Imara Group 2008 annual report

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Imara Group financial report for the year ended 30 April 2008

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Imara Group 2008 annual report

  1. 1. Imara Holdings Limited Group Annual Report Year ended 30 April 2008
  2. 2. Imara Holdings Limited Group Annual Report – 30 April 2008 CONTENTS Page/s Group Profile............................................................................................................................................................ 2 Directorate and Group Management ....................................................................................................................... 3 Glossary of Terms and Definitions ......................................................................................................................... 4 Five Year Financial Highlights ............................................................................................................................... 5 Graphical Five Year Financial Highlights .............................................................................................................. 6 Chairman’s Statement ......................................................................................................................................... 7-10 Chief Executive Officer’s Review of Operations ............................................................................................ 11-13 Report of the Directors ..................................................................................................................................... 14-18 International Footprint and Regional Offices ....................................................................................................... 19 Group Organisational Structure............................................................................................................................. 20 Corporate Governance ...................................................................................................................................... 21-24 Independent Auditor’s Report .............................................................................................................................. 25 Consolidated Income Statement ............................................................................................................................ 26 Consolidated Balance Sheet .................................................................................................................................. 27 Consolidated Cash Flow Statement....................................................................................................................... 28 Consolidated Statement of Changes in Equity ................................................................................................ 29-32 Notes to the Consolidated Financial Statements.............................................................................................. 33-78 Shareholder Information ........................................................................................................................................ 79 Shareholders’ Diary ............................................................................................................................................... 80 Notice of Annual General Meeting .................................................................................................................. 81-82 Form of Proxy ................................................................................................................................................... 83-84 1
  3. 3. Imara Holdings Limited Group Annual Report - 30 April 2008 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 P.O. Box 46699, Village, Gaborone Registration status: Registered in the Botswana International Financial Services Centre (IFSC) Tax Certificate Number 22 - Effective date 28 July 2003 Independent auditors: Ernst & Young Bankers: Close Bank Guernsey Limited Barclays Bank of Botswana First National Bank Limited (Botswana) First National Bank Limited (South Africa) Reporting currency: Botswana Pula (“BWP” or “P”) Transfer Secretaries: Corpserve Botswana Unit 3, Block A, Plot 117 Millennium Office Park, Kgale Hill, Gaborone Telephone: +267 393 2244 Facsimile: +267 393 2243 email: corpserve@info.bw 2
  4. 4. Imara Holdings Limited Group Annual Report - 30 April 2008 DIRECTORATE AND GROUP MANAGEMENT DIRECTORATE Imara Holdings Limited: PJS Gray Chairman British Non-executive MJS Tunmer Chief Executive South African Executive AR Fleming British Non-executive MS Golding South African Executive Resigned -18 July 2007 JR Legat British Executive ACH Mackeurtan South African Executive RH Macleod South African Executive Appointed-19 July 2007 RR Matthews British Non-executive M Mothibatsela Botswana Executive Resigned-31 October 2007 M Mothibatsela Botswana Non-executive Appointed-1 November 2007 SM Ndoro Zimbabwe Non-executive DE Stone South African Executive Company Secretary: DE Stone Botswana Stock Exchange Compliance Officer: DE Stone Audit Committee: RR Matthews Chairman Non-executive PJS Gray Non-executive SM Ndoro Non-executive DE Stone Executive Remuneration Committee: PJS Gray Chairman Non -executive RR Matthews Non-executive SM Ndoro Non-executive Nominations Committee: PJS Gray Chairman Non-executive ACH Mackeurtan Executive MJS Tunmer Executive MANAGEMENT MJS Tunmer Chief Executive Officer DE Stone Chief Financial Officer JR Legat Head: Asset Management MS Golding Head: Corporate Finance Resigned - 18 July 2007 RH Macleod Head: Corporate Finance Appointed - 19 July 2007 MJS Tunmer Head: Stockbroking 3
  5. 5. Imara Holdings Limited Group Annual Report - 30 April 2008 GLOSSARY OF TERMS AND DEFINITIONS The following is a glossary of terms and definitions used in this Annual Report: The glossary of terms and definitions above should be read in conjunction with the Group’s accounting policies. Term Meaning or Definition Attributable earnings the portion of net profit for the year, which is attributable to ordinary shareholders of the Company. Attributable earnings growth the percentage increase in attributable earnings, from one reporting year to the next. BEE broad based black economic empowerment. Cash flow the movement of cash in and out of the Group. Cost to income ratio cost of services sold plus operating expenses, as a percentage of total income, which comprises revenue and other income. Diluted earnings per share attributable earnings divided by the diluted weighted average number of shares. Diluted weighted average number of the weighted average number of shares increased by the number of shares that may be shares issued in future, as a result of existing dilutive instruments (share options & debentures). Dividend per share dividend declared for the year divided by the number of shares in issue at year end. Dividend yield Dividend per share as a percentage of the closing price of the Company’s ordinary shares. Earnings per share or EPS attributable earnings divided by the weighted average number of shares. Earnings yield Earnings per share as a percentage of the closing price of the Company’s ordinary shares. EBITDA Earnings before interest, taxation, depreciation and amortisation. Effective tax rate the tax (charge)/credit