T REPOR AL ANNU

Transcription

1 ANNUAL REPORT 2017

2

3 BEING FULLY PRESENT IN THE NOW, IS THE GREATEST GUARANTEE FOR A BRIGHT FUTURE 33 Broadway Trust, Newmarket, Auckland - Artist s Impression

4 4 PORTFOLIO BY LOCATION HEADLINE PORTFOLIO BY LOCATION SUBHEADER TOTAL OF NEW ZEALAND AND AUSTRALIA PROPERTIES UNDER MANAGEMENT: 114 TOTAL SUM OF THE NEW ZEALAND AND AUSTRALIAN PORTFOLIO: BRISBANE Number of properties: Sum of valuations: 11 A $ 111.6m $1.60 billion TARANAKI Number of properties: Sum of valuations: 12 $ 73.2m NELSON Number of properties: Sum of valuations: 1 $ 4.6m OTAGO Number of properties: Sum of valuations: 3 $ 28.8m

5 5 PORTFOLIO BY LOCATION HEADLINE SUBHEADER NORTHLAND Number of properties: Sum of valuations: WAIKATO Number of properties: Sum of valuations: 2 $ 19.3m 8 $ 71.9m AUCKLAND Number of properties: Sum of valuations: 49 $ 1,014.7m BAY OF PLENTY Number of properties: Sum of valuations: 2 $ 23.2m HAWKES BAY Number of properties: Sum of valuations: 4 $ 50.3m CANTERBURY Number of properties: Sum of valuations: 8 $ 120.2m MANAWATU & WHANGANUI Number of properties: Sum of valuations: WELLINGTON Number of properties: Sum of valuations: 9 $ 45.1m 5 $ 35.7m

6 6

7 7 CONTENTS Key Highlights Annual Review 10 Chairman s Letter 12 Managing Director s Letter 14 Report from Management 16 Funds Management Strategic Update 22 Funds Management Focus 24 Portfolio by Property 32 Director Profiles 34 Investor Relations 38 Corporate Governance Financial Statements 46 Independent Auditor s Report 80 Shareholder Statistics 84 Directory 86

8 8 KEY HIGHLIGHTS KEY HIGHLIGHTS FINANCIAL PERFORMANCE OPERATING PERFORMANCE 19 % Operating performance (Adjusted Funds From Operations) increased strongly by 19% to $6.75 million (up from $5.68 million). $7.75 MILLION Net Profit After Taxation and Total Comprehensive Income of $7.75 million, is 43% lower than FY2016 reported result of $13.52 million, primarily as a result of a number of strong revaluation gains as well as gains on disposals in the prior comparative period (FY2016). FUNDS MANAGEMENT SEGMENT PERFORMANCE 14 % or $0.45 million (after tax) NET ASSET VALUE (NAV) increased from 94 cents per share to 98 cents per share NET PROFIT INVESTMENT ASSETS SEGMENT PERFORMANCE 31 % or $0.73 million (after tax) driven by returns from investment assets (VAF and NPT). CASH DIVIDENDS paid equating to 5.50 cents per share a pay out ratio of 71 % based on Adjusted Funds From Operations earnings of 7.71 cents per share.

9 9 KEY HIGHLIGHTS FUNDS MANAGEMENT - CONTINUOUS GROWTH FIVE NEW SYNDICATION DEALS $6.87 completed during the year generating $1.7 ASSETS UNDER MANAGEMENT NOW MILLION of upfront revenue BILLION inc. 33 Broadway, Newmarket, Auckland. $347 NEW DEAL ASSET VALUE MILLION and equity raised of $203m raised from new deals. Diversified product offering to investors with the Augusta Value-Add Fund No.1, Australian Syndications and 33 Broadway Trust (early in FY2018). RECURRING MANAGEMENT FEES excluding transactional income, now at $5.60 million up 10 % from FY2016 ($5.10 million) INVESTMENT ASSETS - BALANCE SHEET TRANSFORMATION FINANCE CENTRE NOW $96 UNCONDITIONALLY SOLD FOR MILLION with a staged sale through to April Strategic acquisition of NPT SHARES Also acquired 10% stake in Augusta Value Add Fund No. 1 for $6.0 million. Revaluation gain of $0.78 million / 13% recognised in FY2017.

10 10 CHAIRMAN S REPORT HEADLINE SUBHEADER REV IEW ANNUAL

11 REPORT0133 Broadway Trust, Newmarket, Auckland - Artist s Impression 11 CHAIRMAN S HEADLINE SUBHEADER

12 12 CHAIRMAN S LETTER CHAIRMAN S LETTER It s been another year during which Augusta Capital performed strongly against its strategic agenda to protect and grow the future value of the company s assets, based on a clearly defined long-term strategy in the funds management sector. The prime driver in the increased revenue profile and operating earnings was from funds management initiatives. The company is currently in a state of significant transformation which will redefine the future operating earnings of the business and the Board is pleased with the scale and pace at which this change is being realised. The Board recognises the management team for the work undertaken to achieve the financial result, which saw adjusted funds from operations increase 19%, and the progress on the business transformation. Continued sound governance in alignment with the long term strategy is essential and the progress over the past 12 months is proof of that. The past year has seen the launch of the Augusta Value Add Fund, a new wholesale fund and the Graham Street offerings, being the two largest retail capital raises in Augusta s history, as well as the unconditional sale of the Finance Centre. We also took the opportunity to realise a number of strong capital gains for our investors in the currently buoyant market by selling some of our managed assets with investor approval. Recurring operating earnings is the primary barometer of financial performance in becoming a property funds management business as well as the alignment of interest from the investment in products we manage. This strategy delivers a higher return on capital and the future balance sheet will be utilised to drive business growth. The Managing Director will cover the key operating matters and indicators in his report. The future strategy targets the growth in assets under management though the launch or acquisition of a diverse range of products. Property syndicates will continue to be a core part of this growth but will be larger in scale, as is evidenced by the current 33 Broadway, Newmarket, Auckland offer, which is to be the future home of Mercury Energy. This growth will also continue to include Australian product. The stakes in NPT Limited and the Augusta Value Add Fund No. 1 Limited fit with this strategy and transformation. The exit of the Finance Centre created the necessary capability to fund the share acquisition in NPT Limited. We have built a solid platform, and believe we have the necessary capability, to optimise this in conjunction with our strategic partners to drive the growth in the assets under management and maximise returns to investors. Risk management is a focus for the Board to ensure that the balance sheet is appropriately managed and new product initiatives are launched after thorough due diligence. Outlook Augusta is continuing on the journey to grow its business through diversification of its income from directly owned property to other investment and funds management revenue. The sale of the Finance Centre is a critical element to this transition and an outstanding priority. Growth in assets under management and recurring earnings can be delivered with the support of a balance sheet through warehousing assets, underwriting capital raises as well as investing in products managed by Augusta, but ultimately management fee earnings growth is not capital intensive in the long term. Future economic conditions may influence the rate of growth in assets under management as well as the future product offered. It is expected that the balance sheet will transform to investment in funds management initiatives but will retain the necessary capability and flexibility to create and take advantage of new opportunities. The Board s expectation for the year ahead is to maintain the improving trend in earnings with a key focus on the management of existing assets to generate increasing returns and value for our investors. The launch of new initiatives such as the 33 Broadway offer and the potential acquisition of other funds management opportunities will be a continuing focus. The Company plans to hold its annual meeting at the Northern Club, 19 Princes Street, Auckland on Thursday 31 August 2017 at 2.30pm. I encourage shareholders to attend and engage at this year s annual meeting as we will provide a further update on the progress against strategy. P.J. Duffy Chairman 30 May 2017

13 13 CHAIRMAN S LETTER (CONTINUED) WE HAVE BUILT A SOLID PLATFORM, AND BELIEVE WE HAVE THE NECESSARY CAPABILITY, TO OPTIMISE THIS IN CONJUNCTION WITH OUR STRATEGIC PARTNERS TO DRIVE THE GROWTH IN THE ASSETS UNDER MANAGEMENT AND MAXIMISE RETURNS TO INVESTORS.

14 14 MANAGING DIRECTOR S LETTER MANAGING DIRECTOR S LETTER It has been another busy and successful year at Augusta. We continue the evolution to a funds management model and the exit of the Finance Centre clearly sets us on that path. It will provide the necessary financial capability to launch new initiatives and change the course of Augusta including our aspirations to manage product in the listed and wholesale sectors. The efforts of the Augusta team have been significant and with the support of the Board we have set a platform and defined a funds management strategy for the years ahead. Some of the key highlights for the year; Adjusted funds from operations increased 19% on the back of increased recurring base management fees and increased transactional income derived from leasing, project management and sales activity. Assets under management have grown from $1.46 billion to $1.60 billion and we are further adding to this with our current 33 Broadway offer due to settle on 30 June 2017 which will take the portfolio to $1.70 billion. Annualised base management fees, which is a key metric for us increased by 10% to $5.6 million, while transactional income recorded for the year provided an additional $1.95 million. The balance sheet has evolved as we now hold investment assets being the 10% stake in the Augusta Value Add Fund and what is now an 18.85% stake in NPT following a further acquisition post balance date (9.26% was acquired during the FY2017 financial year). Both investments are consistent with our strategy. We have retained earnings to build shareholder wealth in the transformation phase we are now in, with our dividend pay-out ratio the lowest in the sector. Growth in recurring earnings is a key benchmark of performance for us. The transactional income created through an alignment of interests where both the investors and manager are rewarded, continues to become more recurring in nature. Corporate costs have increased as we continue to build our fund capability and platform as the portfolio grows. With scale we expect to generate further synergies in our operations. The Financial Markets Conduct Act is a welcome addition to our sector and ensures all managers have the necessary capabilities to manage investors money, however it has added a layer of cost. The launch of the Augusta Value Add Fund No.1 Limited on 1 April 2016, after a successful capital raise from wholesale investors set the tone for the year and now we are pleased to say that two of the five properties are unconditionally sold well above the acquisition price confirming that the value add strategy is working. The Graham Street offerings, which were our biggest ever syndications, were both fully subscribed, which is clear evidence of the investor appetite for the quality product we offer. NPT As the largest shareholder in NPT Limited, Augusta Capital s board and management team were highly satisfied with the outcome of the Special Meeting on 21 April this year. The result was the outcome of a carefully thought through and well executed plan to realise a change in governance in the interests of all NPT shareholders. Importantly, the NPT investment now stands to deliver Augusta shareholders a vehicle for attractive earnings growth under a burgeoning property funds management business model. The reason management fought so hard for this outcome was that under the previous stewardship NPT was sitting idle for too long as an under-performing company. Augusta can see the potential for NPT and is delighted to have an opportunity to help realise this. In terms of next steps, within the near term Augusta will table a proposal to the new NPT Board to externalise its management. NPT can and should be run for less and Augusta has already identified opportunities, which if realised, would deliver an attractive earnings uplift against NPT s existing assets. To address NPT s sub-scale Augusta will take the time necessary to develop a compelling proposal (or series of proposals) for the new NPT Board to consider. This is a core area of Augusta s expertise and management is confident of delivering on this commitment.

