BancABC: 2006 Annual Report

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2006 Annual Report for BancABC, BancABC is a full service banking institution offering a diverse range of financial services including personal, business and corporate banking as well as asset management, and stock broking and treasury services

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BancABC: 2006 Annual Report

  1. 1. Mozambique Tanzania Contents Introduction ............................................................................................ 2 Values and Personality ............................................................................ 2 Group Financial Highlights ...................................................................... 3 Chairman’s Statement ............................................................................. 5 Directorate and Group Management ....................................................... 7 Directorate ............................................................................................. 8 Group Companies Directorate ................................................................. 10 Group Organogram ................................................................................. 12 Chief Executive Officer’s Report .............................................................. 14 Capital Adequacy ................................................................................... 20 Products and Services ............................................................................ 21 Group Management ................................................................................ 23 Risk and Governance ............................................................................. 24 Corporate Social Investment ................................................................... 30 Annual Financial Statements .................................................................. 31 Analysis of Shareholders ......................................................................... 77 Notice to Shareholders ........................................................................... 78 Form of Proxy ......................................................................................... 79 1
  2. 2. Introduction ABC Holdings Limited is listed on the Botswana and Zimbabwe Stock exchanges and is the holding company of the African Banking Corporation group of companies which comprise diverse financial services activities in the areas of corporate, international, investment and merchant banking, leasing finance, asset management, stock broking and treasury services. African Banking Corporation aims to deliver world-class financial solutions to the sub-Saharan African region. The African Banking Corporation brand has continued to strengthen and as an institution we have gained recognition from market players and regulators alike. Our strong brand and committed staff have enabled us to weather the volatile conditions and the symbolism of our logo – creative energy, radiance and unity – inspires us to fulfil our vision of delivering world-class financial solutions to our clients and partners in Africa. To ensure that we deliver on our brand promise, we continue to recruit staff with global expertise and a thorough knowledge of the people and cultures we operate in, and to continually train and emphasise development of staff throughout the organisation. Our core values remain the guiding principles by which we operate and form the basis of our corporate personality. Values and Personality Our core values, the result of broad stakeholder consultation, centre on five distinct areas; INTEGRITY, INNOVATION, PASSION, PROFESSIONALISM and PEOPLE. Our INTEGRITY is the result of our being reliable, ethical, credible, trustworthy with a great sense of heritage. Our cast iron ethics form our unquestionable character and business practice. Underpinning INNOVATION are the following traits: visionary, dynamic, energetic, challenging and agile. In practical terms, our adoption of this core value means that we are devoted to driving change by provoking new ideas and always doing things differently. We are PASSIONATE because we are inherently people focused, accessible with a personal and customised approach, not forgetting our vital African energy. In short, we are passionate because we believe in and love what we do. Being PROFESSIONAL to us entails being uncompromising, focused, confident in offering world-class products and services. We strive to be excellent at what we do and are always looking to improve on our performance. And finally our PEOPLE embody the integrity, innovation, passion and professionalism that make us the customer-centric group we are today, delivering world-class financial solutions. With African pride and flair, we traverse Africa leaving our unmistakable footprint that is “African Banking Corporation”. These essential and enduring values are deeply rooted in our organisation, underlying our daily actions. 2
  3. 3. Group Financial Highlights Five-year financial highlights on a historical cost basis 31 Dec 06 31 Dec 05 31 Dec 04 31 Dec 03 31 Dec 02 US$ ’000s US$ ’000s US$ ’000s US$ ’000s US$ ’000s INCOME STATEMENT Net interest income after impairment 15,620 20,353 16,671 9,127 6,569 Non interest revenue 30,772 27,974 29,899 24,249 31,256 Total income 46,392 48,327 46,570 33,376 37,825 Operating expenditure (24,757) (29,330) (32,869) (27,221) (20,893) Net operating income 21,635 18,997 13,701 6,155 16,932 Loss on discontinuing operations - - - (284) - Other impairments - (1,845) (373) (4,541) (3,154) Net operating profit before taxation 21,635 17,152 13,328 1,330 13,778 Share of profits of associates and joint venture 1,912 813 831 3,139 - Profit before taxation 23,547 17,965 14,159 4,469 13,778 Taxation (7,673) (6,611) (5,571) (4,214) (3,898) Profit for the year 15,874 11,354 8,588 255 9,880 Attributable to: Equity holders of parent 15,816 11,156 9,791 867 9,880 Minority interest 58 198 (1,203) (612) - Profit for the year 15,874 11,354 8,588 255 9,880 Headline earnings 13,169 11,751 7,743 4,929 13,034 BALANCE SHEET Cash and cash equivalents 70,948 37,657 67,414 71,727 42,439 Financial assets held for trading 140,985 156,437 128,565 73,300 34,544 Derivative assets held for risk management 28,133 - - - - Loans and advances to customers 155,596 120,938 161,449 149,230 101,039 Investments 8,700 6,340 14,287 7,055 11,432 Investment in associates and joint venture 7,050 6,261 6,692 1,849 - Other assets and investment property 6,977 6,690 14,600 15,565 14,957 Property and equipment 8,306 3,916 7,976 8,782 3,137 Intangible assets 6,194 7,285 11,051 11,341 13,741 Total assets 432,889 345,524 412,034 338,849 221,289 Shareholders’ equity 47,075 35,999 43,021 35,867 28,476 Deposits 253,934 256,560 286,249 236,479 121,736 Derivative liabilities held for risk management 28,202 - - - - Borrowed funds 90,666 18,684 30,637 20,959 25,061 Other liabilities and taxation 13,012 13,381 31,227 25,783 27,281 Preference share liabilities - 20,900 20,900 19,761 18,735 Total shareholders’ equity and liabilities 432,889 345,524 412,034 338,849 221,289 Shares in issue 132,568,680 113,449,724 113,449,724 113,449,724 113,449,724 Cost to income ratio 49% 55% 62% 68% 51% Average shareholders’ equity 41,537 39,510 39,444 32,172 30,315 Return on average shareholders’ equity (Headline) 32% 30% 20% 15% 43% Net asset value per share (cents) 35.5 31.7 35.6 27.3 25.1 Closing exchange rates to US$ Botswana Pula 6.05 5.51 4.27 4.43 5.39 Euro 0.76 0.85 0.73 0.80 0.95 Mozambican Metical (dropped three zero in 2006) 25.97 24.18 20.46 23.21 24.10 Tanzanian Shilling 1,264.05 1,162.01 1,073.01 1,035.90 992.22 Zambian Kwacha 4,390.24 3,480.52 4,700.00 4,500.00 4,600.00 Zimbabwe Dollar (dropped three zero in 2006) - official 250.00 26.00 5.61 0.82 0.055 - calculated 2,400.99 88.09 6.20 5.00 1.50 3
