CIDA EMPOWERMENT (PROPRIETARY) LIMITED
(Registration Number : 2004/025068/07)
ANNUAL FINANCIAL STATEMENTS

CIDA Empowerment Trust Annual Financial Statements Empowerment (Pty) Ltd
Annual Financial Statements
Empowerment Fund
31 August 2006



Report of the independent auditors to the members of CIDA Empowerment (Proprietary) Limited

We have audited the annual financial statements and group annual financial statements of CIDA Empowerment (Proprietary) Limited which comprises the directors’ report, the balance sheet as at 31 August 2006, the income statement, the statement of changes in equity and cash flow statement for the year then ended, a summary of significant accounting policies and other explanatory notes, as set out on pages 3 to 17.

Directors’ Responsibility for the Financial Statements
The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with South African Statements of Generally Accepted Accounting Practice, and in the manner required by the Companies Act in South Africa. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, 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 judgement, including 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 significant estimates made by the directors, as well as evaluating the overall financial statement presentation and disclosures. We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a reasonable basis for our opinion.

Consolidation of CIDA BCE Investments (Pty) Ltd
As disclosed in the directors report the company has not consolidated CIDA BCE Investments (Pty) Ltd as required by IAS 27 – Consolidated and Separate Financial Statements.
 
Opinion
In our opinion, except for the impact of the above, the financial statements present fairly, in all material respects, the financial position of the company at 31 August 2006, and of its financial performance and its cash flows for the year then ended in accordance with South African Statements of Generally Accepted Accounting Practice, and in the manner required by the Companies Act in South Africa.
 
Deloitte & Touche
 
Per: B G C Fannin
Partner - Assurance
13 February 2008



REPORT OF THE DIRECTORS
31 August 2006

 
The directors have pleasure in presenting their report on the activities of the company for the year ended 31 August 2006.

General review
The business and operations of CIDA Empowerment (Proprietary) Limited are geared towards the generation of educationally directed annuity income, through a high-yielding portfolio of Black Economic Empowerment (“BEE”) related investments in a mixture of high-growth, highly cash generative entities. CIDA Empowerment (Proprietary) Limited positions itself as a BEE partner of choice for companies operating within South Africa, seeking suitable empowerment credentials.

Nature of business
The company pursues highly cash generative BEE related investments, in order to build a high-yielding investment portfolio which will generate annuity income to fund the delivery of education of financially disadvantaged black South African students, through CIDA City Campus.

Statement of directors’ responsibility
The directors are responsible for the maintenance of adequate accounting records and the preparation and integrity of the annual financial statements and related information.  The auditors are responsible for reporting on the fair presentation of the annual financial statements.  The financial statements have been prepared in accordance with South African Statements of Generally Accepted Accounting Practice and in the manner required by the Companies Act in South Africa.
 
The directors are also responsible for the company’s systems of internal control. These are designed to provide reasonable, but not absolute, assurance as to the reliability of the financial statements, and to adequately safeguard, verify and maintain accountability of the company’s assets, and to prevent and detect misstatement and loss.  Nothing has come to the attention of the directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the period under review. The annual financial statements have been prepared on a going concern basis, since the directors have every reason to believe that the company has adequate resources in place to continue in operation for the foreseeable future.
 
Consolidation of CIDA BCE Investments (Pty) Ltd
The company has not consolidated the investment in CIDA BCE Investments (Pty) Ltd as the year ends of the entities are not co-terminous. Accordingly, the investment has been accounted for at cost.  The company’s year end has subsequently been changed to 28 February. This investment will be consolidated in the financial statements of CIDA Empowerment (Pty) Ltd on 28 February 2008. The financial risk associated with the CIDA BCE investment is limited to a pledge of shares, supporting directors’ level of comfort with the current reporting treatment.
 
Share capital
The company’s authorised share capital consists of 1 000 ordinary shares of R1 each.
 
Holding company
The company’s holding company is CIDA Empowerment Trust.

Dividends
No dividends were paid during the year under review.

Directors
The directors of the company during the year under review and up to the date of this report were as follows:

J  Kogl  
Z K Nzimande  
P L Heinamann (Resigned: 13 December 2006)
K L Shuenyane (Resigned: 21 August 2006)
T Chiappini -Young    
L Mashologu (Resigned: 31 July 2007)
I Dlamini (Appointed: 18 October 2006)
D Skwambane (Appointed: 9 July 2007)


Subsequent events
 
Investments:
Post year-end CIDA Empowerment acquired a strategic 25% stake in Ownership Solutions (Pty) Limited, a company providing Black Economic Empowerment advisory services, as well as a 20% stake in ViaCapital, a company providing specialised finance to the transport sector. Both companies are performing in line with expectations.
 
