Imara Holdings Limited




 Group Annual Report
Year ended 30 April 2007
Imara Holdings Limited
                                           Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                      Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                        Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                                                     Group Annual Report – Year end...
Imara Holdings Limited
                                                     Group Annual Report – Year ended 30 April 2007...
Imara Holdings Limited
                                              Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                               Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                             Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                              Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                                Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                                Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                              Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                              Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                                Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                                Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                               Group Annual Report – Year ended 30 April 2007



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Imara Holdings Limited
                                             Group Annual Report – Year ended 30 April 2007



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Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
Imara Group 2007 annual report
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Imara Group 2007 annual report

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Imara Holdings annual report in respect of the year ended 30 April 2007

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Imara Group 2007 annual report

  1. 1. Imara Holdings Limited Group Annual Report Year ended 30 April 2007
  2. 2. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 CONTENTS Page Group Profile 2 Directorate and Group Management 3 Group Organisational Structure 4 Four-Year Financial Highlights 5 Chairman’s Statement 6–7 Chief Executive Officer’s Review of Operations 8 – 10 Corporate Governance 11 – 13 Report of the Directors 14 – 17 Independent Auditor’s Report 18 – 19 Consolidated Income Statement 20 Consolidated Balance Sheet 21 Consolidated Cash Flow Statement 22 – 23 Consolidated Statement of Changes in Equity 24 – 25 Notes to the Consolidated Financial Statements 26 – 64 Notice of Annual General Meeting 65 – 68 Shareholders’ Diary 69 Notes 70 Form of Proxy Attached 1
  3. 3. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 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 Ground Floor, BIC House Main Mall, Gaborone PO 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: Close Bank Guernsey Limited Barclays Bank of Botswana First National Bank Limited (Botswana) First National Bank Limited (South Africa) Reporting currency: Botswana Pula (BWP) Transfer secretaries: Corpserve Botswana First Floor, Unit 22, Plot 126 Millennium Office Park, Gaborone Telephone: +267 393 2244 Facsimile: +267 393 2243 email: corpserve@info.bw 2
  4. 4. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 DIRECTORATE AND MANAGEMENT DIRECTORATE Imara Holdings Limited: P J S Gray Non-executive Chairman British M J S Tunmer Chief Executive Officer South African P J Corrish Executive British Resigned 27 July 2006 A R Fleming Non-executive British M S Golding Executive South African Resigned 19 July 2007 J R Legat Executive British A C H Mackeurtan Executive South African R R Matthews Non-executive British M Mothibatsela Executive Botswana S M Ndoro Non-executive Zimbabwe Appointed 19 March 2007 D E Stone Executive South African Appointed 27 July 2006 Company Secretary: P J Corrish Resigned 31 May 2006 D E Stone Appointed 1 June 2006 Botswana Stock Exchange Compliance Officer: D E Stone Audit Committee: R R Matthews Chairman Non-executive P J S Gray Non-executive S M Ndoro Non-executive D E Stone Executive Remuneration Committee: P J S Gray Chairman Non-executive A C H Mackeurtan Executive R R Matthews Non-executive S M Ndoro Non-executive M J S Tunmer Executive Nominations Committee: P J S Gray Chairman Non-executive A C H Mackeurtan Executive M J S Tunmer Executive MANAGEMENT M J S Tunmer Chief Executive Officer D E Stone Chief Financial Officer J R Legat Head: Asset Management M S Golding Head: Corporate Finance To 18 July 2007 R Macleod Head: Corporate Finance From 19 July 2007 M J S Tunmer Head: Stockbroking A C H Mackeurtan Country Head: South Africa and MD Stockbroking South Africa M Mothibatsela Country Head: Botswana and MD Asset Management Botswana 3
  5. 5. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 GROUP ORGANISATIONAL STRUCTURE Imara Holdings Limited Group Holding Company Incorporated in Botswana Registered International Financial Services Company (Offshore Investment Status) 100% 100% 100% 100% 100% 100% 69.3% 100% Africa Imara Asset Imara Asset Imara Capital Imara Imara Capital Investments Management Management Limited Trademarks Botswana Limited Limited UK Limited Limited (Pty) Ltd C F Africa Non Trading Limited Companies Management 100% Contracts 25% 47.2% Imara Capital Stockbrokers Imara Imara Capital Imara South Africa Malawi Securities Zimbabwe Holdings Imara Global 100% Namibia (Pty) (Pty) Ltd Limited Botswana (Pvt) Limited Fund Limited (Pty) Limited 100% 100% Imara Imara African Imara Imara Imara Capital Corporate Opportunities Botswana Edwards Limited Finance South 100% Fund Limited Securities Zambia Africa (Pty) Ltd (Pvt) Limited Imara S P Imara Asset Imara Asset Reid (Pty) Ltd Management Management 51% Imara Kenya Imara Africa (Pty) Limited (Pvt) Limited (Stockbroking) Limited Series Imara Asset LEGEND: Imara Management Corporate South Africa Finance (Pvt) (Pty) Ltd Limited Botswana Kenya South Africa Namibia British Virgin Islands United Kingdom Zimbabwe Zambia Malawi 4
  6. 6. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 FOUR-YEAR FINANCIAL HIGHLIGHTS Years ended 30 April 2007 2006 2005 2004 Revenue P000’s 66 124 41 393 28 501 11 690 Revenue growth % 60 45 144 196 EBITDA P000’s 60 629 13 280 2 099 (6 502) Profit before taxation P000’s 59 528 12 173 1 202 (7 114) Profit after taxation P000’s 48 681 9 457 47 (5 704) Attributable earnings P000’s 49 386 9 816 47 (5 704) Attributable earnings growth % 403.12 Over 200 100,83 (365,69) Weighted average shares in issue Number 5 170 043 4 661 328 4 178 860 286 868 Diluted weighted average shares in issues Number 5 367 872 5 356 864 5 073 140 286 868 Shareholders’ equity P000’s 93 979 55 983 21 537 16 979 Total assets P000’s 172 683 106 330 37 829 28 952 Earnings per share – basic Pula 9,56 2,11 0,011 (19,89) Earnings per share – diluted Pula 9,21 1,86 0,042 (19,89) Free cash flow per share Pula 1,54 2,88 (11,55) 29,00 Dividend per share – ordinary (post split)* thebe 17,00 0,60 – – Dividend per share – special (post split)* thebe 10,00 – – – Net asset value per share Pula 18,18 12,01 51,54 59,19 Return on average assets % 34,89 13,12 0,15 (33,40) Return on equity % 51,80 17,53 0,22 (33.60) Quoted share price at year-end Pula 30,00 9,00 – – Price earnings ratio Times 3,14 4,27 – – Dividend yield – ordinary dividend % 5,60 6,67 – – * At an Extraordinary General Meeting of the company on 2 August 2007, shareholders approved a sub-division of the share capital of the company on a 10 for 1 basis. Comparatives for the prior year have been adjusted accordingly. 5
