Your SlideShare is downloading. ×

Imara annual 2010 report

1,024

Published on

Our performance this year is a sober reminder that African capital markets have not yet fully recovered from the impact of the global crisis. The period under review has produced disappointing results …

Our performance this year is a sober reminder that African capital markets have not yet fully recovered from the impact of the global crisis. The period under review has produced disappointing results and our financial performance has been difficult to accurately forecast. Revenue for the year declined by 9% to P 92.81 million, whilst attributable earnings decreased by 96% to P 246 765...

Published in: Investor Relations
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
1,024
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. ME, RESO LU T NA E BY IN G NA ON TU ST R RE
  • 2. CONTENTS ‘Investing in Africa’ Essay 8 Group Profile 14 Directorate and Group Management 15 International Footprint and Regional Offices 16 Divisional Structure 17 Group Organisational Structure 18 Chairman’s Statement 22 Chief Executive Officer’s Review of Operations 24 Report of the Directors 30 Corporate Governance 36 Glossary 42 Five Year Financial Highlights and Ratios 44 Graphical Five Year Financial Highlights and Ratios 46 Independent Auditor’s Report 49 Consolidated Income Statement 50 Consolidated Statement of Comprehensive Income 51 Consolidated Statement of Financial Position 52 Consolidated Statement of Cash Flows 53 Consolidated Statement of Changes in Equity 54 Notes to the Consolidated Financial Statements 57 Shareholder Information 121 Notice of Annual General Meeting 123 Form of Proxy Attached
  • 3. Developing the theme established in our new corporate identity, this Annual Report features six original compositions, created for Imara, by renowned South African artist Athol Moult. The series considers African traditions of counting, currency and trade. These pieces are the first acquisi- tions by The Imara Collection, a compendium of photographic work which, year-by-year, will illustrate ‘Investing in Africa’ through different lenses. Photographs from The Imara Collection will be published exclusively in our Annual Report.
  • 4. Trading in Africa Challenged by the lack of infrastructure and the natural environment, early traders frequently had to make use of rather unusual modes of transport in order to reach their destinations. Versatility has long been a vital part of exploration and commerce in Africa.
  • 5. To accompany the series of compositions commissioned from Athol Moult for this Report, Imara asked James Retief, editor of JSE Magazine, to explore Africa’s investment heritage and potential in words. This is his account. Investing in Africa Now the darling of the global investment community, Africa’s long and rich trade and investment history has provided an excellent foundation for its position as a world-class manufacturer and consumer and investment destination Trade history Early European explorers regarded expansive tracts of Africa, particularly those south of the Sahara, as devoid of civilization, yet little did they realise that this was the very land from which their forebears had originated, some 40 000 years ago. These forefathers had been very active, busying themselves with the development of sound agricultural skills; cultivating crops such as wheat and barley and raising livestock. As they travelled around the continent and came into contact with tribes from other regions, they bartered these goods – thus starting the rich history of trade in Africa. Despite barter of agricultural goods being the predominant means of trade in ancient Africa, the continent holds pride of place in the history of money with Egypt having used metal rings as currency 2 500 years BC. Later, this evolved to include the use of items that enjoyed special advantages as stores of value, including livestock, salt bars, jewellery, beads, manilla currency (X-shaped rings of bronze), textiles and shells. The rise of cities and empires was not only stimulated by this trade, but also helped strengthen the African economy. Consider the strong trade relations formed between Egypt and the Mediterranean region as well as the Ethiopian and Eritrean trade links reaching as far as the Byzantine Empire and India where iron, copper and ivory were traded for Indian fabrics. The Swahili kingdoms of south-east Africa also provided important trading ports for commerce with the Middle and Far East while Central Africa traded gold and bronze for Chinese pottery. PAGE | 8
  • 6. African currency Africa boasts a great variety of currencies in many different sizes, colours and denominations, with several reflecting the colonial history of the continent. The copper Katanga cross was a form of money used in and around the Congo in the 19th and early 20th centuries.
  • 7. The best investment opportunities are found where perception differs from reality and Africa often fits that bill perfectly. But it was the arrival of small and relatively fast ships that facilitated business ties between Europe and Africa. Portugal was first up, with slaves being traded for gems and spices. Soon, other European powers such as France, Denmark, Holland, Belgium and Britain developed their own links with the continent. The Europeans quickly realised the potential profits that could be made by colonising large portions of Africa, cultivating cash crops and exploiting the region’s mineral resources and cheap labour. This quick-buck mentality resulted in widespread environmental degradation and poor infrastructure development, something the region has worked very hard at rectifying. While there are still numerous challenges regarding the legacy of colonialism, the continent has made great strides in developing sound infrastructure, including good road and rail networks, ports and airports, telecommunications, and banking services to name a few. A matter of attraction While the socio-political landscape of Africa has changed significantly over the last century, the continent can still thank its fertile lands and rich resources for the continued attraction of trade and investment. The biggest news in recent years has been the discovery of enormous oil reserves, which have resulted in Africa becoming the third most attractive investment destination following south-east Asia and India. Agriculture has always formed an integral part of Africa’s economy with large-scale farming of cash crops such as coffee, cotton, cocoa and rubber generating income worth millions of dollars. Exchange programmes with countries such as Brazil have focused on sharing technical advances and agricultural knowledge and have resulted in increased production. Africa is now a viable agricultural trading partner and source of much of the world’s food resources. But Africa is not just about abundant arable land and what can grow in it or graze off it. The continent is also blessed with vast mineral resources and more than its fair share of gifted industrialists and entrepreneurs. Minerals are one of the continent’s most valuable commodities and are concentrated in the gold, diamond and copper reserves of the southern nations. Oil, another big earner for the continent, is concentrated in Nigeria, Libya, Algeria, Equatorial Guinea, Sudan, Chad, Uganda, Ghana and Gabon. In 2008, Angola surpassed Nigeria as Africa’s largest, and the world’s eighth largest, producer of oil. With deep reserves and the world’s seemingly unquenchable thirst for ‘black gold’, Africa’s oil producers are well positioned to extract maximum benefit from this valuable resource. While Africa may be the least industrialised continent, abundant and inexpensive labour and the general improvement of political conditions have enhanced its manufacturing potential, resulting in economic and technological growth. This growth is further advanced by the boom in the information and communications technology (ICT) sector as well as the mining industry, with countries such as South Africa offering tax incentives in order to attract foreign direct investment in manufacturing projects. Zimbabwe is also in the process of formulating an ICT bill that will facilitate further investment in the country’s ICT sector and many new investment opportunities, including improvement of the country’s fibre optic infrastructure and connection to various undersea cable landing stations. PAGE | 10
  • 8. The world’s growing demand for ‘green’ technologies has resulted in African countries such as Mauritius, developing new ecologically focused manufacturing processes. This approach includes using renewable sources of electricity to power the manufacture of goods, the use of recycled or recyclable raw materials and the responsible management of waste and emissions. As an emerging market, with only basic legacy infrastructure, Africa is perfectly positioned to widely apply green technologies in its industrial and manufacturing processes. By doing so, the continent has the potential to actually show a lead to the established commodity-producing nations that are bogged down by outdated technologies, thereby opening new markets for African goods. The stratospheric growth of mobile technology in Africa cannot be overemphasised. As a result of the previously poor terrestrial ICT infrastructure, the availability of mobile technology in Africa in the last two decades has led to the continent sporting the highest growth rate of cellular subscribers in the world. In Zimbabwe, the mobile subscriber base more than doubled in 2009 and currently stands at close to four million subscribers – a clear indication of the huge latent market and the renewed faith of mobile operators in the country. In addition to offering a means of communication to millions of previously disconnected Africans, mobile technology has also facilitated access to the internet, mobile banking, mobile TV in select markets, mobile health and agricultural services and even real time commodities market updates. Besides the manner in which this technology has facilitated and promoted being able to do business in Africa, a slew of very favourable investment opportunities has arisen out of this particularly promising and profitable sector. Current affairs While many analysts rank the continent’s investment opportunities highly, the appeal of Africa is constantly under threat from political instability and poor regulatory practice. Importantly though, there have been a number of positive developments aimed at improving the appeal of the region as an investment destination, including the continued democratisation of dictatorial governments, market liberalisation, better governance, real economic growth and a progressive approach to social issues. Figures released by the International Monetary Fund (IMF) in January 2010 indicated that Africa’s economy had grown in 2009 – while most other economies were shrinking. The IMF has raised its growth forecast for Africa for this year (4.3%) and 2011 (5.3%) – far above the projected figures expected for Europe and the United States. While there are pockets of political instability, most African nations have managed to maintain sustained political stability. This goes a long way to improving the investment potential of the region, particularly in the eyes of foreign investors who frequently perceive the continent to be wracked by strife. The best investment opportunities are found where perception differs from reality and Africa often fits that bill perfectly. Extensive business and, by association, investment opportunities exist in many sectors including ICT and financial services, agriculture, infrastructure development such as dams, road and rail networks, renewable energy such a hydro-electric and nuclear power plants, manufacturing consumer goods, pharmaceuticals and, of course, tourism. Botswana, for example, has numerous investment opportunities in the tourism sector, from the development of high-end lodges to the establishment of public-private partnerships with the country’s national parks authority. Opportunities also exist in the development of water transfer infrastructure and the manufacture of leather goods such as belts, handbags and shoes. PAGE | 11
  • 9. The hosting of the 2010 FIFA World Cup in South Africa firmly placed the continent in the global limelight. What surprised many, particularly the continent’s now red-faced detractors, was the hugely successful and capable manner in which the event was managed. This caused many investors to sit up and take notice and has definitely contributed to positioning South Africa, and Africa as a whole, as a viable and attractive investment alternative. The recently published Doing Business 2010 survey produced by the World Bank reported a boom in regulatory reforms, with 67 being recorded in 29 of the 46 sub-Saharan countries. The survey ranks economies based on 10 indicators of business regulation, in effect rating the business-friendliness of nations. Rwanda took the laurels as the world’s top reformer, a first for a sub-Saharan African country. Rwanda’s success is largely due to reforms in seven of the 10 regulatory areas surveyed, which now make it much quicker and easier for entrepreneurs to set up businesses. Thanks to the country’s reorganised registry and statutory time limits, property transfers are now conducted more expeditiously. In addition, imports and exports are now handled in a more efficient manner, investors are offered better protection, a wider range of assets can be used as security for accessing loans, and insolvency reorganisation has been streamlined. These regulatory reforms are of cardinal importance not only in helping businesses survive during times of economic crisis and uncertainty, but also aiding to rebuild businesses when the economy becomes more favourable. In post-conflict regions, reforms are actively improving the regulatory framework for private sector-led development as illustrated by Liberia where eased procedures for business start-up and reduced fees for construction permits have been introduced. Sierra Leone has drafted legislation to improve investor protection and access to credit, as well as made provision for a one-stop centre for business registration. Other leading African reformers include Burkina Faso, Mali, Angola, Cameroon, Ethiopia and South Africa, with Liberia and Egypt also featuring among the top-10 regional reformers. All of these efforts point to the willingness of the region to facilitate and provide a secure trade and investment location. People, planet and profit Gone are the days when business was focused merely on extracting maximum profit. Responsible investing is a significant theme in the world today with the focus firmly on the triple bottom line of people, planet and profit. By following these sustainable business strategies, African companies and their investors alike are playing a fundamental role in furthering the success of the continent. Today’s investors want their investment choices to be backed by a degree of social integrity. It is with this in mind that reforms are being made in terms of corporate governance and the way companies report. In South Africa, reporting requirements already focus on more than merely financials and many companies are already reporting on issues related to sustainability and their social and environmental impact. By advancing this approach to business, issues of community involvement and community development, improvement of education and healthcare, promotion of clean and renewable energy and sustainable infrastructure development will become embedded in the way companies operate. PAGE | 12
  • 10. Responsible investing is a significant theme in the world today with the focus firmly on the triple bottom line of people, planet and profit. In 2004 the Johannesburg Stock Exchange (JSE) in South Africa launched the Socially Responsible Investment (SRI) Index with the aim of measuring compliance by companies with triple bottom line criteria around economic, environmental and social sustainability. The SRI Index acts as a tool for investors to select certified good corporate citizens and provide a benchmark for companies looking to improve their corporate responsibility. The SRI index was the first index of this nature in an emerging market and the first in the world to be launched by a securities exchange. Many investors now use the index to inform their investment decisions and, as the approach gains popularity, it is inevitable that the concept will be replicated by other African exchanges. Challenges One of Africa’s biggest challenges is finding the requisite degree of liquidity to ensure suitable levels of investment. The establishment of common markets and pooling resources is one possible solution to providing such liquidity. These markets will also ultimately make it possible to trade shares and bonds across borders, move capital, goods and services, and labour between partner countries, and provide for the establishment of shared trading platforms and exchanges. The official agreement establishing the East African Community was signed on 1 July 2010 and while it may take a while for all the partners to amend their legislation to fully implement all aspects of the scheme, citizens of some countries are already able to move freely from one member state to the other. One of the critical challenges facing the African investment environment is the availability and speed at which information is made available to investors and analysts. The current asymmetrical flow of information is not conducive to formulating accurate and useful market analysis and many investment opportunities are being lost as a result. However, many African stock markets are investigating the possibility of sharing infrastructure and systems which should go some way to improving the flow and speed of information. One example of this is the use by the Namibian Stock Exchange of the same trading platform as the JSE. The harmonisation of laws and listing and reporting requirements between neighbouring countries will further facilitate the trading process, resulting in virtually endless investment opportunities. Africa’s time Having for a long time been considered the delinquent continent, Africa has transformed itself into one of the fastest-growing regions in the world, featuring robust and resilient economies, a stable banking sector, strong markets, liberalising policies and undiscovered, high-quality and fast-growing companies. With economic growth figures of between 5% and 8%, returns on investment frequently surpassing those of developed economies and the income levels of the one billion-strong population ever rising (thanks largely to globalisation and the unabated demand for goods from countries such as China), the investment potential is huge. Investors can choose from banks, mining, retail, manufacturing and mobile phone companies, all with good prospects, healthy balance sheets and respectable price earnings ratios. Africa is now a global competitor and a premium investment destination. Now is Africa’s time. PAGE | 13
  • 11. GROUP PROFILE General Information Country of incorporation Botswana Principal activities Holding company for a Pan-African Financial Services Group Company registration number CO - 2002/3377 Tax registration number CO - 65018-01-01-9 Registered office Union Provident Trust First Floor, Time Square Plot 134, Independence Avenue, Gaborone, Botswana P.O. Box 46699, Village, Gaborone Registration status Registered in the Botswana International Financial Services Centre (IFSC) Tax Certificate Number 22 - Effective date 28 July 2003 Independent auditors Ernst & Young Bankers Barclays Bank of Botswana Barclays Bank of Mauritius Close Bank Guernsey Limited First National Bank Limited (Botswana) First National Bank Limited (South Africa) Standard Bank Limited (Mauritius) Reporting currency Botswana Pula (P) Botswana Stock Exchange code IMARA Reuters code IMRA.BT Transfer Secretaries Corpserve Botswana First Floor, Unit 3, Block A, Plot 117 Millennium Office Park, Kgale Hill, Gaborone Telephone: +267 393 2244, Facsimile: +267 393 2243 email: corpserve@info.bw Business addresses & contact details Botswana Second Floor, Unit 3, Block A, Plot 117 Millennium Office Park, Kgale Hill, Gaborone Telephone: +267 318 8708, Facsimile: +267 319 1767 South Africa Imara House, Block 3 257 Oxford Road, Illovo 2116, Johannesburg Telephone: +27 11 550 6100, Facsimile: +27 11 550 6110 www.imara.co PAGE | 14
  • 12. DIRECTORATE AND GROUP MANAGEMENT Directorate Imara Holdings Limited SM Ndoro Chairman Zimbabwe Non Executive Appointed 29 September 2009 PJS Gray Chairman United Kingdom Non Executive Retired 29 September 2009 PJS Gray United Kingdom Non Executive Resigned 14 March 2010 MJS Tunmer Chief Executive South Africa Executive AR Fleming United Kingdom Non Executive GE Johns Botswana Non Executive JR Legat United Kingdom Executive ACH Mackeurtan South Africa Executive RH Macleod ** South Africa Executive L Maine ** Botswana Non Executive Appointed 1 December 2009 RR Matthews United Kingdom Non Executive Resigned 29 September 2009 DE Stone South Africa Executive ** Subject to Non Bank Financial Institutions Regulatory Authority, (“NBFIRA”) formal approval. Company Secretary DE Stone Botswana Stock Exchange Compliance Officer DE Stone Audit Committee GE Johns Interim Chairman Non Executive Appointed 14 March 2010 L Maine Non Executive Appointed 1 December 2009 RR Matthews Non Executive Resigned 29 September 2009 PJS Gray Chairman Non Executive Resigned 14 March 2010 SM Ndoro By invitation Non Executive DE Stone By invitation Executive Remuneration Committee GE Johns Chairman Non Executive Appointed 14 March 2010 SM Ndoro Non Executive L Maine Non Executive Appointed 1 December 2009 PJS Gray Non Executive Resigned 14 March 2010 RR Matthews Non Executive Resigned 29 September 2009 Nominations Committee SM Ndoro Chairman Non Executive Appointed 14 March 2010 PJS Gray Chairman Non Executive Resigned 14 March 2010 ACH Mackeurtan Executive MJS Tunmer Executive Management MJS Tunmer Chief Executive Officer DE Stone Chief Financial Officer JR Legat Head of Asset Management RH Macleod Head of Corporate Finance MJS Tunmer Head of Stockbroking PAGE | 15
  • 13. INTERNATIONAL FOOTPRINT AND REGIONAL OFFICES SCOTLAND UAE NIGERIA KENYA MALAWI ANGOLA ZAMBIA ZIMBABWE MAURITIUS BOTSWANA SOUTH AFRICA OFFICES (including Associates, Partners and Representatives) Angola Scotland Luanda +244 222 372 029 Edinburgh +44 131 550 3737 Botswana South Africa Gaborone +267 318 8708 Johannesburg +27 11 550 6100 Kenya United Arab Emirates Nairobi +254-20342756 Dubai +971 566 019 024 Malawi Zambia Blantyre +265 1 822 803 Lusaka +260 211 232 455 Mauritius Zimbabwe Mauritius +230 464 9799 Harare +263 4 790 090 Nigeria Lagos +234 1 4610691 PAGE | 16
  • 14. DIVISIONAL STRUCTURE Imara Group Asset Management Corporate Finance Stockbroking Trust Administration Imara Asset Imara Corporate Imara SP Reid Imara Beresford Imara Holdings Management Finance South (Pty) Ltd International Limited Limited Limited Africa (Pty) Ltd *BVI *South Africa *South Africa *Botswana *Mauritius Imara Asset Imara Botswana Imara Africa Securities Associate Africa Investments Management UK Limited (Pty) Limited Limited Limited *United Kingdom *Botswana *Botswana *BVI Imara Asset Imara Corporate Imara Securities Imara Capital Management South Finance (Pvt) Limited Angola SVM Limitada South Africa (Pty) Ltd Africa (Pty) Ltd *South Africa *Zimbabwe *Angola *South Africa Associate Imara Asset Stockbrokers Imara Capital Management (Pty) Malawi Limited Limited Limited *Botswana *Malawi *Botswana Associate Imara Asset C F Africa Limited Management (Pvt) Imara Edwards Limited Securities *Zimbabwe (Pvt) Limited *BVI Associate *Zimbabwe Associate Imara Trademarks Limited Captial Securities (Pty) Ltd *BVI *Botswana Imara Capital Limited *BVI Imara Capital Kenya Limited *Kenya Imara Capital Limited Zambia *Zambia Capital Group (Pty) Ltd *Botswana Imara Capital Zimbabwe Legend (Pvt) Limited Active Trading Company *Zimbabwe Associate Investment Holding or Group Parent Company Imara Capital Botswana (Pty) Ltd Dormant or Non Trading Company *Country of Registration *Botswana PAGE | 17
  • 15. GROUP ORGANISATIONAL STRUCTURE Group Holding Company, incorporated in Botswana and a registered Imara Holdings Limited International Financial Services Company (Offshore Investment Status) 100% 100% 100% 100% 100% Imara Imara Africa Investments Imara Asset Management Limited Capital Limited Imara Capital Asset Management Limited Botswana (Pty) Ltd UK Limited *BVI *BVI *BVI 100% 25% Imara Management Stockbrokers 100% Africa Securities Contracts Malawi Limited (Pty) Limited Imara Global Fund Imara 100% Botswana Limited Imara African Opportunities Fund Imara 100% Capital Limited Imara (Dormant) Africa Series Fund Imara 51% Asset Management Sub Funds: (Pty) Limited – Zimbabwe Fund – Nigeria Fund – East Africa Fund – African Resources Fund Imara Capital Zingwenya Capital Group South Africa Holdings 100% (Pty) Limited (Pty) Ltd (Pty) Ltd 80% 20% 50.10% Imara Imara Asset Imara SP Reid Corporate Finance Management Capital Securities (Pty) Ltd South Africa South Africa (Pty) Limited (Stockbroking) (Pty) Ltd (Pty) Ltd PAGE | 18
  • 16. 69.3% 100% 25.01% 100% Imara Trademarks Imara Beresford Imara CF Africa Limited Limited International Limited Capital Limited Non Trading Zambia Companies *BVI *BVI *Mauritius 47.2% 100% 25% Imara Beresford Imara Trust Company Stockbrokers Imara Capital 100% Capital Zimbabwe Trust and Corporate Zambia Limited (Pvt) Limited Services (Mauritius) Kenya Limited Limited 100% 100% 100% Imara African Private Equity 100% Fund Managers (Pty) Ltd Imara Imara Beresford Nominees Edwards Securities One Limited (Pvt) Limited Limited Imara Securities Angola 50% SVM Limitada Imara Beresford Imara Asset Management Two Limited One (Pvt) Limited Limited Imara Imara Corporate Finance Directors Zimbabwe Limited (Pvt) Limited Legend Botswana Kenya South Africa Angola British Virgin Islands United Kingdom Zimbabwe Zambia Malawi Mauritius PAGE | 19
  • 17. Mokorro boys The rivers of Africa became natural trading routes and were used to transport goods such as maize, pumpkins, animal skins and precious metals. The many African banknotes used to pay for these goods nowadays depict the continent’s trade heritage and rich bounty, including images of tobacco farming, gold mining and industry.
  • 18. CHAIRMAN’S STATEMENT Our performance this year is a sober reminder It is encouraging to report that income from that African capital markets have not yet fully associates has grown more than 12 fold in the recovered from the impact of the global crisis. year to P 1.92 million, a clear indication that The period under review has produced our acquisition strategy is working and yielding disappointing results and our financial positive momentum. In line with longer term performance has been difficult to accurately strategic objectives, the Group has options forecast. Revenue for the year declined by 9% to increase our equity stakes in these entities to P 92.81 million, whilst attributable earnings going forward and we will continue to look decreased by 96% to P 246 765. Although the for other expansion opportunities. Income Statement is below expectation, the Group remains resilient and the Statement of Financial Position has strengthened with cash and Our people cash equivalents improving by P 21.89 million to P 123.40 million, and with no gearing. This Our remuneration policies are designed to creates a strong foundation for a more retain and incentivise our staff, whilst also profitable company going forward. In this attracting the best talent available in the respect, we have been able to protect markets where we operate. Despite the shareholder wealth with shareholders’ equity austerity measures which have been in place having grown by P 8.64 million during the year. throughout most of the year, in the form of salary reductions at director and senior In addition, we have been able to contain management level, I am pleased to report that operating expenses in a difficult trading we have been able to retain all key personnel environment. Operating expenses at P 82.27 and skill sets and are therefore well positioned million, are almost P 200 000 lower than the to take advantage of any improvement in previous year. Although not immediately trading conditions in the future. apparent in the Income Statement, the Stockbroking and Asset Management Divisions The current Share Option Scheme is nearing have generated strong revenue streams and the end of its life cycle and we plan to profits, whilst funds under management have implement a new scheme in its place. recovered significantly during the past year. Share options are seen as a key component Unfortunately, this improved performance has of overall remuneration packages and been partially reversed by a poor performance in the Corporate Finance Division, which is shareholders will be asked to approve a partly attributable to timing issues on significant new Share Option Scheme at the forthcoming mandates that were not closed in the year under Annual General Meeting. review. However, it is anticipated that these will start to come through this year. The Group will also benefit from the cost cutting measures Outlook introduced in the Corporate Finance Division during the second half of the year. We remain cautiously optimistic about our future prospects. Annuity income streams On the positive side, the Imara Funds have continue to improve, albeit slowly. Our continued to grow with good inflows and with acquisition strategy remains robust and is limited redemptions. The Asset Management yielding positive returns, and the Group company in South Africa has become profitable footprint continues to expand. Using our this year and our South African flagship fund, strong Statement of Financial Position as the Imara Equity Fund, has been favorably a springboard, we will continue to focus received and continues to perform well. on improving performance in our existing We believe that the Asset Management businesses by extending our services and business in South Africa is now set to deliver product range, whilst looking for opportunities long term growth and profits. in new markets. PAGE | 22
  • 19. We do however recognise that current Lethebe Maine was appointed as a non uncertainties in world economies and the executive director of the Company on possibility of a further slow down in economic 1 December 2009. His appointment is still activity could continue to negatively impact subject to formal approval by the Non Bank our financial performance in 2011. Financial Institutions Regulatory Authority, (“NBFIRA”), and the application is pending. As you have already witnessed in this Annual As a former Ombudsman of Botswana, his Report, Imara has new clothing! The Group appointment will further strengthen the Board, has recently embarked on an extensive and will improve the balance between executive re-branding exercise, strengthening the image and non executive directors. and re-positioning the Group. We hope that this will herald a new beginning for our Group and coincide with improved financial performance. Dividend I hope that you like it. The story behind this new imagery is exciting and is based on our African Despite the Group’s strong cash position, your heritage and aspirations for the continent. Board felt it prudent not to pay a dividend for We believe it will inspire our stakeholders as we the year. It is, however, important to note that continue to build a unified and cohesive entity since inception and the first dividend paid in in a seemingly diverse continent. August 2006, Imara has paid its shareholders a cumulative total dividend of P 38.90 million of which P 23.07 million has been paid in cash Governance and Directorate and P 15.83 million in the form of scrip dividends, which translates to the allotment of 1.81 million Strong corporate governance and financial new shares. sustainability are essential for all shareholders in Imara. Your Board of Directors strives to ensure that the Company conducts business Vote of thanks with integrity, the highest ethical standards and complies fully with applicable legislation and Finally, I would like to thank our clients for regulations. The Board is also committed to entrusting us with their wealth management, the adoption and implementation of govern- all of our staff for their hard work over the past ance policies outlined in the King III Code on Corporate Governance. year and my fellow directors for their guidance and continued support. In addition, the Group Philip Gray who served as Chairman of the benefits greatly from the commitment of the Board since 2004, retired as Chairman at the Chief Executive, Mark Tunmer, who continues to Annual General Meeting of the Company on demonstrate resilience and innovation in driving 29 September 2009. He subsequently resigned and implementing our strategy. I appreciate his as a non executive director on 14 March 2010. commitment. Philip has a thorough and comprehensive understanding of governance issues and was largely instrumental in developing and imple- menting the governance policies and practices which exist within the Imara Group today. His contribution in this area has been immense. SM NDORO Roger Matthews also retired as a non executive Chairman director at the Annual General Meeting of the 18 August 2010 Company on 29 September 2009. He has served on the Board since the formation of the Group in 2003 and has also made a valued contribution. PAGE | 23
  • 20. CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS Group Review inflows were received into all products including those launched during the year, The year ended 30 April 2010 was again a while the redemptions of the previous year year of contrasting halves. Despite the global reversed to net subscriptions early on in the upswing, sub-Saharan African markets financial year. (excluding South Africa) lagged their larger peers in the more developed emerging The South African business, which was not markets. This was similar to their delayed affected by the global credit crunch to the downturn in early 2008, when emerging same extent as the rest of the operations, markets began to ease as the early signs of put in another credible year growing funds the credit crunch became apparent. In the under management by 28,3% in Rand terms, second half of the year African markets rose surpassing the peak set in 2008. The flagship more strongly closing the gap with the larger Imara Equity Fund has been well received markets, whilst the uncertainty created by the and continues to perform well. problems in Greece and the Eurozone left African markets largely unaffected. In Zimbabwe, the economy and stock market took on a whole new life under the US dollar Against this background the Group produced bringing to an end the destructive years of disappointing attributable earnings of hyperinflation. As a result, the Zimbabwe P 246 765, which is 96% below the 2009 business, an associate, rebounded and earnings, despite only a 9% decline in produced credible results in its first year revenue to P 92.8 million. It is, however, of a new environment. pleasing to note that the Group’s cash position Whilst the level of funds under management grew by P 21.89 million to P 123.40 million ended the year substantially up, average despite low profitability and acquisitions funds under management for the year were made during the year. Shareholders’ equity below the average for the financial year increased by P 8.64 million to P 140.82 million. ending 2009. As a result, revenues and The reclassification of the South African BEE profits for the full year were below those related interest bearing borrowings from achieved in 2009. Since the African markets long to short term also reduced gearing to have not yet recovered to their peak levels zero. Cost containment initiatives resulted of April 2008, the offshore funds traded at in a marginal reduction in total operating levels below their high water marks. As such, expenses at P 82.27 million, while staff costs no performance fees were earned this year which comprise 40% of total expenses, as was the case in 2009. fell by 11,5%. Strong contributions were again made by the Asset Management and In Mauritius, it is pleasing to report the Stockbroking Divisions, while the Corporate successful merger in October 2009 of Imara Finance Division registered a loss as it Trust Company Mauritius Limited and rebuilt the pipeline of mandates. Beresford Trust and Corporate Services (Mauritius) Limited under a new holding company, Imara Beresford International Asset Management Limited (“Imara Beresford”). Imara’s initial shareholding is 25% with an option to In the Asset Management Division, funds increase this to 51% over five years. under management bounced back ending The merged business has a strong and the year up by P 874.2 million at P 2.76 billion. growing client base and it continues to Although this was lower than the peak level of introduce new services. For instance, P 3.63 billion the previous year, it represents Beresford Pension Trust Limited has been a credible recovery in a difficult and uncertain licensed by the Financial Services Commis- global macro environment. Encouraging sion as a Pension Fund Administrator. PAGE | 24
  • 21. Trading beads Early African traders established trade routes across the length and breadth of the continent, buying and selling basic goods such as fish and grains, as well as exotic products such as ivory and beads. Trading beads, brought to Africa’s shores as ballast on ships, were used as currency for African commodities.
