ACN (AN AUSTRALIAN COMPANY TO BE LISTED ON THE AUSTRALIAN STOCK EXCHANGE)

Transcription

1 ACN (AN AUSTRALIAN COMPANY TO BE LISTED ON THE AUSTRALIAN STOCK EXCHANGE) AN INITIAL PUBLIC OFFERING OF UP TO 100,000,000 SHARES AT $1.00 (AUSTRALIAN) PER SHARE TOGETHER WITH AN OPTION EXERCISABLE AT $1.00 (AUSTRALIAN) PER SHARE THIS IS AN INVESTMENT STATEMENT FOR THE PURPOSES OF THE SECURITIES ACT 1978 IN RESPECT OF ORDINARY SHARES IN PETERS MACGREGOR INVESTMENTS LIMITED (COMPANY). IT IS PREPARED AS AT 3 FEBRUARY THE COMPANY HAS ISSUED A PROSPECTUS IN RESPECT OF ITS OFFER OF SHARES AND ATTACHING OPTIONS, WHICH WAS LODGED WITH THE AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION (ASIC) ON 27 JANUARY 2004 (PROSPECTUS). THE ASIC OR ITS OFFICERS TAKE NO RESPONSIBILITY FOR THE CONTENTS OF THIS INVESTMENT STATEMENT OR THE PROSPECTUS. LEAD MANAGER MACQUARIE EQUITIES INVESTMENT STATEMENT

2 1 IMPORTANT INFORMATION (The information in this section is required under the Securities Act 1978) Investment decisions are very important. They often have long term consequences. Read all the documents carefully. Ask questions. Seek advice before committing yourself. CHOOSING AN INVESTMENT When deciding whether to invest, consider carefully the answers to the following questions that can be found on the pages noted below: Page No. What sort of investment is this? 2 Who is involved in providing it for me? 2 How much do I pay? 2 What are the charges? 3 What returns will I get? 3 What are my risks? 3 Can the investment be altered? 4 How do I cash in my investment? 5 Who do I contact with inquiries about my investment? 5 Is there anyone to whom I can complain if I have problems with the investment? 5 What other information can I obtain about this investment? 5 Additional matters 6 Agreement as to jurisdiction 6 In addition to the information in this document, important information can be found in the current registered Prospectus for the investment. You are entitled to a copy of the Prospectus on request. CHOOSING AN INVESTMENT ADVISER You have the right to request from any investment adviser a written disclosure statement stating his or her experience and qualifications to give advice. That document will tell you: Whether the adviser gives advice only about particular types of investments; and Whether the advice is limited to the investments offered by one or more particular financial organisations; and Whether the adviser will receive a commission or other benefit from advising you. You are strongly encouraged to request that statement. An investment adviser commits an offence if he or she does not provide you with a written disclosure statement within 5 working days of your request. You must make the request at the time the advice is given or within 1 month of receiving the advice. In addition: If an investment adviser has any conviction for dishonesty or has been adjudged bankrupt, he or she must tell you this in writing; and If an investment adviser receives any money or assets on your behalf, he or she must tell you in writing the methods employed for this purpose. Tell the adviser what the purpose of your investment is. This is important because different investments are suitable for different purposes. Shares may only be applied for on the Application Form accompanying the Prospectus. Persons wishing to subscribe for shares with an issue price of 1 Australian dollar to be issued pursuant to the Prospectus (Shares) together with an option exercisable at 1 Australian dollar on or before 31 October 2005 purchased

3 2 for no additional consideration (Option) should carefully read the Prospectus in its entirety and where necessary consult their professional advisers for advice in order to make an informed assessment of the Issue (as defined below) and the rights attaching to the Shares and Options offered pursuant to the Prospectus. WHAT SORT OF INVESTMENT IS THIS? The Shares offered are ordinary shares in the capital of the Company. The Options issued will be exercisable at 1 Australian dollar on or before 31 October 2005 at which time if exercised the option holder will be issued with ordinary shares in the capital of the Company. A minimum of 20,000,000 Shares and a maximum of 100,000,000 Shares are offered under the Prospectus by way of an initial public offering of Shares in the Company at an offer price of 1 Australian dollar per Share together with the associated issue of a minimum of 20,000,000 and a maximum of 100,000,000 Options (Issue). Prior to the Issue there was 1 Share on issue. The offer opened on 3 February 2004 and closes at 5.00pm Sydney time on 26 March 2004 (Offer Period). The Shares will be fully paid shares. There will be no liability on the part of shareholders for any calls and the Shares will rank pari passu with shares currently on issue. Detailed provisions relating to the rights attaching to the Shares are set out in the Company s constitution and the Australian Corporations Act 2001 (Cth.) (Corporations Act). A copy of the constitution can be inspected during office hours at the registered office of the Company. No Shares will be issued on the basis of the Prospectus later than the expiry date of the Prospectus being 13 months after the date of the Prospectus. WHO IS INVOLVED IN PROVIDING IT FOR ME? The Company is the issuer of the Shares. The address of the Company s registered office is as follows: C/- Cansdale Harris Level 7, 87 Wickham Terrace Brisbane QLD 4000 Australia Telephone: (61) (7) Facsimile: (61) (7) The Company was incorporated in December 2003 to provide investors with access to the benefits of the skilled investment personnel of Peters MacGregor Capital Management Pty Limited (PMCM) and their understanding of the global equities markets, particularly in North America and Australasia. The objectives of the Company include capital growth and the payment of dividends. The Company s portfolio of investments (Portfolio) will be managed by PMCM. PMCM is a boutique global equities fund manager that constructs and manages investment portfolios for private investors on an individually managed account basis. The Directors of the Company are: L Wayne Peters (Chairman) Lionel Cansdale James Craigie HOW MUCH DO I PAY? Issue An application for Shares under the Issue can only be made by completing the Application Form accompanying the Prospectus. An application must be completed in accordance with the instructions set out in the Application Form. Applications must be for a minimum of 2,000 Shares at a total cost of A$2,000. Applications for more than 2,000 Shares must be in multiples of 100 Shares. Applications must be accompanied by a cheque in Australian dollars for a total of the $1.00 per Share applied for and must be payable to the Peters MacGregor Investments Limited Float Account. No stamp duty or brokerage is payable by Applicants. The amount payable will not vary during the Offer Period and no further amount is payable on or after in respect of the Shares. There is no cooling off period in respect of the Shares.