  7. 7. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 CHAIRMAN’S STATEMENT REVIEW Imara Holdings continues to roll out its Pan African strategy and build up its underlying businesses while enjoying a record year in 2006-2007, admittedly partially inflated by a non-recurring exceptional profit on disposal of available-for-sale-financial assets. Pre-tax profits rose from BWP12.2 million to BWP59.5 million while basic earnings per share rose from BWP2.11 to BWP9.56 Consequently, the group has announced an ordinary dividend of thebe 17 per share (thebe 0.6 last year) and a special dividend of thebe 10 per share reflecting the non-recurring exceptional profit. (All figures post the 10 for 1 split). The divisional contribution was as follows: Pre-tax profit/(loss) Pre-tax profit/(loss) 2006/2007 2005/2006 BWP BWP Stock broking 46 164 466 9 732 633 Asset Management 11 632 364 (697 735) Corporate finance 2 049 605 2 040 591 Other (318 846) 1 098 067 Buoyant market and trading conditions fuelled by a global liquidity boom and strong commodity prices contributed to a broad based advance in all our stock broking activities, especially on our futures desk which enjoyed a record year. Our asset management division is steadily building up to becoming a major contributor to group profits while our corporate finance division continues to secure high profile mandates against intense competition dominated by the majors. This year’s record profit is a useful reminder of how short term developments can swamp and disguise long term considerations and how we are currently dependent on buoyant market and trading conditions. It is also a useful reminder for management to remain vigilant, avoid complacency and not to be fooled when assessing our progress by failing to distinguish between “market effect” and “management effect” (using an investment management analogy, confusing beta with alpha). With this in mind, a realistic analysis nevertheless reveals that we have made considerable progress in developing and broadening our financial services business as well as laying the foundations for building annuity income. There are several pointers in this regard – over 50% of our stock broking revenue comes from business segments and clients which hardly existed two years ago. It is now simply a matter of time before our rapidly growing asset management business, aided by the introduction of innovative new products, catches up with our core stockbroking profits, thereby enhancing the quality and stability of the group’s earnings. Our Corporate Finance business, operating in a highly competitive arena, has secured some high profile Pan African mandates such as the privatisation of African Explosive Zambia Limited, and it’s subsequent listing on the Lusaka Stock Exchange. Furthermore, our newly created Imara Africa Securities subsidiary should increase our Pan African footprint and diversify our stockbroking revenues from their current domination by South Africa. It must be said this progress has not been easy. Those used to the frenetic decision oriented pace of Manhattan and Hong Kong can find Africa frustrating, where acquisitions and key business agreements can be painfully slow to close, giving rise to professional veterans reminding the new would-be corporate tigers of the old adage “Remember this is Africa”. Our bold office move, integrating all our South African activities under one roof, was a salutary example – unforeseen 6
  8. 8. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 CHAIRMAN’S STATEMENT (continued) difficulties in acquiring key telecommunication hardware and services delayed our move at the last moment by some six weeks, leaving our telecommunications dependent businesses in limbo for what seemed a lifetime and driving our professional project management team demented. Having said all this and looking at the broad picture, it is somewhat gratifying to note, with all the usual caveats, that following our successful listing on the Venture Capital Board of the Botswana Stock Exchange in October 2006 at BWP12, our share price rose substantially to close around BWP70 at the end of July 2007. OUTLOOK In the final analysis, all businesses are dependent on certain key economic factors – mining companies on commodity prices, banks on interest rates and so on. In our case, we are dependent on financial markets which happen to be more volatile and by definition therefore more risky. It is therefore our job to ensure that stakeholders are more than adequately compensated for this risk by achieving above average returns on equity over a meaningful time period. In this context, I would like to thank our CEO, Mark Tunmer, my fellow Directors and indeed all the management and staff for being on track to achieve this medium term goal. However, the short term “core” profit outlook, excluding exceptionals, remains somewhat dependent on buoyant market conditions and after such a prolonged bull market, some respite or setback must be due. In this instance, our newly enhanced risk management systems and swift executive action should contain the fallout and it is hoped that our accelerating investment management income will act as a significant balancing and compensating item through any turbulence. However, returning to the longer term outlook, we remain confident in the group’s profit potential and in this context; I would simply reiterate three important factors which will have an important bearing on the group’s development. 1. The long-term economic and profit outlook for many African countries such as Zambia and Kenya has improved dramatically, outweighing any short-term considerations, whilst the explosive upside potential in Zimbabwe comes inexorably closer as the economic downturn continues. 2. In the meantime, most African stock markets, South Africa aside, are at early stages of their respective development, and remain undervalued by international standards, providing major business opportunities for your Pan-African group. 3. The group is growing organically from a small base where every strategic move forward, be it in expanding our geographic footprint or designing new investment products, can potentially have a significant impact on the bottom line. Admittedly our “first mover advantage” might be eroding as other financial groups jump on the new bandwagon called Africa – possibly the last frontier of emerging markets investment. Nevertheless, there are still vast business opportunities open to us and it is our mission to capitalise on them. P J S GRAY Chairman 31 August 2007 7
  9. 9. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS Group Review The Imara group produced record earnings in 2007, which were some 400% above those achieved in the previous year. Favourable market conditions provided a background for another record year for Imara SP Reid and a strong performance from the Corporate Finance division. The Asset Management division also registered dramatic growth with the Imara African Opportunities Fund being the major contributor. Imara SP Reid was the largest single contributor to group profit with record results being produced. Net profit in excess of BWP35 million was significantly ahead of budget and monthly average brokerage was well up. Derivatives continued to perform well contributing approximately 40% of profits while equity trading profits showed strong growth. Assets under administration grew by 73% to close the year at just under R9 billion. The institutional desk was relatively quiet but did participate recently in another successful private placing of Wits Gold shares The company’s web site continued to receive acceptance as a source of information for clients, staff and the media. Research is disseminated to more than 5 000 clients daily and online trading remained strong. Average new trial subscriptions average 10 per working day. Up until now the website has largely been used to disseminate research and provide deal execution, but henceforth will be upgraded and used to drive a fully fledged e-commerce strategy. Partnerships with independent research producers are also being sought as a vehicle to drive growth in the institutional broking market. Our Malawi associate, Stockbrokers Malawi Limited, had a record year on the back of a very strong market performance. They were sponsoring brokers to the IPO and listing of First Merchant Bank Limited and more recently to the very successful privatisation and listing of NBS Bank Limited. In Zimbabwe, Imara Edwards also had a strong year despite the difficulties inherent with dealing in that market. Progress continued on