  • 22. CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS Our Pension Scheme, the Beresford increased volatility in the market. Proprietary International Pension Plan, has also been trading continued to be slow and as the approved by Her Majesty’s Revenue and market moved sideways with movements Customs (HMRC) in the UK as a Qualifying occurring randomly, traders became more Recognised Overseas Pension Scheme cautious, looking for trading opportunities in (QROPS) in Mauritius. A number of pension a mix of contrary signals. trusts for UK citizens, who have become non- resident to the UK, have already been set up The slower recovery of African markets in the and this line of business looks promising as first half of the year, impacted negatively on the legislative framework for trusts and the tax the performance of Imara Africa Securities environment in Mauritius is very favourable in Botswana. However, towards the end of compared to other traditional jurisdictions. the year, as markets improved, volumes were better. Work is underway to significantly Imara Beresford has also been admitted as reposition this business to ensure that it is the sole Mauritius member of MGI, which is well placed to service the increasing one of the largest associations of independent international interest in Africa. With this in auditing, accounting and consulting firms in mind, a head of research and a marketing the world. Founded in 1947, the association team have been put in place and a number has 283 offices located in 80 countries. As a of new products are being investigated in an member of the association, Imara Beresford effort to augment the product offering. This will have access to a global network of will position the business as a truly “one- professionals which can be an important stop shop” African securities business. source of business referrals. The outlook for this business is most encouraging. Turning to our associates, Stockbrokers Malawi had a disappointing year resulting in the company having to be recapitalised by Stockbroking Imara and our partners, the National Bank of Malawi. However, new management is in Imara SP Reid made a significant contribution place and it is anticipated that the business to the Group and was the highest profit should register a small profit this year. contributor on a pre-tax basis accounting Stockbrokers Zambia also returned a small for P 12.29 million of profit before tax. loss with volumes on the Lusaka Stock This was against a backdrop of volatile Exchange remaining subdued. The first six market conditions and a strong Rand. months of 2010 are encouraging and this Although turnover was down, clients business is expected to return to profit this remained resilient and trading volumes, year. Capital Securities in Botswana, which in general were ahead of conservative became a 51% subsidiary as at 1 November expectations, despite having declined on an 2009, also had a difficult year as volumes on annual basis. Brokerage was under pressure the Botswana Stock Exchange remained due not only to market conditions, but also depressed. Fortunately this has turned around increased competition from the banks, which in 2010 and the company has traded well so have stepped up their marketing campaigns far this year. and cut brokerage rates. Despite these conditions, average brokerage per month In Zimbabwe, Imara Edwards Securities was only marginally lower while at year end, traded very strongly for the first half of assets under administration had risen the year. The political impasse that started considerably to in excess of R 10 billion. in September 2009 slowed foreign interest and this was dramatically increased by the Turnover from the derivates desk grew against gazetting in February 2010 of the regulations expectation, but with increased risk due to the relating to the Indigenisation and Economic PAGE | 26
  • 23. Empowerment Act. These mandated the rebuilding the pipeline lost in 2008/2009 and transfer of 51% ownership of all businesses working on mandates, a number of which valued at over USD 500,000 within five years were expected to be complete by year end to indigenous Zimbabweans. In addition, but carried over to the new financial year. brokerage rates, which are legislated in Of note was the final completion of the Zimbabwe, were reduced from 2% to 1% in disposal of a 50% shareholding in Botswana January 2010. Despite this environment the Soda Ash on behalf of a grouping led by company generated profits, although so far Anglo American. This was one of our longest this year volumes are significantly down mandates as work on it began in 2006. resulting in the company showing a small Currently a number of mandates are being loss for the first four months. worked on in Botswana, South Africa, Tanzania, Zambia and Zimbabwe. Post year- The Imara Securities Angola SCVM Limitada end we were the lead advisers on the very office was established in September 2009. successful listing of Cresta Marakanelo on However, progress towards the establishment the Botswana Stock Exchange in June 2010. of the market has been slow due to several There are also a number of exciting mandates macro factors, the most important of which being pursued, which involve privatisations included a sharp contraction in liquidity as well as listings on regional exchanges. levels due to a lower oil price and a Against this background it is planned to look contraction of foreign investment capital at resurrecting the Imara Participating inflows, primarily due to the still ailing Underwriting Programme, which was Eurozone capital markets. On the positive successfully launched in May 2008 but side, a B+ sovereign credit rating from S&P shelved later that year. In addition to this it is proposed to launch a Private Equity product and Fitch was recently achieved, which will later in the year. enable the country to tap into international capital markets to alleviate liquidity Although the Corporate Finance Division has bottlenecks. We intend to hit the ground been through very testing times we remain running when the market opens to ensure cautiously optimistic that it will make a positive that we are the broker of choice to the contribution to Group earnings this year. international investor. To achieve this, bottom-up research coverage of local Looking at our Zimbabwe Corporate Finance companies, as well comprehensive top- associate, the economics of Zimbabwe under down research, covering the broader dollarization have resulted in corporate economic developments has also begun. management generally having to contemplate Efforts are also constantly made to pre- capital raisings and other transactions that emptively market Angola to international they previously were hoping to avoid. investors, reiterating our position as the This resulted in a lot of work being undertaken forerunner in what is expected to be one with not too much closure. However, on the of sub-Saharan Africa’s larger markets. positive side, the company returned to profits for the first time in a number of years and work in progress indicates a much Corporate Finance improved year. The Corporate Finance Division was restructured in June 2009 when it became Associates apparent that costs needed to be reduced to assist its return to profitability. Staff Imara Capital Zimbabwe completed its first remuneration was reduced, on the basis that full year trading with US dollars as the an enhanced share of the fees earned would functional currency of the economy. go to staff. The year has largely been spent The ‘death’ of the Zimbabwe dollar brought PAGE | 27
  • 24. CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS an immediate end to the hyperinflation, equity market valuations and continues to which dominated the last few years, and attract new funds, both inside and out of allowed businesses to more accurately Zimbabwe, and to develop new products budget and measure performance. The year such as corporate debentures. It is was characterised by two halves. The anticipated that outside of simple market period from March to September 2009 appreciation there will be a relaxation of saw a rapid growth in industrial capacity exchange control, allowing us to place utilisation, significant restocking of the supply Zimbabwean institutional funds with Imara’s side of the economy and strong growth in suite of funds. banking deposits. The period following September 2009 has been characterised by The Memorandum of Understanding a levelling off of growth as liquidity constraints concluded in December 2008 with Chapel impacted on working capital. This coincided Hill Denham in Nigeria to work together, is with disagreements in the unity Government. beginning to show results against a much improved macro environment post the The Zimbabwe Stock Exchange made the banking crisis. A Memorandum of transfer to US dollars painlessly. The market Understanding was also signed with NIC traded at capitalisation levels of around Capital in Nairobi with regard to Corporate USD 3.5 - USD 4 billion for much of the year, Finance and Stockbroking. Results of this largely in line with levels in the previous few to date have been disappointing but we years. Foreign investors were net buyers and remain optimistic. The Asset Management local investors, net sellers, in reasonable Division however, continues to work volumes of, on average, USD 2 - USD 3 million well with ICEA Asset Management, who per day. In mid February 2010 new local are the co-managers of the Imara East ownership legislation impacted on foreign Africa Fund. We continue to look for inflows negatively effecting trading volumes. opportunities to grow and strengthen the business in Africa. Although the operating environment in Zimbabwe showed vast improvement over Imara Holdings remained listed on the the period prior to dollarization, significant Venture Capital Market of the Botswana constraints remain in place. The political Stock Exchange and it is still intended to outlook is uncertain, with the constitution apply to move to the main board once the drafting process slow in starting and minimum requirement of 300 public share- lacking in direction. The indigenisation holders is achieved. At present the Company legislation has put a dampener on foreign has 318 shareholders in total, with 275 investment and added a further layer of red deemed as public shareholders by the BSE. tape to local deal making. However, the recent amendments to the Act, are encour- Following the South African empowerment aging, and it is expected that investors’ transaction in 2007, in terms of which confidence will grow again as they see Zingwenya Holdings holds a 20% interest the practical application. While the in each of the South African operating Zimbabwe Stock Exchange is currently subsidiaries, the Imara South Africa Trust was trading on volumes too thin to sustain all established this year. The broad based Trust the brokers, Imara continues to enjoy a owns an effective 5% of the subsidiaries of reasonable market share. We remain Imara Capital South Africa (Pty) Limited and, confident that we have a viable business with this now in place, Imara South Africa and are well positioned for any upside. has achieved the recommended ownership Asset Management trades positively, requirements in terms of the Codes of Good even at current relatively depressed Practice on Black Economic Empowerment. PAGE | 28
  • 25. Outlook in September 2009 and as a non executive director in March 2010. Philip was an active We are cautiously optimistic, despite the member of the Board from the formation of continuing uncertainty surrounding the Imara in 2003 and his knowledge of capital strength of the global recovery. markets and corporate governance has had The increasing interest in Africa is encour- a significant influence on what Imara is aging and should provide greater impetus today. I would also like to acknowledge the going forward. Most African markets have contribution made by Roger Matthews, who registered positive growth this calendar retired as a founder director at the AGM in year and this is expected to continue. September 2009. I am pleased to welcome Liquidity does, however, remain a constraint Lethebe Maine to the Board, whose legal in most markets. As always, we look and social knowledge will be most valuable. forward to the continuing recovery in Finally, I must thank the Imara team who have Zimbabwe where our associate is well worked extremely hard in what was a most placed to take advantage of an improving difficult year to ensure that Imara is well environment. Our new associates in Mauritius placed to go forward in a stronger Africa. and Zambia, and subsidiary in Botswana, are also well positioned to contribute to Group earnings. We also look forward to the launch of the stock exchange in Angola this year. Against this background of a stronger Africa, it is anticipated that Imara will produce improved earnings this year MJS TUNMER but as always this will be dependent on CHIEF EXECUTIVE OFFICER market conditions. 18 August 2010 During the course of 2010 we have been reviewing our corporate Vision and Purpose to provide a solid foundation for the future growth of the Group. ‘Investing in Africa’ is our new communications theme, which we have introduced in this Annual Report, and around which we will position and manage our brand going forward. Underpinned by a set of shared Values and our Mission to become the leader in wealth management in a successful Africa, we will be orienting our whole Group behind this rich idea. Imara is strong in name and resolute by nature. Our new corporate identity expresses this strategy inspirationally and equips each of the divisions and country operations with a brand of which they can truly be proud. In closing, I would like to thank my Chairman, Mike Ndoro, and the Board for their support and guidance. Special mention must be made of the tremendous contribution made by Philip Gray, who stood down as Chairman PAGE | 29
  • 26. REPORT OF THE DIRECTORS The directors of Imara Holdings Limited have The holders of ordinary shares are entitled pleasure in presenting their report for the year to receive dividends as and when declared ended 30 April 2010. by the Company. All ordinary shares carry one vote per share without restriction. Nature of Business In respect of the year ended 30 April 2009, shareholders were given the option to Imara Holdings Limited is a Botswana registered receive their ordinary dividend of 3 thebe company, licenced by the International Financial per share, either in cash or to receive Services Centre (IFSC), and is the holding ordinary shares in lieu of the dividend company for a group of companies conducting entitlement. Shareholders electing to the following types of business, primarily for receive ordinary shares in lieu of their institutional and private clients: dividend were allotted shares at a price of P 4.25 per share. A total of 146 shareholders, - Asset Management holding 37 658 368 of the issued ordinary - Corporate Finance shares in the Company and representing - Stockbroking 66,09% of the total issued share capital of - Trust Administration and Custodial Services the Company, elected to receive shares in lieu of dividend, resulting in the allotment of There has been no significant change to the 240 061 new shares in the Company. nature of business from previous years. Authorised and Stated Capital Botswana Stock Exchange Authorised capital The Imara share was listed on the Venture The authorised share capital of the Company is Capital Market of the Botswana Stock 200 000 000 ordinary shares of no par value. Exchange on 4 October 2006. A minimum There has been no change in the authorised of 300 public shareholders is required for capital of the Company in the current year. a company to be listed on the main board of the Botswana Stock Exchange. It remains The un-issued ordinary shares are under the the Company’s intention to seek a listing control of the directors. on the main board once the minimum number of shareholders has been achieved. Stated capital As at 30 April 2010, Imara had a total of A summary of the movement in the stated 318 shareholders of which 275 were public capital of the Company as at 30 April 2010 and shareholders (2009 Total: 298 shareholders 2009 is as follows: of which 251 were public shareholders). Number of shares Stated capital 2010 2009 2010 2009 Balance at the beginning of the year 56 778 236 55 618 916 44 909 348 37 111 325 New shares issued : Scrip dividend 240 061 536 135 1 020 260 6 701 647 Share option scheme 857 934 594 420 758 040 854 750 Acquisition of client data base - 28 765 - 241 626 Acquisition of associate companies 286 188 - 1 845 333 - Balance at the end of the year 58 162 419 56 778 236 48 532 981 44 909 348 PAGE | 30
  • 27. Trading shells Early traders used strings of shells to keep a record of cargo leaving and arriving from ports and other trading centres. The influence of tribes and races from other parts of the world can be seen in the faces of Africa’s people and by the many religions now practised on the continent.
  • 28. REPORT OF THE DIRECTORS Accounting Policies and Disclosure statements were approved and adopted by the Board of Directors on 28 July 2010, and Messrs. The consolidated financial statements of the Group MJS Tunmer and DE Stone were authorised to and Company have been prepared on a going sign these statements on behalf of the Board. concern basis in accordance with International They have discharged their responsibility for the Financial Reporting Standards (IFRS), which signing of these financial statements by jointly comprise standards and interpretations signing the Report of the Directors. approved by the International Financial Reporting Standards Board and interpretations approved The un-audited financial statements for the Group by the International Financial Reporting for the six months ended 31 October 2009 were Interpretations Committee (IFRIC), and the announced on 4 December 2009 and reflected applicable requirements of the Botswana profit after tax for the Group of P 388 207. Companies Act (Companies Act, 2003). The audited results of the Group for the year The financial statements have been prepared on ended 30 April 2010, announced on 28 July 2010, an historical cost basis except for certain financial reflect profit after tax of P 500 729. Profit after instruments that are carried at fair value. tax for the second half of the year, therefore amounted of P 112 522. The accounting policies adopted in the preparation of the Group’s and the Company’s financial statements are consistent with those of the Cautionary Announcement previous financial year. The Group traded under a Cautionary Announcement from 31 July 2009 to 26 February Directors’ Responsibility Statement 2010. The Cautionary Announcement related to a possible regional acquisition and was The directors are responsible for the preparation withdrawn after the parties to the transaction and fair presentation of the financial statements agreed to terminate their discussions, due to of the Group and Company in accordance with the lack of unconditional regulatory approval International Financial Reporting Standards and for the proposed transaction. in a manner required by the Companies Act of Botswana (Companies Act, 2003). Change in Regulator This responsibility includes designing, implementing and maintaining internal controls With effect from 8 September 2009, the Group’s relevant to the preparation and fair presenta- primary regulator changed from the Bank of tion of financial statements that are free from Botswana to the newly constituted Non Bank material misstatement, whether due to fraud Financial Institutions Regulatory Authority, or error; selecting and consistently applying (“NBFIRA”). The regulatory reporting require- appropriate accounting policies and making ments of NBFIRA are the same as those that accounting estimates that are reasonable in applied previously. the circumstances. Audit and Risk Committee Financial Results In accordance with the recommendations of The audited results of the Group and Company the King Committee on corporate governance, are set out in the annual financial statements (King III), the composition of the Audit and Risk and accompanying notes. These financial Committee was changed during the year to PAGE | 32
  • 29. comprise non executive directors only. The Audit and Risk Committee meets regularly with senior management and Risk Management Committees in order to assess and review the effectiveness of the Group’s systems of risk management, compliance and internal control. The Audit and Risk Committee is also responsible for reviewing the financial statements of the Group and ensuring that such statements are presented in an IFRS compliant manner. The Committee meets periodically with the Group’s Independent Auditors to consider the nature and scope of the audit reviews and to receive reports in connection with those audit reviews. Directors and Company Secretary Details of the directors and Company Secretary are reflected on page 15 of this Annual Report. Lethebe Maine was appointed as a non executive director on 1 December 2009. His appointment is still subject to formal approval by NBFIRA. Philip Gray, who had been Chairman of the Board since 2004, retired as Chairman at the seventh Annual General Meeting on 29 September 2009. He was replaced as Chairman by Mike Ndoro. Mr Gray subsequently resigned as a non executive director of the Company on 14 March 2010. Roger Matthews, who had been a director of the Company since 2003, retired as a director of the Company at the end of the seventh Annual General Meeting on 29 September 2009. It remains the Directors’ Shareholding Company’s intention to seek a listing on Directors are not required, in terms of the Company’s Constitution, to hold shares in the the main board of the Company but the majority of directors have Botswana Stock independently elected to do so. Exchange once the As at 30 April 2010 and 31 July 2010 (the last practical minimum number of date prior to the publication of this Annual Report), the directors, directly and indirectly, held the shareholders has following shares in the Company: been achieved. PAGE | 33
  • 30. REPORT OF THE DIRECTORS Number of Number of Share options Share options shares held Movement in shares held held under the held under the directly and directors’ directly and Imara Share Imara Share indirectly at shareholding indirectly at Option Scheme Option Scheme Director 30 April 2010 post year end 31 July 2010 30 April 2010 31 July 2010 AR Fleming 5 664 120 - 5 664 120 250 000 250 000 GE Johns 63 122 - 63 122 - - JR Legat 2 586 819 - 2 586 819 50 000 50 000 ACH Mackeurtan 2 549 119 - 2 549 119 33 333 33 333 RH Macleod 1 399 826 - 1 399 826 33 333 33 333 SM Ndoro - - - 50 000 50 000 DE Stone 110 850 - 110 850 140 000 140 000 MJS Tunmer 5 754 859 - 5 754 859 50 000 50 000 Total 18 128 715 - 18 128 715 606 666 606 666 Comparative information relating to directors’ shareholding as at 30 April 2009 and 31 July 2009 are as follows: Number of Number of Share options Share options shares held Movement in shares held held under the held under the directly and directors’ directly and Imara Share Imara Share indirectly at shareholding indirectly at Option Scheme Option Scheme Director 30 April 2009 post year end 31 July 2009 30 April 2009 31 July 2009 AR Fleming 5 662 283 - 5 662 283 250 000 250 000 PJS Gray 938 650 - 938 650 - - GE Johns 62 746 - 62 746 - - JR Legat 2 368 687 - 2 368 687 200 000 250 000 ACH Mackeurtan 2 531 251 - 2 531 251 - 50 000 RH Macleod 1 383 159 - 1 383 159 - 50 000 RR Matthews 1 020 800 - 1 020 800 - - SM Ndoro - - - - 50 000 DE Stone 110 073 - 110 073 90 000 140 000 MJS Tunmer 5 735 869 (31 500) 5 704 369 - 50 000 Total 19 813 518 (31 500) 19 782 018 540 000 840 000 Directors’ Interest in Contracts Directors’ Remuneration None of the directors or officers of the Shareholders will be asked to approve, at Company had an interest in any contract of the Company’s Annual General Meeting, the significance during the financial year ended remuneration paid to the directors for the year 30 April 2010. amounting to P 11 226 545 (2009: P 22 320 591). PAGE | 34
  • 31. Dividend Declaration related costs. The special plea however constitutes only part of the overall arbitration The Board have decided not to pay a dividend process and it is likely that these proceedings in respect of the year ended 30 April 2010. will continue well into the financial year ending 30 April 2011. The Company is continuing with its endeavours to have the matter expedited in Black Empowerment Transaction a timely manner. On 1 October 2007, the Group entered into a No new facts have emerged during the current Black Economic Empowerment (BEE) Transac- year, which have caused the Board to change tion in terms of which 20% of the Group’s South the original view taken in July 2007 that the African operating entities were transferred likelihood of a successful claim is remote. to Zingwenya Holdings (Pty) Limited. Entities This view continues to be supported by written covered by the transaction comprised: opinion from the Company’s legal advisors. Total costs incurred to 30 April 2010 in - Imara Asset Management South Africa defending the action brought against Imara (Pty) Limited Botswana Limited amount to P 1 861 799 - Imara Corporate Finance South Africa (April 2009: P 859 803). These costs have (Pty) Limited been fully expensed in the Income Statement - Imara SP Reid (Pty) Limited of the Company in either the current or previous financial years. The Group has now extended the empowerment shareholding in the South Africa entities through the establishment of a broadly based empower- Post Balance Sheet Events ment Trust, (Imara South Africa Trust), which now effectively holds a further 5% of the equity of the No events or transactions have occurred since above-named entities. The establishment of the 30 April 2010 or are pending, that would have Trust was completed on 20 May 2010. The Trustees a material effect on the financial statements at of the Trust are Messrs JPS O’Leary and TJ Matsau. that date or for the year then ended, or that are of such significance in relation to the Company’s or Group’s affairs as to require mention in a Litigation note to the financial statements in order to not make them misleading regarding the financial As reported in the previous Directors’ Report position, results of operations, or statement of in August 2009, the legal claim against Imara cash flows of the Group or Company. Botswana Limited for damages and alleged breach of contract by NBS Bank Limited of By order of the Board Malawi, (“NBS”) relating to an advisory mandate executed on behalf of the Privatisation Commis- sion of Malawi in the 2007 financial year, has been referred to an Arbitration Panel for resolution. The amount of the claim is DE Stone for Malawi Kwacha 757.3 million, equivalent Chief Financial Officer to approximately P 33.06 million. Arbitration proceedings have been in process since November 2007 and progress during the past year has been slow. An order was handed down in December 2009 in favour of Imara MJS Tunmer Botswana Limited relating to the special plea Chief Executive Officer introduced by NBS and included an award of 28 July 2010 PAGE | 35
  • 32. CORPORATE GOVERNANCE Corporate Governance Principles In appointing directors, emphasis is placed on achieving a balance of skills, experience, The Board of Imara Holdings Limited remains and professional and industry knowledge committed in its stewardship of the Group’s necessary to meet the Group’s strategic affairs, to applying the highest standards of objectives. The selection and appointment of corporate governance and international best directors is a formal and transparent process, practice. Corporate governance policies and involving the Board as a whole, assisted by practices are based on the seven characteris- the Nominations Committee. tics of good corporate governance, as set out in the King Report on Corporate Governance, The Board composition is balanced so that (King II), namely: no individual board member or small group of members has unfettered control over – Discipline decision making. The appointment of an – Transparency additional independent, non executive – Responsibility director is currently under consideration by – Independence the Nominations Committee. – Fairness – Accountability The Board is responsible to shareholders for – Social Responsibility setting the strategic direction of the Company, for the monitoring of operational performance The directors endorse the Code of Corporate and management and for ensuring that succession planning is in place. The Board Practices and Conduct contained in the King is also responsible for the integrity and quality II Report and the recommendations contained of communications with stakeholders, in the subsequent King Report on Governance regulators, shareholders and employees. for South Africa 2009, (King III), which is effective for financial years commencing after In terms of the Company’s constitution, 1 March 2010. The implementation of the King III directors are appointed for three years. recommendations, which broadly advocate a At least one third of the directors, (rounded policy of “comply or explain”, are already in down), retire by rotation annually, and if process, with the objective of compliance by available, can offer themselves for re- April 2011. By supporting the King Reports, Imara election at the Company’s Annual General Holdings Limited demonstrates its commitment Meeting. Non executive directors are not to the highest standards of integrity and ethical required to hold shares in the Company but conduct in its dealings with stakeholders. the majority have independently elected to do so. Remuneration levels of non executive directors are reviewed annually and Board of Directors benchmarked against Botswana financial services sector companies and proxy financial The Group is governed by a unitary Board services groups with a regional presence. of Directors, which in terms of the Company’s Constitution, may not comprise fewer than All directors have direct access to the four nor more than 20 directors, at least Company Secretary and to information one of whom shall be ordinarily resident in regarding the Group’s affairs. They are Botswana. The Board of Directors is chaired entitled to make use of independent profes- by Michael Ndoro an independent, non sional advisors, at company expense, when executive director and comprises nine necessary to discharge specific tasks and directors, four of whom are non executive. duties and have access to the Chief Details of the composition of the Board are Executive Officer and senior executives detailed on page 15 of this Annual Report. where required. PAGE | 36
  • 33. The game of trading Used as a way of counting, the board game known as Bao became a trading game where players sometimes played with diamonds. The stones and seeds used by some tribes represented cattle which were won and lost.
