F UND

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Growing Economic Participation

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PRESENTATION TO THE

SELECT COMMITTEE ON

ECONOMIC & FOREIGN AFFAIRS

24 FEBRUARY 2005

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CONTENTS

1. Introduction 2. Organisational Structure3. Investment Division4. Finance Division

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Main objective

To be a catalyst in facilitating economic equality and transformation

New focus Maximise the empowerment dividend

Driven by

- Current market needs- Broad-based empowerment charter- Government policy and other sectoral

charters- Addressing past failures of BEE

structures

NEF INTRODUCTION

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NATIONAL EMPOWERMENT

FUND

(NEF)

NEF TRUST

NEF VENTURES

In terms of the NEF Act Capitalisation from National

Treasury Specific product offerings in

terms of June 2004 product relaunch

Joint Fund between IDC and the NEF

Separate investment criteria and fund mandate

Transactions between R3m to R10m Minimal overlap with NEF Trust

Transformer product only NEF screens and processes

applications as Fund Manager Capitalisation on a 50/50 basis

between both organizations Fund Size R170m, with initial

expectations of an additional R30m to be earmarked for a smaller Fund

Management fees paid by IDC and NEF respectively

FUND DIFFERENTIATION

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NEF Board

Chief Executive Officer

Chief Financial Officer

A Wright (Acting)

BEE

Ret

ail E

quity

Man

ager

Gen

erat

or

Acc

eler

ator

Tran

sfor

mer

Fina

ncia

l Acc

ount

ing

Man

agem

ent A

ccou

ntin

g

Audit CommitteeHuman Capital & Remuneration Risk Management Committee Investment Committee

Executive - Group Entrepreneurial

SchemesP Naidoo (Acting)

Executive - Market MakingVacant

Support Services Executive

Risk / Internal Auditor Vacant

Rur

al &

Com

mun

ity S

uppo

rt

Proc

ess

and

Proj

ects

Coo

rdin

atio

n

Secretarial & Compliance OfficerE Riley

Kno

wle

dge

Man

agem

ent

Executive Advisory ServicesVacant

BEE

Fac

ilita

tion

Stra

tegi

c Pr

ojec

ts

Und

erw

ritin

g fo

r IPO

Offi

ce A

dmin

istr

atio

n.

Hum

an R

esou

rces

Mar

ketin

g &

Com

ms

Lega

l Adv

isor

y Se

rvic

es

Info

rmat

ion

Tech

nolo

gy

PAVacant

Minister

NEF ORGANISATIONAL STRUCTURE

Total number of employees: 41

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NEF’S BUSINESS OFFERING

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THE NEF IS A DFI OPERATING UNDER THE UMBRELLA OF THE dti

• providing historically disadvantaged persons with the opportunity of, directly or indirectly, acquiring shares or interests in state owned commercial enterprises that are being restructured or in private business enterprises;

• encouraging and promoting …. investments and meaningful economic participation by historically disadvantaged persons;

• promoting and supporting business ventures pioneered and run by historically disadvantaged persons;

• promoting the universal understanding of equity ownership among historically disadvantaged persons;

• encouraging the development of a competitive and effective equities markets inclusive of all persons in the Republic;

• contributing to the creation of employment opportunities

• Increasing the contribution of small enterprises to the economy

• Significantly advancing broad-based black economic empowerment

• Increasing the level of direct investment in the economy and in specific priority sectors

• Contributing towards providing accessible, transparent and efficient access to redress for economic citizens

• Partially fulfilling

– Contributing towards building skills, technology and infrastructure platforms in the economy from which enterprises can benefit

– Repositioning the economy in higher value-added value matrices in manufacturing and services

Market Making – Current products

(CMF, LWF, SPF)

NEF’s products/ activities NEF’s objectives as per the NEF Act dti’s objectives addressed

The NEF’s product offerings have been structures to address the NEF’s objectives and the dti’s strategic objectives for 2004 to 2007

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THE NEF IS A DFI OPERATING UNDER THE UMBRELLA OF THE dti (continued)

