Fund instituted regular meetings with its operations of the Trust Fund. Board Representatives on various funds. During the year, two meetings were held in this regard. The There were some changes in the personnel composition of purpose of the meetings was to enable the Trust Fund the Trust Fund with three new hires and a resignation by receive board level perspectives on the performance the Head of Investments. The position of the Head of of the funds. To facilitate reporting from Board Reps, Investments has since been filled internally and four new a new reporting template was introduced for National Service persons were assigned to the Trust Fund. adoption by the Board Reps. The need to enforce reporting standards is critical as Fund Managers of An Internal Audit unit commenced work with one staff Bedrock and Fidelity Equity Fund II failed to fulfill their during the second half of the year and successfully audited reporting obligations throughout the year. all the major departments of the Trust Fund

Venture Capita Trust Fund 6 ANNUAL REPORT 2012 c. To support fund managers to build value in portfolio STRATEGIC INITIATIVES companies, technical assistance is provided on a case by case basis upon request in 2012. SME Listing Project: Partnership with Ghana Stock Exchange Promotion and Public Awareness This project involves collaborating with the Ghana Stock To drive up awareness for GAIN's presence a number of Exchange and SEC to assist SMEs to list on the Exchange as presentations were made to several institutions and fora a way of improving access to capital for SMEs and including K.N.U.S.T students, Ghana Association of providing a viable and lucrative exit route for Fund Software Companies, and Tamale Investments Forum. Managers. During the second quarter, an MOU evidencing These presentations have been influential in driving up the collaboration between VCTF and GSE was signed. At awareness for GAIN and encouraging entrepreneurs to the beginning of the year GSE formed the GAX Listing apply to the network for funding. In August 2012, the GAIN Committee, which is an interagency committee dedicated Secretariat in collaboration with the Joy FM organized the to ensuring the implementation and launching of GAX. This first Angel Investor – Entrepreneur Forum to educate Committee worked assiduously to ensure the project is entrepreneurs on angel investing and the application successfully implemented. Among the project's most procedure. The Forum was attended by more than 200 attractive features is the GAX Listing Support Fund, which entrepreneurs. Six Angel investors were present as panel is a fund designed to assist companies who may have members to offer insights on Angel investing. The difficulties in covering the upfront cost associated with Secretariat ended the year with a “Meet an Angel Session” listing on the GAX. The final guideline for the Fund was with Mr. Kwasi Twum, CEO of Multimedia Group, to developed by the Committee during the year and Venture explore investment opportunities and offer some insights Capital committed to provide an amount of $500,000 as on starting and managing the business. About 15 carefully seed funding for the Listing Support Fund. Other selected entrepreneurs were able to attend. contributors to the Fund include the African Development Bank, which has approved an amount of $600,000 and the Strategic Collaborations GSE, which is contributing $50,000. As a result of GAIN's public awareness drive, the However, VCTF is required to sit on the GAX Governing Secretariat was engaged in several meetings with various Council to steer the affairs of GAX including approving bodies to explore avenues for collaborating on a common funding applications for the Listing Support Fund. The interest. In March, the Acting Administrator, Mr. Percival GAX listing rules was approved by SEC in the third quarter Ampomah, met with a group of executives from Stanford of the year. The GSE Council also approved the GAX University, to discuss collaboration opportunities Support Fund Guidelines in December 2012. between the two institutions. Based on those discussions, Standford University has made a decision to establish the Stanford Initiative for Innovation in Developing Economies INTRODUCTION OF IMPACT INVESTING (SEEDE) in Ghana and has expressed a strong interest to work in collaboration with GAIN as well as Venture Capital Impact investing has become the buzzword for the Trust Fund to promote entrepreneurship at both the start- investing community in most recent years and for African up and the development level in Ghana. In addition to a Private Equity space. The concept is designed to myriad of resources and human capital, SEED has an encourage investors to direct funds toward opportunities endowment to promote entrepreneurship in developing that deliver a double edged benefit stream of economic economies and they have selected Ghana to be the hub for returns and improvement of social wellbeing. The Trust its engagement with the West African sub region. Fund as part of its strategy to increase private sector

Venture Capita Trust Fund 7 ANNUAL REPORT 2012

participation in the investment, submitted a proposal to The conference attracted over 400 delegates from over 30 The Rockefeller Foundation (TRF) to source for countries including key local stakeholders in the financial counterpart funding to develop impact investing as an sector. Keynote address was delivered by Mr. Seth asset class. Temper, the Deputy Minister for Finance and Economic Following that application, Venture Capital Trust Fund Planning. The purpose of the collaboration with AVCA received a grant of $150,000.00 from The Rockefeller among other things was: Foundation in April 2012 to initiate an impact investing 1. To increase publicity for the Trust Fund among the project in Ghana. The grant among other things was to international investment community both from Africa finance policy research environment, organize and outside Africa; stakeholder consultation, and establish the Ghana 2. To provide local support to AVCA executive in hosting Institute for Responsible Investing (GIRI) - an advocacy the Conference in Accra; body to promote impact investing in Ghana. 3. To showcase Ghana as a ripe destination for PE/VC investments; and 4. To provide an avenue for local fund managers to REGULATIONS FOR PE/VC INDUSTRY interact with potential investors and other fund Securities and Exchange Commission (SEC) has laid a bill managers to establish valuable networks, which can before Parliament seeking to regulate the VC/PE industry be useful for fund raising in the future in Ghana. The motive behind this regulation will be to To make inroads into achieving the Trust Fund's mandate streamline the activities of the PE/VC industry in Ghana, of growing a thriving PE/VC industry in Ghana. thus making the asset class more attractive for both local and foreign investors. Feedback from participants and the general media in An interagency committee will be formed to hold broader Ghana and around the world suggest that Conference stakeholder consultations to interrogate and come up was highly successful at delivering the anticipated with a proposed guideline rules to regulate the industry. results. Further, the Trust Fund has, through the VCTF would also seek Technical Assistance from AVCA, collaboration, established itself as a strong player in the EMPEA etc. in this regard. African Private Equity Space. This can produce several advantages when seeking funds from international investors to partner with. NINTH AFRICAN VENTURE CAPITAL ASSOCIATION (AVCA) CONFERENCE

Ghana's nascent PE/VC industry received yet another boost during the year under review. Prior to the year 2012, the Trust Fund engaged AVCA on the possibility of hosting its Annual Conference in Accra. AVCA subsequently agreed to host the conference in Accra. Venture Capital with support from the Ministry of Finance & Economic Planning (MoFEP) hosted the 9th AVCA Conference in Accra from April 23-24, 2012. The theme of the conference 'Africa, the Rising Giant' aimed to promote, develop, and stimulate private equity and venture capital in Africa.

Venture Capita Trust Fund 8 ANNUAL REPORT 2012

training was attended by 25 participants from the various portfolio companies.