  • 34. CORPORATE GOVERNANCE The Board meets at least four times a year for ensuring compliance with regulations to review the financial performance of the imposed by regulators and supervisory Group, its strategic direction and key policies. authorities and for assessing, managing and It approves budgets and reviews the overall monitoring risks. It also monitors financial effectiveness of systems of internal controls, controls and reporting, compliance with risk management and statutory and International Financial Reporting Standards, regulatory compliance. It also monitors (IFRS), the appointment and effectiveness the implementation of strategy and policy of the independent external auditors and through a structured approach to reporting evaluates risk management procedures in and consequent accountability of executive subsidiary companies and other internal management. systems of control. It also monitors statutory and regulatory compliance at both Group and subsidiary company level. Board Committees The Committee has formal terms of reference The Board is assisted in the discharge of which set out its responsibilities. The Committee its duties and responsibilities by three has satisfied its responsibilities for the year, Board Committees: in compliance with its terms of reference. – Audit and Risk Committee Meetings are held at least three times per – Remuneration Committee annum and are attended by the independent – Nominations Committee external auditors, who have unrestricted access to the Chairman of the Committee. These Committees are accountable to the Meetings are also attended by internal main Board and are chaired by non executive auditors, compliance officers and senior directors. Terms of reference of the management, on an as required basis. Committees have been agreed by the main At least once in each calendar year, the Board and are reviewed periodically. Minutes Committee meet with the external auditors, of committee meetings are circulated and without a member of executive management reported on at subsequent board meetings. being present. Senior executives are invited to attend meetings of the Committees by invitation, The Committee has considered and recorded where considered appropriate. the facts and assumptions on which it has concluded that the Company and the Group are going concerns and will continue as such Audit and Risk Committee in the year ahead. It has recommended that the Board endorse a statement to this effect. The Audit and Risk Committee is chaired by The Committee has also recommended to the Gary Johns, a non executive director, and main Board that the financial statements of currently comprises two members, both the Company and the consolidated financial of whom are non executive. Details of the statements of the Group, be approved composition of the Committee are provided and adopted. on page 15. It is the intention to increase the composition of this Committee to three members through the appointment of an Remuneration Committee additional non executive director. The Remuneration Committee is chaired by The main responsibility of the Committee is Gary Johns, a non executive director, and to assist the Board in discharging its comprises three members all of whom are non responsibilities under the Companies Act, executive directors. PAGE | 38
  • 35. Details of the composition of the Committee is subject to Botswana Stock Exchange (“BSE”), are provided on page 15. The Chief Executive and shareholder approval. The Remuneration Officer and one other executive director Committee will review and approve the attend meetings of the Committee by invitation. new Share Option Scheme ahead of presentation to the BSE and shareholders, The Committee has formal terms of for their approval. reference, which set out its responsibilities. The Committee has satisfied its responsibili- ties for the year, in compliance with its terms Nominations Committee of reference. The Nominations Committee is chaired by The Remuneration Committee is responsible Michael Ndoro and comprises four members, for setting remuneration policies for the two of whom are non executive directors. Group. It aims to ensure that the financial The Committee includes the Chief Executive rewards offered to employees are sufficient Officer, and is responsible for making to attract people of the calibre required to recommendations to the Board on all new effectively implement strategy, and manage appointments to the main board and also the Group’s affairs in order to produce the reviews the appointment of directors to required returns for shareholders. It also subsidiary company boards. A formal and seeks to ensure that directors and execu- transparent process is in place in terms of tives are fairly rewarded for their respective which the requisite skills needed on the contributions to the Group. Annually, Board are identified and those individuals the Committee reviews the Share Option who are best suited for the position and Scheme and the allocation of share options, who are able to assist the Board in their the profit sharing scheme and the apportion- endeavours are recruited. The Committee ment of profit shares to executives and meets on an as required basis. employees. The Committee has formal terms of reference, The current Share Option Scheme is nearing which set out its responsibilities. The the end of its life cycle and the Group plans Committee has satisfied its responsibilities to implement a new scheme in its place. The for the year, in compliance with its terms introduction of a new Share Option Scheme of reference. 2009/2010 Board Attendance Register Director Audit & Risk Remuneration Nominations Main AGM Committee Committee Committee PJS Gray * 3/3 3/3 3/3 4/4 0/1 MJS Tunmer - 3/3 3/3 4/4 1/1 AR Fleming - - - 2/4 0/1 G E Johns 3/3 - - 4/4 1/1 JR Legat - - - 4/4 0/1 ACH Mackeurtan - 2/3 2/3 3/4 0/1 RH Macleod - - - 4/4 0/1 L Maine - - - 1/1 - RR Matthews * 1/3 1/3 1/3 1/4 0/1 SM Ndoro 3/3 3/3 - 4/4 1/1 DE Stone 3/3 - - 4/4 1/1 * Resigned during the year, but attendance measured against meetings held throughout the year. PAGE | 39
  • 36. CORPORATE GOVERNANCE Compliance Dealing in Securities The Group and certain of its subsidiary The Imara share has been listed on the Venture companies are subject to supervisory and Capital Board of the Botswana Stock Exchange regulatory controls in the geographic or since 4 October 2006. The Group has a policy country jurisdictions where they operate. prohibiting dealings in its shares by directors, officers, executive management and all In the case of Imara Holdings Limited, the employees for a designated period, (closed regulators and supervisory authorities are: period), which is from the close of the financial reporting period to the date of the – Non Bank Financial Institutions Regulatory announcement of its results or when they are in possession of price sensitive information, Authority (“NBFIRA”) not readily available to the public. The Group’s – International Financial Service Centre policy is fully compliant with the Botswana (“IFSC”) Stock Exchange’s requirements for – Botswana Stock Exchange listed companies. The Group’s primary regulator changed from the Bank of Botswana to the newly Ethics and Business Integrity constituted Non Bank Financial Institutions Regulatory Authority (“NBFIRA”), on Professional and ethical conduct and the 8 September 2009. The regulatory report- highest standards of integrity are an integral ing requirements of NBFIRA are the same as part of how the Group conducts its business those that previously applied. affairs. The Group recognises that investor and stakeholder perceptions are based on The regulators and supervisory authorities the manner in which the Group, its directors, at subsidiary company and Fund level are management and staff conduct business and as follows: the Group therefore strives to achieve the highest standards of integrity, transparency – Imara Asset Management (UK) Limited – and business ethics at all times. Financial Services Authority - UK – Imara Africa Opportunities Fund - Directors and management are required Dublin Stock Exchange to make an annual declaration of their interests, – Imara Asset Management (South Africa) and a register of interests is maintained by the Company Secretary. Directors and (Pty) Limited – Financial Service Board - SA management are also required to disclose any – Imara SP Reid Limited – Johannesburg material interests in contracts and business Stock Exchange transactions relating to the Group, which occur during the ordinary course of business Supervisory and regulatory controls are and to recuse themselves from any discussions generally based on the submission of relating thereto. prescribed returns and annual compliance certificates and in all instances there is an exception reporting requirement. Communication with Stakeholders There have been no material breaches of The Group is committed to a policy of supervisory or regulatory controls within effective communication with stakeholders the Group and its subsidiaries during the on matters of mutual interest. The Group past year. has fully adopted the Botswana Stock PAGE | 40
  • 37. Exchange guidelines pertaining to the dissemination of financial information to stakeholders. Liaison meetings are also held with the NBFIRA, the International Financial Services Centre, regulators and supervisory authorities to brief them on the Group’s performance and key strategic initiatives. In keeping with the Group’s commitment to continually improve communications with stakeholders, the Group has incorporated an Investor Relations section within the Imara Holdings website, www.imara.co, which allows stakeholders to access salient information pertaining to the Group. Social Responsibility Imara is a Group with an authentic African heritage and we owe our success, in part, to the support of the communities in which we operate. The Group recognises its role and responsibility as a corporate citizen and is committed to providing support to these communities through broad based programmes, sponsorship and initiatives. The Imara South Africa Trust was established in May 2010 and has as its main objective the provision of educational assistance to previously disadvantaged young South Africa students. A portion of the annual dividends declared by Imara Capital South Africa (Pty) Limited will accrue to the Trust. Linked to the Group re-branding exercise, Imara is a Group with which was initiated earlier this year, and an authentic African which is narrated in more detail elsewhere in this Annual Report, the Group also plans heritage and we owe to develop its own art collection – “The Imara our success, in part, Collection”. This body of photographic work will illustrate “Investing in Africa”, through to the support of the a variety of different lenses and will be communities in which published exclusively in our Annual Reports. The work will be curated by Athol Moult who we operate. The Group will be assisted by a hand-picked team of recognises its role previously disadvantaged South Africans, who will receive training in photography, funded and responsibility as by the Imara South Africa Trust. a corporate citizen. PAGE | 41
  • 38. GLOSSARY Term Meaning or Definition Attributable earnings The portion of net profit for the year, which is attributable to ordinary shareholders of the Company Attributable earnings growth The percentage increase in attributable earnings, from one reporting year to the next BBBEE (“BEE”) Broad Based Black Economic Empowerment Cash flow The movement of cash in and out of the Group Capital employed The sum of total equity plus non-current liabilities Closed period The period from the end of a designated financial reporting period to the date of the announcement of the results for that period, during which directors, officers and employees of the Company are prohibited from dealing in the Company’s shares Cost to income ratio Cost of services sold plus operating expenses, as a percentage of total income, which comprises revenue and other income Diluted earnings per share Attributable earnings divided by the diluted weighted average number of shares Diluted weighted average number of shares The weighted average number of shares increased by the number of shares that may be issued in the future, as a result of existing dilutive instruments (share options & debentures) Dividend per share Dividend declared for the year divided by the number of shares in issue at year end Dividend cover The number of times that the Company’s dividend to ordinary shareholders could be paid out of its profit after tax in the same accounting period Dividend yield Dividend per share as a percentage of the closing price of the Company’s ordinary shares Earning per share or EPS Attributable earnings divided by the weighted average number of shares Earnings yield Earnings per share as a percentage of the closing price of the Company’s ordinary shares EBITDA Earnings before interest, taxation, depreciation, amortisation Effective tax rate The tax (charge)/credit as a percentage of profit before taxation Free cash flow per share Net cash flows for the year, (inclusive of working capital changes), divided by the weighted average number of shares Funds under management Assets managed by the Group, which are beneficially owned by clients and as such do not form part of the consolidated Statement of Financial Position PAGE | 42
  • 39. Term Meaning or Definition Gearing ratio Long term interest bearing loans and borrowings divided by shareholders’ equity IFSC International Financial Services Centre, the Botswana offshore centre Liquid assets Assets held in cash or which can be readily turned into cash with minimal capital loss MK Malawi Kwacha, the standard monetary unit of Malawi Market capitalization The value of a company obtained by multiplying the number of ordinary shares in issue by their market value NBFIRA Non Bank Financial Institutions Regulatory Authority Net asset value per share Shareholders’ equity divided by the number of ordinary shares in issue at year end Operating earnings after adjusting Attributable earnings less “special” items (i.e. asset for “special items” management performance fees and other non- recurring profit items) Price earnings ratio The price of the Company’s ordinary shares divided by earnings per share Pula or P Botswana Pula, the standard monetary unit of Botswana Rand or ZAR South African Rand, the standard monetary unit of South Africa Return on average assets Net profit for the year as a percentage of average total assets Return on capital employed Attributable earnings as a percentage of capital employed Return on equity Attributable earnings as a percentage of shareholders’ equity at year end Revenue growth The percentage increase in revenue, from one reporting period to the next Shareholders’ equity Stated capital plus reserves The Group Imara Holdings Limited together with its subsidiaries and associates The Company Imara Holdings Limited, a company registered in Botswana Thebe The smallest monetary unit of Botswana amounting to one hundredth of a Pula USD or US$ United States Dollar, the standard monetary unit of the United States of America Weighted average number of shares The number of ordinary shares in issue at the beginning of the year, increased by shares issued during the year, which in turn are weighted on a time basis for the period during which they participated in the income of the Group PAGE | 43
  • 40. FIVE YEAR FINANCIAL HIGHLIGHTS AND RATIOS Years ended 30 April 2010 2009 2008 2007 2006 Reclassified Re-stated / Re-stated / Reclassified Reclassified Reclassified Salient financial results and data: Revenue P 000’s 92 809 101 516 179 084 127 550 57 680 EBITDA P 000’s 3 988 10 736 67 135 59 311 13 280 Gross profit P 000’s 78 220 85 699 162 541 119 415 48 907 Operating expenses P 000’s 82 267 82 464 99 297 65 809 41 012 Profit before taxation P 000’s 2 163 8 601 65 274 58 284 12 174 Taxation P 000’s 1 662 2 927 9 692 10 847 2 716 Profit after taxation P 000’s 501 5 674 55 582 47 437 9 457 Attributable earnings P 000’s 247 5 770 56 449 48 143 9 816 Operating earnings after adjusting for “special” items P 000’s (1 233) 5 770 1 250 29 507 9 816 Shareholders’ equity P 000’s 140 817 132 168 139 098 91 713 55 983 Capital employed P 000’s 144 399 133 536 139 544 91 550 58 824 Total assets P 000’s 244 099 208 464 257 229 172 683 106 330 Free cash flows for the year P 000’s 25 663 64 461 9 910 7 563 13 431 Funds under management at year end P m’s 2 768 1 894 3 457 2 058 1 128 Number of employees – average for the year Number 109 90 87 85 81 Key financial ratios: Return on equity % 0,18 4,37 40,58 52,49 17,53 Return on capital employed % 0,17 4,32 40,45 52,59 16,69 Return on average assets % 0,22 2,44 25,86 34,00 13,12 Gearing ratio % 0,00 0,69 0,01 0,14 4,33 Revenue growth % (8,58) (43,31) 40,40 121,13 89,94 Effective tax rate % 76,86 34,03 14,85 18,61 22,31 Cost to income % 97,83 92,05 64,05 56,00 80,50 EBITDA – year on year change % (62,86) (84,01) 13.19 346,62 532,56 Gross profit – year on year change % (8,73) (47,28) 36,11 144,17 98,60 Operating expenses – year on year change % (0,25) (16,95) 50,89 60,46 70,63 Profit before tax – year on year change % (74,86) (86,82) 11,99 378,78 912,61 Profit after tax – year on year change % (91,17) (89,79) 17,17 401,61 200 times Attributable earnings growth % (95,72) (89,78) 17,25 390,46 200 times Operating earnings after adjusting for “special” items – year on year change % (121,37) 361,55 (95,76) 200,60 200 times Shareholders’ equity – year on year change % 6,54 (4,98) 51,67 63,82 159,94 Total assets – year on year change % 17,09 (18,96) 48,96 62,40 181,08 Current assets to current liabilities times 2.16 2.60 2.04 2.00 1.68 Liquid assets to current liabilities times 1.96 2.52 1.69 1.54 0.86 Revenue per employee P 000’s 851 1 134 2 058 1 501 712 Profit after tax per employee P 000’s 5 63 639 558 117 PAGE | 44
  • 41. Years ended 30 April 2010 2009 2008 2007 2006 Reclassified Restated / Restated / Reclassified Reclassified Reclassified Market and per share data: Number of shares in issue at year end 000’s 58 162 56 778 55 619 53 688 47 438 Weighted average shares in issue 000’s 57 321 56 394 54 877 51 700 46 613 Diluted weighted average shares in issue 000’s 58 606 58 120 56 602 53 678 53 569 Quoted share price at year end thebe 495 450 840 300 90 Share price - high for the year thebe 680 1 375 840 300 90 Share price - low for the year thebe 416 450 300 90 78 Market capitalisation at year end P m’s 287,90 255,50 467,20 161,06 42,69 Number of shareholders at year end Number 318 298 261 116 - Key market and per share ratios: EPS - basic thebe 0,43 10,2 103 93 21 EPS - diluted thebe 0,42 9,9 100 90 19 Dividend per share - ordinary (pre-splits)* thebe Passed 3,00 19,00 17,00 6,00 Dividend per share - special thebe - - 17,00 10,00 - Dividend per share - total thebe Passed 3,00 36,00 27,00 6,00 Dividend yield - ordinary dividend % - 0,67 2,26 5,67 6,67 Dividend yield - total dividend % - 0,67 4,29 9,00 6,67 Dividend cover - total dividend times - 3.33 2.78 3.27 3.32 Price earnings ratio times 1 149.84 43.98 8.17 3.22 4.27 Net asset value per share Pula 2.46 2.34 2.53 1.77 1.20 Free cash flow per share Pula 0.38 1.17 0.18 0.15 0.29 Re-statement of prior year comparatives: Comparative information for prior years has been restated, where applicable, to take account of the following: 1. A reclassification to “Revenue” of certain revenue items previously classified as “Other Income”. The reclassification was undertaken in the 2008 financial year to ensure full compliance with the accounting policies relating to revenue recognition, presentation and disclosure and to ensure consistency in reported financial information. 2. An adjustment relating to Value Added Tax, (VAT), at the South African stockbroker Imara SP Reid in the 2007 financial year. 3. A sub-division of the share capital of the Company on a 10 for 1 basis was implemented in August 2007. Comparative financial data and ratios have been restated where applicable. 4. Realised gains on available-for-sale-financial assets previously classified as “Revenue” have been reclassified as “Other operating income” in the current reporting period. The reclassification is to ensure compliance with current accounting standards relating to revenue recognition, presentation and disclosure and to ensure consistency in reported financial information. Re-classified items: In the 2009 financial year, the Income Statement was segmented into continuing and discontinued operations. Discontinued operations relate to Imara Asset Management (Pty) Limited – Botswana which has ceased trading and is now dormant. There is no intention to dispose of this company in the foreseeable future. Following a reassessment of discontinued operations in the current year, a decision was taken that this classification was no longer applicable and that the operations of this entity should be reclassified. Comparative financial information has been amended to take account of the reclassification. PAGE | 45
  • 42. GRAPHICAL FIVE YEAR FINANCIAL HIGHLIGHTS AND RATIOS Revenue - P 000’s EBITDA - P 000’s 200,000 80,000 160,000 60,000 120,000 40,000 80,000 40,000 20,000 - - 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Operating expenses - P 000’s Profit after taxation - P 000’s 60,000 120,000 50,000 90,000 40,000 60,000 30,000 20,000 30,000 10,000 - - 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Earnings per share (diluted) - Thebe Dividend per share - Thebe 120 40.00 90 30.00 60 20.00 30 10.00 - - 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Ordinary Special Revenue per employee - P 000’s Profit after tax per employee - P 000’s 2,500 800 2,000 600 1,500 400 1,000 500 200 - - 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 PAGE | 46
  • 43. Shareholders’ equity - P 000’s Capital employed - P 000’s 180,000 180,000 150,000 150,000 120,000 120,000 90,000 90,000 60,000 60,000 30,000 30,000 - - 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Total assets - P 000’s Return on equity - % 280,000 60 240,000 50 200,000 40 160,000 120,000 30 80,000 20 40,000 10 - 0 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Return on capital employed - % Return on average assets - % 60 40 50 40 30 30 20 20 10 10 0 0 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Market capitalisation at year end - P’m Funds under management - P’m 500 4,000 3,500 400 3,000 300 2,500 2,000 200 1,500 100 1,000 500 - - 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 PAGE | 47
  • 44. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IMARA HOLDINGS LIMITED Report on the Financial Statements We have audited the Group financial statements of Imara Holdings Limited and the Company financial statements, set out on pages 50 to 120, which comprise the Statement of Financial Position as at 30 April 2010, and the Statement of Comprehensive Income, Statement of Changes in Equity and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Directors’ Responsibility for the Financial Statements The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of Botswana (Companies Act, 2003). This responsibility includes: designing, implementing and maintaining internal control relevant 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. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in 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 In our opinion, the financial statements present fairly, in all material respects the financial position of the Imara Holdings Limited Group and Company as at 30 April 2010, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of Botswana (Companies Act, 2003). Certified Public Accountants 28 July 2010 2nd Floor, UN Place Khama Crescent PO Box 41015 Gaborone Botswana PAGE | 49
  • 45. CONSOLIDATED INCOME STATEMENT Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Notes Pula Pula Pula Pula Re-classified Revenue 2 92 808 907 101 516 228 54 310 558 25 921 434 Costs of services sold (14 589 090) (15 817 000) – – Gross profit 78 219 817 85 699 228 54 310 558 25 921 434 Other operating income 2 5 032 298 6 589 779 1 485 485 2 676 191 Operating expenses 2 (82 266 563) (82 464 015) (15 856 659) (9 293 366) Finance costs 2 (162 392) (758 456) (4 238 657) (6 746 256) Share of profits from associates 10 1 921 454 139 918 – – Impairment of investment in associates (581 416) (605 871) – – Profit before taxation 2 163 198 8 600 583 35 700 727 12 558 003 Taxation (expense) / credit 3 (1 662 469) (2 926 805) 1 270 200 313 001 Profit for the year 500 729 5 673 778 36 970 927 12 871 004 Attributable to: Equity holders of the parent 246 765 5 769 867 – – Minority interest 253 964 (96 089) – – Profit for the year – as above 500 729 5 673 778 – – Earnings per share: – Basic Thebe 4 0,43 10,2 – – – Diluted Thebe 4 0,42 9,9 – – The Consolidated Statement of Comprehensive Income is set out on page 51. Re-classified items are detailed in Note 2. PAGE | 50
  • 46. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Re-classified Profit for the year – per Consolidated Income Statement 500 729 5 673 778 36 970 927 1 2 871 004 Other comprehensive income: Available-for-sale financial assets – gains / (losses) 3 594 998 (2 105 832) 1 319 541 (663 567) Available-for-sale financial assets – transfer to Income Statement on disposal – (820 240) – – Income tax effect (797 687) (1 288 309) – – 2 797 311 (4 214 381) 1 319 541 (663 567) Exchange differences on translation of foreign operations 3 137 151 3 953 325 – – Other comprehensive income for the year, net of tax 5 934 462 (261 056) 1 319 541 (663 567) Total comprehensive income for the year, net of tax 6 435 191 5 412 722 38 290 468 12 207 437 Attributable to: Equity holders of the parent 6 181 227 5 508 811 38 290 468 12 207 437 Minority interest 253 964 (96 089) – – Total comprehensive income – per above 6 435 191 5 412 722 38 290 468 12 207 437 PAGE | 51
  • 47. CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 April Group Group Company Company 2010 2009 2010 2009 Notes Pula Pula Pula Pula ASSETS Non-current assets Equipment 6 3 612 333 3 470 742 586 081 692 523 Goodwill 7 527 837 96 210 – – Intangible assets 8 438 487 615 147 285 600 428 400 Investment in subsidiaries 9 – – 24 383 600 19 525 933 Investment in associates 10 12 188 060 2 246 312 6 107 296 – Available-for-sale financial assets 11 8 475 145 5 832 270 1 139 667 1 031 592 Accounts receivable – Group companies 12 – – 35 986 788 33 283 487 Deferred tax asset 3 3 251 286 1 176 696 1 580 637 310 437 28 493 148 13 437 377 70 069 669 55 272 372 Current assets Listed trading securities 13 9 231 792 3 953 387 – – Trade and other receivables 14 82 312 674 89 559 076 1 658 370 3 394 277 Cash and cash equivalents 15 123 400 183 101 512 702 35 104 173 49 157 365 Tax refundable 661 444 1 916 – – 215 606 093 195 027 081 36 762 543 52 551 642 TOTAL ASSETS 244 099 241 208 464 458 106 832 212 107 824 014 EQUITY AND LIABILITIES Equity Stated capital 16 48 532 981 44 909 348 48 532 981 44 909 348 Non-distributable reserves 17 931 894 10 312 300 5 514 076 2 649 441 Distributable reserves 74 352 559 76 946 281 30 367 189 (4 894 391) Total shareholders’ equity 140 817 434 132 167 929 84 414 246 42 664 398 Minority interest 2 003 885 327 132 – – Total equity 142 821 319 132 495 061 84 414 246 42 664 398 Non-current liabilities Accounts payable – Group companies 12 – – 19 859 884 61 437 596 Interest bearing loans and borrowings – long term 17 – 915 017 – – Deferred taxation 3 1 577 366 125 445 – – 1 577 366 1 040 462 19 859 884 61 437 596 Current liabilities Trade and other payables 18 90 503 561 72 892 116 2 555 521 3 719 459 Listed trading securities – sold short 6 537 578 140 624 – – Interest bearing loans and borrowings – current 17 2 173 893 15 806 – – Taxation payable 15 493 157 933 2 561 2 561 Provisions 19 470 031 1 722 387 – – Bank overdraft 17 – 69 – – 99 700 556 74 928 935 2 558 082 3 722 020 Total liabilities 101 277 922 75 969 397 22 417 966 65 159 616 TOTAL EQUITY AND LIABILITIES 244 099 241 208 464 458 106 832 212 107 824 014 PAGE | 52
  • 48. CONSOLIDATED STATEMENT OF CASH FLOWS Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Notes Pula Pula Pula Pula Cash flows from operating activities Profit from operating activities: Continuing operations 2 163 198 8 645 915 35 700 727 12 558 003 Discontinued operations – (45 332) – – Profit before tax 2 163 198 8 600 583 35 700 727 12 558 003 Adjusted for: Amortisation 191 336 189 486 142 800 142 800 Depreciation 6 1 471 150 1 188 005 157 262 142 833 Interest received 2 (7 084 834) (11 539 396) (4 888 934) (5 979 051) Finance charges 162 392 758 456 4 238 657 6 746 256 Share of (profit) / losses from associates and impairment 10 (1 340 038) 465 953 – – Share-based payment expense – Options 2 1 545 094 922 986 378 012 205 069 Share-based payment expense – BEE 140 038 2 846 – – Net foreign exchange difference 6 854 301 2 671 352 5 119 320 (2 533 283) (Decrease) / increase in provisions (1 252 355) 3 272 – – Profit from disposal of subsidiary (1 479 993) – (1 301 658) – Loss / (profit) from sale of investments 135 955 (820 240) – – Dividends received 2 (606 488) (834 670) (45 473 000) (15 895 850) Profit on sale of equipment 2 (6 189) (3 181) (1 397) (3 003) Operating cash flows before working capital changes 884 567 1 605 452 (5 928 211) (4 616 226) Increase / (decrease) in trading stock 1 283 316 (273 193) – – Decrease / (increase) in trade and other receivables 9 336 141 98 823 076 1 735 908 (2 276 525) Increase / (decrease) in trade and other payables 14 644 963 (32 967 384) (1 163 938) 1 179 695 Cash generated from operations 26 148 987 67 187 951 (5 356 241) (5 713 056) Income tax paid (3 992 173) (1 828 126) – (410 266) Net cash flows from / (used in) operating activities 22 156 814 65 359 825 (5 356 241) (6 123 322) Cash flows from investing activities Interest received 2 7 084 834 11 539 396 4 888 934 5 979 051 Dividends received 606 488 834 670 45 473 000 15 895 850 Disposal of subsidiary 9 (303 977) – – – Acquisition and recapitalisation of associates 10 (6 641 714) – (4 480 634) – Acquisition of subsidiary 9 2 930 463 – (15 588) (325 003) Purchase of equipment 6 (1 096 204) (1 213 815) (54 573) (483 183) Proceeds – sale of equipment 109 205 379 737 5 150 47 494 Loans granted to Group companies – – (4 857 968) (7 973 828) Sale / (purchase) of available-for-sale financial assets 926 796 776 576 (139 002) – Net cash flows from / (used in) investing activities 3 615 891 12 316 564 40 819 319 13 140 381 Cash flows from financing activities Finance costs (162 392) (758 456) (4 238 657) (6 746 256) Proceeds from issue of shares 16 758 040 1 096 376 758 040 1 096 375 Loans received from Group companies – – (41 577 712) 57 381 609 Net increase in loans and borrowings (15 806) (9 953) – – Dividends paid – shareholders of the parent (689 087) (13 543 112) (689 087) (13 543 111) Net cash flows from financing activities (109 245) (13 215 145) (45 747 416) 38 188 617 Net increase in cash and cash equivalents 25 663 460 64 461 244 (10 284 338) 45 205 676 Net foreign exchange differences on cash and cash equivalents held in foreign currency (3 775 910) 1 278 412 (3 768 854) 2 438 686 Cash and cash equivalents at beginning of year 101 512 633 35 772 977 49 157 365 1 513 003 Cash and cash equivalents at end of year 15 123 400 183 101 512 633 35 104 173 49 157 365 Comprising: Cash and equivalents and short term investments 123 400 183 101 512 702 35 104 173 49 157 365 Bank overdraft – (69) – – Net cash and cash equivalents 123 400 183 101 512 633 35 104 173 49 157 365 PAGE | 53
