07/08/96: Annual Report
SOUTH EAST RAND GOLD HOLDINGS LIMITED
Contents
Page
Directorate and administration 1
Notice of annual general meeting 2
Approval of annual financial statements 3
Report of the independent auditors' 3
Directors' report 4
Balance sheets 6
Income statements 7
Cash flow statements 8
Notes to the cash flow statements 9
Notes to the annual financial statements 10-13
Interest in subsidiaries 14
Directorate and administration
DIRECTORS
N D Lowenthal (Chairman)
H C Buitendag
E Ellerine
N Frangos
E Grolman
J M Liebesman
G B Liebmann
P S Moss
G B Rubenstein
C F Turner
SECRETARIES, MANAGERS, TECHNICAL ADVISERS AND REGISTERED OFFICE
Consolidated Mining Management Services Limited
45 Empire Road
Parktown
Johannesburg, 2193
(PO Box 11165, Johannesburg, 2000)
Republic of South Africa
TRANSFER SECRETARIES
Mercantile Registrars Limited
5th Floor, 94 President Street
Johannesburg 2001
(PO Box 1053, Johannesburg, 2000)
Republic of South Africa
AUDITORS
Charles Orbach & Company
Chartered Accountants (SA)
1st Floor
Barclays House
261 Oxford Road
Illovo
Johannesburg 2196
(PO Box 821, Northlands, 2116)
Republic of South Africa
ATTORNEYS
Fluxman Rabinowitz - Raphaely Weiner
4th Floor
Allianz House
(Formerly Shell Court 2)
33 Baker Street
Rosebank
Johannesburg, 2196
(Private Bag X14, Saxonwold, 2132)
Republic of South Africa
STOCKBROKER
Lowenthal & Co.
9th Floor, West Wing
27 Diagonal Street Building
Johannesburg, 2001
(PO Box 62143, Marshalltown, 2107)
Republic of South Africa
and
10th Floor
33 Church Street
Cape Town, 8001
Republic of South Africa
BANKERS
First National Bank of Southern Africa Limited
Carlton International Trade Centre
Commissioner Street
Johannesburg, 2001
(PO Box 5745, Johannesburg 2000)
Republic of South Africa
1
Notice of annual general meeting
Notice is hereby given that the tenth annual general meeting of members of the company, will be held in the boardroom, 45 Empire Road, Parktown, Johannesburg on 4 September 1996 at 10:00 for the following purposes:
1. To receive and consider the annual financial statements and group annual financial statements for the year ended 31 March 1996.
2. To elect directors in accordance with the company's articles of association.
The following retiring directors are eligible and offer themselves for re-election.
2.1 Mr N D Lowenthal
2.2 Mr H C Buitendag
2.3 Mr E Ellerine
2.4 Mr N Frangos
2.5 Mr E Grolman
2.6 Mr J M Liebesman
2.7 Mr G B Liebmann
2.8 Mr P S Moss
3. To consider and, if deemed fit to pass, with or without modification, the following ordinary resolution:
3.1 As an ordinary resolution.
"that the directors be and they are hereby authorised to allot and issue all or any portion of the 117 682 000 unissued ordinary shares of one cent each in the capital of the company, at such time or times, to such person or persons, company or companies and upon such terms and conditions as they may determine, such authority to remain in force until the next annual general meeting of the company, subject to the rules and regulations of the Johannesburg Stock Exchange."
A member entitled to attend and vote at the meeting may appoint one or more persons as his proxy to attend, speak and vote in his stead. A proxy need not also be a member of the company.
By order of the board
CONSOLIDATED MINING MANAGEMENT SERVICES LIMITED
Secretaries
Per: G W Poole
Johannesburg
7 August 1996
2
Group annual financial statements
for the year ended 31 March 1996
The directors of the company are responsible for the preparation, integrity and objectivity of the financial statements and other information contained in this report. The financial statements have been prepared in accordance with generally accepted accounting practices on a going concern basis.
An audit committee, whose chairman and majority of members are non-executive directors, has been established by the board of directors. The committee meets periodically to discuss accounting auditing internal control and financial matters of the company. The external auditors have unrestricted access to the audit committee.