the establishment of Imara Africa Securities as a “One Stop Shop” broking service for Africa. Significant effort has been made in marketing with a very positive response from international investors. Broking agreements have been signed with in-country brokers, which so far include Botswana, Kenya, Malawi, Mauritius, Nigeria, Zambia and Zimbabwe. With the appointment of a Custodian complete, the company is now able to commence business. The Asset Management Division witnessed tremendous growth in funds under management, which, including our associate companies, exceeded US$350 million at the end of July. As a result revenues of the business as a whole grew considerably. The performance fee on the Imara Africa Opportunities Fund, which registered a 45% gain in the unit price during the year, transformed the finances of the division, and in effect more than paid back all the capital provided by Imara Holdings since inception. With the exception of Imara Asset Management Botswana, all divisions were profitable and cash flow positive. There were a number of divisional highlights in the year, which included the listing of the Imara African Opportunities Fund on the Irish Stock Exchange in October 2006 and the launch of the Imara Africa Series in March 2007. This is an umbrella fund with the first two sub funds launched being the Imara Nigeria Fund and the Imara Zimbabwe Fund. Imara Asset Management Zimbabwe was appointed a sub-adviser to the Zimbabwe Fund to leverage off their local expertise. The Imara Africa Opportunities Fund was granted “local asset status” in Botswana in November 2006, which 8
  10. 10. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS (continued) facilitates its purchase by domestic Botswana investors as a local asset. The Imara Global Fund was also registered in Botswana in April 2007 allowing for the marketing of the fund locally. The Imara Africa Opportunities Fund had a very strong year with its net asset value growing from US$12 million to close the year at US$70 million. At the end of July this had moved to US$120 million. On a disappointing note, despite the tremendous time and effort put into establishing Imara Asset Management Botswana as a Motswana owned and managed asset manager, the company was not appointed as one of the managers to the Botswana Public Officers Pension Fund in the recent tender. In South Africa there was significant growth over the year with funds under management rising to a level sufficient to sustain a profitable and cash flow positive business. New clients brought in by the team have been important contributors, as have the gains in the portfolios themselves. Since the year end a small acquisition in the form of a financial planning and advisory firm has been made. This will bring important new skills to the company as well as a new client base and a broader product offering The Corporate Advisory division again had an active year with twelve mandates being successfully completed in addition to various smaller sponsor mandates for sponsor clients. In South Africa these included the completion of the purchase of the Koornfontein Coal Mine on behalf of an empowerment led consortium and the disposal of Isegen (Pty) Limited, a South African food chemicals producer on behalf of Brait SA and other shareholders. In the region completed mandates comprised the privatisation and listing of African Explosives Zambia Limited on the Lusaka Stock Exchange, the privatisation of Kinyara Sugar in Uganda and the sale of Anglo American plc’s interest in Hippo Valley Sugar Estates Limited of Zimbabwe to Tongaat-Hullett Limited of South Africa. Our Zimbabwe associate worked on twenty-two mandates, which included a number of valuation mandates, general restructuring and two capital raisings for NMBZ Holdings and Pearl Properties. Subsequent to year end the privatisation and listing of NBS Bank, on the Malawi Stock Exchange was completed in June, while work is ongoing on various mandates in Botswana, Cote d`Ivoire, South Africa, Zambia and Zimbabwe. In Zimbabwe, Imara Capital Zimbabwe performed well in an environment where hyper-inflation and currency weakness are the dominant economic forces. As a result the Zimbabwe Stock Exchange is the only viable investment destination for local institutional and private investors. Imara Capital Zimbabwe is directly geared to the Zimbabwe Stock Exchange, and thus it provides a strong inflation and devaluation hedge. Skills retention remains the over riding challenge and management are actively seeking proactive measures to ensure ongoing depth and quality of skills. The current year has started very positively. The Imara group continued to look at various opportunities to grow the business and to increase its geographical spread. A strategic alliance was entered into with MacSharaf Securities and MacCapital in Dubai and it is hoped that this will result in work on a joint basis to service their Middle Eastern client base in Africa. Visits to Nigeria confirmed the view that in addition to Kenya and Zambia, Nigeria is a market with a great deal of opportunity. Efforts in these markets will continue. Imara Holdings was listed on the Venture Capital Market of the Botswana Stock Exchange in October 2006, which has assisted liquidity to some extent. In March it was necessary to publish a Trading Update, in terms of the Botswana Stock Exchange Rules, when it became obvious that 9
  11. 11. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS (continued) results for the year ended 30 April 2007 would be more than 20% ahead of the forecast at the time of listing in October 2006. The price on publication of that update was BWP 21 before moving rapidly to a level of BWP 70 at the end of July. With this significant increase in price, and in line with our stated objective of seeking a listing on the Main Board of the Botswana Stock Exchange, it was decided to initiate a 10 for 1 share split. This is expected to not only add to liquidity but also to bring the price down to a more affordable level for the “man in the street” to participate. It is anticipated that this will assist in the process of increasing the current shareholder base to the required minimum of 300 for a Main Board listing. The split was approved by shareholders in Extraordinary General Meeting on 2 August 2007 for shareholders registered in the books of the company on 3 August, with the new Imara shares trading ex the split on 13 August. Empowerment is a critical issue in South Africa and Imara continued to actively seek the right partner. Agreement, in principle, has been reached with a BEE consortium in terms of which a 20% stake in each of the South African companies will be acquired. In addition to this a further 5% equity stake in each of the South African companies will be set aside for a broad based empowerment Trust whose primary aim is to increase the number of BEE participants. The agreement is subject to shareholder approval and has been included as an agenda item for the Annual General Meeting of the company on 5 October 2007. Details of the proposed transaction are detailed on page 67. The move of our South African businesses, to a single building named Imara House, was finally completed in April 2007. Despite teething problems, this has been a success and the benefits of the three businesses being consolidated in one building are already being felt. Staff training is considered critical to the future success of Imara and in this regard it is intended to establish an Imara graduate training programme. In the meantime Imara SP Reid continues to assist with the training of analysts for the regional offices, while Imara Capital Zimbabwe has also initiated a programme. Outlook The record earnings in 2007 will be difficult to replicate this year. Despite this Imara is expected to produce acceptable earnings growth going forward but this will as always, be dependant on market conditions. In closing, I would like to thank my Chairman, Philip Gray, and the Board for their support and guidance during the year. Special mention must be made of the contribution made by Michael Golding as Head of the Corporate Finance division, who stood down from the Board in July 2007. I welcome Mike Ndoro who joined the board in March 2007 as a non- executive director. Finally, I would like to express my sincere gratitude to the staff of Imara who continue to contribute to the success of the group. M J S TUNMER Chief Executive Officer 31 August 2007 10
