8 July 2004

Dear Shareholder

CVC Limited ("the Company") is pleased to announce a general meeting of shareholders to be held on Monday, 9 August 2004 at 2,00pm at the Company's offices at Level 42, 259 George Street, Sydney NSW.

At the General Meeting, a number of resolutions have been proposed. However, the primary reason for the meeting is to allow shareholders to review and make a determination on a Proposal involving the restructure of the Company through the acquisition of the investment management business of its manager, CVC Investment Managers Pty Ltd ("CVC IM").

The Proposal for the Company's restructure was originally foreshadowed by in the 2003 annual report and consolidates an intensive evaluation by the directors, in conjunction with an independent industry expert, into the most appropriate corporate structure to maximise shareholder value.

The Company is also using this opportunity to propose additional resolutions. The following is a summary of the resolutions to be put forward at the general meeting.

The Resolutions

Restructure of CVC (Resolutions 1, 2 and 3)

As you are aware, on 1 June 2004 CVC Limited announced that it was developing a Proposal for the acquisition of the investment funds management business of its manager, CVC IM. The Company is now seeking shareholder approval for this Proposal.

CVC IM has been operating as the manager of the Company under a Management Agreement dated 30 December 1986. In addition to acting as the Company's manager, CVC IM also acts a manager to other independent specialised Funds. The Proposal to acquire CVC IM's investment management business is specifically designed to allow the Company to:

make immediate savings in the Company's management costs; Ă
generate a new ongoing revenue stream from the management of other investment funds:
remove all current and future performance fee liabilities: and $\ddot{\phantom{0}}$
simplify its operational structure and broaden of its appeal to the investment community.

The Proposal has been designed to create a corporate structure which maximises shareholder value and aligns the interests of the management of the Company with its owners. CVC IM and the Company are related parties and as such, the approval of the Company's shareholders is required under the provisions of the Corporations Act 2001 and the ASX Listing Rules.

CVC Limited Executive and Non-Executive Long Term Incentive Plan (Resolutions 4, 5 and 6)

The Company proposes to introduce a long term incentive plan to further align the interests of the management team of the Company with those of shareholders in the Company and to assist in the retention of key members of the management team, particularly the Managing Director, Mr Alexander Beard, and in light of the proposed restructure considered above. The Pian allows the Company to issue a maximum of \$5m shares, and give financial assistance to acquire the shares, to invited participants but will require the participants to forfeit the shares if they do not achieve performance hurdles and tenures of service set by the Board.

Non-Executive Director Remuneration (Resolution 7)

The Company proposes to increase the aggregate amount it can pay to non-executive Directors of the Company to \$110,000 per annum. The Company believes that to assist with the movement of the Company towards meeting the best practice recommendations for corporate governance it will need to recruit additional independent non-executive directors. The Company currently pays the maximum amount approved to non-executive directors. Resolution 7 seeks shareholder approval for an increase in the aggregate approved remuneration to allow for the appointment of new nonexecutive director(s) and small increases in remuneration paid to current non-executive Directors.

Share Buvback (Resolution 8)

Resolution 8 is a stand-alone resolution to allow the Company to buy back and cancel up to 20 million of its shares on market, in accordance with ASX listing rules, as a capital management tool and to provide liquidity in the Company's shares for shareholders.

Sale of Shares in Pro-Pac Group Limited to CVC Private Equity Limited (Resolution 9)

Resolution 9 is a stand-alone resolution to allow the Company to sell part of its investment in Pro Pac Group Limited ("PPG")to CVC Private Equity Limited, a related party. The transaction is designed to enable the Company to realise a profit on the sale of part of its investment and to broaden the capital base of PPG.

Explanatory Memorandum

The attached notice of meeting includes a detailed Explanatory Memorandum which is designed to provide shareholders with all of the information they require in order to make a decision on the proposed resolutions. Shareholders are strongly urged to read the Explanatory Memorandum and associate documentation carefully and seek independent advice regarding your individual circumstances.

Independent Expert

To enable the shareholders make a decision on Resolution 3 and to comply with the provisions of the Corporations Act and ASX Listing Rules, we have appointed Lonergan Edwards & Associated Limited as an Independent Expert. Their report is included in the Explanatory Memorandum.

The Meeting

The meeting will be held at Level 42, 259 George Street, Sydney, NSW on Monday 9 August 2004 at 2.00pm. If you are unable to attend the meeting you are strongly urged to complete the proxy form and return it as soon as possible and in any event not later than 48 hours before the time of the meeting (see proxy form for further details).

Yours sincerely

Vanda Gould Chairman

CVC LIMITED

ACN 002 700 361

NOTICE OF A GENERAL MEETING and EXPLANATORY MEMORANDUM

including an Independent Expert's Report

in relation to a General Meeting to be held at 2.00pm Sydney Time on $9^th$ August 2004 at Level 42 AAP Centre 259 George Street, Sydney

This is an important document

If you are in any doubt about how to deal with this document, please consult your legal, financial or other professional advisor

Level 42 AAP Centre 259 George Street SYDNEY NEW SOUTH WALES 2000 Telephone: (02) 9087 8000 Facsimile: (02) 9087 8088

THIS IS AN IMPORTANT DOCUMENT - PLEASE READ IT CAREFULLY

IMPORTANT DATES

Closing date for determining eligibility to vote at the General Meeting	7 ^th August 2004
Proxies for the General Meeting to be received by CVC by no later than 2.00pm Sydney time	7 ^th August 2004
General Meeting (for all Shareholders)	9 ^th August 2004

		NOTICE OF A GENERAL MEETING
		NOTES TO NOTICE OF MEETING
		EXPLANATORY MEMORANDUM
		OVERVIEW OF THE RESOLUTIONS
		RESOLUTIONS
1.		RESOLUTION 1 - PAYMENT OF OUTSTANDING INCENTIVE FEES 15
	1.1. 1.2. 1.3. 1.4.	Background Discussion of the proposed settlement of accrued but unpaid incentive fees and effects of approval Shareholder Approval Requirements Statutory information
2.		RESOLUTION 2 - THE NOVATION OF THE MANAGEMENT AGREEMENTS OF THE COMPANY AND LASEREX LIMITED
	2.1. 2.2. 2.3. 2.4. 2.5. 2.6.	Overview of the Proposal Regulatory requirements Implications of Providing Consent for Novation Implications if Resolution not Approved 21. Statutory information Voting Restrictions
3.		RESOLUTION 3 - THE ACQUISITION OF CVC MANAGERS PTY LTD23
	3.1. 3.2. 3.3.	Description of the Proposal 3.1.1. Overview 3.1.2. Reasons for the Restructure 3.1.3. Details of the Transaction Acquisition Price and Consideration 3.1.4. Escrow Period 3.1.5. Warranty to not cause or support the wind up of the Company26 3.1.6. 26 3.1.7. Details of Agreements 3.1.8. 3.1.9. Steps and Conditions Precedent of the Proposal 3.1.10. Related Party Interests 3.1.11. Shareholder Approval Requirements 32.1.12. Voting Exclusion 3.1.13. Independent Expert's Report - Is the Proposal Fair and Reasonable32 3.1.14. What if the Proposal is not implemented? Benefits of the Proposal Potential Disadvantages, Opportunity Costs And Benefits Forgone Of The Proposal34
	3.4.	Overview of the Investment Management Business 3.4.1. Background

			3.4.2. Funds Under Management & Fee Arrangements
		3.4.3.	Investment Management Assets
		3.4.4.	Directors
		3.4.5.	Future Strategy of CVC Managers
		3.4.6.	Financial Information
	3.5.		Taxation Consequences
	3.6.		45
			3.6.1. Trading of the Company's Shares
			3.6.2. Adoption of International Financial Reporting Standards
4.			RESOLUTIONS 4, 5 AND 6 - EXECUTIVE AND NON-EXECUTIVE LONG TERM INCENTIVE PLAN
	4.1.		Adoption of the CVC Limited Executive and Non Executive Long Term Incentive Plan Resolution 4)
	4.2.		Issue and allotment of up to 5,000,000 shares under the Plan (Resolution 5)48
	4.3.		Acquisition of Shares under the Executive Long Term Incentive by Alexander Beard (Resolution 6)
5.			RESOLUTION 7 - APPROVAL OF INCREASE IN NON-EXECUTIVE DIRECTORS REMUNERATION

6.			RESOLUTION 8 - SHARE BUYBACK PROGRAM
7.			RESOLUTION 9 - SALE OF SHARES IN PRO PAC GROUP LIMITED TO CVC PRIVATE EQUITY LIMITED
	7.1.
			Description of the Transaction 7.1.1. Overview of the Transaction
			7.1.2. Reasons for the Transaction
		7.1.3	Details of the Transaction
			7.1.4. Financial Effects of the Transaction
	7.2.		Implications if the Resolution is Approved
	7.3.		Implications if Resolution not Approved
	7.4.		Regulatory Requirements
	7.5.		Statutory information
8.			GLOSSARY
			INDEPENDENT EXPERT'S REPORT

NOTICE OF A GENERAL MEETING

Notice is given that a General Meeting of members of CVC Limited ("the Company"), will be held at Level 42, AAP Centre, 259 George Street, Sydney, New South Wales at 2,00pm Sydney time on 9th August 2004.

Please refer to the Explanatory Memorandum, the Independent Expert's Report and any other documents which accompany this notice of meeting for information on the resolutions proposed.

AGENDA

$\ddagger$ Approval for the payment of \$4,000,000 to CVC Investment Managers Pty Ltd in full and final settlement of incentive fees payable by CVC Limited up to and including 30 June 2004

To consider and if thought fit to pass the following resolution as an ordinary resolution for the purpose of Chapter 2E and Section 195(4) of the Corporations Act 2001 and for all other purposes:

"Subject to the passage of resolutions 2, 3 and 7, that the payment of \$4,000,000 by the Company to CVC Investment Managers Pty Ltd in full and final settlement of CVC Investment Managers Pty Ltd's entitlement to accrued but unpaid incentive fees due to it under the management agreement between the parties and otherwise on the terms and conditions set out in the explanatory memorandum accompanying this notice of meeting, be and is hereby approved."

Voting exclusion statement

The Company will disregard any votes cast on this resolution by CVC Investment Managers Pty Ltd and directors Gould. Leaver, Read and Beard and any of their associates. However, the Company will not disregard a vote if:

it is cast by a person as a proxy appointed in writing that specifies how the proxy is to a) vote on the proposed resolution; and
b) it is not cast on behalf of a related party to whom the resolution would permit a financial benefit to be given or an associate of such a related party.
$2.$ Consent to the Novation of the Management Agreements of Laserex Pty Limited (a wholly owned subsidiary of the Company) and the Company from CVC investment Managers Pty Ltd to CVC Managers Pty Ltd.

To consider and if thought fit, pass the following resolution as an ordinary resolution for the purpose of Chapter 2E and Section 195(4) of the Corporations Act 2001 and for all other purposes:

"Subject to the passage of resolutions 1, 3 and 7, that the consent of the Company to the novation to CVC Managers Pty Ltd of the current management agreement between the Company and CVC Investment Managers Pty Ltd and the current management agreement between Laserex Pty Limited and CVC Investment Managers Pty Ltd, on the terms and conditions summarised in the Explanatory Memorandum accompanying the Notice of Meeting. be and is hereby approved.

Voting exclusion statement

The Company will disregard any votes cast on this resolution by CVC Investment Managers Pty Ltd and directors Gould, Leaver, Read and Beard or any of their associates. However, the Company will not disregard a vote if:

a) it is cast by a person as a proxy appointed in writing that specifies how the proxy is to vote on the proposed resolution: and
it is not cast on behalf of a related party to whom the resolution would permit a financial b) benefit to be given or associate of such a related party.

Approval for the issue to CVC Investment Managers Pty Ltd of 7,391,304 shares in 3. consideration for the acquisition of its investment management business

To consider and if thought fit to pass the following resolution as an ordinary resolution for the purposes of Section 195(4) and Chapter 2E of the Corporations Act 2001. Listing Rules 10.1 and 10.11 and for all other purposes:

"That subject to the passage of resolutions 1, 2 and 7, approval is given for:

the acquisition by the Company from CVC Investment Managers Pty Ltd, of all of the a) shares of CVC Managers Pty Ltd; and
b) the issue and allotment by the Company to CVC Investment Managers Pty Ltd of 7,391,304 fully paid ordinary shares in the capital of the Company in consideration for the acquisition of all of the shares in CVC Managers Pty Ltd,

on the terms and conditions set out in the explanatory memorandum accompanying this notice of meeting."

Voting exclusion statement

The Company will disregard any votes cast on this resolution by CVC Investment Managers Pty Ltd, directors Gould, Leaver, Read and Beard and any of their associates.

$\overline{\mathbf{4}}$ . Approval for the adoption of the CVC Limited Executive and Non Executive Long Term Incentive Plan

To consider and if thought fit to pass the following resolution as an ordinary resolution:

"That the adoption of the CVC Limited Executive and Non Executive Long Term Incentive Plan is approved for all purposes including:

For the purposes of Section 259B of the Corporations Act 2001 to permit the Company a) taking security over shares in itself which are issued under the Plan; and
For the purposes of Section 260C(4) of the Corporations Act 2001 to permit the Company b) to provide financial assistance to persons for the purpose of acquiring shares in the Company without separate shareholder approval.

Approval for the issue and allotment of shares under the CVC Limited Executive and 5. non-Executive Long Term Incentive Plan

To consider and, if thought fit, pass the following resolution as an ordinary resolution for the purposes of exception 9(b) of Listing Rule 7.2 and for all other purposes:

"Subject to the members approving resolution 4, that approval be given for the proposed issue and allotment of up to 5,000,000 fully paid ordinary shares in the Company under the CVC Limited Executive and Non Executive Long Term Incentive Plan"

Voting exclusion statement

The Company will disregard any votes cast on this resolution by Alexander Beard (being the only director who is eligible to participate in the proposed Plan) and any of his associates. However, the Company need not disregard a vote if:

a) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form: or
it is cast by the person chairing the meeting as proxy for a person who is entitled to vote b) in accordance with a direction on the proxy form to vote as the proxy decides.

6. Issue and allotment of shares to Alexander Beard under the CVC Limited Executive and non-Executive Long Term Incentive Plan

To consider and, if thought fit, pass the following resolution as an ordinary resolution: for the purposes of Chapter 2E of the Corporations Act 2001, Listing Rule 10.14 and for all other purposes:

"That, subject to members approving Resolutions 4 and 5, approval is given for the issue and allotment to the managing director of the Company, Mr Alexander Beard, of 1,000,000 fully paid ordinary shares in the Company under the terms of the CVC Limited Executive and Non Executive Long Term Incentive Plan"

Voting exclusion statement

The Company will disregard any votes cast on this resolution by any director of the Company (except one who is ineligible to participate in any employee incentive scheme in relation to CVC.) CVC Investment Managers Ptv Ltd and any of their associates. However, the Company will not disregard a vote if:

it is cast by a person as a proxy appointed in writing that specifies how the proxy is to a) vote on the proposed resolution; and
b) it is not cast on behalf of a related party to whom the resolution would permit a financial benefit to be given or an associate of such a related party.

7. Approval of Increases in Non-Executive Director's Remuneration

To consider and, if thought fit, pass the following resolution as an ordinary resolution: for the purposes of Chapter 2E of the Corporations Act 2001. Listing Rule 10.17 and for all other purposes:

"That approval be given for:

an increase in the remuneration of non-executive directors to an aggregate amount of a) \$110,000 per annum to be split as the Directors see fit; and
subject to the acquisition by the Company of CVC Managers Pty Limited, a further b) increase in the remuneration of non-executive directors to an aggregate amount of \$550,000 per annum to be split as the Directors see fit but subject to an aggregate limit of \$440,000 for Messrs Gould and Leaver, and their related entities, and \$110,000 for all other non-executive directors."

Voting exclusion statement

The Company will disregard any votes cast on this resolution by any director of CVC and any of their associates. However, the Company need not disregard a vote if:

it is cast by a person as proxy for a person who is entitled to vote, in accordance with the a) directions on the proxy form: or
b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote in accordance with a direction on the proxy form to vote as the proxy decides.

8. Approval for an On-Market Share Buyback Program

To consider and if thought fit to pass the following resolution as an ordinary resolution:

"That approval be given for a proposed on-market Share Buyback Program for up to 20 million ordinary shares of the Company on the terms and conditions set out in the explanatory memorandum accompanying this notice of meeting"

9. Sale of Pro Pac Group Limited shares to CVC Private Equity Limited (formerly CVC Biz Vision Ltd)

To consider and if thought fit to pass the following resolution as an ordinary resolution for the purposes of Chapter 2E and Section 195(4) of the Corporations Act 2001 and for all other purposes:

"That approval be given for the proposed sale by the Company of 1,131,544 shares, being 16.3% of the issued capital, in Pro-Pac Group Limited to CVC Private Equity Limited on the terms and conditions set out in the explanatory memorandum accompanying this notice of meeting."

Voting exclusion statement

The Company will disregard any votes cast on this resolution by CVC Private Equity Limited, CVC Investment Managers Pty Ltd and directors Gould, Leaver, Read and Beard and any of their associates. However, the Company will not disregard a vote if:

it is cast by a person as a proxy appointed in writing that specifies how the proxy is to a) vote on the proposed resolution; and
b) it is not cast on behalf of a related party to whom the resolution would permit a financial benefit to be given or an associate of such a related party.

By order of the Board

Dated 8 July 2004

. . . . . . . . . . . . . . . . . . . Michael Bower Company Secretary

NOTES TO NOTICE OF MEETING

Documents

A proxy form accompanies these documents.

Persons entitled to vote

Under regulation 7.11.37 of the Corporations Regulations 2001, the Directors have determined that the shareholding of each member for the purposes of ascertaining their voting entitlements at the General Meeting will be as it appears in the share register at 2.00pm Sydney time on 7th August 2004. There are voting restrictions on shareholders and these are explained further in the accompanying Explanatory Memorandum.

How to vote

If you are eligible, you may vote by attending the meeting in person or by proxy or attorney. A member who is a body corporate may appoint a representative to attend and vote on its behalf.

Voting in person

To vote in person, attend the meeting at the time and place set out in this notice of meeting.

Voting by proxy

To vote by proxy, please complete, sign and return the enclosed proxy form in accordance with the following instructions. If you require an additional proxy form, the Company will supply it on request.

Proxies

A member who is entitled to vote at the meeting, may appoint:

one proxy if the member is only entitled to one vote; or
one or two proxies if the member is entitled to more than one vote.

Where the member appoints 2 proxies, the appointment may specify the proportion or number of votes that each proxy may exercise. If the appointment does not specify a proportion or number, each proxy may exercise one-half of the votes, in which case any fraction of votes will be disregarded.

A proxy need not be a member of the Company.

The proxy form must be signed by the member or the member's attorney. Proxies given by a corporation must be executed in accordance with the Corporations Act and the constitution of that corporation.

The proxy form and the power of attorney or other authority (if any) under which it is signed or a certified copy, must be received by the Company at least 48 hours before the time for holding of the meeting or any adjourned meeting (or such lesser period as the Directors may permit) at:

The Company's registered office at Level 42 AAP Centre, 259 George Street, Sydney, New South Wales 2000; or the following fax number at the Company's registered office: (02) 9087 8088.

Voting by attorney

A member may appoint an attorney to act on the member's behalf at the meeting. The power of attorney or such other evidence of the attorney's appointment and authority to the satisfaction of the Directors must be received by the Company at least 48 hours before the time for holding of the meeting or any adiourned meeting.

Restrictions on Voting

Each of the Resolutions has different voting restrictions. The voting restrictions are contained in the accompanying Explanatory Memorandum.

Enquiries

For further information, please contact Michael Bower at the Company on (02) 9087 8000.

EXPLANATORY MEMORANDUM

This Explanatory Memorandum is dated 8 July 2004 and has been prepared for the information of members of the Company in connection with the business to be considered at a General Meeting of members to be held at Level 42, AAP Centre, 259 George Street, Sydney, New South Wales at 2.00pm (Sydney time) on 9th August 2004.

Specifically, the Explanatory Memorandum provides information regarding the resolutions to be voted on by shareholders. Each Director has approved this Explanatory Memorandum and the despatch of this document to Shareholders.

This Explanatory Memorandum should be read in conjunction with the accompanying notice of meeting, the Independent Expert's Report and all other documents enclosed with this document.

Words and expressions used in this Explanatory Memorandum have the meanings defined in the Glossary contained in this Explanatory Memorandum.

OVERVIEW OF THE RESOLUTIONS

The contents of this Explanatory Memorandum are governed by the constitution of the Company, Corporations legislation, ASX Listing Rules and other requirements. As a result of these requirements, the complicated nature of the matters involved and the related party nature of some of the resolutions this Explanatory Memorandum is a sizeable document.

It is important to understand that the rules governing the content of this Explanatory Memorandum are designed to protect the interests of shareholders by ensuring that shareholders receive all reasonable information that is known to the Company which is material to a decision on how to vote on the resolutions. Accordinaly shareholders should read in full the relevant sections of the Explanatory Memorandum before voting on each resolution.

However, to assist shareholders in reading the detailed sections of this Explanatory Memorandum, the Company provides this general overview of the proposed resolutions. In particular it is intended to explain in general terms what the Company is trying to achieve with each of the resolutions, to give Shareholders an understanding how the resolutions inter-relate and to provide a framework to assist Shareholders when reading the detailed sections.

Restructure of CVC (Resolutions 1, 2 and 3)

The Company is currently managed by a separate company. CVC Investment Managers Pty Limited ("CVCIM"), in accordance with a management agreement for which the Company is required to pay management and incentive/ performance fees. It is proposed that the Company will restructure its activities by acquiring the investment management business of CVCIM. This is to achieve:

a saving in the future costs of the Company by effectively buying out its future management and performance fee obligations;
the bringing 'in-house' of the expertise and the intellectual property of the management team; $\ddot{\bullet}$
the Company having a new ongoing regular revenue base from fee income for managing other managed funds; and
the Company becoming potentially more attractive to institutional and other investors by removing the external management structure and significant related party concerns.

The approval of each of Resolutions 1, 2 and 3, and of resolution 7 considered below, is necessary to achieve the acquisition and restructure.

With Resolution 1 the Company is seeking shareholder approval to a payment of \$4 million to CVCIM as a settlement of Incentive/ Performance fees for the period to 30 June 2004. CVCIM requires this amount to be paid as a condition of the agreement to sell the investment management business to the Company. Even if approved, Resolution 1 will not be passed unless Resolutions 2, 3 and 7 are also passed.

With Resolution 2 the Company is seeking shareholder approval for the novation of the Company's and a subsidiary's, Laserex Pty Limited ("Laserex"), management agreements from CVCIM to CVC Managers Pty Limited ("CVC Managers"). To remove any cross ownership concerns (CVCIM is a major shareholder of the Company) and any exposure to the past 'history' of CVCIM, the acquisition of the investment management business has been structured to be effected through a new 'clean skin' company, CVC Managers. This requires the agreement of each of the managed funds, including the Company and Laserex, to the novation of their management agreements from CVCIM to CVC Managers. Even if approved. Resolution 2 will not be passed unless Resolutions 1, 3 and 7 are also passed.