15 15 MANAGING DIRECTOR S LETTER (CONTINUED) APPETITE FOR SYNDICATED PRODUCT REMAINED STRONG AS WE RAISED $203 MILLION. Funds Management Appetite for syndicated product remained strong as we raised $203 million of new equity in the 12 months to 31 March Five new deals were completed generating $6.87 million of deal fees on a total of $347 million of investment property. Each offer had its own unique characteristics as we strive to further diversify our offerings. Gross management fees recorded for the year were $7.26 million which was an increase of 36% on the prior year. Transactional income is becoming a recurring theme and a significant driver of earnings as we continue to extract value from the assets we manage for our syndicate investors. It creates not only bottom line recurring earnings but positive outcomes for syndicate investors and also a reputation for delivering results. Investment asset income was a new stream of income for the year and this alignment of interests, or co-investment in Augusta product, is something you will see more of in the future. Recurring investment income of $0.66 million was derived from the Augusta Value Add Fund investment and the NPT stake. The Augusta Value Add investment was also revalued upwards by $0.78 million or 13% on the original investment of $6 million. As we paid above the trade price for NPT stock we did record a write-down as at 31 March 2017 of $2.175 million. We are obviously motivated to re-rate the share price. The managed portfolio performed very well over the last 12 months. We were able to sell a number of managed assets above valuation and the March 2017 annual valuations have seen a number of gains for our syndicate investors. The exit of the Finance Centre, which you as shareholders voted on back in July last year, is seen as a key milestone in Augusta s history. Whilst there has been a delay in the issue of a new title to facilitate settlement of the Augusta House transaction we remain focused on executing the phased settlements up to April The deal was structured to provide sufficient time to identify new avenues in our transformational phase as well as the certainty of an unconditional deal. The current market is still very active and we continue to see deals being concluded at compressing yields. The access to and cost of funding is something that may dictate yields in the medium to longer term. The near term key strategic operating priorities include securing the NPT management contract and aside from our stake in the company we obviously bring a wealth of skill and experience in commercial real estate and have a history of turning around under-performing assets. The successful conclusion to the 33 Broadway offer, the settlement of Augusta House and of course the launch of new products are also other key priorities in the year ahead. We have proven we can raise capital on a consistent basis and in respect to recent divestments we have created enhanced values for our investors. M.E. Francis Director 30 May 2017

16 16 REPORT FROM MANAGEMENT REPORT FROM MANAGEMENT FINANCIAL RESULTS The results for the year ended 31 March 2017 recorded total comprehensive income for the year, net of tax of $7.75 million compared to a profit of $13.52 million in the prior year. Adjusted Funds From Operations (AFFO) which represents net profit after income tax paid, excluding revaluations, mark to market of interest rate swaps, deferred tax and one off transactions increased by $1.07 million or 19% from $5.68 million to $6.75 million. This equates to operating earnings per share of 7.71 cents for the year compared to 6.5 cents per share last year. A 19% increase in AFFO was driven by; 1. The Funds Management business segment was up $0.45 million or 14% on last year. This was due to growth in recurring management fees and transactional income 2. Investment Asset performance after tax increased $0.73 million or 31% on last year this was due to higher income from investments (primarily VAF and NPT) as well as growth in Finance Centre earnings due to higher occupancy and rental rates, partly offset by lower rental income as a result of the sale of 7 City Road and 36 Kitchener Street In respect to non-operating adjustments; 3. An investment property positive revaluation gain of $4.12 million was recorded which was $2.95 million or 42% lower compared with the strong valuation increase in the prior year of $7.07 million. 4. Revaluation loss of $2.18 million recognised in relation to the stake in NPT Limited (reflected in other comprehensive income) 5. No material gains on sale were recognised in FY2017 as an asset sold was warehoused for a short period of time for the Augusta Value Add Fund No. 1. A gain on sale was recognised in the prior year of $0.96m for the sale of 7 City Road. 6. Recognition of $1.41 million of transaction costs relating to the future sale of the Finance Centre 7. A positive revaluation gain of $0.78 million for stake in the Augusta Value Add Fund No Derecognition of $0.83 million of intangible assets relating to management contracts of assets that have been sold. The Augusta Capital Board considers the result to be a strong performance on the back of growth in recurring earnings. Transformation of Augusta's Net Revenue Profile ($m) Investment Portfolio Funds Management - Recurring Fees Funds Management - New Deal Fees Note: Net Revenue analysis excludes cleaning net revenue ($M) Net Revenue FY2017 PERFORMANCE DRIVEN BY GROWTH IN RECURRING EARNINGS

17 17 REPORT FROM MANAGEMENT (CONTINUED) Five Year Summary Year Ended 31 March 2017 Net Revenue Investment Portfolio Net Revenue FM Recurring Fees Net Revenue FM New Deals Net Revenue Cleaning Services (0.05) Corporate & Administration Costs (8.14) (7.16) (6.36) (2.11) (1.90) Net Funding Costs (2.16) (2.93) (3.09) (2.66) (2.03) Unrealised Net Change in Value of Investment Properties (2.19) 1.86 Total Comprehensive Income for the Year, Net of Tax Adjusted Funds From Operations (AFFO) - NON-GAAP* AFFO cents per share ($m) 2016 ($m) 2015 ($m) 2014 ($m) 2013 ($m) ($m) ($m) ($m) ($m) ($m) Total Assets Total Liabilities Shareholders Equity Net Interest Bearing Debt to Investment Assets (%) 26.6% 36.5% 37.6% 45.9% 36.2% Shares on Issue (m) Cash Dividends Paid (cps) Net Tangible Assets Per Share (excluding intangible assets and goodwill) ($) Net Assets Per Share ($) Adjusted Funds From Operations (AFFO) Reconciliation ($m) ($m) ($m) ($m) ($m) Total Comprehensive Income for the Year, Net of Tax Adjust For: Loss / (Gains) from sales of investment property 0.02 (0.96) Fair value Loss / (Gains) on investment property (4.12) (7.07) (4.37) 2.19 (1.86) Fair value Loss / (Gains) on the mark to market of derivatives (0.55) (0.59) 0.18 Non-FFO deferred tax expenses - (0.42) (3.18) Other unrealised or one-off items** Adjusted Funds From Operations (AFFO) **Other unrealised or one-off items - detail Contingent Consideration Discount Adjustment - (0.03) Fair Value Gain (Loss) on Investments (0.78) Transaction costs Comprehensive Income - Unrealised Gain / (Loss) on Investments Derecognition of intangible asset Other Movements Other unrealised or one-off items *Adjusted Funds From Operations (AFFO) is non-gaap financial information and are common investor metrics, calculated based on guidance issued by the Property Council of Australia.

18 18 REPORT FROM MANAGEMENT (CONTINUED) The below table outlines the material year on year movements; Year on Year Impacts 2017 $m 2016 $m Year on Year Variance $m Commentary Property Revenue (0.83) Lower due to sale of investment properties (7 City Road and 36 Kitchener St) partly offset by revenue growth in Finance Centre Management Fees Strong growth in base management fees plus transactional fee income partly offset by divestment of some managed properties Offeror Fees deals completed in FY17 Underwriting Fees (0.47) Augusta provided for $68 million of equity underwritten. In total, $203 million of equity was raised Investment Income (0.56) Primarily income from stakes in Augusta Value Add Fund No. 1 and NPT Limited Cleaning Services (0.15) Cleaning business sold in December 2016 Gross Revenue Operating Costs (4.28) (4.83) 0.55 Lower operating costs due to sale of investment properties (7 City Road and 36 Kitchener St) Net Revenue Corporate Costs (8.14) (7.16) (0.98) Personnel costs higher due to creation of new roles and LTI incentive Funding Costs (2.16) (2.93) 0.77 Lower average balances and lower effective interest rates Net Profit Before Fair Value Movements, Gains / (Losses) on Disposal and Taxation Adjusted Funds From Operations Increase of 19%

19 19 REPORT FROM MANAGEMENT (CONTINUED) Segment Reporting Investment Assets () Funds Management () Cleaning () Total () Total gross revenues 8,703 14, ,317 Total net revenues 6,730 12,362 (47) 19,045 Corporate costs (1,492) (6,626) (20) (8,138) EBIT 5,238 5,736 (67) 10,907 Funding costs (1,572) (592) - (2,164) Profit before Fair Value Movements, Gains / (Losses) on Disposal and Taxation 3,666 5,144 (67) 8,743 Segment Year on Year AFFO 3,094 3,705 (54) 6,745 AFFO Prior Year 2,360 3, ,682 Year on year (116) 1,063 Year on year % 31% 14% (287%) 19% Overhead in respect to funds management increased due to additional resourcing requirements. The March 2017 result recognised the full year impact of a number of roles including the General Counsel, Development Manager and Legal & Compliance Manager who were recruited during the later stages of the prior financial year. There was also additional costs recognised in relation to senior management for long term incentives, recruitment and associated human resource costs. Funds Management Five new syndication deals and one fund were completed generating $6.88 million of gross upfront fee income, consisting of offeror fees of $5.45 million and underwriting fees of $1.43 million. The total value of the assets purchased across New Zealand and Australia was in excess of NZ$347 million and the corresponding equity raised was over NZ$203.0 million. (One of the assets purchased was in Australia with a total asset value and equity raise of A$23.0 million and A$14.0 million respectively). Management fees, including transactional income, grew 37% or $1.95 million year-on-year, from $5.31 million to $7.26 million. The impact of new deals, higher transactional income and fee growth on existing properties was partly offset by sale/loss of the management contracts of some managed properties. Augusta continues to grow the recurring income streams from funds under management. Current annualised base management fees are currently $5.6 million (last year was $5.1 million) but with additional fees able to be derived in respect to transactional activity such as leasing, project management and sales. Recurring management fees will continue to grow in early FY2018 with the completion of 33 Broadway Trust offer. Investment Property Portfolio Directly Held The Finance Centre is now subject to an unconditional sale and purchase agreement for $96.0 million. The sale transaction will be staged with the four titles being sold through to April In July 2016 a $9.6 million nonrefundable deposit was received from the purchaser. The 36 Kitchener Street property was sold into Augusta Value Add Fund No.1 established by the Group on 1 April 2016.