  4. 4. Net asset value per share 2.1 2.0 1.6 1.6 1.5 1.5 1.3 THEBE 1.0 0.5 0 2002 2003 2004 2005 2006 Total assets 3,000 2,500 2,000 BWP MILLIONS 1,500 2,617 1,902 1,000 1,759 1,501 1,193 500 0 2002 2003 2004 2005 2006 Return on average shareholders’ equity (Headline) 50% 45% 40% 35% PERCENTAGES 30% 25% 43% 20% 32% 15% 30% 20% 10% 15% 5% 0% 2002 2003 2004 2005 2006 4
  5. 5. Chairman’s Statement Global environment The world economy continued to grow strongly recovering from In January 2006 the bank rate was 14,5%, but rose to 15% in a growth rate of 4,3% in 2005 to grow at 5,2% in 2006. The February 2006, and has remained unchanged since. The prime 2006 strong growth was underpinned by China, India and the lending rate rose in tandem with this from 16% in January 2006 recovery in Japan. to 16.5% in February 2006. For 2007, the world economy is expected to grow at a reduced The Bank of Botswana is expected to start loosening monetary rate of at least 4,5% with China and India being the main growth policy in 2007, as inflation pressures are expected to abate. sources and Japanese economic growth off-setting the weakness Lower real rates should help to stimulate economic activity. in the US economy. The major positives for growth in 2007 will be the expected low and stable oil prices and high consumer The Pula opened the year at BWP 5.4 to the US dollar but edged demand especially in Asia. up in the second half to BWP 6.45 before stabilizing to close the year at 6.04 to the US dollar and 1.16 to the South African The African continent saw strong economic growth in 2006 Rand. with real GDP growing by 5,4% compared to 5,2% in 2005. The strong growth was a result of the success of the economic Mozambique management on the continent and the high commodity prices. Economic growth in Mozambique remained quite high in 2006, More than half of the continent’s countries experienced growth forecast at 7,0% slightly lower than the 7,7% achieved in 2005. of more than 5,0%. In 2007 African real economic growth is Mozambique has witnessed strong economic growth due to forecast to average 5% with most economies benefiting from the large mining investments and prudent macro-economic high commodity prices, low oil prices and continued sound management policies. macro-economic policies and programmes. Inflation in Mozambique ended the year at 9,4% compared to In Southern Africa, economic growth was projected to average 11,2% in 2005 and 9,1% in 2004. Notwithstanding the above 6,0% in 2006 with most countries achieving growth rates the 2006 inflation rate was higher than the Government target above the average. Angola was the economy with the highest rate of 7,5%. The decrease in inflation is a reflection of the contribution to regional economic growth on the back of strong good harvest recorded in 2006 as food is heavily weighted in commodity prices and a massive economic recovery programme. the consumer price index. The other contributory factors were The above regional growth was spurred by investments and the strong local currency and tight monetary policies pursued production from the mining sector, tourism and manufacturing. by the central bank. Inflation is now forecast to fall within the Government target level of 7,5% during 2007. For the year 2007, the region is expected to grow at an average of 7,0% spurred on by improved energy supplies, low fuel and The central bank tightened monetary policy in the first half of energy prices and strong commodity prices. All the regional 2006 on account of rapid monetary expansion. The central countries, except Zimbabwe, are expected to witness strong bank raised the policy rate by 3.38% to 19% in March 2006 to growth this year. contain inflation and provide reasonable real rate of return. In the second half of the year the rate was cut to 17% and the rate Botswana is expected to stabilize in the first half of 2007. The Botswana economy continued on its growth path in 2006 registering growth of 6,5% up from the 3,8% recorded in 2005. The metical traded in a narrow range in 2006, averaging MZM The economy has registered an average growth rate of more 25.20 to MZM 26.85 to the US dollar. The stabilisation of the than 7,0% over the past 20 years, with mining and construction metical in the second half of the year was a reflection of the being the major sources of growth. The economy is expected to healthy donor inflows and a weaker US dollar. grow by 7,0% in 2007. Tanzania Inflation ended the 2006 year at 8,5% compared to 11,4% The Tanzanian economy grew at 5,9% in 2006 lower than the in 2005, with the major impact coming from the decline in oil average of 7,0% recorded in 2004 and 2005. In 2006 growth prices and the weaker South African rand. In 2007 inflation is was affected by power shortages, drought and high oil prices. forecast to continue falling and should be within the Central The economy is forecast to grow at 7,4% in 2007, higher than Bank desired range of 4%-7%. Interest rates increased across the average growth rates for the Eastern Africa and sub Saharan the board on the back of high inflation. African regions. 5
  6. 6. The rate of inflation closed the 2006 year at 6,7% up from 5,9% not helped the few companies that still produce, including the in 2005 largely due to food inflation as a result of drought, and mining industry which has shrunk despite record international high transport costs. In 2007, inflation is expected to fall as mineral prices. Tanzania should record a good harvest and the impact of falling international oil prices reduces transport costs. Interest rates remained high in 2006 with the Reserve Bank of Zimbabwe tightening monetary policy at the beginning of In early 2006, the monetary authorities relaxed their policy the year. Overnight accommodation rates went from 650% in stance and reduced interest rates with treasury bills reducing February to 800% in May 2006. In the mid-year Monetary Policy from 15% to 12%. However, the short-term interest rates were Review the RBZ reduced rates to 300% in a bid to stimulate pushed upwards in the second half in a bid to curb inflation. private sector credit extension. However, in October the central Strong government revenue and comfortable debt position bode bank reversed the policy move by hiking rates to 500% because well for interest rates in 2007. of rapid monetary expansion and runaway inflation. Zambia Directorate The Zambian economy continued to grow strongly reflecting the Mr. Modiri Mbaakanyi resigned from the board on 6 August mining and agricultural sectors contribution to GDP. In 