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AFRICAN PHOENIX INVESTMENTS LIMITED - Reviewed Condensed Consolidated Interim Financial Statements for the Six-Month Period Ended 31 March 2019

Release Date: 04/06/2019 12:30
Code(s): AXL AXLP     PDF:  
 
Wrap Text
Reviewed Condensed Consolidated Interim Financial Statements for the Six-Month Period Ended 31 March 2019

AFRICAN PHOENIX INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1946/021193/06)
(Ordinary share code: AXL) (ISIN: ZAE000221370)
(Hybrid instrument code: AXLP) (ISIN: ZAE000221388)
 

REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS   
FOR THE SIX-MONTH PERIOD ENDED 31 MARCH 2019                                                           


SALIENT FEATURES

NET ASSET VALUE PER ORDINARY SHARE
53.0 cents^
(1H18: 50.2 cents)
(FY18: 52.0 cents)   
^ Net Asset Value per ordinary share is the Company's key
  reporting measure.              

TOTAL CASH AND FINANCIAL ASSETS
AVAILABLE FOR INVESTMENT
R1.3 billion*
(1H18: R1.9 billion)
(FY18: R2.0 billion)   
*  Excludes R654.9 million Stangen & GEMS cash (see note 2 to the financial statements).                                                                
*  Excludes R507.1 million preference share repurchase consideration.                                                               

HEADLINE EARNINGS PER SHARE
1.0 cent
(1H18: 1.4 cents)
(FY18: 3.7 cents)

EARNINGS PER SHARE
1.0 cent
(1H18: 1.4 cents)
(FY18: 3.2 cents)

TOTAL EQUITY
R1.9 billion
(1H18: R1.9 billion)
(FY18: R1.9 billion)

LEADERSHIP REPORT

INTRODUCTION
African Phoenix Investment Limited ("African Phoenix" or
"Phoenix" or "the Company" or "the Group") is an investment
holding company. The shares of Phoenix are listed and
tradeable on the Johannesburg Stock Exchange ("JSE").
The Company owns 100% of The Standard General
Insurance Company Limited ("Stangen") which is the
Company's only trading subsidiary. The Company owns 100%
of Gilt Edged Management Services ("GEMS"), which remains
dormant. There have been no changes in the status of these
companies during the current financial period.

Since the previous financial year-end, there have been
no changes in the status of the Company's investment in
Residual Debt Services Limited (formerly African Bank Limited)
("RDS"), which is still under curatorship, nor in Ellerines
Holdings Limited ("EHL"), which is in business rescue. Both
investments were impaired in full in previous financial periods.

FINANCIAL PERFORMANCE
Total shareholders' equity or net asset value, as at 31 March
2019 amounted to R1.9 billion (31 March 2018: R1.9 billion;
30 September 2018: R1.9 billion). The Group remains both
solvent and liquid with cash reserves and financial assets
of R1.3 billion (31 March 2018: R1.9 billion; 30 September
2018: R2.0 billion). Current period cash and financial assets
do not include R654.9 million of cash held by subsidiaries
now carried at fair value, and has not been adjusted for the
R507.1 million preference share repurchase approved by
shareholders on 20 March 2019.

The growth in net asset value per share (the Company's key
reporting measure) is primarily as a result of interest income
earned on cash investments net of operating expenses for
the period. Operating expenses increased by R44.6 million
(compared to 31 March 2018) principally due to a rise in
Stangen costs (R27.5 million) driven by the acquisition
of the Joshua Trust call centre and the insurance and
call centre operations of Different Life Proprietary Limited
post the comparative period. Furthermore, the Company
incurred costs of R10.3 million (31 March 2018: Rnil;
30 September 2018: R7.2 million) relating to the proposed
transactions (see "Update on Proposed Transactions") and
R7.4 million (31 March 2018: Rnil; 30 September 2018:
Rnil) in short-term incentives for the management team
(R4.0 million after payroll taxes).

The Group reported net profit after tax of R13.8 million for
the six-month period ended 31 March 2019 (31 March 2018:
R20.6 million; 30 September 2018: R45.6 million).

Basic and diluted earnings per share were 1.0 cent for the
period ended 31 March 2019 (31 March 2018: 1.4 cents;
30 September 2018: 3.2 cents).

UPDATE ON PROPOSED
TRANSACTIONS
Preference share repurchase
Scheme repurchase
The Company proposed a scheme of arrangement in terms
of the Companies Act, 2008 ("scheme repurchase") wherein
all the issued preference shares would be repurchased
from preference shareholders for a consideration of R37.50
per preference share. The implementation of the scheme
repurchase required, among other things, shareholder
approval by special resolution, which special resolution was
adopted at the shareholders' meeting held on 20 March 2019
by the requisite majority of shareholders. At the shareholders'
meeting, the resolution to approve the scheme repurchase
was supported by more than 75% of ordinary and preference
shareholders voting together in accordance with the terms
attaching to the ordinary and preference shares as set out in
the memorandum of incorporation of the Company, including
by 78% of ordinary shareholders and 76% of preference
shareholder's voting at the shareholder's meeting.

As detailed in the announcements released on SENS on
4 April 2019 and 5 April 2019, a shareholder that voted
against the resolutions requested that the Company seek
court approval for the scheme repurchase in accordance
with section 115(3)(a) of the Companies Act. A court hearing
date has been set down for 5 June 2019 to hear this matter.
At the time of reporting, the matter remains unopposed by
interested parties.

Given that the timing and outcome of the court process is
uncertain, the fulfilment date of the scheme repurchase and
voluntary repurchase (described below) has been extended
by the Board of Directors ("Board") from 8 April 2019 to 8
July 2019. The Board, however, intends to conduct the court
proceedings as efficiently as possible in order to ensure that
any delay in implementation is minimised.