With Resolution 3 the Company is seeking shareholder approval for the actual acquisition of CVC Managers from CVCIM. The acquisition involves the Company issuing 7,391,304 shares to CVCIM for the purchase of CVC Managers based on a valuation of \$8.5 million. Even if approved. Resolution 3 will not be passed unless Resolutions 1, 2 and 7, considered below, are also passed.

CVC Limited Executive and Non-Executive Long Term Incentive Plan (Resolutions 4, 5 and 6)

The Company proposes to introduce a long term incentive plan to align the interests of the management team of the Company with those of shareholders in the Company and to assist in the retention of key members of the management team, particularly the Managing Director. Mr Alexander Beard, and in light of the proposed restructure considered above. The Plan allows the Company to issue a maximum of 5 million shares, and give financial assistance to acquire the shares, to invited participants but will require the participants to forfeit the shares if they do not achieve performance hurdles and tenures of service set by the Board.

With Resolution 4 the Company is seeking shareholder approval for the plan itself and, for the purposes of the Corporations Act, for the Company taking security on the shares to be issued and providing financial assistance to participants for the acquisition of the shares.

With Resolution 5 the Company is seeking shareholder approval of the shares issued for the plan for the purposes of ASX listing rule 7.1. ASX listing rule 7.1 governs the amount of new shares the Company can issue each year without shareholder approval. By approving Resolution 5 the Company retains the maximum permitted flexibility to issue new shares without the need for further shareholder approval.

With Resolution 6 the Company is seeking shareholder approval for the issue of shares under the plan to Mr Alexander Beard, the Managing Director of the Company. ASX listing rule 10.14 requires shareholders to approve the issue of new shares to Directors of the Company.

Non-Executive Director Remuneration (Resolution 7)

The Company proposes to increase the aggregate amount it can pay to non-executive Directors of the Company to \$110,000 per annum. The Company believes that to assist with the movement of the Company towards meeting the best practice recommendations for corporate governance it will need to recruit additional independent non-executive directors. The Company currently pays the maximum amount approved to non-executive directors. Resolution 7 seeks shareholder approval for an increase in the aggregate approved remuneration to allow for the appointment of new non-executive director(s) and small increases in remuneration paid to current non-executive Directors.

If the Company restructure, discussed for resolutions 1, 2 and 3 above, is effected, entities related to Mr Vanda Gould and Mr John Leaver, two non-executive Directors of the Company, will be receiving fees from CVC Managers, which at that point will become a subsidiary of the Company. As these fees could be considered to be non-executive directors remuneration of the Company, Resolution 7 also seeks shareholder approval for an increase in aggregate non-executive directors remuneration to \$550,000 to ensure the payments would not be in breach of the constitution of the Company. Resolution 7 does not increase the amounts paid to Messrs Gould and Leaver for their involvement with the Company and must be passed for the restructure to occur.

Share Buyback (Resolution 8)

Sale of Shares in Pro-Pac Group Limited ("PPG") to CVC Private Equity Limited ("CVC Private Equity") (a related party) (Resolution 9)

Resolution 9 is a stand-alone resolution to allow the Company to sell part of its investment in PPG to CVC Private Equity to realise a profit on the sale of part of its investment and to broaden the capital base of PPG.

RESOLUTIONS

$\mathbf{1}$ . RESOLUTION 1-PAYMENT OF OUTSTANDING INCENTIVE FEES

1.1. Background

CVCIM has been operating as the Company's investment manager under a management agreement dated 30 December 1986. Shareholders will be aware that the management agreement of the Company with CVCIM provides for:

a regular management fee, calculated at 4% of net assets of the Company, and
an "incentive" fee to be calculated effectively at 20% of the increase in net assets, adjusted for capital changes and dividends, of the Company in each given year.

This management fee structure was based on the standard American Venture Capital fee model at the time the management agreement was entered into and was disclosed in the initial prospectus of the Company issued on 1 March 1985.

Notwithstanding its entitlement to receive the incentive fee. CVCIM has never charged the fee to the Company. This was explained in note 29 of the Company's 2003 financial report as follows:

"...CVCIM, is entitled to an incentive fee calculated at 20% of the increase in net asset value of CVC during each financial year. This fee has never been paid or provided for in the financial report of CVC. CVCIM has indicated that there is no present intention to exercise the right to the incentive fee retrospectively. Should the fee be exercised retrospectively, the accumulated liability to 30 June 2003 not recognised in this financial report is estimated to be \$3.424.602 $(2002:3,316,000).$ "

It has been explained to shareholders at previous general meetings of the Company that CVCIM has not previously charged the incentive fee to the Company because the performance of the Company, whilst acceptable and tax effective, and much better than for almost all other companies set up under the MIC scheme, was not considered to be beyond what CVCIM itself expected. For example a shareholder who subscribed for shares under the Company's 1985 prospectus would have received an approximately 6.5% per annum pre-tax return on equity based on the closing share price at 30 June 1999 or 9% to 30 June 2003.

However, since the start of the current financial year the Company has started to realise some of the significant profits built up in the Company and the share price of the Company has started to reflect the underlying value of the Company built up by CVCIM. As such the Company is expected to declare excellent profits for the current financial year, and based on the share price of \$1.05 per share at 28 June 2004, shareholders have seen an approximate return of 24% per annum since 1999 or 52% for the 12 months since 30 June 2003.

In these circumstances CVCIM considers that it is appropriate to receive a share of the value that it has created for shareholders as envisaged by the original incentive fee arrangement. CVCIM has therefore indicated that it now intends to charge the incentive fee to the Company. in accordance with the management agreement, in respect of the year ended 30 June 2004 and will charge similar fees in future as considered appropriate. Based on the unaudited management accounts of the Company for the 11 months to 31 May 2004, this would result in an incentive fee of approximately \$2.8m for the 30 June 2004 financial year.

Except where CVC shareholders approve the payment of \$4,000,000 to CVCIM in full and final satisfaction of all outstanding incentive fees (as described below), CVCIM has also indicated that its current intention is not to charge the Company for any unpaid incentive fees retrospectively for financial years ending 30 June 2003 or earlier. However, CVCIM reserves the right to do so as a mechanism to share in future wealth creation of the Company and to recognise gains generated to date but not yet realised.

1.2. Discussion of the proposed settlement of accrued but unpaid incentive fees and effects of approval

As part of a maior corporate restructure, the Company has announced its intention to acquire CVCIM's investment management business - see the notes to Resolution 3.

In anticipation of, and conditional on, the acquisition, CVCIM has advised that it will accept \$4m in full and final settlement of CVCIM's total entitlement to incentive fees payable by the Company under the management agreement.

There are two principal advantages in the Company making the proposed payment:

First, the Company believes that the proposed \$4,000,000 payment is significantly less than the actual amount that may become payable by the Company under the management agreement and that the Company will achieve savings in making the payment. The actual amount of incentive fees payable depends on increases in the values of the Company's investments and it is obviously difficult to estimate the extent to which the investments of the Company may increase in the future and trigger future incentive fees. However, there are already increases in the market value of the Company's investments not currently realised which could be considered to give rise potentially to a real future exposure to incentive payments by the For example, the Company is currently holding investments in ASX listed Company. Companies Sunland Group Limited and Greens Foods Limited at their original costs. Based on current market values there are unrealised gains in relation to these investments of approximately \$25 million before taxation which in themselves could generate a significant future incentive fee payable to CVCIM in excess of the proposed \$4,000,000 payment.

Second, the payment will enable the Company to achieve the announced corporate restructure. which the Directors believe is in the best long term interests of CVC shareholders.

The proposed settlement of incentive fees is conditional on the acquisition of CVCIM's investment management business by the Company on or before 31 December 2004. That proposed acquisition is to be considered as Resolution 3 for this meeting, and is subject to a number of conditions precedent, explained in Section 3 of this Explanatory Memorandum. If the acquisition does not occur by 31 December 2004, any approval of this resolution will lapse and have no effect and the liability of the Company for incentive fees, past, present and future, payable to CVCIM will be unchanged and the Company will not receive the benefits of the saving of future incentive fees.

CVCIM is a related party of the Company and four of the five directors of the Company consider themselves to be excluded from voting on the proposal due to their having material personal interests in the proposed resolution. The remaining independent Director of CVC is unable to form a quorum to resolve to make the payment and therefore the Board has decided to put the resolution to shareholders for approval.

1.3. Shareholder Approval Requirements

Disqualifying Material Personal Interests - Section 195 of the Corporations Act

Section 195 of the Corporations Act 2001 provides that directors of a public company who have a material personal interest in the matter being considered at a director's meeting must not:

a) Be present while the matter is being considered at the meeting; or
b) Vote on the matter.

Section 195(4) of the Act provides that if there are not enough disinterested directors to form a quorum for a directors' meeting to consider a matter, 1 or more of the directors (including the interested directors) may call a general meeting and the general meeting may pass a resolution to deal with the matter.

Each of the directors of the Company except Mr John Read and Mr John Riedl are current directors of CVCIM. Mr John Read was a director of CVCIM until September 2003. Accordingly, the directors believe it is appropriate to seek CVC shareholder approval for Resolution 1.

Approval for Related Party Transactions - Corporations Act 2001 Requirements

Section 208 of the Corporations Act 2001 (Act) provides that a public company must not give a financial benefit to a related party except under certain circumstances including circumstances in which shareholders approve the giving of the financial benefit. CVCIM and the Company are related parties. Resolution 1 involves the Company entering an agreement to settle a liability and comes within the definition of a "financial benefit" in Chapter 2E of the Corporations Act.

Shareholder approval is not required if the financial benefit was given on terms that:

would be reasonable in the circumstances if the public company or entity and the related a) party were dealing at arms length; or
b) are less favourable to the related party than the terms referred to in paragraph a).

The transaction involves the settlement of contractual liability to CVCIM by the payment of an amount that is lower than the maximum contractual amount. As such, it could be seen to fall within the exception listed above and therefore not require shareholder approval under Chapter 2E of the Act. Notwithstanding this, the directors believe it is appropriate to seek the approval of shareholders for the payment of the settlement sum. Accordingly, shareholder approval is sought for the settlement of the outstanding debt and the giving of a financial benefit to a related party.

Under Section 224 of the Corporations Act 2001, a vote on a proposed resolution under Chapter 2E of the Act must not be cast by or on behalf of:

A related party of the Company to whom the resolution would permit a financial benefit to a) be given: or
b) An associate of such a related party.

Accordingly, the votes of CVCIM and directors Gould, Leaver, Read and Beard and each of their associates on the proposed resolution will be disregarded.

1.4. Statutory information

In accordance with section 219 of the Act, the Directors provide the following information:

The nature of the proposed financial benefits to be given are:
the payment of \$4,000,000, as settlement of outstanding incentive fees payable by the Company to CVCIM, on the terms and conditions described in this document; and
the financial benefits which will flow from that settlement.
The related parties to whom the proposed resolution would permit financial benefits to be given and nature of the proposed financial benefits to be given are:
CVCIM which will receive a financial benefit of \$4,000,000 resulting from the proposed payment of outstanding incentive fees from the Company, as a settlement of the Company's contractual liability to CVCIM, and the opportunity to sell its investment management business to the Company on the terms and conditions described in resolution 3; and
Messrs Gould, Leaver, Beard and Read who are or were directors of CVCIM.
Messrs Gould, Leaver, Read and Beard make no recommendation in respect of the proposed resolution because each of them have or could be regarded as having a material personal interest in the outcome of the resolution:
Mr Riedl makes no recommendation in respect of the proposed resolution because he believes that shareholders should and are able to form their own view:
The implications of the Company consenting to the settlement are set out earlier in this section:
Other than as explained in this Explanatory Memorandum, there are no other opportunity costs or benefits forgone by the Company by entering the settlement agreement;
There are no materially adverse taxation consequences for shareholders in relation to Resolution 1, the Company will be able to claim a deduction for the amount paid in settlement of the outstanding incentive fees in the ordinary course of business; and
There is no other information that is known to the Company or to any of its directors that is reasonably required by members in order to decide whether or not it is in the Company's interests to pass the proposed resolution that is not contained in this document.

$2₁$ RESOLUTION 2-THE NOVATION OF THE MANAGEMENT AGREEMENTS OF THE COMPANY AND LASEREX LIMITED

2.1. Overview of the Proposal

CVCIM has been operating as the Company's investment manager in accordance with a management agreement dated 30 December 1986. As the Company's investment manager it has the responsibility of selecting and managing the investments made by the Company and providing secretarial, accounting and administrative services. CVCIM also acts as the manager for Laserex, a wholly owned subsidiary of the Company, CVCIM also holds similar agreements with other investment companies.

CVCIM is currently pursuing a corporate restructure where its investment management business, comprised of its management agreements, intellectual property, management team and other associated management assets ("Investment Management Business"), is to be separated from its non-Investment Management Assets. The separation is to be implemented by transferring the Investment Management Business into a wholly owned subsidiary, CVC Managers under a business sale agreement.

To effect the proposed restructure of its affairs, CVCIM has requested that the Company consent to the novation of the Management Agreement to CVC Managers.

It is proposed that the Company give its consent to the novation by entering into a deed of novation with CVCIM, the present manager, and CVC Managers, the proposed new manager.

It will be a condition precedent to the Company's consent to the novation taking effect that within 6 months of the date of the shareholder approval:

other companies managed by CVCIM have novated their management agreements to CVC Managers: and
CVC Managers is granted an appropriate Australian Financial Services ("AFS") Licence by the ASIC. New AFS Licences are not granted unless the ASIC is satisfied that the applicant has the financial substance, technical capacity and experience and internal controls in place, which meet the ASIC's standards.

CVC Limited has announced a proposal to acquire all of the shares in CVC Managers after the transfer to it of CVCIM's Investment Management Business (of which the management agreements with the Company and Laserex form part). This proposal is to be considered as Resolution 3 at this meeting and is discussed in detail in Section 3 of this document. The approval of this resolution 2 is a condition precedent of Resolution 3.

The Company's consent to the novation of its management agreement to CVC Managers will permit the proposed acquisition to proceed. This could be regarded as the Company conferring indirectly a financial benefit on CVCIM (which is a related party of the Company).

2.2. Regulatory requirements

Approval for Directors Material Personal Interest - Section 195 of the Corporations Act

Section 195 of the Corporations Act 2001 provides that directors who have a material personal interest in the matter being considered at a director's meeting must not:

a) Be present while the matter is being considered at the meeting; or
Vote on the matter. b)

Each of the directors of CVC except Mr John Read and Mr John Riedl are current directors of CVCIM. Mr John Read was a director of CVCIM up until September 2003. Accordingly, the directors believe it is appropriate to seek CVC shareholder approval for Resolution 2.

Approval for Related Party Transactions - Chapter 2E of the Corporations Act 2001 Requirements

Accordingly, shareholder approval is sought for the giving of the Company's consent to the proposed novation and the indirect giving of a financial benefit to related parties.

Similarly, Laserex (a subsidiary of the Company) will also be required to provide consent. The Company's giving of consent to the novation of Laserex's management agreement may also confer a financial benefit given to CVCIM by the Company. As such, approval of the Company's shareholders is sought to consent to the novation of Laserex's management agreement.

Under Section 224 of the Corporations Act 2001, a vote on a proposed resolution under Part 2E of the Act must not be cast by or on behalf of:

a) A related party of the Company's to whom the resolution would permit a financial benefit to be given; or
An associate of such a related party. b)

Accordingly, the votes of related parties and associates of CVCIM, CVC Managers and the Directors on the proposed resolution will be disregarded.

2.3. Implications of Providing Consent for Novation

The principal implication of the proposal is that the rights and responsibilities of the management agreements will be transferred from CVCIM to its subsidiary CVC Managers. From the effective date of the novation agreement. CVCIM will be discharged from future obligations under the agreements and CVC Managers will become responsible from that date.

In all other material respects, however, the relationship between the Company and Laserex and the new investment manager, and the level of service provided by the new investment manager. will remain substantially the same. For example, the new manager, whilst a different corporate entity, will retain effectively the same ownership, directors, management team, intellectual property, plant and equipment and other assets required to manage the affairs and business of the Company and the terms and conditions of the management agreement will be unchanged.

The novations will satisfy one of the conditions precedent to facilitate the proposed restructure of the Company as explained in section 3 of this Explanatory Memorandum.

2.4. Implications if Resolution not Approved

If the shareholders of the Company do not approve the resolution:

there will be no change to the current arrangements. CVCIM will continue to manage the Company under the existing Management Agreement; and
the proposed restructure of the Company as explained in section 3 of this Explanatory Memorandum will not occur.

2.5. Statutory information

In accordance with section 219 of the Act, the Directors provide the following information:

The nature of the proposed financial benefits to be given are:
the consents by the Company to the novation of the Management Agreements with CVCIM to CVC Managers on the terms and conditions described in this document: and
the financial benefits which will flow from that consent:
The related parties to whom the proposed resolution would permit the financial benefit to be given are:
CVC Managers (a wholly owned subsidiary of CVCIM) which will become the Company's and Laserex's new investment manager and have the benefit of the novated Management Agreements:
CVCIM which will receive a financial benefit by being able to implement its proposed restructure and potentially to sell its wholly owned subsidiary CVC Managers to the Company; and
The directors of the Company, Messrs Gould, Leaver and Beard who are or were directors of CVCIM and CVC Managers.
Messrs Gould. Leaver. Read and Beard make no recommendation in respect of the proposed resolution because each of them have or could be regarded as having a material personal interest in the outcome of the resolution;
Mr Riedl makes no recommendation in respect of the proposed resolution because he believes that shareholders should and are able to form their own view;
The implications of the Company consenting to the novations are set out in paragraph 2.3 above:
There are no opportunity costs or benefits forgone by the Company by giving its consent except that CVCIM will be released from its future obligations under the Management Agreements;
There will be no taxation consequences for either the Company or its shareholders as a $\bullet$ result of the Company giving its consents; and
There is no other information that is known to the Company or to any of its directors that is reasonably required by members in order to decide whether or not it is in the Company's interests to pass the proposed resolution that is not contained in this document.

2.6. Voting Restrictions

Under Section 224 of the Corporations Act 2001, a vote on a proposed resolution under Part 2E must not be cast by or on behalf of:

A related party of CVC to whom the resolution would permit a financial benefit to be $a)$ given; or
$b)$ An associate of such a related party.

Related parties and associates of CVCIM, CVC Managers and Messr's Gould, Leaver, Beard and Read will not be voting on the proposed resolution.

$3₁$ RESOLUTION 3-THE ACQUISITION OF CVC MANAGERS PTY LTD

3.1. Description of the Proposal

3.1.1. Overview

As foreshadowed in the Company's 2003 Annual report, the Company has evaluated the opportunity to simplify and reduce the costs of its operational structure, give shareholders the ability to participate in the planned future growth of funds under management, and work towards transforming the Company into a company with wider shareholder appeal.

As a result of this evaluation, the Company and CVCIM have determined a proposal ("The Proposal") for the acquisition of the investment management business of CVCIM. This would provide the Company with the opportunity to diversify its activities, so as to become a combined investment and investment management business, and allow it to generate a new ongoing revenue stream and significantly reduce its own management costs. The Proposal forms part of an overall restructure of the Company developed by the directors following consultation with an independent industry analyst.

The directors of CVCIM are Messrs Vanda Gould, John Leaver and Alexander Beard. Mr Read was also a director of CVCIM until September 2003. Messrs Gould, Leaver, Beard and Read are all also directors of the Company. As a result of these related party considerations, the Proposal is being put to shareholders for approval.

CVCIM holds investment management agreements with four other companies/ funds in addition to the Company. Prior to the proposed sale. CVCIM intends to separate the investment management business from its other assets and is seeking the Company's consent to the transfer of the management agreements of the Company and Laserex as described in Section 2. The investment management business is then to be transferred into a wholly owned subsidiary of CVCIM, CVC Managers Pty Ltd (CVC Managers). The specific Proposal being put to shareholders in this resolution is the acquisition of 100% of the shares in CVC Managers, as holder of the management assets, by the Company and the issue of 7,391,304 fully paid ordinary shares in the Company to CVCIM as consideration for the acquisition.

3.1.2. Reasons for the Restructure

Reduce the Cost of the Management of the Company

CVCIM was established by the principals of the Company as its investment manager and has been responsible for providing the Company with investment management services since its formation. These services include the selection and management of investments and the provision of secretarial, accounting and administrative services.

Under the management agreement, CVCIM is entitled to a management fee representing 4% of the 'funds under management', effectively determined with reference to the audited net assets of the Company at the start of the financial year, as well as an incentive fee of 20% of any increment in net tangible assets of the Company over the course of any year. These fees represent a cost to the Company.

The acquisition of the management business of CVCIM by the Company will decrease the cost of management of the Company and remove the potential for the payment of future incentive fees which may accrue from realisation of the Company's investments.

Acquire the Value of CVCIM

CVCIM is a related party to the Company through its directors and shareholders. Despite the fact that the Company and CVCIM share a majority of common directors, the Company holds no ownership in CVC Investment Managers.

The structure of independently owned investment management for private equity funds is common within the industry. However, the directors believe that this structure does not allow the Company to maximise the value of its relationship with CVCIM. The diversity of the Company and its future strategy mean that independently owned management is no longer considered to be the most suitable structure for maximising shareholder value.

Acquisition of a Diversified Asset Manager

In addition to its management agreement with the Company, CVCIM holds management agreements with the following additional specialist funds:

CVC Private Equity:
The Eco Fund Limited ("Eco Fund"):
Laserex; and
CVCIM owns 50% of the shares in CVC REEF Investment Managers Pty Ltd ("CVC REEF IM"). CVC REEF IM holds a management agreement with the fund, CVC REEF Limited ("CVC REEF").

Each of the above agreements entitles CVCIM to management fees. For the 2004 financial year, it is expected that there will be gross management fee income of \$0.7 million from the management of these additional specialist funds. In addition CVCIM is entitled to performance fees that accrue as a result of performance of individual funds above their required hurdle rate and from other management fees and directors fees. The Directors believe that there are also good prospects of earning additional management fees from the establishment of new funds.

3.1.3. Details of the Transaction

Below is a diagram of the current structure of the management of the Company and the other managed Funds:

It is proposed that the Company acquire 100% of the shares of CVC Managers, the intended holder of the investment management business. The proposed assets of CVC Managers are described further in Section 3.4. In summary they comprise of the following assets (the "investment Management Assets") (for further details, see section 3.4.3):

Management Agreement with the Company; Â.
Management Agreement with Laserex;
Management Agreement with CVC Private Equity;
Management Agreement with Eco Fund;
687,875 options to acquire shares in The Eco Fund at an exercise price of \$1,00 per share exercisable at any time up to and including 5 March 2012;
50% of the shares in CVC REEF IM which holds a Management Agreement with CVC REEF:
18% of the shares in CVC REEF:
A retail AFS Licence to manage the Investment Assets:
All intellectual property in relation to CVCIM:
Employment or service contracts for the management team (including the key employees) involved in the business of CVCIM; and
All plant and equipment owned by CVCIM.