  12. 12. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 CORPORATE GOVERNANCE The Board of Imara Holdings Limited is committed to the principles of transparency, integrity and accountability in its stewardship of the group’s affairs. It recognises the significance and evolving nature of corporate governance and assesses the Group’s compliance with sound corporate governance practices on a regular basis, directly and through its Board Committees. The directors endorse the code of corporate practice and conduct contained in the second King Report. By supporting the code, Imara Holdings Limited demonstrates its commitment to the highest standards of integrity and ethical conduct in its dealings with stakeholders. Board of Directors The Board of directors is chaired by Philip Gray an independent, non-executive director and comprises nine directors, four of whom are non -executive. In appointing directors, emphasis is placed on achieving a balance of skills, experience and professional and industry knowledge necessary to meet the group’s strategic objectives. The selection and appointment of directors is a formal and transparent process, and a matter for the board as a whole, assisted by the Nominations Committee. The board composition is balanced so that no individual board member or small group of members has unfettered control over decision making. The Board is responsible to shareholders for setting the strategic direction of the company, for the monitoring of operational performance and management and for ensuring that succession planning is in place. The Board is also responsible for the integrity and quality of communications with stakeholders, regulators, shareholders and employees. In terms of the company’s Articles of Association, directors are appointed for three years. One third of the directors retire by rotation annually and if available, can offer themselves for re-election at the company’s Annual General Meeting. Non-executive directors are not required to hold shares in the company but the majority have independently elected to do so. The remuneration of non- executive directors is not directly linked to the performance of the company in line with sound governance policies to retain independence. Remuneration levels of non-executive directors are reviewed regularly and bench-marked against the Botswana financial services sector companies. All directors have direct access to the Company Secretary and to information on the group’s affairs, are entitled to make use of independent professional advisors, at company expense, when necessary to discharge specific tasks and duties and have access to the Chief Executive Officer and senior executives where required. The Board meets at least once a quarter to review the financial performance of the Group, its strategic direction and key policies. It approves budgets and reviews the overall effectiveness of systems of risk management and internal control. It also monitors the implementation of strategy and policy through a structured approach to reporting and consequent accountability of executive management. Board Committees The Board is assisted in the discharge of its duties and responsibilities by a number of board sub- committees, including audit, remuneration and nominations. These sub-committees are accountable to the main board and are chaired by non- executive directors. Terms of reference of the sub-committees have been agreed by the main board and minutes of sub-committee meetings are circulated and reported on at subsequent board meetings. Senior executives are invited to attend meetings of sub-committees where considered appropriate. 11
  13. 13. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 CORPORATE GOVERNANCE (continued) Audit and Risk Committee The Audit and Risk Committee is chaired by Roger Matthews, a non-executive director, and comprises four members, three of whom are non -executive. The committee has formal terms of reference, which set outs its responsibilities. The main responsibility of the committee is to assist the board in discharging its responsibilities under the Companies Act, for ensuring compliance with regulations imposed by regulators and supervisory authorities and for assessing, managing and monitoring risks. It also monitors financial controls and reporting, compliance with International Financial Reporting Standards, (IFRS), the effectiveness of the external auditors and evaluates risk management procedures in subsidiary companies and other internal systems of control. Meetings are held at least once a quarter and are attended by the external auditors, who have unrestricted access to the Chairman of the committee. Meetings are also attended by internal auditors, compliance officers and senior management, on an as required basis. The committee has considered and recorded the facts and assumptions on which it has concluded that the company and the group are going concerns and will continue as such in the year ahead. It has recommended that the board endorse a statement to this effect and that the financial statements, prepared on this basis, are approved and adopted. The current members of the audit committee are set out on page 3. Remuneration Committee The remuneration committee is chaired by Philip Gray, an independent non-executive director, and comprises five members, three of whom are non-executive directors. The Chief Executive Officer is a member of this committee. The remuneration committee is responsible for setting remuneration policies for the group. It aims to ensure that the financial rewards offered to employees are sufficient to attract people of the calibre required to effectively implement strategy, and manage the groups affairs in order to produce the required returns for shareholders. It also seeks to ensure that directors and executives are fairly rewarded for their respective contributions to the group. Annually the committee reviews the profit sharing scheme and the apportionment of profit shares to executives and employees. The committee met four times during the year. The current members of the remuneration committee are set out on page 3. Nominations Committee The Nominations Committee is chaired by Philip Gray and comprises three members, one of whom is a non-executive director. The committee includes the Chief Executive Officer, and is responsible for making recommendations to the board on all new appointments. A formal and transparent process is in place in terms of which the requisite skills needed on the board are identified and those individuals who are best suited for the position and who are able to assist the board in their endeavours are recruited. The committee meets on an as required basis. The current members of the nominations committee are set out on page 3. 12