Voluntary repurchase
The proposed voluntary repurchase of the preference shares
from preference shareholders electing to participate in the
voluntary repurchase was supported by 93% of shareholders
voting at the shareholders' meeting held on 20 March 2019.
The voluntary repurchase may only be implemented if for
whatever reason the scheme repurchase does not become
operative. In this regard, as outlined above, the Company is
proceeding to the hearing on 5 June 2019 to seek approval
from the court for the scheme repurchase. The Board believes
that if the proposed repurchase of preference shares is
implemented, it will yield benefits as outlined in the Circular to
the shareholders dated 18 February 2019.

Appraisal rights
Prior to the shareholders' meeting held on 20 March
2019, the Company received objection notices in terms of
section 164(3) of the Companies Act from three preference
shareholders holding in aggregate 1 252 598 preference
shares. These shareholders have requested that the
Company offer to repurchase their affected shares as
envisaged in section 164 of the Companies Act. The process
is still under way and the Company will, as required in terms
of section 164 of the Companies Act, issue an offer to these
shareholders in due course.

Implementation of the Black Fund Manager
(BFM) Structure
At the shareholders' meeting held on 20 March 2019, the
Company proposed a number of resolutions related to
the approval of the implementation of the BFM Structure
including inter alia (i) the acquisition of a limited partnership
interest in a private equity partnership, the API Capital Fund;
(ii) the approval of the management arrangements necessary
to implement the BFM Structure; and (iii) the adoption of an
investment policy. All the resolutions were approved by the
requisite majority of shareholders at the shareholders' meeting
on 20 March 2019.

In implementing the approved resolutions, the following
changes took place:

Changes to the Board:

-  Mr Siyabonga Nhlumayo ("Siya"), Mr Shafiek Rawoot
   ("Shafiek") and Mr Morris Mthombeni resigned from the
   Board and were appointed as directors of the General
   Partner - API Capital Proprietary Limited ("API Capital"),
   with Siya and Shafiek as members of the Investment
   Committee of API Capital.
-  Ms Mahlatse Kabi resigned as an independent non-
   executive director of Phoenix and was appointed as a
   member of API Capital's Investment Committee.
-  Mr Oyama Mabandla was appointed as an executive
   director of Phoenix and accordingly is no longer an
   independent non-executive director of the Board.
-  Ms Alethea Conrad who was and has remained an
   independent non-executive director of Phoenix, was
   appointed as the chairperson of the Board.

Phoenix acquired a 99.99% stake in API Capital Fund, a
South African en commandite partnership on 4 April 2019,
with an initial capital contribution of R10 000. The remaining
R499 990 000 commitment was drawn by API Capital and
subsequently invested in API Capital Fund on 7 May 2019.
The API Capital Fund will be managed by API Capital, a
black-owned fund manager as envisaged in the Codes
of Good Practice on Broad-Based Black Economic
Empowerment published by the Minister of Trade and Industry
in terms of section 9(1) of the Broad-Based Black Economic
Empowerment Act, 2003.

API Capital contributed and invested its 0.01% of the
partnership interest, equal to R50 000.

From 1 April 2019, all staff previously employed by Phoenix
were transferred to API Capital. Their costs, as well as other
ongoing costs related to the API Capital Fund will be paid by
API Capital, for which API Capital receives a management fee
as approved by shareholders at the shareholders' meeting.

API Capital which is required to hold at least 1% of Phoenix
A ordinary shares, instructed a broker using an irrevocable
instruction to acquire these shares on 20 March 2019.
Following this instruction, the broker has to date, acquired
8.1 million A shares in the market over a period, such that
API Capital currently owns 0.6% of the total A ordinary shares
in issue.

The Company received R30 000 as subscription proceeds
for the issue of 300 000 000 unlisted non-voting, non-
participating convertible B ordinary shares to the participation
partnership on 20 March 2019. The B ordinary shares will
convert into A ordinary shares in accordance with the terms
approved by the shareholders as set out in the Circular
dated 18 February 2019. This conversion and other terms
of the B ordinary shares ensures the long-term alignment
between the API Capital's management team and the
Company's shareholders. At 31 March 2019, the performance
participation has a nil value as the commencement date of the
Fund is 4 April 2019.

The Company's MOI was amended on 20 March 2019
following the approval of the amendments by the
shareholders at the shareholders' meeting to facilitate the
above transactions.

Subsequent events
As noted earlier, the investments into the API Capital
Fund were made after the period end. These investments
are not reflected in the statement of financial position at
31 March 2019 as they occurred after the reporting date.
The directors are not aware of any other matter arising since
the end of the reporting period, not otherwise dealt with in the
Group's condensed consolidated interim financial results.

Investment Entity accounting
Phoenix holds equity investments in Stangen, GEMS, RDS
and EHL, which Phoenix has historically consolidated on a
line by line basis in accordance with IFRS 10: Consolidated
Financial Statements.

IFRS 10 acknowledges that investment entities have a unique
objective for holding investments in other entities and therefore
sets this out as an exception to consolidating subsidiaries.

An investment entity is required to account for certain
subsidiaries at fair value through profit and loss in accordance
with IFRS 9: Financial Instruments.

The adoption of the investment policy by Phoenix on
20 March 2019, along with other requirements per IFRS 10,
results in Phoenix meeting the definition of an investment
entity per IFRS 10. For practical reasons (and noting that
there is no material impact to the financial statements), the
Company has for accounting purposes applied 31 March
2019 as the effective date on which it became an investment
entity.