CONFERENCES

Members from the Trust attended a three-day conference dubbed SuperReturn Africa in Morocco in December 2012. The Conference brought together most well-respected industry professional from across Africa and the globe. The SuperReturn Africa Conference offered some unique opportunities to interact with key players in the African PE space while at the same time providing vital information First PE/VC Seminar for Policy Makers and Regulators on the trends, activities, and opportunities within the The Venture Capital Trust Fund in collaboration with the industry. Ministry of Finance and the Commonwealth Secretariat organized a two-day seminar that was held at the Holiday OPENING OF A NEW OFFICE IN KUMASI Inn in Accra on 4th and 5th September, 2012. The Seminar attracted more than 50 experts made of up financial sector regulators, policy makers, and international and local During the first quarter of 2012, the Board of Trustees private equity experts for a private equity and venture granted an approval to locate an office accommodation in capital seminar. Kumasi and relocate the field office operations to Kumasi. It is expected that the office will provide a strategic The seminar was designed to provoke discussions and foothold for the Trust Fund in the Northern belt of the engage policy makers and regulators on issues country. We anticipate that the office will be fully ready for th confronting the development of private equity and operations by 15 February, 2013. venture capital industry in Ghana particularly as they relate to the industry's ability to harness local capital from UPDATE ON SPECIAL PURPOSE FINANCING institutional investors, such as pension funds and Commodity Value Chain Financing insurance companies. In 2012, a total amount of GH¢3,492,600 was disbursed to 14 Companies in soya and maize production, aggregation The deliberations during the two days of the seminar made and marketing. Total acreage put under cultivation by 6 of it clear, the need to further deepen engagement with the assisted Companies is 1,600 acres whilst the other 8 stakeholders to demystify the private equity asset class Companies were assisted to aggregate, store and market and make it more amenable to local capital from pension grains (maize and soya) produced by their out-growers funds, insurance companies and other institutional and other farmers in their respective catchment areas. investors in the Country. The impact of the Commodities Value Chain Financing with regards to productivity, jobs creation, incomes creation, provision of ready market outlets to farmers and food CAPACITY BUILDING security in the local communities and the economy as a The Trust Fund organised a two-day training program on whole is significant( Monitoring and Evaluation Exercise to IFRS to build the financial knowledge of Investees and also establish these is underway). Due to the continuous to make them IFRS compliant as required by law. The declining of the sorghum sector however, management

Venture Capita Trust Fund 9 ANNUAL REPORT 2012

Inventory Credit Program (ICP), Warehouse Receipt System, collaboration with Schools Feeding Programme are being considered for possible adoption.

Update On The Development & Assistance Fund (DAF)

In January 2011, the Board of Trustees approved the establishment of a Development Assistance Fund (DAF) as an initiative to develop a pipeline of business for the VCFC Fund Managers, an amount of GHC 1 million was set aside to pilot this initiative and a further GHC 1 million was added in 2012. The initiative has 63 potential businesses who will be used by the fund managers when they grow and meet the criteria for equity financing. decided to suspend additional investments into the sector until further notice. COLLABORATION WITH MINISTRY OF FINANCE AND ECONOMIC PLANNING Pursuant to its goals in commodity value chain financing and emerging opportunities in the Agricultural Sector, the Economic Management and Capacity Building Project Trust Fund collaborated with the Ministry of Food and EMCB –FSR A g r i c u l t u r e , U S A I D / A D V A N C E P r o j e c t , The EMCB project under MoFEP/World Bank provides USAID/Warehousing Receipt System, Northern Rural support to the Trust Fund. Notably among the support Growth Programme (NRGP) and the National Service include capacity building, logistics, and public education Secretariat among others in implementing carrying out its campaign. During the year under review, VCTF activities. participated in most of the meetings held by the Project. This has therefore strengthened the relationship with Despite, the emerging opportunities in the Agricultural MoFEP. Proposal for supplementary funding was Sector, VCTF operations in the period under review developed and submitted to the Project. The proposal revealed the lessons that there is the need to facilitate sought to secure additional $329,000 to finance effective warehousing and marketing arrangements with outstanding programs/activities under the project and also bulk buyers including processors (especially VCTF Investee initiate new programs for the 2012. The Project approved Companies) in the various commodities to ensure timely $126,000 to complete some of the activities and also to bulk sales and payments for produce of nucleus farmers conduct investee companies' assessment. Some and aggregators. This will address delays in payments by outstanding activities including the development of Docu bulk buyers to VCTF clients and improve on timely Drama was completed and fully paid for by the EMCB repayment of loan facilities by the beneficiaries. Besides, project. exchange programmes among entrepreneurs and more management capacity development programmes will be Financial Sector Strategic Plan (FINSSP II) developed and pursued. Government commitment to improving the financial Consequently, research on introducing some Innovative sector was bolstered by introducing reforms in the sector. products alongside the existing Commodity Value Chain As part of the on-going reform, the government developed Financing has been commissioned. Among others is the the Financial Sector Strategic Plan (FINSSP). One of the

Venture Capita Trust Fund 10 ANNUAL REPORT 2012

outputs of FINSSP 1 was the establishment of VCTF. In Interviews sharing insight into the VC/PE industry. 2012, VCTF participated in the development of a new OUTLOOK FOR 2013: strategy document called FINSSP II. Final Report was The activities that will guide the Trust Fund going into 2013 completed and submitted to the World Bank for are as follows: consideration. Under the strategy, VCTF proposed many innovative programs that will promote and consolidate · Secure additional funding for the Trust Fund, the gains the VC/PE industry has made. Follow up on the which will enable the Trust invest in new and more project are being made and it is anticipated that the project promising funds, while pursuing other strategic will take off in July 2013. initiatives such us

· Converting the SPV portfolio into Agric. Fund, Public Awareness Drive Venture Capital Trust Fund as part of its public awareness · Establishing a fund to match investments done by and education programme organised a Regional Angel investors and other specialized vehicles, Roundtable Conference for the three Northern Regions, such as mezzanine and leasing funds, which have been on the drawing tables for some time. with the theme; “Venture Capital Financing: Five Years on: the Success Story, Challenges, the Issues and the Way · Work with MOFEP to complete the loan Forward.” The forum was organized in May in Tamale, documentation for the China EXIM Loan. Bolgatanga and Wa. It was targeted at the larger business communities in the regions. Participants to the three · Work with Government to identify a more secure conferences numbered more than 300. These fora have and regular source of funds for the Trust Fund. greatly enhanced the image of VCTF and increased the public understanding and appreciation of the operations Launch of GAX at the end of the first quarter of 2013 will trigger opportunities for Fund Managers of the Trust Fund. It is expected that this understanding to exit their portfolio companies by listing in the will reflect in the quality and number of applications near future. GAX will be launched in tandem with received by the various fund managers. the GAX listing support fund, which has been Phase four of the Regional Round Table Conference were designed to provide funds to assist companies to list on the exchange. organised in the Volta and Eastern Regional capitals of Ho and Koforidua. More than 200 participants attended the During the first quarter of 2013, our work on Impact conferences. Investing is expected to come to a close with the launch of As part of VCTF's public education and awareness the Ghana Institute for Responsible Investing. programme a media agency was contracted to produce a deco drama on the investments made by the various fund Harnessing local capital is key for building strong foreign managers. With collaboration from the EMCB, this project investor confidence including the DFIs. Some level of was executed successfully and telecasted on GTV in a three consultations have been made so far, however, the Trust part series. Other media and public awareness initiatives Fund will collaborate effectively with the National Pension in 2012 includes General Publications, Print Media and TV Regulatory Authority (NPRA) to device a mechanism to

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allow pension fund trustees to invest in the asset class. Already, NPRA has voiced concerns about transparency and reporting, which the Trust Fund will assess critically.

