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Salvus manager challenges report, governance

Friday 14th October 2011

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Salvus Asset Management is challenging a bid to dump it as manager of listed investment company Salvus Strategic Investments in favour of Milford Asset Management.

In a letter to shareholders ahead of a vote on Oct. 19, SAML said the independent appraisal report asserting that Milford had a stronger track record than SAML was not fair and reasonable.

SAML said the comparison is unfair because Milford had a broader investment mandate and it could have achieved better returns for SSI if it had been given a wider brief.

"SAML would like to clarify that it has recommended to the board of SSI that they should expand the investment mandate of SSI to include Australian companies," it said.

Brian Gaynor is currently a director of SSI and Milford. SAML said Milford would retain a board seat on SSI if it were to be appointed as manager even though at the last annual meeting SSI was moving away from this model in the name of better corporate governance.

Salvus is a closed-end listed investment company that aims to have a portfolio of five to 15 investments over the medium term in NZAX companies, NZX companies outside the top ten companies in the NZX-50 and late stage unlisted companies.

SSI wants shareholders to approve the appointment of Milford as the new manager. It has said if they don't the company's assets will be sold up and the capital returned to shareholders.

SAML also takes issue with statements about the experience of respective investment teams as a reason to change, saying shareholders should look at the international experience of its managers as well as their expertise in investing in smaller companies.

"SAML was not given the opportunity to renegotiate its management contract prior to SSI entering into a conditional investment management agreement with Milford, nor was it shown the full details of that agreement in order to compete with its proposals."

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