20 20 REPORT FROM MANAGEMENT (CONTINUED) Investment Property Fair Value Mar-17 $000 Sale Price $000 Net Market Rent Mar-16 $000 Net Yield (Market) Mar-17 $000 Occupancy Mar-17 % WALE Mar-17 Years Finance Centre Carpark 28,490 30,000 1, % Finance Centre Podium 10,445 11, % Victoria St West 30,000 30,000 2, % Retail Title 24,350 25,000 1, % Total (as at 31 March 2016) 93,285 96,000 6, % Portfolio Valuations The investment properties (Finance Centre) are reported as held for sale. Directors valuations have been assessed using market rental and cap rates. No external valuations were completed as at 31 March 2017, therefore market rents as at March 2016 have been used for cap rate analysis. A revaluation gain of $4.1 million for the full year was achieved which equated to a 4% increase in value at the Finance Centre. The average cap rate based on sale price and market rents for the portfolio as at 31 March 2016 was 6.73% ( %). Balance Sheet and Treasury Total assets were $134.8 million at year end FY2017 compared to $136.8 million as at 31 March 2016 and liabilities decreased from $54.8 million to $49.4 million. Borrowings decreased by $13.9 million during the year. Repayments were made from funds received from sale of assets, refunds of deposits and underwrite positions as well as positive operating cash flows. Drawdowns of debt were made during the year for deposits for new properties, short term underwrite positions and acquisitions of investments. The company s constitution limits borrowings to a ratio of 50% of the gross asset value (GAV). Internal treasury policy is for a long term target ratio of approximately 35%. At balance date this ratio was 26.6%. ( %). Augusta Capital Limited s lenders (ASB) require core borrowings to not exceed 55% of directly held investment property portfolio value. The core debt ratio was 39.7% as at 31 March $48.0 million of debt is currently drawn as at 30 May 2017 and gearing has increased to 33.2% after a further $15.5 million shares in NPT Limited were purchased and the 33 Broadway deposit of $5 million was paid. The core debt banking covenant remains unchanged. The Group s banking facilities with ASB run through to March The facilities are subject to annual review and extension. $22.5 million of the drawn debt is hedged with a weighted average term of 2.9 years. The current balance sheet capacity in the medium term creates the ability to underwrite the 33 Broadway offer as well as capability to support the growth in the funds management business. The upcoming exit of Augusta House will provide further capital to invest in funds management initiatives.

21 21 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2017 NZME. - Building A, Graham Street

22 22 FUNDS MANAGEMENT STRATEGIC UPDATE FUNDS MANAGEMENT STRATEGIC UPDATE A great deal of progress was made during the period under review. Augusta continues to lay a very strong foundation for future growth of its property funds management business. These achievements are encouraging early signs of the long-term potential to create a leading property funds management business with recurring and diversified operating earnings. LAST YEAR WE SAID AUGUSTA IS AT AN IMPORTANT STAGE IN ITS EVOLUTION INCLUDING:»» Market leading position in our core syndication market»» Further launch of more diverse range of investment products with both capital growth and cash yield characteristics WHAT WE ACHIEVED THIS YEAR:»» Launch of our two largest property syndicates (Graham Street properties) strengthening leading position in the syndication market»» Further diversification in the launch of the 33 Broadway offer - the business model has evolved to be a part of the creation of these assets. Augusta Value Add Fund launched on 1 April 2016»» Limited opportunities for growth in our»» Future exit of the Finance Centre unconditional direct property portfolio without substantial sale deal across the entire Centre with a FY2016 new capital, and favourable market FY2017 staggered exit. conditions for diversifying our direct portfolio. Future Balance Sheet The future balance sheet post the exit of the Finance Centre will release capital to grow the funds management business and will include; Warehoused assets pipeline for new product Underwriting capability in respect to new offers The ability to invest in new products or investments which are managed by Augusta to create an alignment of interests The funding structure will also adapt to provide the necessary capability and flexibility to create new opportunities to grow the funds management business. The staggered exit of the Finance Centre, Auckland allows Augusta the necessary time to transition the balance sheet whilst still deriving a running yield up to settlement on each respective asset. The value of the funds management business is reported at historical cost and is not representative of the fair value of the business model. An independent valuation of the business will be sought post the completion of a material event or as the Directors see fit. Balance Sheet Transformation Investment Property Investment Assets Funds Management Business FY16 ($m) $106.8m 78% Cash Other Assets $16.2m 12% $8.6m 6% $5.2m 4%

23 23 FUNDS MANAGEMENT STRATEGIC UPDATE (CONTINUED) Continued focus on growing assets under management and recurring income. TO ACHIEVE THIS MANAGEMENT IS FOCUSED ON:»» Realising further opportunities to manage funds»» Launching additional funds with the potential to expand and diversify these types of offerings into niche and strong performing sectors of the economy»» Ongoing, measured expansion into Australia»» Maintaining prudent capital management structures FY2018» +» Working closely with Bayleys to maintain optimal efficiency across the existing asset portfolio. INVESTMENT PROPERTY REDUCTION DUE TO DIVESTMENT OF FINANCE CENTRE. INVESTMENT ASSETS INCLUDE STAKES IN AUGUSTA VALUE ADD FUND, NPT LIMITED AND UNDERWRITE COMMITMENTS. FY17 ($m) $15.6m 12% $15.5m 11% Expected 1H18 ($m) $35.6m 29% Effective balance sheet structure assumes Augusta House settlement, 18.85% NPT stake and proceeds invested in other funds or underwrite positions. $6.1m 4% $63.3m 51% $93.3m 70% $4.2m 3% $15.5m 13% $3.0m 2% $6.1m 5%

24 24 FUNDS MANAGEMENT FOCUS FUNDS MANAGEMENT FOCUS Assets Under Management ($M) 1,178 1, , , KCL & IPT Acquisitions , , Augusta Syndicates (NZ and AUS) Augusta Capital - Directly Owned Other Properties Under Management Assets Under Management Growth ($M) Assets Under Management up $222m / 15% FY18 Outlook ,456 1,594 1,678 1,684 FY16 NEW ASSETS REVALUATIONS DIVESTMENTS FY17 33 BROADWAY CURRENT FY17 PIPELINE AUGUSTA HOUSE DIVESTMENTS** OUTLOOK* *FY18 Outlook excludes future management acquisitions. **Reflects an assumption based on sales already contracted and historical trends.

25 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH FUNDS MANAGEMENT FOCUS (CONTINUED) 33 Broadway Trust, Newmarket, Auckland - Artist s Impression

26 26 FUNDS MANAGEMENT FOCUS (CONTINUED) FY17 DEAL HISTORY QUALITY TENANT(S), LEASE TERM, LOCATION & ADAPTABILITY $122.5 million of the equity raised was in relation to the Graham St offerings. Assets of this scale had never been syndicated before in New Zealand. The Graham Street properties, located in the Victorian Quarter in Auckland, also won the Best of the Best award at the 2016 New Zealand Property Council awards. Aside from the establishment fee income, material recurring management fee earnings were generated without capital commitment. Building A, Graham Street Category: Office Location: Building A, BDO Centre, 2-4 Graham Street, Auckland Central Tenant: NZME, Pernod Ricard, Meredith Connell Settlement: August 2016 Purchase Price: $115.8 million Capital Raise: $70 million A premium grade office, in a good location, with strong tenants and long leases. Augusta s largest capital raise for a New Zealand property to date. Building B, Graham Street Category: Office Location: Building B, BDO Centre, 2-4 Graham Street, Auckland Central Tenant: NZME, Meredith Connell, Kotahi, Maersk Line Settlement: November 2016 Purchase Price: $88.4 million Capital Raise: $52.5 million Following the success of Building A, Augusta launched Building B, Graham Street. $347 MILLION TOTAL ASSETS SYNDICATED IN TOTAL

27 27 FUNDS MANAGEMENT FOCUS (CONTINUED) Ashburton Central Category: Retail Location: 250 Tancred Street, Ashburton Tenant: Various Settlement: May 2016 Purchase Price: $8.4 million Capital Raise: $5.3 million A re-syndication of an existing managed property. Quinns Hill Category: Office/Industrial Location: 76 Quinns Hill Road East, Stapylton Tenant: A & L, Nu Pure Settlement: July 2016 Purchase Price: A$23 million Capital Raise: A$14 million Augusta s largest capital raise for an Australian property to-date. Appetite from our investors for Australian offerings remain strong. $203 MILLION TOTAL EQUITY RAISED

28 28 FUNDS MANAGEMENT FOCUS (CONTINUED) AUGUSTA VALUE ADD FUND NO. 1 LIMITED Category: Fund Location: Auckland (5 Properties) Tenant: Various Settlement: April 2016 Purchase Price: $109.3 million Current Valuation: $122.8 million Capital Raise: $60 million This new wholesale fund was launched on 1 April Two assets are now unconditionally sold, with deferred settlements, and Augusta is delivering on the strategy of generating value add from the assets through re-positioning and / or capital improvements whilst taking advantage of current market conditions. There are also very real propositions on the remaining portfolio of 3 properties. Yield with potential upside the Fund s objective is to deliver a pre-tax internal rate of return of 11-14% pa (before any performance fee) through acquiring, redeveloping or implementing another value-add strategy (such as re-leasing or re-zoning) and then selling down a portfolio of five Auckland commercial properties. THE LAUNCH OF THIS FUND UNDER THE BRANDING AUGUSTA PRIVATE PARTNERS IS THE FIRST STEP IN A DIVERSIFICATION OF PRODUCT OFFERINGS.

