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PRELIMINARY REPORT TO SHAREHOLDERS

PRELIMINARY REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 31 MARCH 1998

INCREASE IN NET ASSET VALUE 114%

THE FOLLOWING ARE THE AUDITED RESULTS OF THE GROUP FOR THE YEAR ENDED 31 MARCH 1998 TOGETHER WITH THE COMPARATIVE FIGURES:

SUMMARISED GROUP INCOME STATEMENT

YEAR ENDED 31 MARCH

1998 1997

R’000 R’000

OPERATING INCOME (LOSS) 2 935 (732)

INVESTMENT INCOME 11 049 2 423

INCOME BEFORE TAXATION 13 984 1 691

TAXATION 3 066 –

NET INCOME 10 918 1 691

SHARE OF ASSOCIATED COMPANIES’ RETAINED INCOME 16 562 6 426

INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS BEFORE NON-RECURRING ITEMS 27 480 8 117

NON-RECURRING ITEMS 2 666 20 797

– ASSOCIATED COMPANY INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS 30 146 28 914

ATTRIBUTABLE EARNINGS PER SHARE (CENTS) BEFORE NON-RECURRING ITEMS 9,1 11,0

AFTER NON-RECURRING ITEMS 9,9 39,3

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES ON WHICH THE ATTRIBUTABLE EARNINGS PER SHARE HAS BEEN CALCULATED (‘000) 303 441 73 563

ACTUAL NUMBER OF ORDINARY SHARES IN ISSUE AT END OF YEAR (‘000) 346 961 230 729

SUMMARISED GROUP BALANCE SHEET

31 MARCH 31 MARCH

1998 1997

R’000 R’000 FUNDS EMPLOYED SHAREHOLDERS’ INTEREST 1 074 828 551 055

OUTSIDE SHAREHOLDERS’ INTEREST AND PREFERENCE SHARES 50 068 –

LOANS PAYABLE 92 635 104 620

CURRENT LIABILITIES 13 901 24 662

1 231 432 680 337

EMPLOYMENT OF FUNDS FIXED ASSETS 64 10

INVESTMENTS 1 229 014 651 303

– ASSOCIATED COMPANIES 394 556 128 861

– NON-CONSOLIDATED SUBSIDIARY 116 461 128 375

– OTHER INVESTMENTS 717 997 394 067

CURRENT ASSETS 2 354 29 024

1 231 432 680 337

NET ASSET VALUE PER SHARE (CENTS) INVESTMENTS AT COST 310 239

INVESTMENTS AT MARKET/DIRECTORS VALUE (AT 22 JUNE 1998) 910 425

NOTES

1. EVENTS AND DEVELOPMENTS

THE GROUP CONTINUED TO EXPAND IN ITS FIVE PRINCIPAL AREAS OF INVESTMENT, NAMELY TELECOMMUNICATIONS, INFORMATION TECHNOLOGY, MEDIA, GAMING AND FINANCIAL SERVICES.

INVESTMENTS HELD AT 31 MARCH 1997

THE INVESTMENT BY SAFLIFE LTD IN JCI LTD IN THE PREVIOUS YEAR PROVED TO BE UNSUCCESSFUL AND THAT GROUP IS PRESENTLY BEING UNBUNDLED. DURING THE YEAR THE COMPANY RECEIVED 6 857 504 SHARES IN CAPITAL ALLIANCE HOLDINGS LTD AS PART OF THE UNBUNDLING PROCESS. THE VALUE OF THIS INVESTMENT AT THE UNBUNDLING DATE WAS R206 MILLION. IN ADDITION THE GROUP WILL RECEIVE APPROXIMATELY R146 MILLION IN CASH ONCE THE REMAINING ASSETS OF SAFLIFE LTD ARE REALISED AND DISTRIBUTED. CONSEQUENTLY, UNLIKE THE PRIOR YEAR, THE RESULTS OF SAFLIFE LTD HAS NOW NOT BEEN EQUITY ACCOUNTED.

OF THE OTHER INVESTMENTS HELD AT 31 MARCH 1997, THE GROUP INCREASED ITS STAKE IN SA VIDEO GAMING CORPORATION (PTY) LTD FROM 5% TO 25%. THIS COMPANY TRADES AS VIDEO GAMES OPERATOR, SUPPLYING AND DISTRIBUTING CENTRAL ELECTRONIC MONITORING SYSTEMS, VIDEO GAMING MACHINES AND IS CURRENTLY A CONTENDER FOR ROUTE OPERATOR LICENCES BEING ISSUED BY REGIONS.