  14. 14. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 CORPORATE GOVERNANCE (continued) Dealing in Securities The Imara share, which traded on an Over-the-Counter basis in Botswana since 14 February 2006, was listed on the Venture Capital Board of the Botswana Stock Exchange on 4 October 2006. The Group has a policy prohibiting dealings in its shares by directors, officers, executive management and all employees for a designated period, (closed period), which is from the close of the financial reporting period to the date of the announcement of its results or when they are in possession of price sensitive information, not readily available to the public. The groups’ policy is fully compliant with the Botswana Stock Exchange requirements for listed companies. Ethics and Business Integrity Professional and ethical conduct and the highest standards of integrity are an integral part of how the group conducts its business affairs. The group recognises that investor and stakeholder perceptions are based on the manner in which the group, its directors, management and staff conduct business and the group therefore strives to achieve the highest standards of integrity, transparency and business ethics at all times. Directors and management are required to disclose any material interests that they may have in contracts relating to the group and recuse themselves from any discussions relating to these interests. Communication with Stakeholders The group is committed to a policy of effective communication with stakeholders on matters of mutual interest. The group has fully adopted the BSE guidelines pertaining to the dissemination of financial information to stakeholders. Liaison meetings are also held with the Bank of Botswana, the International Financial Services Centre, regulators and supervisory authorities to brief them on the groups’ performance and key strategic initiatives. 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 broadly based programmes, sponsorship and initiatives. Imara is proud to have been the lead or co-sponsor of: • The Botswana 2006 Retirement Fund Conference • The Botswana Stock Exchange Investment Forum 2007 • University of Botswana Foundation • Investing Abroad Conference- Johannesburg South Africa • Graduate Training Programme in conjunction with JSE • JSE/Liberty Life Investment Challenge 13
  15. 15. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 REPORT OF THE DIRECTORS The directors of Imara Holdings Limited have pleasure in presenting their report for the year ended 30 April 2007. NATURE OF BUSINESS Imara Holdings Limited is a registered International Financial Services Company (IFSC), and is the holding company of a group of companies conducting primarily stock broking, asset management and corporate finance activities for institutions and private clients. There have been no significant changes to the nature of business from the prior year. LISTING ON THE BOTSWANA STOCK EXCHANGE The Imara share was listed on the Venture Capital Market of the Botswana Stock Exchange on 4 October 2006. The share listed at BWP12.50 per share and at 30 April 2007 was trading at BWP30 per share. AUTHORISED AND ISSUED SHARE CAPITAL The authorised share capital of the company is 20 000 000 ordinary shares of 1 thebe each (2006 – 20 000 000 ordinary shares of 1 thebe each). At year end the issued share capital was 5 368 815 ordinary shares of 1 thebe each (2006 – 4 743 800 ordinary shares of 1 thebe each), issued for a total consideration of BWP29 807 821 (2006 – BWP25 697 472). This resulted in a share premium of BWP29 754 133 (2006 – BWP25 650 034). SUB-DIVISION OF SHARES At an Extraordinary General Meeting of the company held in Gaborone Botswana on 2 August 2007, shareholders approved, by Special Resolution, a sub-division of the company’s ordinary shares on a ten-for-one basis and authorised the directors to take such steps and sign all documents to give effect to the Special Resolution passed at the meeting. The rationale for the share sub-division of Imara shares was to: • Facilitate the acquisition of shares in Imara by smaller investors; • Promote transferability and liquidity of Imara’s shares on the Botswana Stock Exchange; • Encourage a greater spread of investors. ACCOUNTING POLICIES AND DISCLOSURE The consolidated financial statements of the group and company have been prepared on a going concern basis in accordance with International Financial Reporting Standards (IFRS), which comprise standards and interpretations approved by the International Financial Reporting Standards Board and interpretations approved by the International Financial Reporting Interpretations Committee, (IFRIC), and the applicable requirements of the Botswana Companies Act (CAP. 42:01). The financial statements have been prepared on a historical cost basis except for certain financial instruments that are carried at fair value. 14
  16. 16. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 REPORT OF THE DIRECTORS’ (continued) The accounting policies adopted in the preparation of the group’s and company’s financial statements are consistent with those of the previous financial year. The financial year-end of the Zimbabwe associate company, Imara Capital Zimbabwe (Pvt) Limited, was changed during the year from December to March to bring the year-end closer to the rest of the Imara Group. The change in year-end has been approved by the Zimbabwe Revenue Authority. FINANCIAL RESULTS The audited results of the group and company are set out in the annual financial statements and accompanying notes. These financial statements were approved and adopted by the Board of Directors on 18 July 2007, and Messrs. M J S Tunmer and D E Stone were authorised to sign these statements on behalf of the company. As disclosed in the Trading Statement issued to shareholders on 19 March 2007 a significant portion of the earnings for the current year, arise from the disposal of available-for-sale-financial assets by our South African stockbroker Imara S P Reid Limited and are of a non-recurring nature. This disposal was in line with a strategic decision taken by your Board during the year related to risk concentrations. The impact of these disposals on group profit after tax for the year amounts to BWP18,6 million and accounts for 38,3% of group profitability for the year. In recognition that the profit generated by the disposal of available-for-sale-financial-assets is of an unusual nature and is non-recurring, the Board have decided that for dividend distribution purposes, it should be differentiated from the profits from core trading activities and be the subject of a special dividend to shareholders. Details of the special dividend are outlined in more detail overleaf. AUDIT COMMITTEE The Audit Committee comprising executive and non-executive directors’ 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 and internal control. The Audit Committee is also responsible for reviewing the financial statements of the group and ensuring that these are IFRS compliant. 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 these audit reviews. DIRECTORS AND COMPANY SECRETARY Details of the Directors and Company Secretary are reflected on page 3 of this Annual Report. P J Corrish resigned as Company Secretary with effect from 31 May 2006 and as a director with effect form 31 July 2006. He was replaced by D E Stone as Company Secretary on 31 May 2006 and as a director on 31 July 2006. S M Ndoro was appointed as a non-executive director on 19 March 2007 and M S Golding resigned as an executive director with effect from 18 July 2007. 15
  17. 17. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 REPORT OF THE DIRECTORS’ (continued) As at 30 April 2007 the directors, directly and indirectly, held the following shares in the company: Director Number of shares held, Share options directly and indirectly Issued A R Fleming 532 122 25 000 M S Golding 99 912 23 000 P J S Gray 113 865 10 000 J R Legat 210 089 20 000 A C H Mackeurtan 222 149 5 000 R R Matthews 87 872 10 000 M Mothibatsela 9 200 1 660 S M Ndoro – – D E Stone 7 222 – M J S Tunmer 535 339 13 333 CONTRACTS Obelisk International Trust Company (Guernsey) Limited is a professional adviser to the group and provides administrative and secretarial services. The company was controlled by a non-executive director up until 7 March 2007. Fees paid for services rendered are at commercial rates on an arms length basis. DIRECTORS’ INTERESTS IN CONTRACTS None of the other directors and officers of the Company had an interest in any contract of significance during the financial year. DIRECTORS’ REMUNERATION Shareholders will be asked to approve, at the company’s Annual General Meeting, the remuneration paid to the directors for the year amounting to BWP 4 917 378. (2006 – BWP 3 341 661) DIVIDEND DECLARATION In recognition that profits generated by the disposal of available-for-sale-financial- assets are of an exceptional nature and are non-recurring, the Board has decided that for dividend distribution purposes, these profits should be differentiated from the profits from core business activities, and be the subject of a special dividend to shareholders. Notice is hereby given that the Board has declared both a special dividend and an ordinary dividend, in respect of the year ended 30 April 2007. These dividends are both cum rights for the share sub-division referred to above, the details of which are as follows: Special dividend A special dividend of 10 thebe per share, (based on the shares in issue post the sub-division), payable in cash to all shareholders registered in the books of the company as at 17 August 2007. 16