4 3 WHAT ARE THE CHARGES? No charges are payable by you to the Company, a promoter or an associated person of the Company in addition to the issue price of 1 Australian dollar per Share. Expenses of the Issue are as set out in the Prospectus, including broker fees, experts fees, corporate advisory fees, the ASIC and Australian Stock Exchange Limited (ASX) fees, printing costs and legal costs and are estimated to be between A$497,212 and A$2,531,692. WHAT RETURNS WILL I GET? Possible returns from the Company will be distributions paid by the Company from time to time. However if the Company is wound up, distribution of any surplus assets held by the Company will only be made after payment of all creditors of the Company. You may also receive capital gains on the sale of any Shares or Options you take up under the Issue. In addition, following the Issue the Company will have between 20 million and 100 million Options on issue, which if exercised, would raise between A$20 million and A$100 million. Whether these Options are exercised will depend on a number of factors including the price at which the Shares are trading and investor perception of the Company s prospects from time to time. You should be aware that capital gains tax may be payable by a New Zealand resident shareholder who sells shares on the ASX or off-market. No quantified amount of return is promised by the Company. Taxes or duties and reserves or retentions may affect the amount of return. The person legally liable to pay any returns is the Company. WHAT ARE MY RISKS? Intending investors should be aware that subscribing for Shares involves various risks. There are general risks associated with owning shares in publicly listed companies. The price of shares can go down as well as up due to factors outside the control of the Company. These factors include Australian and worldwide economic and political stability, natural disaster, performance of the Australian stock market as a whole, Australian interest rates, foreign exchange, fluctuations in international prices for commodities, taxation and labour relations environments. The operating results and profitability of the Company are sensitive to a number of factors. The risk factors relating to the Company that intending investors should consider include: (a) the success and profitability of the Company in part will depend upon the ability of the manager of the Portfolio to invest in well-managed companies which have the ability to increase in value over time; (b) the future earnings of the Company and the value of the investments of the Company may be affected by the general economic climate, commodity prices, currency movements, changing government policy and other factors beyond the control of the Company. As a result, no guarantee can be given in respect of the future earnings of the Company or the earnings and capital appreciation of the Company s investments; (c) variations in legislation and government policies generally could materially affect operating results of the Company; (d) any variation in the taxation laws of Australia (or countries in which the Company invests) could materially affect the operating results of the Company; (e) any variation in the exchange rates could materially affect the operating results of the Company; (f) any variation in short and long term interest rates could materially affect the operating results of the Company; (g) any variation in commodity prices could materially affect the operating results of the Company; (h) the price of investments that the Company has purchased can fall as well as rise; (i) the past performance of funds managed by the persons associated with the manager of the Portfolio are not necessarily a guide to future performance of the Company;