The consideration for the proposed acquisition of the shares in CVC Managers will be shares in the Company. The Proposal therefore involves the following transactions:

The acquisition by the Company of the shares in CVC Managers from CVCIM; and $\mathbf{1}$
$\overline{2}$ . The issue of 7,391,304 ordinary shares in the Company to CVCIM as consideration for the shares in CVC Managers, equivalent to a price of \$8.5 million assuming a valuation of \$1.15 per ordinary share.

The following is a diagram showing the proposed revised structure of the management of the Company and the other managed Funds following the proposed restructure:

3.1.4. Acquisition Price and Consideration

The agreed price of the shares of CVC Managers (as holder of the Investment Management Assets) is \$8.5 million ("the Purchase Price").

The consideration for the acquisition will be shares in the Company to be issued to CVCIM equivalent to the dollar value of the Purchase Price ("the Consideration"). The agreed price will be satisfied by the issue of 7,391,304 fully paid ordinary shares in the Company to CVCIM at an issue price of \$1.15 per share (the "Consideration Shares").

The directors have commissioned an Independent Expert's Report to determine whether the overall transaction and specifically the Purchase Price and Consideration are fair and reasonable to the shareholders of the Company not associated with CVCIM.

The Independent Expert has concluded that:

The terms of the proposed acquisition of the funds management business of CVCIM are fair and reasonable to the shareholders of the Company not associated with CVCIM. They have arrived at this conclusion principally because:

the value of \$8.5 million to be attributed to the funds management business of a) CVCIM pursuant to the transaction lies within their assessed valuation range of \$8.2 million to \$9.1 million
the shares in the Company to be issued as consideration for the acquisition of the b) business are to be priced at \$1.15 per share, which lies within their assessed valuation range of \$1.10 to \$1.17 per share in the Company prior to the proposed transaction.

A summary of the acquisition and consideration are as follows:

Valuation of the Investment Management Assets (Purchase Price)	\$8.5 million
Value per Ordinary Share in the Company	\$1.15
Shares issued for Purchase Price (Consideration)	7.391.304

If the Proposal is accepted, the Consideration Shares will be issued to CVCIM on the satisfaction of all the conditions precedent detailed in section 3.1.9 of this Explanatory Memorandum.

It should be noted that the final value assigned to Consideration Shares for accounting and financial reporting purposes, will be required to be determined in accordance with accounting standards in force at each reporting date and may vary from the agreed price of \$8.5 million. Any change in the value assigned will be an accounting effect only and will have no effect on the number of shares issued or any cash effect.

3.1.5. Escrow Period

The Consideration Shares will be subject to an Escrow Period of 2 years under which CVCIM. and its major shareholders, will not be permitted to dispose of any of the Consideration Shares for a minimum period of 2 years from the date of issue, except in the event of a takeover offer being made for the Company.

3.1.6. Warranty to not cause or support the wind up of the Company

The financial benefits of the proposed acquisition of CVC Managers by the Company are expected to accrue over a number of years following the acquisition. Following the issue of the Consideration Shares, CVCIM and its major shareholders will have significant shareholdings in the Company (see section 3.11.1). These shareholdings could be used to cause or support the wind up of the Company and thereby reduce the future financial benefits to the Company of the acquisition. As a condition of the acquisition of CVC Managers by the Company, CVCIM and its major shareholders will provide a warranty to not cause, or support, any proposal to wind up, or substantially wind up. the Company, or CVC Managers, for a period of five years commencing from the date of the acquisition of CVC Managers by the Company.

3.1.7. Capital Structure

Current capital structure of the Company

At the date of this explanatory memorandum, the Company has on issue 103,994,456 fully paid ordinary shares. The following table sets out the top 20 shareholders of the Company; and the effect on the current shareholdings if the Consideration Shares are issued to CVCIM:

Shareholder	Shares Hold Currently	$\%$ Held Currently	Shares Held Post Acq n	$%$ defor Post Accin
Penalton Pty Limited	15,575,978	14.98	15,575,978	13.98
CVCIM	14,313,307	13.76	21,704,611	19.49
Derin Brothers Properties Limited	6,427,115	6.18	6,427,115	5.77
Abasus Investments Limited	6,256,000	6.02	6,256,000	5.62
LJK Nominees Pty Limited	5,886,500	5.66	5,886,500	5.28
Southgate Investment Funds Limited	5,500,000	5.29	5,500,000	4.94
Bank of Commerce (Micronesia) Limited	4,790,411	4.61	4,790,411	4.30
Southsea (Aust.) Pty Limited	4,600,000	4.42	4,600,000	4.13
Huang Xiao Sheung Limited	4,000,000	3.85	4,000,000	3.59
Chemical Trustee Limited	3,294,994	3.17	3,294,994	2.96
Hua Wang Bank Berhard	3,128,338	3.01	3,128,338	2.81
ANZ Nominees	2,300,000	2.21	2,300,000	2.06
Kirman Traders Pty Ltd	1,500,000	1.44	1,500,000	1.35
Tifu Pty Limited	1,435,544	1.38	1,435,544	1.29
Pacific Securities Inc.	1,214,889	1.17	1,214,889	1.09
Indo-Suez Investments Limited	1,115,169	1.07	1,115,169	1.00
Mr Brian Sherman	1,073,860	1.03	1,073,860	0.96
Mr Nigel Stokes	1,006,363	0.97	1,006,363	0.90
LJK Investments Pty Limited	973,642	0.94	973,642	0.87
Wenola Pty Limited Pension Fund	700,000	0.67	700,000	0.63
All Other Shareholders	18,902,346	18.18	18,902,346	16.97
Total	103,994,456	100	111,385,760	100

3.1.8. Details of Agreements

The following agreements will be entered into to implement the Proposal:

Deeds of Novation of the Management Agreements Deeds of Novation of the Management Agreements between the Company, Laserex, CVC Private Equity and Eco Fund and CVCIM to CVC Managers must be executed. They are required to facilitate the transfer of the Investment Management Assets from CVCIM to CVC Managers.
Share Purchase Agreement A Share Purchase Agreement to transfer the shares held by CVCIM in CVC REEF Investment Managers Limited to CVC Managers must be executed. This is also required to facilitate the transfer of the Investment Management Assets from CVCIM to CVC Managers.
Business Sale Agreement A business sale agreement for the sale of the investment ۰ management business from CVCIM to CVC Managers.
Service Agreements Service agreements between the Company and Messrs Leaver and Gould will be executed. This is subject to the passage of Resolution 7 at this General Meeting. These agreements will commit each of Mr Leaver and Mr Gould to a minimum 2 years service period with the Company and/ or CVC Managers from the date of the acquisition of CVC Managers by the Company. This is a condition precedent to completion of the acquisition.
Share Purchase Agreement A Share Purchase Agreement to transfer 100% of the shares held in CVC Managers by CVCIM to the Company.

Execution of these agreements will be conditional on the approval of the Proposal.

Key Terms of the Share Purchase Agreement between the Company and CVCIM

The share purchase agreement formally documents the details of the acquisition, including the Purchase Price and key conditions precedent discussed in this Explanatory Memorandum. In addition it also includes formal settlement arrangements, administrative processes, warranties and indemnities and other general provisions. It will contain terms and conditions customarily found in agreements of this type having regard to the nature and size of the transaction. The key terms included in relation to these matters are as follows:

Termination of the agreement if completion has not occurred by 31 December 2004
Allow either party to defer completion or terminate the agreement, if the other party fails to meet all their obligations on the agreement date
Requires CVCIM to indemnify the Company and CVC Managers from and against all proceedings, actions, claims, demands, losses, liabilities, damages, costs and expenses arising as a result of any warranties being untrue, inaccurate or misleading, or as a result of a breach of the Agreement
Except for fraud or in relation to the tax warranties: caps the liability for any breach of warranty at \$8.5 million
Requires a minimum claim for breach of warranty of \$50,000
Except for fraud or in relation to the tax warranties: limits claims under the warranties to those notified within 18 months of completion of the acquisition.

The key warranties provided within the agreement are as follows:

CVC Managers being the owner of the Investment Management Assets (including the level of working capital set out in section 3.6);
Compliance by CVC Managers with statutory requirements and confirmation of the accuracy of key corporate information provided to the Company.
CVC Managers not having had an insolvency event
CVC Managers having title and unencumbered possession of assets and contracts
Compliance of CVC Managers with taxation requirements and the validity of specific tax circumstances as advised to the Company
Preparation of accounts giving a true and fair view of CVC Managers as at 30 June 2004
Confirmation of the lack of the occurrence of specific subsequent events in relation to CVC Managers following the date of the accounts
Confirmation of the contracts of employment for all employees of CVC Managers and that, save for agreed superannuation and leave entitlements, there are no outstanding liabilities to current or ex-employees for: retirement benefits, pensions, annuities, life assurance schemes, bonus, profit shares, other employee incentive plans or other arrangements
Confirmation that all contracts of employment and contracts for service with key consultants (except Messrs Gould and Leaver) can be terminated by CVC Managers by notice of 30 days or less
No current or pending litigation against CVC Managers

3.1.9. Steps and Conditions Precedent of the Proposal

The following is a summary of the approvals that must be obtained and conditions precedent satisfied before the Proposal can be given effect:

Approval by shareholders of the Company of the payment to CVCIM of outstanding a) incentive fees. This is contained under Resolution 1 of the attached notice of meeting and details are contained in Section 1 of this Explanatory Memorandum.
Approval by shareholders of the Company of the novation of the management b) agreements with CVCIM to CVC Managers of the Company and Laserex. This is contained under Resolution 2 of the attached notice of meeting and details are contained in Section 2 of this Explanatory Memorandum.
Approval by shareholders of the Company of the increase in non-executive directors c) remuneration. This is contained under Resolution 7 of the attached notice of meeting and details are contained in Section 5 of this Explanatory Memorandum.
d) Approval at a meeting of the shareholders of CVC Private Equity of the novation of its management agreement with CVCIM to CVC Managers. This meeting is scheduled to take place on 9th July 2004.
Approval at a meeting of the shareholders of Eco Fund of the novation of its management $e)$ agreement with CVCIM to CVC Managers. This meeting is scheduled to take place on 16th July 2004.
f) Approval by the Australian Commonwealth Government Industry Research and Development Board ("ACGIRDB") for the transfer of the shares in CVC REEF IM from CVCIM to CVC Managers.
Messrs Gould and Leaver entering into service agreements with CVC Managers on the g) terms and conditions described in this explanatory memorandum;
CVC Managers holding an appropriate AFS licence. CVC Managers has made its h) application for this Licence and at this stage the application is pending. CVC Managers expects that the application will be approved by August 2004.
i) A waiver of the requirement under listing rule 10.13.3 for the Consideration Shares to be issued within 1 month after the date of CVC shareholder approval so as to permit the issue of shares at any time up to the later of one month from the date of CVC shareholder approval and the earlier of 10 business days after the granting of an appropriate AFS Licence to CVC Managers and 31 December 2004. This waiver was granted by the ASX on 8 July 2004. A waiver was required because even if the Proposal is approved by shareholders, completion of the acquisition is conditional upon the granting of CVC Managers' AFS Licence from ASIC. Although the grant of the licence is expected by August 2004, any delay will mean that the issue of the Consideration Shares will not occur until after the permitted one month period from the date of the General Meeting.

In relation to the novations of management agreements and the approval of the ACGIRBD, it is important to note that the acquisition involves no change in the Investment Management Assets including the management, staff and resources, currently allocated to each of the relevant funds. As such, the Directors see no reason why there would be any objection to the change in the corporate entity of the manager or its shareholder.

If shareholders approve the Proposal and the other approvals outlined above are obtained and the conditions precedent satisfied, the agreements outlined in Section 3.1.8 will be executed. These will then provide for CVC Managers to become the investment manager for the Company, Laserex, CVC Private Equity, the Eco Fund and, through its arrangement with CVC REEF IM, CVC REEF.

3.1.10. Related Party Interests

The following related party relationships exist between the relevant parties involved in the fransaction:

CVCIM owns 100% of CVC Managers. $\bullet$
CVCIM owns 13.76% of the Company
Mr Beard, Mr Gould and Mr Leaver are directors of the Company, CVCIM, CVC Managers, CVC Private Equity and Eco Fund
Mr Read is a director of the Company, CVC Private Equity and Eco Fund and was a director of CVCIM until September 2003.
The Company owns 10.5% of CVC Private Equity and has underwritten a rights issue by CVC Private Equity which could lead to a maximum ownership of 32.9% following completion of the rights issue
CVCIM has small shareholdings in CVC Private Equity and Eco Fund.
CVCIM has options in the Eco Fund as explained in section 3.6

3.1.11. Shareholder Approval Requirements

The ASX Listing Rules and the Corporations Act 2001 set out shareholder approval requirements for certain transactions. The following sets out the shareholder approval requirements required under the Proposal.

ASX Listing Rule 10.1 - Approval of acquisition of CVC Managers by the Company

ASX Listing Rule 10.1 requires that if the Company acquires a substantial asset from a Related Party, it must first obtain the approval of the Company's shareholders. CVCIM is a related party of the Company. The ordinary shares of CVC Managers that the Company proposes to acquire constitute a substantial asset under the definition provided in Listing Rule 10.1 as the Purchase Price exceeds 5% of the Company's equity interests which as at 31 December 2003 amounted to \$86,826,092.

An approval for Resolution 3 is therefore sought under Listing Rule 10.1 by the Company for the acquisition of a substantial asset from CVCIM.

As required by Listing Rule 10.10.2, a report by independent expert Lonergan Edwards & Associates in relation to the Proposal accompanies this document which concludes that the Proposal is fair and reasonable to CVC shareholders not associated with CVCIM.

ASX Listing Rule 10.11 - Approval of Issue of the Company's Shares to Related Parties

ASX Listing Rule 10.11 requires that an entity must not, subject to limited exceptions, issue or agree to issue equity securities to a Related Party without shareholder approval.

Accordingly, shareholder approval is also sought for the purposes of Listing Rule 10.11 and the following information is provided as required under Listing Rule 10.13:

Name of allottee	CVC Investment Managers Pty Ltd
Number of shares to be issued	7,391,304 fully paid ordinary shares
Date by which CVC will issue the Consideration Shares	31 December 2004
Relationship of CVCIM to CVC	Related party
Issue price and terms of issue	\$1.15 per share to be issued subject to the terms and conditions set out in this document
Intended use of funds raised	The Consideration Shares will be issued in consideration for the acquisition of all of the shares in CVC Managers Pty Ltd (as the holder of CVCIM's Investment Management Assets)

Approval for Directors Material Personal Interest - Section 195 of the Corporations Act

Section 195 of the Corporations Act 2001 provides that directors who have a material personal interest in the matter being considered at a director's meeting, must not:

Be present while the matter is being considered at the meeting; or a)
b) Vote on the matter.

Section 195(4) of the Act provides that if there are not enough disinterested directors to form a quorum for a directors' meeting to consider a matter. 1 or more of the directors (including the interested directors) may call a general meeting and the general meeting may pass a resolution to deal with the matter.

Each of the directors of the Company except Mr John Read and Mr John Riedl are current directors of CVCIM. Mr John Read was a director of CVCIM up until September 2003. Accordingly, the directors believe it is appropriate to seek shareholder approval for Resolution 3.

Approval for Related Party Transactions - Chapter 2E of the Corporations Act 2001 Requirements

Section 208 of the Corporations Act 2001 ("the Act") provides that a public company must not give a financial benefit to a related party except under certain circumstances including circumstances in which shareholders approve the giving of the financial benefit. CVCIM and the Company are related parties. Resolution 3 involves the Company entering an agreement to acquire an asset from, and issue shares to, a related party which comes within the definition of a "financial benefit" in Part 2E of the Corporations Act.

Shareholder approval is not required if the financial benefit is given on terms that:

a) would be reasonable in the circumstances if the public company or entity and the related party were dealing at arms length; or
are less favourable to the related party than the terms referred to in paragraph a). b)

The transaction could be seen to fall within the exception listed above and therefore not require shareholder approval. In particular, the independent expert's report specifically states that the transaction is fair and reasonable to the shareholders of the Company not associated with CVCIM. Notwithstanding this, the directors believe it is appropriate to seek the approval of shareholders for Resolution 3. Accordingly, shareholder approval is sought for the acquisition of CVC Managers in accordance with Resolution 3 and the giving of a financial benefit to a related party.

In accordance with section 219 of the Act, the Directors provide the following information:

The related parties to whom the proposed resolution would permit the financial benefit to be given and the nature of the proposed financial benefits to be given are:
CVCIM which will receive the financial benefits described in relation to resolution 1 and be issued with 7,391,304 fully paid ordinary shares in CVC on the terms and conditions described in this document, including the agreement of the Company, if necessary, to the application of the scrip-for-scrip roll-over relief provisions for CGT to the transaction: and
Messrs Gould, Leaver and Beard to the extent that they hold interests in CVCIM.
Messrs Gould, Leaver, Read and Beard make no recommendation in respect of the $\ddot{\bullet}$ proposed resolution because each of them have or could be regarded as having a material personal interest in the outcome of the resolution;
Mr Riedl makes no recommendation in respect of the proposed resolution because he believes that shareholders should and are able to form their own view:
The implications of the Company consenting to the Proposal are set out in this Explanatory Memorandum:
The opportunity costs and benefits forgone by the Company by entering into the transaction are set out in Section 3.3 of this Explanatory Memorandum;
The taxation consequences for shareholders and the Company by entering into the transaction are set out in Section 3.5 of this Explanatory Memorandum; and
There is no other information that is known to the Company or to any of its directors that is reasonably required by members in order to decide whether or not it is in the Company's interests to pass the proposed resolution that is not contained in this document.

3.1.12. Voting Exclusion

The Company will disregard any votes cast on this resolution by CVCIM, directors Gould, Leaver, Read and Beard and any of their associates.

3.1.13. Independent Expert's Report - Is the Proposal Fair and Reasonable

The Company has retained Lonergan Edwards & Associates Limited ("the Independent Expert") to provide a report on whether the Proposal is fair and reasonable to shareholders not associated with CVCIM.

The Independent Expert has concluded that:

a) the value of \$8.5 million to be attributed to the funds management business of CVCIM pursuant to the transaction lies within their assessed valuation range of \$8.2 million to \$9.1 million
b) the shares in the Company to be issued as consideration for the acquisition of the business are to be priced at \$1.15 per share, which lies within their assessed valuation range of \$1.10 to \$1.17 per share in the Company prior to the proposed transaction.

A copy of the Independent Expert's Report is enclosed as an annexure to this Explanatory Memorandum, Lonergan Edwards & Associates Limited has consented to the inclusion of its report in this document in the form and context in which it appears.

3.1.14. What if the Proposal is not Implemented?

If the Proposal is not implemented, the acquisition of CVC Managers will not take place and the business and capital structure of the Company will remain as detailed in Section 3.1.3 above. None of the benefits or disadvantages of the Proposal will occur. The Company will continue to be managed by CVCIM in accordance with its existing strategy and the Investment Management Assets will continue to be owned by CVCIM.

3.2. Benefits of the Proposal

Expected Benefits of the Proposal

It is expected that the Proposal will have a number of significant benefits for the shareholders. These include:

Reducing the costs associated with investment management and the provision of financial and administrative support to the Company. The Company currently pays management fees to CVCIM under the terms of its management agreement. Following the acquisition of the Company, these fees will be retained within the Company's 100% consolidated group.
Removing the exposure to incentive/ performance fees associated with investment management agreement with CVCIM. Following the acquisition of CVC Managers, these fees will not be charged or will be retained within the Company's 100% consolidated group.
The benefit of recurring revenue through management of the existing specialist portfolios. Acquisition of the Investment Management Assets of CVCIM provides the Company with a recurring investment management revenue stream from its management of the other specialist funds. Recurring management and performance fees provide a level of diversification to the underlying revenue streams currently enjoyed by shareholders.
Broaden the appeal of the Company to investors. The directors believe that the internalised management structure, diversification of revenue streams and reduced perceived related party issues will make the Company more attractive to investors and in particular institutional investors and facilitate the expansion of the funds under management.
Alignment of the interests of the Company's investment manager with those of its shareholders. If the proposed transaction proceeds, and the Investment Management Assets are acquired, the interests of the investment manager and the Company's shareholders achieve greater alignment. Investment decisions that lead to increased performance from the investment activities of the Company and the other specialist funds will result in increased performance of the Company and greater returns to investors. In addition, diversification of the income streams by CVC Managers in the future will improve returns to investors.
Reduces the perceived related party issues within the Company. The Company and CVCIM are related parties. Ownership of its investment manager under the Proposal reduces the perceived related party issues and assists in the maintenance of and compliance with best practice Corporate Governance quidelines.
Enable the expansion and diversification of managed asset classes. The Proposal will provide CVC Managers with a more solid platform to expand and diversify its investment management business. Following its acquisition, CVC Managers intends to expand its business in conjunction with the Company through raising further specialist funds with the intention that the Company through CVC Managers becomes a specialist asset manager.
To allow the Company to maximise the value of its relationship with its manager by acquiring the intellectual property and expertise of CVCIM. The Company will benefit from the investment banking and funds management skills within its manager that have been gained through a long and close relationship between the two companies. In addition to the skills gained through the management of the Company. CVCIM has gained considerable diversified experience from its management of the other specialist funds.

3.3. Potential Disadvantages, Opportunity Costs And Benefits Forgone Of The Proposal

Disadvantages

There are a number of potential disadvantages of the Proposal for the Shareholders. These include:

The Company will be responsible for its management so it will no longer be able to seek redress from CVCIM in the event of a breach of its duties or obligations under the Management Agreement in the future.
Increase in exposure to operational risk through the acquisition of CVC Managers. The Company may be exposed to redress by the other specialist funds managed in the event of a breach of its duties or obligations under the relevant Management Agreements.
Increase in exposure to commercial risk through the acquisition of CVC Managers. The Company will move from a fixed to a variable management/ administration cost structure. In place of a fixed level of cost, the Company will have sole responsibility for managing its own cost structure.

Opportunity Costs and Benefits Foregone

The issue of 7,391,304 shares will dilute the ownership percentages of each current shareholder. Accordingly, the extent to which the current shareholders can participate in the future profits of the Company will be similarly diluted.

3.4. Overview of the Investment Management Business

3.4.1. Background

CVCIM was formed to operate as the investment manager for the Company, which was establishment in 1985 in response to the Australian Federal Government's MIC Program designed to stimulate growth and development of the Venture Capital Industry in Australia. CVC was one of the eleven original participants in the MIC program and CVC is generally regarded as one of the Australian Venture Capital pioneers. The Company is in its 11^th successive vear of profits and as at 31 December 2003 was ranked the highest returning ASX Listed Managed Investment Company over a 5 year period¹.

Through its association with the Company and the other managed funds, CVCIM has facilitated investment in a broad range of asset and debt classes including listed and unlisted equity investments, joint ventures, mezzanine and mortgage debt and convertible notes, Investments have taken place in all stages of the venture capital lifecycle across a wide range of industries. The Manager has acquired a broad range of investment banking and corporate finance skills that have enabled it to successfully raise and manage additional specialist funds as discussed below.

