INTERIM REPORT TO SHAREHOLDERS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2000

THE FOLLOWING ARE THE UNAUDITED RESULTS OF THE GROUP FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2000 TOGETHER WITH COMPARATIVE FIGURES:

ABRIDGED INCOME STATEMENTS SIX MONTHS YEAR ENDED ENDED 30 SEPTEMBER 31 MARCH
2000 1999 2000 R’000 R’000 R’000
OPERATING LOSS (7 368) (1 097) (2 431)
INVESTMENT INCOME 9 753 44 231 27 113
SHARE OF ASSOCIATED COMPANIES LOSSES (75 489) (61 597) (86 934)
NON-RECURRING ITEMS 9 536 346 741 428 935
PROFIT BEFORE TAXATION (63 568) 328 278 366 683
TAXATION 385 13 583 7 909
PROFIT BEFORE PREFERENCE DIVIDENDS (63 953) 314 695 358 774
PREFERENCE DIVIDENDS PAYABLE 4 773 5 521 11 224
(LOSS)/PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS (68 726) 309 174 347 550

EARNINGS (LOSS) PER SHARE (CENTS) HEADLINE (20,7) (10,1) (21,9) BASIC (18,2) 83,3 93,7
WEIGHTED AVERAGE NUMBER OF SHARES IN ISSUE (‘000) 377 766 371 039 371 039
ACTUAL NUMBER OF SHARES IN ISSUE AT END OF PERIOD (‘000) 381 129 371 039 371 039

ABRIDGED CASH FLOW STATEMENTS 30 SEPTEMBER 31 MARCH
2000 2000 R’000 R’000
CASH FLOW FROM OPERATING ACTIVITIES (45 726) (213 702)
NET INVESTMENT INCOME 9 753 27 113
CASH FLOW FROM INVESTING ACTIVITIES FIXED ASSETS ACQUIRED (6) (57)
INVESTMENTS AND LOANS MADE (65 565) (376 922)
PROCEEDS ON DISPOSAL OF INVESTMENTS 65 623 780 491
CASH FLOW FROM FINANCING ACTIVITIES ORDINARY CAPITAL RAISED 55 819 14 243
PREFERENCE SHARE CAPITAL AND TERM FUNDING 58 720 (252 193)
INCREASE IN CASH AND CASH EQUIVALENTS 78 618 (21 027)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD (66 064) (45 037)
AT END OF PERIOD 12 554 (66 064)

ABRIDGED BALANCE SHEETS
30 SEPTEMBER 31 MARCH
2000 2000
R’000 R’000
ASSETS NON-CURRENT ASSETS 3 533 574 3 599 609
INVESTMENTS 3 533 445 3 599 456
EQUIPMENT 129 153
CURRENT ASSETS 61 460 11 548
TOTAL ASSETS 3 595 034 3 611 157
EQUITY AND LIABILITIES ORDINARY SHAREHOLDERS’ EQUITY 3 386 482 3 399 389
OUTSIDE SHAREHOLDERS’ INTEREST AND PREFERENCE SHARES 75 375 75 375
NON-CURRENT LIABILITIES 84 505 25 785
CURRENT LIABILITIES 48 672 110 608 TOTAL
EQUITY AND LIABILITIES 3 595 034 3 611 157
NET ASSET VALUE PER SHARE AT MARKET/DIRECTORS’ VALUATION AT 18 DECEMBER 2000 (CENTS) 920 965
STATEMENT OF CHANGES IN EQUITY SHARE SHARE REVALUATION INVESTMENT EQUITY RETAINED CAPITAL PREMIUM SURPLUS SURPLUS RESERVES INCOME R’000 R’000 R’000 R’000 R’000 R’000
BALANCES 1 APRIL 1999 91 330 1 002 543 1 816 581 112 194 3 205 (31 188)
SHARE CAPITAL AND PREMIUM SHARES ISSUED 1 430 12 866
SHARE ISSUE EXPENSES (53) CURRENT OPERATIONS PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS 347 550
TRANSFER ON REALISATION OF INVESTMENTS 372 543 (3 205) (369 338)
REVALUATION CURRENT REVALUATION SURPLUS 1 379 556
UNBUNDLING DIVIDEND (1 336 625)
BALANCES 31 MARCH 2000 92 760 1 015 356 1 859 512 484 737 – (52 976)
SHARE CAPITAL AND PREMIUM SHARE ISSUED 2 522 53 478
SHARE ISSUE EXPENSES (181) CURRENT OPERATIONS LOSS ATTRIBUTABLE TO ORDINARY SHAREHOLDERS (68 726) TRANSFER ON REALISATION OF INVESTMENTS 9 536 (9 536)
REVALUATION TRANSFER ON REALISATION OF INVESTMENTS (1 420) 1 420
BALANCES 30 SEPTEMBER 2000 95 282 1 068 653 1 858 092 495 693 – (131 238)

