RENN Global Entrepreneurs Fund, Inc.
2010 Annual Report

Dear Shareholders,

 

2010 was one of the most interesting and, in many ways, one of the strangest periods. We did make progress on

three strategies we outlined in last years’ report. We believe this will contribute to good results in 2011 and beyond.

 

The first strategy was to recognize the worldwide growth of entrepreneurs (founder-owner-visionaries), especially in

the world’s fastest growth area, China. The second strategy was to work with legacy companies to create value.

The last strategy was to have strong core holdings that would keep on growing and provide value to shareholders.

 

Of our twenty-six holdings, ten are now related to the long-term prospects of China. These companies have been

growing rapidly and are selling at low valuations in relation to earnings. Most importantly, they are led by

outstanding management teams who have major ownership positions and clear visions of their future.

 

During 2010, several US-traded Chinese companies reported financial reporting problems. While these companies were a small percent of all

US-traded Chinese companies, the short sellers promoted the idea that all Chinese companies have problems. This strategy actually worked as the

whole Chinese group went down. In my opinion, this has resulted in a great buying opportunity. While we admit there will be fraud in some Chinese

companies just as in some US companies, it is a myth that all Chinese are committing fraud. We believe when the “dust settles” we could see major

appreciation here.

 

We made good progress on our second strategy to realize value from long-term troubled legacy holdings. The most important event has been the

announcement of the selling of the assets of Integrated Security Systems, Inc. (IZZI) for $6 million in cash and notes. We now have a company

with liquid assets, a large tax loss, and is a full reporting public company. One of the primary goals for management is to find an attractive, profitable,

growing company that wishes to have a public vehicle. We are hoping to create significant value here. We are at the same time accelerating our

efforts to find a merger partner for CMSF, Inc., which is a full reporting public company but with no assets.

 

The last strategy is to work with our core holdings. Access Plans, Inc. (APNC) has announced the hiring of an investment banker to study ways to

increase shareholder value including going private or selling the company. The public market does not seem to reflect the true value of the company.

Bovie Medical Corporation. (BVX) has announced several new products. The most important is, “J Plasma” which could revolutionize several surgical

procedures. We expect a good recovery in this stock. A new core holding PHC, Inc. (PHC) relates to mental health treatment programs and has been

reporting good financial results. We have a number of other core holdings which we believe will do well in 2011.

 

We have elected not to hold our Annual Investors Conference in May but are considering a later investor conference based on publicly traded

“Founder-Owner-Visionary” companies. We will have our 2010 Annual Shareholders Meeting on Thursday, May 26, 2011 at the Doubletree Hotel,

Campbell Center at 10:00 a.m. to conduct voting and discuss our portfolio.

 

In review, your Fund has distributed $83.4 million in cash and deemed dividends in the past. We are optimistic about the next several years and

appreciate the shareholders’ support.

 

Sincerely,

Russell Cleveland   

President