as a percentage of profit before taxation. Free cash flow per share net cash flows for the year, (inclusive of working capital changes), divided by the weighted average number of shares. Funds under management assets managed by the Group, which are beneficially owned by clients and as such do not form part of the consolidated balance sheet. Net asset value per share shareholders’ equity divided by the number of ordinary shares in issue at year end. Price earnings ratio the price of the Company’s ordinary shares divided by earnings per share. Pula or BWP Botswana Pula, the standard monetary unit of Botswana. Rand or ZAR South African Rand, the standard monetary unit of South Africa Return on average assets net profit for the year as a percentage of average total assets. Return on equity attributable earnings as a percentage of shareholders’ equity at year end. Revenue growth the percentage increase in revenue, from one reporting period to the next. Shareholders’ equity Stated capital plus reserves. The Group Imara Holdings Limited together with its subsidiaries and associates. The Company Imara Holdings Limited, a company registered in Botswana. Thebe The smallest monetary unit of Botswana amounting to one hundredth of a Pula USD or US$ United States Dollar, the standard monetary unit of The United States of America Weighted average number of shares the number of ordinary shares in issue at the beginning of the year, increased by shares issued during the year, which in turn are weighted on a time basis for the period during which they participated in the income of the Group ZWD or Z$ Zimbabwean Dollar, the standard monetary unit of Zimbabwe 4
  6. 6. Imara Holdings Limited Group Annual Report - 30 April 2008 FIVE YEAR FINANCIAL HIGHLIGHTS Years ended 30 April 2008 2007 2006 2005 2004 Re-stated Re-stated Re-stated Re-stated Salient financial results and data: Revenue P 000’s 174 960 127 481 57 680 30 368 14 191 EBITDA P 000’s 67 936 59 487 13 280 2 099 (6 502) Profit before taxation P 000’s 66 075 58 460 12 174 1 202 (7 114) Taxation P 000’s 9 692 10 847 2 716 1 155 (1 410) Profit after taxation P 000’s 55 582 47 437 9 457 47 (5 704) Attributable earnings P 000’s 56 449 48 143 9 816 47 (5 704) Weighted average shares in issue 000’s 54 877 51 700 46 613 41 789 2 868 Diluted weighted average shares in issues 000’s 56 602 53 678 53 569 50 731 2 868 Dividend per share – ordinary thebe 19,00 17,00 0,60 - - ( li liper share – special Dividend )* thebe 17,00 10,00 - - - Shareholders’ equity P 000’s 139 098 91 713 55 983 21 537 16 979 Total assets P 000’s 256 652 172 683 106 330 37 829 28 952 Free cash flows for the year P 000’s 9 910 7 563 13 431 (4 828) (8 319) Funds under management P m’s 3 457 2 058 1 128 217 141 Quoted share price at year end Pula 8,40 3,00 0,90 - - Ratios: Revenue growth % 37,24 121,01 89,94 113,66 196,20 Cost to income % 63,59 55,84 80,50 95,69 149,72 Attributable earnings growth % 17,25 390,46 Over 200 times 100,83 (365,69) Effective tax rate % 14,67 18,55 22,31 85,39 19,82 EPS- basic (All operations) Pula 1,03 0,93 0,21 0,001 (1,99) EPS- basic (Continuing operations) Pula 1,03 0.92 0,21 0,001 (1,99) EPS – diluted (All operations) Pula 1,00 0,90 0,19 0,004 (1,99) EPS – diluted (Continuing operations) Pula 1,00 0,89 0,19 0,004 (1,99) Return on equity % 40,53 51,72 17,53 0,22 (33.60) Net asset value per share Pula 2,53 1,77 1,20 5,15 5,92 Return on average assets % 26,27 34,00 13,12 0,15 (33,40) Price earnings ratio Times 8,16 3,22 4,27 - - Dividend yield – ordinary dividend % 2,26 5,60 0,67 - - Free cash flow per share Pula 0,18 0,15 0,29 (1,16) 2,90 Re-statement of prior years: 1. 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 prior year “per share” disclosures have been re-stated accordingly. 2. Certain revenue items previously classified as “Other Income” have been re-classified as “Revenue”. The re-classification has been undertaken to ensure full compliance with the accounting policies relating to revenue recognition, presentation and disclosure and to ensure consistency in reported financial information. 3. The financial statements for the year ended 30 April 2007 have been re-stated to take account of a prior year adjustment relating to Value Added Tax, (VAT), at the South African stockbroker Imara SP Reid. The impact of the adjustment is more fully described in Note 2. 5
  7. 7. Imara Holdings Limited Group Annual Report - 30 April 2008 GRAPHICAL FIVE YEAR FINANCIAL HIGHLIGHTS 6
  8. 8. Imara Holdings Limited Group Annual Report - 30 April 2008 CHAIRMAN`S STATEMENT Developing the theme from our last annual report, the Imara Group continues to successfully implement its strategic objective of broadening and growing its earnings base on the African continent and perhaps more importantly, improving the quality of its earnings. In this context, the Directors’ are pleased to announce that post tax profits in the year ended April 2008 increased by 17.2% from P 47.4 million to P 55.6 million, equivalent to P 1.03 per share. The company has increased its total dividend by 33% to 36 thebe per share. Net asset value per share increased from P 1.77 to P 2.53 while return on shareholder's equity was a healthy 40.5%. Summary of Group results and divisional contributions: Profit / (loss) before tax Profit/ (loss) before tax 2008 2007 Pula Pula Asset Management 46 922 300 11 632 364 Corporate Finance (5 217 885) 2 049 605 Stockbroking 25 553 790 45 096 432 Other (1 182 765) (318 846) Total 66 075 440 58 459 555 % contribution to Group % contribution to Group Asset Management 71,01 19,90 Corporate Finance (7,89) 3,51 Stockbroking 38,67 77,14 Other (1,79) (0,55) 100,00 100,00 Comparisons with the prior year are again problematic as the 2007 financial year included a non-recurring profit of P18.6 million from the sale of available-for-sale-financial assets. In a similar vein, the 2008 financial year's profits have been significantly and materially enhanced by performance fees earned from our stable of African Equity Funds, equivalent to approximately P35.2 million. However, it is a moot point whether performance fees should be classified as non-recurring for an investment management company. Irrespectively, one point to note is that the quantum amount of performance fees can only be determined at year end and it cannot be included in the Group's results during the year. The 2008 financial year was a challenging and stimulating period for us. On the internal front, we continue to strengthen our compliance, risk management and internal control systems and we have expanded our finance team to cope with the increasing demands and increasing complexity of our business. We have also made some key additions to our investment team while greater discipline and more formalisation of our business strategy process has lead to some exciting business initiatives which could have a significant impact on the Group in years to come. Finally, we have successfully concluded a BEE transaction in terms of which a 20% interest in each of our South African businesses has been transferred to a BEE consortium, with whom we look forward to working closely. 7