The impact of applying the requirements of IFRS 10 is that
Phoenix consolidates the income and expenses relating
to subsidiaries until 31 March 2019. At 31 March 2019
subsidiaries are carried at fair value in the Investments line of
the Statement of Financial Position, instead of consolidating
assets and liabilities on a line-by-line basis.

Please refer to note 2 in the condensed consolidated interim
financial results for disclosure on the valuation of investments.

GOING CONCERN
In performing the going concern assessment, the directors
have considered available information about the future, the
possible outcomes of events and changes in conditions
and the realistically possible responses to such events and
conditions that would be available to the directors.

The directors concluded that the preparation of the financial
information on a going concern basis is appropriate.

DIVIDENDS
No ordinary or preference dividends were declared in the
current period (31 March 2018: Rnil; 30 September 2018: Rnil).

STRATEGIC OUTLOOK
Phoenix has made significant strides in implementing its
strategy. We noted previously that Phoenix's primary aim
is to create and sustain long-term value as measured by
consistent growth in net asset value. The Board intends to
conduct the court proceedings in relation to the preference
share repurchase as efficiently as possible, in order to
align the capital structure with the Company's strategy.
The BFM Structure has been established and API Capital
has reviewed a number of investment opportunities with
a view to investing capital within the next 12 months. API
Capital reports regularly to Phoenix as the limited partner
on the current investment pipeline. The Board notes that
API Capital is currently conducting due diligence processes
on two investment opportunities. A further three investment
opportunities are at non-binding offer stage after having
secured Investment Committee approval. The Board notes
that it will communicate to shareholders via SENS where
further progress is made on the API Capital Fund's investment
programme.

Phoenix continues to explore a number of strategic options
to advance Stangen's strategy of achieving the scale required
to operate as an insurance company with a niche market
proposition.

DIRECTORS' RESPONSIBILITY STATEMENT
The directors are responsible for the preparation and
presentation of these interim financial statements in
accordance with International Financial Reporting Standard
IAS 34: Interim Financial Reporting; the SAICA Financial
Reporting Guides as issued by the Accounting Practices
Committee; the Financial Pronouncements as issued by the
Financial Reporting Standards Council; and the requirements
of the Companies Act of South Africa. The directors are
also responsible for such internal control as the directors
determine is necessary to enable the preparation of interim
financial statements that are free from material misstatement,
whether owing to fraud or error.

APPROVAL OF THE FINANCIAL STATEMENTS
The reviewed condensed consolidated interim financial
statements were approved by the Board on 28 May 2019 and
are signed on its behalf by:


Alethea Conrad            Oyama Mabandla
Chairperson               Executive Director

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 
as at 31 March 2019
                                                                                             Reviewed as     Reviewed as at     Audited as at
                                                                                             at 31 March           31 March      30 September
R000                                                                             Notes              2019               2018              2018 
ASSETS                                                                                                                                          
Non-current assets                                                                               575 015             12 177            57 291   
Investments                                                                          2           572 777                  -            16 462   
Equipment                                                                                          2 034                997             5 207   
Intangible assets                                                                                    204             11 011            16 377   
Deferred tax asset                                                                                     -                169            18 608   
Reinsurance assets                                                                                     -                  -               637   
Current assets                                                                                 1 339 307          2 019 916         2 013 401   
Other assets                                                                                      46 698             91 765            55 205   
Taxation                                                                                           1 531                468             1 622   
Financial assets                                                                                   1 445             20 000           300 127   
Cash and cash equivalents                                                            3         1 289 633          1 907 683         1 656 447   
Total assets                                                                                   1 914 322          2 032 093         2 070 692   
LIABILITIES AND EQUITY                                                                                                                          
Non-current liabilities                                                                                -            145 235           141 016   
Borrowings                                                                                             -             23 377            23 377   
Policyholder liabilities under insurance contracts                                                     -            121 858           117 639   
Current liabilities                                                                               28 651             40 024            57 849   
Taxation                                                                                               -              2 267            17 186   
Other liabilities                                                                                 28 651             37 757            40 391   
Reinsurance creditor                                                                                   -                  -               272   
Total liabilities                                                                                 28 651            185 259           198 865   
Ordinary share capital and share premium                                             4        14 649 959         14 649 929        14 649 929   
Reserves                                                                                    (13 894 091)       (13 932 898)      (13 907 905)   
Ordinary shareholders' equity                                                                    755 868            717 031           742 024   
Preference shareholders' equity                                                                1 129 803          1 129 803         1 129 803   
Total equity (capital and reserves)                                                            1 885 671          1 846 834         1 871 827   
Total liabilities and equity                                                                   1 914 322          2 032 093         2 070 692   
Net asset value per ordinary share (cents)                                                          53.0               50.2              52.0   
Number of A ordinary shares in issue (thousand)                                                1 427 005          1 427 005         1 427 005   