29 29 FUNDS MANAGEMENT FOCUS (CONTINUED) 01 CITY Portfolio Key Victoria Street Kitchener Street Cook Street Carbine Road McDonald Street

30 30 FUNDS MANAGEMENT FOCUS (CONTINUED) 33 Broadway, Newmarket, Auckland - Artist s Impression

31 31 FUNDS MANAGEMENT FOCUS (CONTINUED) 33 BROADWAY Following the overwhelming interest from investors in last year s Augusta offers, we are pleased to offer the opportunity to invest in the development of another new, premium grade, 5 green star office complex in a prime Auckland location with long leases. With assets of this calibre difficult to find in the current market, as part of Augusta s investment selection process and commitment to only offering high quality properties to our investors, our business model has evolved to be a part of the creation of these assets. This substantial Auckland office complex with ground floor retail is currently under construction and offers investors a 7% per annum forecast pre-tax return from Settlement (scheduled for 30 June 2017) through to 31 March The leases, which will apply from completion of the Development, provide for 3% annual rental growth. Augusta understands the importance of cash flow to our Investors. As such these returns are paid to Investors bank accounts monthly. The anchor tenant on a 12 year lease (from completion of the Development) will be Mercury NZ Limited (previously known as Mighty River Power), the electricity retailer and generator listed on both the New Zealand and Australian Stock Exchanges. It is majority owned by the New Zealand Government, with its remaining shares having a wide New Zealand shareholder base. Mercury will rent level 2 of the east building and levels 3, 4, and 5 of both the west and east buildings, representing 57% of the rental income for 33 Broadway. Tegel Foods Limited, the market leading poultry producer, will also be a major tenant with a new 10 year lease from practical completion. Tegel will lease level 1 of the east and west buildings, representing 16.5% of the rental income for 33 Broadway. We recognise this investment is different from our previous investments in that the property remains under construction after your investment. There are circumstances where, if the Development is not completed, or not completed on time, Mercury and/or Tegel may cancel their Leases. However, so long as Mansons Broadway and Mansons Equity remain solvent and continue performing their obligations under the Mansons Development Agreement then the Trust is insulated from development risk. If the Development is not completed prior to the Mercury Sunset Date (or any agreed extension of that date) and is sold at a price which results in Investors receiving less than $50,000 per Unit we will rebate to the Trust our offeror s fee and development fee. The property is located on a prime corner site on Broadway, in the Auckland suburb of Newmarket. The area is regarded as one of Auckland s prominent retail and entertainment districts and the home to numerous corporate tenants including Fuji Xerox, Vector, 2degrees, Watercare, Fidelity Life, Heartland, UDC, Metlifecare, Tonkin & Taylor and the ANZ Regional Centre along with the new Auckland University Campus. Newmarket is also known as a true transportation hub with easy accessibility for staff via train, bus and motorway access. This is a major contributing factor for the increasing demand for Newmarket office accommodation and the current record high levels of occupied floor area. The property is being constructed by one of New Zealand s leading property developers Mansons TCLM. The Mansons group has been around since the 1970 s, and have built more certified green star buildings than any other New Zealand developer and $1.16 billion of developments since As part of the Development, the land will be subdivided into two titles, providing future liquidity options to sell only one of the titles. This property is the fourth recent Augusta offer of a Mansons development with both the Spark Headquarters and BDO Centre (which is also the NZME Headquarters) built by Mansons TCLM. The most recent Augusta offer of the BDO centre won the Best of the Best award at the 2016 New Zealand Property Council awards and this latest Newmarket development is benchmarked to that award winning level of quality. This is a testament to the high quality of their work. Another key feature of Mansons is that they stand behind their work with a 10 year capital expenditure guarantee from completion. For a copy of the Disclosure Statement please visit or mike_houlker@bayleys.co.nz or call THIS SUBSTANTIAL AUCKLAND OFFICE COMPLEX WITH GROUND FLOOR RETAIL IS CURRENTLY UNDER CONSTRUCTION AND OFFERS INVESTORS A 7% PER ANNUM FORECAST PRE-TAX RETURN.

32 32 PORTFOLIO BY PROPERTY PORTFOLIO BY PROPERTY (DIRECTLY OWNED INVESTMENT PROPERTY HELD FOR SALE) Finance Centre Carpark Location: Durham Lane, Auckland Number of carparks: 436 Occupancy: 99% WALE: 10.1 years Key tenants: Wilson Parking New Zealand Ltd, Lollipops, Robert Jones Holdings Sale Price: $30.0 million Finance Centre Podium Location: Durham St West, Auckland Occupancy: 99% WALE: 2.5 years Key tenants: Lollipops Educare Ltd, Just Workout and Foster Moore IT Sale Price: $11.0 million Sale Date: April 2019 Sale Date: April 2019

33 33 PORTFOLIO BY PROPERTY (CONTINUED) Augusta House - 19 Victoria Street West Location: 19 Victoria Street West, Auckland Lettable Area: 7,783m² Occupancy: 100% WALE: 2.7 years Key tenants: Qantas, SMX and Castleford Media Sale Price: $30.0 million Sale Date: June 2017 Retail Title Location: Victoria Street West, Auckland Lettable Area: 5,123m² Occupancy: 91% WALE: 4.7 years Key tenants: Countdown Metro, TAB, Warehouse Stationery Sale Price: $25.0 million Sale Date: April 2018

34 34 DIRECTOR PROFILES DIRECTOR PROFILES Paul Duffy Independent Chairman Dip Urb Val Paul Duffy has over 35 years experience in the property investment/development industry, including CEO/executive director of DNZ Property Fund (now named Stride Property) for 13 years. During his career, Paul held the position of general manager of Fletcher Property Limited and was joint managing director of US Real Estate Subsidiaries for the Abu Dhabi Investment Authority. In this role he oversaw the formation of a large real estate portfolio in the United States and Europe. Paul is currently a director of NPT Limited and of a number of private companies. Mark Francis Non-Independent Executive Director BCom (Fin) Mark has a commerce degree in finance and for the last 22 years has worked in many aspects of property investment and development with companies such as Hendry Hay McIntosh, Village Roadshow, Force Corporation and his own private investment vehicles prior to forming Augusta in Mark is a founder and managing director of Augusta Capital Limited. Mark has significant experience and background in property development and construction projects. Mark s primary business prior to the formation of Augusta Capital Management in 2003 was property development with significant projects across all sectors including commercial, retail, industrial and residential.

35 35 DIRECTOR PROFILES (CONTINUED) Bryce Barnett Non-Independent Executive Director FCA, FPINZ Bryce is a Fellow Chartered Accountant and a Fellow of the Property Institute of New Zealand. He began his career in the Inland Revenue before becoming the Chief Accountant of the Moller Group of Companies in From there he joined General Properties Consolidation Limited as the Managing Director involved in property development and investment throughout New Zealand. In 1989 Bryce became General Manager of MacDow Properties, a subsidiary of the McConnell Dowell. Bryce was responsible for that company s development and investment activity throughout New Zealand. In 1993 Bryce established KCL Property. KCL Property was acquired by Augusta Funds Management in April John Loughlin Independent Director MBA, BCA, FCA, ANZIIF (fellow), INFINZ (fellow), FNZIM, AFInstD John Loughlin is a professional company director. He is chairman of Powerco Limited, Tru-Test Corporation Limited, East Pack Limited, Rockit Global Limited, Askerne Estate Winery Limited and Meat Industry Association of NZ Inc. John has signalled that he will retire as a director of Augusta at the 2017 annual meeting to be held in August.

36 36 DIRECTOR PROFILES (CONTINUED) Martin Goldfinch Independent Director BCom, LLB Martin has extensive commercial experience across a range of industries in both public and private companies. He holds degrees in Law and Commerce from Auckland University. He is currently the Private Equity Manager for Accident Compensation Corporation (ACC) and represents it on the boards of a number of companies that ACC invest in. He also has current directorships with Les Mills Holdings Limited, Youi (NZ) Pty Limited and is a Council Member of NZ Venture Capital Association. Mark Petersen Independent Director Dip Urb Val Mark is a Professional Director and corporate adviser who has worked in the commercial property sector for the past 35 years. Initially working as a registered valuer, Mark s background includes development management, project management and investment management. Mark was Managing Director of NZX listed Shortland Properties Limited from 1989 to Mark is currently a director of CentrePort Limited, Wellington s container port company and its subsidiaries. He is also an advisory Board member for Te Tumu Kainga, a trust administered by the Maori Trustee for the provision of affordable housing. Mark is a former director of Wellington Waterfront Limited, a former director of Australian property focused private equity funds which were established and managed by Grant Samuel and is a past Chair of the NZ Hockey Federation. Mark is currently an Executive Director of D H Flinders NZ Limited. D H Flinders is a Melbourne headquartered corporate advisory firm providing corporate and funds management advice in Australia, New Zealand and South East Asia.

