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| REPORT
OF THE BOARD OF DIRECTORS |
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FOR
THE FIFTEEN MONTHS ENDED 30 JUNE 2002 |
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Dear
Shareholder |
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The
Board has pleasure in reporting on the activities and financial
results of your group for the fifteen months under review.
VenFin
was listed in its present composition for the first time on the
JSE Securities Exchange South Africa (JSE) on 26 September 2000.
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CHANGE
IN YEAR-END |
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The
group changed its year-end from 31 March to 30 June. The change was
necessary to enable the group's service company, M&I Management
Services (Proprietary) Limited (M&I), to deal with both VenFin's
and Remgro Limited's financial year-ends without incurring additional
management costs by appointing additional financial staff.
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OPERATING
ACTIVITIES |
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VenFin
is an investment holding company. The group derives its income mainly
from equity accounted income of associated companies in which VenFin
invested. Interest is also earned on cash resources. |
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The
associated companies' operating activities are mainly spread over
the telecommunications and technology interests. The biggest portion
of the individual investments are in South Africa, but a substantial
investment which is held abroad, is the one-third interest in R&V
Holdings Limited (R&V). The comparative figures are only for twelve
months and therefore not directly comparable. |
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PRO
FORMA HEADLINE EARNINGS |
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Due
to the material effect that the equity accounted results of e-tv will
have on the results of VenFin if the Independent Communication Authority
of South Africa approves the conversion of the loan to equity, the
pro forma headline earnings are presented on the basis that the attributable
portion of e-tv's loss is accounted for as a loss in an associated
company and not as an exceptional item. |
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IMPAIRMENT
OF GOODWILL AND INVESTMENTS |
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Provision
for impairment of goodwill and investments in respect of Camus (an
investment of R&V, an associated company of VenFin), iTouch,
eCompany and Fundamo, which are still in an early development stage,
has been made to reflect the possible risks associated with the
investments.
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GENERAL
REVIEW |
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Operating
results |
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Fifteen
months |
Twelve
months |
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ended |
ended |
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30
June |
31
March |
| Period
ended: |
2002 |
2001 |
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| Headline
earnings (R million) |
707 |
586 |
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Interest in net profit of R&V (R million) |
238 |
295 |
| Interest
in net profit of associated companies |
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– excluding R&V (R million) |
401 |
246 |
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Net interest and other profit (R million) |
68 |
45 |
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– per share (cents) |
135.7 |
112.3 |
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– diluted (cents) |
135.5 |
112.3 |
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| Basic
earnings – net profit for the period (R million) |
233 |
443 |
| –
per share (cents) |
44.7 |
84.9 |
| –
diluted (cents) |
44.7 |
84.9 |
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| Pro
forma headline earnings (R million) |
612 |
509 |
| –
per share (cents) |
117.5 |
97.5 |
| –
diluted (cents) |
117.3 |
97.5 |
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Details
of the operating results are set out in more detail in the review
of investments on pages 18 to 40. |
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Fifteen
months |
Twelve
months |
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ended |
ended |
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30
June |
31
March |
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2002 |
2001 |
| Composition
of headline earnings |
R
million |
R
million |
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| Subsidiary
companies |
68 |
45 |
| Profits |
86 |
53 |
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Losses |
(18) |
(8) |
| Associated
companies |
639 |
541 |
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Profits |
657 |
544 |
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Losses |
(18) |
(3) |
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707 |
586 |
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EXCHANGE
RATE DIFFERENCES |
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Positive
exchange rate differences arising on translation of offshore assets
to SA Rand at 30 June 2002 amounted to R2 296 million and was credited
directly to reserves. |
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INVESTMENTS |
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The
most important changes in investments for the fifteen months under
review were as follows: |
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GenuOne
Incorporated (GenuOne) |
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During
the fifteen months under review a further loan of $2.2 million was
granted to Certus International Société Anonyme (Certus)
in addition to an original loan of $1.5 million. The total amount
was convertible into equity based on certain capitalisation events.
A 30% interest in Certus was also bought for $1.5 million. |
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During
November 2001, Certus was acquired by GenuOne for shares in GenuOne.