5 4 (j) the selling or purchasing of an unhedged option or warrant runs the risk of losing the entire investment or of causing significant losses to the Company in a relatively short period of time; (k) the performance fee may create an incentive for the manager of the Portfolio to make investments on behalf of the Company that are riskier or more speculative than would be the case in the absence of a fee based on the performance of the Company; (l) the Portfolio is expected to be less diversified than some other listed investment companies; (m) the price at which Shares are traded on ASX may be below the net asset backing of those Shares. The constitution of the Company does not entitle shareholders to require the board of the Company to implement a share buy-back or any other capital reconstruction or to take any other remedial action; (n) operational costs for the Company as a proportion of total assets will be affected by the level of total assets of the Company and by the level of acceptance of the Issue. Operational costs will represent a greater proportion of total assets and may reduce the operating results of the Company and accordingly the ability to make dividend payments, if the Company only achieves the minimum subscription under the Issue than if it secures a greater level of acceptance; (o) the size of the Portfolio will affect the risk profile of the Portfolio. The Company may not be able to diversify its investments and so manage its risks as efficiently if it achieves the minimum subscription under the Issue than if it secures a greater level of acceptance. However, the risk of loss of investments included in the Portfolio will not necessarily be reduced if the level of acceptance under the Issue exceeds the minimum subscription. Effective risk management depends on a range of factors including diversification of investments and other factors; (p) the ability of the manager of the Portfolio to continue to manage the Portfolio in accordance with this Prospectus and the Corporations Act is dependent on the maintenance of the manager s AFSL and its continued solvency. Maintenance of the AFSL depends, among other things, on the manager continuing to comply with the ASIC imposed licence conditions and the Corporations Act; (q) the manager of the Portfolio has the ability to transfer the management agreement to another manager as it sees fit, which may change the personnel responsible for managing the Portfolio of the Company; and (r) investors are strongly advised to regard any investment in the Company as a long term proposition and to be aware that, as with any equity investment, substantial fluctuations in the value of their investment may occur. This list is not exhaustive and potential investors should read the Prospectus in full and, if they require further information on material risks, seek professional advice. You will not be required to pay more money to acquire Shares other than the issue price of 1 Australian dollar per Share. If you exercise your rights under the Options, you will be required to pay 1 Australian dollar for each Share issued pursuant to the Option. You cannot be required to exercise the Options. As the Shares will be fully paid shares in the Company, you will not be liable to pay money to any person as a result of the insolvency of the Company. In the event of the liquidation of the Company the Shares would rank behind all creditors of the Company. At the commencement of winding up, restricted securities (if Shares) which are subject to restrictions under any restriction agreement entered into by the Company, rank on a return of capital behind all other Shares of the Company. Detailed provisions relating to the rights attaching to the Shares are set out in the Company s constitution and the Corporations Act. A copy of the constitution can be acquired on request from the Company until the expiry of the Prospectus. CAN THE INVESTMENT BE ALTERED? The issue price of 1 Australian dollar per Share may not be increased. The rights attaching to the Shares may only be altered by special resolution of all shareholders.

6 5 HOW DO I CASH IN MY INVESTMENT? You are free to sell your Shares and the Options on the ASX when they are quoted. There is no market for such sales until they are quoted. Application has been made to the ASX for the Shares and the Options to be quoted on the ASX. If the minimum subscription has not been reached or if the ASX does not give permission for quotation of the Shares within 3 months after the date of the Prospectus (or a later date permitted by ASIC), none of the Shares or Options will be issued and if any have been allotted or issued, the allotment or issue will be void, unless the ASIC grants an exemption permitting the allotment or issue. If no allotment or issue is made or if an allotment or issue is void all monies paid on application for the Shares will be refunded within the time period prescribed under the Corporations Act. You have no right to terminate, cancel, surrender or otherwise make or obtain payment of any returns from the shares other than as permitted by the constitution of the Company and the Corporations Act. WHO DO I CONTACT WITH INQUIRIES ABOUT MY INVESTMENT? If you have any inquiries regarding how to complete the application form or require additional copies of the Prospectus, please contact: Macquarie Equities Limited or Macquarie Equities New Zealand Limited 1 Martin Place Level 14, Phillips Fox Tower Sydney NSW Queen Street, Auckland 1 Australia New Zealand Telephone: (61) (2) SHARES ( ) 0R (64) (9) IS THERE ANYONE TO WHOM I CAN COMPLAIN IF I HAVE PROBLEMS WITH THE INVESTMENT? A complaint about your investment may be made to the Directors of the Company at: Level 7, 87 Wickham Terrace Brisbane QLD 4000 Australia Telephone: (61) (7) There is no ombudsman to whom complaints can be made. WHAT OTHER INFORMATION CAN I OBTAIN ABOUT THIS INVESTMENT? Other information about the Shares and Options and the Company is contained in the Prospectus. A copy of the Prospectus is attached to this Statement. A further copy of the Prospectus may be obtained free of charge from Macquarie Equities Limited at the address shown above under the heading Who do I contact with inquiries about my investment?. The Company was only incorporated in December The Investigating Accountants report prepared by Hanrick Curran is contained in the Prospectus and contains a Pro forma Statement of Financial Position following completion of the Issue. A copy of the Prospectus has been lodged with the New Zealand Registrar of Companies and is available for public inspection. The Company is required by the Corporations Act to distribute its audited financial statements including a profit and loss statement and a balance sheet in respect of each financial year to its shareholders at or before the time when it sends its notice of annual general meeting of the Company to the shareholders. An annual general meeting of the Company must be held once each calendar year within 5 months after the end of its financial year. The Company is a disclosing entity for the purposes of Section 111AC(2) of the Corporations Act and as such, is subject to regular reporting and disclosure obligations. Broadly, these obligations require the Company to: (a) prepare and lodge with the ASIC both yearly and half-yearly financial statements accompanied by a directors statement and report and an audit or review report; and