  18. 18. Imara Holdings Limited Group Annual Report – Year ended 30 April 2007 REPORT OF THE DIRECTORS’ (continued) Ordinary dividend An ordinary dividend of 17 thebe per share, (based on the shares in issue post the sub-division), payable either in cash or scrip at the election of each shareholder, to all shareholders registered in the books of the company as at 17 August 2007. A Form of Election containing details of the scrip offer was sent to shareholders on 24 August 2007. In compliance with BSE reporting requirements, an announcement relating to the scrip dividend will be made in the press, outlining the potential dilution effect of the scrip dividend and the cash equivalent underpin. In terms of the Botswana Income Tax Act (Chapter 50:01) as amended, withholding tax of 15%, unless varied by a Double Taxation Agreement, or any other currently enacted tax rate will be deducted, where applicable, from the gross dividend payable to shareholders. Withholding tax will be applied to both the special and ordinary dividend and in the case of the ordinary dividend, to either the cash or scrip dividend payment. POST BALANCE SHEET EVENTS Subsequent to the approval of group’s audited financial statements, at a meeting of directors held in Gaborone on 18 July 2007, the company received notification of a legal claim against the group for damages and breach of contract in the sum of Malawi Kwacha 757,3 million. (BWP 35,1 million) The claim is against Imara Botswana Limited and relates to an advisory mandate executed on behalf of the Privatisation Commission of Malawi. The basis of the claim, and all related documentation has been the subject of an extensive review by the Board. The matter has also been referred to the company’s attorneys for legal opinion and fully disclosed to the group’s independent auditors. Based on the evidence currently available to the Board and supported by a written opinion from our attorneys, the Board are of the opinion that the likelihood of a successful claim is remote and accordingly, in accordance with International Accounting Standard 37, no provision has been raised nor contingent liability noted in the group’s Annual Audited Financial Statements. The matters set out above, together with the legal opinion and the decision taken by the Board have been considered by the independent auditors, prior to the issuance of their Audit Report, which is set out on page 18. Other than the above, no events or transactions have occurred since 30 April 2007 or are pending that would have a material effect on the financial statements at that date or for the year then ended, or that are of such significance in relation to the company’s or group’s affairs to require mention in a note to the financial statements in order to not make them misleading regarding the financial position, results of operations, or cash flows of the company or group. By Order of the Board. D E STONE Company Secretary 31 August 2007 17
  19. 19. Imara Holdings Limited Consolidated Annual Financial Statements INDEPENDENT AUDITOR’S REPORT INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IMARA HOLDINGS LIMITED Report on the Financial Statements We have audited the accompanying company and group financial statements of Imara Holdings Limited which comprise the directors report, balance sheet as at 30 April 2007, the income statement, the statement of changes in equity and cash flow statement for the year then ended, a summary of significant accounting policies and other explanatory notes, as set out on pages 20 to 64. Directors’ Responsibility for the Financial Statements The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and in a manner required by the Companies Act (Chapter 42:01) of Botswana. 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 of 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 judgement, including the assessment of the risk 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 the directors, 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 company as at 30 April 2007, and of the financial performance and its cash flows for the year ended in accordance with International Financial Reporting Standards, and in a manner required by the Companies Act (Chapter 42:01) of Botswana. 18
  20. 20. Imara Holdings Limited Consolidated Annual Financial Statements INDEPENDENT AUDITOR’S REPORT (continued) Report on Other Legal and Regulatory Requirements In accordance with Section 129 of the Companies Act in Botswana (Cap 42:01), we confirm that: • we have satisfied ourselves as to the existence of securities; and • in our opinion, the company and subsidiaries have kept proper books of account with which the financial statements are in agreement. Ernst & Young Certified Public Accountants 31 August 2007 2nd Floor, UN Place Khama Crescent PO Box 41015 Gaborone, Botswana 19
  21. 21. Imara Holdings Limited Consolidated Annual Financial Statements CONSOLIDATED INCOME STATEMENT Year ended 30 April Group Company Group Company Notes 2007 2007 2006 2006 Pula Pula Pula Pula Revenue 2 66 123 739 – 41 392 645 – Costs of services sold (8 135 581) – (8 772 958) – Gross profit 57 988 158 – 32 619 687 – Other operating income 2 66 180 707 8 509 038 20 909 418 3 619 505 Other operating expenses 2 (64 490 956) (5 784 385) (41 011 929) (2 761 818) Net operating income/(expenses) 1 689 751 2 724 653 (20 102 511) 857 687 Finance costs 2 (311 134) (490 318) (468 525) (610 822) Income from associates 160 814 – 124 905 – Profit from operations before taxes 59 527 589 2 234 335 12 173 556 246 865 Tax (charge)/credit 3 (10 846 936) 66 746 (2 716 496) 173 085 Profit for the year 48 680 653 2 301 081 9 457 060 419 950 Attributable to: Equity holders of the parent 49 386 210 – 9 815 895 – Minority interest (705 557) – (358 835) – Profit for the year – as above 48 680 653 – 9 457 060 – Earnings per share – Basic (Pula) 4 9.56 – 2.11 – – Diluted (Pula) 9.21 – 1.86 – 20
  22. 22. Imara Holdings Limited Consolidated Annual Financial Statements CONSOLIDATED BALANCE SHEET As at 30 April Group Company Group Company Notes 2007 2007 2006 2006 Pula Pula Pula Pula ASSETS Non-current assets Property, plant and equipment 6 3 969 211 31 605 2 716 618 5 959 Goodwill 7 100 952 – 103 825 – Investment in subsidiaries 8 – 11 756 884 – 11 756 884 Investment in associates 9 2 786 067 – 2 816 983 – Available-for-sale financial assets 10 10 658 438 1 408 010 19 305 322 714 000 Inter-company loans 11 – 21 085 174 – 20 312 159 Deferred tax asset 3 1 762 435 239 831 1 704 438 173 085 19 277 103 34 521 504 26 647 186 32 962 087 Current assets Cash and cash equivalents 12 26 211 131 399 898 18 299 466 534 173 Listed trading securities 13 3 635 740 – 1 604 926 – Trade and other receivables 14 123 559 364 467 434 59 778 591 438 263 153 406 235 867 332 79 682 983 972 436 TOTAL ASSETS 172 683 338 35 388 836 106 330 169 33 934 523 EQUITY AND LIABILITIES Equity Issued capital 15 53 688 53 688 47 438 47 438 Share premium 29 754 133 29 754 133 25 650 034 25 650 034 Non-distributable reserves 11 362 928 2 229 193 23 979 887 3 648 129 Distributable reserves 52 808 241 (1 844 058) 6 305 887 (1 261 283) Total shareholders equity 93 978 990 30 192 956 55 983 246 28 084 318 Minority interest (289 096) – 416 461 – Total equity 93 689 894 30 192 956 56 399 707 28 084 318 Non-current liabilities Interest bearing loans and borrowings 16 126 752 – 2 424 370 2 187 678 Current liabilities Trade and other payables 17 66 037 977 1 567 808 41 559 571 427 562 Provisions 18 3 408 159 – 3 168 016 – Inter-company loans 11 – 3 628 072 – 3 234 965 Current portion of interest bearing loans and borrowings 16 518 201 – 162 210 – Tax payable 8 902 355 – 2 616 295 – 78 866 692 5 195 880 47 506 092 3 662 527 Total liabilities 78 993 444 5 195 880 49 930 462 5 850 205 TOTAL EQUITY AND LIABILITIES 172 683 338 35 388 836 106 330 169 33 934 523 21