The annual financial statements and group annual financial statements for the year ended 31 March 1996 set out on pages 4 to 13 were approved by the board of directors on 2 August 1996 and are signed on its behalf by:
N D Lowenthal
H C Buitendag
Johannesburg
Report of the independent auditors
To the members of
SOUTH EAST HAND GOLD HOLDINGS LIMITED
We have audited the annual financial statements and group annual financial statements set out on pages 4 to 13. These financial statements are the responsibility of the company's directors. Our responsibility is to report on these financial statements.
We conducted our audit in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance that, in all material respects, fair presentation is achieved in the financial statements. An audit includes an evaluation of the appropriateness of the accounting policies, an examination, on a test basis, of evidence supporting the amounts and disclosures included in the financial statements, an assessment of the reasonableness of significant estimates and a consideration of the appropriateness of the overall financial statement presentation. We consider that our audit procedures were appropriate in the circumstances to express our opinion presented below.
In our opinion these financial statements fairly present the financial position of the company and the group at 31 March 1996, and the results of their operations and cash flow information for the year then ended in conformity with generally accepted accounting practice and in the manner required by the Companies Act.
Charles Orbach & Company
Chartered Accountants (SA)
Registered Accountants and Auditors
Johannesburg
2 August 1996
3
Directors' report
Your directors submit their report and the audited financial statements for the year ended 31 March 1996.
NATURE OF BUSINESS
During the year under review your company disposed of its investments in its gold mining subsidiaries by way of an unbundling and is now a cash shell.
FINANCIAL RESULTS
The group's results for the year are summarised as follows:
1996 1995
R000 R000
Turnover 165279 224360
Income before taxation 7597 23906
Taxation - 377
Income after taxation 7597 23529
Outside shareholders' interests 2627 9517
Net income attributable to
ordinary shareholders 4970 14012
All revenue was generated from sources within the Republic of South Africa.
DIVIDENDS
No dividend was declared in respect of the year ended 31 March 1996. Dividends totalling 8,0 cents were declared in respect of the year ended 31 March 1995.
SHARE CAPITAL
The company's authorised and issued share capital remained unchanged throughout the year.
The Southgo group was unbundled in terms of section 60 of the Income Tax Act 1993. A distribution in specie was made by way of a reduction in the company's share premium account amounting to R78 062 409. Consequently, at year end, the share premium account was nil. Full details of the unbundling were set out in the Circular to Shareholders dated 20 December 1995.
INTEREST IN SUBSIDIARY COMPANIES
In terms of the unbundling undertaken by your company all of its listed investments were distributed to its shareholders by way of a dividend in specie. Full details of these transactions were set out in the Circular to Shareholders dated 20 December 1995.
Simultaneously Southgo disposed of its investment in Benoni Gold Mine (Pty) Ltd for a cash consideration of R10 000.
As a result of the aforegoing transactions your company no longer owns any subsidiary companies.
Further information regarding the company's former subsidiaries is set out on page 14.
DIRECTORATE
The following directors held office during the accounting period:
N D Lowenthal (Chairman)
H C Buitendag
E Ellerine (Appointed 25 July 1996)
R A Flowerday(Resigned 28 February 1996)
N Frangos (Appointed 25 July 1996)
E Grolman (Appointed 25 July 1996)
J M Liebesman (Appointed 25 July 1996)
G B Liebmann (Appointed 25 July 1996)
R Y Lowenthal* (Resigned 28 February 1996)
P S Moss (Appointed 25 July 1996)
G B Rubenstein
M Schechter (Resigned 28 February 1996) C F Turner
* British
In terms of the company's articles of association, Messrs N D Lowenthal, H C Buitendag, E Ellerine, N Frangos, E Grolman, J M Liebesman, G G Liebmann, and P S Moss retire from office. All directors are eligible for re-election.
DIRECTORS' INTERESTS
As at the date of this report, the number of shares held by the directors, both directly and indirectly, amounted to 5 745 289 (1995: 42 412 661). As at 2 August 1996 there had been no changes in these interests.
SECRETARIES, MANAGERS, TECHNICAL ADVISERS AND REGISTERED OFFICE
Consolidated Mining Management Services Limited (CMMS) act as secretaries, managers and technical advisers to the company.
Messrs N D Lowenthal, H C Buitendag and G B Rubenstein are directors of CMMS.
The business and postal addresses of the company, and CMMS are as follows:
45 Empire Road
Parktown
Johannesburg 2193
(PO Box 11165, Johannesburg, 2000)
PUBLIC SHAREHOLDINGS IN THE COMPANY
As at 31 March 1996 more than 10% of the company's issued share capital was held by public shareholders.