As stated in the previous sections, the Investment Management Business of CVCIM is to be transferred into a subsidiary, CVC Managers, and the Proposal involves the Company acquiring all of the shares in CVC Managers.

3.4.2. Funds Under Management & Fee Arrangements

The total funds under management at 30 June 2003, calculated by reference to the net assets of the individual Companies, of CVCIM was \$91.4 million (including 100% of the funds in CVC REEF) spread across 4 funds. A brief description of each of these funds and their management fee arrangements is as follows:

The Company and Laserex $-$ Laserex is a 100% subsidiary of the Company. Under the Management Agreements with the Company & Laserex, CVCIM is entitled to management fees as follows:
Management Fee Calculated as the higher of 4% of net assets or capital raised at the end of the previous financial year
Incentive Fee Calculated as 20% of the increase in net assets of the Company in each accounting period, adjusted for certain equity transactions. The incentive fee is explained in more detail in section 1 of this Explanatory Memorandum.
CVC Private Equity CVC Private Equity is an unlisted private equity fund which has been in operation since 1999 (previously called CVC Biz-Vision Limited). It focuses on private equity investments across all industry sectors. The Directors of CVC Private Equity intend to make application to the ASX for listing later this year. Under its Management Agreement with CVC Private Equity, CVCIM is entitled to the following management fees:
Management Fee Calculated as the higher of 2.5% of the net assets or capital raised at the end of the previous financial year.
Incentive Fee Based on 20% of the net capital gains above a hurdle rate. The incentive fee arrangement is discussed in more detail in section 3.6 of this Explanatory Memorandum

^<sup>1 ASX Listed Managed Investments - ASX website

Eco Fund Eco Fund is an unlisted Pooled Development Fund specialising in ecologically friendly investments. It was established in 2000 and has made 3 investments to date. Under its Management Agreement with Eco Fund, CVCIM is entitled to the following:
Management Fee Calculated as 2.5% of the net assets or capital raised at the end of the previous financial year.
Share Options CVCIM is not entitled to an incentive fee from Eco Fund. Instead. Eco Fund has issued options to CVCIM to allow it to acquire shares, and thereby share in any uplift in value, in Eco Fund. These options form part of the management business assets of CVCIM to be acquired by the Company and are discussed in further detail in section 3.4.6 of this Explanatory Memorandum.

Eco Fund has called a General Meeting of its shareholders to be held on 16 July 2004. At this meeting it is proposed to approve variations to the management agreement in anticipation of, and contingent on, a raising of additional funds for a listing on the ASX. If this resolution is approved and the new raising completed, the management fee percentage will decrease to 1.8%, if less than \$15m of new capital is raised, or to 1.5%, if more than \$20m of new capital is raised. However, the management fee cannot decrease below the amount payable under the current structure as at 30 June 2004. In addition, the Manager will also receive new options to acquire shares equivalent to 15% of the new capital raised.

CVC REEF CVC REEF was established to commercialise technology in the Australian renewable energy sector. CVC REEF is co-funded by private investors and the Australian Federal Government. CVCIM owns 50% of the shares in CVC REEF IM which holds a Management Agreement with CVC REEF. Under its Management Agreement with CVC REEF. CVC REEF IM is entitled to the following:
Management Fee \$203,239, inclusive of GST, per quarter. Notwithstanding the entitlement to fees of \$203,239 per quarter, CVC REEF IM has been charging reduced fees based on 4% per annum of capital drawn from investors plus the cost of some specific additional costs borne, primarily insurance directors fees and audit fees. There remains a contingent asset to CVC REEF IM in relation to these undercharged fees which is explained in Section 3.6 of this Explanatory Memorandum
Shares CVC REEF IM has been issued 18% of the share capital of CVC REEF in lieu of an incentive fee. These shares effectively give CVC REEF IM an entitlement to 18% of the profits above a base return to capital investors of 6.53% per annum.

The following table shows the split of the \$91.4 million funds under management, based on net assets per financial reports, at 30 June 2003 between the funds managed by CVCIM;

Managed Fund	Funds Under Management
The Company and Laserex	\$62.1 million
CVC Private Equity	\$13.9 million
Eco Fund	\$4.5 million
CVC REEF	\$10.9 million
Total Funds Under Management	\$91.4 million

3.4.3. Investment Management Assets

The Investment Management Assets being acquired under the Proposal are described below. A further description of these assets and their value is contained in the Independent Expert's Report:

Management Agreements The Management Agreements to be transferred are described in Section 3.4.2 above. They are agreements with the Company, Laserex, CVC Private Equity and Eco Fund.
Shares in CVC REEF IM If the Proposal is approved, CVC Managers will own 50% of the shares of CVC REEF IM which manages and owns shares in CVC REEF.
Options in Eco Fund The options issued, and to be issued if new capital is raised, in lieu of an incentive fee to CVCIM will be transferred, see section 3.4.6.
Plant and Equipment There is business equipment including software, information technology equipment and general office furniture supporting the existing investment management business. These assets will be transferred to CVC Managers if the Proposal is approved.
AFS Licence CVC Managers has made an application for a new licence and at this stage the application is pending. It is anticipated that the application will be granted by August 2004.
Employees From the date of novation of the management agreements to CVC Managers, the members of the management, investment and administration team will, subject to continuing employment with the manager, transfer their employment agreements to CVC Managers and become employees of CVC Managers. CVC Managers is also expected to continue consultancy arrangements for the service of a number of individuals engaged in the management, investment and administration activities. The cost of these arrangements has been included in the forecasts for the business in Section 3.4.6 of this Explanatory Memorandum.
Office Space CVCIM occupies floor space at Level 42, 259 George Street, Sydney, New South Wales as a sub-tenant and has been paying \$27,949 plus GST per month. \$335,388 per annum, to its lessor. The transfer of the management assets does not include any liability for the lease of Level 42, 259 George Street, Sydney, New South Wales, however, CVC Managers will continue to rent the premises as a sub-tenant.
Corporate Name Following the acquisition, CVCIM will change its name so as to allow CVC Managers, or another subsidiary of the Company, to change its name to CVC Investment Managers Pty Limited and have the benefit of any goodwill attached to the name.
Other contracts and arrangements CVCIM has a number of other contracts and arrangements in place for services such as computer maintenance, reception and photocopiers. These arrangements are not considered material in size or importance and will be transferred, ceased or changed as required by CVC Managers.

3.4.4. Directors

CVC Investment Managers and CVC Managers have the following directors:

Vanda Gould (Chairman)
John Leaver
Alexander Beard

3.4.5. Future Strategy of CVC Managers

If the Proposal is accepted it is the intention of the directors of the Company that CVC Managers will further expand its Investment Management business through both the management of additional funds raised in conjunction with the Company and through acquisition. CVC Managers will seek to further diversify both the asset classes under management and the industry sectors it specialises in.

3.4.6. Financial Information

As CVC Managers is a newly incorporated company it does not have prior year audited financial information available. However, the business of CVC Managers was an integral component of the business of CVCIM.

Financial Performance

The following table includes a summary of the profit and loss of CVCIM's investment management business to be acquired through CVC Managers, extracted from the audited accounts of CVCIM, for the three years ending 30 June 2001, 30 June 2002 and 30 June 2003. It also includes the latest forecast profit and loss for the business for the year to 30 June 2004. adjusted to exclude incentive fees considered in Resolution 1.

The forecast for the 2004 financial vear has been prepared by the Company and CVCIM based on the unaudited management accounts for the period ending 31 May 2004 and management's forecast of the 1 month to 30 June 2004. --------------------------------------

	Adual 2004	Avatori: 2002	Achal 2003	Hest 2004
Management Fee Income
CVC	1,065,346	1,134,508	1,387,380	1,443,719
Laserex	848,824	1,008,070	1,084,476	1,050,757
CVC Private Equity	185,119	292,658	427,231	380,418
Eco Fund			114,672	112,729
CVC Reef IM	100,000	200,000	172,500	208,500
Other Management Fees	436,900	158,925	371,762	336,104
Total Management Fees	2,636,189	2,794,161	3,558,021	3,532,227
Interest Income	21,811	10,993	34,764	18,892
Other Income	72,607	13,858	96,102	25,768
Total Income	2,730,607	2,819,012	3,688,887	3,576,887
Expenses
Staff/ Director Costs	1,410,112	1,470,366	1,566,289	1,478,452
Consultants	218,352	146,484	362,215	359,924
Occupancy Costs	222,308	266,752	296,585	366,542
Depreciation	25,901	24,755	21,368	14,556
All Other Expenses	284,954	430,673	280,212	321,614
Total Expenses	2,161,627	2,339,030	2,526,669	2,541,088
Profit Before Taxation and Amortisation	568,980	479,982	1,162,218	1,035,799

Financial Position

Once CVC Managers has an AFS licence and the management agreements/ shares are able to be transferred to CVC Managers, CVCIM will novate its management agreements to CVC Managers and ensure that the Company has sufficient cash balances to cover the employee liabilities taken on. If the acquisition of Managers is approved, it is expected that the issue of the AFS licence will occur after the approval. Accordingly CVC Managers will not have traded prior to the acquisition and the anticipated proforma balance sheet at acquisition by the Company will be as follows:

135,100
500
20,000

70,000

20,000

8,369,400
20,000

(95,000)
(40,000)
8,500,000
8,500,000

8,500,000

Following the acquisition by the Company of CVC Managers, the proforma consolidated balance sheet of the Company, using the 31 December 2003 consolidated balance sheet, adjusted for the incentive fee to be considered as Resolution 1 for this meeting and the share buyback effected on 11 March 2004, as a base, would be as follows:

	OVC Group	Shares	CVC	Consolidation	Proforma
	Adjusted	Issued for	Managers at	Elimination	CVC Group
	31 Dec 2003	Acquisition	Acquisition
CURRENT ASSETS	\$	\$	\$	\$	\$
Cash Assets	24,972,403		155,600		25,128,003
Receivables
Inventories	7,295,137 961,328				7,295,137 961,328
Other Financial Assets	4,406,131				4,406,131
Current Tax Assets	54,200				54,200
Other Assets	153,323				153,323
Total Current Assets	37,842,522	$\blacksquare$	155,600		37,998,122
NON-CURRENT ASSETS
Receivables	5.954.174				5,954,174
Equity Accounted
Investments	31,212,753		70,000		31,282,753
Other Financial Assets	13,043,953	8,500,000		(8,500,000)	13,043,953
Intangible Assets	5,136,300		8,389,400		13,525,700
Property, Plant and Equipment	673,872		20,000		693,872
Deferred Tax Assets	98,365				98,365
Total Non-Current Assets	56,119,417	8,500,000	8,479,400	(8,500,000)	64,598,817
TOTAL ASSETS	93,961,939	8,500,000	8,635,000	(8,500,000)	102,596,939
CURRENT LIABILITIES
Payables	13,578,158				13,578,158
Provisions	339,811		135,000		474,811
Current Tax Liabilities	547,722				547,722
Total Current Liabilities	14,465,691	$\blacksquare$	135,000		14,600,691
TOTAL LIABILITIES	14,465,691		135,000		14,600,691
NET ASSETS	79,496,248	8,500,000	8,500,000	(8,500,000)	87,996,248
EQUITY
Contributed Equity	20,237,127	8,500,000	8,500,000	(8,500,000)	28,737,127
Retained Profits	57,021,201				57,021,201
Total Parent Entity Interest	77,258,328	8,500,000	8,500,000	(8,500,000)	85,758,328
Outside Equity Interest	2,237,920				2,237,920
TOTAL EQUITY	79,496,248	8,500,000	8,500,000	(8,500,000)	87,996,248

Shares	103,994,456	7,391,304			111,385,760
Net Assets Per Share	76.4 cents				79.0 cents
Net Tangible Assets Per Share	71.5 cents				66.9 cents

Financial Forecasts

The following table shows the forecast profits before taxation and amortisation for CVC Managers for the financial years 2004/05, 2005/06, 2005/07. It also includes the 2003-04 pre acquisition forecast for 2003/04, as discussed in the section on financial performance above, for the same business in CVCIM for comparison.

	Fest 2004	lad i 2005	國家 2006	FGSI 2007
Management Fee Income
CVC Limited	1,443,719	1,426,319	1,497,635	1,572,517
Laserex	1,050,757	1,005,955	1,056,253	1,109,066
CVC Private Equity	380,418	455,423	478,194	502,104
Eco Fund	112,729	225,000	236,250	248,063
CVC Reef IM	208,500	220,000	240,000	240,000
Other Management Fees	336,104	437,233	447,908	459,118
Total Management Fees	3,532,227	3,769,930	3,956,240	4,130,868
Interest Income	18,892	25,000	25,000	25,000
Other Income	25,768	10,000	10,500	11,025
Total Income	3,576,887	3,804,930	3,991,740	4,166,893
Expenses
Staff/ Director Costs	1,478,452	1,601,989	1,662,088	1,725,193
Consultants	359,924	241,940	254,037	266,740
Occupancy Costs	366,542	397,573	417,452	438,325
Depreciation	14,556	12,000	12,600	13,230
All Other Expenses	321,614	269,000	282,450	296,574
Total Expenses	2,541,088	2,522,502	2,628,627	2,740,062
Profit Before Taxation and Amortisation	1,035,799	1,282,428	1,363,113	1,426,831

The forecasts above have been prepared by the Company and CVCIM. They are based on the current circumstances of the business and the following assumptions:

Following the acquisition, the Company will have the scope to continue or cease charging management fees from CVC Managers to the group companies, the Company and Laserex. Should the management fees cease to be charged the overall financial effect on the group will be nil but it will change the nature of the financial benefits of the acquisition from future profits in the newly acquired subsidiary to reductions in costs in group companies, CVC and Laserex. The forecasts assume that the management fees will continue to be charged and all the benefits of the acquisition will therefore arise through CVC Managers itself.
No additional profit from new funds raised.
No incentive fees. The contingent assets in relation to incentive arrangements are considered separately later in this section.
CVC Managers operates the management business for the full financial years.
A 5% growth in fees from organic growth.
Personnel costs as per current employment or service contracts adjusted for anticipated increases for 2004/05 and by 5% for each of 2005/06 and 2006/07
A line by line forecast of other expenses for 2004/05 with 5% inflation or known increases for 2005/06 and 2006/07

Prospects

As explained above, the forecasts included in the table above do not consider the scope to increase funds under management by setting up new managed funds or through organic growth of current funds under management beyond a base level of 5%. A key driver in the growth of the management business to date has been the ability of the management team to generate additional funds under management and at a much reduced marginal cost by leveraging off the current management resources. It is a key rationale of the restructure being proposed, including the acquisition of the manager, that this process continues, and is accelerated.

The table below shows how the funds under management has increased from \$40.8m to \$91.4m over the 4 years from 1 July 1999 to 30 June 2003:

.	\$000s
Net Assets of Funds Managed At 1 July 1999	40,864
Net Profit After Tax of Funds Managed	27,788
Dividends Paid to Fund Shareholders	(5, 192)
Capital Raised from Fund Shareholders	33,049
Capital Returned to Fund Shareholders	(5, 114)
Net Assets of Funds Managed At 30 June 2003	91.395

Funds managed have grown by organic growth of current funds managed and new funds being raised. Over the four-year period above, the organic growth has represented an average return of over 13%, or 10% after dividends. The forecasts included in this section only assume a 5% growth in fees from organic growth.

It can also be seen from the table above that CVCIM has raised a net average of approximately \$7 million per annum in new funds to be managed. The forecasts included in this section do not include any net new profit from fees on the raising of new funds with additional fees included being limited to match direct new variable costs.

If the funds continue to grow organically at 10% per annum; an average of \$7 million of new money is raised each year; a fee rate of only 2% applies to the additional managed funds; and direct variable costs are 50% of new fees: then the profits before taxation and amortisation in the forecasts above can be expected to increase by \$120,000 for 2004/05, \$240,000 for 2005/06 and \$360,000 for 2006/07.

Accordingly, the Directors believe that there are good prospects for future earnings growth. bevond that in the forecasts above, through the ability to continue to grow funds under management.

Accounting issues -Amortisation

Should the proposed acquisition proceed, the consolidated CVC Limited group financial report will reflect intangible assets in the form of goodwill and licences/ management agreements. These intangible assets will need to be amortised in line with accounting standards over the period to which the benefits arising from the assets are conservatively expected to arise. The Company will have to allocate the amount paid for the licences/ management agreements on a reasonable basis and then determine the amortisation period appropriate for each licence.

The Company has performed a calculation allocating the costs of the licences on the basis of expected 2004-05 revenues from each licence/ management agreement and the expected agreement durations. The calculation shows that the Company will be required to expense amortisation of approximately \$570,000 per annum following the acquisition.

Contingent Assets re Incentive Arrangements

In addition to the management fees included in the analyses above, there are a number of contingent assets of the management business in relation to incentive fees. These fees are intended to reward the manager for superior results in managing the funds and any amounts that could be earned from these fees are additional to the forecasts and projections discussed above. The fees are structured and have a probability of becoming payable that is different for each fund, as follows:

The Company

The management agreement provides for the manager to be entitled to 20% of the increase in net assets, adjusted for capital movements and dividends, each year. If the restructure occurs and resolution 1, as a condition precedent, is passed, the Company will effectively remove its exposure to these incentive fees. Full details of this incentive fee arrangement is considered in Section 1 of this Explanatory Memorandum.

CVC Private Equity

The management agreement provides for the manager to receive 20% of any gain to the extent it exceeds CPI plus 2% and reduced for losses made on other investments. As a result of the performance of CVC Private Equity to date, there are currently outstanding losses of \$2.4 million to be deducted from future gains before an incentive fee will be payable. In these circumstances, whilst the possibility to share in future performance remains, it is considered that no current value can be assigned to the right.

Eco Fund

The Manager receives a performance incentive through the holding of options in Eco Fund. CVCIM, as manager, has been granted 687,875 options to acquire shares in Eco Fund at an exercise price of \$1 per share. The options can be exercised at any time until 5 March 2012 and will form part of the management assets to be transferred should the acquisition occur. The net assets of Eco Fund are currently estimated to be approximately the issue price and so the options are not 'in the money'. However, the options have been valued, using the Black Scholes option pricing model, at approximately \$250,000, assuming a 10% share price volatility factor and a 6% long term interest rate.

As discussed in section 3.4.2, Eco Fund has proposed a change to its management agreement in anticipation of a new capital raising and listing on ASX and the issue of new options to the Manager equivalent to 15% of the new money raised. If the maximum amount of \$30 million is raised the value of the options to be issued to the Manager has been calculated using the Black Scholes model, and the same assumptions as above, at \$982,125. Should a lesser amount be raised the value of the options to be issued to the Manager will be reduced proportionally.

CVC REEF

The Manager, through its 50% investment in CVC REEF IM, currently has two contingent assets in relation to its management agreement for CVC REEF. These relate to a residual profit share and previously undercharged management fees.

REEF IM has an 18% share in the ultimate profits of CVC REEF after deducting a base return of 6.53% on loan capital provided by the other investors. CVC REEF is still in the first half of its lifespan and it is currently impossible to predict the final return on investments. However, the performance of the fund to date has been acceptable and there remains reasonable scope for a profit share to accrue.

REEF is calling and investing funds from investors through the life of the fund. Accordingly, not all the investment funds have been currently drawn down and invested. In view of the gradual build up of the funds managed. REEF IM has not drawn the maximum fees to which it is entitled. At the date of this report there is approximately \$900,000 cumulatively, excluding GST, that has been undercharged, or invested for the benefit of the fund, and this is expected to increase for at least the next two vears (the lower level of fees is reflected in the forecasts above). REEF IM has agreed with CVC REEF that the undercharged fees will become payable to REEF IM once the shareholders in CVC REEF have received a full return of their investment and before paving the base return or the distribution of any profits. Again, as discussed above, it is currently impossible to predict the final return on investments and therefore the value of this contingent asset.

3.5. Taxation Consequences

The taxation consequences for the Company in relation to the Proposal are discussed below. The summary is general in nature. It does not cover all situations and should not be viewed as constituting specific advice. Shareholders should seek their own professional advice before making a decision.

Taxation Liability

The Company should not be liable to pay any taxation on the acquisition of 100% of the shares in CVC Managers. CVC Managers will become a wholly owned subsidiary of the Company.

Outstanding Tax Liabilities of CVC Managers

Under the arrangement, the Company will receive extensive tax warranties from CVCIM, the vendor, confirming all taxation liabilities that arise prior to the acquisition have been paid, or otherwise provided for, by CVC Managers. The warranties will cover material tax liabilities that CVC Managers could be liable for, including any tax liability that may arise as a result of CVC Managers being part of CVCIM's consolidated group for taxation purposes. There will be no limit on the Company's rights of recovery against CVCIM for any breach of these tax warranties.

Cost Base

Except in the circumstances discussed below, the cost base for the shares in CVC Managers will be the acquisition price of \$8.5 million.

If CVCIM and its associates, for tax purposes, own at least 30% of the shares in the Company immediately after the Company issues the \$8.5 million worth of shares to CVCIM, and the Company chooses for the scrip for scrip roll-over relief to apply: the Company will inherit CVCIM's cost base of approximately \$70,000 for the CVC Managers shares instead of the acquisition price of \$8.5 million.

The Company understands that CVCIM will only sell the shares in CVC Managers where it is able to obtain the benefit of the scrip for scrip roll-over relief in relation to their sale. Therefore. if necessary the Company will choose for the scrip for scrip roll-over relief to apply.

The Company is currently seeking advice so as to determine which entities will be deemed to be associates for tax purposes, so as to determine whether the 30% limit is exceeded.

The cost base of the CVC Managers shares will only be relevant where a CGT event occurs in relation to those shares. Under ordinary circumstances, this will generally only arise where there is a sale of the CVC Managers shares. Where there is a sale of the CVC Managers shares, the capital gain will be equal to the consideration received less their cost base. It is considered unlikely that the Company would sell the shares in CVC Managers in the foreseeable future and so the actual cost base assigned to the shares is expected to be irrelevant.

Consequences on consolidation

In the event that the Company elects to be consolidated with its wholly owned subsidiaries for taxation purposes, the Company will become liable, as the head entity of a consolidated group. for the taxation liabilities of CVC Managers arising from the later of the date of acquisition and the date of the consolidation election. Any income tax liabilities that arise prior to this date will remain solely the liability of CVC Managers. A suitable tax sharing agreement will be entered into between the Company and its consolidated entities, including CVC Managers, in the event that the Company chooses to consolidate.

Tax Consequences for Shareholders

This section outlines some of the taxation consequences that arise for shareholders of the Company. It only focuses on the position of resident individuals, resident companies and complying superannuation funds. It does not address the position of other shareholders, such as trustees and non-residents.

There should be no taxation consequences to the shareholders of the Company from the acquisition of CVC Managers. This is because all transactions are being undertaken on an arm's length basis for market value consideration.

3.6. Additional Information

3.6.1. Trading of the Company's Shares

The closing price of the Company's shares on the ASX on 28 June 2004 was \$1.05. The Volume Weighted Average price over the 20 trading days ending on 28 June 2004 was \$1.06.