CONDENSED CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
for the six months ended 31 March 2019
                                                                                            Reviewed six       Reviewed six        Audited 12
                                                                                            months ended       months ended      months ended
                                                                                                31 March           31 March      30 September
R000                                                                             Notes              2019               2018              2018
Insurance income                                                                                  41 638             32 906            66 711   
Interest received                                                                                 83 135             76 491           155 977   
Other income                                                                                         743                900            17 598   
Income from operations                                                                           125 516            110 297           240 286   
Net insurance claims                                                                             (4 368)            (4 163)           (9 424)   
Claims paid to policyholders                                                                    (10 137)           (10 487)          (21 820)   
Movement on insurance reserves                                                                     5 769              6 324            12 396   
Operating costs                                                                      5         (108 766)           (64 187)         (151 143)   
Interest expense                                                                                       -              (142)             (308)   
Profit before capital items and equity
accounted items                                                                                   12 382             41 805            79 411   
Capital and equity accounted items                                                                 1 476            (8 290)           (5 572)   
Reversal of impairment/(Impairment) of financial
instruments                                                                                        1 318            (8 290)             1 977   
Impairment of goodwill                                                                                 -                  -           (2 555)   
Deemed loss on stepped acquisition of associate                                                        -                  -           (4 789)   
Share of profit/(loss) from associate                                                                158                  -             (205)   
Profit before taxation                                                                            13 858             33 515            73 839   
Direct taxation: Normal                                                                             (44)           (12 930)          (28 261)   
Profit for the period                                                                             13 814             20 585            45 578   
Other comprehensive income                                                                             -                  -                 -   
Total comprehensive income                                                                        13 814             20 585            45 578   
Earnings per share (cents)                                                                                                                      
Basic and diluted earnings per ordinary share (cents)                                6               1.0                1.4               3.2   


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 
for the six months ended 31 March 2019
                                                                         Ordinary                                      Preference
                                                                            share                          Ordinary         share
                                                                      capital and    Distributable    shareholders'   capital and
R000                                                                      premium         reserves           equity       premium       Total
Balance at 30 September 2017                                           14 649 929     (13 953 483)          696 446     1 129 803   1 826 249   
Total comprehensive income for the period                                       -           20 585           20 585             -      20 585   
Balance at 31 March 2018                                               14 649 929     (13 932 898)          717 031     1 129 803   1 846 834   
Total comprehensive income for the period                                       -           24 993           24 993             -      24 993   
Balance at 30 September 2018                                           14 649 929     (13 907 905)          742 024     1 129 803   1 871 827   
Total comprehensive income for the period                                       -           13 814           13 814             -      13 814   
Issue of B ordinary shares                                                     30                -               30             -          30   
Balance at 31 March 2019                                               14 649 959     (13 894 091)          755 868     1 129 803   1 885 671   


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS 
for the six months ended 31 March 2019
                                                                                            Reviewed six       Reviewed six        Audited 12
                                                                                            months ended       months ended      months ended
                                                                                                31 March           31 March      30 September
R000                                                                                                2019               2018              2018
Cash flows from operating activities
Cash receipts                                                                                    117 367            110 297           240 159
Cash paid                                                                                      (117 573)           (71 688)         (167 745)
Direct taxation paid                                                                            (20 714)           (11 945)          (31 951)
Interest paid                                                                                         -                   -             (308)
Net cash (outflow)/inflow from operations                                                       (20 920)             26 664            40 155
Cash flows from investing activities
Acquisition of property and equipment                                                              (846)              (115)           (3 022)
Acquisition of intangible assets                                                                   (141)              (199)           (7 535)
Acquisition of investment in Different Life                                                            -                  -           (1 456)
Acquisition from business combination                                                                  -                  -           (4 435)
Stanlib Extra Income Fund realisation/(investment)                                               310 000                  -         (300 000)
Proceeds from other assets                                                                             -                  -            51 407
Adjustment on becoming an investment entity - Stangen and GEMS
accounted for at fair value*                                                                   (654 937)                  -                 -
Net cash outflow from investing activities                                                     (345 924)              (314)         (265 041)
Cash flows from financing activities
Issue of B ordinary shares                                                                            30                  -                 -
Net cash inflow from financing                                                                        30                  -                 -
(Decrease)/Increase in cash and cash equivalents                                               (366 814)             26 350         (224 886)
Cash and cash equivalents at the beginning of the period                                       1 656 447          1 881 333         1 881 333
Cash and cash equivalents at the end of the period/year                                        1 289 633          1 907 683         1 656 447

*  African Phoenix became an investment entity as defined in IFRS 10 during the current period, and therefore ceased to consolidate Stangen 
   and GEMS from 31 March 2019. This results in the cash held at Stangen and GEMS no longer being consolidated but rather being included in 
   the value of investments on the statement of financial position as at 31 March 2019. Please refer to note 2.


AUDITOR'S REPORT ON THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
for the six months ended 31 March 2019

AUDITOR'S REPORT
These interim condensed consolidated financial statements for the period ended 31 March 2019 have been reviewed by the
Group's external auditor, BDO South Africa Inc, who expressed an unmodified review conclusion.

The auditor's review report does not necessarily conclude on all of the information contained in these condensed consolidated
interim financial statements. Shareholders are therefore advised that in order to obtain a full understanding of the nature of
the auditor's engagement they should obtain a copy of the auditor's review report together with the accompanying financial
information from the issuer's registered office.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 
for the six months ended 31 March 2019

BASIS OF PREPARATION
The preparation of this financial information was supervised by Oyama Mabandla.

The condensed financial information contained herein has been prepared in accordance with the framework concepts and the
measurement and recognition requirements of the International Financial Reporting Standards (IFRS) adopted by the International
Accounting Standards Board (IASB), Interpretations issued by the International Financial Reporting Interpretations Committee
(IFRIC) of the IASB, IAS 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the
requirements of the Companies Act of South Africa (Act 71 of 2008), as amended, as well as the Listings Requirements of the
JSE Limited.

The condensed consolidated interim financial statements do not include all the information and disclosures required in the
annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended
30 September 2018. All accounting policies and their application are consistent with those used for the Group's 2018 annual
financial statements, other than the accounting policies included in note 1.1.


1.  ACCOUNTING POLICIES
      ADOPTION OF NEW STANDARDS AND INTERPRETATIONS
      1.1    New and revised IFRSs affecting amounts reported in the current year

             The new standards and interpretations that came into effect during the current year are listed below as part of the
             new and revised IFRSs in issue.