2006 2006, having served the Group since its formation. I would like growth is expected to be 6,0% up from 5,1% in 2005 and 5,4% to thank Modiri for the services rendered to the Group and wish in 2004. The mining sector has continued to record high levels of him well in his future endeavours. Ms. Doreen Khama joined the investment underpinned by high commodity prices. In January board on 28 November 2006 as a non-executive independent 2007, the Government launched its long-term economic plan Director and brings in a wealth of business experience and legal (Vision 2030) which aims at a short-term (2007 to 2010) growth expertise. Doreen is Chairperson of the board of African Banking rate of 6% and long-term growth rate of 10% from 2021 to 2030. Corporation Botswana, and is a highly regarded attorney who The economy is expected to grow by 6,0% in 2007 which is in runs her own practice in Gaborone. We look forward to her line with the plan’s budgeted growth rate. valuable contribution. The inflation rate for 2006 was 8,2% a sharp drop from the Capitalisation 15,9% recorded in December 2005. The fall in inflation was The Group successfully raised USD 60 million by way of due principally to a good agricultural harvest which resulted medium to long-term debt during the second half of 2006. USD in a significant fall in food prices. Zambia recorded a bumper 12 million was injected into the subsidiaries as Tier 1 capital and maize harvest in 2006 and hence witnessed a significant fall in this should be repaid to the lenders through dividends from the food inflation. In 2007, the rate of inflation is expected to fall, subsidiaries. A further USD 20 million has been injected as Tier albeit at a reduced rate to close the year within the 7,0% to II capital in 2007. As a result, all banking subsidiaries would 7,5% range. have capital of at least USD 15 million by end of 2007. The shareholders’ funds are as follows: The positive economic achievements of Zambia are a result of high foreign direct investment and sound macro-economic USD ’000 Tier I Tier II Total policies. Exports have been increasing significantly and are now fairly diversified and the developments in the agriculture sector ABC Botswana 10,640 5,000 15,640 have resulted in near food sufficiency and hence a fall in food imports. The major challenge, however, remains in the area of ABC 10,060 5,000 15,060 social investment and development. Mozambique Declining inflation and strong demand for government securities ABC Tanzania* 9,300 5,000 14,300 are the major reasons for the decline in treasury bill interest rate in 2006. Average treasury bill yield rate fell from 16.7% ABC Zambia 7,960 5,000 12,960 in 2005 to 9.8% in 2006 and the composite treasury bond yield rate fell from 23% to 12.6%. The average lending rates ABC Zimbabwe 16,650 - 16,650 fell from 34% in December 2005 to 28% in December 2006. However, the government is of the view that there is still room for more reduction in accordance with inflation and other macro- * including TDFL economic developments. Dividend Zimbabwe With the capital raising initiatives that are in place, the directors Zimbabwe was the only Southern African economy expected recommend that a dividend be passed. to register a decline in economic production as the economic problems of the past ten years continue. With an unfavourable Conclusion investment environment, shortages of foreign exchange and lack I would like to thank management and staff most sincerely for of international support, the decline is expected to intensify in their contribution in producing an impressive set of results. 2007. During 2006 most production indeces, in volume terms, fell to their 1957 levels signalling a significant decline of the production base. Inflation reached an all time high of 1,282% in December 2006 and is expected to exceed 2,000% in 2007. The authorities OM Chidawu have tried various approaches to fighting inflation but with no Chairman international budget and balance of payments support, these 6 March 2007 measures have come short as recourse to flat and large budget deficits has been a significant contributor to the inflation pressures. Price controls and a rigid exchange rate regime have 6
  7. 7. Directorate and Group Management ABC Holdings Limited - Board of Directors Chairman Mr O M Chidawu Non-Executive Directors Mr H Buttery Mrs D Khama Mr N Kudenga Mr J Moses Mr T S Mothibatsela Mr H Wasmus Executive Director Mr D T Munatsi (Chief Executive Officer) Back row from left: O M Chidawu, H Buttery, N Kudenga, J Moses Front row from left: D T Munatsi, H Wasmus, T S Mothibatsela Executive Committee Chief Executive Officer D T Munatsi Chief Banking Officer F M Dzanya Chief Financial Officer B Moyo Group Head of Treasury H Matemera and Structured Finance Chief Risk Officer J J I Machapu Head of Human N Gapare Resources Group Legal Counsel M de Klerk Chief Information Officer L W Vermeulen Back row from left: F M Dzanya, B Moyo, J J I Machapu, M de Klerk (Secretary) Front Row from left: D T Munatsi and H Matemera Remuneration Committee Audit and Risk Committee Executive Committee Mr H Buttery Mr N Kudenga (Chairman) Mr D T Munatsi (Chairman) Mr O M Chidawu Mr J Moses Mr F M Dzanya Mr J Wasmus Mr B Moyo Mr H Matemera Mr J J I Machapu 7
  8. 8. Directorate CHIDAWU, Oliver M. (Zimbabwean) - Chairman BUTTERY, Howard J. (South African) Oliver Chidawu is Chairman of the ABC Holdings Board. Born in Howard Buttery was born in South Africa in 1946. In his position as Zimbabwe in 1954, he is a first-generation entrepreneur who founded Chairman of Bell Equipment Ltd, a listed South African company, his and manages the Kuchi group of companies, which is active in building current focus is on the development of a strategic alliance of three and electrical contracting. Mr. Chidawu is a major shareholder in international companies namely John Deer (United States), Liebher Bitumen Construction Services and Heritage Insurance Company. He (Germany) and Hitachi (Japan). In addition to serving on the ABC was a founding shareholder and director of Heritage Investment Bank Holdings board, Mr. Buttery also serves as a non-executive director of that merged with First Merchant Bank in 1997. several companies, including Rodgers and Company Limited (Mauritius) and two Swiss international management funds . KUDENGA, Ngoni (Zimbabwean) MOSES, John (South African) Ngoni Kudenga was born in Zimbabwe in 1952. He is a Chartered John Moses was born in South Africa in 1945. He built a distinguished career Accountant. He holds a Bachelor of Accountancy degree from the in banking, commencing with First National Bank in 1975 where he rose University of Zimbabwe and is a fellow of the Chartered Institute of through the ranks and retired as Chairman of Regional Banking in January Management Accountants. He is a past president of the Institute of 2000. He was a council member of the South African Institute of Bankers. Chartered Accountants. Mr. Kudenga is currently the Managing Partner He remains a fellow of this institution. of BDO Kudenga and Co. Chartered Accountants of Zimbabwe. He serves on the boards of Bindura Nickel Corporation, Hypo Valley Estates Ltd and several private companies. 8