• Increasing the contribution of small enterprises to the economy• Significantly advancing broad-based black economic

empowerment • Contributing towards providing accessible, transparent and

efficient access to redress for economic citizens• Partially fulfilling

- Increasing the level of direct investment in the economy and in specific priority sectors

- Contributing towards building skills, technology and infrastructure platforms in the economy from which enterprises can benefit

• Providing historically disadvantaged persons with the opportunity of, directly or indirectly, acquiring shares or interests in state owned commercial enterprises that are being restructured ….;

• Encouraging and promoting savings, investments and meaningful economic participation by historically disadvantaged persons;

• Promoting the universal understanding of equity ownership among historically disadvantaged persons;

• Encouraging the development of a competitive and effective equities markets inclusive of all persons in the Republic;

Group and Entrepreneur schemes – existing productsGenerator, Accelerator, Transformer

NEF’s products/ activities

NEF’s objectives as per the NEF Act dti’s objectives addressed

• Providing historically disadvantaged persons with the opportunity of, directly or indirectly, acquiring shares or interests in state owned commercial enterprises that are being restructured or in private business enterprises;

• Encouraging and promoting savings, investments and meaningful economic participation by historically disadvantaged persons;

• Promoting and supporting business ventures pioneered and run by historically disadvantaged persons;


• Contributing to the creation of employment opportunities;

• Increasing the contribution of small enterprises to the economy


• Increasing the level of direct investment in the economy and in specific priority sectors


• Partially fulfilling

- Contributing towards building skills, technology and infrastructure platforms in the economy from which enterprises can benefit

Group and Entrepreneur schemes – existing products

(Rural and Community Development)

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THE NEF IS A DFI OPERATING UNDER THE UMBRELLA OF THE dti (continued)

• Providing historically disadvantaged persons with the opportunity of, directly or indirectly, acquiring shares or interests in state owned commercial enterprises that are being restructured or in private business enterprises;

• Promoting and supporting business ventures pioneered and run by historically disadvantaged persons;


• Contributing to the creation of employment opportunities



Group and Entrepreneur schemes – existing products

(Retail Equity ownership)

NEF’s products/ activities NEF’s objectives as per the NEF Act dti’s objectives addressed

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• Identification of market failures in SME sector• Avoid duplication of other DFI offerings• Positioning of NEF to complement other DFIs and financial institutions

Product Market failure Complementary to other DFIs/Banks

Group and Entrepreneurial Schemes

• Generator(R250k-R1m)

• Limited access to finance for HDSA entrepreneurs with no collateral

• Brings new businesses into bankable positions.• Khula and IDC

• Accelerator(R1m-R3m)


• Enhances existing businesses future prospects of maintaining independent banking relationships.

• Khula and IC

• Rural and community development(R1m-R3m)

• Lack of equity funding fro rural & community economic infrastructural development especially with prospects of long term (10 year) medium to low returns. This equity catalyses debt from DFIs and banks.

• NEF will only provide a potion of total capital requirement, balance as debt from IDC, DBSA, Land Bank, Banks

• Working with CPPP

• Transformer(R3m-R10m)


• Enter buy-in/buy-out negotiations from a position of weakness

• Co-investment with other DFIs

The NEF’s initial products have been designed to address specific market failures as highlighted below:

NEF POSITIONING IN ADDRESSING MARKET FAILURE

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NEF POSITIONING IN ADDRESSING MARKET FAILURE cont.

• Capital Markets fund (R1m-R10m)

Product Market failure Complementary to other DFIs/Banks

• Liquidity and warehousing(R10m-R50m)

• Strategic projects (>R25m)

• Institutional fund managers do not focus on listed companies with market caps <R1bn and even less emphasis is placed on markets caps of <R500m

• IPOs and capital raisings for small to medium sized Black Empowered businesses are thus extremely

• Large strategic projects create an ideal opportunity for BEE participation at the outset.

• Funding to secure an equity position for BEE participants at the start-up phase is not readily available.