3.6.2. Adoption of International Financial Reporting Standards

On 3 July 2002, the Financial Reporting Council announced that Australia would adopt International Accounting Standards ("IASs") by 1 January 2005. The Australian Accounting Standards Board is currently in the process of issuing, where necessary, revised Australian Accounting Standards so as to be equivalent to the IASs. The Company will be required to report its statement of financial position (previously known as the balance sheet) in accordance with the Australian Standards as equivalents of the IASs for the first time as at 30 June 2006.

The net assets position at the end of the previous financial vear, per the statement of financial position, is the key determinant of management fees payable under the management Therefore, the effects of the changes required by the IASs will have agreements. corresponding effects on the management fees for financial years from 2006-07 onwards.

The Australian Accounting Standards Board has only recently completed the issue of the Australian Standards as equivalents of the IASs that will take effect for 2006. In addition further Standards can be expected for future financial years as the process continues. Accordingly, the Company is not yet in a position to understand the full effects of the adoption of IASs on the Company. However, the work to date indicates that the key effect on the Company's statement of financial position will be to require more emphasis on the use of market values for investments. The Company currently reports investments at the lower of cost and market value with significant unrealised uplifts in market values not reflected. It is therefore expected that, based on current circumstances; the reported value of the net assets of the Company will increase following the adoption of Australian equivalents to IASs.

The forecasts included in this report have been based on current Australian Accounting Standards and do not include any impact for the adoption of IASs. Should the net assets increase as expected as a result of the adoption of IASs, the benefit of savings in management fees payable by the Company for years 2006-07 onwards will be higher than those included in the financial forecasts in this report.

$\overline{4}$ . RESOLUTIONS 4.5 AND 6-EXECUTIVE AND NON-EXECUTIVE LONG TERM INCENTIVE PLAN

4.1. Adoption of the CVC Limited Executive and Non Executive Long Term Incentive Plan (Resolution 4)

The Directors propose to adopt a new executive and non-executive incentive plan called the CVC Limited Executive and Non-Executive Long Term Incentive Plan ("the Plan") and seek shareholder's approval for the adoption of the plan.

The Directors believe the Plan is in the best interests of the Company. The purpose of the Plan is to better align the interests of the shareholders and the Executives and Non-Executives ("the Participants") of the Company by linking the rewards to Participants to the long term success of the Company. The Plan forms part of a comprehensive remuneration strategy for the Participants. If approved by shareholders, the Directors believe the Plan will:

Create a stronger link between the shareholders, the Participants and the Company's overall financial performance as reflected by the performance of the Company's shares;
Assist in the retention of key employees; and
Increase performance through increased participation in the Company by the Participants $\bullet$ as shareholders.

A full copy of the Plan rules is available for inspection at the Company's registered office and will be provided by the Company to shareholders on request. A summary of the terms of the Plan is set out below:

Eligibility

The Board, or a remuneration committee comprised of Board members, may from time to time invite Participants to participate in the Plan and acquire shares in the Company. Participants will acquire no shares under the Plan unless the requirements of the Corporations Act 2001 and the ASX Listing Rules have been complied with.

Maximum number of shares which can be issued

The maximum number of shares which can be issued under the Plan, and any other employee incentive plans, of the Company will be limited to 5 million shares, subject to pro-rata adjustment for capital restructures.

Manner of acquisition

The Participants will be invited, in writing, to subscribe for a new issue of the Company's shares. Generally, shares will be issued to the Participants at the market price at the date of the allocation, being the weighted average price at which those shares were traded on the ASX over the one week period before the date of allocation or, if there were no transactions on the ASX during that one week period, the last price at which an offer was made on the ASX in that period to buy such a share. A Company provided loan as outlined below would fund the acquisition cost of the shares. The shares will be registered in the name of the Participants, but will remain subject to restrictions on dealing as specified by the directors (which may include applying a holding lock to the shares) until the Participants become entitled to withdraw the shares from the Plan (see below).

Performance hurdles

The directors will specify the performance hurdles that will generally need to be satisfied before the Participants may withdraw their shares from the Plan. Performance hurdles will include minimum tenure periods (Vesting Scale) and performance criteria specified by the directors at the time of the invitation. Generally, provided any loan outstanding has been repaid, the Participant may withdraw his/her shares from the Plan once the applicable performance hurdles have been satisfied.

In certain special circumstances (including if a Participant dies, becomes totally and permanently disabled (in the opinion of the Directors), reaches normal retirement age or if the Directors determine that a change of control of the Company has occurred or is likely to occur (for example, because the Company is subject to a takeover bid, proposes to enter into a scheme of arrangement or is to be wound up) the Rules permit the Participant (or his/her legal personal representative as the case may be) to withdraw from the Plan all of the Participant's shares that remain subject to the performance hurdles.

Loan and security

The Company may extend a loan to enable the Participants to acquire shares under the Plan as determined by the Board. Generally speaking, subject to special circumstances (see above) and Company discretion, the loan is repayable within 3 years unless one of the following events occurs first in which case the loan will become repayable immediately:

the dismissal of the Participant:
the acceptance of the resignation of the Participant by the Company or any subsidiary of the Company;
failure to satisfy the performance hurdles within the required time period (as specified by the Board at the time of the invitation);
termination of the employment of the Participant otherwise than by way of dismissal or resignation;

Where a Participants employment is terminated because of special circumstances, the financial assistance will become payable on the earlier of the forfeiture of their plan shares or twelve weeks after termination of employment.

Interest will be payable on the balance of the loan in an amount equal to the value of any dividends paid by the Company in respect of the shares.

As security for the loan, the Participants will pledge the shares acquired under the Plan to the Company at the time the financial assistance is provided and will grant a charge over any benefits attributable to those shares, including bonus shares, rights, and dividends. Under the terms of the loan, the Participant authorises and directs the Company to sell any bonus shares and other rights attributable to the shares held by the Participant under the Plan and apply the proceeds and the value of any special dividends to reduce the outstanding balance of the loan.

Loans or other financial assistance will only be extended to the Participants as permitted by the Corporations Act.

Forfeiture and buy-back

The Participants will generally, subject to the special circumstances (see above), forfeit his/her shares where any of the following apply:

the performance hurdles specified by the Board are not satisfied:
the dismissal or resignation of the employee; or
the last sale price of the shares three years after the date of issue is lower than their original subscription price (unless the relevant Participants requests to retain the shares and the Board decides in its absolute discretion to waive the forfeiture).

In these circumstances, the shares will be transferred to the Company (subject to compliance with the Corporations Act and the ASX Listing Rules) for their original subscription price and be cancelled.

Voting

The Participants may vote their shares acquired under the Plan at meetings of shareholders of the Company.

Expenses of the Plan

The Company will meet the ongoing administration expenses of the Plan. The Participants will meet all outgoings and expenses in selling or otherwise dealing with his or her shares.

Other provisions

The Plan rules also contain various provisions relating to administration of the Plan, variation of the Plan rules and termination of the Plan.

Other implications if approval given

If approval is granted, the Company will be permitted:

to provide financial assistance to Participants for the purpose of acquiring shares in the Company under the Plan without shareholder approval: and
to take security over shares in the Company issued under the Plan to secure the financial assistance given by the Company.

Directors' Recommendation

The Directors unanimously recommend you vote in favour of resolution 4.

4.2. Issue and allotment of up to 5,000,000 shares under the Plan (Resolution 5)

Resolution 5 is proposed to exempt the issue of shares under the Plan from the requirements of ASX Listing Rule 7.1. If the resolution is approved, issues of shares under the Plan will be treated as having been made with the approval of shareholders for the purposes of Listing Rule 7.1. As a result, the directors will not be required to obtain shareholder approval to issue shares under the Plan.

For the purposes of paragraph (b) of exception 9 of Listing Rule 7.2, the Directors advise that no invitations to participate have as yet been made under the Plan and accordingly, no shares have been issued under the Plan.

Voting Exclusion Statement

The Company will disregard any votes cast on resolution 5 by:

all directors of the Company (except one who is ineligible to participate in any employee incentive scheme in relation to the Company); and
an associate of that person. $\bullet$

However, the Company need not disregard such a vote if:

it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form: or
it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

As the Managing Director, Alexander Beard, is the only director of the Company currently entitled to participate in any employee incentive scheme of the Company, all the other directors and their associates will be entitled to vote on resolution 5.

Directors' Recommendation

The Directors unanimously recommend you vote in favour of resolution 5.

4.3. Acquisition of Shares under the Executive Long Term Incentive by Alexander Beard (Resolution 6)

Shareholder approval is sought for the proposed issue and allotment of 1,000,000 fully paid ordinary shares under the Plan to the managing director. Mr Alexander Beard on the terms and conditions set out below.

Shareholder approval is sought under the related party provisions of Chapter 2E of the Corporations Act 2001 and under ASX Listing Rule 10.14, which provides that a director of CVC may not acquire securities under the Plan without shareholder approval.

Subject to shareholders approving resolutions 4 and 5, the Directors (with Alexander Beard absent and not voting) believe it is appropriate that Alexander Beard, the Managing Director, be entitled to acquire shares under the Plan. The Directors believe that the Plan will complete the Company 's remuneration strategy for Mr Beard. Mr Beard's remuneration currently comprises salary and superannuation to a total of \$200,000 per annum.

Terms and conditions of proposed share issue

Subject to shareholders approving resolutions 4 and 5, it is proposed that Alexander Beard be invited to acquire up to 1,000,000 shares under the Plan as part of his remuneration as Managing Director of the Company, and that this part of his remuneration will provide a suitable long-term incentive. Shares will be issued at the market price at the date of allocation, being the weighted average price at which those shares were traded on the ASX over the one week period before the date of allocation or, if there were no transactions on the ASX during that one week period, the last price at which an offer was made on the ASX in that period to buy such a share.

Subject to the Plan rules, shares will not generally be able to be sold or otherwise dealt with by Alexander Beard until the loan has been settled and following performance hurdles have been satisfied:

Minimum Employment Period (Vesting Scale)

Except in the case of Special Circumstances or if the Board terminates the Plan. Alexander Beard must continue to be employed as Managing Director of the Company for 36 months following the issue of the shares. If this is not satisfied, the Managing Director will forfeit all the shares he acquires under the Invitation.

Performance Criteria

The performance criteria will be assessed over the period from the date of issue of the shares up to and including the third anniversary of the date of issue or in the case of earlier termination of the Plan over the period from the date of issue to the date of termination. The performance criteria is that the total shareholder return to shareholders of the Company exceeds the rate of growth over the same period for the S&P/ASX Small Ordinaries Accumulation Index. Total shareholder return is to be calculated by comparing the market value of a holding in the Company's shares, on the date of issue of shares under this resolution to Mr Beard, with the market value of the holding at the end of the vesting period with all dividends being reinvested in further shares of the Company on the day that the dividends were declared. For these purposes, share values are calculated by reference to the closing price on that day on the Australian Stock Exchange (ASX) for shares in the Company.

However, should the performance criteria not be satisfied, then Alexander Beard will be required to forfeit the shares by transferring them to the Company for their original subscription price, subject to adjustment for certain capital restructures, repay any outstanding borrowings in full and have no further entitlement under the Plan.

Prior to this invitation, no shares have been issued to the Managing Director (or any other person) under the Plan. The Managing Director is the only current director of the Company or associate of any director of CVC, entitled to participate in the Plan.

The Board (with Alexander Beard absent and not voting) proposes that the Company will lend Alexander Beard sufficient funds to enable him to acquire the shares under the Plan. The actual amount to be lent will be based on the share price determined according to the plan rules. As an example, if the share price determined according to the plan was equivalent to the closing price of shares in the Company on 18 June 2004 of \$1 then the 1,000,000 shares would require a loan from the Company of \$1 million. Other details of the terms applicable to the loan (including the interest rate) are set out above.

The shares to be acquired by Alexander Beard under this approval will be issued within 12 months of the date of this meeting.

Additional information required under Chapter 2E of the Act

In accordance with section 219 of the Act, the Directors provide the following further information:

The related parties to whom the proposed resolution would permit the financial benefit to be given and the nature of the proposed financial benefits to be given are:
The managing director, Mr Alexander Beard who will be issued with 1,000,000 fully paid ordinary shares in CVC, subject to the Plan rules and will be advanced a loan to acquire those shares on the terms and conditions set out in this document
$\ddot{\bullet}$ The Directors (except Alexander Beard) recommend that shareholders vote in favour of this resolution 6. The invitation will complete CVC's remuneration strategy for the Managing Director as described above and accompany the overall restructuring of CVC as detailed throughout this Explanatory Memorandum.
Alexander Beard makes no recommendation because he has a material personal interest in the outcome of the resolution.
The opportunity costs or benefits forgone by CVC in issuing the shares include:
the potential dilutionary impact on the existing shareholders of the Company. compared with the non-dilutionary impact of cash remuneration. The Directors believe the dilutionary impact to be immaterial and that any potential dilutionary impact is more than offset by the advantages accruing to the Company from securing the services of the managing director.
There are not materially adverse taxation consequences for CVC or its shareholders in $\bullet$ the proposed share issue and loan.
There is no other information that is known to CVC or to any of its directors that is reasonably required by members in order to decide whether or not it is in CVC's interests to pass the proposed resolution that is not contained in this document.

Voting Exclusion Statement

CVC will disregard any votes cast on resolution 6 by:

all directors of CVC (except one who is ineligible to participate in any employee incentive scheme in relation to CVC); and
an associate of that person.

However, CVC need not disregard such a vote if:

it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or
it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

As the Managing Director, Alexander Beard, is the only director of CVC currently entitled to participate in any employee incentive scheme of CVC, all the other directors and their associates will be entitled to vote on resolution 6.

5. RESOLUTION 7-APPROVAL OF INCREASE IN NON-EXECUTIVE DIRECTORS REMUNERATION

In accordance with Rule Number 13.1 of the Company's Constitution, the remuneration of Non-Executive Director's of the Company is to be determined by the Company in General Meeting. At the 1995 Annual General Meeting of the Company the Company approved remuneration of non-executive directors in the aggregate amount of \$50,000 per annum to be divided amongst the non-executive directors as they see fit. It is now proposed that:

a) the Company increase the remuneration of non-executive directors to an aggregate amount of \$110,000 per annum to be split as the Directors see fit:

and

b) subject to the acquisition by the Company of CVC Managers, (as explained in the notes to resolution 3), that the Company further increase the remuneration of non-executive directors to an aggregate amount of \$550,000 per annum to be split as the Directors see fit but subject to an aggregate limit of \$440,000 for Messrs Gould and Leaver, and their related entities, and \$110,000 for all other non-executive directors.

Explanation of the rationale to increase the aggregate amount to \$110,000 per annum

Since the appointment of Mr John Riedl as a non-executive Director in November 2002, there are two non-executive Directors of the Company that receive fees direct from the Company, at \$25,000 per annum each. Accordingly the Company is paying the maximum amount currently approved by shareholders. As part of the Company's ongoing review of its operating structure in light of the best practice recommendations for corporate governance, it is currently anticipated that the Company will look to recruit at least one new independent non-executive Director prior to the commencement of the 2005-06 financial vear.

To provide scope for the recruitment of additional independent non-executive directors, and to allow for small future increases in remuneration and other incidental costs without the need for a further resolution, shareholders are asked to approve an increase in the aggregate annual remuneration of non-executive directors to \$110,000.

Explanation of the rationale to increase the aggregate amount to \$550,000 per annum

The management business of CVCIM does not currently pay any specific director's remuneration to Messrs Gould or Leaver. However, it does pay management fees of an aggregate of \$500,000 per annum to entities related to Messrs Gould and Leaver. These fees cover their services for executive day to day responsibilities in relation to the investment and management of the Company, and other funds managed by CVCIM, in addition to the cost of administration and other services provided. If the acquisition of CVC Managers by the Company proceeds, it is proposed that that CVC Managers will continue to pay such management fees but reduced to an aggregate of \$400,000 per annum. The continuation of the services of Mr Gould and Mr Leaver is considered to be a key requirement for the Company to maximise the benefit of the acquisition of CVC Managers. The approval of this resolution by shareholders is a condition of the acquisition of CVC Managers discussed in section 3 of this Explanatory Memorandum.

The Company's constitution defines an Executive Director of the Company as:

"Executive Director means a Director who is an employee (whether full-time or part-time) of the Company or of any related body corporate of the Company. It does not include a person acting solely as a Director."

Notwithstanding, the executive nature of the services provided by Messrs Gould and Leaver. they may not satisfy the above definition of Executive Directors. Accordingly, shareholders are asked to approve an increase in the aggregate annual remuneration of non-executive directors to cover the fees paid to the Director related entities and to allow for small future increases in remuneration and other incidental costs without the need for a further resolution.

Effect of approving this resolution

For the purposes of Listing Rule 10.17, the Directors advise that if this resolution is passed:

irrespective of whether the acquisition of CVC Managers proceeds the total approved remuneration of non-executive directors will immediately increase by \$60,000 from \$50,000 presently to \$110,000.
should the Company acquire CVC Managers then, at the effective date of acquisition, the total approved remuneration of non-executive directors will increase by a further \$440,000 from \$110,000 to \$550,000.
The maximum amount that may be paid to directors as a whole (executive and nonexecutive) will be:
irrespective of whether the acquisition of CVC Managers proceeds \$310,000 and
should the Company acquire CVC Managers then, from the effective date of acquisition - \$750,000.

Voting exclusion statement

The Company will disregard any votes cast on this resolution by any director of CVC and any of their associates. However, the Company need not disregard a vote if:

it is cast by a person as proxy for a person who is entitled to vote, in accordance with the a) directions on the proxy form; or
b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote in accordance with a direction on the proxy form to vote as the proxy decides.

The Directors believe that the proposed increases in non-executive director fees is reasonable in all the circumstances having regard to CVC's circumstances and the circumstances of the non-executive directors including their expertise and level of responsibilities.

6. RESOLUTION 8-SHARE BUYBACK PROGRAM

The Corporations Act 2001 authorises a company to purchase its own shares on market. The Company is authorised to buy on market up to 10% of the smallest number of its shares at any time during the last 12 months without seeking the approval of shareholders.

However, because the Company wishes to have the flexibility to buy back a greater number than this, it is seeking shareholder approval of the buy back program.

Reasons for Buyback

As discussed throughout this Explanatory Memorandum, the Directors of acquisition of the Company are wishing to undertake a detailed restructure of the company. The share buyback offers an opportunity:

to return capital to long-standing investors, as would be contemplated by a closed end fund:
to better match recurrent earnings with capital employed; and
to prepare for the ultimate investment in the Company by institutional funds.

Details of Buyback

The key details of the proposed buyback are as follows:

Price Range The Company will in its discretion offer to buy back shares on market at a price determined by the Company subject to the listing rules of the ASX. The listing rules of the ASX impose a moving cap on the price the Company may pay for the shares of 5% above the average market price per share for the last 5 trading days, prior to the date on which the shares are bought back, on which trades in the shares were recorded.
Maximum Number of Shares the maximum number of shares in the Company to be purchased will be 20,000,000 (representing approximately 19.2% of the total issued share capital of the Company as at the date of this document).
Period of Offer Availability the offer to buy the shares will not commence until after the 5^th business day after the date of the approval of the buyback.

Advantages of Buyback

The key advantages of the buyback are as follows:

$\uparrow$ increase the liquidity of the Company's shares;
$\overline{2}$ . an efficient use of surplus capital in a market where finding suitable investments is proving difficult;
1. increased price competition for the Company's shares; and
1. the promotion of a more efficient capital structure.

Disadvantages of Buyback

The key disadvantages of the buyback are as follows:

$\mathbf{1}$ . reduces the cash balances of the Company; and
$2.$ is on a selective rather than an equal access basis.

Director's Recommendation

The directors unanimously recommend that the buy back be approved by the shareholders.

$\overline{7}$ . RESOLUTION 9-SALE OF SHARES IN PRO PAC GROUP LIMITED TO CVC PRIVATE EQUITY LIMITED

7.1. Description of the Transaction

7.1.1. Overview of the Transaction

Under Resolution 9, the Company is seeking the approval of shareholders to sell a 16.3% interest in Pro Pac Group Limited ("PPG") to CVC Private Equity.

PPG is an intermediary holding company which owns 80% of Pro-Pac Packaging (Aust.) Pty Ltd ("PPPA"). PPPA is a leading manufacturer of biodegradable protective void fill packaging and a distributor of general industrial packaging products and warehouse safety consumables. PPPA is headquartered in Sydney and has branches in Brisbane and Melbourne.

PPPA has been in existence for 15 years and has displayed significant earnings growth, particularly in the past two years. PPPA had an annual turnover for the financial year 2002/3 of over \$15 million and is expected to meet its targeted turnover for 2003/4 of over \$18 million.

The acquisition of 16.3% of PPG equates to an approximate 13% interest in the underlying operating company, PPPA. The Company acquired its interest in PPG in April 2003.

The Company is not restricted from selling the proposed stake in PPG. However, because of its related party relationship with CVC Private Equity, the directors are seeking shareholder approval by resolution at this General Meeting.

The sale of the shares in of PPG is also contingent on the shareholders of CVC Private Equity approving the transaction at a General Meeting, scheduled to be held on Friday 9th July 2004.

7.1.2. Reasons for the Transaction

The Company currently owns 81.59% of PPG. If the transaction is approved, the Company's ownership will reduce to 65.29%.

The principal reasons for the transaction are:

Provide an additional source of Capital for PPPA The strategy for PPPA is to grow market share through the strategic acquisition of synergistic packaging businesses around Australia. PPPA will require access to capital to progress its acquisition strategy. CVC Private Equity, as a private equity investor, will be capable of further co-investment alongside the Company in future funding rounds, broadening PPPA's capital base and reducing the additional amounts of capital the Company will be required to provide in future.
To reduce the Company's holding in PPG the Company's holding of 81% of PPG is a higher level of ownership than ideally recommended by the manager. CVCIM. For private equity investments of this nature, CVCIM believes that if possible, a reduced and shared ownership provides a more desirable spread of the investment risk.
To realise a return on the investment Sale of a 16.3% share of PPG will enable the Company to crystallise a portion of the unrealised gains on the investment. The sale represents a good return on investment for the Company. The profit on sale is discussed further in below.

Increase the value of the Company's investment in CVC Private Equity - CVC Private Equity is currently progressing towards a proposed listing on the ASX. The addition of PPG as a new investment in the portfolio of CVC Private Equity is expected to increase the appeal, and the value, of the shares of CVC Private Equity. The Company as a major shareholder in CVC Private Equity would benefit from any such increase in value

7.1.3. Details of the Transaction

The purchase consideration to be paid by CVC Private Equity ("the Pro-Pac Consideration") is a maximum total consideration of \$1,923,000 ("the Maximum Amount") for a 16.3% interest in PPG on the basis of a cash payment on settlement of \$1,678,000 ("the Settlement Amount") with the balance of \$245,000 being payable in two tranches ("the Deferred Payment Amount") as follows:

$\mathbf{1}$ . Payment of \$122,500 by no later than 31 July 2005 subject to PPG reflecting a consolidated earnings before interest and taxation and amortisation ("EBITA") of no less than \$2.675 million for the year ended 30 June 2005.
$2₁$ A further payment of \$122,500 by no later than 31 July 2006 subject to PPG reflecting a consolidated EBITA of no less than \$2.862 million for the year ended 30 June 2006.

