Augusta Capital confirms loss of PIE status as market value of funds management exceeds 10% of assets

Thursday 24th March 2016

Augusta Capital, the listed property investor and fund manager, will lose its Portfolio Investment Entity (PIE) status from July 1 because the value of is funds management subsidiary has grown beyond the threshold of 10 percent of total assets.

The Auckland-based company, which last month gained a Financial Markets Conduct Authority licence as a manager of investment schemes covering property syndicates and managed funds, said its funds management business was valued at between $28 million and $34.8 million by PwC. It didn't give an update of its total assets.

As a result of losing PIE status, Augusta will have to withhold tax from dividend payments to New Zealand resident shareholders at a rate of up to 33 percent, rather than the current maximum 28 percent allowed under the PIE rules. A PIE is a special tax investment entity which allows payments can be passed on to shareholders at Augusta's corporate tax rate if there are insufficient imputations credits available.

Based on the current annual dividend of 5 cents a share, the net effective dividend under the non-PIE regime would be 4.64 cents, August said. If the PwC valuation was included the Augusta's financial statements, its net asset value would increase to a range of $1.05 and $1.12, which would be up from the reported NTA of 89 cents at Sept. 30, it said.

"We made the strategic call some time ago that the company's growth would come from the funds management division and this strategy has proved a successful one," said managing director Mark Francis. "Loss of PIE status was always going to be a consequence of this and this was well signalled to the market some time ago." It was "a consequence of our own success."

Funds management generated net revenue of about $4.6 million in Augusta's first half, ahead of the $3.3 million garnered from investment property.

Augusta faces a five-year stand down period from being a PIE effective from July 1, it said. The company would monitor opportunities to regain that status, it said.

Augusta shares fell 0.5 percent to $1.015 and have slipped 0.5 percent in the past 12 months while the NZX 15 index gained about 13 percent.

(BusinessDesk)

BusinessDesk.co.nz

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