Moreover, to attract local as well as foreign capital into the asset class and given the current wave of financial regulation across the globe, VCTF in collaboration with Security and Exchange Commission and other stake holders, will draft rules and guidelines for PE/VC regulations in Ghana. We believe in doing so, we can attract investors into the sector.

The Ghana Financial Sector Strategic Plan (FINSSP II), approved by cabinet, required the Trust Fund to be assessed to determine the relevance of it as government policy towards SME financing in Ghana. We shall focus on this assignment as a means of seeking an expanded mandate and secure long-term funding from Government to the benefit of SMEs.

Another major aim in 2013 is also to streamline Fund Manager's operations to focus more on job creation, while at the same time promoting the industry through extensive research and education, and establishing second round funds with some selected existing fund managers. As a critical requirement for the industry's development, industry programs aimed at building long-term human capital will be continued and we expect to organize at least one training program for Industry professionals to cover value creation strategies, managing portfolio companies, managing exits among others. Also, Technical Assistance (TA) to investee companies, public education and awareness, special-purpose financing and other capital expenditure has been budgeted as part of a broad program to achieve VCTF's objectives.

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BOARD OF TRUSTEES, OFFICIAL AND REGISTERED OFFICE

Board of Trustees Hon. J.H Owusu Acheampong Chairman Hon. Richard L. Agbenyefia Member Alex Asiedu Member Susan Okyere Member Daniel A.K. Mensah Member Alex Tetteh Member Daniel Duku Member & CEO

Secretary Oxford & Beaumont Solicitors 54 Independence Ave 1st Floor, Accra Ghana

Registered office Premier Towers 12th Floor Ministries, Accra

Auditors Opoku, Andoh & Co. Accountancy House Community 5, SDA 8 P.O. Box Co 1364 Tema

Bankers Ghana Commercial Bank Limited Agricultural Development Bank Limited National Investment Bank Limited Fidelity Bank Limited Ecobank Ghana Limited Access Ghana limited Merchant Bank Limited Sahel Sahare Bank

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REPORT OF THE TRUSTEES

The Trustees in submitting the audited financial statements of the fund for the year ended 31 December 2012 report thereon as follows:-

1. Activities The Fund's activities are those of providing venture capital to businesses. Its business involves the provision of long-term committed capital to assist unquoted companies to grow and succeed.

2. Financial statements and dividend GHS

Total Income 4,123,942

Decrease in net assets attributable to Fund Investors (364,288)

3. Dividend The trustees do not recommend the payment of dividends for the year ended 31 December 2012.

4. Nature of business There has been no change in the nature of business of the fund during the year under review.

5. Auditors Inaccordance with Section 134(5) of the Companies Code, 1963, the auditors, Messrs. Opoku, Andoh & Co, continuein office as auditors of the fund.

6. Conclusion We wish to express our appreciation to the managementand the entire staff for their dedicated hard work and service during the year 2012.

On behalf of the Board

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STATEMENT OF TRUSTEES RESPONSIBILITIES

The Trustees are responsible for preparing financial statements for each financial period which give a true and fair view of the state of affairs of the fund at the end of the financial year and of the Statement of Comprehensive Income of the Fund for that period. In preparing those financial statements, the Trustees are required to:

- Select suitable accounting policies and then apply them consistently.

- Make judgments and estimates that are reasonable and prudent.

- State whether the applicable accounting standards have been followed.

- Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the fund will continue in business.

The trustees are responsible for ensuring that the fund keeps accounting records which disclose with reasonable accuracy the financial position of the trustfundand which enable them to ensure that the financial statementscomply with the InternationalFinancial Reporting Standards.

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INDEPENDENT AUDITOR'S REPORT TO THE GOVERNMENT OF GHANA

Report on the financial statements

We have audited the accompanying financial statements of Venture Capital Trust Fund which comprise the statement of financial position as of December 31,2012, the statement of comprehensive income, statement of changes in net assets attributable to fund investors and the statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Trustees' responsibility for the financial statements The fund's trustees are responsible for the preparation and fair presentation of these financial statements in accordance with InternationalFinancial Reporting Standards and in the manner required by the Companies Code, 1963 ( Act 179) and the Venture Capital Trust Fund Act, 2004 (Act 680). This responsibility includes:designing, implementingand maintaining internal controlrelevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors' responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with InternationalStandards on Auditing. Those standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amountsand disclosures in the financial statements.The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements,whetherdue to fraud or error. Inmaking those risk assessments, the auditor considers internalcontrol relevantto the entity'spreparation and fair presentationof the financial statementsin order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

Inour opinion, the consolidated financial statementsgive a true and fair view of the financial position of Venture Capital Trust Fund as at December 31, 2012, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the Ghana Companies Code,1963 (Act 179), the Venture Capital Trust Fund Act, 2004 (Act 680).

Venture Capita Trust Fund 16 ANNUAL REPORT 2012

INDEPENDENT AUDITOR'S REPORT - continued TO THE GOVERNMENT OF GHANA

Report on other legal requirements

The Ghana Companies Code, 1963 (Act 179) requires that in carrying out our audit work we consider and report on the following matters. We confirm that: i. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; ii. In our opinion proper books of accounts have been kept by the fund, so far as appears from our examination of those books; and iii. The statementof comprehensiveincome compare with statement of financial position of the Trust are in agreement with the books account.

……...…………………………………………………. PARTNER SIGNING: PETER OPOKU ICAG/P1009 ACCOUNTANCY HOUSE SDA 8 COMMUNITY 5 TEMA

DATED : 26th September, 2013

Venture Capita Trust Fund 17 ANNUAL REPORT 2012

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31ST DECEMBER 2012 Note 2012 2011 GHS GHS

Income 6 4,123,942 2,887,277

Expenses Administrative Expenses 8 (2,950,140) (3,121,062) Trustees Emoluments (245,719) (123,595) Auditors Remuneration (14,000) (12,000) Depreciation (127,815) (92,230)

Total Operating Expenses (3,337,675) (3,348,887)

Net Operating Income 786,268 (461,610) Impairment Charge on Loans 10c (900,914) (195,121)

Increase/Decrease in Net Assets Attributable to Fund Investors from Operations (114,646) - 656,731

OTHER COMPREHENSIVE INCOME

Net changes in fair value of Financial Assets at fair value through profit or loss 8 (249,642) (2,068,143) Total Comprehensive Income/Loss for the year (364,288) (2,724,874)