  9. 9. WASMUS, Johannes (Dutch) MOTHIBATSELA, Tshipa S. (Botswanian) Hans Wasmus was born in Holland in 1941. He holds a diploma in Tshipa Mothibatsela was born in South Africa in 1948. He holds a accountancy from the Netherlands Institute for Chartered Accountants Bachelor of Engineering in mining from the University of Zambia and a Diploma in Economics. He was employed by FMO, the Netherlands- and a Masters in Engineering from Pennsylvania State University in based development finance institution for 25 years until 2002, initially as the USA. Mr. Mothibatsela completed a management development Regional Manager for Africa and thereafter as CFO. During this period he programme with Anglo American Corporation and went on to establish was seconded to Inde Bank Malawi as senior adviser. He is still a senior his own company, TTCS in Botswana. He is the Chief Executive Officer adviser to FMO and is a non-executive director of several companies. and director of Mothibatsela and Associates Consulting Engineers, a company which he founded. KHAMA, Doreen (Botswanian) MUNATSI, Douglas T. (Zimbabwean) Doreen Khama was born in Botswana in 1949. Mrs Khama is the - Chief Executive Officer Honorary Consul for Austria in Botswana and a practising lawyer by Douglas Munatsi was born in Zimbabwe in 1962. He has been Chief profession. She is the founder and senior partner of Doreen Khama Executive Officer of the ABC Holdings Group since its formation in 2000. Attorneys, a legal firm that has been in operation for more than 20 years. Prior to the establishment of African Banking Corporation, Douglas The firm has offered legal advice to companies such as Damp Holding founded Heritage Investment Bank (HIB), which quickly established AB Sweden, Admiral Leisure World Limited Austria and South Africa, a reputation for successful introduction of innovative capital market LID Limited Russia and Israel, as well Equity Diamond Cutting Works products and became one of the leading merchant banks in Zimbabwe. (Pty) Ltd in South Africa. She is an active business individual nationally, Following the merger of HIB and First Merchant Bank in 1997, Douglas regionally and internationally, and has been able to execute several became Managing Director of the merged bank, which retained the First business developments and maintain a high standing of professional Merchant Bank name. Prior to establishing HIB, Douglas Munatsi was prominence through her affiliations in Greece, Italy and England. She an executive in the Southern Africa regional mission of the International serves as a director and board member for several organisations. Finance Corporation (IFC). Douglas Munatsi holds a Bachelor of Business Studies degree from the University of Zimbabwe and a Master of Business Administration (Finance) from the American University, Washington D.C. He is also an Associate of the Institute of Bankers of Zimbabwe. 9
  10. 10. Group Companies Directorate African Banking Corporation of Botswana Limited African Banking Corporation Mozambique SARL Chairperson D Khama Chairman B Alfredo J Kurian J McGuffog D Moremi D T Munatsi T Mothibatsela V Viseu B Moyo Registered Address: No. 999 Avenida Julius D T Munatsi Nyerere, Polana Cimento, Maputo, Mozambique. Registered Address: ABC House, Tholo Office Park, Plot 50669, Fairground Office Park, Gaborone, Botswana. Tanzania Development Finance Company Limited African Banking Corporation Zambia Limited Chairman I Chasosa Chairman C Chileshe J Doriya N Kudenga J Kipokola C Milupi N Kudenga D T Munatsi DT Munatsi G Narder W Nyachia B Nundwe Registered Address: TDFL Building, Ohio St./ Z C Shaba Upanga Rd, J W Thomas P O Box 2478, Dar es Salaam, Tanzania. Registered Address: National Savings & Credit Building, Northend Cairo Road, Lusaka, Zambia. Microfin Africa Zambia Limited Chairperson R Credo R Jere African Banking Corporation Tanzania Limited R Liebenthal Chairman J Kipokola B Machila I Chasosa R Mavhunga R Dave L Mwafulilwa J Doriya Registered Address: Third Floor Alliance House D T Munatsi Cairo Road, South End. W Nyachia P.O. Box 32482, Lusaka, Zambia. Registered Address: First Floor Barclays House, Ohio Street, P.O. Box 31, Dar es Salaam, Tanzania. 10
  11. 11. African Banking Corporation Zimbabwe Limited Share Transfer Secretaries Chairman N Kudenga ABC Transfer & Secretarial Services (Pty) Ltd H Brits ABC House, Tholo Office Park, F M Dzanya Plot 50669, F R G Read Fairgrounds Office Park, J Sibanda Gaborone, Registered Address: ABC House, Botswana. Mount Pleasant Business Park, 1 Endeavour Crescent, Mount Pleasant, Harare, Zimbabwe. First Transfer Secretaries (Private) Ltd 13th Floor, Century House, Iroko Financial Products Limited 45 Samora Machel Avenue, Chairman D T Munatsi P O Box 11, F M Dzanya Harare, F Ekam-Dick Zimbabwe. U K Gujadhur Y K Juwaheer ABC Holdings Limited Registered Address: 10, Frere Felix de Valois Company Secretary and Legal Advisor Street, Port Louis, Mauritius. Armstrongs Attorneys 5th Floor, Barclays House, Incorporation Details P O Box 1368, ABC Holdings Limited Gaborone, Registration number: 99/4865 Botswana. ABC House, Tholo Office Park, Plot 50669, Fairgrounds Office Park, Gaborone, Botswana. Auditors KPMG Certified Public Accountants Plot 50364B, Fairgrounds Office Park, Gaborone, Botswana. 11
  12. 12. Organisation Structure - ABC Holdings Ltd ABC Holdings Ltd (listed on BSE & ZSE) Tanzania Development Iroko Financial Microfin Africa Finance Company Ltd Products Zambia ABC ABC ABC ABC ABC Other ABCH Zimbabwe Mozambique Botswana Zambia Tanzania Subsidiaries Regulated Banking Regulated Financial • Only significant operating subsidiaries are shown Institution Institution Group Management - ABC Holdings Ltd Chief Executive Officer Chief Financial Chief Risk Legal Chief Banking Officer Officer Council Officer Group Head Country Group Head Treasury and Managing Investment Structured Directors Banking Finance Chief Group Group Head Information Internal Human Officer Audit Resources 12
  13. 13. Governance Structure - ABC Holdings Ltd ABC Holdings Ltd (Board of Directors) Nominations Executive Audit and Risk Remuneration Committee Committee Committee Committee ABC ABC ABC ABC ABC Microfin Africa Mozambique Botswana Zambia Tanzania Zimbabwe Zambia Board Credit Board Credit Board Credit Board Credit Board Credit Board Credit Committee Committee Loan Review Committee Committee Committee Committee Management Management Management Management Management Management Committee Committee Committee Committee Committee Committee Audit Audit Audit Audit Audit Audit Committee Committee Committee Committee Committee Committee 13