• Adverse funding structures dilute the BEE strategic positioning.

Market Making

• Second round funding requirements on broad based structures can dilute the BEE shareholding.

• Other than IPOs, there is not much market liquidity for HDSA owner-managers who wish to realise some value from their businesses without compromising BEE status and hence value.

• Historic funding structures, especially where BEE groups have acquired controlling stakes, are often punitive and over-geared which places pressure on the underlying operations.

• Assists with exists from equity positions held in successful medium to large private businesses

• IDC

• Co-investment with IDC, DBSA, Land Bank

• Restructure funding with a longer-term view• IDC, Banks

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WHAT DIFFERENTIATES NEF? Exclusive generalist funding

for BEE Not focused on personal

credit worth/ security Focused on the “Hurt Factor”

(livelihood dependent) Appetite for risk with a

development focus

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KEY QUALIFYING CRITERIA Entrepreneur Support

• Operational involvement at senior management level

• Financial commitment (relative to the individual and not the size of the transaction)

• Demonstrate sustainability of the business

• NEF investment into operating companies

• Compliance with laws and regulations(e.g. Income tax, Employment Equity)

Rural & Community Support

• Community involvement at all levels

• Strong social upliftment benefits

• Co-funding with other investors (NEF will not be the sole investor)

• Projects must be undertaken in conjunction with a recognised partner

Market Making

• Track record of operational involvement

• Established businesses

• No dilution of management capacity

• Compliance with laws and regulations (e.g. Income tax, Employment Equity)

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Generator Accelerator Transformer

• R250 000 to R1m • R1m to R3m • R3m to R10m Size of investment• Create new HDP-

owned and managed enterprises

• Grow and develop existing HDP-owned and managed enterprises

• Transformation of enterprises at the ownership, decision-making and control levels

Principal goal

• Close corporations) and private (Pty) Ltd companies.

• CCs and (Pty) Ltd companies

• Unlisted limited companies

Types of organisations supported

• Acquisition of equipment

• Financing of working capital

• Bridging finance• Acquisition of

licenses/franchises• Rehabilitation, lease

and performance bonds

• Primarily to fund business expansion, either by acquisition or organically

• Management buy-outs

• Management buy-ins• Employee buy-ins,

Employee share ownership plans

Principal use of investment capital

• Debt (secured and unsecured)

• Equity

• Secured debt• Convertible debt• Preferred equity • Equity

• Secured debt• Convertible debt• Preferred equity• Equity

Types of investment

• 3 – 7 years • 3 – 7 years • 3 – 7 yearsTerm of investment

• >75% • >50% • >25%HDP equity thresholds (including NEF stake)

DETAILED INVESTMENT CRITERIA – ENTREPRENEUR SUPPORT

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THE FRAMEWORK TRACKS THE DEAL FLOW PROCESS THROUGH THE FOLLOWING GENERIC STAGES:1. Eligibility screening;2. Assessment of commercial viability (including historic analysis) and sustainability of financial forecasts, incorporating review of the business plan;3. Evaluation of management’s ability to implement the business plan;4. Proposed investment structure and capacity of business to service/ bear the required cost of funding;5. Identifying risks inherent in the business, formulating the due

diligence investigation plan and setting due diligence materiality limits; 6. RECOMMENDATION TO EXCO (PRE DUE DILIGENCE);

7. Performance of due diligence and evaluation of results;8. Final review of due diligence and comparison to

investment structure;9. FINAL RECOMMENDATION TO EXCO AND IC

EVALUATION FRAMEWORK

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Application form Screening Business plan Prelim Investment report Investment Committee

→ → → → → → →

Receipt of Investment

Application Form and business

motivation

Assessment of application for

eligibility

Investment Associate perform assessment for commercial viability, incorporating business

plan Communication with applicant: decline application or proceed with evaluation

Completeness of Business Plan and evaluate financial

forecasts

Prepare Investment Report for pre-due

diligence & proposed Term Sheet approval

Present Pre Due Diligence report to

Investment Committee

(INCOM)