7 6 (b) immediately notify the ASX of any information concerning the Company of which it is, or becomes, aware and which a reasonable person would expect to have a material effect on the price or value of securities in the Company, subject to certain limited exceptions related mainly to confidential information. Copies of documents lodged at the ASIC in relation to the Company may be obtained from or inspected at an office of the ASIC. Copies of documents lodged with the ASX in relation to the Company may be obtained from, or inspected at, an office of the ASX. The Company will send a copy of the Prospectus and any other additional information required by law to accompany it within 5 working days of a request for it by an intending investor. ADDITIONAL MATTERS The Securities Act (Australian Issuers) Exemption Notice 2002 SR2002/314 requires disclosure of the following additional matters: Allotment of the Shares and Options will be made in the manner specified in the Prospectus and in the manner prescribed under the laws of Australia; Investors should satisfy themselves as to the tax implications of investing in the Shares; Investing in the Shares and Options may carry with it currency exchange risks; The financial reporting requirements applying in New Zealand and those applying to the Company may be different and the financial statements of the Company may not be compatible in all respects with financial statements prepared in accordance with New Zealand law; The Company may not be subject in all respects to New Zealand law; Although a copy of the Prospectus and other documents have been received by the Registrar of Companies, the Prospectus has not been registered in New Zealand under New Zealand law and may not contain all the information that a New Zealand registered prospectus is required to contain; and It is not a condition of this investment statement that the Company be listed on the New Zealand Stock Exchange and that New Zealand resident investors may not have access to information concerning the Company in the same way as investors have in relation to an issuer listed on the New Zealand Stock Exchange. AGREEMENT AS TO JURISDICTION In respect of a dispute concerning the contract for the Shares and Options, the Company: Agrees to submit to the non-exclusive jurisdiction of the New Zealand courts; Has instructed a New Zealand agent for service (details below) to accept service on the Company s behalf; and Agrees that this investment statement is an agreement with each shareholder for the purposes of section 389(1)(e) of the New Zealand Companies Act Despite the statements above, the contract in respect of the Shares and Options may not always be enforceable in New Zealand courts. NEW ZEALAND AGENT FOR SERVICE: Duncan Cotterill Lawyers Level 9, Clarendon Tower Oxford Terrace Christchurch New Zealand Attn: Stephen Brent Telephone: (64) (3) Facsimile: (64) (3)

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9 ACN FOR THE INITIAL PUBLIC OFFER OF UP TO 100,000,000 FULLY PAID ORDINARY SHARES TO RAISE $100,000,000 TOGETHER WITH 100,000,000 OPTIONS TO ACQUIRE ORDINARY SHARES, EACH EXERCISABLE AT $1.00 THIS OFFER IS NOT UNDERWRITTEN LEAD MANAGER - MACQUARIE EQUITIES PROSPECTUS

10 Directory Directors L Wayne Peters (Chairman) Lionel Cansdale James Craigie Company Secretary Lionel Cansdale Registered Office C/- Cansdale Harris Chartered Accountants Level 7 87 Wickham Terrace Brisbane QLD 4000 Telephone: (07) Facsimile: (07) Investigating Accountant & Auditor Hanrick Curran Level Queen Street Brisbane QLD 4000 Telephone: (07) Facsimile: (07) Manager Peters MacGregor Capital Management Pty Limited (ACN ) Australian Financial Services Licence No: Suite 11, 411 New South Head Road Double Bay, Sydney, NSW 2028 Telephone: (02) Facsimile: (02) Sponsoring Broker & Licensed Dealer to the Offer Macquarie Equities Limited (ABN ) Securities Dealers Licence No: Martin Place Sydney NSW 2000 Telephone: (02) Facsimile: (02) Share Registry Registries Limited Level 2 28 Margaret Street Sydney NSW 2000 Telephone: (02) Facsimile: (02) Solicitors to the Offer Watson Mangioni Level Carrington Street Sydney NSW 2000 Telephone: (02) Facsimile: (02) Indicative Timetable Date of Prospectus 27 January 2004 Expiry of exposure period 3 February 2004 Offer to open 3 February 2004 Offer expected to close 26 March 2004 Trading of Shares expected to commence on ASX 14 April 2004 The above dates are indicative only and may vary, subject to the requirements of the Listing Rules and the Corporations Act. The Company reserves the right to close the Offer earlier than 26 March 2004 or extend the Closing Date. No Shares or Options will be issued on the basis of this Prospectus later than the expiry date of this Prospectus being the date 13 months after the date of this Prospectus. The Company will apply to ASX for the Shares and Options to be listed for quotation on ASX within 7 days after the date of this Prospectus.

11 1 Contents Important Notices 2 Chairman s Letter 3 1. OVERVIEW The Offer Offer Not Underwritten Business Objectives The Portfolio Manager Minimum Subscription Risk Factors How to Apply ASX Listing Allotment CHESS Overseas Shareholders 7 2. PETERS MACGREGOR INVESTMENTS LIMITED Overview of Business Company Objectives Investment Strategy Investment Process Permitted Investments Reports to Shareholders LIC Status INFORMATION ON THE MANAGER Business of the Manager Performance History Manager s Investment Team FINANCIAL INFORMATION Pro Forma Statements of Financial Position Proposed Accounting Policies Proceeds of the Offer Dividend Policy Capital Structure Policy Tax Status of LIC INDEPENDENT ACCOUNTANT S REPORT TAXATION REPORT DIRECTORS L Wayne Peters - Chairman Lionel Cansdale James Craigie Corporate Governance Statement RISK FACTORS Risk Factors Investor Considerations Tax Considerations ADDITIONAL INFORMATION Rights Attaching to the Shares Rights attaching to Options Material Contracts Licensed Dealers ASX Waivers Dividend Re-Investment Plan Matters Relevant to the Directors Remuneration of Directors Related Party Transactions Legal Proceedings Consents and Responsibility Statements Interest of Experts GLOSSARY 50

