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New Era Launched For Private Equity In New Zealand

News Release
For immediate release
September 6, 2004

New Era Launched For Private Equity In New Zealand

ABN AMRO Craigs Limited and Direct Capital Private Equity Limited today announced a $40 million capital raising by Pohutukawa Private Equity Ltd (Pohutukawa), a private equity investment company promoted and managed by the two companies.

Neil Craig, ABN AMRO Craigs executive chairman, says Pohutukawa will enable investors to collectively participate in expansion capital and management buy-out opportunities in established unlisted businesses.

"Pohutukawa has been designed to enable retail investors to participate alongside institutional and habitual investors in what we believe is a unique structure within New Zealand," he says.

"We believe Pohutukawa will be attractive to investors for a number of reasons including the relatively low minimum investment requirement of $10,000 - of which only 40% gets called on immediately.

"Also, a portfolio with a balance of private and public equity should provide a higher return for a similar level of risk than a portfolio with listed public equity alone."

Craig adds while there is no intention to list Pohutukawa in the short-term, the Board of Pohutukawa does have this discretion, and ABN AMRO Craigs will provide an informal market for shares in Pohutukawa. He says if any of the businesses Pohutukawa invests in are subsequently floated, shareholders will, if possible, be given the choice of cash or shares in the business being floated.

"Also, of importance to investors, investments made by Pohutukawa will be managed by one of New Zealand's most active and successful private equity fund managers, Direct Capital."

Direct Capital's managing director, Ross George, says the expertise and deal flow that both ABN AMRO Craigs and Direct Capital will bring augers well for the success of Pohutukawa. He says in countries where private equity markets are more established, returns from private equity investments have consistently been in excess of returns from investments in their local share markets.

"While the New Zealand private equity market is relatively young, funds managed by Direct Capital have invested over $150 million in 34 different opportunities over the past 10 years," says George.

"We have established a track record of attractive returns, having effectively achieved an average compound rate of return of 21 per cent after management fees on 15 investments where a liquidity event has occurred and returns are measurable.

"One reason a skilled manager can achieve higher returns from private equity is that there's a much greater choice of businesses in which to invest. For every listed business in New Zealand there are approximately 120 unlisted businesses with 10 or more employees. In addition, with private equity, investments are made on the basis of detailed due diligence and there is opportunity for the private equity investor to provide expertise and the resources for growth."

The Offer by Pohutukawa opens on September 13 and closes on October 8, and is for 40 million partly paid ordinary shares at an issue price of $1 per share. Oversubscriptions of $40 million will be accepted. Investors will pay 40 cents per share at the time of application along with an application fee of 2 cents per share. As investments are made over the next five years, the remaining 60 cents per share will be called up in two 30-cent tranches.

The Board of Pohutukawa comprises two independent directors, chairman Jon Cimino and businessman Murray Davies, and ABN AMRO Craigs directors, Neil Craig and William Stevens. Copies of the Prospectus and Investment Statement will be available from any branch of ABN AMRO Craigs from September 9.

Neither ABN AMRO Craigs nor Direct Capital nor any other person guarantees the offer or the performance of Pohutukawa.


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