Product information communicated to applicant

Send client investment criteria & application form

Application received entered onto deal data base

Asses against eligibility criteria per Investment Charter

Decline or forward for subsequent screening

Committee, (includes CIO,) approves findings on applications (accepted / declined)

Allocate to Investment Associates

Assess Valuation Affordability Business case Contact client to

discuss application

Issue appropriate letter (decline or proceed)

Communicate reasons for declining application

Committee, (includes CIO) approves findings on applications (accepted / declined)

Ongoing query & feedback to applicant

Approval at weekly team meeting

Circulate investment report to EXCO

Term sheet to be included in investment report

Includes risk analysis & due diligence materiality limits

Approval by EXCO

Circulate investment report to INCOM

INCOM needs 2 weeks to evaluate

Term sheet to be included in investment report

Includes risk analysis & due diligence materiality limits

Approval by INCOM

Formal Documentation required:

Completed application form, motivation & financial summaries

Eligibility screening completed on application form

Minutes of Committee Meeting

Letter to client if declined

Report to monthly investment committee meeting

Commercial viability assessment report

Provide Business Plan checklist, if necessary

Letter to Client Business Plan

Pre-screening report

Investment report Proposed Term

Sheet Minutes of Meeting

Pre Due Diligence Report

Proposed Term Sheet

Minutes of Meeting

INVESTMENT PROCESS: TRANSACTIONS > R5m

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Due diligence Final Investment Report Investment Committee Legal

→ → → → →

Perform Due Diligence (DD) Final Investment Report

EXCO Submission for

approval

Report to INCOM for final approval

Legal agreements & disbursement

Risk focused Return assessment based on

sensitivity scenarios Sign off DD file for quality review DD

working paper file Executive Summary report of DD

Prepare investment report recommending deal & subject to legal contracts

Include scope of DD

DD results on executive summary report

Circulate Investment Report to EXCO

Final term sheet to be included in investment report

Circulate Investment Report to INCOM Members

INCOM needs 2 weeks to evaluate

Final term sheet to be included in investment report

Monthly meeting scheduled in advance

Drafting of legal agreements using NEF standard templates

Finalise with attorney’s input

Circulate to investee for review & acceptance

Disburse

NOTES:

1. Timings associated with the Generator and Accelerator products may be quicker in that structuring would be standardised to a point.

2. Capital expansion transactions would likely be able to be accelerated.

3. EXCO comprise of executive management, including CEO of NEF.

4. Negotiations with respect to MBI’s and MBO’s would expectantly take a longer turnaround.

5. Timings are indicative assuming all information from the application is complete and timeous and represents actual time spent on transaction.

Formal Documentation Required:

Due Diligence file Executive summary of DD

Investment Report Executive Summary

report of DD Signed Term Sheet

Investment Report Executive Summary

report of DD Signed Term Sheet Minutes of Meeting

INCOM resolution (minutes of meeting)

Approval letter

Legal contracts Disbursement

documentation

INVESTMENT PROCESS: TRANSACTIONS > R5m cont.

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INVESTMENT PROCESS: TRANSACTIONS > R5m Application Form / Screening /

Business PlanPreliminary Investment

Report Investment Committee Due Diligence Final Investment Report

PIDSA

Total Applications Received

(01/06/04 – 21/02/05) 185

1. E & B CitrusR10,000,000 (EC)

2. EHD Components

R9,940,000 (GP)

Pending Applications (01/06/04 – 21/02/05)

70 (Pre-Investment Business

Support required to accelerate transactions)

1. DatacentrixR50,000,000 (GP)

2. E & B Conservancy R10,000,000 (EC)3. Solar Systems

R7,000,000 (GP)4. Vac Air Technology

R10,000,000 (GP)

Receipt of Investment Application Form & Business Motivation

Assessment of application for eligibility

Investment Associate perform assessment for commercial

viability, incorporating business plan

Communication with applicant: decline application or proceed with

evaluation

Completeness of Business Plan

Evaluate Financial forecasts

Internal Team Approval

Prepare Investment Report for pre-due

diligence & proposed Term sheet Approval by

EXCO Investment Committee (INCOM)