COMMENTARY EVENTS AND DEVELOPMENTS
VODACOM GROUP (PTY) LIMITED THE GROUP CONTINUES TO HOLD ITS 5% INTEREST IN UNLISTED VODACOM GROUP (PTY) LTD (“VODACOM”). VODACOM IS THE LEADING CELLULAR NETWORK OPERATOR ON THE AFRICAN CONTINENT WITH A MAJOR SHARE OF THE SOUTH AFRICAN MARKET AND IS ONE OF THE FASTEST-GROWING GSM CELLULAR NETWORKS IN THE WORLD. THE COMPANY HAS SHOWN PHENOMENAL GROWTH IN ALL ASPECTS OF ITS BUSINESS SINCE INCEPTION AND SHOWS NO SIGNS OF SLOWING DOWN. VODACOM’S SUBSCRIBER BASE IN EXPECTED TO REACH THE FIVE MILLION MARK BY THE END OF THE CURRENT YEAR.

MIDI TV (PTY) LIMITED (“E-TV”) THE GROUP HAS EFFECTIVELY BEEN IN CONTROL OF THE STATION FOR THE PERIOD UNDER REVIEW. THE MANAGEMENT OF THE STATION HAS BEEN STABILISED AND GOOD PROGRESS HAS BEEN MADE. THE STATION’S COVERAGE HAS BEEN INCREASED FROM 66% TO 77% OF THE POPULATION; E-TV IS ADDITIONALLY AVAILABLE ON DSTV. AUDIENCE SHARE HAD GROWN TO 10% BY THE END OF THE PERIOD UNDER REVIEW AND IS INCREASING MONTHLY. REVENUE LIKEWISE HAS DOUBLED FROM THE PREVIOUS YEAR AND NOW APPROXIMATES MUCH MORE CLOSELY THE AUDIENCE SHARE OF THE STATION. THE STATION NEVERTHELESS REMAINS A LOSS-MAKING BUSINESS REQUIRING FURTHER CAPITAL TO COVER ITS ONGOING LOSSES. THESE LOSSES ARE EXPECTED TO CONTINUE FOR SOME 18 TO 24 MONTHS BEFORE THE STATION BECOMES PROFITABLE. E-TV HAS ALSO EXPERIENCED SIGNIFICANT REGULATORY DIFFICULTIES, WHICH HAVE MADE FUNDRAISING FROM WILLING PARTICIPANTS EXTREMELY DIFFICULT AND CONTINUE TO BE OF SERIOUS CONCERN. YOUR DIRECTORS REMAIN CONFIDENT HOWEVER THAT THE PROBLEMS OF THE STATION WILL BE OVERCOME AND THAT THE STATION WILL, IN TIME, PROVE TO BE A VERY VALUABLE ASSET.

VUKANI GAMING (PTY) LIMITED (FORMERLY SAVGC) THE ROUTE MARKET IS LIKELY TO COME INTO BEING IN 2001. HCI POSITIONED ITSELF WITH A 26% STAKE IN VUKANI GAMING (PTY) LIMITED. IN VIEW OF THE PENDING ROLL OUT OF THE ROUTE LICENCES HCI HAS TAKEN CONTROL OF THIS COMPANY WHICH HAS GREAT POTENTIAL TO EMERGE AS A FRONTRUNNER IN THIS SECTOR OF THE GAMING INDUSTRY.

ONLINE GAMING SYSTEMS LIMITED HCI HAS FURTHER POSITIONED ITSELF IN THE INTERNET GAMING INDUSTRY BY BUYING MORE HEAVILY INTO A BULLETIN BOARD LISTED NASDAQ COMPANY. THE COMPANY, ONLINE GAMING SYSTEMS LIMITED, HAS DEVELOPED SOFTWARE THAT ALLOWS REMOTE GAMBLING OVER PRIVATE NETWORKS OR THE INTERNET. WHILE OUR INITIAL INVESTMENT WAS AT A PRICE WHICH WAS IN RETROSPECT UNFORTUNATE, HCI HAS MADE FURTHER MONIES AVAILABLE TO ONLINE GAMING SYSTEMS LIMITED WHICH, ON CONVERSION INTO EQUITY, ARE LIKELY TO RESULT IN HCI BEING EFFECTIVELY ITS CONTROLLING SHAREHOLDER. YOUR DIRECTORS REMAIN OF THE VIEW THAT THE HIGH-TECH END OF THE GAMING MARKET WILL DEVELOP INTO A SUBSTANTIAL AND LUCRATIVE INDUSTRY.

