INTERIM REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2003 (UNAUDITED)
   
   
   
   
 
  COMMENTS
   
  ACCOUNTING POLICIES
  The interim results have been prepared in accordance with South African Statements of Generally Accepted Accounting Practice, the Listing Requirements of the JSE Securities Exchange South Africa and the South African Companies Act.
   
  The accounting policies used in the preparation of the interim financial statements are consistent with those used in the annual financial statements for the year ended 30 June 2003, with the exception of accounting for the Company’s long-term share incentive scheme.
   
  CHANGE IN ACCOUNTING POLICY
  The accounting policy in respect of the Company’s long-term share incentive scheme (the “scheme”) has been changed.
   
  In the past, the diluted headline and basic earnings per share were based on the weighted number of shares in issue after adjustment for the dilutive effect of shares which were to be issued to participants in the scheme. The trustees of the Share Trust subsequently decided to rather acquire shares in the open market and 9 056 974 shares were purchased during the period under review. Therefore, no diluted headline and basic earnings per share are presented.
   
  The estimated cost of the scheme, after taking into account dividends received on the relevant shares, is not material and is accounted for against income and headline earnings as a once-off expense during the period under review.
   
  FINANCIAL REVIEW
  The headline earnings for the six months to 31 December 2003 increased by 23.2% from R302 million to R372 million.
   
  The headline earnings per share for the six months to 31 December 2003, however, increased by 25.9% from 58.7 cents to 73.9 cents, reflecting the positive effect of the share repurchase programme.
   
  The group’s main sources of earnings were: Vodacom Group (Proprietary) Limited (Vodacom) (15.0% interest), which contributed approximately 63% (2002: 55%) to group headline earnings, the associated company R&V Holdings Limited (R&V) (33.3% interest), which contributed 23% (2002: 31%) to headline earnings, and interest income from cash resources, which contributed 12% (2002: 18%) to headline earnings.
   
  The increase in headline earnings is largely attributable to:
 
  • The increase in equity accounted earnings from Vodacom, from R165 million to R233 million, due to the additional 1.5% interest purchased in Vodacom as well as the steady growth in Vodacom’s interim earnings.
  • The continued turnaround of e-tv during the current interim period. The contribution of
    e–tv to VenFin’s headline earnings for the six months to 31 December 2003 amounted to R13 million, compared to a loss of R17 million during the comparative period.
  • Reduced losses at GenuOne Inc, from R15 million to R3 million during the period under review.
   
  NET ASSET VALUE
  The net asset value, at market value of listed investments and directors’ valuation of unlisted investments, at 31 December 2003 amounted to R25.94 per share compared to R24.17 per share at 30 June 2003. This represents an increase of 7.3%.
   
  The following factors, or a combination of them, were taken into account in determining the directors’ valuations of the unlisted investments:
 
  • Market value and earnings yield of similar listed shares, discounted for limited tradeability of the unlisted shares and/or
  • Growth potential and risk factors
  • Underlying net asset value
  • Profit history
  • Cash flow projections
   
  IMPAIRMENT OF INVESTMENTS AND GOODWILL
  Provision for impairment of investments and goodwill amounting to R210 million has been made, of which the most significant are the following:
 
  • An impairment provision amounting to R185 million has been made against the carrying value of the Intervid International convertible loan in RFS Holdings to reflect the risks associated with the total investment in the Intervid group.
  • An impairment provision amounting to R18 million has been made against the unamortised goodwill created on the investment in SAIL, to reflect the decrease in the share price during the period under review.
   
  EXCHANGE RATE DIFFERENCES
  Net negative exchange rate differences arising on the translation of foreign entities to SA rand at 31 December 2003 amounted to R275 million (2002: R807 million) and were debited directly to reserves.
   
  CHANGES TO INVESTMENTS
  The most significant changes to VenFin’s investment portfolio for the six months ended 31 December 2003 were:
   
 
    FrontRange Limited (FrontRange)
 

During the period under review, VenFin invested R19 million in JSE listed FrontRange, a developer of business relationship management solutions with a worldwide presence. At 31 December 2003, VenFin’s effective interest in FrontRange was 6.9%.
     
    SAIL Group Limited (SAIL)
  During the year ended 30 June 2002, it was reported that SAIL, in cooperation with VenFin, entered into an empowerment transaction with AKA Capital in terms of which VenFin sold 20 million of its SAIL shares to AKA Capital. On 31 December 2003 this transaction was partially reversed and 18 million SAIL shares were transferred back to VenFin. Following this transaction, VenFin’s interest in SAIL amounted to 26.1%.
     
    Veritas Venture Partners (Cayman) L.P. (Veritas)
  During August 2003, VenFin invested a further $150 000 in V VP Fund II, L.P. On 31 December 2003 the total investment in the fund amounted to $450 000.
     
    GEMS Oriental and General Fund II (GEMS)
  During the period under review, VenFin invested $6 million in GEMS, a venture capital fund investing in businesses in Asia.
     
    Richemont A units
  During September 2003, RGH Investments Limited, a wholly-owned foreign subsidiary of VenFin, sold 2.2 million Richemont A units for R321 million. A capital surplus of R20 million was realised and is accounted for as an exceptional item.
     
  VenFin Share Trust (Trust)
  During the period under review, VenFin Securities (Proprietary) Limited (VenFin Securities) sold 8 896 346 of the treasury shares to the Trust for a net consideration of R149 million.
   
  Buy-back of VenFin shares
  During the period under review, VenFin’s wholly-owned subsidiary, VenFin Securities, acquired an additional 8 815 000 ordinary VenFin shares for R151 million. After the sale of 8.9 million shares to the Trust, the number of shares which are held as treasury shares on 31 December 2003, was 21 565 620, or 4.4% of the issued ordinary shares of 1 cent each.
   
  Since 31 December 2003
   
  Acquisition by VenFin of controlling interest in Intervid Limited (Intervid)
  Subsequent to the reconstitution of the Intervid Board on Monday, 23 February 2004, initiated by the Howard family, VenFin offered the Howard family the opportunity to acquire the VenFin shareholding in Intervid at 34 cents per share. The Howard family declined the offer, but accepted an offer to sell their shares to VenFin at the same price. Should the agreement become unconditional, VenFin’s effective shareholding in Intervid will increase to 49.78%.
   
 

The agreement is subject, inter alia, to approval of the transaction by the Competition Authorities. Once such approval has been obtained, VenFin will, in terms of the Securities Regulation Code on Takeovers and Mergers, extend a mandatory offer to all the other minority shareholders of Intervid on substantially the same terms as those agreed with the Howard family.
   
  VenFin has re-entered into discussions with the Intervid Board regarding the ongoing financing requirements of Intervid.
   
   
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