Umsobomvu Youth Fund Annual Report 2006 - Nyda

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eportof thedirectorsincomestatementsfor the year ended31 March 2006Umsobomvu Youth Fund 2006 Financial StatementsThe Directors of the Umsobomvu Youth Fund (“UYF” or “theFund”) Board are pleased to submit their report together withthe Fund’s audited financial statements for the year ended31 March 2006.Nature of business and operationsThe Umsobomvu Youth Fund was established by the SouthAfrican Government to address the unemployment challengesfacing South African youth. It is incorporated as an associationnot for gain under Section 21 of the Companies Act, 61 of 1973,as amended.The Fund focuses on the facilitation and promotion of jobcreation as well as skills development and transfer amongyoung South Africans between the pages of 42 and 81 bymaking strategic investments that facilitate opportunitiesfor young people to acquire skills, access job opportunitiesor pursue meaningful self-employment opportunities throughvarious enterprise initiatives.Corporate governanceThe Board and Management of Umsobomvu Youth Fundhave adopted and endorsed the Code of Corporate Practiceand Conduct as set out in the King II Report on CorporateGovernance and supplemented by the Protocol on Governancein the Public Sector. The Corporate Governance Manual and thesupporting Charters were approved by the Board of Directorsin June 2005.Public Finance Management Act (PFMA)Umsobomvu Youth Fund has implemented governancestructures, policies and processes to support its compliancewith the provisions of the PFMA. In addition, Management hasprepared a materiality framework which was duly reviewedand approved by the Board of Directors in June 2005. Thisframework has recently been amended for review and approvalby the Board, and will be forwarded to the Fund’s executiveauthority.Whilst every effort is made to manage and monitor compliance,the Fund has identified instances in its operations that arenon-compliant with the PFMA, and has fully documentedand disclosed these matters to the Board and these will beforwarded to the Executive Authority. Details of these instancesof non-compliance are as follows:• Sec 29 Treasury Regulations: Shareholder’s compact awaitingthe Minister’s approval;• Sec 54(2): A specific transaction occurred in 2005, in termsof which UYF acquired “significant shareholding” in Hi-TechTransformer Maintenance (Pty) Ltd, in the ordinary courseof UYF’s lending business, as a result of which it becamea subsidiary. The Fund did not inform National Treasury inwriting or request the Minister of Labour to approve theacquisition of this significant shareholding prior to theconclusion of this transaction as the Directors were of theopinion the transaction was in the ordinary course of UYF’slending business. The Fund has applied to the Minister ofLabour requesting exemption from S54(2)(a)-(d) of the PFMAand is awaiting the Minister’s response on this matter.• The auditors have reported the above matter to theIndependent Regulatory Board for Auditors as this matter mayconstitute a reportable irregularity in terms of the AuditingProfession Act.• Sec 55(2)(b)(i) PFMA: Two isolated cases of irregular expenditurein respect of overpayments amounting to R389 312 andR346 319, respectively, to approved projects were detected;• Sec 55(2)(b)(iii) PFMA: One incident of fruitless and wastefulexpenditure in respect of an insurance write-off of R79 169had been incurred; and• Sec 55(1)(c): The Fund was unable to supply draft annualfinancial statements to its auditors within two months of thefinancial year-end.International Financial ReportingStandards (IFRS)In the current year under review, the Fund elected to adopt andcomply with International Financial Reporting Standards (IFRS)and to prepare its annual financial statements in accordancewith these standards. These financial statements are the firstfinancial statements to be prepared in accordance with IFRS,and note 1 to the annual financial statements on page 50details the accounting policies adopted by the Fund.The Fund is following international best practice by adoptingthe International Financial Reporting Standards, and its annualfinancial statements will be internationally comparable. Themajority of financial and development finance institutions haveadopted IFRS.Umsobomvu Youth Fund met the requirements of the SouthAfrican Venture Capital Association (SAVCA) and has beenadmitted as a full member from the year 2006. As an accreditedventure capital organisation, the Fund qualifies for certainexemptions in IFRS from consolidating underlying investmentsin its Group annual financial statements.42