Present Pre Due Diligence Report to

EXCO INCOM Perform Due Diligence (DD) Final

Investment Report

EXCO INCOM Submission for

Approval

Presentation to the NEF INCOM / Ventures IC for Final Approval

(FICA)

Interim Investment Committee for

transactions above R5m approved

PIDA

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INVESTMENT PROCESS: TRANSACTIONS UP TO R5m

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NOTES:1. Timings associated with the Generator and

Accelerator products may be quicker in that structuring would be standardised to a point.

2. Capital expansion transactions would likely be able to be accelerated.

3. EXCO comprise of executive management, including CEO of NEF.

4. Negotiations with respect to MBI’s and MBO’s would expectantly take a longer turnaround.5. Timings are indicative assuming all information from the application is complete

and timeous and represents actual time spent on transaction.

Legal agreements & disbursement

EXCO Submission for

approval

Final Investment Report

Perform Due Diligence (DD)

→→→→ Due diligence Final Investment Report Investment Committee Legal

Legal contracts Disbursement documentation

Investment Report Executive Summary report of DD Signed Term Sheet Minutes of Meeting Approval letter

Investment Report Executive Summary report of DD Signed Term Sheet

Due Diligence file Executive summary of DD

Formal Documentation Required:

Drafting of legal agreements using NEF standard templates

Finalise with attorney’s input Circulate to investee for review

& acceptance Disburse Outsource legal service

Circulate Investment Report to EXCO

Final term sheet to be included in investment report Exco team

Prepare investment report recommending deal & subject to legal contracts Include scope of DD DD results on executive

summary report Investment Associate

Risk focused Return assessment based on

sensitivity scenarios Sign off DD file for quality review DD

working paper file Executive Summary report of DD Team members form investment

associate team Specialist, if necessary

INVESTMENT PROCESS: TRANSACTIONS UP TO R5m cont.

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INVESTMENT PROCESS: TRANSACTIONS UP TO R5m Application Form / Screening /

Business PlanDue Diligence Final Investment

ReportPreliminary Investment

ReportInvestment Committee

Receipt of Investment Application Form & Business

MotivationAssessment of application for

eligibilityInvestment Associate perform

assessment for commercial viability, incorporating business

planCommunication with applicant: decline application or proceed

with evaluation

Completeness of Business Plan

Evaluate Financial forecastsInternal Team Approval Prepare Investment Report

for pre-due diligence & proposed Term sheet

Approval by EXCO Investment Committee

(INCOM)Present Pre Due

Diligence Report to EXCO INCOM

Perform Due Diligence (DD)

Final Investment ReportEXCO INCOM Submission

for Final ApprovalInvested Portfolio

PIDAPIDSA

Total Applications Received

(01/06/04 – 21/02/05) 1174

1. Something FishyR390,000 (GP)

2. Makarapa HeadwearR400,000 (GP)

1. Greisen Finance (Pty) Ltd.

R3,990,000 (GP) 2. Izazi Support Systems R300,000 (MP) 3 JC Backhoe Spares

R2,000,000 (GP/PE/KZN)4. Khanya Plastic R1,800,000 (WC) 5. Ogwini Bakery

R1,167,367 (GP)6. Platinum Koi

R900,000 (WC) 7. Quality Frozen Food R2,950,000 (GP) 8. Speedy Umtata

R415,000 (EC) 9. Steel Metal & Tools CC

R3,374,700 (GP)

Pending Applications (01/06/04 – 21/02/05)

553 (Pre-Investment Business

Support required to accelerate transactions)

1. Amsterdam T/D ‘65 CC R680,000 (GP)

2. Semaku R1,345.000 (GP)

NEF VENTURES –5 Transactions(As per attached Report)