  14. 14. Chief Executive Officer’s Report Headline earnings It is pleasing to note that with the exception of ABC 100 Tanzania which recorded a small attributable loss of BWP 13 000, all banking operations recorded profits in Headline earnings (BWP ’million) 80 2006, a good indication that the Group is now poised to 60 deliver sustainable future earnings for the shareholders. 40 Botswana and Zambia doubled their earnings in 2006 77 70 in comparison to 2005, whilst Mozambique registered a 61 20 36 95% increase in attributable earnings. The turnaround 22 0 of Microfin Zambia during the second half of the year is 2002 2003 2004 2005 2006 indeed a good development as the operation recorded a Profit for the year and return on average equity profit of BWP 0.969 million for the year, coming from a half year loss of BWP 9.3 million. Owing to the above, 100 45% the subsidiaries outside Zimbabwe contributed BWP 90 40% 31 million to the bottom line, which translates to 33% 80 35% 70 of current year attributable profits. This year’s solid 30% 60 25 % performance is indicative of the fact that the Group has ROaE Profits 50 40 20% now matured and its diversification strategy is beginning 30 15% to bear fruit. 10% 20 10 5% 0 0% The Group’s return on average assets improved from 2002 2003 2004 2005 2006 3.2% in 2005 to 4.1% in 2006. Strong growth in operating Profit for the year ROaE income was the main driver of the increase in the ratio. Overview ABC Holdings Group once again produced an excellent Financial Performance Net interest income set of results for the year ended 31 December 2006, with Net interest income amounted to BWP 118 million down strong contributions from all major banking subsidiaries. from BWP 126 million recorded in 2005. The reduction Attributable profit at BWP 93 million was 60% higher than is a result of translation of Zimbabwe operations results BWP 58 million recorded in prior year. Group headline at an exchange rate of ZWD 397:BWP 1 compared to earnings of BWP 77 million were 26% higher than prior ZWD 16: BWP 1 used in 2005. On a segmental basis, all year earnings of BWP 61 million. Headline earnings per the other subsidiaries recorded increases in net interest share increased by 15% to 62 Thebe in comparison to income in 2006 compared to 2005 as a result of an 54 Thebe achieved in the previous financial year. Average increase in interest earning assets. Mozambique and return on shareholders’ equity of 40% is in line with the Botswana contributed 17% each to net interest income Group’s long-term target and is significantly higher than due to a combination of an increase in interest earning 32% achieved in 2005. The satisfactory return on equity assets and the portfolio mix. The Zimbabwe operations is attributable to a combination of solid earnings growth contributed 24% due to the high margins prevailing in and sound capital management in spite of the interest that market. Net interest margin in respect of average and exchange rate volatility in some countries that the earning assets increased during the year in spite of the Group operates in. Net asset value per share improved to continued pressure on lending margins as a result of both BWP 2.08 from BWP 1.63 recorded in 2005. competition and a general reduction in rates. 14
  15. 15. Chief Executive Officer’s Report Impairment of loans and advances Taxation Impairment of loans and advances of BWP 26.4 million The Group’s effective tax rate reduced to 33% in 2006, for the year ended 31 December 2006 was higher than compared to 37% recorded in 2005. The reduction is BWP 20.7 million recorded in 2005. ABC Botswana, ABC attributable to higher income being generated in lower tax Tanzania and Microfin Africa Zambia contributed BWP 22 regimes and the return to profitability of operations which million to impairments. The resolution of the reconciliation recorded losses for which no tax relief was obtained in and arrears issues in Microfin Africa Zambia led to an prior years. overall reduction of the impairment charge by BWP 5 million in the second half of 2006. The ratio of non- Balance sheet review performing loans to gross loans declined to 11% from The balance sheet grew by 37% from BWP 1.9 billion 13% recorded in 2005. The non-performing loans ratio is recorded at 2005 year-end to BWP 2.6 billion as at 31 still considerably higher than the industry average and the December 2006. The growth is attributed to organic growth Group is working hard to reduce this to more acceptable in the subsidiaries, coupled with the USD 60 million long- levels of between 2% to 3%. term debt raised by the holding company from National Development Bank of Botswana (NDB) and BIFM Capital Non- interest revenue during the last six months of 2006. Non-interest income increased by a commendable rate of 25% to BWP 180 million in 2006 compared to BWP Loans and advances increased by 41% from BWP 666 145 million recorded in 2005. Some 29% of the total non- million to BWP 941 million at end of 2006. In a bid to funded revenue was derived from the investment portfolio improve net interest margin Botswana recorded a 49% held for trading. Foreign exchange gains contributed 22% increase in loans and advances. Zimbabwe’s contribution with transaction based fee and commission income also has shrunk to below 1% as the balance sheet is strategically contributing 22%. Botswana, Mozambique and Zambia skewed towards low risk liquid assets. Overall, the quality recorded impressive foreign currency trading income as of loans improved during 2006, with the non-performing a result of higher volumes and slightly enhanced margins loan ratio reducing from 13% at 2005 year end to 11% at in 2006. 31 December 2006. Operating expenses Five year loans and NPL movement 1000 16 % 900 80 14 % 74% 800 Cost to income ratio 70 12 % 63% 700 60 600 10 % 50 55% 56% 40 49% 500 8% 30 400 941 6% 666 662 636 20 300 10 4% 397 200 0 2% 100 2002 2003 2004 2005 2006 0 0% 2002 2003 2004 2005 2006 Cost to income ratio of 49% is significantly better than 56% Loans NPLs recorded in 2005 and marginally better than the Group’s short-term target of 50%. The reduction in the Group’s cost Deposits increased by 8% from BWP 1.4 billion at to income ratio is due to a combination of higher operating 2005 year-end to BWP 1.5 million as at 31 December income and containment of operating expenses for the 2006. Significant growth was recorded in Botswana year ended 31 December 2006. and Mozambique. ABC Tanzania and ABC Zambia also recorded increases in deposits albeit coming off a low Operating expenditure in absolute terms reduced from BWP base. ABC Zimbabwe recorded a hefty 72% reduction in 152 million to BWP 145 million mainly as a result of the deposits from BWP 149 million to BWP 42 million. The depreciation of the Zimbabwe dollar which resulted in ABC reduction in Botswana Pula terms is a result of the strong Zimbabwe costs being lower than prior year in Botswana performance by the equities which are perceived to be Pula terms. On a segmental basis, ABC Mozambique and an inflation hedge, hence significant funds have been ABC Zambia recorded the highest operating expenses with invested in the property and equity market. In addition, the ABC Tanzania recording the lowest costs in the Group. Staff massive depreciation of the ZWD has resulted in deposits costs amounted to BWP 83 million (2005: BWP 88 million) coming down in BWP terms. Botswana contributed 56% and constituted 57% of total cost base compared to 58% to total deposits slightly down from 58% recorded in in 2005. Total number of employees reduced from 369 in 2005. 2005 to 342 at end of 2006. 15