             The standards were adopted in the current year, but none were material to the financial statements.

             IFRS effective for periods beginning on or after 1 January 2018 (applicable to the annual financial
             statements for the year ending 30 September 2019)

             IFRS 4: Insurance Contracts (IFRS 4)
             The amendments to IFRS 4 were effective during the current period. The two amendments relate to addressing the
             interaction between applying IFRS 4 and IFRS 9: Financial Instruments (IFRS 9). Insurance entities can either:
             
             -  Apply a temporary exemption from IFRS 9, which has been granted to insurers that have not previously applied
                IFRS 9 and whose activities are predominantly connected with insurance; or
             -  Apply an optional accounting policy choice which allows an insurer to apply the overlay approach to designated
                financial assets when it first applies IFRS 9.
            
             The Group holds an investment in Stangen. Stangen had not previously applied IFRS 9 and its activities are
             predominately connected with insurance. Stangen therefore has a temporary exemption from applying IFRS 9 per
             the IFRS 4 amendments. Stangen continues to apply IAS 39: financial instruments recognition and measurement.
             IFRS 4 therefore does not have a material impact on the results of Stangen. Phoenix measures the investment in
             Stangen at fair value as at 31 March 2019. The amendments to IFRS 4 did not have a material impact on the Group
             during the current financial period.

             IFRS 9: Financial Instruments (IFRS 9)
             IFRS 9 became effective during the current period. IFRS 9 introduces a new approach to the classification of
             financial assets, which is driven by the business model in which the asset is held and their cash flow characteristics.

             A new business model was introduced which does allow certain financial assets to be categorised as "fair value
             through other comprehensive income" in certain circumstances. The new standard introduces an "expected credit
             loss" model for the measurement of impairment of financial assets classified as amortised cost and fair value
             through other comprehensive income. IFRS 9 also contains a new model for hedge accounting that aligns the
             accounting treatment with the risk management activities of an entity.

             The group holds financial assets predominantly in the form of cash and cash equivalents and investments held at
             fair value. The initial recognition of the investments at fair value occurred during the current period and therefore
             have not been reclassified. These investments are categorised as financial assets at fair value through profit and
             loss. Financial assets classified as fair value through profit and loss are not subjected to the expected credit
             loss model.

             Cash and cash equivalents as well as other financial assets held at the beginning of the reporting period were not
             reclassified and the application of the expected loss model did not result in a material adjustment. The adoption of
             IFRS 9 did not have a material impact on the Group during the current financial period.

             IFRS 15: Revenue contracts from customers (IFRS 15)
             IFRS 15 became effective during the current period. IFRS 15 requires entities to recognise revenue to depict the
             transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
             expects to be entitled in exchange for those goods or services. This core principle is achieved through a five-step
             methodology that is required to be applied to all contracts with customers.

             The entity earns revenue predominantly through insurance income measured in terms of IFRS 4 and interest income
             generated from cash and cash equivalents measured in terms of IFRS 9. The adoption of IFRS 15 did not have a
             material impact on the Group during the current financial period.

      1.2    New and revised IFRSs in issue but not yet effective
             IFRSs effective for periods beginning on or after 1 January 2019.

             IFRS 16: Leases
             Please refer to the accounting policies included in the Group's 30 September 2018 annual financial statements.
            
             IFRS 17: Insurance contracts
             Please refer to the accounting policies included in the Group's 30 September 2018 annual financial statements.
      
      1.3    Significant judgements and assumptions
             IFRS 10: Consolidated Financial Statements sets out the principles for the presentation and preparation of
             consolidated financial statements when an entity controls one or more other entities. IFRS 10 also sets out the
             requirements for applying an exception to consolidation for investment entities.

             IFRS 10 defines an investment entity as:
             An entity that:

             a.  obtains funds from one or more investors for the purpose of providing those investor(s) with investment
                 management services;
             b.  commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation,
                 investment income, or both; and
             c.  measures and evaluates the performance of substantially all of its investments on a fair value basis.
             
             The determination of whether an entity meets the definition per IFRS 10 requires significant judgement. We note
             that Phoenix:
             
             a.  obtains funds from multiple shareholders, who trade using the platform provided by the JSE, for the purposes of
                 making investments;
             b.  commits to investors that its objective is to invest funds using the new BFM Structure for returns from capital
                 appreciation and investment income (this commitment was included in the Circular and resolutions approved by
                 shareholders on 20 March 2019); and
             c.  measures and evaluates the performance of the BFM Structure and its investments on a fair value basis.
             
             Management and the Board therefore conclude that the definition of investment entity per IFRS 10 is applied
             appropriately with regard to Phoenix.
      
      1.4    Other accounting policies
             All other accounting policies applicable to these condensed consolidated interim financial statements are consistent
             with the accounting policies included in the Group's 30 September 2018 annual financial statements.


2.  INVESTMENTS^
                                                                                            Reviewed six       Reviewed six        Audited 12
                                                                                            months ended       months ended      months ended
                                                                                                31 March           31 March      30 September
    R000                                                                                            2019               2018              2018
    Stangen                                                                                      527 585                  -                 -
    GEMS                                                                                          45 192                  -                 -
    Different Life*                                                                                    -                  -            16 462
    Total investments                                                                            572 777                  -            16 462

 *  The investment relates to a 25% shareholding in Different Life held by Stangen.
 ^  The fair value of the investments in EHL and RDS have also been determined using the net asset value approach. Both these entities' 
    liabilities exceed their assets and therefore the fair value remains nil as at 31 March 2019.

    For practical reasons (and noting that there is no material impact to the financial statements), the Company has applied, for
    accounting purposes, 31 March 2019 as the date on which it became an investment entity.
    