  9. 9. Imara Holdings Limited Group Annual Report - 30 April 2008 CHAIRMAN`S STATEMENT (continued) On the external front, world market conditions became progressively more difficult during the course of the year as the sub-prime market crisis got overtaken by the spectre of rapidly rising inflation and declining economic activity. Given this backdrop, our South African stock broking subsidiary, Imara SP Reid, (“ISPR”) did well to hold profits steady, stripping out last year's non-recurring gain on a financial asset sale. Local market conditions in the RSA were extremely choppy as characterised by a wide divergence in performance of the various sectors - banks shed 24% on an annual basis as the Reserve Bank increased interest rates while booming resource prices saw a 36% increase in resource sector prices. Against this backdrop, ISPR’s net profit after tax came in at ZAR 20.95 million as average monthly brokerage rose from ZAR 2.73 million in the 2007 financial year to ZAR 2.96 million in the current year and the average trade per month figure increased from 9076 to 9883 trades over the same period. However, notwithstanding all this and the broadening of our earnings base, it has been becoming clear that 2008 - 2009 will be even more challenging and difficult, especially for our futures side, but such is life in a notoriously volatile and cyclical business. In the meantime, tight cost controls and good risk management should limit the downside. Our Pan African brokerage company, Imara African Securities, opened its doors for business late last year. The company has been actively recruiting dealers and analysts and with the addition of Cote d'Ivoire, Ghana and Uganda, we can now trade eleven markets with all the necessary settlement and custody arrangements now in place. Although, it is early days, the portents for this business look good. Our asset management business exceeded all our expectations in 2007 - 2008 and a 299% increase in net profits was substantially ahead of budget. The net asset value of our flagship Imara African Opportunities Fund increased by 297% from USD 70 million to USD 250 million while the unit price rose by some 30% including a performance fee of over USD 7 million. Our Imara Zimbabwe Fund, part of our Imara African Series of specialist funds, experienced an accelerating trend of new subscriptions towards the end of the year, rising from USD 9.4 million at the end of the previous year end to USD 30.5 million, an increase of 224%. This fund also rose by some 30% generating a performance fee of USD 1.6 million. The other two and more recent additions to our Imara African Series stable, namely East Africa and Nigeria, experienced more modest developments, but should be important contributors in due course. In the longer term, African markets' relatively low correlations to world markets and low institutional exposure to this asset class has resulted in robust and sustained demand for our investment products notwithstanding a depressed world backdrop. Our Corporate Finance division recorded a small loss for the 2008 financial year as a result of some key staff resignations and the subsequent re-building of the team, which inevitably had an impact. Notwithstanding this, the division successfully executed eight corporate finance mandates during the period under review and at year end; we had five mandates as work in process. In addition, the division is recovering strongly and now has a solid pipeline of interesting transactions consisting of a further eight mandates, three of which were signed after year end. In the meantime, several investment type new products such as a Private Equity Fund are under active consideration and construction which should increase the quality of this division's earnings, let alone the quantum, in the longer term. On balance, looking at the carnage in the banking/finance sectors around the world and political crises in African countries such as Kenya and Zimbabwe (where our associate is still producing satisfactory profits) our results for 2007 - 2008 could be deemed somewhat satisfactory whilst solidly underpinning our strategic business model. However, there is no room for complacency. 8
  10. 10. Imara Holdings Limited Group Annual Report - 30 April 2008 CHAIRMAN`S STATEMENT (continued) In this context and recognising our large cash holdings, we have increased the dividend by 33% to 36 thebe per share. However, as in the previous year we have divided the dividend into two tranches - an ordinary dividend of 19thebe reflecting the core/underlying business and a "special" dividend of 17thebe per share reflecting the exceptional performance fee which may or may not be non-recurring. Only time will resolve the debate, but given the dynamics of our operating environment, prudence and caution should prevail. This approach should also extend to our forecast for the current year where it is difficult to be optimistic, especially given the progressive softness in our broking division. However, having said that, our conservatively based budgets suggest that overall Group profits could be maintained at current levels - a significant achievement under current conditions. In addition, recent history would suggest that the forecast risks could be asymmetrically biased to the upside as we progress to Q3 and Q4 of our financial year. With regards to the longer term outlook, it is probably fair, given recent developments in Africa, to revisit our relatively bullish scenario outlined in our last annual report. Investors will recall we based some of our optimism on the following assumptions: 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. In addition to the points listed above, there have been some other somewhat more latent themes, which have knitted these points neatly together, namely: 1) African markets are an "emerging" asset class in their own right 2) African markets are, from an institutional perspective, under owned in a global context 3) African markets have demonstrated fairly low correlations with developed markets Given political setbacks in countries such as Kenya, Zimbabwe's political elites dogged determination to win Olympiad style records for hyperinflation and South Africa's president elect's challenge to the country's established political institutions, has this strategic vision gone either terribly wrong or at least suffered a major setback? On sober and mature reflection, we believe that, against the backdrop of the worst global financial crisis for the last 50 years, our bullish strategic scenario remains relatively intact possibly enhanced by two relative new developments; namely the boom in commodity prices and China's increasing involvement in the continent. It should be borne in mind that Africa is a complex patchwork of a myriad of politico-economic systems and situations, each with their own rhythm or advances and setbacks often referred to as "two steps forward one step backwards"; as Kenya lurched into it's long awaited and somewhat anticipated political crisis, (one step back), Angola has successfully emerged from it's domestic civil strife to record GNP growth rates in the order 15% - 20% per annum (two steps forward). 9