  16. 16. Chief Executive Officer’s Report (continued) 1,800 Botswana 1,600 1,400 African Banking Corporation of Botswana Limited – 100% holding Deposits (BWP ’million) 1,200 ABC Botswana’s attributable profits at BWP 11.8 million 1,000 are more than double the USD 5.1 million achieved in 1,535 800 prior year. The performance is commendable considering 1,415 1,222 600 1,048 400 the level of loan impairment that was made relating to the 656 200 perennial non performing debt problem. The provisioning 0 exercise effectively put the impairment issue behind the 2002 2003 2004 2005 2006 bank. The operation recorded net interest income of BWP 20.4 million which covers 95% of operating expenses. Deposits by geographical segment The bank’s strong performance was underpinned by Zambia Zimbabwe improved foreign exchange trading income and fees 10% 3% Tanzania and commissions earned. Cost to income ratio at 49% is 12% significantly lower than 80% recorded in 2005 and is now within the group’s short-term target of 50%. Total deposits of BWP 1.1 billon comfortably exceed BWP 900 million as Mozambique Botswana at 31 December 2005. 20% 55% Mozambique Net asset value increased by 49% from BWP 185 million African Banking Corporation Mozambique Sarl – 100% holding to BWP 276 million. However, NAV per share increased ABC Mozambique posted profit of BWP 13 million for the by 27% as a result of an increase in issued and fully paid year ended 31 December 2006 compared to BWP 6.7 shares. The increase in shareholders’ equity is due to million recorded in 2005. The good performance was as a strong performance during the year and the new shares result of higher net interest income and foreign currency issued to preference shareholders under the Preference trading income. Cost to income ratio of 61% is significantly Share Restructuring Agreement (BWP 34.4 million) and lower than 69% recorded in prior year. Net asset value to employees and directors under the Staff and Directors’ increased to BWP 63.9 million from BWP 31.4 million Share Purchase Scheme (BWP 8.9 million). The increase in 2005, as a result of an additional capital injection of in NAV is commendable considering that the foreign BWP 18.1 million coupled with profit retention. Balance currency translation reserve increased by BWP 70 sheet footings increased from BWP 184 million to BWP million largely due to the depreciation of the Zimbabwe 382 million as at 31 December 2006. dollar. Shareholders’ equity in each of the main banking subsidiaries increased during the year on the back of Tanzania strong performance and the injection of capital from African Banking Corporation Tanzania Limited – 74% holding ABCH. All banking subsidiaries had healthy capital and Tanganyika Development Finance Company Limited – 68% holding liquidity ratios as at 31 December 2006. ABC Tanzania posted an attributable loss of BWP 17 000 for the year ended 31 December 2006 compared to a Shareholders equity (BWP ’million) 300 prior year loss of BWP 3.3 million. Although the bank’s losses have continued, there has been a significant 250 decrease in their magnitude from 2005 to 2006. The major 200 contributors were the improvement in net interest income 150 due to an increase in the balance sheet and margin. The 276 reasonably good performance was dented somewhat by a 185 100 173 153 huge impairment of loans and advances of some BWP 4.8 137 50 million on two accounts. Were it not for this the operation 0 2002 2003 2004 2005 2006 would have posted a profit for the first time since its formation. Whilst cost to income ratio at 84% is better than Segmental Analysis 115% achieved in 2005, it is still well above the Group’s Geographical Segment- Profit for the year ABCH and other short-term target of 50%. Total assets grew by 61% 2% Botswana 13% from BWP 140 million to BWP 226 million. Tanganyika Development Finance Company Limited (TDFL) recorded Mozambique profit for the year of BWP 3 million compared to BWP 2.2 14% million recorded in 2005. 2006 performance was buoyed Zimbabwe Tanzania 13% by dividend income and share of profits from Associate 67% Zambia 5% companies which contributed BWP 4.3 million. 16
  17. 17. Chief Executive Officer’s Report Zambia Business Segment African Banking Corporation Zambia Limited – 100% holding Treasury Microfin Africa Zambia Limited – 100% holding Treasury operations contributed markedly to the group’s ABC Zambia posted profit for the year of BWP 4.0 million bottom line with improved performances in all our banking compared to prior year’s profits of BWP 1.5 million. Income operations. Strong performance in foreign currency trading from Government securities and loans and advances were resulted in an 11% contribution to total income for the year. adversely affected by the falling interest rates. Late draw Interest from money market placements and investment downs on approved facilities also contributed negatively securities contributed 51%, down from 64% contribution in as the bulk of funds were invested in the low yielding 2005. The change in asset mix in Botswana and Mozambique overnight placements. In addition, mark to market losses contributed to this reduction as the group’s balance sheet of government bonds affected the operation and this led to was realigned towards lending assets. Interest from cash the disposal of long dated securities in the second half of and cash equivalents and investment securities reduced the year. Cost to income ratio reduced to 77% from 87% from BWP 206 million in 2005 to BWP 157 million in 2006. recorded in 2005. Net asset value improved markedly In Zambia, margins came under pressure as interest rates from BWP 29.4 million to BWP 50.6 million. However, eased in 2006, compared to 2005. The reduction in rates deposit mobilisation continues to be a big challenge for this was due to higher demand for government securities from operation. Microfin Africa Zambia Limited made a dramatic offshore and local investors emanating from the increased recovery from the huge loss of BWP 9.3 million recorded confidence from the investor community after the foreign in the first half of the year. The operation recorded a profit debt write off and the prudent fiscal policy management of BWP 1 million for the year ended 31 December 2006, by the Government. High net interest margins coupled with translating to second half performance of BWP 10 million improved liquidity contributed to the good performance by post tax. The remarkable recovery is a result of reversals the Zimbabwe treasury division. of the impairment loses and the high net interest income coupled with lower operating expenses in the second half. Corporate and Private Banking Corporate and Private Banking division had a satisfactory Zimbabwe year beating prior year performance by 30%. A pleasing African Banking Corporation Zimbabwe (Holdings) Limited – 100% holding growth in loan book was registered in Botswana and ABC Zimbabwe posted profit after tax of BWP 62 million Mozambique albeit margins remained under pressure for the year ended 31 December 2006 compared to in the big ticket transactions segment. Gross loan book prior year’s profit of BWP 53 million. Despite translating increased from BWP 729 million to BWP 1,019 million, the Zimbabwe results at Old Mutual implied rate of ZWD translating into a 40% increase. Interest from loans and 397: BWP 1 (2005: ZWD 16:BWP 1) the operation posted advances contributed 49% of total gross income up from impressive