    As detailed in the Leadership Report, the adoption of the investment policy by Phoenix on 20 March 2019, along with
    other requirements per IFRS 10, results in Phoenix meeting the definition of an investment entity per IFRS 10. The
    investment entities exception to consolidation requires that investments in subsidiaries are measured at fair value through
    profit and loss in accordance with IFRS 9: Financial Instruments (IFRS 9). IFRS 13: Fair Value Measurements (IFRS 13)
    defines fair value, sets out a framework for measuring fair value and details the required fair value disclosures.
    
    Basis of valuation
    
    Fair value is defined as the price that would be received for an asset in an orderly transaction between market participants
    at the measurement date. A fair value measurement assumes that a hypothetical transaction to sell an asset takes place in
    the principal market or in its absence, the most advantageous market for the asset.
    
    Valuation approaches
    
    A consistent valuation approach will be applied unless there is a change in the circumstances in relation to an investment.
    In selecting the most appropriate valuation technique, the Board considers the specific terms of the investment which may
    impact its fair value. Valuation techniques considered include but are not limited to:
    i.  Income approach - Discounted Cash Flow (DCF);
    ii.  Market approach - Price of recent investment or earnings multiples; and
    iii.  Net assets approach.
    
    Investment in API Capital Fund
    
    Following shareholder approval received on 20 March 2019, African Phoenix committed R500 million to acquire a 99.99%
    stake in API Capital Fund, a South African en commandite partnership. The initial capital contribution of R10 000 was
    invested in the API Capital Fund on 4 April 2019 (being the Investment Date). The remaining R499 990 000 commitment
    was drawn and invested on 7 May 2019. These investments are not reflected in the statement of financial position as at
    31 March 2019 as they occurred after the reporting date.
    
    Investment in current subsidiaries: Net assets approach
    
    The net assets approach has been applied to the valuation of the investments in Stangen and GEMS. It is noted that
    Stangen is currently loss making. An income or market valuation approach is therefore not considered appropriate.
    Phoenix is of the view that a net assets valuation approach is more reflective of the current value of the business as it
    takes into account Stangen's investment into the infrastructure and staff before reaching the scale required to generate
    operating profits.
    
    All other fair value policies are consistent with the accounting policies disclosed in the Group's 30 September 2018 annual
    financial statements.

    IFRS 10: Consolidated Financial Statements
    
    As noted in the Leadership Report, the impact of applying the requirements of IFRS 10 is that:
    
    -  Phoenix became an investment entity on 31 March 2019 and therefore consolidates the income and expenses relating
       to subsidiaries until that date consistent with the comparative periods. The statement of comprehensive income
       and statement of cash flows for the six months ended 31 March 2019 therefore reflects six months of consolidated
       incomes, expenses and cash flows of Phoenix, GEMS and Stangen;
    -  the statement of financial position as at 31 March 2019 reflects investments in subsidiaries at fair value through profit
       and loss in accordance with IFRS 9 and therefore does not consolidate the assets and liabilities held by the subsidiaries
       on a line by line basis. Instead, the fair value of the subsidiaries, which equates to the net asset value of the subsidiaries
       as at 31 March 2019, are reflected in the investments line; and
    -  the statement of changes in equity is unaffected by applying the requirements of IFRS 10.
    
    Please see below the details of the net asset value for Stangen, which is reflective of the fair value of the investment in Stangen:
    
                                                                                            Reviewed six       Reviewed six        Audited 12
                                                                                            months ended       months ended      months ended
                                                                                                31 March           31 March      30 September
    R000                                                                                            2019               2018              2018
    Cash and cash equivalents                                                                    590 423          1 534 879           625 760   
    Investment in Associates/Different Life                                                       16 620             20 000                 -   
    Reinsurance debtors                                                                            3 566                245               637   
    Other assets                                                                                  43 673             12 382            59 236   
    Total assets                                                                                 654 282          1 567 506           685 633   
    Policyholder liabilities                                                                     111 101            121 858           117 639   
    Other liabilities                                                                             15 596             10 822            28 981   
    Total liabilities                                                                            126 697            132 680           146 620   
    Share capital and share premium                                                               26 500             26 500            26 500   
    Retained earnings                                                                            501 085          1 408 326           512 513   
    Total equity                                                                                 527 585          1 434 826           539 013   
    Total equity and liabilities                                                                 654 282          1 567 506           685 633   
    Fair value:                                                                                  527 585          1 434 826           539 013   


    Please see below the details of the net asset value for GEMS which is reflective of the fair value of the investment in GEMS:

                                                                                            Reviewed six       Reviewed six        Audited 12
                                                                                            months ended       months ended      months ended
                                                                                                31 March           31 March      30 September
    R000                                                                                            2019               2018              2018
    Cash and cash equivalents                                                                     64 514              7 738            61 224   
    Other assets                                                                                   5 012             55 291             4 884   
    Total assets                                                                                  69 526             63 029            66 108   
    Borrowings                                                                                    23 377             23 377            23 377   
    Other liabilities                                                                                957                154                 -   
    Total liabilities                                                                             24 334             23 531            23 377   
    Share capital and share premium                                                               13 843             13 843            13 843   
    Retained earnings                                                                             31 349             25 655            28 888   
    Total equity                                                                                  45 192             39 498            42 731   
    Total equity and liabilities                                                                  69 526             63 029            66 108   
    Fair value:                                                                                   45 192             39 498            42 731   


2.1 Risk Management

      2.1.1  Financial risk management
             The group's financial risk management objectives and policies are consistent with those disclosed in the
             consolidated financial statements for the year ended 30 September 2018.