  • 49. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Total equity: As at 30 April Non- Total Stated distributable Distributable shareholders’ Minority Total capital reserves reserves equity interest equity (See below) Group: Balance – 1 May 2008 37 111 325 9 650 370 92 336 185 139 097 880 423 221 139 521 101 Profit / (loss) for the year – – 5 769 867 5 769 867 (96 089) 5 673 778 Other comprehensive income – (261 056) – (261 056) – (261 056) Total comprehensive income – (261 056) 5 769 867 5 508 811 (96 089) 5 412 722 Sub-total 37 111 325 9 389 314 98 106 052 144 606 691 327 132 144 933 823 Issue of new shares 7 798 023 – – 7 798 023 – 7 798 023 Share-based payment expense– share options (net) – 922 986 – 922 986 – 922 986 Dividends paid – BEE Partners – – (915 012) (915 012) – (915 012) Dividends paid – – (20 244 759) (20 244 759) – (20 244 759) Balance – 30 April 2009 44 909 348 10 312 300 76 946 281 132 167 929 327 132 132 495 061 Group: Balance – 1 May 2009 44 909 348 10 312 300 76 946 281 132 167 929 327 132 132 495 061 Profit / (loss) for the year – – 246 765 246 765 253 964 500 729 Other comprehensive income – 5 934 462 – 5 934 462 – 5 934 462 Total comprehensive income – 5 934 462 246 765 6 181 227 253 964 6 435 191 Sub-total 44 909 348 16 246 762 77 193 046 138 349 156 581 096 138 930 252 Acquisition of subsidiary (Note 9) – – – – 1 422 789 1 422 789 Issue of new shares 3 623 633 – – 3 623 633 – 3 623 633 Share-based payment expense – share options (net) 1 545 094 – 1 545 094 – 1 545 094 Share-based payment expense – BEE transaction – 140 038 – 140 038 – 140 038 Dividends paid – BEE partners – – (1 131 140) (1 131 140) – (1 131 140) Dividends paid – – (1 709 347) (1 709 347) – (1 709 347) Balance – 30 April 2010 48 532 981 17 931 894 74 352 559 140 817 434 2 003 885 142 821 319 PAGE | 54
  • 50. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) Total Equity: As at 30 April Non- Stated distributable Distributable Total capital reserves reserves equity (See below) Company: Balance – 1 May 2008 37 111 325 2 390 022 2 479 364 41 980 711 Profit / (loss) for the year – – 12 871 004 12 871 004 Other comprehensive income – (663 567) – (663 567) Total comprehensive income – (663 567) 12 871 004 12 207 437 Sub-total 37 111 325 1 726 455 15 350 368 54 188 148 Issue of new shares 7 798 023 – – 7 798 023 Dividends paid – – (20 244 759) (20 244 759) Share-based payment expense – share options (net) – 922 986 – 922 986 Share-based payment expense – employees of the Company – 205 069 – 205 069 Share-based payment expense – employees of subsidiary companies – 717 917 – 717 917 Balance – 30 April 2009 44 909 348 2 649 441 (4 894 391) 42 664 398 Company: Balance – 1 May 2009 44 909 348 2 649 441 (4 894 391) 42 664 398 Profit / (loss) for the year – – 36 970 927 36 970 927 Other comprehensive income – 1 319 541 – 1 319 541 Total comprehensive income – 1 319 541 36 970 927 38 290 468 Sub-total 44 909 348 3 968 982 32 076 536 80 954 866 Issue of new shares 3 623 633 – – 3 623 633 Dividends paid – – (1 709 347) (1 709 347) Share-based payment expense – share options (net) – 1 545 094 – 1 545 094 Share-based payment expense – employees of subsidiary companies – 1 167 082 – 1 167 082 Share-based payment expense – employees of the Company – 378 012 – 378 012 Balance – 30 April 2010 48 532 981 5 514 076 30 367 189 84 414 246 PAGE | 55
  • 51. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) Non-distributable reserves: As at 30 April Foreign Available- Total currency Share-based for-sale non- translation payment financial distributable reserves reserves reserves reserves (Per above) Group: Balance – 1 May 2008 (962 479) 2 791 465 7 821 384 9 650 370 Other comprehensive income 3 953 325 – (4 214 381) (261 056) Share-based payment expense – share options – 922 986 – 922 986 Balance – 30 April 2009 2 990 846 3 714 451 3 607 003 10 312 300 Group: Balance – 1 May 2009 2 990 846 3 714 451 3 607 003 10 312 300 Other comprehensive income 3 137 151 – 2 797 311 5 934 462 Share-based payment expense – share options – 1 545 094 – 1 545 094 Share-based payment expense – BEE transaction – 140 038 – 140 038 Balance – 30 April 2010 6 127 997 5 399 583 6 404 314 17 931 894 Company: Balance – 1 May 2008 – 1 296 268 1 093 754 2 390 022 Other comprehensive income – – (663 567) (663 567) Share-based payment expense – share options (net) – 922 986 – 922 986 Share-based payment expense – employees of subsidiary companies – 717 917 – 717 917 Share-based payment expense – employees of the Company – 205 069 – 205 069 Balance – 30 April 2009 – 2 219 254 430 187 2 649 441 Company: Balance – 1 May 2009 – 2 219 254 430 187 2 649 441 Other comprehensive income – 1 319 541 1 319 541 Share-based payment expense – share options (net) – 1 545 094 – 1 545 094 Share-based payment expense – employees of subsidiary companies – 1 167 082 – 1 167 082 Share-based payment expense – employees of the Company – 378 012 – 378 012 Balance – 30 April 2010 – 3 764 348 1 749 728 5 514 076 PAGE | 56
  • 52. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of preparation The consolidated financial statements of the Group and the financial statements of the Company have been prepared on a going concern basis in accordance with International Financial Reporting Standards (IFRS), which comprise standards approved by the International Accounting Standards Board, (IASB), and interpretations approved by the International Financial Reporting Interpretations Committee, (IFRIC), and the applicable requirements of the Botswana Companies Act, 2003. The financial statements have been prepared on an historical cost basis except for certain financial instruments that are carried at fair value. Basis of consolidation The consolidated financial statements comprise the financial statements of Imara Holdings Limited and its subsidiaries drawn up to 30 April each year. All intra-Group balances, transactions, income and expenses are eliminated in full on consolidation. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The subsidiaries have the same reporting date as the holding company and apply consistent accounting policies. Minority interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the Income Statement and within equity in the Statement of Financial Position, separately from the parent’s shareholders’ equity. Investments in subsidiaries are carried at cost at a Company level. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Changes in accounting policies The accounting policies applied are consistent with those of the previous financial year, except as follows: The Group has adopted the following new and amended IFRS and IFRIC interpretations during the year. Adoption of these revised standards and interpretations did not have any financial effect on the financial statements of the Group. They did however give rise to additional disclosures, including in some cases, revisions to accounting policies. Only those amendments that impact the Group have been disclosed. IAS 1 (Revised 2007) Presentation of Financial Statements The standard replaces IAS 1 Presentation of Financial Statements (revised in 2003) as amended in 2005. The revised IAS 1 Presentation of Financial Statements was issued in September 2007 and is effective for accounting periods beginning on or after 1 January 2009. PAGE | 57
  • 53. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Changes in accounting policies (continued) The standard separates owner and non-owner changes in equity. The Statement of Changes in Equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line. In addition, the standard introduces the Statement of Comprehensive Income: it presents all items of income and expense recognised in profit or loss, together with all other items of recognised income and expense, either in one single statement, or in two linked statements. The Group has elected to present two statements, a Consolidated Income Statement and a Consolidated Statement of Comprehensive Income. IFRS 2 Share-based Payment Vesting Conditions and Cancellations (Amendment) The IASB issued an amendment to IFRS 2 which clarifies the definition of vesting conditions and prescribes the treatment for an award that is cancelled. Where an award does not vest as a result of a failure to meet a non-vesting condition, the accounting treatment depends on whether the failure to meet the condition is within or outside the control of either the entity of the counterparty. A failure to satisfy a non-vesting condition that is within the control of either the entity or the counterparty is accounted for as a cancellation. However failure to satisfy a non-vesting condition that is beyond the control of either party does not give rise to a cancellation. The Company adopted this amendment as of 1 January 2009. It did not have an impact on the financial position or performance of the Group. IFRS 7 Financial Instruments: Disclosures The amended standard requires additional disclosures about fair value measurement and liquidity risk. Fair value measurements related to items recorded at fair value are to be disclosed by source of inputs using a three level fair value hierarchy, by class, for all financial instruments recognised at fair value. In addition, reconciliation between the beginning and ending balance for level 3 fair value measurements is now required, as well as significant transfers between levels in the fair value hierarchy. The amendments also clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used for liquidity management. The required disclosures are provided in Note 23. IFRS 8: Operating segments The IASB issued IFRS 8 in November 2006. IFRS 8 replaces IAS 14 segment reporting upon its effective date. The Group adopted this amendment as of 1 January 2009. The Group concluded that the operating segments determined in accordance with IFRS 8 are the same as the business segments previously identified under IAS 14. IFRS 8 disclosures are disclosed in Note 5 including the related revised comparative disclosure information. In April 2009 the IASB issued further amendments to IFRS 8 clarifying that segment assets and liabilities need only be reported when those assets and liabilities are included in measures that are used by the chief operating decision maker. As the Group’s chief operating decision maker does review segment assets and liabilities, the Group has continued to disclose this information in Note 5. PAGE | 58
  • 54. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Changes in accounting policies (continued) International Financial Reporting Standards (IFRS’s) and interpretations (IFRIC’s) issued and revised but not yet effective: Reference Name Effective date IFRS – Issue date IFRS 1 First-time Adoption of International Financial Reporting 1 July 2010 January 2010 Standards: Limited exemption from comparative IFRS 7 disclosures for first time adopters. This standard is not expected to impact the reported financial performance of the Group. IFRS 2 Amendments to IFRS 2 1 January 2010 June 2009 Share-based Payment – Vesting Conditions and Cancellations This standard is not expected to impact the reported financial performance of the Group. IFRS 2 Amendment to IFRS 2 Group cash settled Share-Based 1 January 2010 June 2009 payment transactions This standard is not expected to impact the reported financial performance of the Group. IFRS 3 Business Combinations 1 July 2009 January 2008 This standard is not expected to impact the reported financial performance of the Group. IFRS 9 Financial Instruments 1 January 2013 November 2009 This standard is expected to impact the reported financial performance of the Group, however the possible impact that the application of IFRS 9 will have on the financial statements, cannot be reliably estimated at this stage. IAS 24 Related Party Disclosures 1 January 2011 November 2009 This standard is not expected to impact the reported financial performance of the Group. IAS 27 Consolidated and Separate Financial Statements 1 July 2009 January 2008 This standard is not expected to impact the reported financial performance of the Group. IAS 32 Classification of Rights Issues 1 February 2010 August 2009 This standard is not expected to impact the reported financial performance of the Group. IAS 39 Amendments to IAS 39 – Financial Instruments: 1 July 2009 (no July 2008 Recognition and Measurement – Eligible Hedged Items connection to This standard is not expected to impact the reported any specific financial performance of the Group. annual period) IFRIC 15 Agreements for the Construction of Real Estate 1 January 2009 July 2008 This standard is not expected to impact the reported financial performance of the Group. PAGE | 59
  • 55. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Changes in accounting policies (continued) International Financial Reporting Standards (IFRS’s) and interpretations (IFRIC’s) issued and revised but not yet effective (continued): Reference Name Effective date IFRS – Issue date IFRIC 17 Distribution of non-cash assets to owners 1 July 2009 January 2008 This standard is not expected to impact the reported financial performance and financial position of the Group. IFRIC 18 Transfers of Owners from Customers 1 July 2009 January 2009 This standard is not expected to impact the reported financial performance of the Group. IFRIC 19 Extinguishing financial liabilities with equity instruments 1 July 2010 November 2009 This standard is not expected to impact the reported financial performance and financial position of the Group. Cost of services sold Cost of services sold consists of all direct costs associated with revenue generation inclusive of sub- contractor expenses and recoverable and non-recoverable disbursements. Equipment Equipment is stated at cost less accumulated depreciation, and accumulated impairment losses. Depreciation is computed on a straight line basis over the estimated useful life to reduce the asset’s value to residual value as follows: Electronic library 10% Motor vehicles 20% Office equipment 10% – 33,33% It is the policy to apportion depreciation in the year of acquisition and disposal. The carrying amounts are reviewed for impairment when events or changes in circumstance indicate that the carrying value may not be recoverable. An item of equipment is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset, (calculated as the difference between the net disposal proceeds and the carrying amount of the asset), is included in the Income Statement in the year of de-recognition. Residual values, useful lives and methods of depreciation are reviewed on an annual basis. Fiduciary activities The Group acts in fiduciary capacities that result in the holding, placing or managing of assets for the account of and at the risk of clients. As these are not assets of the Group, they are not reflected in the Statement of Financial Position but are included as a note to the financial statements at market value as part of funds under management. (Note 20) PAGE | 60
  • 56. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Financial instruments: Financial assets: Initial recognition Financial assets in the scope of IAS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables, held to maturity investments, and available-for-sale-assets as appropriate. The Group determines the classification of its financial instruments at initial recognition. Financial assets are recognised initially at fair value, plus in the case of investments not at fair value through profit and loss, directly attributable transaction costs. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way purchases) are recognised on the trade date, being the date on which the Group commits to purchase an asset. The Group’s financial assets include listed trading securities, unlisted trading securities, trade and other receivables, loan and other receivables and cash and cash equivalents. Subsequent measurement Financial assets at fair value through profit and loss Financial assets at fair value through profit and loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit and loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that do not meet the hedge accounting criteria as defined in IAS 39. Financial assets at fair value through profit and loss are carried in the Statement of Financial Position at fair value, with gains and losses recognised in the Income Statement. The Group determines the classification of its financial assets after initial recognition and where appropriate re-evaluates this designation at each financial year-end. Loans and other receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such financial assets are carried at amortised cost using the effective interest rate method. Gains and losses are recognised in the Income Statement when the loans and receivables are de-recognised or impaired, as well as through the amortisation process. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are designated as available- for-sale or are not classified in any of the preceding categories. Certain listed securities are classified as available for sale financial assets. After initial measurement, available-for-sale financial assets are measured at fair value with unrealised gains or losses recognised in other comprehensive income until the investment is de-recognised, at which time the cumulative gain or loss recorded in equity is recognised in the Income Statement. When available-for-sale financial assets are determined to be impaired, the cumulative loss recorded in other comprehensive income is recognised in the Income Statement. Listed trading securities Listed trading securities are non-derivative financial assets that are actively traded in organised financial markets. Fair value is determined by reference to quoted market bid prices at the close of business on the balance sheet date. Certain listed trading securities are classified as fair value through profit and loss financial assets. Gains and losses are recognised in the Income Statement when the listed trading securities are de-recognised or impaired. PAGE | 61
  • 57. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Financial instruments (continued) Subsequent measurement (continued) Unlisted securities Unlisted securities are non-derivative financial assets where there is no quoted market price. Unlisted securities are classified as available-for-sale financial assets. Fair value is determined using valuation techniques. Such techniques may include using recent arm’s length market transactions, reference to the current market value of another financial instrument which is substantially the same or is based on the expected cash flow of the underlying net asset base of the investment. Trade receivables Trade receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, trade receivables are carried at amortised cost using the effective interest rate method less any allowance for impairment. Gains and losses are recognised in the Income Statement when the trade receivables are de-recognised or impaired, as well as through the amortisation process. Cash and cash equivalents Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. After initial recognition, cash and cash equivalents are subsequently carried at amortised cost. For the purposes of the Consolidated Cash Flow Statement, cash and cash equivalents consists of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Financial liabilities: Initial recognition Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings. The Group determines the classification of its financial liabilities at initial recognition. Financial liabilities are recognised initially at fair value and in the case of loans and borrowings, directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, bank overdraft and loans and borrowings. Subsequent measurement The measurement of financial liabilities depends on their classification as follows: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss includes financial liabilities held for trading, financial liabilities designated upon initial recognition as at fair value through profit or loss and option liabilities which arose as a result of the South African BEE transaction with Zingwenya Holdings (Pty) Limited in 2008. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that do not meet the hedge accounting criteria as defined by IAS 39. Gains or losses on liabilities held for trading are recognised in the Income Statement. The Group has not designated any financial liabilities as at fair value through profit or loss. PAGE | 62
  • 58. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Subsequent measurement (continued) Loans and borrowings After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the Income Statement when the liabilities are de-recognised as well as through the amortisation process. Trade payables Trade payables are financial liabilities with fixed or determinable payments. After initial recognition, trade payables are carried at amortised cost using the effective interest rate method. Gains and losses are recognised in the Income Statement when the trade payables are de-recognised. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial Position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liability simultaneously. Amortised cost of financial instruments Amortised cost is computed using the effective interest method less any allowance for impairment and principle repayment or reduction. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate. Impairment of financial assets The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measureable decrease in the estimated future cash flow, such as changes in arrears or economic conditions that correlate with defaults. Trade and other receivables For amounts due from loans and receivables to customers carried at amortised cost, the Group first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. PAGE | 63
  • 59. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment of financial assets (continued) If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the Income Statement. Interest income continues to be accrued on the reduced carrying amount based on the original effective interest rate of the asset. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is recognised in the Income Statement. The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. Available-for-sale financial investment For available-for-sale financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. Where there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the Income Statement – is removed from equity and recognised in the Statement of Comprehensive Income. Impairment losses on equity investments are not reversed through the Income Statement, while increases in their fair value after impairment are recognised in Other Comprehensive Income. In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However the amount recorded for impairment is the cumulative loss, measured as the difference between amortised cost and the current fair value, less any impairment loss on the investment previously recognised in the Income Statement. Interest continues to be accrued at the original effective interest rate on the reduced carrying amount of the asset and is recorded as part of ‘Interest received’. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the Income Statement, the impairment loss is reversed through the Income Statement. Financial assets A financial asset (or where applicable a part of a financial asset or part of a group of similar financial assets) is de-recognised when: • the rights to receive cash flows from the asset have expired; or • the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either: (a) the Group has transferred substantially all the risks and rewards of the asset or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass- through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset not transferred control of the asset, a new asset is recognised to the extent of the Group’s continuing involvement in the asset. PAGE | 64
  • 60. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment of financial assets (continued) Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. When continuing involvement takes the form of a written and/or purchased option (including a cash settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option (including a cash settled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price. Financial liabilities A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the Income Statement. Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating units (“CGU”) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time and value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. Where appropriate, these valuation results are corroborated by valuation multiples, quoted share prices for publicly traded proxy companies or other available fair value indicators. Impairment losses are recognised in the Income Statement in those expense categories consistent with the function if the impaired asset, except for property previously re-valued where the revaluation was taken to equity. In this case the impairment is also recognised in equity up to the amount of any previous revaluation. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or CGU recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Income Statement unless the asset is carried at re-valued amount, in which case the reversal is treated as a revaluation increase. Goodwill Goodwill is tested for impairment annually at 30 April and when circumstances indicate that the carrying value may be impaired. PAGE | 65
  • 61. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment of non-financial assets (continued) The following criteria are also applied in assessing impairment of specific assets: Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than their carrying amount an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. Intangible assets Intangible assets with indefinite useful lives are tested for impairment annually as at 30 April either individually or at the cash-generating unit level, as appropriate and when circumstances indicate that the carrying value may be impaired. Leases The determination of whether an arrangement is, or contains a lease, is based on the substance of the arrangement, at inception date of whether or not the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. Group as lessee Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges and any transaction costs are charged directly to the Income Statement. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the Income Statement on a straight line basis over the lease term. Group as lessor Leases, where the Group does not transfer substantially all the risks and benefits of ownership of the asset, are classified as operating leases. Operating lease rentals are recognised in the Income Statement when the lessor’s right to receive the rental is established. Foreign currency translation The consolidated financial statements are presented in Pula (“P”), the currency of Botswana. The Pula is the functional and presentation currency of the parent company and that of the Group. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. All differences are taken to the Income Statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. PAGE | 66
  • 62. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Foreign currency translation (continued) The assets and liabilities of overseas subsidiaries are translated into Pula, at the rate of exchange ruling at the reporting date date. The Income Statements of overseas subsidiaries are translated at weighted average exchange rates for the year. The exchange differences arising on the retranslation are recognised in Other Comprehensive Income. On disposal of a foreign entity, accumulated exchange differences are recognised in the Income Statement when the gain or loss on disposal is recognised. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the acquired company and are recorded at the closing exchange rate. Goodwill and business combinations Business combinations are accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at fair values at the date of acquisition, irrespective of the extent of any minority interest. Goodwill is initially measured at cost being the cost of the business combination over the Group’s share in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the Income Statement. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. When the Group acquires a business, embedded derivatives separated from the host contract by the acquiree are not re-assessed on a acquisition unless the business combination results in a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract. Income taxes Current taxation is charged on the net income for the year after taking into account income and expenditure which is not subject to taxation, and deductible capital allowances on fixed assets. Withholding tax on dividends paid is set off against the additional company taxation of the Group in the year in which the dividends are paid. Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences except: • where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting income or taxable income; and • in respect of taxable temporary differences associated with investments in subsidiaries, associates and interest in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. PAGE | 67
  • 63. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income taxes (continued) Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised except: • where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting income or taxable income; and • in respect of deductible temporary differences associated with investments in subsidiaries, associates and interest in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it is probable that future taxable income will allow the deferred tax asset to be recovered. Current tax liabilities / (assets) for the current and prior periods shall be measured at the amount expected to be paid to / (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Income tax relating to items recognised directly in equity is recognised in equity and not in the Income Statement. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The intangible assets of the Group are assessed as having a finite useful life. Intangible assets with finite useful lives are amortised over their useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of the future economic benefit embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the Income Statement. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Income Statement when the asset is derecognised. The Group’s intangible assets are amortised on a straight line basis over a five year period. PAGE | 68