SIGNIFICANT SHAREHOLDINGS IN THE COMPANY
The following is the only shareholder holding more than 5%. of the issued share capital of the company at 31 March 1996.
Consolidated Mining Corporation Limited - 57,3%
4
HOLDING COMPANY
The company's holding company is Consolidated mining Corporation Limited, a company incorporated in the Republic of South Africa.
POST BALANCE SHEET EVENTS
1. Subject to certain conditions, your company will acquire, with effect from 1 July 1996, in exchange for 140 000 000 new shares in Southgo, the entire issued share capital in and claims on loan account against Insulated Structures (1989) (Pty) Ltd (IS), a manufacturer of cold and freezer rooms and refrigerated display cabinets.
2. Subject to certain conditions, your company will acquire for a total consideration of R11 953 333 payable by the issue of 426 904 762 new shares in Southgo the entire issued share capital in and claims on loan account against Robida Investments (Pty) Ltd (Robida), a dormant company who has acquired in exchange for claims on loan account in favour of the vendor, as a going concerns the businesses of Benoni Building Supplies CC (BBS) and Benoni Building Supplies (Vaal) CC (BBS Vaal). BBS and BBS Vaal are wholesalers, suppliers and distributors of building and allied products. The consortium, as refer-red to below, will acquire 291 071 429 of the BBS and BBS Vaal consideration shares at 2,8 cents per share, which acquisition will become effective after the fulfilment of the conditions precedent. The consortium will extend an offer to Southgo shareholders to acquire their Southgo shares for a cash consideration of 2,8 cents per share.
3. After the above, a "clawback" offer will be extended to the shareholders of Southgo at 2,8 cents per share in the ratio of approximately 100 clawback shares for every 100 Southgo shares held for the purpose of raising approximately R21 million.
4. A consortium comprising Citizen Corp (Pty) Ltd, Global Capital Ltd, Global Equities International, GBH Investments Ltd and the Opportunity Trust will, after the implementation of the transactions, hold a controlling shareholding of approximately 65% in Southgo.
5. To effect the change of control, the board of directors of your company will be reconstituted to comprise E Ellerine, N Frangos, E Grolman, J M Liebesman (Chief Executive), G B Liebmann and P S Moss.
6. Negotiations regarding further acquisitions by the company are ongoing and announcements will be made in the press when those negotiations are concluded.
In this regard shareholders are also referred to the cautionary announcements published on 19 July 1996 and 2 August 1996.
A circular containing full details of the transactions will be despatched to shareholders in due course.
5
Balance sheets
at 31 March 1996
Company Group
1995 1996 1996 1995
R000 R000 Note R000 R000
CAPITAL EMPLOYED
1323 1323 Share capital 1323 1323
78063 -Share premium - 78063
- 2189Non-distributable reserves 3 2189 25884
Distributable reserves
700 551- retained income 551 1183
80086 4063 Shareholders' interest 4063 106453
Outside shareholders' interest - 74428
80086 4063 4063 180881
EMPLOYMENT OF CAPITAL
80139 -Mining investments 4 - 195900
110 1245Loans 5 1245 1132
80249 1245 1245 197032
6024 3082 Current assets 3082 28519
- -Stock 1 - 3330
110 -Accounts receivable - 14898
- -Taxation prepaid - 202
4860 -Amounts due by subsidiary companies 4 - -
1054 3082 Cash at bank and on call 6 3082 10089
6187 264Current liabilities 264 44670
845 264Accounts payable 264 29403
- -Owing to group companies - 7130
49 -Taxation - 59
- -Bank overdrafts - 2785
5293 -Shareholders for dividend - 5293
(163) 2818 Net current assets/(liabilities) 2818 (16151)
80086 4063 4063 180881
6
Income statements
for the year ended 31 March 1996
Company Group
1995 1996 1996 1995
R000 R000 Note R000 R000
Turnover 1.6 165279 224360
Net income before taxation
10413 1064 and extraordinary items 7 7597 23906
27 -SA Normal Taxation 8 - 377