  11. 11. Imara Holdings Limited Group Annual Report - 30 April 2008 CHAIRMAN`S STATEMENT (continued) Admittedly, African market valuations are no longer as attractive as they were and inevitably the global stock market crisis has impacted somewhat on market correlations. However, not only do we believe that our core themes and assumptions are broadly intact, but more importantly that there is still a plethora of business opportunities in this large emerging and diverse continent for nimble entrepreneurial players such as Imara. In the meantime, growing organically from a small base, some of our key strategic moves to exploit these opportunities have already had a major impact on the Group and with some exciting initiatives in the pipeline, we feel we are still in control of our own destiny and growth trajectory. As we stated before, there is no room for complacency and from an insider’s or internal perspective, there is still work to be done on improving or strengthening some management issues such as manpower planning, internal communication, effectiveness of financial reporting and so on. However, none of this is apparent from an external perspective as we seem to move effortlessly through the various stages of our corporate development, avoiding some of the major traps awaiting ambitious companies such as ours. Admittedly we have made some errors of judgement along the way, but these have been detected early, corrected immediately and have had a limited impact on our strategic development. Indeed, somewhat perversely, we have learnt and benefited from these inevitable mistakes that small rapidly developing companies usually make and the Group is stronger as a result. In the meantime, we have not deviated from our key strategic goals of broadening our footprint in terms of geographic and earnings diversity, improving the quality of our earnings in terms of visibility, stability and predictability whilst striving for cyclically adjusted strong earnings growth and high returns on equity. Inevitably, we will meet some tough patches along the way; our current operating environment is probably almost certainly one of those, but in the long term we believe Imara's strategic vision is intact and we are well equipped to exploit it. My thanks to our Founder and CEO, Mark Tunmer, his team of executives and all our hard working staff who have made this possible. We have come a long way but in some respects, we are still at the early stage of a long and hopefully profitable journey. P GRAY CHAIRMAN 5th September 2008 10
  12. 12. Imara Holdings Limited Group Annual Report - 30 April 2008 CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS Group Review The Imara Group has produced strong 2008 after tax earnings of P55.6 million, which were 17% above the prior year. Prior year earnings included a non-recurring profit of P18.6 million, which arose from the sale of available for sale financial assets. It is encouraging to note that this performance was achieved despite relatively unfavourable market conditions in the second half of the year. Asset Management was the largest contributor to Group profit, primarily based on the strong performance of the Africa Funds, whilst Imara SP Reid did well to match last year’s earnings at the operating level. The Corporate Finance division recorded a small loss due principally to the loss of certain key staff. The Asset Management division witnessed significant growth in funds under management, which, including our associate companies, totalled almost BWP3.5 billion at year end. Revenues grew considerably to account for 48% of Group revenue, whilst the performance fees on the Imara African Opportunities Fund and the Imara Africa Series, were a major contributor to Group profits. With the exception of Imara Asset Management Botswana, all businesses were profitable or breakeven and cash flow positive. Despite the very difficult markets, in South Africa there was growth in funds under management, which resulted in a breakeven position with positive cash flow. The financial planning and advisory firm acquired at the beginning of the year was successfully integrated into the business and is making a positive contribution. The recent launch of our first South African unit trust, the Imara Equity Fund and the establishment of the Imara International Managed Fund, as a vehicle for our offshore investment allowance is expected to enhance earnings going forward. There were a number of divisional highlights in the year, which included the launch in January of the Imara East Africa Fund, which is the third sub fund in the Imara Africa Series. The Imara African Opportunities Fund had a very strong year with net asset value growing from US$70 million to close the year at US$250 million (July US$247 million). It was again necessary to manage inflows as far as possible to match underlying liquidity in the markets. Of significance was the positive performance of the Nigeria Fund and the Zimbabwe Fund despite volatility there. On a disappointing note, a decision was taken to mothball Imara Asset Management Botswana in October 2007 due to its failure to be appointed as one of the managers to the Botswana Public Officers Pension Fund in mid 2007. Imara SP Reid was again a positive contributor to group profits despite difficult world markets due to the sub- prime crisis, rising inflation and slowing economic activity. After adjusting for the non-recurring profit last year of P18.6 million, profits were flat, a significant achievement in this environment. The derivatives division continued to perform well while assets under administration grew by 11%. It was also encouraging to note a 9% increase in the average number of trades carried out per month. Our Malawi associate, Stockbrokers Malawi Limited, had a difficult year despite strong market performance. This was due to changes in senior management, which have now been rectified. The company was sponsoring broker to the very successful privatisation and listing of NBS Bank Limited. In Zimbabwe, Imara Edwards again had a strong year despite the difficulties inherent with dealing in that market. Imara Africa Securities, despite registering a small operating loss, continued to receive a positive response from international investors. Broking services are now being offered in Botswana, BRVM (Cote d` Ivoire, Benin, Guinea Bissau, Niger, Mali, Togo, Burkina Faso, Senegal), Ghana, Kenya, Malawi, Mauritius, Namibia, Nigeria, Uganda, Zambia and Zimbabwe. The team has been bolstered with the recruitment of two analysts and a dealer, which places the company in a strong position to grow its service delivery going forward. 11
  13. 13. Imara Holdings Limited Group Annual Report - 30 April 2008 CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS (continued) The Corporate Advisory division had a very disruptive year with the resignation of Michael Golding, who headed up the division, in July 2007. This was followed during the year by the resignation of three other executives. A considerable effort has been put into rebuilding the team under Rod Macleod and I am pleased to report that this is now complete. The team is now well balanced with a strong skills set. Despite these difficulties eight mandates were successfully completed. These included the inward listing of Rockwell Diamonds on the JSE Securities Exchange, the disposal of a stake in Koornfontein Mines, the disposal of CDC Group’s rubber plantations and factory in Cote d`Ivoire and the privatisation and listing of NBS Bank on the Malawi Stock Exchange. In addition to this two new products were launched after year end, which should provide annuity income to the division. These include the Imara African Private Equity Fund and the Imara Participating Underwriting Programme. We were also particularly pleased to be appointed as lead adviser together