In addition, if at any time prior to 30 June 2006, PPG is:

sold for a total consideration or at a value of not less than \$12.8 million, where it owns 80% of PPPA, or
sold for a total consideration or at a value of not less \$16 million, where it owns 100% of PPPA, or
listed on a recognised stock exchange

then the Deferred Payment Amount, less any instalments paid, will immediately become payable to the Company irrespective of the EBITAs achieved.

The Company has commissioned an independent valuation of PPG by valuer Lonergan Edwards & Associates Limited ("LEA"). Using LEA's valuation, the value of the 16.3% interest being sold is within the range \$1,760,000 and \$1,923,000. The purchase consideration proposed by CVC Private Equity is at the top of the range if PPG meets its EBITA targets, but is lower than the bottom of the range if the targets are not met. However, the low range provided by LEA assumes the earnings growth envisaged by the deferred payment amount.

The other terms and conditions of the proposed transaction are substantially similar to the terms and conditions under which the Company made its original acquisition in PPG.

7.1.4. Financial Effects of the Transaction

The sale will allow the Company to realise a profit on its original acquisition price paid following the acquisition in April 2003. The following table summarises the resulting pre-tax profit on sale and Internal Rate of Return (IRR) for the Company if the sale is approved, in the following four scenarios:

Only the settlement amount becomes payable to the Company:
Only the settlement and the first deferred payment becomes payable to the Company;
Only the settlement and the second deferred payment becomes payable to the Company;

The Maximum amount is payable to the Company and all payments are in line with the original schedule and not brought forward by the listing of PPG on a recognised stock exchange.

	Settlement Amount	1 ^st Deferred Payment	2 ¹⁰ Deferred Payment	Maximum Amount
Proceeds Received	1,678,000	1,800,500	1,800,500	1,923,000
Cost	1,131,544	1,131,544	1,131,544	1,131,544
Profit on Sale	546.456	668,956	668,956	791,456
IRR	48%	55%	53%	59%

For the CVC Group, the reported profit will be lower than for the Company because the effect of consolidating PPG has increased the carrying value of the PPG investment. Assuming a profit of \$2.5 million before tax for PPG for the period from 1 July 2003 to the date of the transaction and a 30% effective tax rate: the profit to be recognised on consolidation for the transaction in each of the four scenarios explained above, would be reduced by approximately \$220,000.

7.2. Implications if the Resolution is Approved

First, if the resolution is approved and the proposed sale proceeds and is completed, the Company will reduce its ownership stake in PPG from 81.59% to 65.3% and its effective interest in PPPA to 52.2%

Second, completion of the transaction at the Settlement Amount and the Maximum Amount will result in an increase of the Company's cash balances by \$1,678,000 and \$1,923,000 respectively.

Third, the Company will make a pre-tax profit on the sale of the shares in the order of \$546,856 (using the Settlement Amount) rising to \$791,856 (using the Maximum Amount)

Fourth, the investment manager of the Company, currently CVCIM but proposed to be CVC Managers as explained in this Explanatory Memorandum, will be entitled to increased future management fees calculated as 4% of the net assets of the Company at the start of the financial vear as a result of the profit on sale of the shares.

7.3. Implications if Resolution not Approved

If the shareholders of the Company do not approve the resolution, the transaction will not proceed and the Company will not sell the interest in PPG and neither the Company nor its Manager will receive any benefit.

7.4. Regulatory Requirements

Disqualifying Material Personal Interests - Section 195 of the Corporations Act

Section 195 of the Corporations Act 2001 provides that directors of a public company who have a material personal interest in the matter being considered at a director's meeting must not:

Be present while the matter is being considered at the meeting; or a)
$b)$ Vote on the matter.

Each of the directors of CVC except Mr John Riedl are current directors of CVC Private Equity. Accordingly, the directors believe it is appropriate to seek CVC shareholder approval for Resolution 9

Approval for Related Party Transactions - Corporations Act 2001 Requirements

Section 208 of the Corporations Act 2001 (the "Act") provides that a public company must not give a financial benefit to a related party except under certain circumstances including circumstances in which shareholders approve the giving of the financial benefit.

Section 229 provides a broad definition for the giving of a financial benefit. In particular, Section 229 (3) (b) states that "buving an asset from or selling an asset to the related party" amounts to the giving of a financial benefit. Therefore technically, the sale of an interest in PPG to CVC Private Equity amounts to a financial benefit under this definition.

Shareholder approval is not required if the financial benefit was given on terms that:

a) would be reasonable in the circumstances if the public company or entity and the Related Party were dealing at arms length; or
b) are less favourable to the Related Party than the terms referred to in paragraph a.

CVC Private Equity is a related party of the Company. The directors believe that the transaction is on normal commercial terms that would be reasonable if the parties were dealing at arms length. However, given the related party relationship, they believe it is appropriate to submit the proposal to shareholders for approval. Accordingly, shareholder approval is sought for the Company entering into the proposed transaction and the indirect giving of a financial benefit to related parties.

As required under Section 224 of the Corporations Act 2001, the Company will disregard any votes cast on this resolution by CVCIM and directors Gould. Leaver, Read and Beard or any of their associates. However, the Company will not disregard a vote if:

it is cast by a person as a proxy appointed in writing that specifies how the proxy is to a) vote on the proposed resolution; and
b) it is not cast on behalf of a related party to whom the resolution would permit a financial benefit to be given or associate of such a related party.

7.5. Statutory information

In accordance with section 219 of the Act, the Directors provide the following information:

The related parties to whom the proposed resolution would permit the financial benefit to be given and the nature of the proposed financial benefits to be given are:
CVC Private Equity which will receive a financial benefit in the form of the shares in PPG:
CVCIM or CVC Managers, as manager of the Company, which will be entitled to an increased management fee from the Company of 4% of the profit achieved by the Company on the sale; and
Messrs Gould, Leaver, Beard and Read to the extent that they hold interests in the Company, CVC Private Equity, CVC Managers and CVCIM
None of the directors make any recommendation to shareholders on how to vote on the proposed acquisition because they each believe that shareholders should and are able to form their own view;
The opportunity costs or benefits forgone by the Company in selling the 16.3% share of PPG are:
Transaction Costs the Company will bear costs associated with the transaction such as legal and other consultants fees. These are not expected to be significant.
Reduction in participation of future upside in the investment By selling a portion of its share in PPG, the Company will lose its right to benefit from the potential investment upside of that portion of the shareholding in any future exit or revaluation of the investment.
Ability to sell the interest to an alternative purchaser for a higher price By selling the interest to CVC Private Equity, the Company loses the potential to sell that interest to an alternative purchaser at a higher price. The Directors believe that the proposed sale price is fair and reasonable and there is no quarantee that an alternative investor would pay a higher price for the shares sold.
The proposed sale by the Company of 16.3% of the shares in PPG will give rise to a maximum capital gain to the Company of approximately \$791,456.
The proposed sale does not give rise to any taxation consequences to the Company's shareholders.
There is no other information that is known to the Company or to any of its directors that is reasonably required by members in order to decide whether or not it is in the Company's interests to pass the proposed resolution that is not contained in this document

GLOSSARY 8.

the Act	The Corporations Act 2001
ACGIRDB	The Australian Commonwealth Government Industry Research and Development Board
AFS (Licence)	Australian Financial Services (Licence)
ASIC	Australian Securities & Investments Commission
ASX	The Australian Stock Exchange Limited
the Board	The Board of Directors of the Company
the Company	CVC Limited (ACN 002 700 361)
Consideration	The Consideration to be given by CVC for the acquisition of CVC Managers being the issue of 7,391,304 ordinary shares in CVC Limited.
Consideration Shares	The 7,391,304 ordinary shares in CVC Limited proposed to be issued to CVCIM for the acquisition of CVC Managers.
Constitution	The Constitution of the Company
CVC	CVC Limited (ACN 002 700 361)
CVC Group	CVC Limited and its subsidiaries, associates and joint ventures
CVCIM	CVC Investment Managers Pty Limited (ACN 002 965 326) (AFS Licence number 239667)
CVC Managers	CVC Managers Pty Limited (ACN 108 360 372)
CVC Private Equity	CVC Private Equity Limited formerly CVC Biz-Vision Limited (ACN 059 092 198).
CVC REEF	CVC REEF Limited (ACN 093 173 749)
CVC REEF IM	CVC REEF Investment Managers Pty Limited (ACN 087 646 946) (AFS Licence number 260387)
the Deferred Payment Amount	The additional amounts of contingent Pro-Pac Purchase Consideration payable, being two tranches of \$122,500.
Director(s)	The current Directors of the Company are Messrs Vanda Gould, John Read, John Leaver, Alexander Beard and John Riedl.
EBITA	Earnings before interest and taxation and amortisation
Eco Fund	The Eco Fund Limited (ACN 088 731 837). Currently called The Eco Fund Limited but with a proposal before its members to change the name to CVC Sustainable Investments Limited
Explanatory Memorandum	The section of this document providing explanatory details of the resolutions to be considered at the General Meeting

General Meeting	The General Meeting of the Company scheduled to be held at 2pm Sydney Time on 9 ^th August 2004 at Level 42 AAP Centre 259 George Street Sydney NSW 2000
IASs	International Accounting Standards
Incentive Fees	Additional Management fees payable based on the performance of the managed fund
Independent Expert	Lonergan Edwards & Associates Limited
Internal Rate of Return $(\mathsf{IRR})$	The annualised percentage return on an investment
Investment Management Assets	Being the assets of the Investment Management Business of CVCIM proposed to be acquired by CVC Managers detailed in section 3.4.3 of the Explanatory Memorandum
Investment Management Business	The Investment Management Business of CVCIM proposed to be transferred to CVC Managers.
Laserex	Laserex Pty Limited (ACN 008 018 326)
LEA	Lonergan Edwards & Associates Limited
Management agreement	Agreement between an investment company/ fund and its manager for the provision of investment, administration and other services.
Manager	The manager of the Company, in accordance with the management agreement being CVCIM and proposed to be CVC Managers.
Managing Director	The Managing Director of the Company, currently Mr Alexander Beard.
the Maximum Amount	The maximum amount of Pro-Pac Purchase Consideration, being \$1,923,000.
MIC Scheme	Management & Investment Companies Act 1983
Participants	Executives and Non-Executives invited to participate in the CVC Limited Executive and Non-Executive Long Term Incentive Plan
The Plan	The proposed CVC Limited Executive and Non Executive Long Term Incentive Plan
PPG	Pro-Pac Group Limited (ACN 104 805 361)
PPPA	Pro-Pac Packaging (Aust.) Pty. Limited (ACN 059 499 660)
Pro-Pac Purchase Consideration	The amount to be paid by CVC Private Equity to the Company for a 16.3% stake in Pro-Pac Group Limited
The Proposal	The proposal for CVC to acquire CVC Managers
Purchase Price	The purchase price for the acquisition of CVC Managers, being \$8.5 million.
the Settlement Amount	The initial amount of Pro-Pac Purchase Consideration being \$1,760,000

INDEPENDENT EXPERT'S REPORT

Please see attached Independent Expert's Report.

The Directors CVC Limited Level 42, AAP Centre 259 George Street Sydney NSW 2000

ABN 53 095 445 560 AFS Licence No 246532 Level 27, 363 George Street Sydney NSW 2000 Australia GPO Box 1640, Sydney NSW 2001

Telephone: [61 2] 8235 7500 Facsimile: (61 2) 8235 7550 www.fonerganedwards.com.au

9 June 2004

Subject: CVC Investment Managers Pty Limited

Dear Sirs

$\mathbf{1}$ CVC Limited (CVC) proposes to acquire the funds management business of CVC Investment Managers Pty Limited (CVCIM).
$\overline{2}$ The consideration for the acquisition of the funds management business of CVCIM of \$8.5 million is to be satisfied by the allotment to CVCIM of 7.39 million fully paid shares in CVC at a price of \$1.15 per share. The acquisition will result in CVCIM holding an interest in CVC of around 19.5%.
$\overline{3}$ CVC is a listed Australian company whose principal activity comprises the provision of investment capital to companies with substantial profit growth prospects.
$\overline{4}$ CVCIM is an unlisted Australian company whose principal activities comprise funds management and investment. CVCIM manages the investment portfolio of CVC.
5 The proposed transaction effectively represents the internalisation by CVC of its investment management activities. The related party nature of the transaction requires the consent of CVC shareholders in general meeting.

Purpose of report

6 The directors of CVC have requested that Lonergan Edwards $\&$ Associates Limited (LEA) prepare an independent expert's report within the terms of Australian and Securities Investments Commission (ASIC) Policy Statement 75 to assist CVC shareholders in making a decision whether or not to approve the proposed transaction. Our report has been prepared for the purpose of meeting the requirements of ASX Listing Rule 10.1 in relation to the related party nature of the proposed transaction.
$\overline{7}$ Our report will accompany an Explanatory Memorandum to be sent by CVC to its shareholders in connection with the proposal. LEA is independent of CVC and CVCIM and has no other involvement or interest in the proposal.

Summary of opinion

$\overline{8}$ In LEA's opinion the terms of the proposed acquisition of the funds management business of CVCIM are fair and reasonable to the shareholders of CVC not associated with CVCIM. We have arrived at this conclusion principally because:
the value of \$8.5 million to be attributed to the funds management $(a)$ business of CVCIM pursuant to the transaction lies within our assessed valuation range of \$8.2 million to \$9.1 million
$(b)$ the CVC shares to be issued as consideration for the acquisition of the business are to be priced at \$1.15 per share, which lies within our assessed valuation range of \$1.10 to \$1.17 per CVC share prior to the proposed transaction.
$\overline{Q}$ Based on our adopted values of CVC and the funds management business of CVCIM on a standalone basis, our assessed value of a CVC share subsequent to the proposed acquisition is consistent with our assessed value of a CVC share prior to the proposed acquisition.

Other matters

10 The ultimate decision whether to approve the proposed transaction should be based on each CVC shareholder's assessment of their own circumstances. If shareholders are in doubt about the action they should take in relation to the proposal or matters dealt with in this report, shareholders should seek independent professional advice. For our full opinion on the proposed transaction and the reasoning behind our recommendation. CVC shareholders should read the remainder of our report which is set out in the following sections:

Section		Paragraph
ľ	Outline of proposed transaction	$11 - 13$
П	Scope of our report	$14 - 31$
m	Profile of CVC	$32 - 56$
IV	Profile of CVCIM	$57 - 61$
V	Valuation approach	$62 - 70$
VI	Valuation of CVC	$71 - 75$
VII	Valuation of CVCIM	$76 - 87$
VIII	Assessment of proposed transaction	$88 - 96$
Appendices
A	Qualifications, declarations and consents
B	Investments – listed

$\tilde{C}$

$\bar{\bf 3}$

Outline of proposed transaction $\mathbf{I}$

Terms

$11$ CVC Limited (CVC) proposes to acquire the funds management business of CVC Investment Managers Pty Limited (CVCIM).
$12$ The consideration for the acquisition of the funds management business of CVCIM of \$8.5 million is to be satisfied by the allotment to CVCIM of 7.39 million fully paid shares in CVC at a price of \$1.15 per share. The acquisition will result in CVCIM holding an interest in CVC of around 19.5%.

Conditions

13 The proposed transaction is subject to a number of conditions, including:
CVC shareholder approval by those shareholders not associated with $(a)$ CVCIM
CVC shareholder approval of the prior settlement by CVC of accrued $(b)$ incentive fees payable to CVCIM of \$4.0 million
the issue of an Australian Financial Services Licence to CVC $(c)$ Managers Pty Ltd
$(d)$ approval by shareholders of other funds managed by CVCIM to the novation of their management agreements to CVC Managers Pty Ltd
approval of the transfer of shares in CVC REEF Investment Managers $(e)$ Limited to CVC Managers Pty Ltd
$(f)$ all relevant regulatory approvals.

Scope of our report $\mathbf{H}$

Purpose

$14$ ASX Listing Rule 10.1 prohibits the acquisition of a business undertaking by a company from a related party without approval by a majority of shareholders at a general meeting.
15 ASX Listing Rule 10.10 requires that shareholders voting on such a proposal be provided with sufficient information to assess the merits of the proposal including a report, prepared by an independent expert, stating whether the proposed transaction is fair and reasonable so far as those shareholders not associated with the transaction are concerned.
16 The directors of CVC have requested LEA to prepare an independent expert's report to assist CVC shareholders in making a decision whether or not to approve the proposed transaction. Accordingly, the independent expert's report sets out an independent assessment of whether the terms of the proposed transaction are fair and reasonable to CVC shareholders not associated with the proposed transaction, together with the reasons for this opinion.
$17$ This report has been prepared by LEA for the benefit of CVC shareholders to assist them in considering the resolutions to approve the proposed transaction. Our report will accompany the Notice of Meeting and Explanatory Memorandum to be sent to CVC shareholders. The sole purpose of our report is to determine the opinion referred to above.
18 The ultimate decision whether to approve the proposed transaction should be based on each CVC shareholder's assessment of their own circumstances. If in doubt about the proposal or matters dealt with in this report, shareholders should seek independent professional advice.

Basis of assessment

19 In preparing our report we have given due consideration to the Policy Statements and Practice Notes issued by ASIC, particularly Policy Statement 75 "Independent Expert Reports to Shareholders".
20 Policy Statement 75 establishes certain guidelines in respect of independent expert's reports prepared for the purposes of the Corporations Act. Policy Statement 75 is primarily directed towards reports prepared for the purposes of what is now Section 640 of the Corporations Act and comments on the meaning of "fair and reasonable" in the context of a takeover offer.
21 Pursuant to Policy Statement 75, an offer is "fair" if the value of the offer price or consideration is equal to or greater than the securities the subject of the offer. A comparison must be made assuming 100% ownership of the target company.
22 Policy Statement 75 considers an offer is "reasonable" if it is fair. An offer may also be reasonable if, despite not being "fair" but after considering other significant factors, shareholders should accept the offer in the absence of any higher bid before the close of the offer.
23 In LEA's opinion, the most appropriate basis upon which to evaluate the proposal is to consider all the circumstances of the proposal and compare the likely advantages and disadvantages to non associated shareholders if the proposal is agreed to with the advantages and disadvantages to those shareholders if it is not
24 The following facts, inter alia, have been considered when determining whether the proposal is fair and reasonable to CVC shareholders:
the fair market value of CVC and the funds management business of $(a)$ CVCIM on a standalone basis
the relative position of CVC shareholders before and after the proposed $(b)$ transaction
whether the issue of shares to CVCIM shareholders, if approved, may $(c)$ deter a future takeover offer for all the shares in CVC
$(d)$ other qualitative and strategic issues associated with the proposal and the extent to which they may advantage or disadvantage existing CVC shareholders if the proposal proceeds or is rejected
our opinion on whether the terms of the proposed transaction are fair $(e)$ and reasonable to those shareholders of CVC not associated with CVCIM.

Limitations and reliance on information

25 Our opinions are based on economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly over relatively short periods of time.
26 Our report is also based upon financial and other information provided by CVC and CVCIM. We have considered and relied upon this information and believe that the information provided is reliable, complete and not misleading and we have no reason to believe that material facts have been withheld. The information provided was evaluated through analysis, enquiry and review for the purpose of forming an opinion on the proposed transaction from the perspective of CVC shareholders. However, in assignments such as this, time is limited and we do not warrant that our enquiries have identified or verified all of the matters which an audit, extensive examination or "due diligence" investigation might disclose. None of these additional tasks have been undertaken.

$27$ We understand the accounting and other financial information that was provided to us has been prepared in accordance with generally accepted accounting principles and are consistent with the method of accounting in previous years.
28 An important part of the information base used in forming an opinion of the kind expressed in this report is the opinions and judgement of management of the relevant companies. This type of information has also been evaluated through analysis, enquiry and review to the extent practical. However, it must be recognised that such information is not always capable of external verification or validation.
29 We in no way guarantee the achievability of budgets or forecasts of future profits. Budgets and forecasts are inherently uncertain. They are predictions by management of future events which cannot be assured and are necessarily based on assumptions of future events, many of which are beyond the control of management. Actual results may vary significantly from forecasts and budgets.
30 We have assumed that the budgets and forecasts have been prepared fairly and honestly based on the information available to management at the time and within the practical constraints and limitations of such budgets and forecasts. We have assumed that the budgets and forecasts do not reflect any material bias, either positive or negative. We have no reason to believe that these assumptions are inappropriate.
31 In forming our opinion, we have also assumed that:
$(a)$ the information set out in the Explanatory Memorandum is complete, accurate and fairly presented in all material respects
if the proposal is implemented it will be implemented in accordance $(b)$ with the terms set out in this report
the legal mechanisms to effect the proposal are valid and will be $(c)$ effective.

$III$ Profile of CVC

32 CVC was established under the MIC scheme in 1985 and is a listed Australian company whose principal activity comprises the provision of investment capital to companies with substantial growth prospects. It is one of Australia's oldest management investment companies.
33 The CVC investment portfolio includes listed and private equity, venture capital, pooled development funds and property investment.
34 CVC seeks investment predominantly in established, profitable, high growth companies across all industry sectors. Key investment characteristics sought include companies / businesses:
$(a)$ exhibiting growth rates of 10% or more per annum in existing and expanding markets
$(b)$ with a strong competitive advantage and high barriers to entry (technology and economics)
with a revenue model with recurrent and scaleable characteristics $(c)$
with protected intellectual property $(d)$
with a quality management team with a proven track record $(e)$
$(f)$ with a clear exit strategy.

Financial position

35 The financial position of CVC as at 30 April 2004 is summarised below:

	\$000
Assets
Investments:
- listed	42,376
- unlisted	26,444
Loans	5,147
	73,967
Cash	11,260
Receivables	123
Other	42
Total assets	85,392

Liabilities
Creditors	354
Total liabilities	354

Net assets	$85,038$ ⁽¹⁾

Note:

1 Excludes liability of \$4.0 million in respect of accrued incentive fees - refer paragraph 43.

Investments - listed

36 The major listed investments as at 30 April 2004 represented 95.8% of the book value of the listed investment portfolio and comprised:

	Interest	Book
	held	value
	$\%$	S000
Sunland Group Limited	19.17	32,381
Stargames Limited	13.03	4,962
Greens Foods Limited	8.65	3.261
		40.604

37 We have separately assessed each of the major listed investments in Appendix B of our report.

Investments - unlisted

38 The unlisted investments as at 30 April 2004 comprised:

	Interest	Book
	held	value
	$\%$	\$000
Property development:
- Queensland	50.0	11.405
- Fern Bay joint venture	50.0	875
Probiotec Australia Pty Ltd	17.15	3.052
Pro-Pac Group Limited	81.59	6,791
CVC Private Equity Limited	10.48	1,180
Everest Capital Limited	w	3,036
Rattoon Holdings Limited	aa.	105
		26.444

39 We have separately assessed each of the major unlisted investments in Appendix C of our report.

Loans

40 Loans at a net book value of \$5,147,000 comprised advances to investee companies and other entities, and were stated net of provisions for potential non-recovery of \$7,114,000.
41 In assessing the recoverability of specific advances we have had regard to:
rates of interest charged and the extent to which interest income is $(a)$ currently being received
$(b)$ underlying security held.
$(c)$ the financial capacity of the debtor to service and repay the loan
the respective terms and conditions of the loans advanced $(d)$
loan repayments subsequent to 30 April 2004. $(e)$
42 Based on the above we have adopted a range of \$5,048,000 to \$6,067,000 as representative of the fair market value of the loan portfolio for the purpose of our report.