VenFin's total loan of $3.7 million in Certus was also converted into
equity in GenuOne and an additional $2.5 million was invested in the
newly merged entity. VenFin also holds warrants to invest a further
$2.5 million in the merged entity, exercisable over three years. At
30 June 2002, VenFin's effective interest in GenuOne was 25.1%. |
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Midi
TV (Proprietary) Limited (e-tv) |
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e-tv
is the only independent free-to-air television broadcaster in South
Africa. During April 2000 VenFin granted an indirect, interest-free
loan of R281.8 million to Sabido (Proprietary) Limited (Sabido), the
holding company of e-tv. An additional R38.6 million was advanced
to Hosken Consolidated Investments Limited (HCI) for e-tv during the
fifteen months under review. If these loans had been converted into
equity in Sabido, VenFin's indirect interest in e-tv would have been
26% and would have been accounted for as an investment in an associated
company. Pro forma headline earnings are presented to account for
the earnings after conversion to an associate. VenFin also advanced
a further loan to HCI for R280 million on 7 January 2002 to buy Warner
Bros. International Television Distribution's interest in e-tv and
to meet other funding requirements of e-tv. This loan is interest-bearing
and fully secured by HCI's interest in Vodacom Group (Proprietary)
Limited (Vodacom). |
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Psitek
(Proprietary) Limited (Psitek) |
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During
December 2001, VenFin acquired an additional 12.4% of Psitek for R27
million. At 30 June 2002, the interest was 33.1%. |
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SAIL
Group Limited (SAIL) |
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VenFin
had an interest of 35.9% in Luna Corporation Limited (Luna) at 31
March 2001. Luna was the holding company of SAIL which is listed on
the JSE. Luna's holding in SAIL was unbundled on 26 September 2001
and after the unbundling, VenFin held a direct interest of 30% in
SAIL. SAIL acquired Vodacom Sports and Entertainment (Proprietary)
Limited (VSE) from Vodacom during the fifteen months and issued new
shares to the management of VSE. SAIL, in co-operation with VenFin,
also entered into an empowerment transaction with AKA Capital on 22
February 2002 in terms of which VenFin sold 20 million of its SAIL
shares to AKA Capital. On 30 June 2002 VenFin held an interest of
19.5% in SAIL. |
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Intervid
Limited (Intervid RSA) |
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During
June 2001 VenFin acquired a further 1 000 000 shares in Intervid RSA
at a cost of R6 million. At 30 June 2002, the interest in Intervid
RSA was 17.4%. |
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FRS
Financial Reporting Solutions (Proprietary) Limited (FRS) |
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The
VenFin Board approved an investment of R20 million in FRS on 28 March
2001. This investment will be made in tranches when certain milestones
are met by FRS. Since July 2001 VenFin invested R14 million in FRS.
At 30 June 2002, the interest was 41.4%. In terms of the shareholders'
agreement, VenFin's interest will dilute to 33.3% if certain milestones
are met by FRS. |
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Veritas
Venture Partners (Cayman) L.P. (Veritas) |
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VenFin
has approved an investment in VVP Fund II, LP for the sum of $1.5
million. This presently represents an interest of about 4% in the
partnership. Veritas has drawn down $150 000 of this commitment. VVP
Fund II, LP is based in Israel and is a venture capital fund managed
by Veritas. |
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Fundamo
(Proprietary) Limited (Fundamo) |
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Through
further investments of R7.2 million, VenFin increased its interest
in Fundamo to 37.6% during the fifteen months under review. |
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R&V |
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R&V
made the following investments during the fifteen months under review: |
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Intervid
International AG |
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RFS
Holdings Limited, Jersey, a wholly-owned subsidiary of R&V,
funded Intervid International during April 2001 in the sum of
CHF84.7 million. The funding was effected by way of a loan which
is compulsorily convertible into equity in Intervid International
or Intervid RSA within four to six years from the date of advance.
The percentage interest in Intervid International will depend
on the performance of Intervid International (minimum interest
of 30% and maximum interest of 50%). |
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VHF
Technology Société Anonyme (VHF) |
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During
the fifteen months period a convertible loan of CHF1.5 million
was granted to VHF. The loan is interest free and repayable
at the latest by 31 March 2003. Should the loan not be repaid
by this date, it is convertible into shares in VHF. |
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CommsCo
Holdings Société Anonyme (CommsCo) |
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On
3 October 2001 RFS Holdings Limited invested EUR296 000 in CommsCo
for a 40% interest in that company. The other shareholders in
CommsCo are Richemont (40%) and Dimension Data (20%). |
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Buy-back
of VenFin shares |
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During
March 2002, VenFin's wholly-owned subsidiary, VenFin Securities (Proprietary)
Limited, acquired 3 800 000 ordinary VenFin shares for a total amount
of R69.8 million. During June 2002 a further 3 600 000 shares were
acquired for R67.2 million. These transactions did not have a material
effect on earnings or earnings per share. |
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Subsequent
to the year-end: |
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Fibalogic
(Proprietary) Limited (Fibalogic) |
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VenFin
has entered into discussions with third parties regarding the possible
disposal of its interest in Fibalogic. |
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GenuOne
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VenFin
approved an additional investment of $4 million in GenuOne. |
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Vodacom |
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On
29 August 2002 it was announced that VenFin had entered into discussions
with HCI regarding the purchase of HCI's 5% interest in Vodacom. VenFin
will issue further announcements as appropriate. |
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SHARE
CAPITAL |
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During
the fifteen months the trustees of the VenFin Share Scheme (the "scheme")
offered ordinary shares to participants as follows: |
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Number
of |
Number
of |
Number
of |
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Offer |
Number
of |
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shares |
participants |
shares
where |
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price |
shares |
Number
of |
accepted
on |
who
rejected |
the
offer |
| Date |
(Rand) |
offered |
participants |
30
June 2002 |
the
offer |
was
rejected |
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| 2/4/2001 |
17.05 |
192
100 |
5 |
192
100 |
– |
– |
| 1/9/2001 |
17.70 |
67
801 |
1 |
67
801 |
– |
– |
| 25/9/2001 |
15.90 |
5
941 907 |
204 |
5
935 436 |
4 |
6
471 |
| 1/11/2001 |
17.55 |
12
611 |
2 |
12
611 |
– |
– |
| 1/12/2001 |
19.20 |
7
294 |
2 |
7
294 |
– |
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| 1/1/2002 |
19.70 |
1
300 |
1 |
1
300 |
– |
– |
| 14/1/2002 |
19.05 |
41
995 |
1 |
None |
1 |
41
995 |
| 1/2/2002 |
18.20 |
106
805 |
8 |
104
474 |
1 |
2
331 |
| 1/3/2002 |
18.45 |
106
868 |
5 |
106
868 |
– |
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| 2/4/2002 |
17.90 |
219
012 |
9 |
167
397 |
1 |
51
615 |
| 3/6/2002 |
17.85 |
31
991 |
2 |
31
991 |
– |
– |
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6
729 684 |
240 |
6
627 272* |
7 |
102
412 |
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*
Refer to note
7. |
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The
offer is open for acceptance for one year from the date of the offer.