Venture Capita Trust Fund 18 ANNUAL REPORT 2012

STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER 2012

Note 2012 2011 GHS GHS ASSETS

Non-Current Assets Property & Equipment 9 3,856,873 4,850,086 Financial Assets at fair value through profit or loss 10a 10,780,869 7,117,833 14,637,742 11,967,919 Current Assets Loans 10b 10,067,610 5,024,979 Receivables 11 1,559,124 420,374 Cash and cash equivalent 12 13,796,683 11,540,099 25,423,418 16,985,451 TOTAL ASSETS 40,061,160 28,953,370

LIABILITIES

Deferred Income 13 69,909 - Current liabilities Payables 14 270,839 407,070

Net Assets attrubutable to Fund Investors 39,720,412 28,546,300

TOTAL LIABILITIES AND NET ASSETS ATTRIBUTABLE TO FUND INVESTORS 40,061,160 28,953,370

Venture Capita Trust Fund 19 ANNUAL REPORT 2012

STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO FUND INVESTORS AS AT 31ST DECEMBER 2012

2012 2011 GHS GHS

Net Asssets attributable to Fund Investors at 1st January 28,546,300 31,271,175 Increase/Decrease in Net Assets attributable to Fund Investors from operations (364,288) (2,724,874) Funds from Ministry of Finance 10,000,000 - Prior Year Adjustment 1,538,400 - Net Asssets attributable to Fund Investors at 31st December 39,720,412 28,546,300

Venture Capita Trust Fund 20 ANNUAL REPORT 2012

STATEMENT OF CASHFLOW FOR THE YEAR ENDED 31ST DECEMBER 2012 2012 2011 GHS GHS Operating Activities Net assets attributable to Fund Investors from operations (364,288) (2,724,874)

Other net changes in fair value of financial assets at fair value through profit or loss 249,642 2,068,143 Impiarment charge 900,914 195,121 Depreciation charge 127,815 92,230 Profit on disposal (9,441) (7,251) Operating cash flow before movement in working capital 904,642 (376,631)

Changes in working capital Increase in Loans (5,943,545) (3,683,122) Increase in Receivables (1,138,750) (217,422) Increase in Payables (136,231) 210,660 Net cash generated from operating activities (6,313,884) (4,066,515)

Investing activities Addition to Financial Assets (2,374,279) (1,549,564) Additions to Property & Equipment (269,331) (4,810,297) Proceeds from Disposal of Property & Equipment 10,170 7,251 Reclassification of Property & Plant 1,134,000 - Net cash outflow from investing activities (1,499,440) (6,352,610)

Financing Activities Grant from Rockfeller Foundation 69,909 - Funds from Ministry of Finance 10,000,000 -

Net increase/(decrease) in cash and cash equivalent 2,256,585 (10,419,125)

Cash and cash equivalents at 1st January 11,540,099 21,959,224 Cash and cash equivalents at 31st December 13,796,683 11,540,099

Venture Capita Trust Fund 21 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

1. General information d. Use of estimates and judgement

Venture Capital Trust Fund was established by an Act of The preparation of financial statements in conformity with Parliament, Venture Capital Trust Fund Act, 2004 (Act 680) IFRSs requires management to make judgements, as a Government of Ghana initiative to provide finance to estimates and assumptions that affect the application of small and medium enterprises (SMEs). policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated Venture Capital Trust Fund is registered and domiciled in assumptions are based on historical experience and Ghana. The address of the fund's registered office can be various other factors that are believed to be reasonable found on page 2 of the financial statements. The Fund's under the circumstances, the results of which form the business is to provide venture capital funding to private basis of making the judgements about carrying values of sector small and medium size enterprises in Ghana. assets and liabilities that are not readily apparent from other sources. Actual results may differ from these The investment activities of the Fund are undertaken estimates. through and managed by Fund Managers. The Fund Manager is responsible for the management, operation The estimates and underlying assumptions are reviewed and administration of the affairs of the Fund. on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if 2. Basis of preparation the revision affects only that period or in the period of the a. Statement of compliance revision and future periods if the revision affects both current and future periods. The financial statements have been prepared in accordance with International Financial Reporting In particular, information about significant areas of Standards (IFRSs) and its interpretations adopted by the estimation uncertainty and critical judgements in applying International Accounting Standards Board (IASB). accounting policies that have the most significant effect on the amount recognised in the financial statements are b. Basis of measurement described in note 5.

The financial statements are prepared under the historical cost basis as modified to include the fair valuation of certain finanacial assets and liabilities to the extent required or permitted under accounting standards and as set out in the relevant accounting policies. c. Functional and presentational currency

The financial statements are presented in Ghana Cedis (GHS) which is the fund's functional and presentation currency.

Venture Capita Trust Fund 22 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012 e New standards and interpretations not yet Exposure Draft on the replacement of IAS 39 and applies to adopted classification and measurement of financial assets and liabilities as defined in IAS 39 . The standard was initially The standards and interpretations that are issued, but not effective for annual periods begining on or after 1 January yet effective , up to the date of issuance of the Fund's 2015. In subsequent phases, the board will address financial statements are disclosed below. The Fund impairment and hedge accounting.The Trust Fund will intends to adopt these standards, if applicable, when they quantify the effect of the adoption of the first phase of become effective. IFRS 9 in conjunction with the other phases, when issued , to present a comprehensive picture. IFRS 1 Government Loan - • Amendments to IFRS 1 These amendments require first-time adopters toapply the IFRS 11 - Joint Arrangements requirements of IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, prospectively The standard becomes effective for annual periods to government loans exsisting at the date of transition to beginning on or after 1January 2013. It replaces IAS 31 IFRS 9 (or IAS 39,as applicable) and IAS 20 to government Interests in Joint Ventures and SIC 13 Jointly Controlled loans retrospectively if the information needed to do so Entities - Non-monetary Contributionby Ventures.Because had been obtained at the time of initially accounting for IFRS 11 uses the principle of control in IFRS 10 define that loan. The exception would give first time adoption control, the determination of whether joint control exists relief from retrospective measurement of government may change. The adoption of IFRS 11 is not expected to loans with a below-market rate of interest. The have a significant impact on the accounting treatment of amendment is effective for annual periods on or after 1 investments currently held by the Fund. January 2013.The amendment has no impact on the Trust Fund. IFRS 12 - Disclosure of Investment with Other Entities IFRS 7 Disclosures - Offsetting Finanacial Assets and Financial Liabilities - Amendments to IFRS 7 These The standard becomes effective for annual periods amendments require an entity to disclose information beginning on or after 1 January 2013. It includes all of the about rights to set - off and related arrangements (eg. disclosures that were in IAS 27 related to consolidated Collateral agreements). The disclosures would provice financial statement, as well as all of the disclosures that users with information that is useful in evaluating the were previously included in IAS 31 Interest in Joint effect of netting arrangements on an entity's financial Ventures ans IAS 28 Investment in Associates. These position. The new disclosures are required for all disclosures relate to an entity 's interest in subsidiaries recognised financial instruments that are set off in ,joint arrangements, associates and structured entities. A accordance with IAS 32 Financial Instruments: number of new disclosures are also required. One of the Presentation. most significant changes introduced by IFRS 12 is that an entity is now required to disclose the judgements made to IFRS 9 Financial Instruments determine whether it controls another entity. Many of these changes were introduced by the IASB in response to IFRS 9 , as issued , reflects the first phase of the IASB's work the financial crisis.Now, even if the Company concludes though the adoption date is subject to the recently issued that it does not control an entity , the information used to

Venture Capita Trust Fund 23 ANNUAL REPORT 2012

make that judgment will be transparent to users of the beginning on or after 1 January 2013. IFRS 13 does not financial statements to make their own assessment of the change when an entity is required to use fair value, but financial impact were the company to reach a different rather ,provides guidance on how to measure the fair value conclusion regarding conclusion regarding consolidation. of financil and non - financial assets and liabilities when The standard will not have any impact on the financial required or permitted by IFRS. There are also additional position or performance of the Company. disclosure requirments. Adoption of the standard is not expected to have a material impact on the financial position IFRS 13 - Fair Value Measurement or performance of the Company.

