Four years have passed since the restructuring of the old Rembrandt Group into Remgro and VenFin. The South African landscape changed significantly over this period, with the rand vacillating between lows of R13 and highs of R6 to the dollar. Over the past 18 months the rand
was one of the best performing currencies in the world, which had a significant impact on South African businesses that operate on an international basis. Local businesses have to contend with low inflation and a stable, albeit appreciating, currency in an environment where capital controls have declined over the past ten years, but still remain pervasive.

South Africa currently finds itself with a freer capital account than emerging markets in general, but still significantly less free than developed markets. A study by Goldman Sachs on emerging markets found that a reduction in capital controls leads to an improvement in a variety of economic and financial variables. These include a higher real GDP, higher net FDI inflows, lower currency volatility, higher equity returns and lower inflation. Freer capital markets will significantly enhance the investor profile of South Africa on a global basis.

Over the past few years I repeatedly cautioned against over-optimism. There is still evidence of oversupply in all industries, which has a significant impact on the investment markets and sectors in which VenFin operates. We remain focused on our strategy of investing in telecommunication, technology and media-related companies and our investment team screens a large number of potential opportunities. However, despite our efforts, significant investments that meet our due diligence requirements and will deliver superior returns to VenFin shareholders, are not always readily available, or are at a higher price than we are prepared to pay.

Given the scarcity of local investment prospects, we decided to utilise a significant portion of our South African cash to repurchase VenFin shares. Our reasoning behind the share repurchase programme is as follows:

• We are indirectly investing in assets that we know
• We are investing in high-quality assets
• We are buying at a significant discount to net asset value
• We are returning capital to shareholders

Through the share repurchase programme, we have by default also increased your exposure to Vodacom, which is celebrating its first decade of operations this year at the same time that South Africa is commemorating its first decade of democracy. Vodacom continues to play a leading role in democratising telephony in Southern Africa, particularly through the Vodago offering, a prepaid service pioneered in South Africa.

BEE
In 1995, VenFin and Vodacom once again led the way in South Africa with the conclusion of Vodacom’s black economic empowerment (BEE) transaction. Through an innovative funding arrangement, a 5% option in Vodacom was sold to the National Union of Mineworkers (NUM) and SACTWU for R91 million. Six years later the unions sold the same stake back to VenFin and Vodafone for R1.5 billion, making this one of the most successful BEE deals ever done in South Africa. This enables them to take control of Hosken Consolidated Investments Limited from which e.tv has been established.

We continue to demonstrate the same commitment to empowerment through further funding arrangements and are very comfortable with our progress in this regard. The Mineworkers Investment Company (MIC) was funded to enable them to buy a 25% stake in Tracker, and SACTWU was funded to buy a 50% stake in SAIL Sport and Entertainment. We are also currently in the process of concluding BEE transactions for some of our other investments.

Corporate governance
The VenFin Board of Directors is pleased to report that it has dealt with the majority of the corporate governance recommendations raised by the King II Code on Corporate Governance, and is committed to addressing any outstanding issues. We are aware of our accountability to our shareholders, employees, government, the environment and society in general for the responsible conduct of all our affairs.

Our Board has been strengthened by Mike Bosman, Liesbeth Botha, Anthony Fletcher and Elias Links, who brought with them years of experience as directors of companies. The majority of the Board now consists of independent non-executive directors.

Results
I am pleased to announce headline earnings of 151.4 cents per share, an increase of 16.3% on the prior year. The results reflect the positive effect of the share repurchase programme, which contributed 5% to earnings per share.

The net asset value (NAV) per share, at valuation, increased by 19.2% to R28.80. Once again the favourable impact of the share repurchase programme is clear, contributing 12.1% to NAV per share.

VenFin’s share price closed at R19.88 on 30 June 2004, which represents a 31.0% discount to NAV. We will continue to look at strategies to try and unlock this discount.

Acknowledgement
Finally, I would like to thank all of our shareholders, colleagues and in particular all our investee companies for their continued support and performance. VenFin is a sound, healthy company as a result of the direct input and performance of all involved.

Johann Rupert
Chairman