1. Exotic BreadsR1,700,000 (KZN)

2. Isibane Safety R1,000,000 (WC)3. Kuzuko R5,000,000 (EC)4. Notae R960.000 (KZN)5. National Trans. & Ind. R1,500,000 (WC)6. Secretarial Unlimited

R450.000 (KZN)7. Theme-U-Snack CC

R1,000,000 (WC)8. Tilt Tango CC R820,000 (WC)

NEF TRUST –GES & MARKET MAKING

6 Transactions (As per attached Report)

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The following calculations provide a sum-of-the-parts breakdown of the NEF’s required returns:

Rate p.a.Inflation rate 3% – 6%Real return required 3% - 4%Risk factors 2% - 8%Operating costs 2% - 3%Taxation (income tax & CGT) 2% - 3%Subtotal12% - 24%Less: empowerment benefit concessions achieved(0% - 5%)Total return required 12% - 19%

INVESTMENT PRODUCT PRICING cont.

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WIP SCHEDULE – INVESTMENT DIVISION NEF summary dealflow pipeline is attached. This summary includes the transaction within NEF

Ventures. Excluding the transactions that are in various stages

of review (pending), 27 transactions are being considered within a formal approval framework (dealflow pipeline).

2 of these transactions have had final approval and awaiting disbursement subject to completion of legal documentation.

11 Transactions have been completed & disbursed and form part of the invested portfolio.

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NEF TRANSACTION WIP SCHEDULELast Updated: 21 February 2005

Company name Company Description Capital Required

Potential Jobs

Current Jobs Province

EHD Components Engine Spares 9,940,000 76 GautengGreisen Finance (Pty) Ltd. Financial Services 3,990,000 15 GautengSolar Systems Electrical Goods 7,000,000 8 8 GautengVac Air Technology Industrial Vacuum Products Mnf. 10,000,000 105 GautengTOTAL: 30,930,000

Amsterdam Trading '65 CC Transportation 680,000 3 GautengExotic Breads Bakery 1,700,000 20 KZNIsibane Safety Protective Equipment 1,000,000 14 Western CapeIzazi Support Systems Harvesting & Distribution of thatched grass 300,000 MpumalangaMakarapa Headwear Headwear 400,000 4 GautengNotae Entertainment 960,000 8 KZNOgwini Bakery Bakery 1,167,367 GautengPlatinum Koi Breeds Fish 900,000 0 8 Western CapeSecretarial Unlimited Printing Services 450,000 5 KZNSemaku Plasma Screen Adverts 1,345,000 4 GautengSomething Fishy Food Franchise 390,000 8 GautengSpeedy Umtata Automotive Services 415,000 7 Eastern CapeTheme U Snack CC Novelty Gifts 1,000,000 5 Western CapeTilt Tango CC Transportation 820,000TOTAL: 11,527,367

VENTURES

GENERATOR

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NEF TRANSACTION WIP SCHEDULE cont.

Company name Company Description Capital Required

Potential J obs

Current Jobs Province

J C Backhoe Spares CC Heavy Duty Equipment Spares 2,000,000 18 10 GP/ PE/ KZNKhanya Plastic Recycling CC Recycles Waste Plastic 1,800,000 20 Western CapeNational Transmission & Ind. CC Imp. & Dist. Conveyor & Trans. belts 1,500,000 20 11 Western CapeQuality Frozen Food Frozen Food Distributors 2,950,000 20 GautengSteel Metal & Tools CC Imports Steel & Aluminum 3,374,700 9 8 GautengTOTAL: 11,624,700

0TOTAL: 0

E&B Citrus Citrus Farming 10,000,000 114 7 Eastern CapeE&B Conservancy Game Farming 10,000,000 40 Eastern CapeKuzuko Game Lodge & Bush Camp 5,000,000 40 Eastern CapeTOTAL: 25,000,000

Datacentrix IT Services 50,000,000 GautengTOTAL: 50,000,000GRAND TOTAL 129,082,067 615 280

Note:This report is for internal deal flow management purposes There is no certainty that all the abovementioned deals will be concluded