Liabilities

43 The financial position of CVC as at 30 April 2004 excludes a contingent liability (as disclosed in the 2003 annual report of CVC) in respect of accrued incentive fees of \$4.0 million payable to CVCIM.
44 It is a condition of the proposed transaction that these accrued fees be settled in cash prior to completion thereof. We have allowed for this liability in our assessed value of CVC summarised in Section VI of our report.

Earnings profile

45 A summary of CVC's reported profit and loss for the two years ended 30 June 2003 and the six months ended 31 December 2003 is set out below:

			Six months
		Year ended 30 June	ended
	2002	2003	31 Dec 2003
	\$000	\$000	\$000
Revenue	24.662	6,985	30,175
Expenses	(20,693)	(10, 422)	(27, 656)
Associated companies	2.618	4,306	5,621

			Six months
	Year ended 30 June		ended
	2002	2003	31 Dec 2003
	\$000	\$000	\$000
Joint ventures	3.612	4,543	1,516
Profit before tax	10,199	5,412	9,656
Income tax expense	(102)	(177)	(337)
	10,097	5,235	9,319
Minority interests	(18)	(192)	(315)
Profit after tax	10.079	5,043	9,004

Dividends	1.646	2,185	1.640

46 The nature of CVC's activities as an investment company gives rise to significant fluctuations in reported performance.
47 Major factors which impacted on the reported profitability included:
2002 the sale of the company's interest in Clinical Waste Australia $(a)$ Limited
$(b)$ $2003 - a$ lack of significant realisations of investments
$(c)$ December 2003 – realisation of part of the investment in Sunland Group Limited, partly offset by provisions against the non-recovery of loans to Vita Life Sciences Limited and the write-down of investments therein.

Taxation

48 As at 30 June 2003 CVC reported available tax losses of a revenue nature of \$2.3 million and of a capital nature of approximately \$40.8 million. We have been advised that these relate to the investment activities of CVC.
49 We have therefore had regard to the existence of these losses in estimating the tax liability associated with unrealised gains (and losses) based on our assessed value of the investment portfolio held by CVC. In estimating this tax liability we have also had regard to losses that would arise based on the nonrecovery of loans, assuming the loan portfolio is realised at the values stated in our report.

Share capital

50 As at 30 April 2004 and the date of this report CVC had 103,994,456 shares on issue. The company completed a recent share buy-back in March 2004, with the final tranche of 4.87 million shares being acquired at a price of \$1.14 per share.

There are no options or other securities on issue with rights to convert to 51 issued shares in CVC.
CVCIM holds 14.3 million shares in CVC representing an interest of 13.8%. 52
53 As at 31 May 2004 the top ten shareholders held 68% of the issued capital of CVC.

Share price performance

54 The price of CVC's shares from 1 January 2003 to 31 May 2004 is summarised in the table below:

				Total monthly
	High	Low	Close	volume
	\$	\$	\$	$600*$
Quarter ended
March 2003	0.88	0.80	0.80	120
June 2003	0.82	0.72	0.72	31
Month ended
July 2003	0.82	0.79	0.82	95
August 2003	0.85	0.82	0.85	363
September 2003	1.00	0.85	1.00	754
October 2003	1.15	0.98	1.15	57
November 2003	1.16	1.05	1.05	535
December 2003	1.15	1.05	1.15	35
January 2004	1.29	1.00	1.00	121
February 2004	1.10	1.00	1.10	121
March 2004	1.34	1.10	1.16	5,199
April 2004	1.20	1.12	1.12	67
May 2004	1.29	1.08	1.08	124

55 Shares in CVC are thinly traded. The significant volume in March 2004 reflects the buy-back of 4.87 million shares noted above.
56 The following graph illustrates the movement in CVC's share price:

Profile of CVCIM $\bf{IV}$

57 CVCIM is an unlisted Australian company whose principal activities comprise funds management and investment. CVCIM manages the investment portfolio of CVC.
58 $CVCIM$ is also the manager of the related investment entities $-CVC$ Private Equity Limited, CVC REEF Limited and The Eco Fund Limited.
59 CVCIM provides management skills to the investee companies including key agreements, patents and intellectual property, internal control procedures, management information systems, monthly reporting procedures, statutory reports, assistance with government grant applications, commercial risk assessment, distribution networks, export markets, legal / commercial advice, market research / benchmarking, merger / acquisition / management buy-out advice, negotiations with bankers and financiers, and sale of businesses through IPO / trade sale or other business combination. Such services provide an annual source of consulting fee income, in addition to the management fees derived from the entities listed above.

Earnings profile

60 The proposed transaction envisages that the existing funds management business of CVCIM will be transferred to a newly incorporated company CVC Managers Pty Limited (CVC Managers). A summary of the operating performance of the business to be transferred for the two years ended 30 June 2003 and a forecast for the year ending 30 June 2004 is set out below:

	Year ended/ending 30 June
	Actual	Actual	Forecast
	2002	2003	2004
	\$000	\$000	\$000
Management Fee Income
$CVC^{(1)}$	2,142	2,472	2,495
$CVC$ Biz Vision $Ltd^{(2)}$	293	427	380
The Eco Fund Limited	$\overline{\phantom{a}}$	115	113
CVC REEF Investment Managers $Ltd^{(3)}$	200	172	208
Other management fees	159	372	336
Total management fees	2,794	3,558	3,532
Interest income	11	35	19
Other income	14	96	26
Total income	2,819	3,689	3,577
Expenses
Staff/director costs	1,470	1,566	1,478
Consultants	146	362	360
Occupancy costs	267	297	367

	Year ended/ending 30 June
	Actual	Actual	Forecast
	2002	2003	2004
	\$000	\$000	\$000
Depreciation	25	21	14
All other expenses	431	281	322
Total expenses	2,339	2,527	2.541
Profit before taxation	480	1,162	1.036

Notes:

Includes Laserex Limited (wholly owned by CVC). $\mathbf{1}$

$\overline{2}$ Since re-named CVC Private Equity Limited.
$\overline{3}$ 50% owned by CVCIM.

Financial position

61 The financial position of CVC Managers at the date of acquisition of the funds management business of CVCIM is projected to be:

	\$
Current assets
Bank	135,100
Cash on hand	500
ASIC bond bank account	20,000
Total current assets	155,600
Non-current assets
Investments:
- CVC REEF Investment Managers Limited ⁽¹⁾	70,000
Plant and equipment	20,000
Intangible assets	8,389,400
Total non-current assets	8,479,400
Total assets	8,635,000
Liabilities
Employee entitlements	135,000
Total liabilities	135,000
Net assets	8,500,000

Note:

1 CVCIM co-manages CVC REEF Limited through a 50% interest in CVC REEF Investment Managers Limited.

$\overline{\mathbf{V}}$ Valuation approach

62 Australian Securities and Investments Commission (ASIC) Practice Note 43 "Valuation Reports and Profit Forecasts" outlines the appropriate methodologies which a report should consider when valuing assets or securities for the purposes of, amongst other things, share buy-backs, selective capital reductions, schemes of arrangement, takeovers and prospectuses. These include:
the discounted cash flow methodology $(a)$
$(b)$ the application of earnings multiples appropriate to the businesses or industries in which the company or its profit centres are engaged, to the estimated future maintainable earnings or cash flows of the company, added to the estimated realisable value of any surplus assets
the amount which an alternative acquirer might be willing to offer if all $(c)$ the securities in the target company were available for purchase
$(d)$ the amount that would be distributed to shareholders in an orderly realisation of assets
$(e)$ the most recent quoted price of listed securities
$(f)$ the current market value of the assets, securities or company.
63 Methodologies using capitalisation multiples of earnings or cash flows are commonly applied when valuing businesses where a future "maintainable" earnings stream can be established with a degree of confidence. Generally, this applies in circumstances where the business is relatively mature, has a proven track record and expectations of future profitability and has relatively steady growth prospects. Such a methodology is generally not applicable where a business is in a start up phase, has a finite life, or is likely to experience a significant change in growth prospects and risks in the future.
64 Capitalisation multiples can be applied to either estimates of future maintainable operating cash flow, earnings before interest and tax (EBIT) or net profit after tax. The appropriate multiple to be applied to such earnings is usually derived from stock market trading in shares in companies that are considered to be comparable and from precedent transactions within the industry. The multiples derived from these sources need to be reviewed in the context of the differing profiles and growth prospects between the company being valued and those considered comparable. When valuing controlling interests in a business an adjustment is also required to incorporate a premium for control. The earnings from any non-trading or surplus assets are excluded from the estimate of the maintainable earnings and the value of such assets is separately added to the value of the business in order to derive the total value of the company.
65 Discounting of future cash flows is commonly used when valuing mining companies or where an asset has a finite life and the future cash flows can be forecast with a degree of confidence. Additionally, this methodology is adopted for the valuation of projects and assets where it is not possible to estimate "maintainable" earnings as the business is in a state of transformation, start up or period of rapid growth. Under this methodology, the value of an asset is calculated as the net present value of the estimated future cash flows including a terminal value, if appropriate. In order to arrive at the net present value, cash flows are discounted using a discount rate which reflects the risks associated with the cash flow stream.
66 An asset based methodology is applicable in circumstances where neither a capitalisation of earnings nor a discounted cash flow methodology is appropriate. It can also be applied where a business is no longer a going concern or where an orderly realisation of assets and distribution of the proceeds is proposed. Using this methodology, the value of the net assets of the company would be adjusted for the time, cost and taxation consequences of realising the company's assets.

Methodologies selected

67 The fair market value of CVC has been assessed by aggregating the estimated fair market value of the investment portfolio of the company, together with the realisable value of other assets and deducting liabilities.
68 The valuation of individual investments has been made on the basis of fair market value as a going concern. The primary valuation methodologies used to value individual investments have been:
$(a)$ listed investments – by reference to the most recent quoted price and recent capital raisings
$(b)$ unlisted investments – the capitalisation of future maintainable earnings and the discounted cash flow approach.
69 Other assets have been valued based on the estimated net realisable value of each asset.
$70$ The fair market value of the funds management business of CVCIM has been determined using the discounted cash flow methodology.

VI Valuation of CVC

Methodology

$71$ The fair market value of CVC has been assessed by aggregating the estimated fair market value of the investment portfolio of the company, together with the realisable value of other assets and deducting liabilities. Where appropriate, we have recognised a tax liability in respect of unrealised gains (and losses) based on our assessed value of individual investments.

Valuation summary

$72$ Assessed values of individual investments are set out in Appendices B and C of our report. Other assets and liabilities of CVC are discussed as appropriate in Section III of our report.
73 A summary of our assessed value of CVC is set out below:

		Assessed value
	Book value	Low	High
Assets	\$000	\$000	\$000
Investments
- listed	42,376	65,337	68,977
- unlisted	26,444	43,425	49,180
Loans	5,147	5,048	6,067
	73,967	113,810	124,224
Other assets
Cash	11,260	11,260	11,260
Receivables	123	123	123
Other	42	42	42
	11,425	11,425	11,425
Total assets	85,392	125,235	135,649
Liabilities
As recorded	354	354	354
CVCIM incentive fees		4,000	4,000
Tax on unrealised gains on investments		6,913	9,955
Total liabilities	354	11,267	14,309
Net assets	85,038	113,968	121,340

$74$ Based on issued shares of 103,994,456 our assessed value represents a range of \$1.10 to \$1.17 per CVC share.

$75$ This range compares to the price of \$1.14 per share at which CVC completed a share buy-back in March 2004. We have been advised that at that time the liability of \$4.0 million in respect of CVCIM incentive fees was considered to be of a contingent nature only. We note that the low range of our assessed value of a CVC share is consistent with the price of the recent share buy-back, adjusted for the incentive fee liability.

VII Valuation of CVCIM

Methodology

76 In determining the fair market value of the funds management business of CVCIM we have adopted the discounted cash flow (DCF) approach as our primary valuation methodology.
$77$ Our DCF valuation is based on free cash flow forecasts for the four years ending 30 June 2008 prepared by CVCIM management, which we have adjusted where considered necessary.
78 Free cash flow represents the operating cash flows on an ungeared basis (ie) before interest costs and debt repayments) less taxation payments and capital expenditure and working capital requirements. The free cash flow on an ungeared basis is adopted to enable the value of a business unit to be determined irrespective of the level of debt funding employed (which is then deducted from the ungeared value of a business to arrive at the value of equity in a company).
70 We have cross-checked our DCF valuation having regard to:
$(a)$ the implied forecast PE multiples
$(b)$ the net assets employed in the funds management business
$(c)$ the valuation expressed as a percentage of funds under management (taking into account comparable percentages based on recent market) transactions).

Assumptions

80 We have based our valuation on the existing funds under management and related contractual agreements. The key assumptions underlying the free cash flow forecasts are:
$(a)$ a growth in management fee income over the forecast period of 5% per annum, which we consider reasonable / conservative having regard to historical growth rates in the net assets of CVC
recurring revenue in respect of consultancy / directors fees of around $(b)$ \$350,000 per annum
a consistent level of management / consulting expenses at 51% of total $(c)$ income
overhead and other expenses based on the 2004 forecast, inflated at 3% $(d)$ per annum
a tax rate of 30%. $(e)$
81 With respect to forecast management fees the cash flow forecasts also assume the sustainability of the current level of CVC management fees of 4% per annum. We note that this level of fees was determined in 1986 at the time of the establishment of CVC and is currently "above market".
1. We have also considered the entitlement of CVCIM to any success/performance based fees. In this regard we note that in conjunction with the proposed transaction CVCIM will receive \$4.0 million from CVC in settlement of any entitlement to incentive fees in relation to CVC to 30 June 2004.
83 We have assumed in respect of other existing contractual agreements that:
no entitlement to a performance fee of significance is likely to arise $(a)$ with respect to CVC Private Equity Limited, having regard to the cumulative performance of this fund to date
the value of the 687,875 options held in The Eco Fund Limited is $(b)$ unlikely to be significant having regard to the exercise price of the options and the cumulative performance of the fund to date
$(c)$ the present value of the profit share entitlement with respect to CVC REEF Limited is unlikely to be significant, having regard to the prior entitlement of investors and the cumulative performance of the fund to date

Assessed indicative value

84 In arriving at our assessed value of the funds management business of CVCIM we have adopted a discount rate of between 12.5% and 13.5% per annum. This assumes that the business is equity funded and recognises:
forecast income largely reflects an entitlement to management fees $(a)$ based on existing contractual arrangements
$(b)$ the majority of the management fees accrue in respect of CVC, $13.8\%$ of which is owned by CVCIM
the favourable investment performance of CVC (both recently and $(c)$ over time) is unlikely to give rise to investor discontent with CVCIM as manager
$(d)$ termination of CVCIM as manager of CVC requires a special resolution and related 75% support for such a proposal
the relative size of CVCIM to other equity / property fund managers $(e)$
$(f)$ rates of return sought by investors in funds management companies such as CVCIM.
85 We have estimated the terminal value of the funds management business of CVCIM as at 30 June 2008, based on the free cash flow projected in the year ending 30 June 2008. We have assumed a growth rate in perpetuity of 3.5% per annum.
86 We have assessed the value of the funds management business of CVCIM in the range of \$8.2 million to \$9.1 million.
87 We note that:
$(a)$ the implied forecast PE multiples of between 11.0 and 12.2 for the year ending 30 June 2005 are towards the high end of what we would consider a reasonable range
$(b)$ the implied percentage of funds under management of around $7\%$ is appreciably greater than comparable percentages implied from recent market transactions. However this reflects the contractual arrangements prevailing (in particular the entitlement to a management fee of 4% per annum).

VIII Assessment of proposed transaction

88 In our opinion the terms of the proposed transaction are fair and reasonable to those shareholders of CVC not associated with CVCIM. The reasons for this opinion are set out below.

Assessed value

89 We have assessed the value of CVC prior to the proposed transaction in the range of \$1.10 to \$1.17 per share. The shares to be issued as consideration for the funds management business of CVCIM are to be issued at \$1.15 per share.
90 We have assessed the value of the funds management business to be acquired in the range of \$8.2 million to \$9.1 million. The proposed transaction attributes a value to this business of \$8.5 million.
91 We therefore consider the terms of the proposed transaction to be fair, as both the value of consideration offered and the value of the business to be acquired lie within our respective assessed range of values prior to the proposed transaction.
92 We have also considered the value of CVC subsequent to the proposed transaction assuming:
7.391.304 CVC shares are issued as consideration $(a)$
$(b)$ a value of the funds management business acquired equivalent to our assessed range of \$8.2 million to \$9.1 million.
93 Based on the above, the value of CVC is unchanged in the range of \$1.10 to \$1.17 per share as follows:

	Low \$000	High \$000
Assessed value of CVC Assessed value of funds management business	113,968 8,197	121,340 9,089
Adjusted value of CVC	122,165	130,429
Number of shares on issue after allotment	111,385.760	111,385,760
Adjusted value per share	\$1.10	\$1.17

Other considerations

$Q\Delta$ CVCIM currently holds a 13.8% interest in CVC. As a consequence of the transaction the existing shareholders in CVCIM will hold a combined interest in CVC of around 19.5%. We have considered the implications for CVC shareholders not associated with CVCIM and are of the view:
$(a)$ the increase in percentage interest is unlikely to have a material effect or deter the likelihood of a future takeover offer for all the shares in $CVC$
the interest of shareholders in CVCIM and CVC will prima facie be $(b)$ totally aligned in future, which we consider in the best interests of shareholders in CVC not associated with CVCIM.
95 Our assessed value of the funds management business of CVCIM has had regard to all incentive fee entitlements of CVCIM to the date of this report. To the extent that incentive fee entitlements arise in future, all CVC shareholders will participate in the income that accrues. Furthermore, CVC shareholders will benefit from the proposed transaction by the removal of any future liability for manager incentive fees.
96 The proposed transaction effectively represents the internalisation by CVC of its investment management activities. Based on observed transactions the proposal is consistent with recent market trends to remove any perceived conflicts of interest between managers and shareholders / investors. Accordingly, we would expect market reaction to the proposed transaction to be positive rather than negative.

Yours faithfully

Martin Holt Director

Wedniaid S

Craig Edwards Director

Appendix A

Oualifications, declarations and consents

Qualifications

$\mathbf{1}$ LEA is a licenced investment adviser under the Corporations Act. LEA's authorised representatives have extensive experience in the field of corporate finance, particularly in relation to the valuation of shares and businesses.
$\overline{2}$ This report was prepared by Martin Holt, Director and Craig Edwards, Director who are both authorised representatives of LEA. Mr Holt and Mr Edwards have over 20 years and 12 years experience in the provision of valuation advice respectively.

Declarations

$\mathcal{L}$ This report has been prepared at the request of the directors of CVC to accompany an Explanatory Memorandum to accompany a notice of meeting of shareholders. It is not intended that this report should serve any purpose other than as an expression of our opinion as to whether or not the proposed transaction is fair and reasonable to those CVC shareholders not associated with the proposed transaction.

Interests

$\overline{4}$ At the date of this report, neither LEA, Mr Holt or Mr Edwards have any interest in the outcome of the proposed transaction. LEA is entitled to receive a fee based on time expended at our standard hourly professional rates plus out of pocket expenses (and GST) for the preparation of this report. With the exception of this fee, LEA will not receive any other benefits, either directly or indirectly, for or in connection with the preparation of this report.

Indemnification

$\ddot{5}$ As a condition of LEA's agreement to prepare this report, CVC agrees to indemnify LEA in relation to any claim arising from or in connection with its reliance on information or documentation provided by or on behalf of CVC or CVCIM which is false or misleading or omits material particulars or arising from any failure to supply relevant documents or information.

Consents

6 LEA consents to the inclusion of this report in the form and context of which it is included in the Explanatory Memorandum to shareholders.

Investments – listed

Sunland

$\mathbf{1}$ Sunland Group Limited (Sunland) was established in 1983 and listed on the ASX in 1995. The company has grown from developing a single dwelling on the Gold Coast to a portfolio of land, medium density housing, high rise apartments, hotel ownership and management.
$\overline{2}$ This activity now spans across three states from Northern Oueensland to South-East Oueensland, from the Central Coast of NSW to inner Sydney, and in Victoria where projects have been concentrated in Melbourne and surrounding growth corridors. Offices in Brisbane, Gold Coast, Melbourne and Sydney have been established to support the group's activities in these areas.
3 Revenues have grown annually, with the company experiencing significant growth in the last two to three years. Revenues are forecast to exceed \$300 million in the 2004 year, generating an expected after tax profit in excess of \$52.0 million. Net assets as at 31 December 2003 were recorded at \$115 million.
$\overline{4}$ CVC was a founding shareholder in Sunland and realised part of its investment in the 2004 financial year. Subsequent to the recent rights issue by Sunland, in which CVC took up its full entitlement, CVC holds a current interest of around 19% in Sunland.
$\overline{5}$ Other substantial shareholders include interests associated with the senior management of the company.
6 In determining the market value of the CVC shareholding we have had regard to the prevailing share price of Sunland, recent share trading history and the recent rights issue launched in February 2004.
$\overline{7}$ In the previous 12 months shares in Sunland have traded in the range of \$0.58 to \$1.25 per share, with the major share price appreciation taking place during the period July to October 2003. We have attributed this increase to market recognition of the improved profitability of the company. Trading in the period subsequent to the rights issue has been in a narrower price range of around \$1.00 to \$1.15 per share.
8 A total of approximately 84.7 million shares were traded in the previous 11 months representing 49% of the issued share capital of Sunland (prior to the recent rights issue). This includes trades of 8.2 million shares in September 2003 and 25.2 million shares in October 2003 associated with a partial selldown by CVC and interests associated with the senior management of the company. Adjusting for these transactions the volume of share trading

represents approximately 30% of the issued share capital of Sunland at the time.