THE GROUP CONTINUES TO HOLD ITS 51% FINANCIAL INTEREST IN AFRICA-ON-AIR (PTY) LTD, WHICH OPERATES THE 94.7 HIGHVELD STEREO RADIO STATION. IN THE PRIOR YEAR THE RESULTS OF THIS COMPANY WERE CONSOLIDATED. THE OTHER SHAREHOLDER IN AFRICA-ON-AIR (PTY) LTD, PRIMEDIA BROADCASTING (PTY) LTD, HAS MANAGEMENT CONTROL OF THE COMPANY AND IN ADDITION OWNS ONE A SHARE WHICH, ON CONVERSION, WILL RESULT IN PRIMEDIA BROADCASTING (PTY) LTD OWNING 50% OF AFRICA-ON-AIR (PTY) LTD. THIS CONVERSION WILL TAKE PLACE SHOULD THE PRIMEDIA BROADCASTING (PTY) LTD LOAN NOT BE REPAID BY THE YEAR 2002. AS THERE IS A POSSIBILITY OF THIS HAPPENING, AFRICA-ON-AIR (PTY) LTD HAS NOW BEEN EQUITY ACCOUNTED AND NOT CONSOLIDATED. THE SUMMARISED GROUP INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 1997 AND THE SUMMARISED GROUP BALANCE SHEET AT THAT DATE SET OUT ABOVE, HAVE BEEN RESTATED ON THE EQUITY ACCOUNTING BASIS. THIS HAS NO EFFECT ON EARNINGS PER SHARE OR NET ASSET VALUE.

THE GROUP ALSO CONTINUES TO OWN ITS 5% INTEREST IN VODACOM GROUP (PTY) LTD. THIS COMPANY OWNS ONE OF THE TWO CELLULAR TELEPHONE OPERATORS IN SOUTH AFRICA AND IS OPERATING VERY SUCCESSFULLY.

NEW INVESTMENTS

THE GROUP MADE A NUMBER OF EXCITING INVESTMENTS DURING THE YEAR. MOST OF THESE HAVE BEEN REPORTED IN THE PRESS OR IN CIRCULARS TO SHAREHOLDERS AND ARE SUMMARISED BELOW:

A 12,1% INTEREST IN DATATEC LTD.

DATATEC IS A SOUTH AFRICAN LISTED INTERNATIONAL NETWORKING, TECHNOLOGY AND SERVICES GROUP. THE DATATEC GROUP OPERATES PRINCIPALLY IN MARKETS WHERE THE PRODUCTS AND SERVICES ARE DIRECTLY AIMED AT EXPLOITING THE CONTINUING GROWTH IN MARKETS INFLUENCED BY THE INTERNET.

A 25% INTEREST IN SOFTLINE LTD.

SOFTLINE IS AN INFORMATION TECHNOLOGY GROUP FOCUSED ON THE DEVELOPMENT, IMPLEMENTATION AND SUPPLY OF TECHNOLOGY PRODUCTS AND SERVICES, CONCENTRATING ON THE SOFTWARE, SERVICES AND TRAINING SECTORS OF THE MARKET WITH A MAIN FOCUS ON SUPPLYING MISSION CRITICAL FINANCIAL SOLUTIONS.

A 32,59% INTEREST IN UNIBANK GROUP LTD.

UNIBANK OFFERS A SELECTED RANGE OF DEPOSIT TAKING AND ASSET BASED FINANCE ACTIVITIES, CO-BRANDED GENERAL PURPOSE CREDIT CARDS AND CORPORATE AND STRUCTURED FINANCE SERVICES, AS WELL AS A RAPIDLY GROWING SAVINGS AND MICRO LOANS DIVISION FOCUSED PRIMARILY ON PAYROLL EMPLOYEE NEEDS.

A 26% INTEREST IN MIDI TV (PTY) LTD.

MIDI TV WAS THE SUCCESSFUL BIDDER FOR THE COMMERCIAL TV CHANNEL TO BE OPERATED LATER THIS YEAR.

A 50% INTEREST IN EVEREST SYSTEM SOLUTIONS (PTY) LTD.

EVEREST SYSTEMS SOLUTIONS IS A COMPANY PROVIDING SPECIALISED COMPUTER CONSULTANCY AND SOFTWARE DEVELOPMENT.

SUBSEQUENTLY TO THE FINANCIAL YEAR END, THE GROUP MADE THE FOLLOWING INVESTMENTS:

A 30% INTEREST IN BFS CAPITAL LTD.

BFS CAPITAL PROVIDES SPECIALISED DEBT AND EQUITY FINANCE SERVICES TO MANY LEADING COMPANIES IN SOUTHERN AFRICA. THE RANGE OF SERVICES OFFERED INCLUDE CORPORATE AND STRUCTURED FINANCE, PROPERTY FINANCE AND SPECIALISED TREASURY PRODUCTS.