The scheme is a deferred purchase scheme and payment is made in three
equal annual instalment, the first of which is payable after three
years. |
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Participants
have no right to delivery, voting or dividends on shares before payment
has been made. Participants have the option to pay on a later date
with the resultant deferment of rights. Payment must, however, be
made within ten years. |
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SERVICE
COMPANY |
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In
2000, an agreement was concluded with a service company, M&I to
render management and support services to VenFin. The shareholders
of M&I are all employees of M&I who own all the issued ordinary
shares. Rembrandt Trust (Proprietary) Limited owns all the "A" ordinary
shares of M&I. The "A" ordinary shares only have voting rights
but have no rights to the income or assets of M&I. |
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VenFin
pays fees to M&I which cover the overhead costs of the management
of VenFin. These fees are calculated at a maximum of 0.463% per year
of the market capitalisation of VenFin, calculated on a monthly average
basis. This percentage may not be exceeded without the approval of
75% of all classes of shareholders of VenFin. The fees are payable
at the end of each month. For the past fifteen months, the fees amounted
to R47 million, or 0.396% of the average market capitalisation, and
are explained in note
12 to the annual financial statements. |
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PRINCIPAL
SHAREHOLDER |
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Rembrandt
Trust (Proprietary) Limited holds all the issued unlisted B ordinary
shares of the Company and is entitled to 42.2% of the total votes. |
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An
analysis of the shareholders appears on page 86. |
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SUBSIDIARY
COMPANIES AND INVESTMENTS |
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Particulars
of subsidiary companies, associated companies and other investments
are disclosed in Annexures A
and B. |
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DIRECTORS |
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Messrs
G T Ferreira and J E Newbury were appointed as non-executive directors
on 28 November 2001. |
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The
names of the directors appear on pages 8 and 9. |
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In
terms of the provisions of the Articles of Association, Messrs J J
Durand, G T Ferreira, J E Newbury and J Malherbe retire
from the Board by rotation. These directors are eligible and offer
themselves for re-election. |
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CO-INVESTMENT
SCHEME |
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This
scheme was terminated on 1 April 2002 and a new scheme will be introduced
in the 2003 financial year. |
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DIRECTORS'
INTERESTS |
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At
30 June 2002 the aggregate of the direct and indirect interests of
the directors in the issued share capital of the Company amounted
to 0.13% (31 March 2001: 0.08%). |
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An
analysis of the directors' interests in the issued share capital of
the Company appears on page 86. |
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DIRECTORS'
EMOLUMENTS |
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The
Board recommends that directors' fees for services rendered during
the past fifteen months be fixed at R457 000 (31 March 2001: R150
000). |
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ACQUISITION
OF SHARES OF THE COMPANY |
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It
is recommended that a general authority be granted to the Board for
it to acquire, should circumstances warrant it, the Company's own
shares and to approve the acquisition of shares in the Company by
any of its subsidiaries, subject to the provisions of the Companies
Act 61 of 1973, as amended, and the Listing Requirements of the JSE. |
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Special
resolutions to this effect are incorporated in the notice of the Annual
General Meeting that appears on page 89. |
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SECRETARY |
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On
28 November 2001, Mrs M Lubbe was appointed as Company Secretary in
the place of Mr J C Engelbrecht who has retired. |
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The
address of the Company Secretary appears on page 88. |
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DIVIDENDS |
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No
dividend is proposed for the fifteen months to 30 June 2002. |
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APPROVAL |
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The
annual financial statements set out on pages 52 to 84 have been approved
by the Board. |
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Signed
on behalf of the Board of Directors. |
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| Johann
Rupert |
Josua
Malherbe |
| Chairman |
Chief
Executive Officer/Deputy Chairman |
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Stellenbosch
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9
September 2002 |
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