  • 64. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Investment in associates The Group’s investment in associates, are accounted for using the equity method of accounting. An associate is an entity in which the Group has significant influence. Under the equity method, the investment in the associate is carried in the Statement of Financial Position at cost plus post acquisition changes in the Group’s share of the net assets of the associate. Goodwill relating to the associate is included in the carrying amount the investment and is not amortised or separately tested for impairment. The Income Statement reflects the share of the results of operations of the associates. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable, in the Statement of Changes in Equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. The share of profit of associates is shown on the face of the Income Statement. This is the profit attributable to equity holders of the associate and therefore is profit after tax and minority interests in the subsidiaries of the associates. After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss to the Group’s investment in its associates. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the Income Statement. The reporting dates of the associates differ from those of the holding company. In the case of Stockbrokers Malawi Limited, the reporting date is 31 December 2009. The majority shareholder in this company is unwilling to change the reporting date to bring it into line with the rest of the Imara Group. The reporting date for Imara Capital Zimbabwe (Pvt) Limited is 31 March 2009. Adjustments are made for the effects of any significant transactions or events that occur between the reporting date of the associate and that of the Group. The accounting policies of associates conform to those used by the Group for like transactions and events in similar circumstances. Pensions and other post-employment benefits The Group does not provide pensions and other post-employment benefits other than in Botswana where it provides for severance benefits mandated by the Employment Act. Expenses are recognised in the Income Statement as incurred. The severance benefit is not subject to periodic actuarial valuation. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the Income Statement, net of any expected reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, sales tax and duties. PAGE | 69
  • 65. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Revenue recognition (continued) The following specific recognition criteria must also be met before revenue is recognised: • Asset management investment and advisory fees Revenue is recognised when the related services have been performed. • Asset management performance fees Revenue is recognised when the related services have been performed and performance fee criteria measured. • Brokerage Brokerage revenue, commissions, handling fees and sponsor broker fees are recognised upon performance of services, net of value added taxes and discounts. • Commission Commissions are recognised as revenue when the related services have been performed. • Corporate finance mandate and advisory fees Revenue is recognised when the related services have been performed except for those fees relating to transactions where fees are contingent. In such cases fees are only recognised upon the fulfilment of the contingent event. • Dividends Revenue is recognised when the shareholders’ right to receive the payment is established. • Fee income Fee income is recognised as revenue when the related services have been performed. • Futures trading Revenue comprises securities trading profits, which are earned for facilitating the acquisition of single stock futures by clients. Revenue is recognised when the service is provided. • Interest Revenue is recognised as the interest accrues (taking into account the effective yield on the asset). • Management fees – Group Revenue is recognised on an accrual basis in respect of intra-group services rendered. • Securities trading Revenue is recognised based on changes in the fair value of the listed securities traded, net of charges. Realised gains or losses are recognised when the transaction is settled. Unrealised gains and losses are recognised at the end of each monthly reporting period. • Trust fees include fees for trust registration, custodial and administration services. Trust registration and custodial fees are payable annually in advance and are recognised when the right to receive payment is established, net of value added tax and discounts. Trust administration fees are recognised upon performance of services, net of value added taxes and discounts. Share-based payment transactions The cost of equity-settled transactions is measured by reference to the fair value at the date on which the option was granted. The fair value is determined by an external valuer using a binomial valuation model, further details of which are given in Note 22. No expense is recognised for awards that do not ultimately vest except for awards where vesting is conditional upon a market condition, which is treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance and/or service conditions are satisfied. PAGE | 70
  • 66. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Share-based payment transactions (continued) Share Option Scheme The Share Option Scheme is defined as an “equity settled scheme”. Under such a scheme, equity instruments are issued to certain directors and employees in consideration for services rendered to the Group. In terms of the Share Option Scheme, equity-settled awards cannot be cancelled. Where the terms of an equity-settled award are modified, as a minimum, an expense is recognised at the date of modification, as if the terms had not been modified. In addition, an expense is recognised for any modification, which increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the holder. The expense arising from share-based payments is included as part of “operating expenses”, with a corresponding increase to the share-based payment reserve. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share (Note 4). Black Economic Empowerment (“BEE”) transaction – Zingwenya Holdings (Pty) Limited BEE transactions that result in equity instruments being issued to third parties at less than fair value are accounted for as equity settled share-based payment transactions. Where no vesting conditions are imposed on the counterparty, the related expense is recognised immediately with a corresponding amount being accounted for as a share-based payment reserve in equity. Further details relating to the BEE transaction are detailed in Note 22. Stated capital Stated capital comprises of ordinary issued shares and share premium. Stated capital is recognised at the fair value of the consideration received by the Group. Expenses relating to the issuance of shares are charged to the Income Statement as incurred. Significant accounting estimates and judgements The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are regularly evaluated and are based on historical experience and other related factors, including expectations of future events that are believed to be reasonable under the circumstances. The areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the financial statements are: • Measurement of the provision for potential claims is based on the gross amount of intimated claims, amounts previously settled in terms of similar claims and the view of legal advisers. (Note 19) • The determination of the fair value of unlisted securities using valuation techniques and referenced to recent transactions which are substantially similar. (Note 11) • Objective evidence of impairment of available-for-sale financial assets by reference to the fair value of the investment in relation to its cost. The Group recognises impairment charges on available- for-sale financial assets when there has been a significant or prolonged decline in fair value below their cost. The determination of what is significant or prolonged requires judgement. In making these judgements, the Group evaluates, among other factors, historical share price movements and the duration and extent to which the fair value is less than cost. (Note 11) • Objective evidence of impairment of loans receivable by reference to the market value of collateral held as security in the related client account. (Note 14) • The estimated useful lives of equipment and their residual values are re-assessed annually. (Note 6) • Recoverability of deferred taxation based on expected future profitability. (Note 3) • Share-based payments. (Note 22) PAGE | 71
  • 67. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Value Added Tax (“VAT”) Revenues, expenses and assets are recognised net of VAT, except where the VAT incurred on a purchase of an asset or service is not recoverable from the Tax Authorities, in which case the VAT is recognised as part of the cost of acquiring the asset or as part of the cost of the service. The net amount of VAT recoverable from, or payable to, the Tax Authorities is included as part of receivables or payables in the Statement of Financial Position. 2. REVENUES AND EXPENSES Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Notes Pula Pula Pula Pula Revenue: Asset management – investment and advisory fees 26 962 693 29 012 260 – – Brokerage 26 761 062 27 413 786 – – Commissions 2 040 876 1 121 872 – – Corporate finance mandates and retainer fees 1 869 786 5 330 254 – – Dividends received: From listed investments Non-group 606 488 834 670 – – From un-listed investments Group – – 45 473 000 15 895 850 Fee income – non-Group 8 397 315 8 513 583 – – Futures trading (commission received) 16 492 098 14 446 057 – – Interest receivable: Group 12 – – 4 584 673 5 236 042 Non-Group 7 084 834 11 539 396 304 262 743 009 Management fees receivable – Group Group 12 – – 3 948 623 4 046 533 Non-Group 55 183 – – – Securities trading (fair value losses or gains) 2 538 572 3 184 745 – – Trust fees – 119 605 – – 92 808 907 101 516 228 54 310 558 25 921 434 Other income: Exchange gains 176 398 2 779 633 – 2 438 685 Fee recoveries 716 045 2 715 206 – – Operating lease income 91 429 73 555 182 430 149 928 Profit on disposal of equipment 6 189 3 181 1 397 3 003 Profit on disposal of subsidiary 1 479 993 – 1 301 658 Realised gains on available-for- sale financial assets – 820 240 – – Sundry income 2 562 244 197 964 – 84 575 5 032 298 6 589 779 1 485 485 2 676 191 PAGE | 72
  • 68. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. REVENUES AND EXPENSES (continued) Re-classified items: In the 2009 financial year, the Income Statement was segmented into continuing and discontinued operations. Discontinued operations relate to Imara Asset Management (Pty) Limited – Botswana which has ceased trading and is now dormant. There is no intention to dispose of this company in the foreseeable future. Following a reassessment of discontinued operations in the current year, a decision has been taken that this classification is no longer applicable and that the operations of this entity should therefore be re-classified. Comparative financial information has been amended to take account of the re-classification. The impact of the re-classification is an increase of P 513 on revenue, an increase of P 13 009 on other income and an increase of P 58 854 on operating expenses. The re-classification has no impact on reported profit after taxation. In the 2010 financial year, realised gains on available-for-sale financial assets, previously classified as “revenue”, have been re-classified as “Other operating income”. The re-classification is to ensure compliance with current accounting standards relating to revenue recognition, presentation and disclosure and to ensure consistency in reported financial information. Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Operating expenses: Included in operating expenses are: Auditor’s remuneration 2 108 418 1 937 434 471 230 295 830 Current year 1 959 287 1 452 512 425 000 245 830 Prior year 53 813 422 016 40 000 – Other services 89 088 62 906 – 50 000 Expenses 6 230 – 6 230 – Amortisation (Note 8) 191 336 189 486 142 800 142 800 Depreciation (Note 6) 1 471 150 1 188 005 157 262 142 833 Directors’ remuneration 17 305 156 19 015 209 3 300 951 3 103 746 Directors’ remuneration – Executive – see note below 15 535 828 17 501 321 1 800 276 1 602 609 Directors’ remuneration – Non-Executive 1 769 328 1 513 888 1 500 675 1 501 137 Exchange losses 3 712 081 1 630 245 3 768 854 – Information technology expenses 1 220 476 1 289 882 46 598 104 737 Insurance and licences 971 222 809 447 707 240 611 099 Operating lease expense 2 746 582 2 444 058 127 875 113 051 Professional fees 2 616 185 1 612 952 591 512 284 457 Realised losses – available-for-sale-financial assets 135 955 – – – Share-based payment expense (Note 22) 1 545 094 922 986 378 012 205 068 Share-based payment expense – BEE transaction 140 038 – – – Staff costs 26 456 911 27 092 094 3 045 589 1 660 196 Stock exchange fees 4 725 143 4 669 188 113 252 110 500 Travel 2 742 326 3 000 715 951 784 614 328 68 088 073 65 801 701 13 802 959 7 388 645 Finance costs: Interest payable – Group – – 4 238 657 5 987 800 Interest payable –non-Group – – – 736 506 Bank overdraft 162 392 736 506 – 21 950 Loans and borrowings – 21 950 – – 162 392 758 456 4 238 657 6 746 256 PAGE | 73
  • 69. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. REVENUES AND EXPENSES (continued) Directors’ remuneration: 1. The directors’ remuneration disclosed in the note above excludes performance bonuses in respect of the 2009 financial year which were paid in 2010. Such amounts have been charged against prior year provisions for performance bonuses and consequently are excluded from the Income Statement charge for the current year. 2. Directors’ remuneration includes remuneration paid to directors of subsidiary companies as well as the parent company. The detailed disclosure of directors’ remuneration in Note 12 is in respect of the parent company directors only. 3. Included in Cost of Sales is an amount of P 1 335 618 which relates to remuneration paid to directors of subsidiary companies. This amount is additional to the amount disclosed as directors’ emoluments above. PAGE | 74
  • 70. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. INCOME TAX – GROUP Year ended 30 April Group Group 2010 2009 Pula Pula Current income tax: Current income tax charge 3 153 290 3 862 861 Adjustment in respect of (over) / under provision of income tax in previous year (157 707) (13 980) Secondary Tax on Companies (STC) 25 058 474 077 Capital gains tax – – Withholding tax 53 908 94 554 3 074 549 4 417 512 Deferred income tax: Relating to origination and reversal of temporary differences (1 410 935) (868 476) Changes in tax rates – – Utilisation of prior year deferred tax assets not recognised – (2 842) Adjustments in respect of deferred tax in previous years (1 145) (619 389) (1 412 080) (1 490 707) Income tax reported in the Income Statement 1 662 469 2 926 805 Tax rate reconciliation (Pula): A reconciliation between the tax expense and the product of accounting profit multiplied by Botswana’s International Financial Services Centre (“IFSC”) tax rate for the year is as follows: Accounting profit before tax at Botswana IFSC income tax rate of 15% 324 480 1 296 887 Adjusted for: Effect of higher domestic rate in Botswana (499 225) (245 979) Effect of higher rate in South Africa 743 096 489 014 Effect of higher rate in United Kingdom 3 902 8 167 Effect of lower rate in British Virgin Islands (1 650 061) (1 630 642) Effect of rate change on opening deferred tax balances – – Non-deductible expenses / non-taxable income 529 062 435 444 Secondary Tax on Companies (STC) 25 058 474 077 Withholding tax 53 908 94 554 Capital gains tax at lower tax rates – (114 858) Adjustment in respect of (over) / under provision of income tax in previous year 1 266 (13 980) Adjustment in respect of deferred tax in the previous year (22 813) (2 166 477) Utilisation of prior year deferred tax assets not recognised – – 491 327 (1 373 793) Deferred tax asset credit not recognised due to uncertainty of future taxable income 2 153 796 4 300 598 At effective tax rate (See reconciliation below) 1 662 469 2 926 805 PAGE | 75
  • 71. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. INCOME TAX – GROUP (continued) Year ended 30 April Group Group 2010 2009 % % Reconciliation of income tax rate: Standard Botswana International Financial Services Centre (IFSC) tax rate 15,00 15,00 Adjusted for: Effect of higher domestic rate in Botswana (23,08) (2,67) Effect of higher rate in South Africa 34,35 5,66 Effect of higher rate in United Kingdom 0,18 0,09 Effect of lower rate in British Virgin Islands (76,28) (18,86) Effect of rate change on opening deferred tax balances – – Non-deductible expenses / non-taxable income 24,46 5,04 Tax on dividends declared – – Capital gains tax – (1,32) Withholding tax 2,49 1,09 Secondary Tax on Companies (STC) 1,16 5,48 Adjustment in respect of (over) / under provision of income tax in previous year 0,06 (0,16) Adjustment in respect of deferred tax in the previous year (1,05) (25,06) Utilisation of prior year deferred tax assets not recognised – – (22,71) (15,71) Deferred tax asset not recognised due to uncertainty of future taxable income 99,57 49,74 Effective tax rate 76,86 34,03 Pula Pula Deferred income tax asset: Deferred income tax liabilities: Accelerated depreciation for tax purposes (46 482) (23 522) Unrealised trading profits – (30 516) Capital gains tax (2 203 982) (1 288 310) Unrealised exchange losses – – (2 250 464) (1 342 348) Deferred tax assets: Assessable loss 3 228 742 2 086 237 57 175 – Provisions 638 467 307 362 3 924 384 2 393 599 Net deferred tax asset 1 673 920 1 051 251 Analysed as follows per balance sheet: Deferred tax assets 3 251 286 1 176 696 Deferred tax liabilities (1 577 366) (125 445) Net deferred tax per above 1 673 920 1 051 251 PAGE | 76
  • 72. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. INCOME TAX – GROUP (continued) Year ended 30 April Group Group 2010 2009 Pula Pula Assessable losses: Balance brought forward 31 008 944 16 607 131 Prior year adjustment – 14 712 (Increase) / decrease in current year 15 391 675 14 387 101 Balance carried forward 46 400 619 31 008 944 Expiring as follows: 30 June 2010 – 390 264 30 June 2011 1 095 422 1 095 422 30 June 2012 1 439 913 1 439 913 30 June 2013 2 705 301 2 704 967 30 June 2014 3 956 593 3 956 593 30 June 2015 12 193 196 – Indefinite assessed losses 25 010 194 21 421 785 46 400 619 31 008 944 Assessed losses for which no deferred tax is recognised (29 241 101) (24 360 128) Year ended 30 April Group Group 2010 2009 Pula Pula INCOME TAX – COMPANY Current income tax: Current income tax charge – – Withholding tax – 4 961 – 4 961 Deferred income tax: Relating to origination and reversal of temporary differences (1 269 393) (312 135) Adjustments in respect of deferred tax in previous years (807) (5 827) Income tax reported in the Income Statement (1 270 200) (313 001) Reconciliation of tax rate: A reconciliation between the tax expense and the product of accounting profit multiplied by Botswana’s IFSC tax rate for the year is as follows: Accounting profit before tax at Botswana IFSC income tax rate of 15% 5 355 109 1 883 701 Adjusted for: Non-deductible expenses / non-deductible income (6 624 502) (2 195 836) Withholding tax – 4 961 Adjustment in respect of deferred tax in the previous year (807) (5 827) (1 270 200) (313 001) Deferred tax asset not recognised due to uncertainty of future taxable income – – At effective tax rate (See reconciliation below) (1 270 200) (313 001) PAGE | 77
  • 73. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. INCOME TAX – GROUP (continued) Year ended 30 April Company Company 2010 2009 % % INCOME TAX – COMPANY (continued) Reconciliation of income tax rate: Standard Botswana International Financial Services Centre (IFSC) tax rate 15,00 15,00 Adjusted for: Non-deductible expenses / non-taxable income (18,56) (17,49) Withholding tax – 0,05 Adjustment in respect of deferred tax in the previous year – (0,05) (3,56) (2,49) Deferred tax asset credit not recognised due to uncertainty of future taxable income – – Effective tax rate (3,56) (2,49) Pula Pula Deferred income tax asset: Deferred income tax liabilities: Accelerated depreciation for tax purposes (17 583) (9 730) Unrealised exchange losses – – (17 583) (9 730) Deferred tax assets: Assessable loss 1 596 744 317 866 Provisions 1 476 2 301 1 598 220 320 167 Net deferred tax asset 1 580 637 310 437 Analysed as follows per balance sheet: Deferred tax assets 1 580 637 310 437 Deferred tax liabilities – – Net deferred tax per above 1 580 637 310 437 Assessable losses: Balance brought forward 2 119 105 – Increase / (decrease) in current year 8 525 857 2 119 105 Balance carried forward 10 644 962 2 119 105 PAGE | 78
  • 74. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 4. EARNINGS PER SHARE Basic earnings per share are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding for the year. Diluted earnings per share are calculated by dividing net profit attributable to ordinary equity holders of the parent, by the weighted average number of ordinary shares outstanding for the year, plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential shares into ordinary shares. The following table reflects the profit and share data used in the basic and diluted earnings per share computations: Year ended 30 April Group Group 2010 2009 Pula Pula Dilution of earnings: Profit attributable to ordinary shareholders 246 765 5 769 867 Adjusted profit attributable to ordinary shareholders 246 765 5 769 867 Year ended 30 April Group Group Number Number Weighted average number of ordinary shares – basic earnings per share 57 321 021 56 394 055 Effect of dilution: Share Option Scheme 1 284 993 1 726 255 Weighted average number of ordinary shares for effect of dilution 58 606 014 58 120 310 Earnings per share – basic thebe 0,43 10,2 Earnings per share – diluted thebe 0,42 9,9 5. SEGMENTAL REPORTING For management purposes, the Group is organised into business units based on their products and services. The Group has three reportable operating segments as follows: – Asset Management – Corporate Finance – Stockbroking Management monitors and manages the operating results of the business units separately for the purposes of decision making, resource allocation and performance assessment. Segment performance is evaluated based on operating profit and loss and is measured consistently with operating profit and loss in the consolidated financial statements. However, group financing, treasury functions and income taxes are managed on a Group basis. Transfer pricing between operating segments are on an arm’s length basis in a manner similar to transactions with independent third parties. The Group’s geographical segmental reporting is based on the location of the Group’s assets and its spread of customers on a geographical basis. The following tables present revenue, profit or loss, total assets and total liabilities information in respect of the Group’s business units and geographical segments for the years ended 30 April 2010 and 2009: PAGE | 79
  • 75. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 5. SEGMENTAL REPORTING (continued) BUSINESS SEGMENTS 30 April 2010 Asset Group Manage- Corporate Stock- Adjust- consoli- ment Finance broking Other ments dated Pula Pula Pula Pula Pula Pula Revenue: External customers 27 049 703 2 058 369 63 086 343 614 492 – 92 808 907 Inter segment revenue – 366 298 – 48 774 485 (49 140 783) – Total segmental revenue 27 049 703 2 424 667 63 086 343 49 388 977 (49 140 783) 92 808 907 Other material items: Interest revenue 55 327 188 583 6 374 247 466 677 – 7 084 834 Interest expense – 232 127 925 34 235 – 162 392 Depreciation expense 54 948 259 032 861 644 295 526 – 1 471 150 Amortisation expense 48 536 – – 142 800 – 191 336 Capital expenditure 75 089 – 721 161 296 954 – 1 096 204 Profit and loss: Segment profit / (loss) before taxation 12 000 938 (6 088 631) 11 636 960 (16 726 107) – 823 160 Share of income from associates – – (553 160) 2 474 614 – 1 921 454 Impairment gains / (losses) – – 234 299 (815 715) – (581 416) Consolidated profit / (loss) before taxation 12 000 937 (6 088 631) 11 318 099 (15 067 208) – 2 163 198 Taxation (319 235) 191 045 (2 787 263) 1 252 984 – (1 662 469) Profit after taxation 11 681 702 (5 897 586) 8 530 836 (13 814 224) – 500 729 Assets: Segment assets 17 746 428 698 318 164 551 879 47 948 232 – 230 944 857 Goodwill and other tangibles 152 887 – – 813 437 – 966 324 Investments in associates – – 2 175 552 10 012 508 – 12 188 060 Total assets 17 899 315 698 318 166 727 431 58 774 177 – 244 099 241 Liabilities: Total liabilities 5 711 552 (3 161 452) 88 907 499 9 820 323 – 101 277 922 GEOGRAPHIC SEGMENTS 30 April 2010 British Group Virgin South Adjust- consoli- Botswana Islands Africa Other ments dated Pula Pula Pula Pula Pula Pula Revenue 3 863 903 21 960 694 66 634 036 350 274 – 92 808 907 Non-current assets * 8 141 454 4 489 178 2 706 666 1 429 416 – 16 766 714 * Non-current assets exclude deferred tax and financial instruments. PAGE | 80
  • 76. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 5. SEGMENTAL REPORTING (continued) BUSINESS SEGMENTS 30 April 2009 Asset Group Manage- Corporate Stock- Adjust- consoli- ment Finance broking Other ments dated Pula Pula Pula Pula Pula Pula Revenue: External customers 30 640 469 5 669 875 64 591 039 614 845 – 101 516 228 Inter segment revenue 4 665 715 440 100 – 19 341 999 (24 447 814) – Total segmental revenue 35 306 184 6 109 975 64 591 039 19 956 844 (24 447 814) 101 516 228 Other material items: Interest revenue 508 049 339 631 9 369 911 1 321 805 – 11 539 396 Interest expense 614 – 216 929 540 913 – 758 456 Depreciation expense 53 716 254 082 621 869 258 338 – 1 188 005 Amortisation expense 46 686 – – 142 800 – 189 486 Capital expenditure 77 889 31 018 561 153 543 755 – 1 213 815 Profit and loss: Segment profit / (loss) before taxation 10 421 722 (5 236 508) 16 227 350 (12 346 028) – 9 066 536 Share of income from associates – – 139 918 – – 139 918 Impairment gains / (losses) – – (329 410) (276 461) – (605 871) Consolidated profit / (loss) before taxation 10 421 722 (5 236 508) 16 037 858 (12 622 489) – 8 600 583 Taxation 80 507 384 180 (3 501 770) 110 278 – (2 926 805) Profit after taxation 10 502 229 (4 852 229) 12 536 088 (12 512 211) – 5 673 778 Assets: Segment assets 20 495 163 5 868 639 114 034 871 65 723 263 – 206 121 936 Goodwill and other tangibles – – – 96 210 – 96 210 Investments in associates – – – 2 246 312 – 2 246 312 Total assets 20 495 163 5 868 639 114 034 871 68 065 785 – 208 464 458 Liabilities: Total liabilities 6 191 149 442 635 45 090 989 24 244 624 – 75 969 397 GEOGRAPHIC SEGMENTS 30 April 2009 British Group Virgin South Adjust- consoli- Botswana Islands Africa Other ments dated Pula Pula Pula Pula Pula Pula Revenue 5 076 420 26 077 026 70 233 655 129 127 – 101 516 228 Non-current assets * 1 263 664 2 285 761 2 857 963 21 023 – 6 428 411 * Non-current assets exclude deferred tax and financial instruments. PAGE | 81
  • 77. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 6. EQUIPMENT – GROUP Year ended 30 April 2010 Motor Office Electronic Total vehicles equipment library 2010 Pula Pula Pula Pula Balance at beginning of year At cost 559 305 6 667 834 1 663 697 8 890 836 Accumulated depreciation (151 018) (4 261 380) (1 007 696) (5 420 094) Net carrying amount 408 287 2 406 454 656 001 3 470 742 Acquisition of equipment in subsidiary – net 48 214 399 328 – 447 542 Acquisition of equipment in subsidiary – cost 105 208 877 118 – 982 326 Acquisition of equipment in subsidiary – accumulated depreciation (56 994) (477 790) – (534 784) Exchange rate adjustment 1 493 119 356 51 162 172 011 Re-classification between categories Additions 216 308 879 896 – 1 096 204 Disposals (net) (19 696) (83 320) – (103 016) Depreciation (112 124) (1 180 688) (178 338) (1 471 150) Balance at end of year net of accumulated depreciation 542 482 2 541 026 528 825 3 612 333 Balance at end of year At cost 868 944 8 524 604 1 823 978 11 217 526 Accumulated depreciation (326 462) (5 983 578) (1 295 153) (7 605 193) Net carrying amount 542 482 2 541 026 528 825 3 612 333 EQUIPMENT – GROUP Year ended 30 April 2009 Motor Office Electronic Total vehicles equipment library 2009 Pula Pula Pula Pula Balance at beginning of year At cost 224 360 6 556 578 1 662 291 8 443 229 Accumulated depreciation (142 394) (3 643 124) (836 318) (4 621 836) Net carrying amount 81 966 2 913 454 825 973 3 821 393 Exchange rate adjustment 54 (1 366) 1 407 95 Re-classification between categories 341 520 (341 520) – – Additions 236 098 977 717 – 1 213 815 Disposals (net) (175 875) (200 681) – (376 556) Depreciation (75 476) (941 150) (171 379) (1 118 005) Balance at end of year net of accumulated depreciation 408 287 2 406 454 656 001 3 470 742 Balance at end of year At cost 559 305 6 667 834 1 663 697 8 890 836 Accumulated depreciation (151 018) (4 261 380) (1 007 696) (5 420 094) Net carrying amount 408 287 2 406 454 656 001 3 470 742 PAGE | 82
  • 78. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 6. EQUIPMENT – COMPANY Year ended 30 April 2010 Motor Office Total vehicles equipment 2009 Pula Pula Pula Balance at beginning of year: At cost 475 011 417 836 892 847 Accumulated depreciation (99 384) (100 940) (200 324) Net carrying amount 375 627 316 896 692 523 Additions – 54 573 54 573 Disposals (net) – (3 753) (3 753) Depreciation (69 002) (88 260) (157 262) Balance at end of year, net of accumulated depreciation 306 625 279 456 586 081 Balance at end of year: At cost 475 011 467 621 942 632 Accumulated depreciation (168 386) (188 165) (356 551) Net carrying amount 306 625 279 456 586 081 EQUIPMENT – COMPANY Year ended 30 April 2009 Motor Office Total vehicles equipment 2009 Pula Pula Pula Balance at beginning of year: At cost 304 546 157 243 461 789 Accumulated depreciation (38 182) (26 941) (65 123) Net carrying amount 266 364 130 302 396 666 Additions 213 543 269 637 483 180 Disposals (net) (35 898) (8 592) (44 490) Depreciation (68 382) (74 451) (142 833) Balance at end of year, net of accumulated depreciation 375 627 316 896 692 523 Balance at end of year: At cost 475 011 417 836 892 847 Accumulated depreciation (99 384) (100 940) (200 324) Net carrying amount 375 627 316 896 692 523 PAGE | 83