results mainly as a result of high net interest 36% recorded in 2005. Interest from loans and advances margins and mark to market gains on investment portfolio. increased by 30% from BWP 116 million recorded in 2005 Zimbabwe contribution to group profits reduced from 92% to BWP 151 million for the year ended 31 December 2006. in 2005 to 67% for the year ended 31 December 2006. The overall quality of the loan book improved during the Cost to income ratio at 23% is well within the group’s long- year as the ratio of NPLs to gross loans reduced from 13% term target of 40%. The environment in Zimbabwe will in to 11%. Despite this improvement in asset quality, the credit all likelihood continue to be challenging in 2007. However, impairment increased by 27% reflecting the increase in the we believe our strategy to preserve capital in Zimbabwe gross book. puts us in good stead going forward. As a result whilst Zimbabwe’s contribution to Group profits is likely to come Zambia recorded modest growth due to challenges in down as other operations continue to grow, we have no mobilising local currency funding. Tanzania held fort in doubt that Zimbabwe will be a significant contributor to spite of not having significant capital and closed the year Group profits, albeit at a reduced level. with a vibrant deal pipeline. 17
  18. 18. Chief Executive Officer’s Report (continued) The Zimbabwean macro-economic situation continued to During the year, Group Finance made progress in implementing deteriorate in 2006 with no signs of slowdown in the meltdown. the Management Information System and this is seen as a good This was compounded by unpredictable and inconsistent ingredient in ensuring timeous financial reporting to both internal monetary policy pronouncements resulting in the corporate and external stakeholders. To ensure that staff in Finance are sector restricting borrowings. A deliberate policy has been taken up-to-date with new regulations and International Financial to curtail lending in Zimbabwe as the inherent interest and credit Reporting Standards, training sessions were organised in the risks outweigh the potential returns on lending. Consequently the countries and at group level. loan book has shrunk to an all time low of only BWP 6 million as at 31 December 2006. Group Risk is responsible for monitoring the key daily risks faced by the Group, including credit, market and operational risk. Overall the Division improved on credit administration resulting in The risk management function of the Group are vested in the a noticeable improvement in the quality of the loan book across Group Risk department headed by the Chief Risk Officer who the group. Injection of fresh capital in our operations outside has direct access to the Audit and Risk Committee. Credit risk Zimbabwe which has raised the single obligor limits of those has continued to be a key area receiving attention from the risk operations will see this Division becoming a meaningful player department. There has been improvement in the ratio of non in the short financing arena in the middle to blue chip corporate performing loans to gross loans in 2006 as a result of enhanced sector in all the markets we operate. monitoring and reporting by the department. Microfinance Internal audit plays a key role in maintaining and improving the Strong brand recognition and loyalty in the market place enabled internal control environment in the group. The department is the operation to maintain a steady loan book. The unit is poised to headed by the Group Internal Auditor who reports directly to the grow in 2007 as the legacy issues have been addressed. Audit and Risk Committee and his reports are acted upon by management throughout the group. Investment Banking The group’s investment banking division contributed 3% to total The Group Human Resources department is responsible for income up from 2% recorded in 2005. Assets under management human capital management and formulating HR and reward reduced slightly from BWP 257 million to BWP 256 million as a strategies for the group. The head of the HR department reports result of the exchange movement in Zimbabwe. directly to the Group CEO. The Group has a strong management team within the country operations and at the centre. The Support Divisions team comprises highly qualified and experienced bankers The Group continued to place emphasis on technology with on- with a wealth of international and local experience. The Group going investments in IT. The group operates a centralized IT unit is seeking to build a deep bench of skilled and experienced with responsibility for all components of the Group’s technology managers through its comprehensive Graduate Management development and support services. In the second half of 2006 Development Programme. Following the success of the first the group experienced serious VSAT connectivity issues. Owing to intake of 2003, the second programme which commenced in the above a decision has been taken to migrate from the current 2005 had overwhelming response from all countries. The Group Linkway mesh network to the I-Direct network. We remain of the is soon to implement an Executive Management Development view that this will result in marked improvement in connectivity Programme which will groom future ABC senior executives. and should help in improving service levels to our customers. Further the group is in the process of implementing the Balance In addition the FCC Banking platform will be upgraded from the Score Card, a tool for formulating strategy and measuring current version 5 to the latest version 7.X. This should enable performance of the organisation down to the individual. the Bank to offer products that have hitherto not been part of its service offering. The upgrade will deliver significant benefits to Future prospects our business units and ultimately to our customers. Following the injection of capital into the subsidiaries the Group’s medium term ambition is to position all banking operations Group Finance is responsible for Management and Financial into the top tier of every market that it operates in. This will be reporting, Regulatory reporting, Budgeting and Group Tax. achieved by expanding product range and networks to meet the 18
  19. 19. Chief Executive Officer’s Report organic growth demands. Where opportunities arise, the Group Rating will seek to pursue acquisitions which will enhance both the Global Credit Rating has awarded ABC Holdings Limited an balance sheet and earnings. improved rating of BBB for long-term debt and remains at A3 for short-term debt. This is a welcome development as it reinforces Whilst ABC Zimbabwe’s contribution will continue to be the general positive market perception that the ABC Group is significant, it is pleasing to note that, its overall contribution is much improved and poised for exciting growth. We expect the projected to come down from 67% in 2006 to below 50% in rating to translate into stronger deposit mobilisation for the whole 2007 as other subsidiaries’ performance improves. Group. Clearly the prospects for the Group have never been brighter. Acknowledgements The Group has successfully dealt with the perennial problems of I would like to thank and congratulate management and staff on bad debts, cash flow and lack of capital. Management and the these pleasing set of results. Board believe that the Group is now on a firm footing to achieve sustained growth going forward. Our biggest challenge for 2007 and beyond is to deliver growth which is commensurate with our current and planned capitalisation and the expectations of our capital partners. It is DT Munatsi – Chief Executive Officer clear that the ability of our operations to respond to the new 6 March 2006 capitalisation will take some time to entrench. 19