with our Zambian partners, Stockbrokers Zambia, for the privatisation and listing of the Zambia National Commercial Bank (ZANACO) on the Lusaka Stock Exchange. Our Zimbabwe associate worked on nine mandates, but the year was dominated by executing as lead adviser the merger of Meikles Africa, Kingdom Financial Holdings, Tanganda Tea Company and Cotton Printers to form Kingdom Meikles Africa. This was the largest corporate transaction in the history of the Zimbabwe Stock Exchange. Prospects for the coming year are encouraging with mandates being executed in Botswana, Malawi, South Africa, Zambia and Zimbabwe while the pipeline is strong. Our associate, Imara Capital Zimbabwe performed well in a continually deteriorating environment in which hyper- inflation and currency weakness are the dominant economic forces. The Zimbabwe Stock Exchange is the only viable investment destination for local institutional and private investors and as Imara Capital Zimbabwe is directly geared to the Stock Exchange, it provides a strong inflation and devaluation hedge. Skills retention remains a problem despite management’s best efforts. The current year has started positively. Efforts to grow the Imara business and to increase its geographical spread continued. Agreement was reached in January with ICEA Asset Management to co-manage the Imara East Africa Fund and it is hoped this will lead to stronger ties. Subsequent to the year end a license was granted to Imara Trust Company (Mauritius) Limited, which will provide a full trust and offshore service to our African clients. Initiatives to gain a presence in West Africa and other countries are ongoing. Imara Holdings remained listed on the Venture Capital Market of the Botswana Stock Exchange and it is our stated intention to apply to move to the Main Board once we have achieved the minimum of 300 shareholders. At present we have 261 shareholders and it is expected that Imara will meet the requirements this year to facilitate this move. The 10 for 1 share split, which was approved by shareholders in August 2007, has assisted liquidity. In the year under review liquidity was 10.67% (2007 – 3.8%) with 5.9m shares, with a value of P43.65m, trading (2007 adjusted for the 10 for 1 split - 2.02m shares/P2.86m). In March, your Directors deemed it prudent to publish a Trading Update, to advise shareholders that the results for the year ended 30 April 2008 could be significantly affected by the performance fees earned on the Africa Funds. These fees, which crystallised on 30 April 2008, did have a substantial impact on Group earnings and as such, a further Trading Update was published in May. Imara shareholders approved the South African empowerment transaction, at the Annual General Meeting in October 2007, in terms of which Zingwenya Holdings now holds a 20% interest in each of the South African operating subsidiaries. It is believed that Zingwenya Holdings’ three prominent shareholders will add significant value to the South African operations. In addition to this, work is ongoing to establish a broad based trust, which will own 5% of the three operating subsidiaries. With this in place Imara will have achieved the recommended ownership requirements in terms of the Codes of Good Practice on Black Economic Empowerment. 12
  14. 14. Imara Holdings Limited Group Annual Report - 30 April 2008 CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS (continued) Staff training remains a high priority and in this regard Imara SP Reid continues to assist with the training of analysts for the regional offices. Imara Capital Zimbabwe has also initiated a training programme for analysts as well as administrative staff. Outlook With global markets still weak as a result of the sub-prime crisis and certain African markets experiencing weakness this year, it is expected that it may be difficult to match the record earnings achieved in 2008. Despite this Imara is expected to produce acceptable earnings in the current year but this will be dependent on market conditions. In closing, I would like to thank my Chairman, Philip Gray, and the Board of Directors 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 Rod Macleod, who joined the board as his replacement. Finally, I would like to acknowledge the tremendous effort of the Imara staff, all of whom continue to contribute to the success of the Group. MJS TUNMER CHIEF EXECUTIVE OFFICER 5th September 2008 13
  15. 15. Imara Holdings Limited Group Annual Report - 30 April 2008 REPORT OF THE DIRECTORS The directors of Imara Holdings Limited have pleasure in presenting their report for the year ended 30 April 2008. Nature of Business Imara Holdings Limited is a registered International Financial Services Centre (“IFSC”) company, 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. Botswana Stock Exchange The Imara share was listed on the Venture Capital Market of the Botswana Stock Exchange on 4 October 2006. At 30 April 2008, Imara had 261 shareholders’ and 55 618 916 shares in issue. A minimum of 300 shareholders is required for a company to be listed on the main board of the Botswana Stock Exchange. The Imara share was trading at a price of P 8.40 at 30 April 2008. Since the year end date, the share price has traded as high as P 13.00 and closed on the 5 September 2008 at P 11.75. Authorised Share Capital The Companies Act (Chapter 42:01) was revised and replaced with the Companies Act, 2003 Act No. 32 of 2004. The new Act came into effect on 3 July 2007. Under the revised Act all shares to be issued after 3 July 2007 will be of no par value (Section 47) and all shares already issued are deemed to have been converted to no par shares (Section 47) as of the same date. The conversion of the shares from par value shares to no par value shares does not affect the rights of shareholders. This change does not affect the operations of the company but affects the disclosure and presentation of share capital and share premium which are now presented as a single reporting line item in the financial statements as “Stated Capital”. The authorised share capital of the company is 200 000 000 ordinary shares of no par value (2007 – 20 000 000 ordinary par value shares of 1 thebe each). The un-issued ordinary shares are under the control of the directors. 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; and • Encourage a greater spread of investors. The sub-division resulted in the allotment of 49 319 335 new shares. Stated Capital At year end the stated capital of the company was P 37 111 325, comprising 55 618 916 ordinary shares of no par value. Share capital and share premium, (now classified as stated capital), for the year ended 30 April 2007 totalled P 29 807 821, comprising 5 368 815 ordinary shares of 1 thebe each. 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. 14