  • 79. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 7. GOODWILL Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Balance at the beginning of the year 96 210 96 027 – – Arising on the acquisition of subsidiary (Note 9) 422 816 – – – Exchange rate adjustment 8 811 183 – – 527 837 96 210 – – Comprising: Imara SP Reid (Pty) Limited 105 021 96 210 – – Capital Securities (Pty) Limited 422 816 – – – 527 837 96 210 – – Imara SP Reid (Pty) Limited (“ISPR”), is a South African stockbroking subsidiary. Capital Securities (Pty) Limited (“Capital Securities”) is a Botswana stockbroking subsidiary. Goodwill arising in the current financial year relates to the acquisition of a 50,10% shareholding in Capital Securities (Pty) Limited, on 1 November 2009. The fair value of the identifiable assets and liabilities of Capital Securities as at the date of acquisition are detailed in Note 9. Goodwill is tested for impairment annually or more frequently if circumstances indicate that goodwill is impaired. Goodwill is subsequently stated at cost less accumulated impairments in value as follows: The recoverable amount of ISPR has been determined using the value in use calculation based on the cash flow projections in financial budgets approved by senior management. A pre-tax group specific risk adjusted discount rate of 10,71% (2009: 10,68%) was used. The projected cash flows beyond the 5 years were extrapolated using a steady average growth rate of 4,10% (2009: 3,2%), not exceeding the long term average growth rate for the market in which the business operates. The cash flows were determined based on past performance, management expectations and recent market developments. The recoverable amount of Capital Securities has been determined using the value in use calculation based on the cash flow projections in financial budgets approved by senior management. A pre-tax group specific risk adjusted discount rate of 10,05% was used. The projected cash flows beyond the 5 years were extrapolated using a steady average growth rate of 2,5% not exceeding the long term average growth rate for the market in which the business operates. The cash flows were determined based on past performance, management expectations and recent market developments. PAGE | 84
  • 80. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 8. INTANGIBLE ASSETS Year ended 30 April 2010 Management Client data shares base* Total GROUP: Cost: At beginning of year 714 000 233 433 947 433 Exchange rate adjustment – 21 377 21 377 At end of year 714 000 254 810 968 810 Amortisation: At beginning of year (285 600) (46 686) (332 286) Amortisation charge for the year (142 800) (48 536) (191 336) Exchange rate adjustment – (6 701) (6 701) At end of year (428 400) (101 923) (530 323) Net book value 285 600 152 887 438 487 INTANGIBLE ASSETS Year ended 30 April 2009 Management Client data shares base* Total GROUP: Cost: At beginning of year 714 000 232 990 946 990 Exchange rate adjustment – 443 443 At end of year 714 000 233 433 947 433 Amortisation: At beginning of year (142 800) – (142 800) Amortisation charge for the year (142 800) (46 686) (189 486) At end of year (285 600) (46 686) (332 286) Net book value 428 400 186 747 615 147 * Client data base – The client data base was recognised as an intangible asset following Imara Asset Management South Africa (Pty) Limited’s acquisition of an asset management client data base from Leitch & Associates in July 2007. The acquisition was subject to suspensive conditions, which were fulfilled at 30 April 2008. Management shares are founder shares and are held primarily to secure the on-going management rights for the Imara Global Fund. The shares do carry voting rights but have no entitlement to economic rights or to the underlying value of the Fund itself. The management agreement for the Imara Global Fund is for an indefinite period but the cost of the management shares are being amortised over a period of 5 years. PAGE | 85
  • 81. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 8. INTANGIBLE ASSETS (continued) Year ended 30 April 2010 Management shares Total COMPANY: Cost: At beginning of year and end of year 714 000 714 000 Amortisation: At beginning of year (285 600) (285 600) Amortisation charge for the year (142 800) (142 800) At end of year (428 400) (428 400) Net book value 285 600 285 600 INTANGIBLE ASSETS Year ended 30 April 2009 Cost: Management shares Total At beginning of year and end of year 714 000 714 000 Amortisation: At beginning of year (142 800) (142 800) Amortisation charge (142 800) (142 800) At end of year (285 600) (285 600) Net book value 428 400 428 400 PAGE | 86
  • 82. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. INVESTMENT IN SUBSIDIARIES Group Group Company Company % 2010 2009 2010 2009 holding Pula Pula Pula Pula Ordinary shares at cost: Africa Investments Limited (1) 100% – – 7 877 845 7 877 845 CF Africa Limited (1) 69,3% – – 1 747 525 1 747 525 Imara Asset Management Limited (1) 100% – – 22 754 22 754 Imara Asset Management UK Ltd (2) 100% – – 83 473 83 473 Imara Africa Private Equity Fund Managers (Pty) Limited (3) 100% – – 100 – Imara Capital Botswana (Pty) Ltd (3) 100% – – 2 819 936 2 819 936 Imara Capital Limited (1) 100% – – 9 000 006 5 000 006 Imara Capital Kenya Limited (4) 100% – – 8 446 – Imara Capital Zambia Limited (5) 100% – – 7 042 – Imara Trademarks (BVI) Limited (1) 100% – – 6 6 Imara Trust Company (Mauritius) Ltd (6) 100% – – – 325 003 – – 21 567 133 17 876 548 Preference shares at cost: Imara Asset Management UK Limited 100% – – 205 339 205 339 Share-based payment reserve – See below – – 2 611 128 1 444 046 – – 24 383 600 19 525 933 Country of incorporation: (1) British Virgin Islands (2) United Kingdom (3) Botswana (4) Kenya (5) Zambia (6) Mauritius For ordinary shares at cost, the percentage holding equates in all instances to the voting rights attached to shares. No voting rights attach to the preference shares. Share-based payment reserve relates to the equity component of share options granted to employees and directors of the Company and its subsidiaries under the Group’s Share Option Scheme. (Note 22) Acquisition of subsidiaries by the Company: Year ended 30 April Company Company 2010 2009 Pula Pula Acquisition of subsidiaries during the year: Imara Africa Private Equity Fund Managers (Pty) Limited – Botswana 100 – Imara Capital Kenya Limited 8 446 – Imara Capital Zambia Limited 7 042 – 15 588 – PAGE | 87
  • 83. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. INVESTMENT IN SUBSIDIARIES (continued) Acquisition of subsidiaries by the Company (continued) Imara Africa Private Equity Fund Managers (Pty) Limited During the year, Imara Holdings Limited subscribed for 100 new ordinary shares in the capital of Imara Africa Private Equity Fund Managers (Pty) Limited for a consideration of P 100. The net asset value of the Company at the date of acquisition was P Nil and the total subscription price for the new shares was settled in cash. The Company has been established to provide management services to Private Equity Funds which may be established by the Group in the future. The Company is wholly owned by Imara Holdings Limited and is currently dormant. Imara Capital Kenya Limited During the year, Imara Holdings Limited subscribed for 5 000 new ordinary shares in the capital of Imara Capital Kenya Limited for a consideration of P 8 446. The net asset value of the Company at the date of acquisition was P Nil and the total subscription price for the new shares was settled in cash. The Company is an investment holding company, is wholly owned by Imara Holdings Limited and is currently dormant. Imara Capital Zambia Limited During the year, Imara Holdings Limited subscribed for 5 000 000 new ordinary shares in the capital of Imara Capital Zambia Limited for a consideration of P 7 042. The net asset value of the Company at the date of acquisition was P Nil and the total subscription price for the new shares was settled in cash. The Company is an investment holding company and is wholly owned by Imara Holdings Limited. Imara Capital Zambia Limited owns a 25% equity stake in Stockbrokers Zambia Limited which was acquired on 31 October 2009. Details relating to the acquisition of an equity stake in Stockbrokers Zambia Limited are detailed in Note 10 – Investment in Associates. Acquisition of subsidiaries by the Group: Capital Securities (Pty) Limited On 1 November 2009, the Group, through its subsidiary company Imara Capital Botswana (Pty) Limited, acquired a 50,10% interest in Capital Securities (Pty) Limited, a stockbroking company registered and operating in Botswana. PAGE | 88
  • 84. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. INVESTMENT IN SUBSIDIARIES (continued) Acquisition of subsidiaries by the Group (continued) Capital Securities (Pty) Limited (continued) The fair value of the identifiable assets and liabilities of Capital Securities (Pty) Limited as at the date of acquisition were: Pula Assets: Property, plant and equipment 447 542 Deferred tax assets 88 388 Available-for-sale financial assets 110 628 Listed trading securities 164 767 Trade and other receivables – see note below 2 125 189 Cash and cash equivalents 3 269 771 Total assets 6 206 285 Liabilities: Trade and other payables (3 197 297) Taxation (157 707) Total liabilities (3 355 004) Net assets acquired: 2 851 281 Minority interest (1 422 789) Goodwill 422 816 Purchase consideration 1 851 308 Less: Cash and cash equivalents (3 269 771) Less: Shares of the Group parent company issued at fair value (1 512 000) Net cash flow on acquisition (2 930 463) Purchase consideration: Shares of the Group parent company, issued at fair value – see note below 1 512 000 Cash consideration 339 308 1 851 308 Contingent liability for the balance of the purchase consideration – see note below 670 133 2 521 441 The purchase consideration, settled through the issuance of shares amounts to P 1 512 000, comprising 252 000 ordinary shares, at a value of P 6.00 per share. The fair value of shares issued was determined by the price quoted on the Botswana Stock Exchange on 13 October 2009, being the date on which acquisition negotiations were concluded. Assets acquired and liabilities assumed: The fair value of the trade and other receivables acquired amounts to P 2 125 189. The gross amount of the trade and other receivables is P 2 125 189. None of the trade and other receivables have been impaired and it is expected that the full contractual amounts will be collected. The goodwill of P 422 816 comprises of the value of expected synergies arising from the acquisition. None of the goodwill is expected to be tax deductible. The intangible assets represent Botswana Stock Exchange proprietary rights and are valued at fair value as at the date of acquisition. PAGE | 89
  • 85. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. INVESTMENT IN SUBSIDIARIES (continued) Acquisition of subsidiaries by the Group (continued) Capital Securities (Pty) Limited (continued) From the date of acquisition, Capital Securities (Pty) Limited has contributed P 1 331 045 of revenue and P 54 517 to the net profit after tax of the Group. If the business acquisition had taken place at the beginning of the financial year, revenue would have increased by P 2 737 518 and the net profit after tax of the Group would have decreased by P 289 393. Contingent Purchase Consideration: 25% of the total purchase consideration, amounting to P 670 133, was withheld by the Group as a contingent consideration at the acquisition date. The contingent consideration becomes due and payable if Capital Securities (Pty) Limited attains a profit after taxation of P 1 300 000 for the period 1 January 2010 to 31 December 2010. The fair value of the contingent purchase consideration as at 30 April 2010 is considered to be Nil as budget projections for the year ending 31 December 2010 reflect that the required level profit after tax is unlikely to be achieved. Company Company 2010 2009 Pula Pula Increase in investment in subsidiary: Imara Capital Limited – BVI: At the beginning of the year 5 000 006 6 Movement for the year 4 000 000 5 000 000 At the end of the year 9 000 006 5 000 006 On 29 April 2010, Imara Holdings Limited subscribed for 100 new ordinary shares in the capital of Imara Capital Limited, the British Virgin Islands registered entity, for a consideration of P 4 000 000. The total subscription price for the new shares was settled through the conversion of a loan account due by Imara Capital Limited to Imara Holdings Limited. Disposal of subsidiary: Imara Trust Company (Mauritius) Limited: During the year, the Group sold its 100% interest in Imara Trust Company (Mauritius) Limited to Imara Beresford International Limited an investment holding company, registered in Mauritius. It is the parent company of Imara Trust Company (Mauritius) Limited and Beresford Trust and Corporate Services Limited, both of which are registered in Mauritius and are engaged in global trust, custodial and management services. Imara Holdings Limited has acquired a 25% equity stake in Imara Beresford International Limited as more fully described in Note 10 – Investments in Associates. The effective date of the disposal of Imara Trust Company (Mauritius) Limited was 1 October 2009. PAGE | 90
  • 86. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. INVESTMENT IN SUBSIDIARIES (continued) Disposal of subsidiary (continued) Imara Trust Company (Mauritius) Limited (continued) The fair value of the assets and liabilities of Imara Trust Company (Mauritius) Limited on the date of disposal are summarised below: Pula Deferred tax asset 38 058 Cash and cash equivalents 303 977 Trade and other receivables 35 450 Trade and other payables (230 817) Net assets disposed of 146 668 Profit on disposal of shares 1 479 994 1 626 662 Less: Shares issued by Imara Beresford International Ltd as consideration (Note 10) (1 626 662) Less: Cash and cash equivalents at date of disposal (303 977) Net cash outflow (303 977) 10. INVESTMENT IN ASSOCIATES Year ended 30 April 2010 Imara Stock- Stock- Imara Capital Beresford brokers brokers Zimbabwe International Zambia Malawi (Pvt) Total Limited Limited Limited Limited Group Pula Pula Pula Pula Pula GROUP: Balance at the beginning of the year – – – 2 246 312 2 246 312 Share of profits / (losses) 198 932 (266 142) (287 018) 2 275 682 1 921 454 Re-capitalisation during the year – – 810 601 – 810 601 Acquisitions during the year: 4 480 634 1 683 813 – – 6 164 447 Cash consideration 4 480 634 1 350 480 – – 5 831 114 Equity consideration – 333 333 – – 333 333 Sale of subsidiary in return for equity interest 1 626 662 – – – 1 626 662 Impairment gain / (loss) on investment – per Income Statement – – 234 299 (815 715) (581 416) Balance at the end of the year 6 306 228 1 417 671 757 882 3 706 279 12 188 060 PAGE | 91
  • 87. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 10. INVESTMENT IN ASSOCIATES (continued) GROUP (continued) Year ended 30 April 2009 Imara Capital Stockbrokers Zimbabwe Malawi (Pvt) Total Limited Limited Group Pula Pula Pula GROUP: Balance at the beginning of the year 189 492 2 522 773 2 712 265 Share of profits 139 918 – 139 918 Dividends received – – – Impairment of investment per Income Statement (329 410) (276 461) (605 871) Balance at the end of the year – 2 246 312 2 246 312 INVESTMENT IN ASSOCIATES Year ended 30 April 2010 Imara Beresford International Total Limited Company Pula Pula COMPANY: Balance at the beginning of the year – – Acquisitions during the year – paid in cash 4 480 634 4 480 634 Sale of subsidiary in return for equity interest 1 626 662 1 626 662 Balance at the end of the year 6 107 296 6 107 296 Imara Beresford International Limited: The Group, through its parent company Imara Holdings Limited owns 25% of Imara Beresford International Limited, an investment holding company, registered in Mauritius and incorporated on 24 September 2009. It is the parent company of Imara Trust Company (Mauritius) Limited and Beresford Trust and Corporate Services Limited, both of which are registered in Mauritius and who are engaged in global trust administration, custodial and management services. Imara Trust Company (Mauritius) Limited was a wholly owned subsidiary of Imara Holdings Limited up until 30 September 2009, at which date it was sold to Imara Beresford International Limited. The financial year end of Beresford Trust and Corporate Services Limited is 31 December 2009. An independent statutory audit of Beresford Trust and Corporate Services Limited for the year ended 31 December 2009 has been carried out as well as an audit review of the results for the four month period from 1 January 2010 to 30 April 2010. Application has been made for the year end of Beresford Trust and Corporate Services Limited to be changed to 30 April with effect from 2011. The financial year end of Imara Beresford International Limited and Imara Trust Company (Mauritius) Limited is 30 April 2010. Independent statutory audits have been carried out for both companies for the period and year ended 30 April 2010. Impairment testing of the investment in associate for the year was based on the audited financial statements to 30 April 2010. PAGE | 92
  • 88. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 10. INVESTMENT IN ASSOCIATES (continued) Imara Beresford International Limited (continued): The following tables give summarised information of the Group’s investment in Imara Beresford International Limited, based on USD denominated financial statements to 30 April 2010. These are the latest available management accounts for the Company. No comparative financial information is provided as the investment in Imara Beresford International Limited was made in the current year. 30 April 2010 Pula Share of associate’s balance sheet – 25%: Current assets 1 303 990 Non-current assets 6 282 574 Current liabilities 892 990 Other liabilities 26 946 Net assets 7 586 565 Share of associate’s revenue and profit after tax – 25%: Revenue 1 972 094 Profit after taxation 198 932 Stockbrokers Zambia Limited: On 31 October 2009, the Group through its wholly owned subsidiary company, Imara Capital Zambia Limited, acquired a 25% interest in Stockbrokers Zambia Limited, a stockbroking company registered and operating in Zambia. The financial year end of Stockbrokers Zambia Limited is 31 December and an independent statutory audit for the year ended 31 December 2009 has been completed. Impairment testing of the investment at 30 April 2010 has been based on the audited financial statements to 31 December 2009 and un-audited management accounts for the four month period from 1 January 2010 to 30 April 2010. These are the latest available management accounts for the Company. The following tables give summarised information of the Group’s investment in Stockbrokers Zambia Limited, based on audited financial statements to 31 December 2009, and un-audited management accounts 30 April 2010. No comparative financial information is provided as the investment in Stockbrokers Zambia Limited was made in the current year: 30 April 2010 Pula Share of associate’s balance sheet – 25%: Current assets 237 627 Non-current assets 462 102 Current liabilities 211 374 Other liabilities – Net assets 488 355 Share of associate’s revenue and profit after tax – 25%: Revenue 502 265 Loss after taxation 266 142 PAGE | 93
  • 89. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 10. INVESTMENT IN ASSOCIATES (continued) Stockbrokers Malawi Limited: The Group, through its British Virgin Islands company, Imara Capital Limited, owns 25% of Stockbrokers Malawi Limited, a company incorporated in Malawi and engaged in the business of securities. The financial year end of Stockbrokers Malawi Limited is 31 December and an independent statutory audit for the year ended 31 December 2009 has been completed. During the year, shareholders agreed to MK 70 million (P 3 242 400) re-capitalise the company through a rights offer of MK 40 million (P 1 852 800) and zero coupon convertible shareholder loans of MK 30 million (P 1 389 600). In order not to dilute its shareholding and on the basis of improved financial forecasts for the company, Imara Capital Limited contributed a total of MK 17 500 000 (P 810 601) towards the re-capitalisation, being its 25% share of the total amount raised. In the previous financial year ended 30 April 2009, the investment in Stockbrokers Malawi Limited was impaired to zero. This was due to the non-availability of audited financial information at the time of impairment testing and uncertainty over the future profitability of the Company. Impairment testing of the investment at 30 April 2010 has been based on the audited financial statements to 31 December 2009 and un-audited management accounts for the four month period from 1 January 2010 to 30 April 2010. These are the latest available management accounts for the Company. Dividend remittances from Malawi are subject to Exchange Control approval. The following tables give summarised information of the Group’s investment in Stockbrokers Malawi Limited, based on audited financial statements to 31 December 2009, (Year-ended 31 December 2008 – un-audited), and un-audited management accounts to 30 April 2010. These are the latest available management accounts for the Company: April 2010 April 2009 Pula Pula Share of associate’s balance sheet – 25%: Current assets 16 001 718 1 418 907 Non-current assets 559 887 146 866 Current liabilities 15 830 641 1 196 054 Other liabilities 21 636 – Net assets 709 328 369 718 Share of associate’s revenue and profit after tax– 25%: Revenue 431 049 1 068 226 (Loss)/profit after taxation (287 018) 167 153 Imara Capital Zimbabwe (Pvt) Limited The Group owns 69,27% of CF Africa Limited, a British Virgin Islands registered company, whose only asset is a 46,35% interest in Imara Capital Zimbabwe (Pvt) Limited, a company incorporated in Zimbabwe and engaged in the businesses of Asset Management, Corporate Finance Advisory and Securities. The effective shareholding of Imara Holdings Limited in Imara Capital Zimbabwe (Pvt) Limited is 32,11%. The assessment of impairment in value of the investment in associate in the prior year was therefore based on USD denominated audited financial statements of the company for the 12 months to 31 March 2010 and on reviewed USD denominated management accounts for the one month ended 30 April 2010. These are the latest available financial statements for the company. The investment in associate is carried at cost plus the post acquisition changes in the Group’s share of the net assets of the associate. PAGE | 94
  • 90. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 10. INVESTMENT IN ASSOCIATES (continued) Imara Capital Zimbabwe (Pvt) Limited (continued) The following tables give summarised information of the Group’s investment in Imara Capital Zimbabwe (Pvt) Limited, based on USD denominated financial statements to 30 April 2010. April 2010 April 2009 Pula Pula Share of associate’s balance sheet – 46,35%: Current assets 3 704 871 496 027 Non-current assets 1 429 345 1 710 474 Current liabilities 1 285 702 728 127 Other liabilities 141 981 – Net assets 3 706 533 1 478 374 Share of associate’s revenue and profit after tax– 46,35%: Revenue 13 752 643 Not available Profit after taxation 2 275 682 Not available In February 2009, Imara Capital Zimbabwe (Pvt) Limited adopted the United States Dollar as their reporting currency. This followed an extended period of hyperinflation in Zimbabwe which rendered the local currency unit meaningless as a measure of value. Consequently in the financial year ended 31 March 2009, the translation of income statement items from Zimbabwe Dollars to a reportable currency became impractical with the result that comparative financial information is not available. 11. AVAILABLE-FOR-SALE FINANCIAL ASSETS Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Listed securities: JSE securities 7 138 453 4 728 337 – – Angola Stock Exchange securities 139 002 – 139 002 – Botswana Stock Exchange proprietary rights 110 628 – – – Other listed securities 1 000 665 1 031 592 1 000 665 1 031 592 8 388 748 5 759 929 1 139 667 1 031 592 Unlisted securities: Imara / Investec Unit Trust Wrap Fund 6 022 4 106 – – Old Mutual Unit Trusts 80 375 68 235 – – 8 475 145 5 832 270 1 139 667 1 031 592 Listed securities The fair value of listed securities is determined by reference to the quoted market bid prices at the close of business on the balance sheet date. Unlisted securities The fair value of the Imara / Investec Unit Trust Wrap Fund is determined by reference to the bid price for this class of product at the close of business daily. The bid price is computed by reference to the underlying value of assets in the Fund and is published daily by Investec Bank. The last valuation was carried out on 30 April 2010. The fair value of Old Mutual Unit Trusts is determined by reference to the quoted bid price for this type of investment product at the close of business each day. PAGE | 95
  • 91. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. RELATED PARTY DISCLOSURES Subsidiary companies: Imara Holdings Limited is the Group parent company. It is registered in Botswana, is listed on the Venture Capital Board of the Botswana Stock Exchange and is licenced in the International Financial Services Centre (“IFSC”) – Botswana’s Offshore Centre. Imara Holdings Limited owns 100% of the issued capital of the following Group companies: – Africa Investments Limited – A British Virgin Islands registered company; – Imara Private Equity Fund Managers (Pty) Limited – A Botswana registered company; – Imara Asset Management Limited – A British Virgin Islands registered company; – Imara Asset Management (UK) Limited – A United Kingdom registered company; – Imara Capital Limited – A British Virgin Islands registered company; – Imara Capital Botswana (Pty) Limited – A Botswana registered company; – Imara Capital Kenya Limited – A Kenyan registered company; – Imara Capital Zambia Limited – A Zambian registered company; – Imara Trademarks Limited – A British Virgin Islands registered company; Imara Holdings Limited also has a majority shareholding in the following Group companies: – CF Africa Limited (69,27% shareholding) – A British Virgin Islands registered company, which has as its sole asset, a 46,45% shareholding in Imara Capital Zimbabwe (Pvt) Limited, a company incorporated in Zimbabwe. – Imara Securities Angola SVM Limitada is an Angolan registered company in the process of formation. Registration formalities can only be concluded once a stockbroking licence for the new entity has been issued. The licence application is currently pending with the Angolan Authorities. In terms of a Shareholders Agreement, Imara Holdings Limited has the right to subscribe for 50% of the issued share capital of the Company upon formation. Imara Capital Botswana (Pty) Limited is the holding company for the Botswana registered entities, excluding Imara Holdings Limited, and owns the following companies: - Imara Botswana Limited; - Imara Capital Limited; - Imara Asset Management (Pty) Limited (51%); - Capital Securities (Pty) Limited (50,10%). Imara Asset Management (Pty) Limited is owned 49% by Worxnet (Pty) Limited. A decision was taken in October 2007, to discontinue the operations of the company. Following a re-assessment of discontinued operations in the current year, a decision has been taken that this classification is no longer applicable and that the operations of this entity should be re-classified. Capital Securities (Pty) Limited is owned 49,90% by directors and management of the company. It is registered in Botswana and is engaged in stockbroking. Imara Capital South Africa (Pty) Limited is registered in South Africa and is wholly owned by Africa Investments Limited, a British Virgin Islands registered company. Imara Asset Management South Africa (Pty) Limited, Imara Corporate Finance South Africa (Pty) Limited and Imara SP Reid (Pty) Limited are subsidiaries of Imara Capital South Africa (Pty) Limited. Imara Asset Management (UK) Limited is registered in England, is a wholly owned subsidiary of Imara Holdings Limited and is authorised and regulated by the Financial Services Authority. PAGE | 96
  • 92. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. RELATED PARTY DISCLOSURES (continued) Associate companies: Imara Capital Limited, the British Virgin Islands registered company, owns 25% of Stockbrokers Malawi Limited. Stockbrokers Malawi Limited is an associate company of Imara Holdings Limited. The amount due is in respect of dividends declared but not received. Imara Holdings Limited owns 69,27% of CF Africa Limited whose sole asset is a 46,45% interest in Imara Capital Zimbabwe (Pvt) Limited. Imara Holdings Limited therefore has an indirect shareholding in Imara Capital Zimbabwe (Pvt) Limited of 32,18%. Imara Capital Zimbabwe (Pvt) Limited is an associate company of Imara Holdings Limited. Imara Capital Zambia Limited, the Zambian registered company, owns 25% of Stockbrokers Zambia Limited. Stockbrokers Zambia Limited is an associate company of Imara Holdings Limited. Imara Beresford International Limited is a Mauritian registered company which owns Beresford Trust and Corporate Services Limited (“BTCS”) and Imara Trust Company (Mauritius) Limited. Imara Holdings Limited owns 25% of Imara Beresford International Limited. BTCS and Imara Trust Company (Mauritius) Limited are both engaged in the trust administration and management business. In the previous financial year, Imara Trust Company (Mauritius) Limited was a wholly owned subsidiary company of Imara Holdings Limited. Other related parties: – Beresford Trust and Corporate Services Limited (“BTCS”) is a subsidiary of Imara Beresford International Limited and provides administration services to the Imara Global Fund. Fees charged for services rendered are on normal commercial terms, on an arm’s length basis. – Imara SP Limited is registered in the British Virgin Islands and is a shareholder in the Group. The company is controlled by a Non-Executive Director. – The Etana Trust is registered in Jersey and is controlled by Beresford Trust and Corporate Services. Etana Trust is a shareholder in Imara Holdings Limited. An Executive Director of Imara Holdings Limited has an indirect interest in the Etana Trust. – Imara Managed Futures Fund (Pty) Limited accepts debenture subscriptions from high net worth individuals and channels them into the Imara Managed Futures Fund, an investment holding trust, which holds assets for the benefit of debenture holders. During the year the Group entered into transactions with the directors and other related parties. These transactions along with related balances at 30 April 2010 and for the period then ended are as follows: Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Professional fees paid: Beresford Trust and Corporate Services Limited 318 653 301 306 60 104 – Management fees receivable – Group: Imara Asset Management South Africa (Pty) Limited – – 60 397 95 927 Imara Botswana Limited – – 891 915 45 000 Imara Capital South Africa (Pty) Limited – – 1 041 002 – Imara Corporate Finance South Africa (Pty) Limited – – 240 627 1 176 185 Imara SP Reid (Pty) Limited – – 1 714 682 2 729 421 – – 3 948 623 4 046 533 PAGE | 97