The standard becomes effective for annual periods

Venture Capita Trust Fund 24 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

New standards and interpretations not yet adopted - IAS 28 Investments in Associates and Joint Ventures (as continued revised in 2012)

IAS 1 Presentation of Items of Other Comprehensive As a conseqence of the new IFRS 11 Joint Arrangements, Income - Amendments to IAS 1 and IFRS 12 Disclosures of Interests in Other Entities, IAS 28 Investments in Associates, has been renamed IAS 28 The amendments to IAS 1 change the grouping of items Investments in Associates and Joint Ventures , and presented in other comprehensive income (OCI). Items describes the application of the equity method to that could be reclassified (or recycled) to profit or loss at a investment in joint ventures in addition to associates. The future point in time (for example , net gains on hedges of revised standard becomes effective for annual period net investments, exchange differences on translation of begining on or after 1 January 2013. foreign operations, net movements on cash flow hedges and net losses or gains on available -for-sale financial IAS 32 Offsetting Financial Assets and Financial Liabilities - assets) would be presented separately from items that Amendments to IAS 32 will never be reclassified(for example ,acturial gains and losses on defined benefit plans). The amendment affects These amendments clarify the meaning of "currently has a presentation only and has no impact on the Company 's legally enforceable right to set-off" . It will be necessar to financial position of performace. The amendment assess the impact on the Company by reviewing becomes effective for annual periods begining on or after 1 settlement procedures and legal documentation to July 2012. ensure that offsetting is still possible in cases where it has been achieved in the past. In certain cases , offsetting may IAS 19 Employee Benefits - Amendments no longer be achieved. In other cases, contracts may have to be renegotiated. The requirementthat the right of set- The amendments to ISA 19 remove the option to defer the off be available for all counterpaties to the netting recognition of acturial gains and losses , ie . , the corridor agreement may prove to be a challenge for contracts mechanism . All changes in the value of defined benefit where only one party has the right to offset in the event of plans will be recognised in profit or loss and other default. comprehensive income. The effective date of the The amendments also clarify the application of the IAS 32 standard is 1 January 2013 . The amendment has no impact offsetting criteria to settlement systems ( such as central on the Company's financial position or performance. clearing house systems) whixh apply gross settlement mechanisms that are not simultaneous. This amendments ISA 27 Separate Financial Statements (as revised in 2012) has no effect on the company. These amendments become effective for annual periods begining on or after 1 As a consequence of the new IFRS 10 and IFRS 12, what January 2014. remains in IAS 27 is limited to accounting for subsidiaries, jointly controlled entities and associates in separate IFRIC 20 Stripping Costs in the Production Phase of a financial statements. The Company does not present Surface Mine separate financial statements. The amendment becomes effective for annual periods begininig on or after 1 January This interpretation applies to waste removal (stripping) 2013. cost incurred in surface mining activity, during the

Venture Capita Trust Fund 25 ANNUAL REPORT 2012

production phase of the mine. The interpretation addresses the accounting for the benefit from the stripping activity. The interpretation is effectivefor annual periods begining on or after 1 January 2013. The new interpretation will not have an impact on the Company.

Annual Improvements -May 2012

These improvements will not have an impact on the Company , but include:

IFRS 1 First-time Adoption of International Financial Reporting Standards

This improvement clarifies that an entity that stopped applying IFRS in the past and chooses, or is required to apply IFRS, has the option to re-apply IFRS1. If IFRS 1 is not re-applied, an entity must retrospectively restate its financial statements as if it had never stopped applying IFRS.

IAS 1 Presentation of Financial Statements

This improvement clarifies the difference between voluntary additional comparative information and the minimum required comparative information. Generally the minimum required comparative information is the previous period.

Venture Capita Trust Fund 26 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

Annual Improvements May 2012 - continued exchange rates if held at historical cost, exchange rates at the date that fair value was determined if held at fair value, IAS 16 Property Plant and Equipment and the resulting foreign exchange gains and losses are recognised in the income statement or shareholders' This improvement clarifies that major spare parts and equity as appropriate. servicing equipment that meet the definition of property ,plant and equipment are not inventory Financial Instruments

IAS 32 Financial Instruments , Presentation Financial assets and financial liabilities at fair value through profit or loss This improvement clarifies that income taxes arising form distributions to equity holders are accounted for in The Fund classifies its investments in equity securities as accordance with IAS 12 Income Taxes. financial assets or financial liabilities at fair value through profit or loss. These financial assets and financial liabilities IAS 34 Interim Financial Reporting are classified as fair value through profit or loss on initial recognition. The amendment aligns the disclosure requirements for Financial assets and liabilities designated at fair value total segment assets with total segment liabilities in through profit or loss are financial instruments that are interim financial statements. This clarification also ensures not classified as held for trading but are managed, and that interim disclosures are aligned with annual their performance is evaluated on a fair value basis in disclosures. These improvements are effective for annual accordance with the International Private Equity and periods begining on or after 1 January 2013. Venture Capital Valuation Guidelines. The Fund's policy requires management to evaluate the Significant accounting policies information about these financial assets and liabilities on a fair value basis together with other related financial The principal accounting policies applied in the information. preparation of the financial statements are set out below. Assets and liabilities in this category are classified as These policies have been consistently applied to all the current assets and current liabilities if they are expected to years presented, unless otherwise stated. be realised within 12 months of the balance sheet date. Those not expected to be realised within 12 months of the Foreign Currency Transactions balance sheet date are classified as non-current. Financial assets are derecognised when the rights to The fund's foreign currency transactions are translated receive cash flows from the investments have expired or into the functional currency using the exchange rates the Fund has transferred substantially all risks and rewards prevailing at the dates of the transactions. Foreign of ownership. exchange gains and losses resulting from the settlement Dividend income from finanacial assts at fair value through of such transactions, and from the translation at year-end profit or loss is recognised in the income statement within monetary assets and liabilities denominated in foreign dividend income when the fund's right to receive currencies, are recognised in the income statement. Non- payments is established. Interest income on debt monetary assets and liabilities are translated at historical securities is recognised in the income statement.