10386 1064 Net income after taxation 7597 23529
- -Outside shareholders' interest 2627 9517
Net income attributable to
10386 1064 ordinary shareholders 4970 14012
- 1213Transfer to non-distributable reserves 3 5218 3552
10386 (149) (248) 10460
10585 -Dividends - 10585
(199) (149) (248) (125)
- -Extraordinary items 9 (384) -
(199) (149) Deficit for the year (632) (125)
899 700Retained income at beginning of year 1183 1308
700 551Retained income at end of year 551 1183
Earnings per share (cents) 1.7
- Before exceptional item 2,8 10,4
- After exceptional item 3,8 10,6
7
Cash flow statements
for the year ended 31 March 1996
COMPANY GROUP
1995 1996 1996 1995
R000 R000 Note R000 R000
CASH RETAINED FROM/(UTILISED IN)
(1772) (5286) OPERATING ACTIVITIES 13269 (1741)
(252) (252) Cash generated by/(applied to) operations 1 619123038
10390 118 Investment income 469 964
Cash generated by decrease
28 205in/(utilised to increase) working capital 2 12237 (5722)
10166 71Cash generated by operating activities 18897 18280
- (15)Finance costs (276) (371)
(30) (49)Taxation paid 3 (59) (649)
10136 7Cash available from operating activities 18562 17260
(11908) (5293) Dividends paid 4 (5293) (19001)
CASH (UTILISED IN)/AVAILABLE FROM
2453 7314 INVESTING ACTIVITIES (10678) (5979)
- -Additions to mining investments (9431) (6732)
Net proceeds on disposal of mining
- 2376investments 2376 391
- -Distribution on unbundling (2805) -
2188 4860 Repaid by subsidiary companies
265 78(Increase)/decrease in loans (818) 362
681 2028 2591 (7720)
CASH EFFECTS OF FINANCING
ACTIVITIES
(681) (2028) (Increase)/decrease in short-term borrowings 5 (2591)7720
(681) (2028) (2591) 7720
8
Notes to the cash flow statements
for the year ended 31 March 1996
Company Group
1995 1996 1996 1995
R000 R000 R000 R000
1. CASH GENERATED BY/(APPLIED TO) OPERATIONS
10413 1079 Net operating income before interest and taxation 787324277
(275) (1213) Exceptional item (1213) (275)
(10390) (118) Investment income (469) (964)
(252) (252) 6191 23038
2. CASH GENERATED RY DECREASE IN/ (UTILISED TO
INCREASE) WORKING CAPITAL
- -Stock 709 (130)
- 110Accounts receivable 4209 (11099)
28 95Accounts payable 7319 5507
28 205 12237 (5722)
3. TAXATION PAID IS RECONCILED TO THE
AMOUNTS DISCLOSED IN THE INCOME STATEMENTS
AS FOLLOWS:
(52) (49) Amounts prepaid/(unpaid) at beginning of year 143 (129)
(27) -Amounts charged to income statement - (377)
- -Transferred on unbundling (202) -
49 -Amount (prepaid)/unpaid at end of year - (143)
(30) (49) (59) (649)
4. DIVIDENDS PAID IS RECONCILED TO THE AMOUNTS
DISCLOSED IN THE INCOME STATEMENTS AS FOLLOWS:
(6616) (5293) Amounts unpaid at beginning of year (5293) (6616)
(10585) - Dividend declared - (10585)
Dividends paid to outside shareholders - (7093)
5293 - Amounts unpaid at end of year - 5293
(11908) (5293) (5293) (19001)
5. SHORT TERM LOANS
- -Increase in short-term loans 1938 636
(681) (2028) (Increase)/decrease in cash at bank and on call (2053)5294
- -(Decrease)/increase in bank overdraft (2476 1790
(681) (2028) (2591) 7720
9
Notes to the annual financial statements
at 31 March 1996
1. ACCOUNTING POLICIES
The annual financial statements incorporate the following principal accounting policies which have been applied on a basis consistent with the previous accounting period.
1.1 Basis of Presentation
The annual financial statements have been prepared on the historical cost basis of accounting.
1.2 Basis of Consolidation
The consolidated annual financial statements include the assets and liabilities of all subsidiaries as well as their results for the year.
Where changes of interest took place during the year the results of the subsidiaries are included as from the effective date of becoming subsidiaries or to the effective date of disposal.
The reserve or cost of control is the difference between the cost of investments in subsidiaries and book value of the net assets of those subsidiaries at date of acquisition. Where appropriate, this difference is allocated to the underlying assets.