  16. 16. Imara Holdings Limited Group Annual Report - 30 April 2008 REPORT OF THE DIRECTORS (continued) Stated Capital (Continued) In respect of the year ended 30 April 2007, shareholders were given the option to receive their ordinary dividend of 17 thebe per share, either in cash or to receive ordinary shares in lieu of the dividend entitlement. Shareholders electing to receive ordinary shares in lieu of the dividend were allotted shares at a price of P 7.20 per share. A total of 100 shareholders, holding 37 430 386 ordinary shares of the company and representing 68.96% of the total issued share capital of the company elected to receive shares in lieu of dividend resulting in the allotment of 8 837 730, (adjusted for the 10 for 1 split), new shares in the company. 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 an historical cost basis except for certain financial instruments that are carried at fair value. 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. Financial Results The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of Botswana (Companies Act, 2003). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. 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 23 July 2008, and Messrs. MJS Tunmer and DE Stone were authorised to sign these statements on behalf of the board. As alluded to in the Trading Statement issued to shareholders on 3 March and confirmed in the Trading Statement of 16 May 2008, performance fees relating primarily to the Imara Africa Opportunities Fund have had a significant and beneficial impact on the financial results of the Group for the year ended 30 April 2008. Under current accounting conventions and guidelines, such performance fees can only be accounted for at year-end when the amounts can be reliably determined. Such accounting treatment results in a distortion between first and second half earnings, a trend which is likely to continue in future years. The impact of the performance fees on the net earnings of the Group for the year amounts to P 35.2 million and accounts for 63% of group profitability for the year. Shareholders are reminded that results for the previous financial year included a non-recurring exceptional profit, arising from the disposal of available-for-sale-financial assets, which resulted in non-recurring profit of P18.6 million. 15
  17. 17. Imara Holdings Limited Group Annual Report - 30 April 2008 REPORT OF THE DIRECTORS (continued) Financial Results (continued) In relation to the current year, it is a moot point whether performance fees should be classified as non-recurring or exceptional for a company engaged in investment management activities, but the Board have nevertheless decided that for dividend distribution purposes there should be a differentiation between profits from core trading activities and exceptional items. Accordingly the dividends declared in respect of the current year are to be split between an ordinary dividend, reflecting core underlying business and a special dividend reflecting the exceptional performance fee. Details of the ordinary and special dividend are outlined in more detail below. Audit and Risk Committee The Audit and Risk 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 and Risk 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. Michael S Golding resigned as an executive director with effect from 18 July 2007 and was replaced by Roderick H Macleod, who joined the Board on 19 July 2007. On 31 October 2007, Maleho Mothibatsela resigned as an executive director but was retained on the Board as a non- executive director. He resigned from the Board on 7 August 2008. It is the Board’s intention to appoint a new independent Motswana non- executive director in his stead. Directors Shareholdings Directors are not required to hold shares in the company but the majority have independently elected to do so. As at 30 April 2008 and 31 August 2008, the directors, directly and indirectly, held the following shares in the company: Number of shares Movement in Number of shares held directly and directors held directly and Share options Share options Director indirectly shareholding indirectly held held 30 April 2008 post year end 31 August 2008 30 April 2008 31 August 2008 AR Fleming 5 327 219 - 5 327 219 250 000 250 000 PJS Gray 1 138 650 (200 000) 938 650 100 000 - JR Legat 2 182 118 (6 500) 2 175 618 200 000 200 000 ACH Mackeurtan 1 828 858 - 1 828 858 - - RH Macleod 1 363 159 20 000 1 383 159 20 000 - RR Matthews 920 800 100 000 1 020 800 100 000 - M Mothibatsela 29 600 25 000 54 600 16 600 - SM Ndoro - - - - - DE Stone 78 669 30 000 108 669 100 000 90 000 MJS Tunmer 5 490 026 169 963 5 659 989 133 330 - TOTALS 18 359 098 138 643 18 457 561 919 930 540 000 16
  18. 18. Imara Holdings Limited Group Annual Report - 30 April 2008 REPORT OF THE DIRECTORS (continued) Directors’ Interests in Contracts None of the 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 P11 118 782. (2007 – P 6 290 778). The composition of directors’ remuneration is detailed in note 14 to the Annual Financial Statements. Black Economic Empowerment Transaction On 1 October 2007, the Group concluded a Black Economic Empowerment (“BEE”) Transaction in terms of which 20% of the South Africa operating entities, were transferred to Zingwenya Holdings Limited (Proprietary) Limited. Entities covered by the BEE transaction comprise: - Imara Asset Management South Africa (Proprietary) Limited, - Imara Corporate Finance South Africa (Proprietary) Limited, - Imara SP Reid (Proprietary) Limited, (“Imara SP Reid”), Full details of the transaction are contained in note 24 of the Consolidated Financial Statements. Dividend Declaration In recognition that profits generated through the performance fees are of an exceptional nature, the Board has decided that for dividend distribution purposes, such 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 2008. Special dividend A special dividend of 17 thebe per share, payable in cash to all shareholders registered in the books of the company as at 15 August 2008. Ordinary dividend An ordinary dividend of 19 thebe per share, payable either in cash or scrip at the election of each shareholder, to all shareholders registered in the books of the company as at 15 August 2008. A Form of Election containing details of the scrip offer was sent to shareholders on 22 August 2008. In terms of the Botswana Income Tax Act (Chapter 42:01) 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. Adoption of a New Constitution The new Companies Act ( Chapter 42:01) which came into effect on 3 July 2007, permits companies to substitute their existing Memorandum and Articles of Association with a Constitution. While there is no obligation to do so, Imara believes that it is both progressive and pragmatic to do so. Shareholders will therefore be asked to approve the adoption of a new Constitution for the company at the forthcoming Annual General Meeting of the Company. At this juncture it is not considered necessary to adopt new Constitutions for all of the Group subsidiary companies, and for the time being these companies will continue to operate under their existing Memorandum and Articles of Association. 17