Venture Capita Trust Fund 27 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

(ii) Off setting financial instruments future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, Financial assets and liabilities are set off and the net where appropriate, the risks specific to the liability. amount presented in the balance sheet when, the fund has a legal right to set off the amounts and intends either to (f) Interest income settle on a net basis or to realise the asset and settle the liability simultaneously. Interest income is recognised on a time-proportion basis Income and expenses are presented on a net basis when using the effective interest method. It includes interest permitted by the accounting standards, or for gains and income from cash and cash equivalents and on debt losses arising from a group of similar transactions. securities . © Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted (g) Impairment in an active market. Receivables are recognised initially at (I) Financial assets fair value. They are subsequently measured at amortised cost using the effective interest rate method, less A financial asset is considered impaired if objective provision for impairment. evidence indicates that one or more events have had a A provision for impairment is established when there is negative effect on the estimated future cash flows of that objective evidence that the Fund will not be able to collect asset. all amounts to be received. Significant financial difficulties An impairment loss in respect of a financial asset measured of the counterparty and default in payments are is calculated as the difference between its carrying considered indicators that the amount to be received is amount, and the present value of the estimate cash impaired. inflows to be received in relation to the asset. Individually Once a financial asset or a group of similar financial assets significant financial assets are tested for impairment on an has been written down as a result of an impairment loss, individual basis. interest income is recognised using the rate of interest to All impairment losses are recognised in the income discount the future cash flows for the purpose of statement. An impairment loss is reversed if the reversal measuring the impairment loss. can be related objectively to an event occurring after the impairment loss was recognised. (d) Cash and cash equivalents (ii) Non-financial assets Cash and cash equivalents include cash in hand, demand deposits, other short-term highly liquid investments with The carrying amounts of the fund's non-financial assets are original maturities of three months or less, and bank reviewed at each reporting date to determine whether overdrafts. there is any indication of impairment. If any such indication exists then the asset's recoverable amount is estimated. (e) Provisions A provision is recognised in the balance sheet when the (h) Taxation fund has a present legal or constructive obligation as a The Fund is domiciled in Ghana. Under the current laws, result of a past event, and it is probable that an outflow of there is no income, company capital gains or other taxes economic benefits will be required to settle the obligation. payable by the Fund. Provisions are determined by discounting the expected

Venture Capita Trust Fund 28 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

(I) Events after reporting period herein are not necessarily indicative of an amount the Fund could realise in a current transaction. Future confirming Events subsequent to the balance sheet date are reflected events will also affect the estimates of fair value. The effect in the financial statements only to the extent that they of such events on the estimates of fair value, including the relate to the year under consideration and the effect is ultimate liquidation of investments, could be material to material. the financial statements.

(j) Fair value estimation (ii) Cash and cash equivalents

A number of the fund's accounting policies and disclosures The fair value of cash and cash equivalents approximates require the determination of fair value, for both financial their carrying values. and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure (iii) Non-derivative financial liabilities purposes based on the following methods. Fair value, which is determined for disclosure purposes, is (I) Fair values for unquoted securities are calculated on the present value of future principal and determined by the Fund's using valuation techniques. interest cash flows, discounted at the market rate of interest at the reporting date. Instruments with maturity They take into account the relevant developments since period of 6 months are not discounted as their carrying the acquisition of the investments and other factors values approximate their fair values. pertinent to the valuation of the investments with reference to such rights in connection with realisation, 4 Critical accounting estimates and judgement recent third-party transactions of comparable types of instrument, reliable indicative offers from potential The Fund makes estimates and assumptions that affect the buyers, non-maintainable earnings and growth stage and reported amounts of assets and liabilities within the next the value of the net assets attributable 'fund investors' as financial year. Estimates and judgements are continually reported by the various Venture Capital Companies evaluated and are based on historical experience and other (investees) in which the fund has invested. Cross-checks of factors, including expectations of future events that are primary techniques are made against other secondary believed to be reasonable under the circumstances. valuation techniques. 4.a Fair value of investments not quoted in an active In determining fair valuation, management in many market instances relies on the financial data of investees and on estimates by the management of the investee companies The fair value of securities that are not quoted in an active as to the effect of future developments. Although market is determined by using valuation techniques as per management uses its best judgement in estimating the fair the International Private Equity and Venture Capital value of investments, there are inherent limitations in any Valuation Guidelines or other valuation techniques that estimation techniques. The fair value estimates presented management deems reasonable.

Venture Capita Trust Fund 29 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

Fair Value Hierarchy

The Fund has adopted the amendment to IFRS 7 in respect of disclosures about the degree of reliability of fair value measurements. This requires the Fund to classify for disclosure purposes fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The fair value hierarchy shall have the following levels:

· Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) · Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). · Inputsfor the asset or liability that are not based on observable market data (thatis, unobservableinputs) (level3).Observable data refers to market data that is readily available, regularly distributed or updated, reliable and verifiable and provided by independent sources that are actively involved in the relevant market.

The following indicates the fair value hierarchy of the Fund's financial assets measured at fair value at 31st December 2011

Level 1 Level 2 Level 3 Assets

Financial Asset designated at fair value through profit and loss - - 10,780,869

5 Functional currency The Fund considers the Ghana Cedi (GHS) to be the currencythat most faithfullyrepresents the economic effect of the underlying transactions, events and conditions. The Ghana Cedi (GHS) is the currency in which the Fund measures its performance and reports its results, as well as the currency in which it receives subscriptions from its investors.

Property & Equipment Items of property and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expendituer that are directly attributable to the acquisition of the assets.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropraite, only when it is probably that future economic benefits associated with the item will flow to the bank and the cost can be measured reliably . All other repairs and maintenance are charged to the income statement during the financial period in which they are incured.

An impairment loss is recognised if the carrying amount of an asset exceed its recoverable amount. The recoverable amount of an asset is the greater of its value in use and fair value less cost to sell . Impairment losses are recognised in the Income Statement.

Depreciation is recognised in the income statement on a straight - line basis over the estimated useful lives of each part of an item of property and equipment .

The current annual depreciation rates for each class of property and equipment are as follows: Motor vehicle 25% Furniture & Fittings 10% Office Equipment 33.33% IT Equipment 33.33%

Depreciation methods,residual values and useful lives are reassessed at each finacial year. Gains and losses on disposal of property and equipment are included in the income statement.

