Kina Asset Management was incorporated on 9 October 2007.

The Company will aim to provide investors with a way to participate in investment opportunities identified by the Manager. The Company has a wholly owned subsidiary Kina Asset Management No 1 Limited which will hold the Company’s investments. Kina Asset Management No 1 Limited was incorporated on 29 November 2007.

The Company will invest the proceeds of the Offer, less any expenses of the Offer, in a Portfolio of Permitted Investments as outlined in Section 3.5, which will be predominantly POMSoX and ASX listed securities. However, the proceeds of the Offer may also be applied towards any other undertaking that the Company may lawfully engage in as a listed investment company.

Investment Objectives

The investment objectives, as proposed by the Manager and agreed to by the Company and reflected in the Investment Strategy discussed at Section 3.3, are to:

• provide a positive rate of return to Shareholders via a combination of capital growth and income;
• provide Shareholders with regular dividends; and
• preserve the capital of the Company.

Investment Strategy

An Investment Strategy has been approved by the Company with advice from the Manager and is to be implemented by the Manager. The underlying principle of the Investment Strategy is to invest in opportunities that the Manager believes have good prospects for steady capital growth, and a history of paying regular dividends. The Manager will be a stock picker, not a market timer.

The Investment Strategy mandates that the Portfolio will normally be fully invested in equity securities and not normally invested in fixed interest securities. Cash will normally be held only for operational purposes.

Portfolio Construction

Initially, investments will be made predominantly in equities issued by entities operating in PNG. Over time, it is intended to diversify into equities issued by entities operating outside PNG of up to 40% of the Portfolio value.

Up to 25% of the Portfolio value may be held in unlisted securities.

Initially the Portfolio will not be leveraged. The Board will review this strategy periodically in consultation with the Manager.

The Manager intends to identify companies which meet the Company’s Investment Strategy, and then make an investment in each of those companies on the Company’s behalf. Therefore, it is unlikely that the Company will hold an interest in more than 15 – 25 companies at any one time.

It is possible that the Company will have up to 95% of the value of its Portfolio invested in a total of less than 15 investments with substantial individual holdings (up to 38% of the Portfolio could be invested in securities of a single entity assuming the Offer is fully subscribed) anticipated in the first 6-12 months of trading. The Manager anticipates rebalancing the Portfolio during the first year to ensure overexposures to individual investments are eliminated and brought within the normal limits under the Investment Strategy such that not more than 20% of the Portfolio will be invested in securities of a single entity. The concentration of the Company’s Portfolio in this way may result in a reduction of the benefits of diversification and may increase the risk profile of the Company when compared to a more diversified portfolio. Investors should carefully consider whether they are comfortable with the possibility of such reduced diversification before deciding to invest in Shares in accordance with this Offer.

Permitted Investments

Under the terms of the Management Agreement, the Manager is only permitted to invest the Company’s funds in the following investments:

• listed securities, being any security listed on POMSoX, ASX or any other recognised securities exchange;
• unlisted securities that the Manager considers to be suitable for investment;
• managed investment schemes including index funds;
• cash and interests in cash management trusts;
• bills of exchange, promissory notes or other negotiable instruments accepted, drawn or endorsed by any bank; and
• other financial products as permitted by the Investment Strategy.

Pursuant to the Management Agreement, the Manager is permitted to undertake investments without Board approval, provided they are within the parameters of the Investment Strategy. The Manager must seek approval from the Board to undertake investments outside the parameters of the Investment Strategy.

Dividend Policy

Dividends may be payable to Shareholders annually in arrears as a final dividend each year where the Board feels it is prudent to do so and the distribution is permitted by the Companies Act. A dividend reinvestment plan may also be offered to Shareholders.

Reports to Shareholders

In accordance with the POMSoX Listing Rule 4.12, within 14 days of the end of each month the Company is required to release to Shareholders via POMSoX a statement of the net tangible asset backing of its Shares at the end of that month.