      2.1.2  Fair value risk
             IFRS 13 provides a hierarchy that classifies inputs employed to determine fair value. Investments measured
             and reported at fair value are classified and disclosed in one of the following categories:

             Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

             Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
             either directly (i.e. as prices) or indirectly (i.e. derived from prices).

             Level 3: Inputs for the assets or liability that are not based on observable market data.

             The investments in Stangen and GEMS shown in note 2 are all classified as Level 3 Investments per the
             IFRS 13 on initial recognition at 31 March 2019. Due to the date of initial recognition coinciding with the
             period end, there were no fair value gains or losses on these investments. The fair value of these investments
             has been determined using the net assets approach. The significant inputs into these valuations are
             included in note 2. Due to the nature of the net assets valuation approach, no material estimates were used.
             The valuations are sensitive to the operations and profitability of Stangen and GEMS.

             The carrying value of financial assets and financial liabilities measured at amortised cost approximates their
             fair value.


3.  CASH AND CASH EQUIVALENTS

                                                                                            Reviewed six       Reviewed six        Audited 12
                                                                                            months ended       months ended      months ended
                                                                                                31 March           31 March      30 September
    R000                                                                                            2019               2018              2018
    Current and call accounts*                                                                   531 995            120 703           121 808   
    Fixed and notice deposit accounts*                                                           757 638          1 786 980         1 534 639   
    Total cash and cash equivalents                                                            1 289 633          1 907 683         1 656 447   


    *  Current period cash and cash equivalents do not include R654.9 million of cash held by subsidiaries, and has not been adjusted for 
       the R507.1 million preference share repurchase expected cash outflow.

    Cash held in investments measured at fair value:
    Stangen                                                                                      590 423
    GEMS                                                                                          64 514
    Total                                                                                        654 937

4.  ORDINARY SHARE CAPITAL AND SHARE PREMIUM

    Authorised                                                                                           Number of shares in thousand   
    A ordinary shares of 2.5 cents each                                                        2 000 000          2 000 000         2 000 000   
    B ordinary shares of 0.01 cent each^                                                       1 400 000                  -                 -   
                                                                                                        Value of authorised shares in R000   
    A ordinary shares of 2.5 cents each                                                           50 000             50 000            50 000   
    B ordinary shares of 0.01 cent each^                                                             140                  -                 -   
    Issued                                                                                                Number of shares in thousand   
    A ordinary shares of 2.5 cents each                                                        1 427 005          1 427 005         1 427 005   
    B ordinary shares of 0.01 cent each^                                                         300 000                  -                 -   
                                                                                                          Value of issued shares in R000   
    A ordinary shares of 2.5 cents each                                                           35 675             35 675            35 675   
    B ordinary shares of 0.01 cent each^                                                              30                  -                 -   
    Ordinary share premium                                                                    14 614 254         14 614 254        14 614 254   
    Total share capital and premium                                                           14 649 959         14 649 929        14 649 929   

    ^  300 000 000 unlisted, non-voting, non-participating B ordinary shares were issued to the participation partnership on 20 March 2019.
       The participation partnership is the vehicle for facilitating the long-term alignment of the API Capital management team.


5.  OPERATING EXPENSES
                                                                                            Reviewed six       Reviewed six        Audited 12
                                                                                            months ended       months ended      months ended
                                                                                                31 March           31 March      30 September
    R000                                                                                            2019               2018              2018
    Actuarial fees                                                                                 1 785              2 366             4 444   
    Amortisation, depreciation and software costs                                                  6 187              4 212             9 407   
    Audit, consulting and legal fees                                                              10 529              8 587            23 712   
    Binder fees and lead costs                                                                    12 098             14 622            33 016   
    Commission paid                                                                                9 339                  -             4 430   
    Debit order costs                                                                              1 833              2 362             4 537   
    Market research and advertising                                                                4 925             10 458            17 953   
    Non-executive directors' remuneration                                                          2 819              4 748             8 537   
    Other costs                                                                                    8 291              4 617            10 135   
    Property rental                                                                                2 426                520             2 550   
    Proposed transaction costs                                                                    10 259                  -                 -   
    Staff remuneration*                                                                           38 275             11 695            32 422   
    Total costs                                                                                  108 766             64 187           151 143   
    Stangen operating expenses                                                                                                                  
    Maintenance and other expenses                                                                39 586             22 744            54 416   
    New business acquisition costs                                                                37 196             26 504            61 825   
    Stangen                                                                                       76 782             49 248           116 241   
    Phoenix operating expenses                                                                                                                  
    Staff remuneration                                                                            11 729              2 102             4 823   
    Basic remuneration                                                                             4 309              1 841             4 562   
    Short-term incentive*                                                                          7 420                  -                 -   
    Other fees - business rescue practitioner                                                          -                261               261   
    Proposed transaction costs^                                                                   10 259                  -             7 196   
    Non-executive directors' remuneration                                                          1 271              3 600             6 387   
    Consulting and legal fees                                                                      2 972              5 334             7 226   
    Listing and shareholder announcement expenses                                                  2 322              1 999             3 887   
    Property rental                                                                                  618                  -               587   
    Business rescue fees                                                                             427                290             1 142   
    Other costs                                                                                    2 386              1 614             3 654   
    Phoenix Group excluding Stangen                                                               31 984             14 939            34 902   
    Total costs                                                                                  108 766             64 187           151 143   

    *  Staff remuneration cost for Phoenix includes R4 million (after taxes) paid to the Investment Team as a short-term incentive on the basis 
       set out in the Remuneration Report of the 2018 Integrated Annual Report, which was supported by shareholders at the Annual General Meeting 
       on 20 March 2019.
    ^  Proposed transaction costs which include fees for independent expert, financial advisor, legal advisor, sponsor, etc. do not include costs related
       to the litigation process initiated post 31 March 2019.