Venture Capita Trust Fund 30 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

6. Income 2012 2011 GHS GHS

Interest on Fixed Deposits and Loans 4,094,006 2,848,273 Common wealth Secretariate 14,744 31,753 Others 15,192 7,251 Total Income 4,123,942 2,887,277

7. Administrative expenses 2012 2011 GHS GHS Salaries & wages 1,854,090 1,120,709 Seminars, workshops & conferences 89,910 571,385 Rent 116,041 114,927 Fuel, lubricants & motor vehicle repairs 28,592 19,720 Communication / telephone 24,694 73,355 Travel & transport 304,013 504,009 Advertising & publicity 120,490 90,398 Bank charges 10,741 43,227 Electricity 15,530 22,661 Repairs & maintenance 93,768 139,877 Stationery & office supplies 48,669 55,272 Staff training 46,143 103,921 Security & cleaning 18,039 12,487 Consultancy 71,813 140,165 Office expenses 59,001 66,772 Medical 3,717 6,573 Sundry expenses 6,735 2,128 Insurance 38,154 33,476 2,950,140 3,121,062

8 . Other Changes in fair value on financial assets at fair value through 2012 2011 profit or loss GHS GHS

Unrealised loss on investments- Activity Venture Fin. Co. Ltd. 193,477 226,637 Unrealised loss on investments- Fidelity Equity Fund II (358,978) 578,800 Unrealised gain on investments- Gold Venture Capital Ltd. (93,865) (70,068) Unrealised loss on investments- Bedrock V.C.F Ltd. 437,214 1,912,860 Unrealised gain on investments - Ebankese. 71,793 (580,087) Total change in fair value through profit or loss 249,642 2,068,143

Venture Capita Trust Fund 31 ANNUAL REPORT 2012 NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

9. Property & Equipment Land & Motor Furniture Office IT Total Building Vehicles & Fittings Equipment Equipment Cost GHS GHS GHS GHS GHS GHS

As at 1st January 4,646,236 296,124 42,106 37,765 93,506 5,115,737 Additions 101,700 115,081 700 5,538 46,312 269,331 Reclassification (1,134,000) - - - - (1,134,000) Disposal - (23,035) - - - (23,035) As at 31st December 3,613,936 388,170 42,806 43,303 139,818 4,228,033

Depreciation As at 1 January - 150,294 13,805 26,487 75,065 265,651 Charge for the year - 86,405 4,229 9,036 28,145 127,815 Disposal - (22,306) - - - (22,306) As at 31st December - 214,393 18,034 35,523 103,210 371,161

Net Book Value 31 December , 2012 3,613,936 173,777 24,772 7,780 36,608 3,856,873 31 December , 2011 4,646,236 145,830 28,301 11,278 18,441 4,850,086

10a. Financial Assets at fair value through profit & loss 2012 2011 GHS GHS Activity Venture Finance Company Limited 1,640,833 1,834,310 Fidelity Equity Fund ii Limited 2,163,494 1,349,391 Gold Venture Capital Limited 2,251,595 2,157,730 Bedrock Venture Capital Fund Limited 1,878,124 171,059 Ebankese Venture Fund Limited 2,846,823 1,605,343 10,780,869 7,117,833 The fair value of the investment in the Venture Capital Finance Companies have been computed by using the net book value as a proxy. This approach has been used due to the lack of current valuation of these equity instruments.

10b.Analysis of Loans 2012 2011 GH¢ GH¢ Neither past due nor impaired 10,067,610 5,024,979 Impaired 1,385,217 484,303 Gross Loans 11,452,827 5,509,282 Allowance for impairment -1,385,217 -484,303 Net Loans 10,067,610 5,024,979

10c.Impairment Loans 2012 2011 GHS GHS

Balance as at 1st January 484,303 289,182 Movement during the year 900,914 195,121 Balance as at 31st December 1,385,217 484,303

Venture Capita Trust Fund 32 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

10d. Financial risk management

10.1 Financial risk management objective

The objective of the Fund is to achieve medium to long-term capital growth through investing in a selection of unlisted private companies. The Fund's activities expose it to a varietyof financial risks: market risk (includingforeign exchangerisk, interest rate risk and price risk), credit risk and liquidity risk.

10.1.1 Market risk

(a) Price risk The Fund's investmentsare susceptible to market price risk arising from uncertaintiesabout futurevalues of the instruments.The Fund Managers provide the Trust with investmentrecommendations.The Fund Manager's recommendations are reviewed by the Fund's InvestmentCommittee before the investment decisions are implemented. To manage the market price risk, the Fund Manager reviews the performance of the portfolio companies on an on-going basis and is regularly in contact with the management of the portfolio companies for business and operational matters.

The performance of investments held by the Fund is therefore monitored by the Fund Manager on an on-going basis. At 31 December, the fair value of equity securities exposed to price risk were as follows:

2012 2011 GHS GHS Financial asset designated at fair value through profit or loss: Equity securities not traded in an active market designated at fair value through profit or loss 10,780,869 7,117,832 Loans subject to interest rate risk: 10,067,610 5,024,979

Total 20,848,479 12,142,811

(b) Foreign exchange risk

The Fund hold assets denominated in currencies other than the functionalcurrencyGhanaCedi (GHS). It is therefore exposed to currency risk, as the value of the financial instruments denominated in other currencies will fluctuate due to the changes in exchange rates. The Fund Manager is responsible for managing the Fund's currency position.

Foreign currency risk, as defined in IFRS 7, arises as the value of recognised monetary assets and monetary liabilities denominated in other currencies fluctuate due to changes in foreign exchange rates. IFRS 7 considers the foreign exchange exposure relating to non-monetaryassets and liabilities to be a componentof market price risk not foreign currencyrisk. However, the Fund Manager monitors the exposure on all foreign-currency-denominated assets and liabilities. The table below has therefore been analysed between monetary and non-monetary items to meet the requirements of IFRS 7.

Amounts presented in equivalent amounts of GHS with the original currency as US$

2012 2011 As at 31 December GHS GHS Assets Cash at bank 79,510 10,325 Other assets - including interest receivable - -

Liabilities Other liabilities - - Net currency exposure 79,510 10,325

Venture Capita Trust Fund 33 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

At 31st December 2012, had the exchange rate between the Ghana Cedi and the US dollar increased or decreased by 5% with all other variables held constant,the increase or decrease respectively in net assets attributableto the investors from operations would amount to approximately GHS513 (2011: ), of which GHS513 (2011: ) are attributable to monetary items. This would have been mainly as a result of foreign exchange gains/losses on translation of foreign currency denominated financial assets.

(c) Interest rate risk

The Fund is subject to cash flow interest rate risk due to fluctuations in the prevailing levels of market interest rates. The table below summarises the Fund's exposure to interest rate risks.

Up to 1 to 12 More than Non interest Total 1 month months 1 year Bearing As at 31 December 2012 GHS GHS GHS GHS GHS Assets

Loans - 10,067,610 - - 10,067,610 Receivables 1,559,124 1,559,124 Cash and cash equivalents - 13,796,683 - - 13,796,683

Total assets - 25,423,419 - - 25,423,419

Liabilities

Payables 270,839 270,839 Total liabilities - - - 270,839 270,839

As at 31 December 2011 Assets

Loans - 5,024,979 - - 5,024,979 Receivables 1,559,124 1,559,124 Cash and cash equivalents - 11,540,099 - - 11,540,099 Total assets - 18,124,202 - - 18,124,202 Liabilities Payables - - - 407,070 407,070 Total liabilities - - - 407,070 407,070

The Fund has direct exposure to interest rate changes on the cash flows of its interest bearing assets and liabilities. However, it may also be indirectly affected by the impact of interest rate changes on the earnings of certain companies in which the Fund invests, and the impact on the valuationthat use interest rates as an input in the valuationmodel. Therefore,the above sensitivity analysis may not indicate the total effect on the Fund's net assets attributable to the investors of future movements in interest rates.