37 37 SENIOR MANAGEMENT SENIOR MANAGEMENT OF AUGUSTA Simon Woollams Chief Financial Officer Simon has a commerce degree majoring in accountancy and is a Chartered Accountant. Simon has a strong financial background including roles with BDO Spicers, UK experience and ANZ National Bank in the property and finance teams. Simon has been with Augusta since Guy French-Wright Chief Operating Officer Guy joined Augusta from Quintessential Equity, a wholesale property fund manager based in Melbourne, Australia, where he was General Manager Development and was responsible for building a diversified development business. Prior to that, he was Development Director Commercial at the Mirvac Group in Melbourne and has held a range of other management positions at Mirvac Group, Salta Properties and Austcorp Group in Australia. He started his career as an Investment Banking Associate at Macquarie Bank. Luke Fitzgibbon General Counsel & Company Secretary Luke joined Augusta in January 2016 from Chapman Tripp where he spent 8 years in the corporate team where he advised on securities laws (including for Augusta s syndications), mergers and acquisitions as well as general commercial and corporate advice. Luke s role at Augusta is to oversee and advise on all legal aspects of the Augusta business. Stephen Brown-Thomas Development & Project Manager Stephen has a bachelor of business majoring in valuation and property management and has over 10 years experience in property, asset and development management. Stephen has previously had roles with DTZ International and joined KCL Property in Stephen subsequently joined Augusta in April 2014 after the acquisition of KCL as Development Manager and has had a strong focus on development and project work throughout the Augusta portfolio whilst also managing a number of assets. Phil Hinton General Manager Phil has decided to retire from a full time role with Augusta Capital, effective in June Phil is also a director of the Parent's wholly owned subsidiary, Augusta Funds Management Limited and he will retire as a director at the same time. He will, however, continue as a consultant, based in New Plymouth assisting the company on key projects, particularly in the investor relations area.

38 38 INVESTOR RELATIONS INVESTOR RELATIONS Investing in Augusta Capital Limited Shares in the Company are quoted under the issuer code AUG on the NZX Main Board. There is only one class of securities, being Ordinary Fully Paid Shares. Annual and Interim Reports The Company s Annual report will be sent to Shareholders in June of each year. The interim report and annual reports will be available on the Company website at the end of May and November of each year. Meetings The Company s Annual Meeting is to be held on Thursday 31 August 2017 at the Northern Club, 19 Princes Street, Auckland at 2:30pm. Website The Company s website address is The website contains information on the history, structure, governance and latest news on the Company, including details of the managed portfolio, financial reports and press releases. Announcements All announcements of material information to the NZX Main Board are posted on the Company s website at Copies of announcements can be requested from the General Counsel & Company Secretary at luke@augusta.co.nz Registry The registry for the shares of the Company is maintained by Link Market Services Limited. Investors should contact the registry if they wish to change their investment details such as address, method of receipt of dividend or general NZX inquiries. Management Any inquiries about Augusta Capital Limited can be directed to Luke Fitzgibbon, General Counsel & Company Secretary, Augusta Capital Limited. luke@augusta.co.nz Phone (09) Fax (09)

39 39 CORPORATE GOVERNANCE CORPORATE GOVERNANCE The Board comprises six Directors: four Independent Directors (of which one is the Chairman) and two Executive Directors. The Company s Constitution provides for the appropriate number of Directors to be between three and seven but requires the number of Independent Directors represented on the Board to in all cases constitute a majority. The independent directors are Paul Duffy, Martin Goldfinch, Mark Petersen and John Loughlin. Mark Francis and Bryce Barnett are executive directors, with Mark Francis the designated executive director for the purpose of NZX Main Board Listing Rule (c). The Boards of Augusta Capital and Augusta Funds Management are committed to maintaining the highest standards of business behaviour and accountability. Accordingly, each Board has adopted corporate governance policies and practices designed to promote responsible conduct throughout the Augusta Group. The corporate governance framework is set out in the Board Charter, a copy of which can be found at the Company s website: As part of the Board Charter, the Board has identified the following as its main functions: from time to time, select and (if necessary) replace the Chairperson; ensure the company has a competent management team; ensure that there are adequate management resources to achieve Augusta Capital and Augusta Funds Management s objectives; review and approve the strategic, business and financial plans prepared by management and to develop a depth of knowledge of the group s business so as to understand and question the assumptions upon which such plans are based and to reach an independent judgment on the probability that such plans can be achieved; review and approve individual investment and divestment decisions which the Board has determined should be referred to it before implementation; review and approve material transactions not in the ordinary course of the group s business; monitor the group s performance against its approved strategic, business and financial plans and to oversee the group s operating results on a regular basis so as to evaluate whether the business is being properly managed; ensure the group meets its statutory responsibility for the affairs and activities of the group including providing annual financial statements that comply with generally accepted accounting practice and provide a true and fair view of the group s financial position; protect and enhance the value of the assets of the group for the benefit of shareholders, through the approval of appropriate corporate strategies (particularly those relating to capital structure, acquisition and divestment proposals and capital expenditure) and review of the performance of management; delegate responsibility to management to implement and deliver the adopted corporate strategies determined by the Boards; ensure effective disclosure policies and procedures are fulfilled to maintain a fully informed market; ensure ethical behaviour by the group, the Boards and management, including compliance with each company s Constitution, the relevant laws, listing rules and regulations and the relevant auditing and accounting principles; implement and from time to time review the group s Code of Ethics, foster high standards of ethical conduct and personal behaviour and hold accountable those directors, managers or other employees who engage in unethical behaviours; ensure the quality and independence of the group s external audit process; assess from time to time each Board s effectiveness in carrying out these functions and the other responsibilities of the Board. The Board Charter also deals with a number of other matters including: board composition; the Chairperson s role; director empowerment assurance; director responsibilities; conflicts of interest; board committees; external audit policy; remuneration policy; shareholder participation; and reporting and disclosure. A Code of Ethics has been adopted to apply to all employees and directors. The Code sets out the minimum standards expected of Augusta s employees and directors and is intended to facilitate decisions that are consistent with Augusta values, business goals and legal and policy obligations.

40 40 CORPORATE GOVERNANCE (CONTINUED) The following policies have also been adopted to govern the behaviour of Augusta s employees and directors: Insider Trading Policy: the policy sets out standards and rules designed to ensure compliance with the insider trading provisions of the FMCA. The policy requires that all staff and directors obtain the consent of the Chairman before trading and contains blackout periods around results announcement dates prohibiting any trading. Risk Management Policy: The Boards recognise that there are a number of risks that the group faces. Accordingly, they have adopted a risk management policy which identifies key policies and procedures (such as regular reporting, insurance, financial and operational controls and a business continuity plan) to manage key business risks. Financial Reporting Policy: given the number of audited financial statements that the group is required to prepare in respect of managed investment schemes (in addition to the financial statements for Augusta Capital and Augusta Funds Management), the Boards recognise the importance of financial reporting. The policy therefore sets out a number of policies and procedures to:»» ensure financial statements are in compliance with GAAP;»» select and consistent apply appropriate accounting policies in compliance with GAAP;»» prepare financial statements that give a fair presentation of the financial performance and position of the company;»» prepare financial statements within required timeframes. Compliance Policy: recognising Augusta Funds Management s obligations as a licensed manager, the Boards have adopted a compliance policy to document policies and procedures to enable the company to achieve compliance with external rules as well as internal policies. The policy also sets out the Company s compliance assurance programme to test such compliance. The policy applies to all operations of the group, rather than solely Augusta Funds Management s licensed obligations. Board Committees To assist each Board in carrying out their objectives and functions, the Boards of Augusta Capital and Augusta Funds Management each have a number of formally constituted committees. The committees are as follows: Audit and Risk Management Committee The Audit and Risk Management Committee of each group company is responsible for monitoring and reviewing the effectiveness of the Company s controls in the areas of operational risk and financial reporting. The members are Mark Petersen (Chair), John Loughlin and Martin Goldfinch. Remuneration Committee The Remuneration Committee is a committee of the Augusta Capital board only. It addresses remuneration policy, sets salary terms and conditions and approves senior management remuneration. The members are John Loughlin (Chair) and Martin Goldfinch. Health and Safety Committee The Health and Safety Committee of each group company assists the Boards to fulfil its health and safety responsibilities and ensure compliance with all legislative and regulatory requirements. The committee reviews all health and safety incidents and oversees the due diligence on health and safety risks within the managed portfolio. The members are Mark Francis (Chair) and Mark Petersen. Compliance Committee The Compliance Committee of each group company assists the Board in discharging its responsibilities relative to compliance with policies and procedures and regulatory obligations. It reviews reports from management on compliance assurance testing undertaken. The members are Mark Francis (Chair), Mark Petersen and Martin Goldfinch. Due Diligence Committees As applicable, each group company convenes a due diligence committee to review the due diligence completed on any acquisition to be undertaken by a group company. The committee comprises of an independent director as chair, an executive director, members of management and the Company s legal advisers. A copy of each committee s charter is at the Company s website: The corporate governance principles adopted and followed by the Company differ from the Corporate Governance Best Practice Code issued by the NZX in the following ways: the Company does not maintain a nominations committee to recommend director appointments to the Board; directors are not encouraged to take a portion of their remuneration via a performance-based equity securities compensation plan or encouraged to invest a portion of their cash remuneration in purchasing the Company s equity securities. Augusta Capital notes the revised NZX Corporate Governance Code which will come into effect from 1 October 2017 and will report against that Code in the next annual report. The Company considers that it currently complies with a significant majority of the recommendations set out in the code but continuously reviews its Corporate Governance policies and practices. It looks forward to reporting against the Code in the next annual report.

41 41 CORPORATE GOVERNANCE (CONTINUED) Nature of Operations and Principal Activites The principal activities during the period were that of commercial and industrial property investment, funds management specialised in property and cleaning services. During the period the cleaning business was sold to a third party. There has been no other changes in the nature of these activities during the period. Directors Relevant Interests in the Shares of the Company The interests of the Directors in the shares of Augusta Capital Limited as at 31 March 2017 were: Director Nature of Interest Number of Shares Mark Francis Legal and beneficial owner 14,620,000 Bryce Barnett Beneficial owner 5,000,000 Power to control vote John Loughlin Legal and beneficial owner 37,286 Directors interests During the year ended 31 March 2017 the following are dealings in Augusta Capital shares involving Directors of the Company or its subsidiaries; Share Acquisitions Share dealings Number of shares acquired Class of shares Consideration paid Date of acquistion B.R. Barnett* 88,966 Ordinary $71, May 2016 P.M. Hinton** 22,242 Ordinary $17, May 2016 * Shares issued as part of the KCL settlement and before B.R. Barnett was appointed a Director of Augusta Capital Limited and Augusta Funds Management Limited. ** Shares issued as part of the KCL settlement and before P.M. Hinton was appointed a Director of Augusta Funds Management Limited. P.M. Hinton is a director of Augusta Funds Management Limited only. Indemnification and Insurance of Directors and Officers The Company has agreed to indemnify all the Directors for: (a) costs incurred in defending any liability for any act or omission made by the Director in their capacity as a director and for to which they are acquitted, judgment is given in their favour or the proceeding is discontinued; (b) any liability in their capacity as a director (other than liability to the Company or its subsidiaries) for any act or omission as a director except where due to the wilful default or fraud, any criminal liability, breach of the duty to act in good faith, breach of any fiduciary duty and any other liability for which the giving of an indemnity is prohibited by law. During the financial year, the company has paid premiums (as permitted by sections 162(3)-(5) of the Companies Act 1993) in respect of a Directors and Officers Liability Policy insuring all the Directors of Augusta Capital Limited (subject to the policy terms and conditions) against claims arising whilst they are acting in their individual or collective capacities as Directors and Officers. The payment of insurance premiums was expressly approved by the Board, who consider the cost is fair to the Company.