  23. 23. Imara Holdings Limited Consolidated Annual Financial Statements CONSOLIDATED CASH FLOW STATEMENT Year ended 30 April Group Company Group Company Notes 2007 2007 2006 2006 Pula Pula Pula Pula Profit from operating activities 59 527 589 2 234 335 12 173 556 246 865 Adjustment for: Depreciation 2 789 948 5 854 638 006 3 973 Interest received 2 (6 973 242) (2 748 991) (2 852 617) (1 960 246) Finance charges paid 2 311 134 490 318 468 525 610 822 Income from associates (160 814) – (124 905) – Share based payment plan expense 21 506 938 506 938 245 936 245 936 Profit on sale of investments – – (512 755) – Net foreign exchange difference (5 574 351) (1 925 873) 5 534 847 2 948 984 Foreign exchange differences on cash and cash equivalents 260 925 – (23 133) – Increase in provisions 240 143 663 627 702 766 75 128 Profit on sale of property, plant and equipment – – (31 500) – Revaluation of investment in subsidiary – – – (29 351) Operating cash inflows/ (outflows) before working capital changes 48 928 270 (773 792) 16 218 726 2 142 111 Increase in trading stock (2 030 814) – (848 938) – (Increase)/Decrease in trade and other receivables (63 780 773) (29 171) (33 983 531) 5 164 Increase/(Decrease) in trade and other payables 24 478 406 476 619 31 935 748 (4 586) Cash generated from operations 7 595 089 (326 344) 13 322 005 2 142 689 Income tax (paid)/refunded 3 (4 618 873) – 199 337 – Net cash flows from/(used) in operating activities 2 976 216 (326 344) 13 521 342 2 142 689 22
  24. 24. Imara Holdings Limited Consolidated Annual Financial Statements CONSOLIDATED CASH FLOW STATEMENT (continued) Year ended 30 April Group Company Group Company Notes 2007 2007 2006 2006 Pula Pula Pula Pula Cash flows from investing activities Interest received 2 6 973 242 2 748 991 2 852 617 1 960 246 Dividends received from associate 191 730 – – – Purchase of property, plant and equipment 6 (2 122 737) (31 500) (496 480) – Proceeds – sale of property, plant and equipment 30 750 – 86 453 – Lease instalments (127 765) – (103 778) – Acquisition of shares in subsidiaries – – (1 747 574) (1 747 525) Loans granted to group companies – (773 016) – (2 157 668) Sale/(purchase) of available- for-sale financial assets 1 149 657 (694 010) (236 471) – Net cash flows from/(used in) investing activities 6 094 877 1 250 465 354 767 (1 944 947) Financing activities Finance charges paid 2 (311 134) (490 318) (468 525) (610 822) Proceeds from issue of shares 494 532 494 532 – – Proceeds from issue of shares in subsidiary – – 98 – Finance leases raised 25 319 – – – Loans received from group companies – 393 107 – 324 348 Repayment of loans and borrowings 16 (316 848) (316 848) – – Dividends paid (1 138 869) (1 138 869) – – Net cash flows from financing activities (1 247 000) (1 058 396) (468 427) (286 474) Net increase in cash and cash equivalents 7 824 093 (134 275) 13 407 682 (88 732) Foreign exchange differences on cash and cash equivalents (260 925) – 23 133 – Cash and cash equivalents at beginning of year 18 299 466 534 173 4 868 651 622 905 Cash and cash equivalents at end of year 12 25 862 634 399 898 18 299 466 534 173 23
  25. 25. Imara Holdings Limited Consolidated Annual Financial Statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY As at 30 April Group Company Group Company Notes 2007 2007 2006 2006 Pula Pula Pula Pula Issued capital: (1) Balance at beginning of year 15 47 438 47 438 44 139 44 139 Issue of ordinary shares: 15 6 250 6 250 3 299 3 299 Debenture conversions 3 651 3 651 3 299 3 299 Scrip dividend 1 517 1 517 – – Share options exercised 1 082 1 082 – – Balance at end of year 53 688 53 688 47 438 47 438 Shares in Issue: In issue at the beginning of the year – 4 743 800 – 441 391 Issued during the year: – 625 015 – 32 989 Debenture conversions – 365 040 – 32 989 Scrip dividend – 151 738 – – Share options exercised – 108 237 – – In issue – (pre share split – January 2006) – 5 368 815 – 474 380 New shares resulting from share split (10 for 1) – – – 4 269 420 In issue at the end of the year – 5 368 815 – 4 743 800 Share premium: Balance at beginning of year 25 650 034 25 650 034 24 150 518 24 150 518 On issue of shares during the year: 4 104 099 4 104 099 1 499 516 1 499 516 Debenture conversions 1 867 179 1 867 179 1 499 516 1 499 516 Scrip dividend 493 450 493 450 – – Share options exercised 1 743 470 1 743 470 – – Balance at end of year 29 754 133 29 754 133 25 650 034 25 650 034 24
  26. 26. Imara Holdings Limited Consolidated Annual Financial Statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) As at 30 April Group Company Group Company Notes 2007 2007 2006 2006 Pula Pula Pula Pula Non-distributable reserves: Foreign Currency Translation Reserve Balance at beginning of year 1 7 225 518 – 701 630 – Current year movement 1 (5 626 670) – 6 523 888 – Balance at end of year 1 598 848 – 7 225 518 – Share Based Payment Plan Reserve Balance at beginning of year 396 277 396 277 150 341 150 341 Current year movement 2 506 938 506 938 245 936 245 936 Balance at end of year 903 215 903 215 396 277 396 277 Available-for-Sale Reserve Balance at beginning of year 1 16 358 092 3 251 851 – 302 868 Current year movement 1 (7 497 227) (1 925 873) 16 358 092 2 948 984 Balance at end of year 8 860 865 1 325 978 16 358 092 3 251 852 Total non-distributable reserves 11 362 928 2 229 193 23 979 887 3 648 129 Distributable reserve: Accumulated Profit Balance at beginning of year 6 305 887 (1 261 283) (3 510 008) (1 681 233) Profit for the year 49 386 210 2 301 081 9 815 895 419 950 Dividends paid (2 883 856) (2 883 856) – Total distributable reserve 52 808 241 (1 844 058) 6 305 887 (1 261 283) Minority shareholders interest: Balance at beginning of year 416 461 – – – Share of loss for the year (705 557) – (358 835) – Disposal of shares in Imara Asset Management (Pty) Limited – – 49 – On acquisition of CF Africa Limited – – 775 247 – (289 096) – 416 461 – (1) 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 company’s shares have, since 4 October 2006, been listed on the Venture Capital Market of the Botswana Stock Exchange. 25
  27. 27. Imara Holdings Limited Consolidated Annual Financial Statements 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 (CAP. 42:01). The financial statements have been prepared on a historical cost basis except for certain financial instruments that are carried at fair value and in accordance with IAS 29 where the functional currency is the currency of a hyperinflationary economy where they are stated in terms of the measuring unit current at the balance sheet date. 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 Balance Sheet, separately from parents shareholders’ equity. Investments in subsidiaries are carried at cost at a company level. Borrowing costs Borrowing costs are recognised as an expense when incurred. Changes in accounting policies The accounting policies adopted 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 effect on the financial statements of the group. They did however give rise to additional disclosures. • IAS 21 Amendment – The Effects of Changes in Foreign Exchange Rates • IAS 39 Financial Instruments: Recognition and Measurement • IFRIC 4 Determining whether an Arrangement contains a lease 26