CIDA Empowerment was introduced as beneficiary of the APEXHI Empowerment Trust in December 2006. CIDA Empowerment (Pty) Ltd unexpectedly realised a capital profit of R18,7 million on the sale of these rights, further bolstering the company’s balance sheet.
 
Changes to the executive:
The board sadly said goodbye to Lerato Mashologu, an Executive Director of the fund.  Lerato remains a trustee of the CIDA Empowerment Trust, the holding company of CIDA Empowerment (Pty) Ltd.  The fund is in the process of recruiting a replacement Executive Director.
 
Change in year end:
CIDA Empowerment (Pty) Ltd has changed its year end to 28 February, in line with that of its holding company, the CIDA Empowerment Trust.
 
Auditors
Deloitte & Touche are the appointed auditors of the company in accordance with section 270(2) of the Companies Act.

Registered office Postal address
3 on Glenhove Postnet Suite 218
Corner Glenhove and Tottenham Roads Private Bag X31
Melrose Estate Saxonwold
2196   2132


INCOME STATEMENT
for the year ended 31 August 2006


Note

2006

2005



R

R

Revenue

3

10 535 799

398 026

Operating expenses before finance costs


(1 379 548)

(1 169 384)

Fair value gains

4

50 259 418

-

Profit (loss) from operations

5

59 415 669

(771 358)

Net finance costs

6

(87 614)

(40 351)

Profit (loss) before taxation


59 328 055

(811 709)

Taxation

7

(9 682 125)

-

Profit (loss) for the year


49 645 930

(811 709)


BALANCE SHEET

31 August 2006


Note

2006

2005



R

R

Assets


 

 

Non-current assets


 

 

Property, plant and equipment

8

14  982

-

Investments

9

46 162 261

-

Investment in subsidiary

10

4 097 201

-

 


50 274 444

-

       

Current assets

 

 

Trade and other receivables

11

153 185

-

Cash and cash equivalents

10 233 692

223 364

Total current assets  

10 386 877

223 364

Total assets  

60 661 321

223 364

       
Equity and liabilities      
       
Capital and reserves      
Share capital

12

100

100

Accumulated profits  

48 834 221

(811 709)

Total capital and reserves  

48 834 321

(811 609)

       
Non-current liability

13

1 317 063

403 501

Long-term loan  

1 317 063

403 501

       
Deferred capital gains taxation

14

7 287 616

-

       
Current liabilities      
Trade and other payables

15

222 812

480 400

Provisions  

240 000

55 000

Short-term loans

16

365 000

96 072

Taxation  

2 394 509

-

Total current liabilities  

3 222 321

631 472

Total equity and liabilities  

60 661 321

223 364


STATEMENT OF CHANGES IN EQUITY

for the year ended 31 August 2006


Share
capital

Accumulatedprofits

Total



R

R

Company


 

 

Balance at 31 August 2004

100

-

100

Loss for the year

-

(811 709)

(811 709)

Balance at 31 August 2005

100

(811 709)

(811 609)

Profit for the year

-

49 645 930

49 645 930

Balance at 31 August 2006

100

48 834 221

48 834 321



CASH FLOW STATEMENT
for the year ended 31 August 2006


Share
capital

2006

2005



R

R

Operating activities:


 

 

Cash generated from (utilised in) operations

17

8 932 377

(235 958)

Net finance costs

 

(87 614)

(40 437)

Net cash from (utilised in) operating activities


8 844 763

(276 309)

Investing activities:      
Additions to property, plant and equipment

8

(16 925)

-

Net cash utilised in investing activities  

(16 925)

-

Financing activities:      
Long-term loan raised  

913 562

403 501

Proceeds from share capital issued  

-

100

Short-term loan raised  

268 928

96 072

Net cash from financing activities  

1 182 490

499 673

       
Net increase in cash and cash equivalents  

10 010 328

223 364

Cash and cash equivalents at beginning of the year  

223 364

-

Cash and cash equivalents at end of the year   10 233 692

223 364



NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for the year ended 31 August 2006
 
1. Presentation of financial statements
These financial statements are presented in Rands since this is the currency in which the majority of the company’s transactions are denominated.
 
2. Summary of significant accounting policies
The annual financial statements have been prepared under the historical cost convention with the exception of certain assets that are carried at fair value, and in accordance with South African Statements of Generally Accepted Accounting Practice. The principal accounting policies adopted in the preparation of these annual financial statements are set out below and are consistent in all material respects with those applied in the previous year.  
 
Provisions
Provisions are recognised when the company has a present obligation as a result of a past event and it is probable that this will result in an outflow of economic benefits that can be reliably estimated.
 
Revenue recognition
Revenue comprises the invoiced value of sales and services rendered to customers, excluding Value Added Taxation, in respect of trading operations and is recorded at the date services are rendered.
 