42 42 CORPORATE GOVERNANCE (CONTINUED) Interests Register In addition to the disclosure above regarding share acquisitions and director indemnities and insurance, the following are relevant disclosures in relation to changes in the Interests Registers of the Company and its subsidiaries following 1 April 2016: Director Company / Transaction Interest Mark Petersen Harbour Quays Shed 39 Limited Director Harbour Quays C1 Limited Director Harbour Quays D3 Limited Director Martin Goldfinch Cavalier Woolscourers Limited Cavalier Wool Holdings Limited Resigned as a director Resigned as a director Mark Francis AFM GP (Building B Graham Street) Limited AFM GP (Building A Graham Street) Limited AFM GP (Ashburton Central) Limited Issue of Performance Share Rights under Augusta Capital Long Term Incentive Plan Director Director Director Participant in Augusta Capital Long Term Incentive Plan Bryce Barnett AFM GP (Building B Graham Street) Limited AFM GP (Building A Graham Street) Limited AFM GP (Ashburton Central) Limited Issue of Performance Share Rights under Augusta Capital Long Term Incentive Plan Director Director Director Participant in Augusta Capital Long Term Incentive Plan John Loughlin Bay Venues Limited Port of Napier Limited Resigned as a director Resigned as a director Director Remuneration for the Year Ended 31 March 2017 Director Roles Fees Paid Paul Duffy Independent Chairman 110,000 Chair, Due Diligence Committee for Building A, BDO Centre syndicate Chair, Due Diligence Committee for Building B, BDO Centre syndicate Mark Petersen Independent Director 61,000 Chair, Audit and Risk Management Committee, Member, Compliance Committee, Health and Safety Committee John Loughlin Independent Director 68,000 Chair, Remuneration Committee Member, Audit and Risk Management Committee, Chair, Due Diligence Committee for Quinns Hill Road, Brisbane syndicate Martin Goldfinch Independent Director Member, Audit and Risk Management Committee Member, Compliance Committee Chair, Chair, Due Diligence Committee for Ashburton Central syndication 60,000 In addition to the director fees noted above, the total remuneration and value of other benefits paid to M.E. Francis was $588,000 and B.R. Barnett was $457,000. This remuneration and other benefits were paid for their services as employees of Augusta Capital. No remuneration was paid in respect of their role as directors.

43 43 CORPORATE GOVERNANCE (CONTINUED) Directorships The names of the directors of the Company are set out in the Director Profiles on pages The following person held office as directors of the Company s subsidiaries at 31 March 2017: Main operating subsidiaries Augusta Funds Management Limited: Paul Duffy, John Loughlin, Martin Goldfinch, Mark Petersen, Bryce Barnett, Phil Hinton and Mark Francis Metroclean Limited: Mark Francis General Partners of Limited Partnerships managed by Augusta Funds Management Limited The following subsidiaries act as the general partner of limited partnerships which are managed by Augusta Funds Management Limited: AFM GP (Ashburton Central) Limited: Mark Francis and Bryce Barnett AFM GP (Building A Graham Street) Limited: Mark Francis and Bryce Barnett AFM GP (Building B Graham Street) Limited: Mark Francis and Bryce Barnett AFM GP (Hugo Johnston Drive) Limited: Mark Francis and Bryce Barnett AFM GP (Peachgrove Road) Limited: Mark Francis and Bryce Barnett AFM GP (Shands Road) Limited: Mark Francis and Bryce Barnett Sherbrooke Rd Partners Pty Limited ; Bryce Barnett and David Krishnan Quinns Hill Rd Partners Pty Limited ; Bryce Barnett and David Krishnan In addition, the following subsidiary has been incorporated to act solely as an initial limited partner when limited partnerships are formed: AFM LP Limited: Mark Francis and Bryce Barnett Nominee companies for proportionate ownership schemes The following companies act as nominee companies holding real property and other assets on bare trust for proportionate ownership schemes managed by Augusta Funds Management Limited: 23 Arrenway Equities Limited: Mark Francis, Bryce Barnett and Phil Hinton 587 Nominees Limited: Mark Francis 87 Main Highway Equities Limited: Mark Francis, Bryce Barnett and Phil Hinton Branston Street Nominees Limited: Mark Francis and Phil Hinton Church St Nominees Limited: Mark Francis, Bryce Barnett and Phil Hinton Colombo Street Nominee Limited: Mark Francis, Bryce Barnett and Phil Hinton Courtenay St Equities Limited: Mark Francis, Bryce Barnett and Phil Hinton Great South Road Equities Limited: Mark Francis, Bryce Barnett and Phil Hinton Hugo Johnston Equities Limited: Mark Francis, Bryce Barnett and Phil Hinton Kerwyn Ave Nominees Limited: Mark Francis, Bryce Barnett and Phil Hinton King Street Nominees Limited: Mark Francis and John Loughlin Manukau Rd Equities Limited: Mark Francis, Bryce Barnett and Phil Hinton Morrin Rd Equities Limited: Phil Hinton Port Rd Equities Limited: Mark Francis, Bryce Barnett and Phil Hinton Ronwood Ave Equities Limited: Mark Francis, Bryce Barnett and Phil Hinton Te Rapa Rd Nominees Limited: Mark Francis, Bryce Barnett and Phil Hinton Trafalgar Sq Equities Limited: Mark Francis, Bryce Barnett and Phil Hinton Tremaine Avenue Limited: Mark Francis, Bryce Barnett and Phil Hinton Vickery Street Nominees Limited: Mark Francis and Phil Hinton Vogler Dr Equities Limited: Mark Francis, Bryce Barnett and Phil Hinton The following company holds interests in a proportionate ownership scheme on bare trust for certain investors: Evans Road Limited: Bryce Barnett and Mark Francis Remuneration of Employees Whose Remuneration and Benefits Exceeded $100, , , , , , , , , , , , , , , , , , , , , , ,999 1 Total 13

44 44 CORPORATE GOVERNANCE (CONTINUED) Auditor s Remuneration Fees paid to auditors for the year ended 31 March 2017 were $103,000 (2016 $85,000). Other non-audit services (tax and consulting) from EY for the year ended 31 March 2017 were $57,000 (2016 $64,000). Donations Donations of $17,462 were made during the year (2016 $5,261). Gender Disclosures The breakdown of the gender composition of the Company s directors and executive team for the previous two years is as follows; Board Officers Financial Year Male Female Male Female 12 months ending 31 March months ending 31 March

45 45 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2017 Building B, Graham Street, Auckland

46 STATE MENT FINANCIAL

47 S Building B, Graham Street, Auckland 02

48 48 Building B, Graham Street, Auckland

49 49 INDEX Consolidated Statement of Comprehensive Income 50 Consolidated Statement of Changes in Equity 51 Consolidated Statement of Financial Position 52 Consolidated Statement of Cash Flows 53 Notes to the Consolidated Financial Statements Corporation Information Summary of Significant Accounting Policies Significant Accounting Judgements and Estimates Financial Risk Management Objectives and Policies Subsidiaries Segment Information Net Revenue Costs and Expenses Income Tax Earnings per Shares Dividends Paid and Proposed to Shareholders Cash and Cash Equivalents Trade and Other Receivables Investment Properties Investment Assets Fixed Assets Intangible Assets and Goodwill Trade Payables and Accruals Interest-Bearing Loans and Borrowings Financial Assets Issued Capital and Reserves Commitments and Contingencies Remuneration Related Party Disclosures Lease Commitments Events After the Balance Sheet Date 78

50 50 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2017 Revenue Property Revenue 6,750 7,393 Management Fees 7,258 5,314 Offeror Fees 5,451 5,119 Underwriting Fees 1,425 1,903 Cleaning Services Income (discontinued operations) Operating Costs Recovered 1,295 1,485 Investment Income Gross Revenue 23,317 21,933 Less Operating Costs 7 (4,272) (4,829) Net Revenue 7 19,045 17,104 Less Corporate Costs Administration Costs 8 (8,138) (7,162) Total Corporate Costs (8,138) (7,162) Profit Before Financing, Fair Value Movements, Gain / (Loss) on Disposal and Taxation 10,907 9,942 Finance Income Finance Expenses 8 (2,437) (3,048) Net Finance Costs (2,164) (2,930) Profit Before Fair Value Movements, Gain / (Loss) on Disposal and Taxation 8,743 7,012 Unrealised Gain / (Loss) in Value of Investment Properties 14 4,121 7,071 Unrealised Gain / (Loss) on Interest Rate Swap 550 (465) Unrealised Gain / (Loss) on Investments Contingent Consideration Discount Adjustment (11) 33 Gain / (Loss) on Disposal of Assets (19) 962 Transaction costs 14 (1,414) - Derecognition of Intangible Assets 17 (828) - FX Gain / (Loss) realised (6) - Net Profit Before Taxation 11,916 14,613 Taxation Expense Current Taxation 9 (1,998) (1,515) Deferred Taxation Taxation Expense (1,990) (1,096) Profit for the Year 9,926 13,517 Net Loss on Available-For-Sale Financial Assets 15 (2,175) - Net Other Comprehensive Loss to be Reclassified to Profit and Loss in Subsequent Periods, Net of Tax (2,175) - Total Comprehensive Income for the Year, Net of Tax 7,751 13,517 Basic/Diluted Earnings Per Share cents cents Note The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