TRANSFORMER

RURAL & COMMUNITY DEVELOPMENT

MARKET MAKING

PIDSA - Pre Internal Deal Screening Approval Requested / PIDA - Post Internal Deal Approval Received / DD - EXCO Committee Approval / FICA - Final Investment Committee Approval Received

ACCELERATOR

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NEF TRUST – INVESTMENT PORTFOLIO

TotalUrban / Male &Rural Female

CAPITALISATION OF FUND 150,000,000

FUNDS COMMITTEDName of Investment:MUKS Business Enterprise CC 250,000 G Other Services Gauteng 3 1 100% 1 1Wax Works 650,000 G Manufacturing W / Cape 18 1 100% 1 1

All Joy 5,000,000 MM Other Services (Food) Gauteng 230 6 86% 1 5 1 14% 1 7

Banra Enterprises CC 430,800 A Manufacturing Gauteng 9 1 100% 1 1Golden Falls Trading (Misho) 900,000 G Manufacturing Gauteng 18 1 100% 1 1Kula's Tissue Products CC 250,000 G Manufacturing Gauteng 8 1 100% 1 1

TOTAL 7,480,800 Undrawn Commitments 450,000 Disbursed 7,030,800

Undrawn Capital 142,519,200

No. of Transactions 6Total Value of Transactions 7,480,800 Employment Positions 286 286 10 5 5 2 2 12

Target CurrentSECTORS Target Current REGIONS Current Male 50% 83%Manufacturing 25% 1.5% Gauteng 4.6% Female 50% 17%Information Technology (IT) 20% Western Cape 0.4%Financial Services 20% Kwa Zulu Natal Non HDP 25% 42%Tourism 15% Mpumalanga HDP 75% 58%Other Services 10% 3.5% LimpopoPrinting 5% Northern CapeSmall scale mining 5% Eastern CapeTotal 100% 5.0% Free state

North West Province* NEF PRODUCT Key Target Current 5.0%Generator G 20% 1.4%Accelerator A 20% 0.3%Transformer T 20%Rural & Community R&C 20%Market Making MM 20% 3.3%

100% 5.0%

No. Percentage HDP NON HDPNo. Percentage HDP Non HDPValue ( R ) Sector Province EmployeesNEF Product

Male FemaleShareholders

NEF TRUST INVESTMENT PORTFOLIO - GES & MARKET MAKINGas at 4 February 2005

Investment Portfolio

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NEF VENTURES – INVESTMENT PORTFOLIO

TotalUrban / Male &Rural Female

CAPITALISATION OF FUND 170,000,000

FUNDS COMMITTEDName of Investment:Clickrite 4,911,991 ME Printing Gauteng 60 Urban 4 100% 4 0 0 0% 0 4Blink 3,500,000 S Media Gauteng 9 Urban 5 100% 5 0 0 0% 0 5Emergia 3,100,000 S Financial Services Gauteng 3 Urban 2 100% 2 0 0 0% 0 2Lindiwe 3,075,000 S Marketing & Dist. Western Cape 8 Urban 4 80% 4 0 1 20% 1 5Nucleus Administrators 3,400,000 S Financial Services Gauteng 4 Urban 3 100% 1 2 0 0% 0 3

TOTAL 17,986,991

Undrawn commitments 8,589,920 Disbursed 9,397,071

NEF Funded 50% 4,698,536 IDC Funded 50% 4,698,536

Undrawn Capital 152,013,009

No. of Transactions 5Total Value of Transactions 17,986,991 Employment Positions 84 84 18 16 2 1 1 0 19

Target CurrentSECTORS Prudential limits Current REGIONS Current Male 50% 95%Marketing & Dist. 30% 1.8% Gauteng 8.8% Female 50% 5%Financial Services 30% 3.8% Western Cape 1.8%Media 30% 2.1% Kwa Zulu Natal White 11%Printing 30% 2.9% Mpumalanga PDI 89%