  • 93. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. RELATED PARTY DISCLOSURES (continued): Related party transactions and balances (continued): Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Management fees receivable – Non-Group: Imara Managed Futures Fund 55 183 – – – Management fees receivable – Group: Imara Holdings Limited charges an annual management fee to certain of its subsidiary companies in respect of services rendered to these companies by the Imara Holdings Limited executives. Management fees receivable – Non-Group: Imara SP Reid, the South African stockbroker charges an annual management fee to the Imara Managed Futures Fund in respect of support services rendered to this entity. Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Interest receivable – Group companies: CF Africa Limited – BVI – – 29 181 33 005 Imara Botswana Limited – – 611 051 819 390 Imara Capital Limited – BVI – – 858 067 1 877 475 Imara Capital Botswana (Pty) Limited – – 706 132 365 260 Imara Capital South Africa (Pty) Limited – – 2 380 242 2 136 272 Imara Trust Company (Mauritius) Limited – – – 4 640 – – 4 584 673 5 236 042 Interest receivable – Related parties: Imara Capital Zimbabwe (Pvt) Limited – – 24 430 51 523 Imara SP Limited – BVI – – 18 884 18 121 Imara Trust Company (Mauritius) Limited – – 32 306 – Etana Trust – – 15 324 17 533 – – 90 944 87 177 Interest receivable – third parties – – 213 318 655 832 Interest receivable – non-Group – – 304 262 743 009 Amounts due by related parties relate to payments made by Imara Holdings Limited to independent third parties, in respect of Company secretarial and administrative fees. Interest is charged on outstanding amounts at 10,50% (2009: 14,50%). PAGE | 98
  • 94. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. RELATED PARTY DISCLOSURES (continued): Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Amounts owed by Group companies: Long term: CF Africa Limited– BVI – – 310 267 276 445 Imara Asset Management (UK) Limited – – 233 197 240 013 Imara Botswana Limited – – 6 617 969 6 318 227 Imara Capital Limited – Botswana – – 9 817 967 5 102 073 Imara Capital Limited – BVI – – 6 055 108 5 670 273 Imara Capital South Africa (Pty) Limited – – 11 275 509 15 448 739 Imara Trust Company (Mauritius) Limited – – – 227 717 Imara Capital Zambia Limited – – 1 676 771 – – – 35 986 788 33 283 487 Amounts owed to Group companies: Africa Investments Limited – BVI – – 326 815 7 132 798 Imara Africa Private Equity Fund Managers (Pty) Limited – – 100 – Imara Asset Management (Pty) Limited – Botswana – – 400 669 441 335 Imara Asset Management Limited – BVI – – 14 108 566 49 275 026 Imara Capital Kenya Limited – 8 446 – Imara Trademarks Limited – BVI – – 5 015 288 4 588 437 – – 19 859 884 61 437 596 Amounts owed by related parties: (Note 14) Etana Trust 166 067 138 450 166 067 138 450 Imara Capital Zimbabwe (Pvt) Limited 45 275 2 195 172 45 275 2 195 172 Imara SP Limited 199 429 175 934 199 429 175 934 Imara Trust Company (Mauritius) Limited 325 453 – 325 453 – 736 224 2 509 556 736 224 2 509 556 Amounts owed to related parties: (Note 18) Short term: Imara Capital Zimbabwe (Pvt) Limited – 887 678 – – Imara SP Limited – 19 722 – – Imara Beresford International Limited 49 034 – – – 49 034 907 400 – – Inter-company long-term loans have no fixed term of repayment, are unsecured and attract interest at rates of 10,50% (2009: 14,50%) for Botswana, British Virgin Islands and South African incorporated companies. These interest rates equate to market related interest rates for similar type loans in the respective country jurisdictions. Imara Holdings has subordinated portions of the loans owed to it by Group companies. As these loans are not expected to be repaid in the foreseeable future, where the loan is in a foreign currency, the loan has been treated as a net investment in the foreign entity and exchange gains and losses are recognised in equity. PAGE | 99
  • 95. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. RELATED PARTY DISCLOSURES (continued): Remuneration paid to directors and key management personnel: Directors: Year ended 30 April 2010 Non-executive Executive Total Pula Pula Pula Non-Executive: Fees 862 542 – 862 542 Expenses 669 037 – 669 037 Share-based payment expense 81 681 – 81 681 Total non-executive 1 613 260 – 1 613 260 Executive: Salary – 5 728 723 5 728 723 Short term benefits – 354 013 354 013 Fixed remuneration – 6 082 736 6 082 736 Performance bonus – 3 234 875 3 234 875 Share-based payment expense – 295 674 295 674 Total executive – 9 613 285 9 613 285 Total non-executive and executive 1 613 260 9 613 285 11 226 545 RELATED PARTY DISCLOSURES Directors: Year ended 30 April 2009 Non-executive Executive Total Pula Pula Pula Non-Executive: Fees 1 264 253 – 1 264 253 Expenses 249 635 – 249 635 Share-based payment expense 38 816 – 38 816 Total non-executive 1 552 704 – 1 552 704 Executive: Salary – 7 393 663 7 393 663 Short term benefits – 313 385 313 385 Fixed remuneration – 7 707 048 7 707 048 Performance bonus – 12 914 672 12 914 672 Share-based payment expense – 146 167 146 167 Total executive – 20 767 887 20 767 887 Total non-executive and executive 1 552 704 20 767 887 22 320 591 Directors’ remuneration: The directors’ remuneration disclosed in the note above includes performance bonuses in respect of the 2009 financial year which were paid in 2010. Such amounts have been charged against prior year provisions for performance bonuses and consequently are excluded from the Income Statement charge for the current year as disclosed in Note 2. PAGE | 100
  • 96. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. RELATED PARTY DISCLOSURES (continued): Remuneration paid to directors and key management personnel: (continued) Year ended 30 April 2010 Key management personnel: Pula Salary 3 508 268 Short term benefits 101 612 Fixed remuneration 3 609 880 Performance bonus 3 170 062 Share-based payment expense 230 458 7 010 400 RELATED PARTY DISCLOSURES Year ended 30 April 2009 Key management personnel: Pula Salary 3 863 102 Short term benefits 117 394 Fixed remuneration 3 980 496 Performance bonus 9 917 156 Share-based payment expense 77 849 13 975 501 Remuneration in respect of key management personnel relates to four employees, two of whom are employed at Imara SP Reid (Pty) Limited, one who is employed at Imara Asset Management, the British Virgin Islands Company and one employed by Imara Capital South Africa (Pty) Limited. All four employees were employed by the Group for a full 12 month period in both the 2009 and 2010 financial years. Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula 13. LISTED TRADING SECURITIES Listed traded securities 9 231 792 3 953 387 – – 14. TRADE AND OTHER RECEIVABLES Trade receivables 4 776 695 5 514 239 – – Amounts receivable in respect to broking activities 37 777 508 57 240 659 – – Collateral deposits against scrip lending 10 713 366 2 487 943 – – Amounts receivable – carry accounts 26 232 428 19 554 894 – – Sundry receivables 2 076 453 2 251 785 922 146 884 721 Related party receivables (Note 12) 736 224 2 509 556 736 224 2 509 556 82 312 674 89 559 076 1 658 370 3 394 277 PAGE | 101
  • 97. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 14. TRADE AND OTHER RECEIVABLES (continued) Trade receivables are non-interest bearing and are generally on 30 to 60 day terms. Amounts receivable in respect of broking activities are due on demand and do not attract interest. Collateral deposits against scrip lending attract interest on a floating rate basis at rates and the rate applicable on 30 April 2010 was 6,25% (2009: 8,30%). The repayment period for amounts due in respect of certain collateral deposits against scrip lending are contract specific. None of these balances were past due at year end. Loans receivable, in respect of carry accounts, are due on demand and attract interest at floating interest rates ranging between 8,00% and 13,00% (2009: 12,00% and 16,00%) Impairment losses, where applicable, are charged through the use of an allowance account. Financial assets pledged as collateral: The Group had pledged cash amounting to P 10 713 365 (2009: P 2 489 190) as collateral for scrip lending transactions. No other financial assets have been pledged as collateral for financial liabilities or contingent liabilities. As at 30 April, the ageing analysis of trade and other receivables is as detailed below. These balances are neither past due nor impaired: As at 30 April 2010 Neither past due nor impaired Past due but not impaired Less than 31 to 61 to 91 to More than 30 days 60 days 90 days 120 days 120 days TOTAL Trade receivable 4 682 805 67 640 25 084 2 165 – 4 776 695 Other receivables 268 369 127 326 139 827 13 167 1 527 763 2 076 452 Related parties 53 086 22 394 5 128 – 330 163 410 771 As at 30 April 2009 Trade receivable 1 429 615 1 251 665 838 495 1 180 032 814 432 5 514 239 Other receivables 344 629 597 293 46 750 629 669 633 444 2 251 785 Related parties 274 070 439 870 76 050 265 969 1 453 597 2 509 556 No other class of financial assets are past due as at the balance sheet date. As at 30 April, the following trade and other receivables were impaired and provided for in full. They are therefore not included in the above receivables as their net carrying amount is nil. Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Trade receivables 55 560 50 897 – – Other receivables 411 551 401 550 – – 467 111 452 447 – – Movements in the provision for past due trade receivables and sundry receivables were as follows: Group Company Individually Collectively Individually Collectively impaired impaired Total impaired impaired Total Pula Pula Pula Pula Pula Pula At 1 May 2008 764 912 – 764 912 – – – Charge for the year – – – – – – Utilised (312 465) – (312 465) – – – At 30 April 2009 452 447 – 452 447 – – – Charge for the year 10 000 – 10 000 – – – Exchange rate movement 4 664 – – – – – Utilised – – – – – – At 30 April 2010 467 111 – 462 447 – – – PAGE | 102
  • 98. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 15. CASH AND CASH EQUIVALENTS Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Cash on hand and at bank 84 409 809 55 774 420 732 997 8 885 951 Short term deposits 38 990 374 5 466 868 34 371 176 – Short term treasury bills – 40 271 414 – 40 271 414 123 400 183 101 512 702 35 104 173 49 157 365 For purposes of the Cash Flow Statement, cash and cash equivalents comprise the following: Cash and cash equivalents – per above 123 400 183 101 512 702 35 104 173 49 157 365 Bank overdraft (Note 17) – (69) – – 123 400 183 101 512 633 35 104 173 49 157 365 Rand call deposits bear interest, linked to prime, of between 0,00% and 7,90% per annum (2009: 0,00% and 7,40%). Short-term deposits held with African Alliance and Stanbic Investment Management Services (Pty) Limited, have effective returns of between 5,94% and 9,67% per annum (2009: 9,82% and 11,94%). Foreign bank balances attracted interest during the year of between 0,00% and 0,70% per annum (2009: 0,00% and 3,65%) on US Dollar deposits, and 0,00% and 0,60% per annum (2009: 0.00% and 5,88%) on Sterling deposits. The Group’s cash which has been identified as not being immediately required for operational purposes, has since September 2008, been invested into short dated United Kingdom Treasury Bills denominated in both United States Dollars and Sterling. These treasury bills, which are guaranteed by the United Kingdom government, typically have maturity dates of between 30 and 120 days, earn interest ranging between 2,6% and 4,5% and are rolled over on maturity, depending on operational cash flow requirements. There is an active market for the treasury bills and as such they can be converted into cash prior to the stated maturity date. 16. STATED CAPITAL Authorised share capital: 200 000 000 ordinary shares of no par value Year ended 30 April Company Company 2010 2009 Issued capital: Number Number Reconciliation of the number of shares in issue: In issue at beginning of the year 56 778 236 55 618 916 Shares issued: – in respect of scrip dividend 240 061 536 135 – under the Share Option Scheme 857 934 594 420 – to acquire a client data base (Note 8) – 28 765 – as part consideration for the acquisition of investments in associates and subsidiaries (Note 10) 286 188 – In issue at end of the year 58 162 419 56 778 236 PAGE | 103
  • 99. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 16. STATED CAPITAL (continued) Issued capital: Year ended 30 April 2010 Stated capital Pula Company: Balance at beginning of year 44 909 348 Issue of ordinary shares: – in respect of scrip dividend 1 020 260 – under the Share Options Scheme 758 040 – as part of the consideration for the acquisition of investments in associates 1 845 333 Balance at end of year 48 532 981 STATED CAPITAL Year ended 30 April 2009 Stated capital Pula Company: Balance at beginning of year 37 111 325 Issue of ordinary shares: – under the Share Options Scheme 854 750 – in respect of scrip dividend 6 701 647 – to acquire a client date base 241 626 Balance at end of year 44 909 348 Notes relating to issued capital: The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction. The un-issued ordinary shares are under the control of the directors. In respect of the financial years ended 30 April 2009 and 2008, shareholders were given the option to receive their ordinary dividend in cash or to receive ordinary shares in lieu of the dividend entitlement. Such dividends are paid in September / October of the following year. The following table gives information relating to the respective scrip dividend offers: Financial year to which dividend payment relates 30 April 2009 30 April 2008 Financial year in which dividend declared and paid 30 April 2010 30 April 2009 Ordinary dividend per share 3 thebe 19 thebe Dividend payment date 2 October 2009 26 September 2008 Conversion price for the allotment of scrip shares P 4.25 P 12.50 Number of scrip shares alloted 240 061 536 135 PAGE | 104
  • 100. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 17. INTEREST BEARING LOANS AND BORROWINGS Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Long term portion: Shareholders’ dividends – see below – 915 017 – – – 915 017 – – Current portion: Office equipment lease – 15 806 – – Shareholders’ dividends – see below 2 173 893 – – – 2 173 893 15 806 – – Bank overdraft – 69 – – Shareholders’ dividends: In terms of a Share Loan Agreement with the Group’s South African empowerment partner, Zingwenya Holdings Limited (Pty) Limited (“Zingwenya”), dividends declared by South African Group companies between, 1 October 2007 and 31 October 2010 accrued to Zingwenya, but are withheld pending settlement of the BEE transaction. The BEE transaction is more fully described in Note 22. Bank overdraft: No Group companies were in overdraft at the reporting date but limited utilisation of overdraft facilities did occur during the year. Bank overdrafts are unsecured and attract interest at rates varying between 10,00% and 13,00% (2009: 13,00% and 15,50%). Bank overdraft is separately disclosed in the Statement of Financial Position. 18. TRADE AND OTHER PAYABLES Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Trade payables 9 820 245 12 832 196 – – Amounts payable in respect of broking activities 65 888 277 50 312 114 – – Other payables 3 385 836 1 634 981 1 149 337 298 221 Accruals 11 360 169 7 205 425 1 406 184 3 421 238 Related party payables (Note 12) 49 034 907 400 – – 90 503 561 72 892 116 2 555 521 3 719 459 Trade payables are non-interest bearing and are normally settled on 30 to 60 day terms. Amounts payable in respect of broking activities are non-interest bearing and are settled within five days of the transaction date. Other payables are non-interest bearing and have average terms of between 30 and 60 days. PAGE | 105
  • 101. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 19. PROVISIONS Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Balance – beginning of year 1 722 387 1 719 114 – – Revision of estimate following settlement by a co-defendant (1 410 092) – – – Exchange rate adjustment 157 736 3 273 – – Balance – end of year 470 031 1 722 387 – – The above represents provisions to cover potential claims arising from a civil case against Imara SP Reid (Pty) Limited, where it is a defendant relating to the operation of its former branch in Nelspruit. 20. FUNDS UNDER MANAGEMENT Year ended 30 April Group Group 2010 2009 Pula Pula Funds under management – Group companies 2 056 188 564 1 296 249 203 Funds under management – associate companies 711 804 862 597 567 687 2 767 993 426 1 893 816 890 The Group provides asset management and unit trust services to pension funds, trusts, institutions, companies and individuals, whereby it holds, places and manages funds on behalf of clients. The Group receives management fees for providing these services. Funds under management are not assets of the Group and are not recognised in the balance sheet. The Group is not exposed to any credit risk relating to funds under management. 21. COMMITMENTS AND CONTINGENCIES Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Hire purchase commitments: Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows: Within one year – 17 211 – – After one year but not more than five years – – – – – 17 211 – – Less: Future finance charges – (1 405) – – Present value of hire purchase liabilities – 15 806 – – PAGE | 106
  • 102. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 21 COMMITMENTS AND CONTINGENCIES (continued) Operating lease commitments: Operating leases – Company as lessee: The Group has entered into commercial lease agreements in relation to office premises in Botswana and South Africa. The Botswana lease, in respect of property in Gaborone, has a remaining lease term of 33 months and expires on 31 January 2013. The lease has an option to renew for a further 36 months term. The South African lease, in respect of premises in Johannesburg, has a remaining lease term of 34 months with an option to renew for a further 60 months term. Future minimum rentals payable under non-cancellable operating leases are as follows: Year ended 30 April Group Group Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Within one year 2 025 623 1 762 700 284 544 147 015 After one year but not more than five years 1 942 518 3 273 657 300 – 3 968 141 1 765 973 941 844 147 015 Operating leases – Company as lessor: The Group has entered into commercial property sub-lease agreements with subsidiary companies, in relation to the rental of office space in both Botswana and South Africa. These non-cancellable leases are on terms similar to the head lease agreement, and have remaining terms of 9 months in relation to Botswana and 34 months in relation to South Africa. The lease agreements include a clause allowing an upward revision of the rental charge on an annual basis. No disclosure has been made in respect of the financial impact of these sub-lease agreements, as on a Group consolidated basis the financial amounts are eliminated. Capital commitments: At 30 April 2010 the Group has the following capital commitments: Pula Imara Securities Angola SVM Limitada – see note below 1 713 000 Imara Securities Angola SVM Limitada: Imara Securities Angola SVM Limitada is an Angolan registered company in the process of formation. Registration formalities can only be concluded once a stockbroking licence for the new entity has been issued. The licence application is currently pending with the Angolan Authorities. In terms of a Shareholders Agreement, Imara Holdings Limited has the right to subscribe for 50% of the issued share capital of the company upon formation. The minimum capital requirement for a securities company in Angola is USD 500 000. The capital commitment reflected above represents Imara’s 50% share of this capitalisation. Equipment: Capital expenditure of P 668 300 authorised but not yet committed for the year ending 30 April 2011. PAGE | 107
  • 103. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 22. SHARE-BASED PAYMENTS Share-based payment plan: The Share Option Scheme introduced by the Company in its 2005 financial year is defined as an “equity settled scheme”. Under the scheme share options are granted to directors and employees with more than 12 months service. In terms of the scheme, up to 10% of the issued share capital of the Company at any one time is available to the Directors to grant share options. Minor modifications were made to the Scheme in 2006 in order to ensure compliance with the requirements of the Botswana Stock Exchange, ahead of the Company’s listing. The exercise price of the options is equal to the market price of the shares on the date of grant. The exercise period for each option is five years. One third of the options granted vest in each financial year, provided that the grantee is still in the employ of the Company, and performance criteria are not taken into account. The full price of any option granted, must be settled in cash before shares are allotted. The holders of share option grants, as at 2 August 2007, were eligible for the 10 for 1 share split implemented by the Company. During the year, the following options were granted: 30 April 2010 Expiry Number Option price Grant date date of options Pula 31 July 2009 1 August 2014 800 000 4.05 30 April 2009 Expiry Number Option price Grant date date of options Pula 1 August 2008 31 July 2013 300 000 12.50 The range of exercise prices for options outstanding at the end of the year was P 0.4879 to P 12.50. (2009: P 0.4364 to P 12.50). The expense recognised during the year in respect of services received and the apportionment of this cost to operating companies within the Group is as follows: 2010 2009 Pula Pula Imara Holdings Limited 378 012 205 068 Imara Asset Management South Africa (Pty) Limited 173 201 109 593 Imara Asset Management Limited – BVI 237 763 139 014 Imara Botswana Limited 179 185 – Imara Capital South Africa Limited 74 229 67 023 Imara Corporate Finance South Africa (Pty) Limited – 42 667 Imara SP Reid (Pty) Limited 419 781 305 709 Imara Africa Securities (Pty) Limited 82 923 53 912 1 545 094 922 986 PAGE | 108
  • 104. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 22. SHARE-BASED PAYMENTS (continued) Share-based payment plan The following table illustrates the number and weighted average exercise prices (“WAEP”), of and movements in, share options granted since inception of the option scheme: 2010 2010 2009 2009 Number WAEP Number WAEP Outstanding – beginning of year 1 902 590 1.68034 2 197 010 0.94260 Granted during the year 800 000 4.0500 300 000 12.50000 Forfeited during the year (5 000) 12.5000 – – Exercised during the year (857 934) 0.88356 (594 420) 1.43796 Outstanding and exercisable – end of the year 1 839 656 2.02502 1 902 590 1.68034 The following table lists the inputs to the binomial valuation model used for the year: 2010 2009 Dividend yield % 1,42 0,75 Expected volatility % 41,26 40,99 Risk free interest rate % 10,05 11,42 Weighted average share price – exercisable options Pula 4,39577 2,81201 Expected volatility is a measure of the expected price fluctuations of the underlying share. As the Imara share was not publicly quoted at certain of the grant dates, and has only been listed since 4 October 2006, reliable historical trading data relating to the share is not available. Volatility has therefore been determined by reference to listed companies, which could be regarded as proxies for Imara Holdings Limited. Expected volatility reflects the assumption that historical volatility is indicative of future trends, which may not necessarily be the actual outcome. Black Economic Empowerment share-based payment Imara Asset Management South Africa (Pty) Limited (“Imara Asset Management”), Imara Corporate Finance South Africa (Pty) Limited (“Imara Corporate Finance”), and Imara SP Reid (Pty) Limited (“Imara SP Reid”), each entered into separate share loan agreements with Zingwenya Holdings (Pty) Limited (“Zingwenya”), on 1 October 2007, in terms of which each of the subsidiaries loaned shares to Zingwenya as follows: Value of Value of Number of shares loaned to Zingwenya share loan share loan Rand Pula equivalent Imara Asset Management: 38 ordinary shares in Imara Corporate Finance 8 500 000 7 306 234 1 250 ordinary shares in Imara SP Reid 8 500 000 7 306 234 17 000 000 14 612 468 Imara Corporate Finance: 38 ordinary shares in Imara Asset Management 8 500 000 7 306 234 1 250 ordinary shares in Imara SP Reid 8 500 000 7 306 234 17 000 000 14 612 468 Imara SP Reid: 38 ordinary shares in Imara Asset Management 8 500 000 7 306 234 38 ordinary shares in Imara Corporate Finance 8 500 000 7 306 234 17 000 000 14 612 468 PAGE | 109
  • 105. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 22. SHARE-BASED PAYMENTS (continued) Black Economic Empowerment share-based payment (continued) The share loan agreements resulted in a transfer of the shares loaned to Zingwenya, such that Zingwenya is entitled to 20% of the voting rights and dividends declared by each subsidiary between 1 October 2007 and 31 October 2010. Other salient terms of the share loan agreement are summarised below: (a) Each of the loans above accrues interest at RSA R 153 Bond yield to maturity plus 2% up to 31 August 2009 and the RSA R 154 bond yield to maturity plus 2%, from 1 September 2009 onwards; (b) Dividends will accrue to Zingwenya and will be withheld by the subsidiaries until settlement; (c) The share loans can be settled at any time between 1 October 2007 and 31 October 2010: (i) in cash at a settlement price of R 17 million plus interest accrued, less dividends accrued to Zingwenya, less the deposit and interest accrued thereon; or (ii) by return of the shares loaned, in which event the dividends accrued to Zingwenya will be forfeited and the deposit, together with interest earned thereon, will be refunded to Zingwenya; and (d) the share loans have to be settled simultaneously and in the same manner (i.e. all by way of a cash settlement or all by way of a share settlement). Zingwenya paid good faith deposits of R 1.7 million to each of the subsidiaries in November 2007. The deposits were subsequently refunded to Zingwenya in December 2008 and replaced with personal guarantees issued by Zingwenya’s three shareholders. In addition to the share loan agreements described above, Imara Capital South Africa (Pty) Limited, (“Imara Capital”), entered into a Shareholders Agreement with Zingwenya, the salient terms of which are summarised below: (a) The subsidiaries will maintain a dividend cover of 2 times between 1 October 2007 and 31 October 2010, subject to liquidity and solvency requirements imposed by the South African Companies Act (Act 61 of 1973); (b) Zingwenya appointed three directors to the Imara Capital board and one director to each of the Imara Asset Management, Imara Corporate Finance and Imara SP Reid boards of directors; (c) Imara Capital will hold the loan shares, transferred by each of the subsidiaries to Zingwenya, in safe custody on behalf of Zingwenya and the subsidiaries, pending settlement. A a result of the transaction described above, the three subsidiaries will be able to illustrate 20% black empowerment ownership in terms of the Codes of Good Practise on Black Economic Empowerment. In terms of IFRS 2, the substance of the Agreement referred to above, is deemed to be that each of the subsidiaries wrote a call option to Zingwenya, in respect of the shares loaned. The share-based expense recognised on 1 October 2007 and the apportionment thereof between the subsidiaries was as follows: Rand Pula equivalent Imara Asset Management – – Imara Corporate Finance – – Imara SP Reid 1 739 500 1 494 770 1 739 500 1 494 770 The Pula equivalent of the share-based expense is based on the exchange rate ruling at 1 October 2007. The value of the options granted on Imara Asset Management (Pty) Limited and Imara Corporate Finance South Africa (Pty) Limited shares were determined to be nil on the grant date. PAGE | 110
  • 106. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 22. SHARE-BASED PAYMENTS (continued) Black Economic Empowerment share-based payment (continued) The total share-based payment expense recognised in the 2010 financial year amounted to P 140 038. (2009: Nil) No share-based payment expense was recognised in the 2010 0r 2009 financial years. The value of the options was determined in terms of a binomial option pricing model. The key inputs into the model were as follows: 2010 2009 Dividend cover 2 times 2 times Expected volatility 37,00% 46,00% Risk free rate of return 6,70% 7,46% 23. FINANCIAL INSTRUMENTS The tables below summaries the classification of the Group’s financial instruments: As at 30 April 2010 Available- Financial for-sale liabilities at financial amortised Non-financial Loan and AFVTPL* instruments cost instruments receivables TOTAL ASSETS: Available-for-sale financial instruments – 8 475 145 – – – 8 475 145 Listed traded securities 9 231 792 – – – – 9 231 792 Trade and other receivables – – – – 83 312 674 83 312 674 Cash and cash equivalents – – – – 123 400 183 123 400 183 9 231 792 8 475 145 – – 206 712 857 224 419 794 LIABILITIES: Interest bearing borrowings – long term – – – – – Interest bearing borrowings – short term – – 2 173 893 – – 2 173 893 Listed trading securities – sold short 6 537 578 – – – – 6 537 578 Trade and other payables – – 85 267 910 5 235 651 – 90 503 561 Provisions – – – 470 031 – 470 031 6 537 578 – 87 441 803 5 704 682 – 99 685 063 * Financial instruments classified as trading securities are carried at fair value through profit and loss. PAGE | 111
  • 107. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 23. FINANCIAL INSTRUMENTS (continued) As at 30 April 2009 Available- Financial for-sale liabilities at financial amortised Non-financial Loan and AFVTPL* instruments cost instruments receivables TOTAL ASSETS: Available-for-sale financial instruments – 5 832 270 – – – 5 832 270 Listed traded securities 3 953 387 – – – – 3 953 387 Trade and other receivables – – – – 89 559 076 89 559 076 Cash and cash equivalents – – – – 101 512 702 101 512 702 3 953 387 5 832 270 – – 191 071 778 200 857 435 LIABILITIES: Interest bearing borrowings – long term – – 915 017 – – 915 017 Interest bearing borrowings – short term – – 15 806 – – 15 806 Listed trading securities – sold short 140 624 – – – – 140 624 Trade and other payables – – 65 686 691 7 205 425 – 72 892 116 Provisions – – 1 722 387 – 1 722 387 Bank overdraft – – 69 – – 69 140 624 – 66 617 583 8 927 812 – 75 686 019 FINANCIAL INSTRUMENTS The tables below summaries the classification of the Company’s financial instruments: As at 30 April 2010 Available- Financial for-sale liabilities at financial amortised Non-financial Loan and instruments cost instruments receivables TOTAL ASSETS: Available-for-sale financial instruments 1 139 667 – – – 1 139 667 Accounts receivable – Group companies – – – 35 986 788 35 986 788 Trade and other receivables – – – 1 658 370 1 658 370 Cash and cash equivalents – – – 35 104 173 35 104 173 1 139 667 – – 72 749 331 73 888 998 LIABILITIES: Interest bearing borrowings – long term – 19 859 884 – 19 859 884 Trade and other payables – 821 822 1 733 699 – 2 555 521 – 20 681 706 1 733 699 – 22 415 405 PAGE | 112