9 Having regard to the percentage interests held by the major shareholders, we regard the level of share trading as a reasonably representative basis from which to determine the market value of the company.
$10^°$ We have also had regard to the 1 for 4 renounceable rights issue launched by Sunland in February 2004. The issue was priced at \$1.05 per share, which represented a discount of around 17% to the prevailing (cum-entitlement) share market price. The issue successfully raised \$45.1 million, and was supported by all major institutional shareholders, CVC and senior management.
$11$ We have based our assessed value of the CVC shareholding in Sunland on:
the price of the recent rights issue of \$1.05 per share $(a)$
$(b)$ sharemarket trading subsequent to the rights issue
forecast 2004 earnings of in excess of 24 cents per share $(c)$
the intention of the Sunland directors to pay a fully franked dividend of $(d)$ six cents per share in July 2004
$(e)$ the size of the shareholding held by CVC.
12 Based on the above we have adopted a share price range for Sunland of \$1.05 to $$1.10$ per share.
13 We have therefore assessed the value of the CVC shareholding in Sunland in the range of \$43.19 million to \$45.25 million as follows:

	Low	High
Share price range adopted	\$1.05	\$1.10
Number of shares held	41.132,699	41,132,699
Assessed value	\$43.19 million	\$45.25 million

Stargames

$14$ Stargames Limited (Stargames) was established following the restructuring and renaming of the Kolback Group in 1999, and listed on the ASX in that vear. The principal activities comprise:

the design, manufacture and marketing of electronic gaming machines. $(a)$ gaming technologies and related gaming services
the importation and distribution of electronic vending equipment. $(b)$
15 The gaming division is the main activity of the company. To assist in achievement of its objective of becoming a global gaming product and technology supplier. Stargames has established a number of strategic partnerships with international gaming companies.
16 The international market place is perceived as presenting the greatest opportunities given the highly competitive and established nature of the Australian market
$17$ Revenues have grown annually since listing and are forecast to exceed \$55 million for the 2004 year, generating an expected after tax profit of around \$5.5 million. Net assets as at 31 December 2003 were recorded at \$30.2 million
18 CVC holds approximately 12.2 million shares in Stargames representing an interest of around 13.0%. Interests associated with the chairman and senior management of the company hold around 9% of Stargames.
19 In determining the market value of the CVC shareholding we have had regard to the prevailing share price of Stargames, together with recent share trading history.
20 In the previous 12 months shares in Stargames have traded in the range of \$0.85 to \$1.36 per share, with the major price appreciation taking place in the period July to September 2003. We have interpreted this increase as reflecting a greater market awareness and acknowledgement of the improved profitability of the company. Trading in the subsequent three months to the date of this report has declined to around \$1.00 to \$1.10 per share.
21 A total of approximately 11.2 million shares were traded in the previous 11 months representing around 12% of the issued share capital of Stargames. Trading volumes were relatively consistent throughout the period.
22 Having regard to the percentage interests held by the major shareholders, we regard the level of share trading as a reasonably representative basis from which to determine the market value of the company.
23 We have therefore based our assessed value on the current share market price of around \$1.05 per share, to which we have applied a discount in the range of 5% to 10% to recognise the price at which we believe a parcel of shares of the size held by CVC would need to be offered to enable their sale in a single line.

24 We have therefore assessed the value of the CVC shareholding in Stargames in the range of \$11.56 million to \$12.17 million as follows:

	Low	High
Share price	\$1.05	\$1.05
Discount	10%	5%
Number of shares held	12,166,383	12,166.383
Assessed value	\$11.56 million	$$12.17$ million

Greens Foods

25 Greens Foods Limited (Green Foods) manufactures, packages, imports and distributes processed foods, in particular company blended foods, cereals, snacks and pet food.
26 Following a significant restructuring of its activities in 2001/2002 the company returned to profitability in the 2003 year, Revenues for 2004 are forecast at around \$160 million, with an expected EBIT in excess of \$11.0 million. The company's current operational focus is to enhance manufacturing efficiencies leading to improved operating margins.
27 CVC holds approximately 9.3 million shares in Greens Foods representing an interest of around 8.7%, having acquired its original holding in 2001. Major shareholders include GPG with a holding of around 29% and two other private equity related groups.
28 In determining the market value of CVC's shareholding we have had regard to the prevailing share price of Greens Foods, together with recent share trading history.
29 In the previous 12 months shares in Greens Foods have traded in the range of \$0.63 to \$1.14 per share, with the major price appreciation taking place gradually over the period October 2003 to January 2004. We have interpreted this increase as reflecting a greater market awareness and acknowledgement of the improved profitability and operating performance of the company. Trading in the subsequent period to the date of this report has been in the range of around \$0.95 to \$1.10 per share.
30 A total of approximately 36 million shares were traded in the previous 11 months representing 33% of the issued share capital of Greens Foods. This includes trades totalling 6.1 million shares in November 2003, when significant shareholders acquired / increased their shareholdings in Greens Foods via on-market transactions.
31 We regard the level of share trading as a reasonably representative basis from which to determine the market value of the company.
32 We have therefore based our assessed value on the current share market price of around \$1.00 per share, to which we have applied a discount of 10% in our low range scenario to recognise the price at which we believe a parcel of shares of the size held by $\overline{C}VC$ would need to be offered to enable their sale in a single line.
33 No discount has been applied in our high range scenario in recognition that:
$(a)$ shares in Greens Foods have traded above \$1.00 per share for the majority of the period commencing January 2004
there have been no recent negative announcements concerning the $(b)$ operating performance of the company
$(c)$ major shareholders (excluding CVC) have demonstrated a previous desire to increase their holdings in Greens Foods via on-market transactions.
34 We have therefore assessed the value of the CVC shareholding in Greens Foods in the range of \$8.41 million to \$9.35 million as follows:

	Low	High
Share price	\$1.00	\$1.00
Discount	10%	$0\%$
Number of shares held	9.347.289	9.347.289
Assessed value	\$8.41 million	\$9.35 million

Other listed companies

35 We have assessed the value of the other listed company investments of CVC having regard to:
the prevailing share price, together with the recent share trading history $(a)$
the volumes of shares traded in the previous 12 months $(b)$
the interest of CVC in the company in both volume of shares and $(c)$ percentage terms
any other constraints limiting the capacity of CVC to realise the $(d)$ investments.

	Number	Interest
	οf	held	Low	High
	shares	%	\$000	\$000
SMS Management	4,000,000	1.27	1,120	1,160
Triple Plate Junction	1,000,000	2.59	1,000	1,000
Vita Life Sciences ⁽¹⁾	5,012,949	9.66	$\overline{\phantom{a}}$	w
Other			57	57
			2,177	2.217

Based on the above our assessed range of values are summarised below: 36

Note:

1 Loans/convertible notes assessed at less than face value. No value in equity.

Summary

We have assessed the fair market value of the listed investment portfolio of 37 CVC in the range of \$65.3 million to \$69.0 million as follows:

	Interest	Book		Assessed value
	held	value	Low	High
	$\frac{0}{10}$	\$000	\$000	\$000
Sunland	19.17	32,381	43,189	45,246
Stargames	13.03	4.962	11,558	12,166
Greens Foods	8.65	3,261	8,413	9,348
Other listed companies		1,772	2,177	2,217
		42,376	65.337	68,977

Investments – unlisted

Oueensland property development

$\mathbf{1}$ The property development activities of CVC in Queensland are held through 50% interests in each of the following joint venture partnerships:
$(a)$ Chevron Developments
Bel Air Real Estate $(b)$
Skyline Investments Australia. $(c)$
$\overline{2}$ The principal activities of Chevron Developments comprise the ownership and operation of the Chevron Renaissance shopping centre on the Gold Coast, Oueensland and the provision of finance for property development.
$\overline{3}$ We have assessed the value of Chevron Developments having regard to:
$(a)$ the estimated fair market value of the Chevron Renaissance shopping centre, in respect of which we have adopted a value in the range of \$73.0 million to \$79.0 million
$(b)$ related borrowings in respect of the shopping centre of \$46.75 million
$(c)$ other assets and liabilities.
$\overline{4}$ We have therefore assessed the value of the 50% interest of CVC in Chevron Developments in the range of \$16.2 million to \$19.2 million as follows:

	Low	High
	\$000	\$000
Chevron Renaissance shopping centre	73,000	79,000
Related borrowings	(46, 750)	(46,750)
	26,250	32,250
Other assets and liabilities	6,214	6,214
Value of Chevron Developments	32,464	38,464

Value of CVC 50% interest	16,232	19,232

5 The principal activity of the Bel Air Real Estate joint venture is the ownership and operation of a shopping strip on the Gold Coast, Queensland.

6 We have assessed the value of Bel Air Real Estate having regard to:
the estimated fair market value of the shopping strip, in respect of $(a)$ which we have adopted a value in the range of \$3.5 million to \$4.0 million
related borrowings in respect of the shopping strip of \$2.0 million $(b)$
other assets and liabilities. $(c)$
$\overline{\overline{7}}$ We have therefore assessed the value of the 50% interest of CVC in Bel Air Real Estate in the range of \$1.6 million to \$1.8 million as follows:

	Low	High
	\$000	\$000
Bel Air shopping strip	3,500	4.000
Related borrowings	(2,000)	(2,000)
	1,500	2,000
Other assets and liabilities	1,614	1.614
Value of Bel Air Real Estate	3.114	3.614

Value of CVC 50% interest	1,557	1.807

8 The principal activity of Skyline Investments Australia is the provision of finance to property developments on the Gold Coast, Queensland.
$\overline{Q}$ We have had regard to loans outstanding (to Chevron Developments) and have assessed the value of the 50% interest of CVC in Skyline Investments Australia at \$3.7 million, equivalent to a pro-rata share of net assets.

Fern Bay joint venture

CVC holds a 50% interest in the Fern Bay joint venture which is undertaking a $10$ land sub-division on coastal land located north of and in close proximity to Newcastle. The land has the potential for the development of up to around 1,000 residential lots, with Stages 1 and 2 for a total of 208 residential lots having received development approval.

$11$ Construction of Stages 1 and 2 is scheduled over the period to September 2006, with sales to commence on the completion of Stage 1 in April 2005.
$12$ We have assessed the value of the Fern Bay joint venture having regard to:
$(a)$ a preliminary feasibility study covering Stages 1 and 2
$(b)$ the timing of cash flows associated with the costs of construction and sales proceeds from sub-divided land
$(c)$ existing borrowings of \$14.0 million and the timing of loan repayments
$(d)$ the entitlement of CVC to the first \$3.0 million of profit arising
discount rates in the range of 20% to 25% per annum applied to the $(e)$ after tax cash flows
$(f)$ the potential for future development subsequent to completion of Stage $\overline{2}$ .
13 Based on the above we have assessed the value of the CVC interest in the Fern Bay joint venture in the range of \$4.6 million to \$5.8 million.

Probiotec

$14$ Probiotec Australia Pty Ltd (Probiotec) is a manufacturer, processor and wholesaler of specialist dairy proteins, vitamins and nutraceuticals. It commenced operations in 1997 and has production facilities in Bundaberg, Queensland and Nowra, NSW.
15 Recent initiatives to continue the historic growth of the business include joint ventures with Kraft and Dairy Farmers, and the acquisition of the business / assets of Pharmaction.
16 Annualised revenues currently exceed \$20.0 million, with a forecast EBIT thereon of around \$4.0 million. Total assets approximate \$24.0 million, with borrowings of \$8.5 million.
$17$ Subsequent to a recent capital raising of \$3.0 million CVC currently holds a 17.15% interest in Probiotec. There are around 25 shareholders in total.
18 In assessing the value of the CVC interest we have had regard to:
the recent capital raising, which implied a post-capital raising value of $(a)$ Probiotec of \$23.6 million
the historic and forecast EBIT multiples implied therein $(b)$
$(c)$ the reasonableness of the implied intangible value in the company
$(d)$ a discount in the range of 10% to 20% to recognise both the limited marketability of Probiotec shares and the minority interest in Probiotec held by CVC.
19 Based on the above we have assessed the value of the CVC shareholding in Probiotec in the range of \$3.25 million to \$3.6 million.

Pro-Pac Group

20 Pro-Pac Group Limited (Pro-Pac) is a manufacturer and distributor of environmental packaging equipment. The business has been established for 15 years, with operations in Sydney, Melbourne and Brisbane.
$21$ It has a leading market position in biodegradable void fill and holds exclusive licence agreements for Australasia, reflecting long standing relationships with licensors (key licences run to 2011, with a further five year option to 2016).
22 The business has a large, diversified customer base, with high customer retention. There is a local diversified supply of the majority of raw material used in manufacture.
The business operations of Pro-Pac are contained in a subsidiary company, 23 Pro-Pac Packaging (Aust) Pty Limited, in which Pro-Pac has an 80% interest. The remaining 20% interest is held by the CEO.
24 Revenues have grown annually and are forecast to exceed \$18 million in the 2004 financial year, generating an expected EBIT of around \$2.4 million.
25 Net tangible assets employed in the business approximate \$3.3 million, represented mainly by plant and equipment and working capital (mainly receivables). The company has no borrowings.
CVC holds a controlling 81.59% interest in Pro-Pac, originally acquired in 26 2003.
$27$ In assessing the value of this interest we have:
adopted the capitalisation of future maintainable earnings methodology $(a)$ to arrive at a value of the underlying business of Pro Pac Packaging in the range of $$12.5$ million to $$13.75$ million
recognised surplus cash of \$1.0 million in assessing the value of a $(b)$ 100% interest in the equity of Pro-Pac Packaging
$(c)$ had regard to:
- the controlling 80% interest of Pro-Pac in Pro-Pac Packaging $(i)$
- $(ii)$ the controlling 81.59% interest of CVC in Pro-Pac.
28 Based on the above we have assessed the value of the CVC shareholding in Pro-Pac in the range of \$8.8 million to \$9.6 million.

CVC Private Equity

29 CVC Private Equity Limited is an investment company managed by CVCIM. Funds raised to date approximate \$17.0 million.
30 The two major investments are Battery Energy Power Solutions Pty Ltd and Australian Repair Solutions Pty Ltd, incorporating its wholly owned subsidiary Telefix Sales Pty Limited.
$31$ The value of CVC Private Equity has been assessed by aggregating the estimated fair market value of the investment portfolio of the company, together with the realisable value of other assets and deducting liabilities.
32 The valuation of individual investments has been made on the basis of indicative fair market value as a going concern. Investments are held in unlisted companies. The primary valuation methodology used to value individual investments has been the discounted cash flow (DCF) approach.
33 In considering the indicative market value of individual investments we have also had regard to:
$(a)$ the percentage interest held
the degree of control / influence exerted by CVC Private Equity over $(b)$ the company, including board positions held
any recent significant transactions that might provide a reference point $(c)$ as to market value.

34 We have assessed an indicative value of CVC Private Equity in the range of \$15.2 million to \$16.7 million as follows:

	Low	High
	\$000	\$000
Battery Energy	3,332	4,175
Telefix / ARS	2,972	3,922
Other loans / investments	1,533	1,583
	7,837	9,680
Cash	7.419	7,419
Other assets / (liabilities)	(90)	(357)
	15,166	16,742

$35$ In recognition that the investments of the company are managed by CVCIM we have assessed the 10.48% interest in CVC Private Equity held by CVC equivalent to its pro-rata interest in the company, in the range of \$1.6 million to $$1.75$ million.

Everest Capital

36 CVC has made a capital investment of \$3.0 million in the Everest Babcock $\&$ Brown Absolute Return Fund (the Fund), a wholesale fund offered by Everest Capital Limited which commenced in October 2003. The Fund itself has underlying investments in 20 individual funds, both domestic and international, mainly of an equities related nature.
37 The CVC investment is leveraged with a total investment in units in the Fund of \$15.3 million, the additional \$12.3 million being provided through related borrowing facilities. The initial invested capital of \$3.0 million is guaranteed, so the risk in the investment lies in whether the increase in the value of the units meets the interest payments on the borrowings.
38 We have valued the CVC interest based on the reported performance of the Fund to 31 March 2004, which indicates that the increase in value of the units exceeded the interest on the borrowings by approximately \$0.5 million.
39 We have therefore ascribed a value of \$3.5 million to the investment in the Fund for the purpose of our report.

Summary

40 We have assessed the fair market value of the unlisted investment portfolio of CVC in the range of \$43.4 million to \$49.2 million as follows:

	Interest	Book	Assessed value
	held	value	Low	High
	%	\$000	\$000	\$000
Queensland property development
- Chevron Developments	50.0	7,140	16,232	19,232
- Bel Air Real Estate	50.0	527	1,557	1,807
- Skyline Investments Australia	50.0	3,738	3,738	3,738
		11,405	21,527	24,777
Fern Bay joint venture	50.0	875	4.648	5,818
Probiotec Australia Pty Ltd	17.15	3,052	3,250	3,600
Pro-Pac Group Limited	81.59	6,791	8.812	9,628
CVC Private Equity Limited	10.48	1,180	1,583	1,752
Everest Capital Limited	w	3,036	3,500	3.500
Rattoon Holdings Limited ⁽¹⁾	$\blacksquare$	105	105	105
		26,444	43,425	49,180

Note:

1 Rattoon Holdings Limited valued at price of recent rights issue.

CVC LIMITED ACN 002 700 361

Registered Office: Level 42 AAP Centre, 259 George Street Sydney NSW 2000, Australia

		Phone: (02) 9087 8000		Fax: (02) 9087 8088
			PROXY FORM
I,	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, (FULL NAME, BLOCK LETTERS)
οf	.
	being a member of CVC Limited.
SECTION A
	HEREBY APPOINT
οf	.
	or, failing him/her, the Chairman of the Meeting, as my/our proxy to vote for me/us and on my/our behalf at the General Meeting of the Company to be held on Monday 9 ^th day of August 2004 at 2.00 pm (Sydney time), or at any adjournment thereof. The proxy so appointed shall represent all my/our voting rights except those (if any) specified in B below.
	SECTION B (DO NOT COMPLETE THIS SECTION UNLESS YOU WISH TO APPOINT TWO PROXIES)
οf	AND I FURTHER APPOINT . .
	as my proxy to vote for me/us and on my/our behalf at the said meeting or at any adjournment thereof. The proxy, appointed by this Section B, shall represent my/our voting rights in respect of shares.
	I/ we instruct my/our proxy to vote as indicated below in respect of the resolutions.
			A			в
		For	Against	Abstain	For	Against	Abstain
Resolution 1-	Settlement of Incentive Fees
Resolution 2-	Novation of Management Agreements
Resolution 3-	Acquisition of CVC Managers Pty Ltd
Resolution 4-	Long Term Incentive Plan
Resolution 5-	ong Term Incentive Plan for ASX Rule 7.1
Resolution 6-	Long Term Incentive Plan for Mr Alexander Beard
Resolution 7-	Non-Executive Directors' Remuneration
Resolution 8- Share Buy-back
Resolution 9 -	Sales of Shares in Pro-Pac Group Limited
	If you do not wish to direct your proxy how to vote, please place a mark in the box: By marking this box you acknowledge that the Chairman may exercise your proxy even if he has an interest in the outcome of the resolutions and votes cast by him other than as proxy holder will be disregarded because of that interest. The Chairman will vote all undirected proxies in favour of all resolutions.

Signed this....................................

.......................................

Signature of Shareholder (s)

Signature of Witness

.......................................

AI assistant

CVC LIMITED — Proxy Solicitation & Information Statement 2004

64728_rns_2004-07-07_b8ae1482-d3b8-4fed-90c2-c49cc70dff86.pdf

Dear Shareholder

The Resolutions

Restructure of CVC (Resolutions 1, 2 and 3)

CVC Limited Executive and Non-Executive Long Term Incentive Plan (Resolutions 4, 5 and 6)

Non-Executive Director Remuneration (Resolution 7)

Share Buvback (Resolution 8)

Sale of Shares in Pro-Pac Group Limited to CVC Private Equity Limited (Resolution 9)

Explanatory Memorandum

Independent Expert

The Meeting

ACN 002 700 361

NOTICE OF A GENERAL MEETING and EXPLANATORY MEMORANDUM

This is an important document

THIS IS AN IMPORTANT DOCUMENT - PLEASE READ IT CAREFULLY

IMPORTANT DATES

TABLE OF CONTENTS

NOTICE OF A GENERAL MEETING

AGENDA

Voting exclusion statement

Voting exclusion statement

Approval for the issue to CVC Investment Managers Pty Ltd of 7,391,304 shares in 3. consideration for the acquisition of its investment management business

Voting exclusion statement

$\overline{\mathbf{4}}$ . Approval for the adoption of the CVC Limited Executive and Non Executive Long Term Incentive Plan

Approval for the issue and allotment of shares under the CVC Limited Executive and 5. non-Executive Long Term Incentive Plan

Voting exclusion statement

6. Issue and allotment of shares to Alexander Beard under the CVC Limited Executive and non-Executive Long Term Incentive Plan

Voting exclusion statement

7. Approval of Increases in Non-Executive Director's Remuneration

Voting exclusion statement

8. Approval for an On-Market Share Buyback Program

9. Sale of Pro Pac Group Limited shares to CVC Private Equity Limited (formerly CVC Biz Vision Ltd)

Voting exclusion statement

NOTES TO NOTICE OF MEETING

Documents

Persons entitled to vote

How to vote

Voting in person

Voting by proxy

Proxies

Voting by attorney

Restrictions on Voting

Enquiries

EXPLANATORY MEMORANDUM

OVERVIEW OF THE RESOLUTIONS

Restructure of CVC (Resolutions 1, 2 and 3)

CVC Limited Executive and Non-Executive Long Term Incentive Plan (Resolutions 4, 5 and 6)

Non-Executive Director Remuneration (Resolution 7)

Share Buyback (Resolution 8)

Sale of Shares in Pro-Pac Group Limited ("PPG") to CVC Private Equity Limited ("CVC Private Equity") (a related party) (Resolution 9)

RESOLUTIONS

$\mathbf{1}$ . RESOLUTION 1-PAYMENT OF OUTSTANDING INCENTIVE FEES

1.1. Background

1.2. Discussion of the proposed settlement of accrued but unpaid incentive fees and effects of approval

1.3. Shareholder Approval Requirements

Disqualifying Material Personal Interests - Section 195 of the Corporations Act

Approval for Related Party Transactions - Corporations Act 2001 Requirements

1.4. Statutory information

$21$ RESOLUTION 2-THE NOVATION OF THE MANAGEMENT AGREEMENTS OF THE COMPANY AND LASEREX LIMITED

2.1. Overview of the Proposal

2.2. Regulatory requirements

Approval for Directors Material Personal Interest - Section 195 of the Corporations Act

Approval for Related Party Transactions - Chapter 2E of the Corporations Act 2001 Requirements

2.3. Implications of Providing Consent for Novation

2.4. Implications if Resolution not Approved

2.5. Statutory information

2.6. Voting Restrictions

$31$ RESOLUTION 3-THE ACQUISITION OF CVC MANAGERS PTY LTD

3.1. Description of the Proposal

3.1.1. Overview

3.1.2. Reasons for the Restructure

Reduce the Cost of the Management of the Company

Acquire the Value of CVCIM

Acquisition of a Diversified Asset Manager

3.1.3. Details of the Transaction

3.1.4. Acquisition Price and Consideration

3.1.5. Escrow Period

3.1.6. Warranty to not cause or support the wind up of the Company

CVC LIMITED Proxy Solicitation & Information Statement 2004

$2₁$ RESOLUTION 2-THE NOVATION OF THE MANAGEMENT AGREEMENTS OF THE COMPANY AND LASEREX LIMITED

$3₁$ RESOLUTION 3-THE ACQUISITION OF CVC MANAGERS PTY LTD