Consulting income
Income from consultation is recognised when the services which give rise to this income takes place.
 
Grants and donations
Grants and donation income are recognised when the company becomes legally entitled to the income.
 
Interest received
Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity.

Taxation
The charge for current tax is the amount of income taxes payable in respect of the taxable profit for the current year.  It is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.  In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Such assets and liabilities are not recognised if the temporary difference arises from goodwill (or negative goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the tax profit nor the accounting profit.
 
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled.  Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Financial instruments

Financial assets and financial liabilities are recognised on the company’s balance sheet when the company has become a party to the contractual provisions of the instrument.

Measurement
Financial instruments are initially measured at cost, which includes transaction costs.  Subsequent to initial recognition, these instruments are measured as set out below:

Trade and other receivables
Trade and other receivables are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

Cash and cash equivalents
Cash and cash equivalents are measured at fair value.

Trade and other payables
Trade and other payables are stated at their nominal value.

Financial liabilities
Financial liabilities are recognised at amortised cost, namely original debts less principle payments and amortisations.

Equity instruments
Equity instruments are recorded at the proceeds received, net of direct issue costs.
 
Gains and losses on subsequent measurement
Gains and losses arising from a change in the fair value of financial instruments that are not part of a hedging relationship are included in net profit or loss for the year in which it arises.Derivative instruments
 
Derivative financial instruments are initially measured at fair value on the contract date, and are remeasured to fair value at subsequent reporting dates.

Borrowings

Interest bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premium payable on settlement or redemption, are accounted for on an accrual basis and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Investments
Investments are recognised on a trade-date basis and are initially measured at cost.
 
At subsequent reporting dates, debt securities that the company has the expressed intention and ability to hold to maturity (held-to-maturity debt securities) are measured at amortised cost, less any impairment loss recognised to reflect irrecoverable amounts.  The annual amortisation of any discount or premium on the acquisition of a held-to-maturity security is aggregated with other investment income receivable over the term of the instrument so that the revenue recognised in each period represents a constant yield on the investment.
 
Investments other than held-to-maturity debt securities are classified as either a financial asset at fair value through profit and loss or as available-for-sale investments.  These investments are measured at subsequent reporting dates at fair value. Unrealised gains and losses on a financial asset at fair value through profit and loss are dealt with in net profit or loss for the period.
 
Unrealised gains or losses on investments classified as available-for-sale are recognised in equity, through the statement of changes in equity, until the financial asset is derecognised, at which time the cumulative gain or loss previously recognised in equity is recognised in profit or loss for the period.
 
Intangible assets
Intangible assets are measured initially at cost and are amortised on the straight line basis over their estimated useful lives.

Borrowing costs

All borrowing costs are dealt with in income in the period in which they are incurred.
 
Leased assets

Assets leased in terms of finance leases, where material, are capitalised at their cash cost equivalent and a corresponding liability is raised. Capitalised leased assets are depreciated using the straight line basis at rates considered appropriate to reduce book values over their useful lives to estimated residual values.  
 
Lease payments are allocated between the finance cost and the capital repayment using the effective interest rate method. Lease finance costs are charged to operating income as they become due.
 
Rentals under operating leases are charged to income on the straight line basis over the term of the relevant lease.

Critical judgements in applying accounting policies

The following are the critical judgements, apart from those involving estimations (see below), that  management has made in the process of applying the entity’s accounting policies and that have the
most significant effect on the amounts recognised in financial statements.
 
Judgements
In the process of applying the group and company's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Income Taxes
The company recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the company to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the company to realise the net deferred tax assets recorded at the balance sheet date could be impacted. Additionally, future changes in tax laws in the jurisdictions in which the company operates could limit the ability of the company to obtain tax deductions in future periods.

Contingent liabilities
Management applies its judgment to the fact patterns and advice it receives from its attorney, advocates and other advisors in assessing if an obligation is probable, more likely than not, or remote. This judgement application is used to determine if the obligation is recognised as a liability or disclosed as a contingent liability.


3. Revenue


2007

2006


R

R

Revenue comprises:

 

 

 - Conference fees

275 878

-

- Consulting fees

71 630

59 200

 - Donations

10 003 194

338 826

- Fundraising services

100 000

-

- Recoupments

85 097

-

 

10 535 799

398 026


4. Fair value gains

Fair value gains comprise of:

 

 

 - SOMA Initiative Investment

2 328 926

-

- Trans Union Credit Bureau Investment

43 833 291

-

 - CIDA BCE

4 097 201

-

 

50 259 418

-


5. Profit (loss) from operations

This is arrived at after taking the following into account:

 

 

     

Expenses:

 

 

Auditors remuneration

 

 

- Audit fees

195 000

45 000

 

 

-

Depreciation

 

 

- Furniture and fittings

82

-

- Computer equipment

1 861

-

 

1 943

-

     
- Consulting fees

290 003

661 501

     
- Operating lease - property rental

78 184

52 700

The company does not have any obligations under future non-cancellable leases.  