12 2 IMPORTANT NOTICES This Prospectus is dated 27 January 2004 and was lodged with the ASIC on that date. No responsibility for the contents of this Prospectus is taken by the ASIC and the ASX or any of their officers. This document is important and requires your immediate attention. It should be read in its entirety. You may wish to consult your professional adviser about its contents. No person is authorised to give any information or make any representation in connection with the Offer which is not contained in this Prospectus. Any information or representation not so contained or taken to be contained may not be relied on as having been authorised by the Company in connection with the Offer. Defined terms and abbreviations included in the text of this Prospectus are set out in the Glossary in Section 10. Offers under this Prospectus will be made pursuant to an arrangement between the Company and licensed securities dealers or Australian Financial Services Licensees (dealers) pursuant to Section 911A(2)(b) of the Corporations Act. The Company will only authorise dealers to make offers to people to arrange for the issue of Shares and Options by the Company under the Prospectus and the Company will only issue Shares and Options in accordance with such offers if they are accepted. The Company will forward all Application Forms and Application Monies it receives to Macquarie Equities Limited (Macquarie). Macquarie will deposit and deal with the Application Monies pursuant to this Prospectus. Macquarie s function should not be considered as an endorsement of the Offer nor a recommendation of the suitability of the Offer for any investor. Macquarie does not guarantee the success or performance of the Company or the returns (if any) to be received by investors. Neither Macquarie nor any other dealer is responsible for or caused the issue of this Prospectus. The Company reserves the right to enter into similar arrangements to those with Macquarie with other dealers. ELECTRONIC PROSPECTUS This Prospectus is available in electronic form on Macquarie s website at: The Offer or invitation to which the Electronic Prospectus relates is only available to persons receiving the Electronic Prospectus in Australia. The Company will send to a person a copy of the paper Prospectus and paper Application Form free of charge if the person asks during the application period. The Shares and Options to which the Electronic Prospectus relates will only be issued on receipt of a printed copy of the electronic Application Form. The Application Form may be generated by software accessible by the same means as the Prospectus.

13 3 27 January 2004 Dear Investor, On behalf of the directors, I am pleased to invite you to become a Shareholder in Peters MacGregor Investments Limited (Company). I have been managing my own portfolio of international shares for more than 10 years and in 1999 established Peters MacGregor Capital Management Pty Limited (PMCM) to manage investments on behalf of high net worth private investors. PMCM presently manages portfolios for wholesale investors on an Individually Managed Account (IMA) basis. The current minimum subscription is $2 million. PMCM has a track record of generating high returns. Since inception PMCM has achieved an average annual compound gross return of approximately 32%. Whilst past experience cannot be used as an indication of future performance, the long term success of PMCM indicates that the Manager s investment philosophies and processes are robust. The Company has been formed to offer a broader community of investors access to the investment style and success of PMCM. The Manager is a value focused investor and has a goal of achieving a long term annual compound total return of 12% per annum. PMCM s investment philosophy has been to concentrate investments in a small number (maximum of 20) of outstanding businesses and hold those investments for the long term. Historically, PMCM has found the majority of these investment opportunities in international markets, in particular the USA. The investment approach is outlined in Section 2 and is not suitable for short-term speculators. I will be personally investing $1,000,000 in the Company and much of my personal wealth is managed on the same basis as the PMCM IMA portfolios. I assure you that PMCM will manage your money as though it were our own. Please read this Prospectus carefully before making your investment decision, as it contains detailed information about the Company and the offer of Shares and Options to investors. I recommend this Prospectus to you and look forward to welcoming you as a Shareholder of the Company. Yours sincerely, L Wayne Peters Chairman

14 4 1. Overview 1.1 THE OFFER The Company will offer for subscription up to 100,000,000 Shares at $1.00 per Share to raise up to $100,000,000. For each Share issued, subscribers will receive 1 free Option to subscribe for a Share at an exercise price of $1.00 exercisable by 31 October OFFER NOT UNDERWRITTEN The Offer is not underwritten. 1.3 BUSINESS OBJECTIVES The Company has been incorporated to provide investors with the opportunity to invest in a long term portfolio of international shares and gain access to the specific investment process and the funds management experience of PMCM. The key focus of the Company will be capital growth. The investment objective is to achieve a 12% annual compound return (comprising both income and capital growth) over the long term (greater than 5 years). See Section 2 for further details on the Company s investment strategy. 1.4 THE PORTFOLIO MANAGER The portfolio of investments of the Company will be managed by PMCM, a boutique global equities fund manager. Further details with regards to PMCM can be found in Section 3 of the Prospectus. Management Fee PMCM will receive a management fee equivalent to 1% per annum of the Value of the Portfolio. Performance Fee A Performance Fee is payable at 20% of the amount by which the Portfolio s performance (after deducting the management fee) exceeds the high water mark. No performance fee will be payable to the Manager in respect of any performance period where the Portfolio s return has been less than the high water mark. High Water Mark The high water mark in any given period will be the greater of: 1. The previous period s closing balance of the Portfolio (subject to adjustment) compounded by 7% per annum; or 2. The previous period s high water mark (subject to adjustment) compounded by 7% per annum. The result is that the high water mark will increase at a minimum by 7% per annum. See Section 9.3 for further details.