  19. 19. Imara Holdings Limited Group Annual Report - 30 April 2008 REPORT OF THE DIRECTORS (continued) Litigation As reported in the 2007 Annual Report, 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 35,8 million). The claim is against Imara Botswana Limited and relates to an advisory mandate executed on behalf of the Privatisation Commission of Malawi. No new facts have emerged during the current year, which have caused the Board to change the view, taken in July 2007, that the likelihood of a successful claim is remote. This view continues to be supported by a written opinion from the Company’s legal advisors. Correspondence and documentation relating to the claim has been the subject of an extensive review by the Board and, consistent with the prior year, 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, have been considered by the independent auditors, prior to the issuance of their Audit Report, which is set out on page 25. However as provided for in the original agreement, relating to disputes arising from the advisory mandate, the company has agreed to enter in a process of arbitration in order to bring finality to this matter. A panel of three Arbitrators, one of whom has been nominated by Imara, have been appointed to hear the case. The first meeting of the panel took place in South Africa in July 2008, at which a timetable for the arbitration process was agreed. It is likely that arbitration proceedings will only commence in January 2009 and be concluded shortly thereafter. Non-recoverable costs relating to this process have been estimated at P 300 000. Post Balance Sheet events Other than the above, no events or transactions have occurred since 30 April 2008 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. DE STONE COMPANY SECRETARY 5th September 2008 18
  20. 20. Imara Holdings Limited Group Annual Report - 30 April 2008 INTERNATIONAL FOOTPRINT AND REGIONAL OFFICES BOTSWANA ZIMBABWE (associate) Imara Holdings Limited Imara Capital Zimbabwe (Private) Limited Unit 3, Block A, Plot 117, Tendeseka Office Park, 1st Floor Millennium Office Park, Kgale Hill Block 2, Samora Machel Ave. East Gaborone, Botswana P.O. Box 1475, HARARE P Bag 00186, Gaborone, Botswana Tel: + 263 4 790090 / 790936 Tel: + 267 3188708 Fax: + 263 4 791345 Fax: + 267 3188113 SOUTH AFRICA UNITED KINGDOM Imara Capital South Africa (Pty) Limited Imara Asset Management (UK) Limited Imara House, 257 Oxford Road Andersen House, Illovo, South Africa, 2116 Newton Road, P.O. Box 696, Johannesburg 2000 Henley-on-Thames, Tel: + 27 11 550 6100 Oxon RG9 1HG Fax: + 27 11 550 6110 Tel: + 44 1 491 577 238 Fax: + 44 1 491 579 368 MALAWI (associate) MAURITIUS Stockbrokers Malawi Limited Imara Trust Company (Mauritius) Limited Ground Floor, Able House, 1001 Alexander House, 35 Ebene Cybercity Cnr Hannover Ave & Chilembwe Rd, Blantyre Republic of Mauritius P O Box 31180, Chichiri, Blantyre 3, Malawi, Central Tel: +230 464 9799 Africa Telefax: +230 464 9798 Tel: +265 08 824 327, 09 824 327 Fax: +265 01 624 353 19
  21. 21. Imara Holdings Limited Group Annual Report - 30 April 2008 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% 50% 100% 69.3% 100% 100% Africa Imara Asset Imara Asset Imara Trust Imara Capital Imara Imara Capital C F Africa Imara Non Trading Investments Management Management Company Limited Securities Botswana Limited Trademarks Companies Limited Limited UK Limited (Mauritius) Angola SVM (Pty) Ltd Limited Limited Limitada Management 100% Contracts 25% 47.2% Imara Securities Imara Global Stockbrokers Botswana Imara Capital Imara Fund Malawi 100% (Pty) Limited Zimbabwe Holdings Limited Trading as (Pvt) Limited Namibia Imara Africa (Pty) Limited Securities 100% Imara African Imara Imara Imara Capital Opportunities 100% Botswana Edwards Limited Fund Limited Securities Zambia (Pvt) Limited Imara Series Fund Imara Capital Imara Asset Imara Capital 100% Sub Funds: Limited Management Kenya • Zimbabwe Fund (Dormant) (Pvt) Limited Limited • Nigeria Fund • East Africa Fund Imara Asset Imara 51% Management Corporate (Pty) Limited Finance (Pvt) Limited Imara Zingwenya Capital Holdings South Africa (Pty) Ltd LEGEND: (Pty) Ltd Botswana Kenya 80% 20% South Africa Namibia British Virgin Islands United Kingdom Imara Zimbabwe Corporate Imara S P Imara Asset Zambia Finance Reid (Pty) Management South Africa Ltd South Africa Malawi Mauritius (Pty) Ltd (Stockbroking) (Pty) Ltd Angola 20
  22. 22. Imara Holdings Limited Group Annual Report - 30 April 2008 CORPORATE GOVERNANCE The Board of Imara Holdings Limited is committed, in its stewardship of the Group’s affairs, to the seven characteristics of good corporate governance, as contained in the second King Report, namely discipline, transparency, responsibility, independence, fairness, accountability, and social responsibility. The Board 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 Practices 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 ten 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. At least one third of the directors, (rounded down), 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. Remuneration levels of non-executive directors are reviewed annually and bench-marked against the Botswana financial services sector companies and proxy groups with a regional presence. 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 three times a year 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 internal controls, risk management and statutory and regulatory compliance. 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 and risk, 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 are reviewed periodically. 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. 21
  23. 23. Imara Holdings Limited Group Annual Report - 30 April 2008 CORPORATE GOVERNANCE (continued) Audit and Risk Committee The Audit and Risk Committee is chaired by Roger Matthews, an independent 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 independent external auditors and evaluates risk management procedures in subsidiary companies and other internal systems of control. It also monitors statutory and regulatory compliance at both Group and subsidiary company level. Meetings are held at least three times per annum and are attended by the independent 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. At least once in each calendar year, the Committee, excluding the executive management representative, meet with the external auditors. 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 three members all of whom are non-executive directors. The Chief Executive Officer and one other executive director attend meetings of the Committee by invitation. 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 Group’s 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 three 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 to the main board and also reviews the appointment of directors to subsidiary company boards. 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. 22
  24. 24. Imara Holdings Limited Group Annual Report - 30 April 2008 CORPORATE GOVERNANCE (continued) 2007/2008 Board Attendance Register Director Audit & Risk Remuneration Nominations Main AGM Committee Committee Committee PJS Gray 3/3 3/3 3/3 3/3 0/1 MJS Tunmer - 3/3 3/3 3/3 1/1 AR Fleming - - - 0/3 0/1 JR Legat - - - 3/3 0/1 ACH Mackeurtan - 3/3 3/3 3/3 1/1 RH McLeod - - - 3/3 0/1 RR Matthews 3/3 3/3 3/3 3/3 0/1 M Mothibatsela - - - 3/3 1/1 SM Ndoro 3/3 3/3 - 3/3 1/1 DE Stone 3/3 - - 3/3 1/1 It should be noted that whilst Adam Fleming, for a variety of reasons, has been unable to attend formal board meetings, his informal contribution and assistance to the Group has been invaluable, given his proven and widespread experience internationally. The board have granted special leave of absence to him regarding his attendance at meetings. Compliance The Group and certain of its subsidiary companies are subject to supervisory and regulatory controls in the geographic or country jurisdictions where they operate. In the case of Imara Holdings Limited, the regulators and supervisory authorities are: • Bank of Botswana • International Financial Service Centre (“IFSC”) • Botswana Stock Exchange. The regulators and supervisory authorities at subsidiary company and Fund level, are as follows: • Imara Asset Management (UK) Limited – Financial Services Authority -UK • Imara Africa Opportunities Fund - Dublin Stock Exchange • Imara Asset Management (South Africa) (Pty) Limited -Financial Service Board - SA • Imara SP Reid Limited - Financial Services Board & JSE Limited Supervisory and regulatory controls are generally based on the submission of prescribed returns and annual compliance certificates and in all instances there is an exception reporting requirement. There have been no material breaches of supervisory and regulatory controls within the Group and its subsidiaries during the past year, and where necessary, remedial action has been taken to address minor matters brought to the attention of Compliance Officers. Dealing in Securities The Imara share has been listed on the Venture Capital Board of the Botswana Stock Exchange since 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. 23