51 51 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2017 Note Share Capital Retained Earnings / (Deficit) Available For Sale Reserve Other Capital Reserves Balance as at 1 April ,817 (11,629) ,188 Issue of Shares 3, ,712 Profit / (Loss) for the year - 13, ,517 Total comprehensive income for the year ended 31 March , ,517 Dividends 11 - (4,370) - - (4,370) Balance as at 31 March ,529 (2,482) ,047 Total Note Share Capital Retained Earnings / (Deficit) Available For Sale Reserve Other Capital Reserves Balance as at 1 April ,529 (2,482) ,047 Issue of Shares Share Based Payments Profit / (Loss) for the year - 9, ,926 Other Comprehensive Loss (2,175) - (2,175) Total comprehensive income for the year ended 31 March ,926 (2,175) - 7,751 Dividends 11 - (4,706) - - (4,706) Balance as at 31 March ,654 2,738 (2,175) ,390 Total The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

52 52 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2017 Current Assets Cash and Cash Equivalents 12 6,079 5,150 Trade and Other Receivables 13 1,541 2,779 Prepaid Expenses Income Tax Receivable Deposits Paid (Purchase of Property) 13-4,873 Interest Rate Swaps 20 1,357 - Total Current Assets 9,336 13,063 Investment Properties Held for Sale 14 93,285 17,900 Non Current Assets Investment Properties 14-88,900 Investment Assets 15 15, Intangible Assets 17 6,699 7,386 Goodwill 17 8,836 8,994 Fixed Assets 16 1, Total Non Current Assets 32, ,870 Total Assets 134, ,833 Current Liabilities Income Received in Advance Trade Payables and Accruals 18 2,212 2,226 Deposits Received 14 3,000 - Interest Rate Swaps Contingent Consideration Fair Value of Rental Underwrite Deferred Taxation Total Current Liabilities 6,251 3,333 Non Current Liabilities Borrowings 19 35,000 48,900 Deposits Received 14 6,600 - Interest Rate Swaps ,613 Deferred Taxation Total Non Current Liabilities 43,110 51,453 Total Liabilities 49,361 54,786 Shareholders Equity 85,390 82,047 Total Liabilities and Shareholders Equity 134, ,833 Note For and on behalf of the Board of Directors, who authorise the issue of these Consolidated Financial Statements; Director: Date: 30 May 2017 Director: Date: 30 May 2017 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

53 53 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2017 Note March 2017 March 2016 Cash Flows from Operating Activities Profit Before Tax from Continuing Operations 11,916 13,517 Adjustments to reconcile profit before tax to net cash flows operating activities Depreciation of fixed assets, amortisation and derecognition of intangible assets Revaluation of investment property (4,121) (7,518) Gain / (Loss) on disposal of property and assets 19 (1,087) Transaction costs - property disposal 1,414 - Fair Value Gain / (Loss) on investments (780) - Finance Income (273) (118) Finance Costs 2,437 3,048 Fair Value Adjustment to Financial Instruments (550) 465 Contingent Consideration 11 (33) Share Based Payment Expense Net foreign Exchange Difference 6 - Working Capital Adjustments (Increase) / Decrease in trade and other receivables and prepayments Increase / (Decrease) in trade and other payables (270) ,277 9,960 Interest Received Interest Paid (2,531) (3,084) Income Tax Paid (2,017) (1,184) Net Cash Flows from Operating Activities 7,002 5,810 Investing activities WIP developments (154) (1,034) Deposits Paid (12,476) (11,155) Deposits Refunded 17,349 8,819 Deposits received in relation to investment property sales 9,600 - Net Retentions Received / (Paid) Net proceeds from sale of investment properties 16,052 20,996 Net proceeds from sale of other assets ,450 Capital Expenditure and purchase of plant and equipment (1,096) (1,184) Purchase of Investment Property Held For Sale - (16,500) Net Purchase of Investment Assets 15 (16,900) (12,450) Net Cash Flow From Investing Activities 12, Financing Activities Proceeds from borrowing 18,500 22,450 Repayment of borrowings (32,400) (19,450) Dividends paid (4,706) (4,370) Net Cash Flow From Financing Activities (18,606) (1,370) Net increase in cash held 929 4,523 Opening Cash balance 5, Cash and cash equivalents at 31 March 6,079 5,150 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

54 54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Corporate Information The consolidated financial statements of Augusta Capital Limited (the Company ) and its subsidiaries (collectively the Group ) for the year ended 31 March 2017 were authorised for issue in accordance with a resolution of the Directors on 30 May The Company is a limited company incorporated and domiciled in New Zealand and whose shares are listed on the New Zealand Stock Exchange. The Company is an FMC Reporting Entity under the Financial Markets Conduct Act The registered office is located in Level 2, Bayleys House, 30 Gaunt Street, Wynyard Quarter, Auckland. The nature of the operations and principal activities of the Group are that of investment in funds management specialising in property, commercial property and cleaning services. The cleaning services business was sold to the third party in December The Company still owns Metroclean Limited and intends to liquidate Metroclean Limited in the year ended 31 March Summary of Significant Accounting Policies (a) Basis of Preparation The consolidated financial statements have been prepared in accordance with generally accepted accounting practice in New Zealand ( NZ GAAP ). For the purpose of complying with NZ GAAP, the Company and its subsidiaries are forprofit entities. The consolidated financial statements have also been prepared on a historical cost basis, except for investment properties, derivative financial instruments, investment assets and investments and associates which have been measured at fair value. The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars (). (b) Statement of Compliance The consolidated financial statements comply with New Zealand equivalents to International Financial Reporting Standards ( NZ IFRS ). The consolidated financial statements also comply with International Financial Reporting Standards ( IFRS ). Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial year. Accounting Standards that are issued but not yet effective A number of new standards, amendments to standards and interpretations are effective for reporting periods on or after 1 April 2017, and have not been adopted in preparing these consolidated financial statements by the Group. None of these are expected to have a significant effect on the consolidated financial statements of the Group, except for the following: NZ IFRS 9 Financial Instruments - This standard is part of a wider project to replace NZ IAS 39 Financial Instruments: Recognition and Measurement. The standard establishes two primary measurement categories for financial assets: amortised cost and fair value. The basis of classification will depend on the Group s business model for managing the financial asset and contractual cash flow characteristics of the financial asset. The existing NZ IAS 39 requirements, being the classification for financial liabilities and the ability to use fair value is retained, however where fair value is used it will be for accounted as follows: the change attributable to the changes in credit risk are presented in other comprehensive income, while the remaining change is presented in profit or loss. If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss. The Group is assessing the impact of NZ IFRS 9 and does not expect any significant impact given the nature of the balance sheet, except for listed investment(s) which are currently held as available-for-sale, with gains and losses recorded in OCI (Other Comprehensive Income). Under NZ IFRS 9 these gains and losses will be measured at fair value through profit or loss instead, which will increase volatility in recorded profit or loss. The AFS reserve currently presented as accumulated OCI will be reclassified to opening retained earnings. The application date for this standard is for accounting periods beginning on or after 1 January 2018 hence the application date for the Group is 1 April NZ IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. NZ IFRS 15 supersedes: (a) NZ IAS 11 Construction Contracts (b) NZ IAS 18 Revenue (c) NZ IFRIC 13 Customer Loyalty Programmes (d) NZ IFRIC 15 Agreements for the Construction of Real Estate (e) NZ IFRIC 18 Transfers of Assets from Customers (f) NZ SIC-31 Revenue Barter transactions Involving Advertising Services The core principle of NZ IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: (a) Step 1: Identify the contract(s) with a customer (b) Step 2: Identify the performance obligations in the contract

55 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH (c) Step 3: Determine the transaction price (d) Step 4: Allocate the transaction price to the performance obligations in the contract (e) Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation Management believe, that the impact of NZ IFRS 15 is likely to be in respect of the measurement and recognition of one-off deal fees and transactional / performance based fees. Management will assess individual contracts to understand the changes in treatment required. However a full assessment of the impact has not yet been performed. The application date for the standard is for accounting periods beginning on or after 1 January 2017 hence the application date for the Group is 1 April IFRS 16 is the new standard on the recognition measurement, presentation and disclosure of leases. The standard will replace: a) NZ IAS 17 Leases; b) NZ IFRIC 4 Determining whether an Arrangement contains a Lease; c) NZ SIC 15 Operating Leases Incentives; and d) NZ SIC -27 Evaluating The Substance of Transactions. Involving the legal form of a lease. The Group has not yet assessed the impact of this standard. The Application of NZ IFRS 16 is required for annual periods beginning on or after 1 January As the Group continues to move into the funds management business, management believe NZ IFRS 16 will have less of an impact. However a full assessment will be undertaken to confirm this. (c) Basis of Consolidation The consolidated financial statements of the Group comprise the financial statements of the Company and its subsidiaries as at and for the year ended 31 March each year. Subsidiaries are all those entities over which the Company is exposed, or has rights, to variable returns from its investment with the entity and has the ability to affect those returns through its power over the entity. The existence and effect of potential voting rights that are currently exercisable or convertible are considered, if those rights are substantive, when assessing whether a Company controls another entity. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends have been eliminated in full. 3. Significant Accounting Judgements and Estimates In applying the Group s accounting policies management continually evaluates judgements, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. Actual results may differ from the judgements, estimates and assumptions. Judgements made by the Directors in the application of NZ IFRS, that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements. Significant judgements, estimates and assumptions made by the Group in the preparation of these consolidated financial statements are outlined below. The preparation of these consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. Although the Group has internal control systems in place to ensure that estimates can be reliably measured, actual amounts may differ from those estimates. The areas involving a higher degree of judgement or areas where assumptions are significant to the Group include following; Valuations of Investment Properties (Note 14) Impairment of Goodwill & Intangibles (Note 17) Classification of the Augusta Value Add Fund No. 1 (Note 15). 4. Financial Risk Management Objectives and Policies The Group s principal financial instruments, other than derivatives, comprise bank loans, cash and short-term deposits. The main purpose of these financial instruments is to provide funding for the Group s operations. The Group has various other financial instruments such as trade receivables and trade payables, which arise directly from its operations. The Group also enters into derivative transactions consisting principally of interest rate swaps. The purpose is to manage interest rate risk arising from the Group s operations and its sources of finance. It is, and has been throughout the period under review, the Group s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group s financial instruments are interest rate risk, credit risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. The Group also monitors the market price risk arising from all financial instruments and the Group s accounting policies in relation to derivatives are set out below. Interest rate risk The Group s exposure to market risk for changes in interest rates relates primarily to the Group s long-term debt obligations. The level of debt is disclosed in Note 19. To manage this in a cost-efficient manner, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount.

