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Salvus Launches NZSX Float

Salvus Launches NZSX Float

News release: 11th May 2004

Salvus Strategic Investments Limited ("SSI") today launched a share market issue that will raise up to $50 million in order to build a portfolio of investments in the New Zealand small company sector. The objective of the Listed Investment Company is to out-perform the NZSX Smaller Company Capital Index. The Joint Lead Managers and Organising Brokers to the issue are Direct Broking and Forsyth Barr Limited. The New Zealand roadshow will commence this week and will be supported by additional marketing to UK institutions. The offer period is scheduled to close on June 4.

SSI's intention is to build a portfolio of 10 - 30 investments over the medium term targeting listed companies outside the NZSX top 40, the NZAX market and late stage unlisted companies.

SSI will be managed by Salvus Asset Management Limited - a niche investment management company owned and run by Andrew Couch and Simon Wilson. Both the fund managers have valuable international experience investing in smaller companies derived from working for prestigious UK institutions. Mr Couch has 12 years experience in London working for Fleming Investment Management Ltd, Guinness Flight Global Asset Management Ltd. and Newton Investment Management Ltd. He was a Director of both Guinness Flight and Newton. He has built an excellent track record over this period on both UK and international investment portfolios resulting in responsibilities for portfolios with a value in excess of NZ$4bn. Mr Wilson worked at Edinburgh Fund Managers for four years after completing his MBA. He worked in a team of three managing EFM's top performing Japanese equity funds.

The Board of SSI is chaired by Barrie Downey, an experienced and respected company director, currently on the board of Sky Network Television Ltd and National Property Trust Ltd. The other two independent directors are Roger Armstrong, a well-known financial analyst and columnist, and Grant Baker, a successful entrepreneur in the small company arena.

Mr Downey said that although the management company is newly formed, its principals have an established track record and broad international experience in managing equity funds.

"Salvus has chosen the smaller company sector of the New Zealand market because of its unusually attractive investment profile. The sector is characterised by companies which are either poorly researched or researched less thoroughly than the large listed companies, making it difficult for investors to adequately assess risk and return prospects. As a result, there are many opportunities that get overlooked by the market.

"The investment management team will undertake its own in-depth research into companies and the industries they operate in, so as to gain a full understanding of the company's operations and long-term strategic direction. Regular contact will be maintained with management of the companies in which Salvus invests and strong interest taken in supporting high standards of corporate governance.

"Furthermore, Salvus' ability to invest in unlisted small companies provides an opportunity for investors to obtain exposure to this segment which would otherwise be difficult to achieve."

Mr Couch said that considerable analysis had already been done on the New Zealand market prior to launching this issue and commented:

"In our view, the New Zealand smaller company market is unusual because it offers a combination of value and attractive growth rates. This makes it stand out in an international context. In addition, the market in smaller company shares should expand dramatically over the next few years because of the initiatives and growth strategy adopted by the New Zealand Stock Exchange. Furthermore, New Zealand has a thriving private company sector - research shows that there are about 3400 companies in New Zealand that generate revenues of greater than $10 million. The fact that only 4% of these companies are listed demonstrates the size of the unlisted market opportunity.

"The NZSX Small Company Index has outperformed New Zealand large company indices and other Asia-Pacific indices such as Australia, Korea and Hong Kong over the past five years. This is a powerful demonstration that a bull market in New Zealand smaller company shares is underway."

The concept was presented to selected UK and NZ institutions, which have indicated strong interest in participating in the capital raising. Mr Couch said that he was very pleased with the interest Salvus has received from institutions. "It shows that we are getting the message across that the New Zealand smaller companies' sector has untapped potential and that our investment style is the right one for this asset class."

Key Dates

Registration of Prospectus and Investment Statement: 7 May 2004

Offer Opening Date: 11 May 2004

Printed Prospectus and Investment Statement available: 11 May 2004

Offer Closing Date: 3pm, 4 June 2004

Allotment Date: 8 June 2004

Anticipated Listing Date: 10 June 2004

Warrant Exercise Date: 30 March 2007 and 31 March 2008


Application has been made to New Zealand Exchange Limited for permission to list the ordinary shares and all the requirements of the New Zealand Exchange Limited relating there to that can be complied with on or before the date of the distribution of this news release have been complied with however, New Zealand Exchange Limited accepts no responsibly for any statement in this news release.

Highlights of Salvus Strategic Investments Limited ("SSI")

Investment Universe

- NZSX-listed companies not included in the top 40 companies in the NZSX50 Index

- NZAX-listed companies

- Late-stage unlisted companies

- No venture capital or start-up companies

Investment Parameters - To build a portfolio of 10-30 investments over the medium term

- No more than 15% of Net Asset Value in any one company (at cost)

- No more than 30% of Net Asset Value in unlisted companies (at cost)

Performance Objective - Long-term growth of capital and dividends

Investment Management Style - Long-term value

Structure - Closed-end listed investment company

Attached Warrants - One warrant will be attached for every ordinary share allotted in SSI

- Exercisable at $1.00 on 30 March 2007 and 31 March 2008

Investment Manager - Salvus Asset Management Limited ("the Manager")

Investment Management Team - Andrew Couch and Simon Wilson

Benchmark - NZSX Smaller Company Capital Index

Management Fee - 1.25% per annum of the net asset value of SSI, calculated and payable monthly in arrears

Performance-related Fees - 15% of the out-performance of the Company's net asset value over the Benchmark (averaged over 3 years)

- No performance fee for the first 3 years unless the net asset value per share increases by 10% over that period

Share Buy-back Facility - Up to 5% of shares outstanding per annum can be bought back on market and held as treasury stock for resale or cancellation

Gearing - The Board policy of SSI specifies it can borrow up to 20% of total assets

Dividend Re-Investment Plan - Dividends can be re-invested in SSI ordinary shares at a discount of up to 3%

Shareholder Reporting - SSI's net asset value per share will be published weekly to NZX

- Annual and Interim reports will be sent to shareholders

- The Manager will provide quarterly updates to NZX for release to the market

Taxation Status - SSI intends to build a portfolio of long-term strategic investments in a tax efficient manner

Minimum Investment - 5,000 Shares (having an aggregate consideration of $5,000) and thereafter in multiples of 500 Shares ($500)


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