Significant changes at Salvus

Salvus Strategic Investment (NZX:SAM) has reappointed the managers of its listed investment trust and changed its investment universe and benchmarks.

Wednesday, May 6th 2009, 8:55AM

The directors say the manager has been appointed for another five years saying they have employed a successful investment strategy and met all their obligations.

Salvus Asset Management is made up of Andrew Couch and Simon Wilson.

The directors of the trust said in a statement to the NZX they have extended the “non-termination period” of the management agreement to May 2014.

“The independent directors consider that the manager has employed a successful investment strategy as shown by the historic relative outperformance of fund and has exceeded all of its obligations under the management agreement to date.”

They have also strengthened the lock-in arrangements for Couch and Wilson, and strengthened the change of control provisions relating to the manager.

Another change made is that the manager now gets 25% of any performance fee payable in SAM shares issued at net asset value rather than the entire performance fee being taken in cash as was previously the case.

In exchange for these concessions by the manager, the independent directors have removed the cap of 1.5% of NAV on any performance fee. The performance fee remains calculated as 15% of the average outperformance of the NAV of the company relative to the benchmark index over a rolling three year period.

Also adjusted the payment of any performance fee to be based on the average NAV of the company in the final year of the three year performance period. Historically, the payment of any performance fee has been based on the average NAV of the company over a three year period.

In addition, in order for a performance fee to be paid, there must be a positive change in the NAV of the company over that final year of the three year performance period. Other changes made to the trust are its investment universe and benchmarks.

The investment universe has been expanded to include all companies listed on the NZX50 Index that are below the top 10 companies, together with companies listed on the NZX SmallCap and NZAX Indices and also unquoted companies. The benchmark index for trust has been changed to a composite index comprising a 50% weighting of the NZX MidCap Capital Index and a 50% weighting of the NZX SmallCap Capital Index.

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