Venture Capita Trust Fund 34 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

10.1.2 Credit risk

The Fund takes on exposure to credit risk, which is the risk that one party will cause a financial loss for the other party by failing to discharge an obligation. The Fund is exposed to the risk of non-paymentof debt instrumentor the interest due on loans given to portfolio companies. The Fund assesses all counterparties, including its customers, for credit risk before contracting with them. The maximum exposure to credit risk before any credit enhancementsat 31st December is the carrying amount of the financial assets set out below. The Fund's maximum exposure to credit risk is detailed in the table below:

2012 2011 GHS GHS

Loans receivable 10,067,610 5,024,979

The Fund provides loans to private companies. No collateral is received from the underlying companies. The credit quality of these investmentsis based on the financial performance of the individual portfolio company. For those assets that are not past due, it is believed that the risk of default is small, and the capital repayments and interest payments will be made in accordance with the agreed terms and conditions. No terms or conditions are renegotiated.

Impairment Losses

The aging of loan debtors at the reporting date is: Gross Impairment Gross Impairment 2012 2012 2011 2011 GHS GHS Not past due 5,741,978 281,713 3,998,274 137,129 Past due 1-30 days - - Past due 31-60 days - - Past due 61-90 days - - Over 90 days 5,710,850 1,103,504 1,511,008 347,175

10.1.3 Liquidity risk

Liquidity risk is the risk that the Fund may not be able to generate sufficient cash resources to settle its obligations in full as they fall due or can only do so on terms that are materially disadvantageous.

The Fund invests in unlisted equity and debt investments that are not traded in an organised market and may be illiquid. As a result, the Fund may not be able to liquidate quickly its investments in these instrumentsat an amount close to their fair value to meet its liquidity requirements, or be able to respond to specific events such as deterioration in the creditworthiness of any particular issuer. As at 31st December 2012, the Fund held GHS 10,780,869 in investmentsthat it considered to be illiquid (2011: GHS7,117,833).

Venture Capita Trust Fund 35 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

The Fund manages its liquidity risk by a combination of (i) contractualuncalled committed capital, which can be called with 30 days notice, to fund investments and management fees, and (ii) maintaining cash levels to fund short term operating expenses. The following table illustrates the expected liquidity of assets held and undrawn capital commitments:

Undrawn capital Less than 1 - 12 More than Commitments 1 month months 12 months As at 31 December 2012

Assets 1,296,683 12,500,000 10,780,869

The table below analyses the Fund’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts in the table are the contractualundiscounted cash flows. Less than Between 1 More than On demand 1 year & 2 years 2 years Total As at 31 December 2012 GHS GHS GHS GHS GHS

Liabilities

Payables - 270,839 - - 270,839

Total liabilities - 270,839 - - 270,839

Total unfunded capital commitments to investee Companies - - - - -

10.1.4 Capital risk management

The capital of the Fund is represented by the net assets attributable to the Investors.The Fund’s objective when managing the capital is to safeguard the ability to continue as a going concern in order to provide returns for Investors and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Fund.

Venture Capita Trust Fund 36 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

10.1.5. Financial Instruments by category

Asset designated at fair Assets per Statement of Financial Position value through As at 31 December 2012 Receivables profit/loss Total

Financial asset at fair value through profit or loss - 1 0,780,869 10,780,869

Loans 1 0,067,610 - 10,067,610

Receivables 1,559,124 - 1 ,559,124

Cash at bank 1 3,796,683 - 13,796,683

Total assets 2 5,423,418 1 0,780,869 36,204,287

As at 31 December 2011

Financial asset at fair value through profit or loss - 7,117,833 7 ,117,833

Loans 5,024,979 - 5 ,024,979

Receivables 420,374 - 420,374

Cash at bank 1 1,540,099 - 11,540,099 Total assets 1 6,985,451 7,117,833 24,103,283

Liabilities as per Statement of Financial Position As at 31 December 2012 Other Fin. Liab. At fair Total value Liabilities through profit/loss

Payables 270,839 - 270,839 Total liabilities 270,839 - 270,839

As at 31 December 2011

Payables 407,070 - 407,070 Total liabilities 407,070 - 407,070

Venture Capita Trust Fund 37 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

The carrying value less impairment provision of other receivables and payables measured at amortised cost are assumed to approximate the fair values for disclosure purposes. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Fund for similar financial instruments. In cases where the carrying amount is a reasonable approximation of fair value – for example, for financial instruments such as short-term receivables and payables – no additional fair value is disclosed. All current assets and current liabilities are short – term.

11. Receivables 2012 2011 GHS GHS

Activity Venture Finance Company Limited 1,794 1,794 SIC - FSL 774,900 - Dr. Prince J. Blankson 359,100 - Accrued interest: deposits 240,418 349,763 Prepayments 82,583 65,800 Staff Debtors 22,763 3,017 Accountable Imprest 77,566 - 1,559,124 420,374

12. Cash and cash equivalent For the purpose of the cash flow statement, cash and cash equivalents comprise the following balances with original maturity of less than 90 days: 2012 2011 GHS GHS Agricultural Development Bank 95,561 95,531 Ghana Commercial Bank 77,009 3,889 National Investment Bank 14,643 2,000,296 Fidelity Bank Limited 2,056,209 1,220,803 Ecobank Ghana Limited 17,665 17,665 Merchant Bank Limited 28,014 20,063 Access Bank Limited 96 96 SIC - FSL 326 1,176,285 Gold Coast Securities Limited 11,500,000 7,000,000 Sahel Sahara 3,765 3,945 Cash in hand 3,395 1,526 13,796,683 11,540,099

13 Deferred Income - GHS 69,909 This represent the deferred part of grant received from Rockfeller Foundation

14 Payables 2012 2011 GHS GHS Ministry of Food & Agric 72,000 72,000 Techiman Office 815 Accruals 184,024 323,070 Audit fees 14,000 12,000 270,839 407,070

Venture Capita Trust Fund 38 ANNUAL REPORT 2012

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2012

15 Related parties

Parties are considered to be related if one party has the ability to controlthe other party or exercise significant influenceover the other party in making financial or operational decisions.

The Trust Fund has provided loan to the companies below and a director of theTrust Fund is also a director in both companies. The transactions were carried out in the normal course of the Fund's business.Their balances as at the end of 31st December 2012 is as follows.

2012 2011 GHS GHS Belorm Farms and Transport Company Ltd 576,896 494,652 DMG Labs Company Ltd 104,753 90,382

16 Going concern considerations These financial statements have been prepared on a going concern basis, which assumes that the fund will continue to operate for its life of ten (10) years after which it will be liquidated.

Venture Capita Trust Fund 39 PRIVATE MAIL BAG Ct449, CANTONMENT, ACCRA 12TH FLOOR PREMIER TOWERS, MINISTRIES, ACCRA TEL: +233 (0302) 671459 / 670946 / 670986 / FAX: (0302) 672509 [email protected] www.venturecapitalghana.com.gh