15 5 1.5 MINIMUM SUBSCRIPTION The minimum subscription for the Offer is $20,000,000, being receipt of valid Applications for not less than 20,000,000 Shares and 20,000,000 attaching Options. If this minimum subscription is not achieved and the Application Price for these Shares is not received by the Company by the date 4 months after the Opening Date, the Company will repay all money received from Applicants within 7 days after that date without interest. 1.6 RISK FACTORS An investment in the Company is speculative and involves a number of risks. While the Directors intend to use prudent management techniques to minimise the risks to Shareholders, no assurances can be given by the Company as to the success or otherwise of its business. Investors should consider the risk factors identified in this Prospectus, particularly those identified in Section 8, before applying for Shares and Options. 1.7 HOW TO APPLY Applications for Shares and Options must be made and will only be accepted on the Application Form issued with and attached to this Prospectus. An Application Form must be completed in accordance with the instructions set out on the reverse side of the Application Form. Applications must be for a minimum of 2,000 Shares and 2,000 Options for a total of $2,000. Applications may be made for additional Shares and Options in multiples of 100 Shares and 100 Options for $100. Applications must be accompanied by payment in Australian currency of $1.00 for each Share and Option applied for. Cheques must be made payable to Peters MacGregor Investments Limited - Float Account and crossed Not Negotiable. Payments by cheque will be deemed to have been made when the cheque is honoured by the bank on which it is drawn. No stamp duty or brokerage is payable by Applicants. The amount payable on Application will not vary during the period of the Offer and no further amount is payable on allotment. Completed Application Forms and accompanying cheques may be lodged with: Peters MacGregor Investments Limited Share Offer c/- Registries Limited or c/- Registries Limited PO Box R67 Level 2 Royal Exchange 28 Margaret Street NSW 1223 Sydney NSW 2000

16 6 A binding contract to issue Shares and Options will only be formed at the time Shares and Options are allotted to Applicants. Application Forms will be accepted at any time after the issue of this Prospectus and prior to the close of business on the Closing Date. Early lodgement of your Application is recommended as the Offer may be closed early. 1.8 ASX LISTING Application will be made to ASX within 7 days after the date of this Prospectus for the Company to be listed on the ASX and for quotation of the Shares and Options issued pursuant to this Prospectus and all other Shares on issue as at the date of such quotation. The fact that ASX may list the Company is not to be taken as an indication of the merits of the Company or the Shares or Options. ASX quotation, if granted, will commence as soon as practicable after holding statements are dispatched. The Directors do not intend to allot any Shares and Options unless and until ASX grants permission for the Shares and Options to be listed for quotation unconditionally or on terms acceptable to the Directors. If permission is not granted for the Shares to be listed for quotation before the end of 3 months after the date of this Prospectus or such longer period permitted by the Corporations Act with the consent of ASIC, all Application Moneys received pursuant to the Prospectus will be refunded without interest to Applicants in full within the time prescribed by the Corporations Act. 1.9 ALLOTMENT No allotment of Shares and Options will be made until the minimum subscription has been received and permission has been granted by ASX for quotation of the Shares and Options unconditionally or on terms acceptable to the Directors. It is expected that allotment of the Shares and Options will take place by 2 April The Company will forward all Application Forms it receives to Registries. All Application Monies received pursuant to this Offer will be held in a subscription account until allotment. This account will be established and kept by Registries on behalf of Applicants. An Application constitutes an offer by the Applicant to subscribe for Shares and Options on the terms and subject to the conditions set out in this Prospectus. Where the number of Shares and Options allotted is less than the number applied for or where no allotment is made, the surplus Application Monies will be returned by cheque within 7 days of the Closing Date. Interest will not be paid on the refunded Application Monies.

17 CHESS The Company will apply to ASX to participate in the Securities Clearing House Electronic Subregister System known as CHESS. CHESS is operated by the ASX s Securities Clearing House (SCH) in accordance with the ASX Listing Rules and the SCH Business Rules. Under CHESS, the Company will not be issuing certificates to investors who elect to hold their shares on the CHESS subregister. After allotment of Shares, Shareholders will receive a CHESS statement. The CHESS statements which are similar to bank account statements, will set out the number of Shares allotted to each Shareholder pursuant to this Prospectus. The statement will also advise holders of their holder identification number and explain for future reference the sale and purchase procedures under CHESS. Further statements will be provided to holders which reflect any changes in their shareholding in the Company during a particular month OVERSEAS SHAREHOLDERS The Offer does not constitute an offer in any place in which, or to any person to whom, it would be unlawful to make such an offer. The Offer will be extended to investors in New Zealand by way of this Prospectus and an Investment Statement which, together with other associated documentation, will be lodged with the NZ Companies Office to enable the offer to be made to New Zealand investors.