Group annual financial statementsGroup annual financial statements have been prepared inaccordance with accounting policies of the Fund.The Fund adopted the IFRS and specifically the exemptionin terms of venture capital organisations in the year underreview, which provides investors with the flexibility to prepareGroup annual financial statements in respect of investments inassociates and joint ventures, or to reflect these investments atfair value in the Company annual financial statements.Financial results and financialpositionThe financial results and position of the Fund for the yearunder review are set out on pages 42 to 81 of these financialstatements.The salient results of youth development funding are asfollows:Sinceinception to Financial year31 March 2006 ended2006 2005Disbursements Rand Rand RandTotalcommitmentBalance ofsince Fund’s committed andinception to contracted funds31 March 2006 as at 31 March2006 2005Commitments Rand Rand RandYouthDevelopmentand RelatedProjects 475 619 058 120 549 105 138 100 456Investments inSmall and MediumEnterprises 231 445 223 121 089 976 140 040 000Micro FinanceLoans andCo-operatives 24 064 000 411 038 2 166 234731 128 281 242 050 119 280 306 690Project-relatedoperatingexpenses 141 363 731872 492 012 242 050 119 280 306 690balancesheetsat 31 March 2006YouthDevelopmentand RelatedProjects 355 070 854 117 876 112 104 501 507Project-relatedoperatingexpenses 141 363 731 47 512 946 42 989 746Grant Utilised 496 434 585 165 389 058 147 491 253Investment inSmall and MediumEnterprises 110 355 246 40 593 917 19 539 447Micro FinanceLoans andCo-operatives 23 652 963 14 423 844 5 929 119Acquisition of a subsidiaryDuring the year under review, the Fund acquired a subsidiaryin Hi-Tech Transformer Maintenance (Pty) Ltd, in the ordinarycourse of its lending business. The Fund, as at 31 March 2006,held 55 shares or 55% of the issued share capital in thesubsidiary. The results of the subsidiary have been consolidatedinto the annual financial statements of the Fund.The Fund disposed of 6% of the abovementioned shareholdingsubsequent to 31 March 2006, resulting in this subsidiarybecoming an associate company.Amountsdisbursed 630 442 794 220 406 819 172 959 819Umsobomvu Youth Fund 2006 Financial Statements43
Page 1 and 2: facilitating facilitatingjob creati
Page 5 and 6: CapacityBuilding &ResearchProcess C
Page 8 and 9: performancefor yearunder reviewSkil
Page 10 and 11: oard ofdirectorsWe subscribe to aph
Page 12 and 13: executivecommitteeUmsobomvu Youth F
Page 14 and 15: chairman’sreportAdv Richard Molok
Page 16 and 17: chiefexecutiveofficer’sreport“
Page 18 and 19: chiefexecutive’sreport• Youth E
Page 20 and 21: operationalreviewUmsobomvu Youth Fu
Page 22 and 23: operationalreviewCompanies pledging
Page 28 and 29: operationalreviewYouth Entrepreneur
Page 30 and 31: operationalreviewYouth Advisory Cen
Page 32 and 33: statement ofcorporategovernanceYout
Page 34 and 35: statement ofcorporategovernanceall
Page 36 and 37: statement ofcorporategovernanceYout
Page 38 and 39: statement ofcorporategovernancePhot
Page 40 and 41: statement ofresponsibilitiesand app
Page 42 and 43: eport ofthe auditcommitteeincomesta
Page 46 and 47: eportof thedirectorsincomestatement
Page 48 and 49: incomestatementfor the year ended31
Page 50 and 51: statementof changesin reservesfor t
Page 52 and 53: notes to thefinancialstatementsfor
Page 84: contactinformationUmsobumvu Youth F

Umsobomvu Youth Fund Annual Report 2006 - Nyda

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