We have a major correction of one of my articles on AROFF...

I was contacted by Francis Daniels, a director at the investment manager of Africa Opportunity Fund (AROFF), added to our funds portfolio this week. He corrected errors in what I had previously published.

While AROFF's current net asset value is unknowable it trades in US$ in both London and the US. Today it was $1.09 bid, $1.21 ask because the US market-maker cannot unwind his position until Monday in London. Its net asset value at close Nov. according to Mr. Daniels was $1.223. It's not updated weekly for a UK Investment Trust, unlike as for a US Closed End Fund.

The Telegraph, a British newspaper, reported in early Sept. that AOF's net asset value (NAV) had risen 17.1% in some period, presumably in a year.

Mr. Daniels said the fund closed Sept. with net asset value of $1.211/sh. The discount from NAV was 4.1% based on its appraised net asset value which Mr. Daniels says was $1.31 at the close of Sept. That was the last period for which it has reported appraised NAV. I used the appraised NAV figure which Mr. Daniels says I should not have done.

Being ill-informed about UK investment trust reporting requirements, I don't know the significance of the difference between appraised NAV per share and what the fund itself reported, $1.31 vs $1.211.

Further corrections. AROFF indeed cut its dividend at the start of this year to 8 10ths of a US cent per share based on the 3 month Libor rate at the start of the year, multiplied by its NAV at the close of the prior year. It is payable in 4 quarterly installments of 2/10ths of a US cent starting with Q2. In Q1 the payout was 0.0026 cents/sh but the Q1 payout in 2014 will be a final 0.002 cents/share; it goes ex-div Christmas Eve, Dec. 24 and will be paid Jan. 9, 2014. I totally messed up the amounts on the dividend in my earlier article.

AROFF is self-managed by investment adviser Africa Opportunity Partners Ltd where Mr. Daniels works. It invests "opportunistically" according to its statement (prospectus), and can buy in a wide variety of vehicles: real estate, equity, quasi-equity, and debt issued by African companies, governments, or hybrids (quangos). It invests where the asset managers think the price is at a material discount to the intrinsic asset value.

Its last quarterly Sept. 30 South African holdings mystified me, accounting for only 4%. South African stocks Shoprite Hldgs, Old Mutual plc, and African Bank Investment Ltd (a troubled consumer finance firm) accounted for 9%, 3%, and 8.5% of total placements.

It turns out that AROFF is using a hedging or arbitraging strategy. It is long in Zambia on the Shoprite listed on the Lusaka exchange. Meanwhile it is short the Johannesburg Shoprite which is more expensive because of what Mr. Daniels says are "large global institutional investors on their share registers."

Similarly, AROFF is long Old Mutual shares not in their South African homeland, but on the terrifying Zimbabwe stock exchange. It is unclear if the fund has shorted the Johannesburg Old Mutual. Mr. Daniels didn't say what strategic use they have made of the 50% drop in ABI shares during the course of H1 after it overpaid for a furniture retailer and took hefty provisions and write-downs.

South Africa net exposure is equal to that in two other countries: Zimbabwe and Nigeria, also at 4%. Ivory Coast was at 3% and Botswana at 2%. Others accounted for 21%.

As I guessed, Mr. Daniels confirmed that the reason South Africa is so low is that opportunistic investors have to look beyond the most obvious and open African stock market.

AROFF's top 10 produces a weighted average yield of 4.6% and a rolling price/earnings ratio of 8x earnings according to the managers as audited by Ernst & Young. Its return on assets on the top ten is 8% and its return on equity on them is 21%, not overall as I mistakenly wrote. These are still very powerful metrics but I overstated performance.

No US analysts cover this stock. Its September report was the last audited one filed with the UK regulators. It is of course not a member of the US Closed-End Funds Assn. Our coverage should improve after I bring back on board an Africa expert who tipped this stock but didn't write it up; that was me.