  28. 28. Imara Holdings Limited Consolidated Annual Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) IAS 21 The Effects of Changes in Foreign Exchange Rates As of 1 January 2006, the group adopted the amendments to IAS 21. As a result, all exchange differences arising from a monetary item that forms part of the group’s net investment in foreign operation, are recognised in a separate component of equity in the consolidated financial statements regardless of the currency in which the monetary policy is denominated. IAS 39 Financial Instruments: Recognition and Measurement Amendment for financial guarantee contracts, amended the scope of IAS 39 to require financial guarantee contracts that are not considered to be insurance contracts, to be recognised initially at fair value and to be re-measured at the higher of the amount determined in accordance with IAS 37, and the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with IAS 18 – Revenue. IFRIC 4 Determining Whether an Arrangement contains a Lease The group adopted IFRIC 4 as of 1 January 2006, which provides guidance in determining whether arrangements contain a lease to which lease accounting must be applied. This change in accounting policy has no significant impact on the group’s results as at 30 April 2007. 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. Convertible debentures Convertible debentures are initially recognised at the fair value of the consideration received, less directly attributable transaction costs. The component of the convertible debenture that exhibits characteristics of a liability is recognised as a liability in the balance sheet under interest bearing loans and borrowings. The interest expense is recognised in the income statement. Convertible debentures are derecognised when the obligation under the liability is discharged, cancelled or expires. 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 Company, they are not reflected on the balance sheet but are included as a note to the financial statements at market value as part of funds under management. (See Note 19) Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when: • the rights to receive cash flows from the asset have expired; 27
  29. 29. Imara Holdings Limited Consolidated Annual Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) • the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass through’ arrangement; or • the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where 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 derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts recognised in the income statement. Foreign currency translation 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 balance sheet 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. The assets and liabilities of overseas subsidiaries are translated at the rate of exchange ruling at the balance sheet 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 taken directly to equity. 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 Goodwill acquired in a business combination is initially measured at cost being the excess of the business combination over the net fair value of identifiable net assets, liabilities and contingent liabilities of a subsidiary, associate or joint venture at the date of acquisition. Goodwill is tested for impairment annually or more frequently if circumstances indicate that the goodwill is impaired. Goodwill is subsequently stated at cost less accumulated impairment in value. 28
  30. 30. Imara Holdings Limited Consolidated Annual Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Goodwill (continued) Impairment is determined for goodwill by assessing the recoverable amount of the cash generating unit, to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount of the cash generating unit to which the goodwill has been allocated, an impairment loss is recognised Impairment losses relating to goodwill cannot be reversed in future periods. The group performs its annual impairment test of goodwill as at 30 April. Impairments An assessment is made at each balance sheet date to determine whether there is objective evidence that an asset or group of assets may be impaired. An assets recoverable amount is the higher of an assets or cash generating units 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 flows that are largely independent from those of other assets or groups of assets. If evidence of impairment exists, the estimated recoverable amount of that asset is determined and any impairment loss recognised for the difference between the recoverable amount and the carrying amount, as detailed below. Impairment losses are recognised in the Income Statement. The group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant not, the asset is included in a group of financial assets with similar characteristics and that group of financial assets is collectively assessed 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. • For financial instruments at amortised cost – the carrying amount of the asset is reduced to its estimated recoverable amount either directly or through the use of an allowance account and the amount of the loss is included in the Income Statement for the period; and • For financial-instruments-at-fair-value - where a loss has been recognised directly in equity as a result of the write-down of the asset to recoverable amount, the cumulative net loss recognised in equity is transferred to the Income Statement for the period. An assessment is made at each reporting date as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. Income taxes Taxation is provided in the financial statements using the gross method of taxation. 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 allowance 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. 29
  31. 31. Imara Holdings Limited Consolidated Annual Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income taxes (continued) 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. 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 re-assessable 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 and deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the balance sheet date. 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. Investment in associates The group’s investments in associates are accounted for under the equity method of accounting. An associate is an entity in which the group has significant influence and which is neither a subsidiary nor a joint venture of the group. 30
  32. 32. Imara Holdings Limited Consolidated Annual Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Investment in associates (continued) Under the equity method of accounting, the investment in associates is carried in the balance sheet at cost plus post acquisition changes in the group’s share of the net assets of the associates, less any impairment in value. Goodwill relating to associates is included in the carrying amount of the investment and is not amortised. After application of the equity method, the group determines whether it is necessary to recognise any additional impairment loss with respect to the group’s net investment in associates. 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 associates, the group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity. 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 2006. 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 (Private) Limited is 31 March 2007. This date is considered to be sufficiently close to that of the holding company so as not to have any material affect on reported results. The accounting policies of associates conform to those used by the group for like transactions and events in similar circumstances. Investments and other financial assets Financial assets in the scope of IAS 39, are classified as either financial assets at fair value through profit or loss, loans and receivables and available-for-sale-assets as appropriate. • Regular way purchases or sales of investments and other financial assets are recognised on the trade date. Regular way purchases or sales are purchases or sale of investments and other financial assets that require delivery of assets within the period generally established by regulation or convention in the market place. • When financial assets are initially recognised, they are measured at fair value, plus, in the case of listed trading securities, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and where appropriate re-evaluates this designation at each financial year-end. • Financial assets are classified as at fair value through profit and loss, as generally listed trading securities if they are acquired for the purpose of selling in the near future. Gains or losses on financial assets held as listed trading securities are recognised in income. • Other long-term financial instruments, including interest bearing loans and borrowings are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in income when the loan and receivables are de- recognised or impaired, as well as through the amortisation process. 31

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