18 8 2. Peters MacGregor Investments Limited 2.1 OVERVIEW OF BUSINESS Peters MacGregor Investments Limited is a company which has been formed to invest in a portfolio of permitted investments (see Sections 2.4 and 2.5 for details). The Company will provide investors with the opportunity to invest in a long term portfolio of international Securities and gain access to the specific investment process and the funds management experience of PMCM. The markets that are currently researched by the Manager are North America, Australia and New Zealand. The Company intends to take a long term view with respect to its investments and expects to hold these for a number of years. The Company intends to hold a highly concentrated portfolio of Securities in companies that are well researched and understood by the Manager, and that the Manager believes are currently undervalued by the market. The Manager does not expect to hold more than 20 companies in the Portfolio at any given time. The Company may maintain large cash holdings if attractive investments cannot be found. 2.2 COMPANY OBJECTIVES The key focus of the Company is capital growth. The investment objective is to exceed the average return of the MSCI World Total Return Index (net local) over the long term (greater than 5 years) by 4%. The return of this index has approximated 8% since inception (33 years ago). The performance of this index is historical and not necessarily an indication of future performance. Given that the Portfolio will have a high level of concentration relative to other investment portfolios, it is unlikely that actual performance of the Portfolio will track this index. This index is a measure of global market equity performance and consists of the 23 major developed market country indices. Since the Manager has invested to date in North America and Australasia and is open to opportunities on all major exchanges, it believes this index is the most appropriate for comparing the Company s performance. The Manager expects that investing in the MSCI World Total Return Index (net local) will produce satisfactory results over time. As such, it follows that, for long term investors, gaining small advantages annually over that index will prove rewarding.

19 9 2.3 INVESTMENT STRATEGY The investment strategy of the Manager is to identify investment opportunities which are selling at a discount to the Manager s assessed economic value. The Manager s investment strategy is guided by three overriding principles, namely: 1. Choose a few businesses that have a reasonable certainty of producing above average returns over time; 2. Concentrate investments in those Securities provided they can be purchased at attractive prices; and 3. Have a long term investment strategy and the vision to hold steady during any short term market fluctuations. The Manager is a value focused investor and will take a common sense approach to investing in a market. 2.4 INVESTMENT PROCESS The Manager s investment process of identifying opportunities is focused on three key areas, as outlined in the diagram below: IDENTIFYING GREAT INVESTMENTS Understandable Strong balance sheet Good economics: Free cash flow that will grow Pricing power High return on equity Bright Prospects Competitive advantages OUTSTANDING BUSINESS G R E A T COMPETENT MANAGEMENT P R I C E Capable management Rational capital allocators Appropriate incentives Shareholder-orientated Share ownership 75% or less of economic value Competitor analysis Multiple comparisons Present value of future free cash flow

20 10 Outstanding Business First and foremost the Manager views investments as businesses. The key to its approach is to buy into businesses that it understands, which have good economics and bright prospects. The Manager must be able to assess what these businesses will look like in the long-term. Key research filters include: a. The business should be simple and understandable. BUSINESS b. The business should have a consistent operating history. c. The business should have favourable long term prospects. a. Focus on return on shareholder equity. FINANCIAL b. Strong free cash flow. c. High profit margins. d. Rational capital allocation - for every dollar retained, has the company created at least one dollar of market value? Competent Management The Manager investigates a company thoroughly before it makes an investment decision. It reviews the business s history and how management has performed against stated objectives. The Manager s approach to buying Securities is the same as if it were seeking to buy the entire company. Key research filters include: a. Management should be rational and shareholder oriented. MANAGEMENT b. Management should be candid with shareholders. c. Management should resist the institutional imperative (a short term view).

21 11 Great Price Each business is valued on a discounted free cash flow basis. An investment is made only if the share price is at a material discount to this estimated economic value (typically a 25% discount is required). This is the margin of safety and it is critical to long-term high returns. It is also critical in avoiding situations which could lead to permanent loss of capital. PRICE/VALUE Price Line MARGIN OF SAFETY Value Line TIME This price-value relationship is an important concept. Over time a company s share price will trend toward its true value. So the investments have two powerful factors working simultaneously: the value of the business is growing while the share price is playing catch-up to this value. Focused Portfolio The Manager believes that a focused portfolio is simply a case of 'less is more'. By focusing on a small number of hand picked companies, it is better placed to know their management and their prospects extremely well. The Manager holds that this is critical in seeking above average results. A bumpy 12% return is preferred to a smooth 9% return. Price fluctuations in the short term neither vindicate nor disprove the investment decision. Richard A Brealey, author of An Introduction to Risk and Return from Common Stocks, observed that: a simple 5 stock portfolio provides 77.4% of the benefits of diversification if each stock is in a different industry.while 12 stocks brings that benefit to 90.4% and 100 to 98.83% Clearly, the marginal benefit of diversification reduces considerably as portfolio size increases.