6.  EARNINGS PER SHARE

                                                                                            Reviewed six       Reviewed six        Audited 12
                                                                                            months ended       months ended      months ended
                                                                                                31 March           31 March      30 September
                                                                                                    2019               2018              2018
    Profit for the period                                                                         13 814             20 585            45 578   
    Basic earnings attributable to ordinary shareholders                                          13 814             20 585            45 578   
    Adjusted for:                                                                                                                               
    Impairment of goodwill                                                                             -                  -             2 555   
    Deemed loss on stepped acquisition of associate                                                    -                  -             4 789   
    Headline earnings/diluted headline earnings                                                   13 814             20 585            52 922   
    Total number of A ordinary shares in issue (thousand)                                      1 427 005          1 427 005         1 427 005   
    Weighted number of A ordinary shares in issue (thousand)*                                  1 427 005          1 427 005         1 427 005   
    Basic/diluted earnings per share (cents)                                                         1.0                1.4               3.2   
    Headline earnings/diluted headline earnings per share (cents)                                    1.0                1.4               3.7   

    *  The company issued 300 000 000 unlisted, non-voting, non-participating B ordinary shares on 20 March 2019. Given the commencement of 
       the API Capital Fund on 4 April 2019, the dilutive impact of these shares as at 31 March 2019 is nil.

7.  GOING CONCERN

    The directors have considered the following factors in deciding whether the Group is a going concern:

    -  The Group has sufficient cash resources to pay its creditors as and when they fall due and meet its operating costs for
       the foreseeable future.

    -  The Group's only operating subsidiary, Stangen, is a going concern.

    -  The Group has available cash resources to deploy in developing existing operations or investing in new opportunities.

    -  The Board and management are not aware of any significant pending legislation that will threaten the going concern
       status of the Group.

    -  It is management's view that sufficient risk mitigants are in place for key financial risks facing the Group.

    The going concern assessment is a matter of judgement. In making this judgement, the directors have considered the
    uncertainties arising from their assessment, both individually and collectively.

    Based on the above, the directors consider the preparation of the condensed consolidated interim financial statements
    on a going concern basis as appropriate given that the Group has sufficient assets and cash to settle its commitments
    in the normal course of business for a period of not less than one year from the date of approval of these condensed
    consolidated interim financial statements.

8.  SUBSEQUENT EVENTS

    On 4 April 2019, Phoenix made the R10 000 initial capital contribution to the API Capital Fund, as defined in the Circular
    issued on 18 February 2019 and approved by shareholders on 20 March 2019. This was followed by a R499 990 000
    investment on 7 May 2019. These investments are not reflected in the statement of financial position as at 31 March 2019
    as they occurred after the reporting date.

    The directors are not aware of any other matter arising since the end of the reporting period, not otherwise dealt with in the
    Group's condensed consolidated interim financial statements.

9.  SEGMENT REVENUE AND RESULTS

    R000                                                                                       Insurance          Corporate             Total
    31 March 2019                                                                                                                               
    Income                                                                                        65 058             60 458           125 516   
    (Loss)/profit before taxation from continuing operations                                    (15 934)             29 792            13 858   
    Total assets*                                                                                      -          1 914 322         1 914 322   
    Total liabilities*                                                                                 -           (28 651)          (28 651)   
    Net asset value                                                                                    -          1 885 671         1 885 671   
    31 March 2018                                                                                                                               
    Income (continuing operations)                                                                88 925             21 372           110 297   
    Profit/(loss) before taxation from continuing operations                                      36 954            (3 439)            33 515   
    Total assets                                                                               1 567 506            464 587         2 032 093   
    Total liabilities                                                                          (132 680)           (52 579)         (185 259)   
    Net asset value                                                                            1 434 826            412 008         1 846 834   
    30 September 2018                                                                                                                           
    Income (continuing operations)                                                               176 785             63 501           240 286   
    Profit before taxation from continuing operations                                             45 759             28 080            73 839   
    Total assets                                                                                 685 633          1 385 059         2 070 692   
    Total liabilities                                                                          (146 620)           (52 245)         (198 865)   
    Net asset value                                                                              539 013          1 332 814         1 871 827   

    *  No segment assets and liabilities for the insurance segment are disclosed at 31 March 2019 as the company has applied the
       investment entity exception (please refer to note 2). The company therefore has one operating segment at 31 March 2019.


ADMINISTRATION

SPONSOR
Merchantec Capital

BOARD OF DIRECTORS
Independent non-executive: A Conrad (Chairperson); N Siyotula*; R Mathura; and T Pather#
Non-executive: S Sithole
Executive: O Mabandla

* Resigned post period end with effect from 28 May 2019
# Appointed post period end with effect from 29 May 2019


REGISTERED OFFICE
3rd Floor, Global House
28 Sturdee Avenue
Rosebank, Johannesburg, 2196

COMPANY SECRETARY
Acorim Proprietary Limited

TRANSFER SECRETARIES
Link Market Services South Africa Proprietary Limited
13th Floor, Rennie House
19 Ameshoff Street
Braamfontein
South Africa

PO Box 4844
Johannesburg
2000

Telephone: +27 11 713 0800
Telefax: +27 86 674 4381

WEBSITE
www.phoenixinvestments.co.za

FUND MANAGER AND SERVICE PROVIDER
API Capital Proprietary Limited
Directors: M Mthombeni (Chairperson); S Nhlumayo and S Rawoot
Investment Committee: S Nhlumayo; S Rawoot; A Carim; S Dougherty and M Kabi



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