LimpopoTotal 10.6% Northern Cape

Eastern Cape* STAGE OF INVESTMENT Key Target Current Free stateSeed capital, Start-up, Early stage S 50% 7.7% North West ProvinceMBO / MBI / Expansion ME 50% 2.9% 10.6%

100% 10.6%

NEF VENTURES - INVESTMENT PORTFOLIOas at 4 February 2005

Investment Portfolio ShareholdersMale Female

Value ( R ) Sector Province EmployeesStage of Investment No. Percentage HDP Non HDP No. Percentage HDP Non HDP

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FIG 1:Geographical Analysis of Total Enquiries Received ( 1 June- 18 February 2005)

Gauteng42%

Mpumalanga5%

Eastern Cape4%

Limpopo4%

Northern Cape3%

Incomplete Data3%

Kwa Zulu Natal7%

Info & Info213%

Western Cape10%

International0%

North West Province5%

Free state2%

Cellphone Enquires2%

GautengWestern CapeInfo & Info2Kwa Zulu NatalMpumalangaIncomplete DataLimpopoNorthern CapeEastern CapeCellphone EnquiresFree stateNorth West ProvinceInternational

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FIG 2: Geographical Analysis of Total Applications Received (1 Jun - 18 Feb 2005)

Gauteng50%

Western Cape13%

KwaZulu-Natal8%

Limpopo4%

North West4%Mpumalanga

7%

Eastern Cape8%

Northern Cape2%

Free State4%

Gauteng

Western Cape

KwaZulu-Natal

Free State

Eastern Cape

Northern Cape

Mpumalanga

North West

Limpopo

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DESIGNATED SOCE’s

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FUNDING

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OPERATIONAL HIGHLIGHTS Constitution of Board Sub-Committees including

Investment Committee completed in October 2004.

Executive and management positions stabilised pending final appointments.

Disbursements on transactions approved, following launch of new products, commenced in November 2004.

Further disbursements in the IT, wine making and transport business sectors took place between November 2004 and January 2005.

Compliance and internal control procedures and processes fully implemented and transactions are closely scrutinised to ensure full compliance prior to disbursement.

FUND

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CAPITALISATION

Investments R150 million has been earmarked for investment capital to the NEF which is

expected next week following the successful signing of the Shareholder Performance Agreement.

The NEF has cash reserves at present (January 2005 – R64 million) to funds its operations and investment activities until end March 2005 at which point these will be depleted operationally and fully invested through its current funding work in progress (R129 million).

The first tranche of the R2 billion allocation is expected in the first quarter of the next financial year and this is understood to be in the order of R450 million based on the NEF business plan capitalisation draw downs and discussions with National Treasury.

The DG’s and the DPE are currently working on the transfers of the remaining allocation of SOCE equity investments. Significant impact on the balance sheet.

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CASH FLOW FORECAST FOR PERIOD ENDING

MARCH 2005

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CONSOLIDATED BUDGET

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NEF CAPITAL DRAW-DOWN SCHEDULE FOR YEARS ENDING 31 MARCH 2009

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ENTERPRISE GOVERNANCE

Statutory Compliance:

Emphasis of matter in terms of PFMA / Treasury Regulations were raised in the March 2004 External Audit Report.

These are being dealt with and will be fully cleared by March 2005

Ongoing PFMA / NTR compliance is being fully adhered to as described alongside.

31 Jan 2005 (done)

22 Feb 2005 (in progress)

10 Feb 2005 (presented to AC)

24 Nov 2004 (done)

31 Jan 2005 (done)

31 Jan 2005 – IA Manager1 Jan 2005 – IA Co-source

15 Oct 04 extension (done)

15 Oct 04 extension (done)

24 Sep 04 (done)

• Dti Performance Agreement

REQUIREMENT

• Risk Assessment

• Materiality Framework

• S38 Certificate

• Q3 Report

• Internal Audit

• Corporate Strategy/ Business Plan

• Budget 2006

• Annual Report

DUE DATE

FUND

NATIONALEMPOWERMENT


CONCLUSION

F UND

Documents

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