A 33,33% INTEREST IN GLOBAL PAYMENT TECHNOLOGY HOLDINGS (PTY) LTD

GLOBAL PAYMENT TECHNOLOGY HOLDINGS HAS THREE OPERATING COMPANIES SPECIALISING IN SMART CARD AND POINT OF SALE TERMINALS, GAMING AND CASH HANDLING SYSTEMS. ALL THREE OPERATING COMPANIES ARE MARKET LEADERS IN THEIR RESPECTIVE FIELDS AND HAVE EXCLUSIVE DISTRIBUTION AGREEMENTS WITH THEIR RESPECTIVE INTERNATIONAL SUPPLIERS.

AN ADDITIONAL 13,58% INTEREST IN UNIBANK GROUP LTD, SUBJECT TO CERTAIN PRECONDITIONS BEING FULFILLED, THUS INCREASING THE GROUP’S INTEREST IN UNIBANK TO 46,17%.

2. OPERATIONS & RESULTS FOR THE YEAR

THE COMPANIES IN WHICH THE GROUP IS NOW INVESTED OFFER EXCITING PROSPECTS IN THEIR FIELDS. THESE INVESTMENTS WILL BE CONSOLIDATED IN THE YEAR AHEAD 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 AND INTEREST AND DIVIDENDS RECEIVED FROM INVESTMENTS. ACCORDINGLY, EARNINGS PER SHARE IS NOT INDICATIVE OF THE PERFORMANCE OF THE UNDERLYING COMPANIES IN WHICH INVESTMENTS ARE HELD. THE DIRECTORS ARE SATISFIED THAT THE COMPANIES IN WHICH THE GROUP OWNS STRATEGIC STAKES WILL PROSPER IN THE YEAR AHEAD.

THE NET ASSET VALUE PER SHARE HAS INCREASED FROM R2,50 PER SHARE IN JANUARY 1997 TO THE PRESENT R9,10 PER SHARE REPRESENTING A 264% INCREASE.

3. DIVIDENDS

THE DIRECTORS HAVE DECIDED NOT TO DECLARE A DIVIDEND FOR THE YEAR ENDED 31 MARCH 1998. 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.

4. PROSPECTS FOR THE FUTURE

GAMING

THE GROUP IS CURRENTLY STRATEGICALLY PLACED IN BIDS FOR ROUTE OPERATOR LICENCES TO BE ISSUED BY REGIONS DURING THE NEXT 12 MONTHS. IT IS ALSO INVOLVED WITH PARTNERS IN BIDDING FOR THE NATIONAL LOTTERY LICENCE. WHILST NONE OF THESE APPLICATIONS MAY ULTIMATELY BE CONCLUDED, THESE OPPORTUNITIES CAN PROVIDE THE GROUP’S SHAREHOLDERS WITH SIGNIFICANT BLUE SKY DURING THE YEAR IF THE GROUP IS SUCCESSFUL.

MEDIA

THE GROUP INTENDS EXTENDING ITS INTERESTS IN THE MEDIA SECTOR BY ACQUIRING VARIOUS RADIO, TELEVISION AND OTHER INTERESTS. THIS SHOULD RESULT IN A BROADER INTEREST IN A HIGHLY LUCRATIVE AND GROWING SECTOR.

INFORMATION TECHNOLOGY

THE GROUP INTENDS TO EXPAND ITS RELATIONSHIP WITH DATATEC LTD DURING THE FORTHCOMING YEAR. THE DIRECTORS ANTICIPATE THAT THIS WILL RESULT IN BOTH AN INCREASED STAKE IN DATATEC LTD ITSELF AS WELL AS JOINT VENTURES BETWEEN THE GROUP AND DATATEC LTD.

FINANCIAL SERVICES

THE GROUP HAS SUCCEEDED IN BUYING TWO HIGHLY PROFITABLE PRIVATE FINANCIAL SERVICES COMPANIES BOTH OF WHICH ARE LIKELY TO BE LISTED DURING THE NEXT 12 TO 18 MONTHS. IF CURRENT FINANCIAL SERVICE PRICE/EARNINGS RATIOS OF COMPARABLE LISTED COMPANIES ARE MAINTAINED, HCI SHAREHOLDERS WILL GAIN SIGNIFICANTLY ON THESE LISTINGS.

THE CURRENT INVESTMENTS WITHIN THE GROUP ARE PERFORMING WELL ABOVE AVERAGE AND THE DIRECTORS EXPECT THIS TO CONTINUE INTO THE NEXT PERIOD.

Source: HCI