  • 108. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 23. FINANCIAL INSTRUMENTS (continued) As at 30 April 2009 Available- Financial for-sale liabilities at financial amortised Non-financial Loan and instruments cost instruments receivables TOTAL ASSETS: Available-for-sale financial instruments 1 031 592 – – – 1 031 592 Accounts receivable – Group companies – – – 33 283 487 33 283 487 Trade and other receivables – – – 3 394 277 3 394 277 Cash and cash equivalents – – – 49 157 365 49 157 365 1 031 592 – 20 957 293 85 835 129 107 824 014 LIABILITIES: Interest bearing borrowings – long term – 61 437 596 – – 61 437 596 Trade and other payables – 298 221 3 421 238 – 3 719 459 – 61 735 817 3 421 238 – 65 157 055 The table below summaries by class of financial instruments, the net gains and losses, relating to these instruments: Net gains and losses Group: As at 30 April 2010 Interest Interest Fair value Impairment received paid movements losses Total Available-for-sale-financial assets – – (135 955) – (135 955) Loans and receivables 7 084 834 – – – 7 084 834 Financial assets held at fair value through profit and loss – – 2 538 572 – 2 538 572 Financial liabilities at amortised cost – (162 393) – – (162 393) Total 7 084 834 (162 393) 2 402 617 – 9 325 059 Group: As at 30 April 2009 Available-for-sale-financial assets 820 240 820 240 Loans and receivables 11 583 883 – – – 11 583 883 Financial assets held at fair value through profit and loss – – 3 184 745 – 3 184 745 Financial liabilities at amortised cost – (758 456) – – (758 456) Total 11 583 883 (758 456) 4 004 985 – 14 830 412 Company: As at 30 April 2010 Loans and receivables 4 888 935 – – – 4 888 935 Financial liabilities at amortised cost – (4 238 657) – – (4 238 657) 4 888 935 4 238 657 – – 650 278 Company: As at 30 April 2009 Loans and receivables 5 979 051 – – – 5 979 051 Financial liabilities at amortised cost – (6 746 256) – – (6 746 256) 5 979 051 (6 746 256) – – 767 205 PAGE | 113
  • 109. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 23. FINANCIAL INSTRUMENTS (continued) Financial risk management objectives and policies The Group’s principal financial instruments are detailed in the table above. The main purpose of these financial instruments is to finance the Group’s operations. The main risks arising from the Group’s financial instruments are credit risk, equity price risk, interest rate risk, foreign currency risk, liquidity risk and securities exchange trading risk. Credit risk The Group’s policy is to trade only with recognised and creditworthy third parties. All customers who wish to trade on credit terms are subject to credit vetting and “know your customer” procedures before any credit is extended. With respect to credit risk arising from the other financial assets of the Group, comprising cash and cash equivalents and trade and other receivables, the Group’s exposure to credit risk arises from default of the other party, with a maximum exposure equal to the carrying amount of these instruments. There are no significant concentrations of credit risk. Equity price risk Equity price risk is the risk that the fair values of equity instruments decrease as a result of changes in the levels of equity indices and the value of individual stocks. The equity price risk exposure arises from the Group’s listed trading securities portfolio. The sensitivities are calculated by multiplying the year end balances with the reasonable possible changes. The effect on equity as a result of a change in the fair value of listed trading securities due to a reasonably possible change in the Johannesburg Stock Exchange and Zimbabwe Stock Exchange All Share Index, with all other variables held constant, is as follows: Group Group 2010 2009 Change in Effect on Change in Effect on Available-for-sale financial assets: equity price equity value equity price equity value % Pula % Pula Market indices: Zimbabwe Stock Exchange 30% 300 200 30% 309 478 Johannesburg Stock Exchange 30% 2 141 536 30% 1 036 947 Market indices: Zimbabwe Stock Exchange (15%) (150 100) (15%) (154 739) Johannesburg Stock Exchange (15%) (1 070 768) (15%) (518 473) The effect on profit before tax as a result of a change in the fair value of listed trading securities due to a reasonably possible change in the Johannesburg Stock Exchange and the Zimbabwe Stock Exchange All Share Index, with all other variables held constant, is as follows: Company Company Assets and liabilities held at fair value 2010 2009 through profit and loss Change in Effect on Change in Effect on (Listed trading securities): equity price equity value equity price equity value % Pula % Pula Market indices: Zimbabwe Stock Exchange 30% – 30% – Johannesburg Stock Exchange 30% 808 264 30% 1 143 829 Market indices: Zimbabwe Stock Exchange (15%) – (15%) – Johannesburg Stock Exchange (15%) (404 132) (15%) (571 914) The effect of equity price risk on profit before tax of the Company is Nil (2009: Nil). PAGE | 114
  • 110. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 23. FINANCIAL INSTRUMENTS (continued) Interest rate risk The Group’s exposure to market risk for changes in interest rates, relate primarily to its bank and cash balances, collateral deposits against scrip lending and loans receivable on carry accounts. The Group’s policy is to manage interest receivable through a mix of demand and short term investment products using both fixed rate variable rate. The Company’s exposure to market risk for changes in interest rates, relate primarily to its bank and cash balances. The Group has only limited interest bearing borrowings. Its policy to manage interest payable is by using a mix of demand and short term borrowings, and also a mix of fixed and variable interest rates. Demand borrowings, such as bank overdrafts, are managed on a daily basis and are repaid whenever the Group has surplus operational cash resources. The parameters for managing the mix between demand and short term borrowings, and between fixed rate and variable rate debt have not been formalised into a Group policy. Interest rate risk table The following table demonstrates the sensitivity to a reasonably possible change in interest rates on the Group’s profit after tax (through the impact of variable rate call deposits), with all other variables held constant: Effect Effect Percentage on profit on profit increase before tax before tax 2010 2009 Group: 0,75% 518 959 452 578 1,25% 824 636 754 297 Company: 0,75% 3 961 66 192 1,25% 6 602 110 636 Foreign currency risk As a result of the investment in subsidiary company operations in British Virgin Islands, Mauritius, South Africa and the United Kingdom, and investments in associate companies in Malawi and Zimbabwe, the Group’s Balance Sheet can be affected by movements in the USD / Pula, Rand/Pula, USD / Rand and Sterling / Pula exchange rates. The balance sheet items which are most susceptible to foreign currency risk are “Cash and cash equivalents” and “Group company receivables and payables”. The Group also has transactional currency exposures which occur in the normal course of business. Such exposures arise from sales or purchase by an operating unit in currencies other than the unit’s measurement currency. Steps have been taken during the current financial year to formalise the management of foreign currency risk through the formation of a FX Committee and the issuance of a draft foreign currency risk management policy. The terms of reference of the FX Committee and the foreign currency risk management policy document are both subject to ongoing review and refinement. Cash and cash equivalents which are surplus to operational working capital requirements are actively managed and invested in a mix of foreign currencies comprising Pula, Rand, USD and Sterling. Intra-Group loans are settled as and when cash flows permit and are reviewed monthly. PAGE | 115
  • 111. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 23. FINANCIAL INSTRUMENTS (continued) Foreign currency risk (continued) The following table demonstrates the sensitivity to a reasonably possible change in the Rand, USD and Sterling exchange rates with the Pula, with all other variables held constant, on the Group’s profit before tax (due to changes in the fair value of monetary assets and liabilities) and the Group’s equity: Group: Rand USD Sterling Increase/ Increase/ Increase/ (decrease) Effect (decrease) Effect (decrease) Effect in exchange on profit in exchange on profit in exchange on profit rate before tax rate before tax rate before tax 2010: 2,5% – 7,0% 2 006 103 2,5% 174 366 (1,25%) – (3,0%) (859 758) (1,25%) (87 183) 2009: 2,5% – 7,0% 3 433 864 2,5% 23 892 (1,25%) – (3,0%) (1 471 656) (1,25%) (11 946) Company: Rand USD Sterling Increase/ Increase/ Increase/ (decrease) Effect (decrease) Effect (decrease) Effect in exchange on profit in exchange on profit in exchange on profit rate before tax rate before tax rate before tax 2010: 2,5% – 7,0% 1 954 756 2,5% 174 366 (1,25%) – (3,0%) (837 752) (1,25%) (87 183) 2009: 2,5% – 7,0% 3 369 895 2,5% 23 892 (1,25%) – (3,0%) (1 444 241) (1,25%) (11 946) The following table demonstrates the sensitivity to a reasonably possible change in the Rand and USD exchange rates with the Pula, with all other variables held constant, on the Group’s and Company equity. The exchange rate risk arises primarily from intra-Group loans that are treated as a part of the net investment in subsidiary and any exchange rate differences are taken to equity. Group: Rand USD Increase/ Increase/ (decrease) (decrease) in exchange Effect on Effect on in exchange Effect on Effect on rate equity equity rate equity equity 2010 2009 2010 2009 2,5% 281 888 386 218 2,5% 25 951 169 602 (1,25%) (140 944) (193 109) (1,25%) (11 122) (72 687) Liquidity risk The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts, bank loans, finance leases and hire purchase contracts. The table below summarises the maturity profile of the Group’s financial liabilities at 30 April 2010 and 2009, based on contractual un-discounted payments: PAGE | 116
  • 112. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 23. FINANCIAL INSTRUMENTS (continued) Liquidity risk (continued) Group: Less than 3 to 12 1 to 5 More than On demand 3 months months years 5 years Total Pula Pula Pula Pula Pula Pula At 30 April 2010: Interest bearing loans and borrowings – – – – – – Trade and other payables – 85 267 910 – – – 85 267 910 Current portion of loans and borrowings – – 2 173 893 – – 2 173 893 At 30 April 2009: Interest bearing loans and borrowings – – – 915 017 – 915 017 Trade and other payables – 65 686 691 – – – 65 686 691 Current portion of loans and borrowings – – 15 806 – – 15 806 Bank overdraft 69 – – – – 69 The table below summarises the maturity profile of the Company’s financial liabilities at 30 April 2009 and 2010, based on contractual un-discounted payments: Company: Less than 3 to 12 1 to 5 More than On demand 3 months months years 5 years Total Pula Pula Pula Pula Pula Pula At 30 April 2010: Accounts payable – Group – – – – 19 859 884 19 859 884 Trade and other payables – 821 822 – – – 821 822 At 30 April 2009: Accounts payable – Group – – 61 437 596 – – 61 437 596 Trade and other payables – 298 221 – – – 298 221 Accounts payable – Group Accounts payable – Group have no fixed repayment terms and are therefore excluded from the table above. Securities exchange trading risk Companies in the Group periodically short the market and are therefore exposed to short term fluctuations in the market prices of the securities shorted. Trading risk management is based on the principle that dealer and trading limits are in place, trading risks are properly identified, measured, reported and monitored on a daily basis. PAGE | 117
  • 113. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 23. FINANCIAL INSTRUMENTS (continued) Capital management The Group itself is not subject to any statutory or regulatory capital adequacy or liquidity prudential controls. The primary objective of the Group’s capital management is to ensure that it maintains prudent capital and gearing ratios in order to support its business and maximise shareholder value. The Securities Division is subject to capital adequacy and liquidity controls imposed by the regulators and Stock Exchanges in the jurisdictions where they are licenced to operate. Responsibility for compliance with the prescribed capital and liquidity ratios is delegated to the respective Risk and Compliance Committees, which meet on a regular basis. The individually regulated companies within the Group have complied with all externally imposed requirements throughout the year. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may capitalise intra-group loan accounts, adjust the dividend payments to shareholders, offer scrip in lieu of dividends, buy back its shares, issue new shares, adjust gearing ratios or negotiate borrowings. The Group’s capital management is measured monthly against a selected range of industry benchmarks. Capital comprises equity attributable to the shareholders of the parent company. No material changes were made to the objectives or policies relating to the management of capital during the year. Net fair values Financial instruments at fair value are either priced with reference to a quoted market price for that instrument or by using a valuation model. Where a valuation model is used, the methodology is to calculate the expected cash flows for the specific financial instrument and then discount these values back to a present value. The fair value of long term loans are estimated using discounted cash flows applying appropriate market rates. The carrying amounts of trade and other receivables, cash and cash equivalents, trade and other payables approximate their fair value due to the short term nature of the instruments. Set out in the table below is a comparison by category of carrying amounts and fair values of financial instruments for the Group. Carrying amount Fair value Group Group Group Group 2010 2009 2010 2009 Pula Pula Pula Pula Financial assets: Available-for-sale financial assets 8 475 145 5 832 270 8 475 145 5 832 270 Trade and other receivables 82 312 674 89 559 076 82 312 674 89 559 076 Listed trading securities 9 231 792 3 953 387 9 231 792 3 953 387 Cash and cash equivalents 123 400 183 101 512 702 123 400 183 101 512 702 Financial liabilities: Interest bearing loans and borrowings – 915 017 – 915 017 Trade and other payables 90 503 561 72 892 116 90 503 561 72 892 116 Listed trading securities sold short 2 173 893 140 624 2 173 893 140 624 Current portion of loans and other borrowings 6 537 578 15 806 6 537 578 15 806 PAGE | 118
  • 114. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 23. FINANCIAL INSTRUMENTS (continued) Net fair values (continued) Set out in the table below is a comparison by category of carrying amounts and fair values of financial instruments of the Company. Carrying amount Fair value Company Company Company Company 2010 2009 2010 2009 Pula Pula Pula Pula Financial assets: Available-for-sale-financial assets 1 139 667 1 031 592 1 139 667 1 031 592 Trade and other receivables 1 658 370 3 394 277 1 658 370 3 394 277 Cash and cash equivalents 35 104 173 49 157 365 35 104 173 49 157 365 Financial liabilities: Trade and other payables 2 555 521 3 719 459 2 555 521 3 719 459 Determination of fair value and fair values hierarchy: The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy: As at 30 April 2010 Level 1 Level 2 Group Company Group Company Financial assets: Available-for-sale financial assets 8 225 513 1 000 665 249 630 139 002 Listed trading securities 9 231 792 – – – Total financial assets 17 457 305 1 000 665 249 630 139 002 Financial liabilities: Listed trading securities – sold short 6 537 578 – – – Total financial liabilities 6 537 578 – – – As at 30 April 2009 Level 1 Level 2 Group Company Group Company Financial assets: Available-for-sale financial assets 5 832 270 1 031 592 – – Listed trading securities 3 953 387 – – – Total financial assets 9 785 657 1 031 592 – – Financial liabilities: Listed trading securities – sold short 140 624 – – – Total financial liabilities 140 624 – – – Level 2 financial assets include Botswana Stock Exchange Rights and Angola Stock Exchange Securities which are accounted for at amortised cost. PAGE | 119
  • 115. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 23. FINANCIAL INSTRUMENTS (continued) Net fair values (continued) Included in the Level 1 category are financial assets and liabilities that are measured in whole or in part by reference to published quotes in an active market. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Group does not have Level 2 and Level 3 financial assets. Level 2 financial assets are those financial assets whose fair value is based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3 financial assets are those financial assets whose fair value is based on inputs for the asset or liability that are not based on observable market data. 24. SUBORDINATION AGREEMENTS Imara Holdings Limited has signed agreements to subordinate for the benefit of the other creditors both past and present of a number of its subsidiaries, so much of their claims that would enable the claims of such creditors to be paid in full. The subordinations will remain in force and effect in respect of each subsidiary for which such an agreement has been given only so long as that subsidiary’s liabilities exceed its assets, fairly valued and shall lapse immediately upon that date. 25. EVENTS AFTER THE BALANCE SHEET DATE There have been no events, facts or circumstances of a material nature that have occurred subsequent to the reporting date which necessitate an adjustment to the disclosure in these Annual Financial Statements or the notes thereto. 26. FOREIGN CURRENCY TRANSLATION RATES 2010 2009 2008 2007 2006 Pula : US Dollar 6.948 7.414 6.502 6.313 5.625 Pula : British Sterling 10.600 10.910 12.885 12.608 10.267 Pula : South African Rand 0.940 0.861 0.860 0.904 0.929 Pula : Kenya Shilling 0.083 0.087 0.097 0.083 0.073 Pula : Malawi Kwacha 0.044 0.050 0.047 0.046 0.001 Pula : Mauritian Rupee 0.209 0.205 0.239 0.181 0.169 South African Rand : US Dollar 7.391 8.609 7.564 6.986 6.052 United States Dollar : Pula 0.144 0.135 0.154 0.158 0.178 British Sterling : Pula 0.094 0.092 0.078 0.079 0.097 South African Rand : Pula 1.064 1.161 1.163 1.107 1.076 Kenya Shilling : Pula 11.986 11.456 10.311 11.978 13.640 Malawi Kwacha : Pula 22.91 20.17 21.13 21.58 740 Mauritian Rupee : Pula 4.777 4.879 4.190 5.533 5.928 South African Rand : US Dollar 7.391 8.609 7.564 6.986 6.052 PAGE | 120
  • 116. SHAREHOLDER INFORMATION AT 30 APRIL 2010 Top 20 shareholders of Imara Holdings Limited Total Shares Percentage Rank Name Reference Country held interest 1. Etana Holdings Limited RET 01 Mauritius 5 744 635 9,88 2. First National Nominees (Pty) Limited South Africa 3 753 290 6,45 3. Imara S P Limited Mauritius 3 613 450 6,21 4. Fahris Limited Isle of Man 3 374 766 5,80 5. Capita Life & Pensions Regulated Services Limited H019471 United Kingdom 3 323 485 5,71 6. BTCS Nominees Limited RC 0008 United Kingdom 3 049 899 5,24 7. Barclays Botswana Nominees (Pty) Limited 068/009 Mauritius 2 973 244 5,11 8. Barclays Botswana Nominees (Pty) Limited 067/001 Mauritius 2 891 094 4,97 9. Elsingham Investments Limited Guernsey 2 330 498 4,01 10. Cannon International Limited Guernsey 2 070 000 3,56 11. Rhodora Limited Jersey 1 910 830 3,29 12. Barclays Botswana Nominees (Pty) Limited FAM3582376 Botswana 1 421 266 2,44 13. Idlewild Investments Limited Switzerland 1 399 826 2,41 14. Basfour 883 (Pty) Limited South Africa 1 366 140 2,35 15. Ostrer – Neil Mark United Kingdom 1 174 300 2,02 16. BTCS Nominees Limited RC0068 United Kingdom 1 061 869 1,83 17. Stock Market Investments Limited France 1 028 006 1,77 18. Juspoint Nominees (Pty) Limited South Africa 1 000 000 1,72 19. BTCS Nominees Limited RT0001 United Kingdom 945 276 1,63 20. Etana Holdings Limited RET 02 Mauritius 906 353 1,56 Total shares held by top 20 shareholders 45 338 227 77,96 Total number of shares issued 58 162 419 100,00 Number of Percentage Legal status of shareholders shareholders Local Foreign interest Individual Residents 175 1 000 801 – 1,72 Individual Residents 29 – 2 077 114 3,57 Companies 10 263 016 – 0,45 Companies 10 – 13 176 554 22,66 Nominees 12 2 500 033 – 4,30 Nominees 59 – 30 343 851 52,17 Investment Companies and Trusts 12 108 950 – 0,19 Investment Companies and Trusts 8 – 5 359 364 9,21 Pension Funds 1 3 323 485 5,71 Other Organisations 2 9 251 – 0,02 318 3 882 051 54 280 368 100,00 Percentage of total shareholding 6,67 93,33 100,00 PAGE | 121
  • 117. SHAREHOLDER INFORMATION (continued) Number of Total shares Percentage Shareholder spread shareholders held interest 0 – 100 000 197 301 431 0,52 100 001 – 250 000 87 5 621 996 9,67 250 001 – 500 000 9 3 422 511 5,88 500 001 – 750 000 4 2 669 213 4,59 750 001 – 1 000 000 4 3 735 246 6,42 1 000 001 – 2 000 000 7 9 362 237 16,10 2 000 001 – 3 000 000 4 10 190 260 17,52 3 000 001 – 5 000 000 5 17 114 890 29,43 5 000 001 – 10 000 000 1 5 744 635 9,87 318 58 162 419 100,00 Director, employee and public shareholder analysis Total shares Number of Percentage held shareholders interest Directors of the Company and its subsidiaries 22 516 980 25 38,71 Employees of the Company and its subsidiaries 5 200 392 18 8,94 Public shareholders 30 445 047 275 52,35 Total 58 162 419 318 100,00 Geographical spread of shareholders Number of Number of Percentage shareholders shares held interest Australia 2 101 801 0,17 Botswana 211 3 882 051 6,67 Switzerland 3 1 567 002 2,69 Germany 1 5 000 0,01 France 2 1 040 091 1,79 Guernsey 3 4 400 498 7,57 Isle of Man 1 3 374 766 5,80 Jersey 1 1 910 830 3,29 Mauritius 26 18 915 854 32,52 United Kingdom 23 13 090 127 22,51 USA 11 1 372 962 2,36 South Africa 29 8 438 750 14,51 Zambia 1 34 188 0,06 Zimbabwe 4 28 499 0,05 318 58 162 419 100,00 PAGE | 122
  • 118. NOTICE OF ANNUAL GENERAL MEETING Notice is hereby given that the eighth Annual General Meeting of members of the Company will be held at the Grand Palm Hotel and Casino Resort, Gaborone, Botswana on Tuesday, 12 October 2010 at 1600 hours for the following purpose: 1. Approval of Minutes To approve the minutes of the previous Annual General Meeting of members held on 29 September 2009 at the Gaborone Sun Hotel, Gaborone, Botswana. SPECIAL BUSINESS 2. Termination of the Existing Share Option Scheme Special resolution 1: To approve the termination of the existing Imara Holdings Limited Share Option Scheme, originally implemented on 18 March 2004, which in terms of Rule 12, “..... expires when all the shares set aside for the Scheme have been allotted and paid for, or 10 (ten) years from the date upon which the Scheme is approved by the Company in General Meeting, whichever occurs sooner.” The existing Share Option Scheme is nearing the end of its life cycle and going forward will no longer serve its intended purpose. It is therefore proposed that as a pre-condition for the implementation of a new Share Option Scheme, that the existing Share Option Scheme is terminated and that the remaining shares set aside under this scheme be forfeited and cancelled. 3. Approval of a New Share Option Scheme Special resolution 2: To consider and if deemed appropriate, approve the implementation of a new Share Option Scheme for the Company. A Share Option Scheme is seen as a vital component of the overall remuneration packages for personnel of a listed entity. Such schemes allow companies to attract and retain key personnel, and to this end, it is recommended that a new scheme be introduced to replace the current scheme which has been terminated. 4. Adoption of Rules for the New Share Option Scheme Special resolution 3: Subject to the approval of Special Resolution 2 above, to consider and if deemed fit, approve the adoption of rules for the new Share Option Scheme. A copy of the rules for the new share option scheme, are available for perusal at the registered offices of the Company: Union Provident Trust, First Floor, Time Square, Plot 134, Independence Avenue, Gaborone. Botswana. ORDINARY BUSINESS 5. Approval of Annual Financial Statements Ordinary resolution 1: To receive, consider and if deemed fit, approve and adopt the audited Annual Financial Statements for the year ended 30 April 2010, together with the Report of the Directors and Independent Auditors thereon. 6. Election of Directors Ordinary resolution 2: To elect Directors in place of those retiring in accordance with the provisions of the Company Constitution. PAGE | 123
  • 119. NOTICE OF ANNUAL GENERAL MEETING (continued) 2.1 Mr AR Fleming retires as a director in terms of Clause 20 of the Constitution. Being available and eligible, he offers himself for re-election. 2.2 Mr DE Stone retires as a director in terms of Clause 20 of the Constitution. Being available and eligible, he offers himself for re-election. 2.3 Mr MJS Tunmer retires as a director in terms of Clause 20 of the Constitution. Being available and eligible, he offers himself for re-election. Extract from the Constitution of Imara Holdings Limited – Clause 20 – Election of Directors: No resolution to appoint or elect a director shall be put to the holders of Securities unless: (a) the resolution is for the appointment of one Director; or (b) the resolution is a single resolution for the appointment of two or more Directors, and a separate resolution that it be so voted on, has first been approved without a vote being cast against it. 7. Directors’ Remuneration - Non-Executive Ordinary resolution 3: To approve the remuneration of Non-Executive Directors for the year ended 30 April 2010. Non-Executive Directors’ remuneration for the year ended 30 April 2010 amounted to P 1 613 260, (2009: P 1 552 704), and is fully detailed in Note 12 to the Annual Financial Statements. 8. Directors’ Remuneration - Executive Ordinary resolution 4: To approve the remuneration of Executive Directors for the year ended 30 April 2010. Executive Directors’ remuneration for the year ended 30 April 2010 amounted to P 9 613 285, (2009: P 20 767 887), and is fully detailed in Note 12 to the Annual Financial Statements. 9. Auditor’s Remuneration Ordinary resolution 5: To approve the remuneration of the Independent Auditors for the year ended 30 April 2010. Auditors remuneration for the year ended 30 April 2010 amounted to P 2 108 418, (2009: P 1 937 434). The components of the auditor’s remuneration are detailed in Note 2 to the Annual Financial Statements. The current year remuneration includes an amount of P 53 813 which relates to the prior year. 10. Appointment of Independent Auditors Ordinary resolution 6: To appoint Independent Auditors for the ensuing year, ending 30 April 2011. Messrs Ernst & Young have indicated a willingness to continue as Independent Auditors to the Company for the ensuing year. 11. Other Business To transact such other business as may be transacted at an Annual General Meeting. By Order of the Board DE STONE COMPANY SECRETARY 18 August 2010 PAGE | 124
  • 120. FORM OF PROXY For use at the eighth Annual General Meeting of members of the Company to be held at the Grand Palm Hotel and Casino Resort, Gaborone, Botswana on Tuesday, 12 October 2010 at 1600 hours for the following purpose: PLEASE READ THE NOTES HERETO BEFORE COMPLETING THIS FORM I/We (NAME(S) IN BLOCK LETTERS) being the holder of (Number of) ordinary shares in Imara Holdings Limited, do hereby appoint (see Note 2) 1. or failing him/her; 2. or failing him/her; 3. the Chairman of the Annual General Meeting as my/our proxy to act for me/us at the Annual General Meeting of the Company, to be held at Grand Palm Hotel and Casino Resort, Gaborone, Botswana on Tuesday, 12 October 2010 at 1600 hours, or any adjournment thereof, for the purpose of considering and, if deemed fit, passing, with or without modification, the resolutions set out in the Notice convening the meeting and to be proposed thereat, and to vote for and/or against the resolutions and/or abstain from voting in respect of the ordinary shares registered in my/our name/s (in accordance with the following instructions): For Against Abstain Special Resolution 1 Special Resolution 2 Special Resolution 3 Ordinary Resolution 1 Ordinary Resolution 2.1 Ordinary Resolution 2.2 Ordinary Resolution 2.3 Ordinary Resolution 3 Ordinary Resolution 4 Ordinary Resolution 5 Ordinary Resolution 6 Signed at on 2010 Signature Assisted by (if applicable) Assisted by (if applicable)
  • 121. FORM OF PROXY (continued) NOTES: 1. Each ordinary shareholder is entitled to appoint one or more proxies (who need not be a member of the Company), to attend, speak and vote in place of that ordinary shareholder at the Annual General Meeting. 2. A shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the space provided, with or without deleting “the Chairman of the Annual General Meeting”, but such deletion must be initialled by the shareholder. The person who is to be present at the meeting and whose name appears first on the form of proxy and whose name has not been deleted shall be entitled to act as proxy to the exclusion of those whose names follow. 3. If the shareholder completing the proxy does not indicate how the proxy is to vote on any resolution, the proxy shall be deemed authorised and be entitled to vote on such resolution as he / she deem fit. 4. The authority of a person signing proxy under a power of attorney of a Company must be attached to the proxy unless that authority has previously been recorded by the Company Secretary or is waived by the Chairman of the Annual General Meeting. 5. Forms of proxy must be lodged at or posted to be received at the offices of the company, Imara Holdings Limited, Block A, Unit 3, Plot 117, Millennium Office Park, Kgale Hill, Gaborone, Private Bag 00186, Gaborone not later than 48 hours before the start of the meeting. 6. The completion and lodging of this form of proxy shall not preclude the relevant shareholder from attending the Annual General Meeting and speaking and voting in person thereat, to the exclusion of any proxy form which is completed and / or received other than in accordance with theses instructions, provided that he is satisfied as to the manner in which a shareholder wishes to vote. 7. Any alteration or correction to this form must be initialled by the signatory / signatories.

×