  20. 20. ABC Holdings Limited Capital Adequacy Capital Adequacy statement as at 31 December 2006 2006 2005 2004 2003 2002 % % % % % CAPITAL ADEQUACY OF ABC BANKING OPERATIONS ABC Zimbabwe Limited 23% 32% 17% 13% 13% ABC Botswana Limited 30% 23% 24% 19% 20% ABC Mozambique Sarl 31% 18% 21% 21% 38% ABC Zambia Limited 27% 22% 21% 24% 21% ABC Tanzania Limited 20% 10% 11% 6% 12% Consolidated Capital Adequcy of ABC Holdings Limited on a Historical Cost Basis 2006 2005 Asset per Risk-weighted Asset per Risk-weighted Balance Sheet Assets BWP Balance Sheet Assets BWP BWP ’000s ’000s BWP ’000s ’000s RISK-WEIGHTED ASSETS On balance sheet 0% risk weighting 1,047,073 - 799,003 - 20% risk weighting 339,338 67,868 215,709 43,142 50% risk weighting 47,322 23,661 5,008 2,504 100% risk weighting 1,157,595 1,157,595 853,995 853,995 Off balance sheet 0% risk weighting - 1 - 50% risk weighting 57,136 28,568 46,738 23,369 100% risk weighting 79,353 79,353 31,684 31,684 Total 2,727,817 1,357,045 1,952,137 954,694 Qualifying Capital Percentage of Percentage of 2006 2005 risk-weighted risk-weighted BWP ’000s BWP ’000s assets assets PRIMARY CAPITAL Share capital and premium 270,157 20% 225,205 24% Capital Reserves and Retained Earnings 329,218 25% 213,534 22% Goodwill and FCTR (358,666) -27% (288,177) -30% 240,709 18% 150,562 16% SECONDARY CAPITAL Preference share capital - - 23,011 - General debt provision (50%) 4,285 - 3,018 - Available for sale reserves 908 - 1,364 - 5,193 0% 27,393 3% TOTAL QUALIFYING CAPITAL 245,902 18% 177,955 19% This statement has been prepared by applying the risk weightings applicable to regulated banks in Botswana, to all group assets, in order to derive a consolidated capital adequacy ratio. It is intended as a guideline only . 20
  21. 21. Products and S Corporate and international banking Products offered by treasury division include: The corporate and international Banking division has Domestic highly motivated and professional staff with a wealth of • demand deposits experience who are able to provide clients with prompt, • call deposits advice and personalised service. • forward rate agreements • Bills of Exchange, including Treasury Bills, Banker’s The team strives to carefully balance available resources Acceptances, Accommodation Bills, Negotiable to fulfil the group’s goal of achieving high capital ratios, Certificates of Deposit, Promissory Notes and liquidity and strong credit quality. The division offers the Commercial Paper; following comprehensive facilities: • capital markets instruments including government, • bridging loans municipal and parastatal bonds; and • short-term loans • other derivate products, including but limited to • medium term loans options on bonds and index linked bonds • cash advances • off-shore finance (import and export) International • documentary letters of Credit • demand deposits • guarantees • call deposits • asset finance • spot foreign exchange market transactions in major • syndicated loans and certain regional currencies; • commodity finance • forward exchange rates • currency options African Banking Corporation’s international banking • currency swaps team uses its experience to provide clients with high level expertise in conducting international banking Investment banking transactions. ABC’s investment banking division is committed to: • delivering first class, independent professional Treasury advisory services; Our Treasury team is committed to providing world-class • establishing strong value- added partnerships by service in every sphere, both domestic and international acquiring an in- depth understanding of clients’ by: businesses; • providing a top quality and professional level of • creating innovative financial structures to achieve service in both domestic and international financial clients’ strategic goals consistent with their cost and markets; risk management objectives; • offering interest and exchange rates that are among • effecting corporate restructurings with the objective of the most competitive in the market; reducing cost of borrowing and managing foreign • being one of the market leaders in the development exchange risk in order to help create wealth for its of new financial products in the respective countries; clients; • supplying an impartial and expert advisory service; • providing expert underwriting and placement and building a close personal relationship with clients capability for equity and debt issues; to obtain a full understanding of their particular • raising long term capital on both corporate and businesses in order to tailor services that meet project finance basis; individual needs. • structuring privatisations to unlock value for Government, create ownership opportunities for the public and private productive assets in the hands of the private sector; 21
  22. 22. Products and services (continued) • establishing and maintaining relationships with major Structured trade finance stockbrokers, accounting and legal firms, as well as Our structured trade finance unit creates tailor-made emerging market funds and institutional and private frameworks to cater for clients’ requirements and needs investors; and outside normal banking credit lines. Here the focus is on • employing and motivating professionals of the highest underlying transaction flows, rather than balance sheet calibre and integrity. strength. Advisory services Whilst core trade products, such as negotiable • Debt and equity capital markets instruments (e.g. bills of exchange, promissory notes) - Private placements and documentary credit (letters of credit), still play a role - Privatisation in cross-border trade, our structured Trade Finance Unit - Mergers, acquisitions and disposals provides more sophisticated derivatives of these products - Restructuring and risk-hedging instruments. • Project financing - Infrastructure Finance Types of financing includes back to back transactions, - Public-private partnership or private finance collateralised management stock financing, avalised note - Mining finance discounting, structured discounting facility and order - Property Finance finance. • Securitisation Investment management services The investment management team advises and manages funds on behalf of institutional and retail clients. We offer: • Asset management for institutions and corporations. This includes exposure to equity, property, bond and money markets • Ancillary support services - safe custody, dividends, cash management and investment commentaries • Portfolio management • Unit trusts which include; - Equity-based funds - Cash-based Funds - Property-based funds 22

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