1.3 Mining Investments
In accordance with the accounting practice generally adopted by the gold mining industry in South Africa the following policies have been applied:
1.3.1 The group's mining assets are of a wasting nature. in order to recognise this, the group will appropriate from income within the lifetime of the operations such amounts which, together with the issued capital, premium and long-term liabilities of the company, will equal the expenditure on these assets. Income so appropriated will therefore not be available for distribution to shareholders.
In pursuance of this policy, no account has been taken of:
a) Depreciation of these assets. (Normal replacements are chargeable against revenue.)
b) Exhaustion of ore reserves.
1.3.2 No account is taken of gold in the process of production.
1.3.3 Interest on funds borrowed for the acquisition of mining assets is capitalised to the cost of these assets until such time as the assets have been fully developed and/or brought into use.
1.4 Stock Stock consists of mine consumable stores and is valued at the lower of cost or net realisable value on a first-in, first-out basis. Obsolete, redundant and slow moving stock is identified and written down to estimated realisable values.
1.5 Dividends
Dividends received from subsidiaries and associates are regarded as accruing in the period in respect of which they are declared.
1.6 Turnover
Turnover comprises revenue from gold and silver production and the sale of by-products.
1.7 Earnings per share
The earnings per share has been calculated on attributable net income for the year, after taxation, on the weighted average of 132 318 000 ordinary shares in issue during the year (1995:132 318 000 shares).
Company Group
1995 1996 1996 1995
R000 R000 R000 R000
2. SHARE CAPITAL
2.1 Authorised
2500 2500 250 000 000 ordinary shares of 1 cent each 2500 2500
2.2 Issued
1323 1323 132 318 000 ordinary shares of 1 cent each 1323 1323
The unissued ordinary shares are under the
control of the directors subject to sections
221 and 222 of the Companies Act, 1973 and
subject to the rules and regulations of the
Johannesburg Stock Exchange.
10
Notes to the annual financial statements
at 31 March 1996 (continued)
Company Group
1994 1996 1996 1994
R000 R000 R000 R000
2.3 Share incentive scheme
In terms of the scheme a maximum of
3 000 000 shares may be issued to eligible
members who are defined as any officer or
employee of the company or its subsidiaries.
A total of 2 330 000 shares have been
issued in previous years.
.3. NON-DISTRIBUTABLE RESERVES
- 976Surplus on disposal of investments/mining assets 976 -
- 1213Surplus on write back of loans 1213 -
- -Income appropriated for expenditure on mining assets - 25884
- -Balance 1 April 25884 22332
- -Net amount transferred during the year (25884) 3552
- 2189 2189 25884
4. MINING INVESTMENTS
4.1 Mining assets, comprised land and buildings,
plant, surface and underground equipment and
shafts, mining rights and expenditure capitalised
at cost less amounts recovered - 195900
4.2 Interest in subsidiary companies
89484 -Shares at cost
5622 -Loans receivable
95106 -
10107 -Less: Provision against subsidiaries
84999 -
(4860) -Short-term loans
80139 - - -
80139 -Total mining investments - 195900
5. LOANS
110 1245Loans to Share Incentive Trusts 1245 1132
6. AMOUNTS DUE RV FELLOW SUBSIDIARIES
1054 2921 - included in cash at bank and on call 2921 9960
The amounts were placed on call deposit at various
times during the year with Consolidated Mining
Management Services Limited, whose business
includes the accepting of funds. The highest
outstanding balance was R41 797 178
(1995: R18 372 487). The rate of interest varied
between 8,75% - 13,875% (1995: 9,375% - 11,375%)
and an amount of R2 216 249 (1995: R858 290) was
paid as interest. In accordance with normal practice
for funds placed at call no security was obtained for
balances outstanding.
11
Notes to the annual financial statements
at 31 March 1995 (continued)
Company Group
1994 1996 1996 1994
R000 R000 R000 R000
7. NET INCOME BEFORE TAXATION
Included in net income before taxation:
Income
Income from subsidiary companies
10315 - - dividends
75 118 Interest received 469 964
Expenditure
12 13 Auditors' remuneration 95 127
- -Fees - current 95 125
- prior year - 2
Administration, accounting management and
33 33 secretarial fees 2326 3510
- 15 Interest paid 276 371