6. Net finance costs

Interest received

23 008

86

Interest paid

(110 622)

(40 437)

 

(87 614)

(40 351)


7. Taxation

South African normal taxation

 

-

- current taxation

2 394 509

-

- deferred taxation

7 287 616

-

No provision for taxation raised on the results for the prior year as the company had an estimated tax loss available to set-off against future taxable income amounting to R811 709.  

8. Property, plant and equipment


Furniture and fittings

Computer equipment

Total


R

R

R

2006


 

 

 


 

 

Cost

 

 

 

At 1 September 2005

-

 

 

Additions

825

16 100

16 925

At 31 August 2006

825

16 100

16 925

Accumulated depreciation

-

At 1 September 2005  

-

Depreciation

82

1 861

1 943

At 31 August 2006

82

1 861

1 943

Carrying value      
At beginning of the year

-

-

-

At end of the year

743

14 239

14 982

At end of the year      

9. Investments

 

2007

2006

 

R

R

Stated at fair value through profit and loss

 

 

- Transunion Credit Bureau

43 833 301

-

- SOMA Initiative Investment

2 328 960

-

 

46 162 261

-


10. Investments in subsidiary

 

Issued share capital

Percentage held

2007

2006

 

R

%

R

R

Unlisted

   

 

 

Stated at fair value through profit and loss

   

 

 

- CIDA BCE Investments (Pty) Ltd

100

100

4 097 201

-


11. Investments

 

2007

2006

 

R

R

Trade and other receivables

153 185

-

The directors consider that the carrying amount of trade and other receivables approximates their fair value.  

12. Share capital

 

2007

2006

 

R

R

Authorised

1 000

1 000

1 000 ordinary shares of R1 each    
Issued    
100 ordinary shares of R1 each

100

100


13. Long-term loan

Investec Bank Limited

1 317 063

1 317 063

The loan bears interest at prime plus 4% and is by intent long-term in nature. Subsequent to year end, this loan has been repaid in full.  

14. Deferred capital gains taxation

Balance at the beginning of the year

-

-

Charge to the income statement

7 287 616

-

Balance at the end of the year

7 287 616

-


15. Trade and other payables

Trade payables

42 214

480 400

Other payables and accruals

180 598

-

Balance at the end of the year

222 812

480 400

The directors consider the carrying amounts of the trade and other payables approximate their fair value.    

16. Short-term loan

Unsecured

 

 

Connectivity (Proprietary) Limited

365 000

96 072

The loan bears interest at prime less 3% and does not have a repayment date. 

Therefore, it has been classified as a current liability.  Connectivity (Proprietary) Limited is a related party (refer note 18). Subsequent to year end this loan has been repaid in full.
   

17. Cash generated from operations

Profit before taxation

59 328 055

(811 709)

Adjustments for:

- Depreciation

1 943

-

- Fair value adjustments

(50 259 418)

-

- Net finance costs

87 614

40 351

Operating income before working capital changes

9 158 194

(771 358)


Adjustments for working capital changes:

 

 

- Increase in trade and other receivables

(153 185)

-

- (Decrease) increase in trade and other payables

(257 632)

535 400

- Increase in provisions

185 000

-

 

(225 817)

535 400

Cash generated from (utilised in) operations

8 932 377

(235 958)


18. Taxation paid

Amount unpaid at the beginning of the year

-

-

Charge to the income statement

2 394 509

-

Amount unpaid at the end of the year

(2 394 509)

-

Taxation paid

-

-


19. Related parties

The company is 100% owned by CIDA Empowerment Trust.

The company received a loan to the value of R365 000 from Connectivity (Proprietary) Limited which is a related company.  Connectivity is 100% owned by CIDA Investment Trust. The loan bears interest at prime less 3% and does not have a repayment date. Subsequent to year end this loan has been repaid in full.

20. Financial instruments

Interest rate risk

The company has a loan from Investec Bank Limited and bears interest at prime plus 4%.  In addition, the company has a loan from Connectivity which bears interest at prime less 3%.  The company does not have a process in place to manage these risks.

Credit risk

The company only deposits cash with banks of high credit rating.  Therefore, the company’s credit risk is reduced to a minimum.

Fair values

The fair values of all financial instruments are substantially identical to the carrying values reflected in the balance sheet.

 

 

 

“The education offered at CIDA City Campus is designed to make students relevant, truly empowered, integrated citizens and leaders that are skilled and equipped to build the South African economy and society.”

- President Thabo Mbeki, addressing Parliament, 2001

 

“I believe the students at CIDA are using creativity and lateral thinking skills to a remarkable degree.”

- Edward De Bono

 

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