22 12 The Manager s View on Risk There are two types of risk that are important to the Manager: business risk and price risk. Selecting businesses with competitive advantage, sound economics, competent management and bright futures can substantially reduce business risk. By staying with businesses within the Manager s circle of competence, unknown factors are minimized and potential for success is maximized. Price risk enters the equation if too much is paid for the business, even though it is an excellent business. This is why a reasonable margin of safety is essential. Think Long-Term With regard to the investment time horizon, the Manager holds to the old adage: Time in the market is more important than timing the market. While the Manager will not necessarily hold an investment for 10 years, a Security will not be purchased unless the Manager is prepared to hold it for at least this period. Foreign Currency It is likely that a material part of the Portfolio will comprise Securities quoted on overseas markets which are denominated in foreign currency. Such investments expose the Company to fluctuations in the exchange rate between Australian dollars and the relevant foreign currency. The Manager s focus is on achieving returns from the market performance of Securities held in the Portfolio rather than fluctuations in foreign currency in which the foreign quoted Securities are traded. The Manager intends to enter forward purchase contracts for foreign exchange to hedge its exposure to such fluctuations in exchange rates. The Manager will review its approach to hedging in light of the costs of entering into hedge contracts and its assessment of the relative stability of the currencies in which foreign traded Securities are denominated. Initially it is expected that all investments not denominated in Australian dollars will be the subject of hedge contracts. This practice reflects the historical approach adopted by the Manager in its current business as outlined in Sections 3.1 and PERMITTED INVESTMENTS The Management Agreement permits investment in: Securities quoted on stock exchanges where Securities quoted on those exchanges are included in the MSCI World Total Return Index (net local) or other exchanges which the Board determines have a level of market integrity and disclosure similar to the exchanges included in the MSCI World Total Return Index (net local); warrants and exchange traded options over such listed Securities; debentures, unsecured notes and bonds;

23 13 cash and interests in cash management trusts; future derivative contracts as permitted by the Manager s AFSL; foreign exchange contracts as permitted by the Manager s AFSL; other financial products as permitted by the Manager s AFSL. The Management Agreement does not limit the geographic spread of investments. Historically the Manager has invested in North America, Australia and New Zealand. The Manager is not permitted to short sell Securities or borrow to undertake permitted investments. However the effect of hedging contracts may be to provide exposure to the foreign exchange counterparty in a manner akin to gearing of the Portfolio. 2.6 REPORTS TO SHAREHOLDERS To assist Shareholders assess the value of Shares and Options and to comply with the Listing Rules, within 14 days after the end of each month the Company will release to Shareholders through the ASX a statement of the net tangible asset backing of its Shares as at the end of the preceding month. The calculation of the net tangible asset backing of Shares will be made in accordance with the Listing Rules. The Company will provide to holders of Shares and Options on request, free of charge, a copy of statements of the net tangible asset backing of Shares from time to time. 2.7 LISTED INVESTMENT COMPANY (LIC) STATUS The Company considers that the tax concessions available to Shareholders as a result of the Company being considered a LIC are an important benefit to be made available to Shareholders. Accordingly, when determining whether to undertake or realise an investment on behalf of the Company, the Manager will have regard to the impact of that investment or realisation of an investment on the LIC status of the Company and, unless there is considered to be a compelling reason to do so, will not undertake any action which would jeopardise that status. In particular, any investment which would result in the Company holding more than 10% of the issued Securities of an investee may only be made with the prior approval of the Board. Notwithstanding that it is presently considered beneficial for Shareholders, there can be no certainty that the tax concessions presently available will continue to be available to Shareholders or will be advantageous for all Shareholders. Similarly, changes in the taxation legislation or the interpretation of that legislation may require each of the Manager and the Company to reconsider its position on the issues outlined above. Moreover, the Manager may consider that the financial benefits associated with undertaking or realising an investment may outweigh any taxation consequences for Shareholders. Accordingly, potential Applicants should not make a decision to apply for Shares and Options under this Prospectus primarily on the basis of any taxation benefit.

24 14 3. Information on the Manager 3.1 BUSINESS OF THE MANAGER PMCM is a boutique global equities fund manager, founded in 1999 by Wayne Peters, that constructs and manages investment portfolios for private investors on an IMA basis. PMCM is licensed as an Australian Financial Services Licensee (No ) under the Corporations Act. In January 2000 PMCM established and acted as responsible entity (securities licence no ) for the Peters MacGregor Growth Fund, a registered managed investment scheme (Growth Fund). In November 2000 PMCM terminated the Growth Fund and commenced to provide investment management services to wholesale investors on an IMA basis. PMCM determined that an IMA was a more efficient structure for high net worth investors. PMCM had no securities dealers licence or AFSL during this period. PMCM obtained its AFSL in April It is arguable that PMCM required an AFSL to provide IMA services to its Australian-based investors prior to the grant of its AFSL. The investment management mandate has been consistent since inception of the Manager. PMCM presently manages funds on behalf of wholesale investors with a current minimum subscription of $2 million. PMCM has approximately $67 million under management under these IMA arrangements. PMCM intends to continue to conduct this business after completion of the Issue. Its investment strategies and philosophies have been crafted from the teachings of Professor Benjamin Graham and Warren Buffett, namely a long-term value based approach to investment selection. PMCM s investment philosophy is guided by three overriding principles: 1. Choose a few businesses that have a reasonable certainty of producing above average returns over time; 2. Concentrate investments in those shares provided they can be purchased at attractive prices; and 3. Have a long term investment strategy and the vision to hold steady during any short term market fluctuations. A detailed overview of the Manager s investment strategy is set out in Section 2.3.