METTLE LIMITED THE GROUP INCREASED ITS INVESTMENT IN METTLE LIMITED (“METTLE”) TO 47% BY ACQUIRING A FURTHER 17% STAKE FROM THE BOARD OF EXECUTORS. SUBSEQUENT TO THE PERIOD UNDER REVIEW, THE GREENWICH GROUP LIMITED (“GREENWICH”) HAS ACQUIRED 100% OF THE ISSUED SHARE CAPITAL OF METTLE RESULTING IN THE GROUP SELLING ITS ENTIRE INTEREST IN METTLE IN EXCHANGE FOR A 33% INTEREST IN GREENWICH. GREENWICH IS IN THE PROCESS OF CHANGING ITS NAME TO METTLE LIMITED. THIS TRANSACTION HAS RESULTED IN METTLE BEING REVERSE-LISTED ON THE JSE SECURITIES EXCHANGE SOUTH AFRICA. METTLE HAS CONTINUED TO SHOW STRONG GROWTH IN HEADLINE EARNINGS FOR THE INTERIM PERIOD. THE MERGER WILL RESULT IN THE GROUP HAVING A GREATER DIVERSITY OF SOURCES OF EARNINGS AS WELL AS A SIGNIFICANT OFFSHORE BASE.

THE MERGER ALSO RESULTED IN HCI CONSOLIDATING ITS INTERESTS IN IQ BUSINESS GROUP (PTY) LIMITED (“IQ BUSINESS GROUP”) AS METTLE UNBUNDLED ITS HOLDING IN IQ BUSINESS GROUP PRIOR TO THE GREENWICH TRANSACTION. AFTER DILUTIONS FOR THE NEDCOR TRANSACTION, HCI RETAINS AN EFFECTIVE INTEREST OF 19% IN IQ BUSINESS GROUP. OPERATIONS AND RESULTS FOR THE PERIOD THE BUSINESS OPERATIONS OF HCI ENTAIL THE MAKING OF INVESTMENTS IN OPPORTUNITIES AS IDENTIFIED BY THE BOARD OF DIRECTORS AND TO ADD VALUE TO SUCH INVESTMENTS OVER TIME.

THE COMPANIES IN WHICH THE GROUP HAS INVESTED CONTINUE TO OFFER EXCELLENT PROSPECTS IN THEIR FIELDS. THE INVESTMENTS ARE CONSTANTLY REVIEWED AND NEW ONES SOUGHT TO COMPLEMENT THEM. THE DIRECTORS ARE CONFIDENT THAT THE GROUP WILL CONTINUE TO DELIVER SATISFACTORY GROWTH.

EARNINGS PER SHARE INCORPORATES ONLY THE RESULTS OF THOSE COMPANIES EQUITY ACCOUNTED TOGETHER WITH INTEREST AND DIVIDENDS RECEIVED FROM INVESTMENTS. ACCORDINGLY, EARNINGS PER SHARE IS NOT INDICATIVE OF THE PERFORMANCE OF ALL THE UNDERLYING COMPANIES IN WHICH INVESTMENTS ARE HELD. THE HEADLINE LOSS PER SHARE HAS INCREASED DUE TO A GREATER SHARE OF THE LOSSES OF MIDI TV (PTY) LTD BEING EQUITY ACCOUNTED SINCE THE GROUP’S STAKE IN THE TV STATION BEING INCREASED FROM 34% TO 50%.

THE NON-RECURRING ITEMS ARE ATTRIBUTABLE TO THE PROFIT ON THE SALE OF THE GROUP’S INTEREST IN SIB HOLDINGS LTD AND THE SURRENDER OF 37% OF THE GROUP’S INTEREST IN UNIFER HOLDINGS LTD.

DISTRIBUTIONS TO SHAREHOLDERS
THE DIRECTORS HAVE DECIDED NOT TO DECLARE A DIVIDEND FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2000. THE COMPANY REQUIRES ITS CASH RESOURCES FOR FURTHER INVESTMENTS. PAYMENT OF A DIVIDEND WILL BE CONSIDERED IN FUTURE YEARS OUT OF DIVIDENDS RECEIVED BY THE COMPANY FROM ITS INVESTMENTS WHEN CIRCUMSTANCES WARRANT.

PROSPECTS FOR THE FUTURE THE PROSPECTS FOR THE GROUP OVER THE COMING MONTHS REMAIN CONCENTRATED ON THE EXPANSION AND CONSOLIDATION OF ITS INTERESTS IN THE MEDIA, BROADCASTING, INFORMATION TECHNOLOGY, FINANCIAL SERVICES AS WELL AS GAMING AND ENTERTAINMENT SECTORS. THE GROUP’S MAJOR INVESTMENTS ARE WELL POSITIONED TO SHOW SATISFACTORY RETURNS IN FUTURE YEARS. THE GROUP HAS ALSO INVESTED IN CERTAIN START-UP BUSINESSES THAT HAVE SIGNIFICANT BLUE-SKY POTENTIAL. YOUR DIRECTORS ARE CONFIDENT THAT THE GROUP WILL CONTINUE TO DELIVER SATISFACTORY RETURNS IN THE NEAR FUTURE.

Source: HCI