Barak Board Update for investors
With the successful completion of the audits for all of the funds (the "Funds") established as segregated portfolios of Barak Fund SPC Limited (the “Company”), the board of the Company (the "Board") would like to provide investors with some perspective on the work already completed to prepare the Company for the new developments being planned.
Posted: 14 April 2021
This work has been undertaken to stabilise the company as a result of Covid-19 induced investee-level liquidity challenges and return the Company to a path to growth in light of the substantial growth opportunities in a post-Covid market environment.
The Board is aware of the significant amount of misinformation regarding Barak Fund Management Limited ("BFML") and the various funds associated with it, which has permeated the market in recent weeks. As we near the completion of the restructuring process, the Board wishes to reiterate its support for BFML and the key goal in the restructuring of the Company – fairness to investors.
The last time we wrote to investors, we highlighted that the completion of the audits of the Annual Financial Statements was critical to the advancement of the restructuring process. The Board is pleased to confirm that the auditors have now released the 2019 audited annual financial statements for the Barak Structured Trade Finance (STF) Fund, Barak Africa Trade Finance Fund, Barak Mikopo Leveraged Structured Credit Fund Segregated Portfolio and the Barak Sharia Fund. This follows the earlier completion of the audits for the Barak Shanta Fund, the Barak Impact Fund, and the Barak Asha Fund.
Following conclusion of the audits, the auditors have raised no material concerns, and have given all the Funds an unqualified audit opinion, indicating that the accounts have been fairly and appropriately presented, and in compliance with generally accepted accounting principles (GAAP).
In their opinions, the auditors raised “Emphasis of Matter” relating to Expected Credit Losses as well as “Material Uncertainty”, relating to going concern. Notifications of this nature have become a common occurrence for most entities in the last year as assets have proved increasingly difficult to value.
Without the impact of COVID-19 on asset valuations, the 2019 audit would have been signed off within the standard timeframe of June 2019, and no emphasis of matter or material uncertainty would have been necessary. Following Barak’s communication to investors notifying them of the intent to wind up the Fund, the auditors provided the emphasis of matter to notify investors of this intent, and flag the material change in the financial status of the fund for any who may be redeeming their investments
The 2020 audit processes for all these Funds, which have been running in parallel to the 2019 audits to avoid delays, are progressing at pace and we expect these to be released on time.
The Board played a pro-active role in ensuring that the previous auditor was replaced, and a new auditor was appointed in a timely manner, regardless of the challenges associated with such a change.
The appointment of MHA as the new auditor enabled the audit to be completed within the Board’s stipulated timeframes. The work already completed on the Funds' financial reporting has allowed the new auditor to sign off on these processes in approximately 3 months, which is reason for comfort for investors.
The Board is committed to the highest standards of corporate governance, and acts to ensure that the Company operates according to best Corporate Governance practices. The Board wishes to clarify that allegations from whistle blowers were taken extremely seriously by the Board.
Most of the allegations of “conflicts of interest” dating from May 2019 were resolved before completion of the audit. After extensive investigation by independent, qualified forensic investigators working together with the auditors, no wrongdoing has been found.
As BFML delivers on key milestones to complete the restructuring, the Board will maintain its focus on the highest standards of transparency and corporate governance. We will continue to work closely with BFML to ensure a successful conclusion to the restructuring process. The Board is in full support of BFML and the steps taken to improve the Company’s cost structures, enhance its compliance processes and progress the restructuring process.
The Company has remained fully operational throughout the suspension of trading in the Fund’s units, and has been actively servicing borrowers throughout this period. The Board remains optimistic about the ability of the Company to create value in African markets as they recover from the economic impact of COVID-19.
The combination of long experience in private credit markets working with African borrowers and specialised insight into the complexities of investing in emerging markets will serve investors well as markets and economic activity begin to normalise. We look forward to communicating with you again regarding further progress with the restructuring and the development of the Company.