  25. 25. Imara Holdings Limited Group Annual Report - 30 April 2008 CORPORATE GOVERNANCE (continued) 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 recognizes 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 make an annual declaration of their interests, and a register of interests is maintained by the Company Secretary. Directors and management are also required to disclose any material interests in contracts and business transactions relating to the Group, which occur during the ordinary course of business and to recuse themselves from any discussions relating thereto. 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. In keeping with the Groups’ commitment to continually improve communications with stakeholders, the Group incorporated an Investor Relations section within the Imara Holdings website, (www.imaraholdings.com), which allows stakeholders to access salient information pertaining to the Group.. Social Responsibility Imara is a Group with an authentic African heritage and we owe our success, in part, to the support of the communities in which we operate. The group recognises its role and responsibility as a corporate citizen and is committed to providing support to these communities through broad based programmes, sponsorship and initiatives. 24
  26. 26. Imara Holdings Limited Consolidated Annual Financial Statements INDEPENDENT AUDITOR’S REPORT INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF IMARA HOLDINGS LIMITED Report on the Financial Statements We have audited the group financial statements of Imara Holdings Limited and the Company financial statements, set out on pages 26 to 78 which comprise the directors report, balance sheets as at 30 April 2008, and the income statements, statements of changes in equity and cash flow statements for the year then ended, and a summary of significant accounting policies and other explanatory notes. Directors’ Responsibility for the Financial Statements The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of Botswana (Companies Act, 2003). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects the financial position of the Group and the Company as of 30 April 2008, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of Botswana (Companies Act, 2003). Certified Public Accountants 5th September 2008 2nd Floor, UN Place Khama Crescent PO Box 41015 Gaborone, Botswana 25
  27. 27. Imara Holdings Limited Consolidated Annual Financial Statements CONSOLIDATED INCOME STATEMENT Year Ended 30 April Group Group Company Company 2008 2007 2008 2007 Pula Pula Pula Pula Note Re-stated Re-stated CONTINUING OPERATIONS: Revenue 3 174 959 517 127 480 896 25 737 188 7 619 427 Costs of services sold (16 495 102) (8 085 690) - - Gross profit 158 464 415 119 395 206 25 737 188 7 619 427 Other income 3 6 407 080 4 753 975 503 782 889 611 Operating expenses 3 (98 426 515) (65 613 320) (6 044 333) (5 784 385) Finance costs 3 (458 599) (237 120) (563 142) (490 318) Share of profits from associates 89 059 160 814 - - Profit before taxation 66 075 440 58 459 555 19 633 495 2 234 335 Taxation (expense)/credit 4 (9 692 211) (10 846 936) (655 222) 66 746 Profit for the year from continuing 56 383 229 47 612 619 18 978 273 2 301 081 operations DISCONTINUED OPERATION: (Loss after tax) for the year from a 5 (801 576) (175 528) - - discontinued operation Profit for the year 55 581 653 47 437 091 18 978 273 2 301 081 Attributable to: Equity holders of the parent 56 449 140 48 142 648 - - Minority interest (867 487) (705 557) - - Profit for the year - as above 55 581 653 47 437 091 - - Earnings per share - (All operations): 6 - Basic (Thebe) 103 93 - - - Diluted (Thebe) 100 90 - - Earnings per share - (Continuing operations): - Basic (Thebe) 103 92 - - - Diluted (Thebe) 100 89 - - Certain revenue items previously classified as “Other Income” have been re-classified as “Revenue”. The re-classification has been undertaken to ensure full compliance with the accounting policies relating to revenue recognition, presentation and disclosure and to ensure consistency in reported financial information. Comparative figures for the year ended 30 April 2007 have been re-stated where applicable. 26
  28. 28. Imara Holdings Limited Consolidated Annual Financial Statements CONSOLIDATED BALANCE SHEET As at 30 April Group Group Company Company 2008 2007 2008 2007 Pula Pula Pula Pula Note Re-stated ASSETS Non-Current Assets Equipment 8 3 821 393 3 969 211 396 666 31 605 Goodwill 9 96 027 100 952 - - Intangible assets 10 804 190 714 000 571 200 714 000 Investment in subsidiaries 11 - - 12 483 013 11 756 884 Investment in associates 12 2 712 265 2 786 067 - - Available-for-sale financial assets 13 8 714 677 9 944 438 1 600 558 694 010 Accounts receivable -group companies 14 - - 31 309 659 21 085 174 Deferred tax asset 4 857 748 1 762 435 - 239 831 17 006 300 19 277 103 46 361 096 34 521 504 Current Assets Listed trading securities 15 3 539 570 3 635 740 - - Trade and other receivables 16 188 382 152 123 559 364 1 117 754 467 434 Cash and cash equivalents 17 44 884 280 26 211 131 1 579 181 399 898 Tax refundable 2 839 866 - - - 239 645 868 153 406 235 2 696 935 867 332 TOTAL ASSETS 256 652 168 172 683 338 49 058 031 35 388 836 EQUITY AND LIABILITIES Equity Stated capital 18 37 111 325 29 807 821 37 111 325 29 807 821 Non-distributable reserves 9 650 370 11 362 928 2 390 022 2 229 193 Distributable reserves 92 336 185 50 541 896 2 479 364 (1 844 058) Total shareholders’ equity 139 097 880 91 712 645 41 980 711 30 192 956 Minority interest 423 221 (289 096) - - Total equity 139 521 101 91 423 549 41 980 711 30 192 956 Non-current liabilities Accounts payable -group companies 14 - - 4 055 987 3 628 072 Interest bearing loans and borrowings 19 15 739 126 752 - - Deferred taxation 4 7 525 - 7 525 - 23 264 126 752 4 063 512 3 628 072 Current Liabilities Trade and other payables 20 105 859 500 68 304 322 2 539 764 1 567 808 Current portion of interest bearing loans and borrowings 19 10 020 169 704 - - Taxation payable 407 866 8 902 355 407 866 - Provisions 21 1 719 114 3 408 159 - - Bank overdraft 19 9 111 303 348 497 66 178 - 117 107 803 81 133 037 3 013 808 1 567 808 Total liabilities 117 131 067 81 259 789 7 077 320 5 195 880 TOTAL EQUITY & LIABILITIES 256 652 168 172 683 338 49 058 031 35 388 836 27

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