56 56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Financial Risk Management Objectives and Policies (Continued) As the Group holds interest rate swaps in respect of $22.5 million (2016 $22.5 million) of the total Group debt, there is a risk that their economic value will fluctuate because of changes in market interest rates. The notional value of interest rate swaps is disclosed in Note 20, and it is acknowledged that this risk is a by-product of the Group s attempt to manage its cash flow interest rate risk. These swaps are entered into to economically hedge underlying and forecast debt obligations. At the balance date the Group also held interest rate swaps in respect of a further $68.0 million (2016 $Nil) of debt. These swaps relate to the Group s latest syndication, 33 Broadway Trust, and the Group intends to novate these to the trust in June These swaps were entered into for the sole benefit of 33 Broadway Trust. At 31 March 2017, after taking into account the effect of interest rate swaps which is in respect of 64% (or $22.5 million) of the Group s borrowings, and with the balance of the debt (36% or $12.5 million) based on interest floating rates, the effective interest rates including margins are below for both the Group and Company; - $8.5 million at the effective rate of 5.52% - $8.5 million at the effective rate of 7.17% - $5.5 million at the effective rate of 6.82% The Group however has further exposure to changes in the floating liquidity premium margin, which is currently reviewed by ASB Bank on a quarterly basis. All other bank margins are fixed over the term of the loan facility, with the exception of potential future margin review changes, which ASB Bank has a right to review; in circumstances such as if the loan covenants are breached. As at balance date the Group had the following financial assets exposed to New Zealand variable interest rate risk that are not designated in cash flow hedges; Actual 2017 Actual 2016 Cash at bank and in hand 6,079 5,150 The following demonstrates the sensitivity to the profit before tax and Shareholders Equity, resulting from a reasonably possible change in interest rates, with all other variables held constant. This is also on the basis of the cash deposits being available for a full year, and the interest rate change is also relevant for a full year. The below is based on an increase or decrease in interest rates of 50 basis points (+/- 0.5%); Profit or loss impact of interest rate movement (+ 50 basis points) Profit or loss impact of interest rate movement (- 50 basis points) Shareholders Equity impact of interest rate movement (+ 50 basis points) Shareholders Equity impact of interest rate movement (- 50 basis points) (236) (264) Credit risk Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents and trade and other receivables. In management s opinion, the Group trades only with recognised, creditworthy third parties, whose obligations to the Group are contractually enforceable under tenancy agreements and carpark licences. Receivable balances are monitored on an ongoing basis. As the Group has a wide spread of tenants over many industry sectors as well as holding contractual management rights in respect to the funds management business, it is not exposed to any significant concentration of credit risk. Assessments are made where appropriate in respect to new tenants including verification of financial position and industry reputation. Amounts which are past due are reviewed and any necessary provision for doubtful debts is raised where appropriate, based on all factors considered. The doubtful debts provision as at 31 March 2017 is $nil (2016 $Nil). No other past due receivables are impaired. The balance of the financial assets which are past due but not impaired as at 31 March 2017 is $44,838 (2016 $311,554). The aging of these past due financial assets (receivables) is greater than 30 days but less than 90 days. During the 2017 year, there was $133,109 bad debts which were written off (2016 $42,840) and there was no recovery of doubtful debts recorded during the year (2016 $Nil). With respect to credit risk arising from the other financial assets of the Group, which comprise interest received on cash and cash equivalents and interest rate swaps in respect to the receive portion, the Group s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. ASB Bank Limited, who is the counter party in respect to the financial assets of the Group, currently holds an AA- credit rating (issued by Standard & Poors). Liquidity risk Liquidity risk arises from the Group s financial liabilities and the ability to meet all its obligations to repay financial liabilities as and when they fall due. The Group s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans, and ordinary shares. The table below reflects all contractually fixed pay-offs for settlement and repayments resulting from recognised financial liabilities. This table is based on all interest rate variables being held constant over the relevant period of time. It does not allow for potential future margin increases as these can not be easily identified as at balance date. All payments are undiscounted and the timing of the cash flows is based on the contractual terms of the underlying contract.

57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Financial Risk Management Objectives and Policies (Continued) As at 31 March 2017 Financial Liabilities 1 month 2-3 months 3 months - 1 year Non-derivative financial liabilities Trade payables Interest payable ,327-2,654 Borrowings ,000-35,000 Derivative financial liabilities Interest rate swap (net settled) ,395 2,701 Total ,485 36,980 1,395 40, years 2-5 years Total As at 31 March 2016 Financial Liabilities 1 month 2-3 months 3 months - 1 year 1-2 years 2-5 years Total Non-derivative financial liabilities Trade payables Interest payable ,584 2,112-4,224 Borrowings ,900-48,900 Contingent consideration Derivative financial liabilities Interest rate swap (net settled) ,828 Total ,899 51, ,146

58 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Financial Risk Management Objectives and Policies (Continued) The interest payable above represents interest payable on the borrowings at the floating interest rate plus the bank s margin as at balance date. While the interest rate swap (net) payable represents the interest payable on the borrowings, based on the interest rate differential between the floating rate and the swap rate, assuming no change in the floating rate from balance date. $18.5 million was drawn down at various stages during the year and $32.4 million has subsequently been repaid as a permanent reduction in the loan facilities (2016 $19.5 million of debt was drawn down and $22.5 million was subsequently repaid). Trade payables and interest costs will be paid out of working capital and operating cash inflows. The net settlement sale proceeds on future contracted asset sales may also be used to repay borrowings. The balance of the borrowings are expected to be refinanced on their maturity in March 2019 and are not to be repaid. Management have frameworks in place to monitor the Group s liquidity and to ensure that banking covenants are complied with. Cash flow reports and banking covenant analysis is prepared and reviewed on a regular basis throughout the year. The table below outlines the carrying amounts at balance date for each of the following categories; As at 31 March 2017 Note Fair value through profit and loss Loans and Receivable Other Amortised Cost Cash and cash equivalents - 6,079 - Trade and other receivables - 1,541 - Listed Investments 15 8, Interest rate swap gain (loss) (157) - - Bank borrowings - - (35,000) Trade payables and interest accrued - - (2,180) Deposits Received - - (9,600) Total 8,618 7,620 (46,780) As at 31 March 2016 Fair value through profit and loss Loans and Receivable Group Other Amortised Cost Cash and cash equivalents - 5,150 - Trade and other receivables - 2,779 - Interest rate swap gain (loss) (2,063) - - Bank borrowings - - (48,900) Trade payables and interest accrued - - (1,926) Contingent consideration (112) - - Deposits Paid - 4,873 - Total (2,175) 12,802 (50,826) 5. Subsidiaries The consolidated financial statements of the Group include: Country of % of equity interest Name incorporation Augusta Fund Management Limited New Zealand 100% 100% Metroclean Limited New Zealand 100% 100% Augusta Funds Management Limited and Metroclean Limited focus on funds management specialising in property and providing cleaning services respectively. The cleaning services business was sold to a third party in December The Company still owns Metroclean Limited and intends to liquidate in the year ending 31 March 2018.

59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Segment Information The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors in assessing performance on a monthly basis. The Group had three distinct divisions, being investment property, funds management and cleaning services. During the year ended 31 March 2017 these three segments were reported to the Board. For the year ended 31 March 2017 Investment Assets () Funds Management () Cleaning (Discontinued) () Unallocated () Elimination () Total () Revenues Third party 8,703 14, ,317 Inter segment 1, (1,250) - Total gross revenues 9,953 14, (1,250) 23,317 Total net revenues 6,730 12,362 (47) ,045 Overheads (1,492) (6,626) (20) - - (8,138) EBIT 5,238 5,736 (67) ,907 Net Funding Costs (1,572) (592) (2,164) Profit before Fair Value Movements, Gains / (Losses) on Disposal and Taxation 3,666 5,144 (67) - - 8,743 Capital Gain/ (Loss) on Disposal (5) - (14) - - (19) Revaluation of Investment Property 4, ,121 Transaction costs associated with future sale of Finance Centre (1,414) (1,414) Unrealised profit / (loss) on the fair value of investments (1,395) Other adjustments - (828) (295) Profit before taxation 7,148 4,316 (81) ,916 Total Assets 114,492 20, ,751 Total Liabilities 47,044 2, ,361 Other Disclosures Investment Property Held For Sale 93, ,285 Intangible Assets & Goodwill - 15, ,535 A reconciliation of the unallocated segment is as follows; Contingent consideration discount adjustment (11) Unrealised profit / (loss) on the fair value of interest rate swaps 550 FX Gain / (Loss) realised (6) Loss before tax of unallocated segment 533 During the year ended 31 March 2017; 36 Kitchener Street was sold at carrying value of $16.5 million on 1 April Lot 2, 2 Brian Smith Drive, (Silverdale Land) was sold at carrying value of $1.4 million on 31 March During the year ended 31 March 2017 the Company charged overheads costs incurred to Augusta Funds Management Limited, being a subsidiary Company. This overhead cost allocation was based on various factors, the most material being personnel costs as well as the administrative costs of running the funds management business.

60 60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Segment Information (Continued) Borrowings and all other liabilities such as income received in advance, trade payables, accruals, the fair value of interest rate swaps and all tax liabilities are managed on a group basis and are not allocated to operating segments. All other assets, aside from investment property, funds management assets and fixed assets, such as cash in hand, trade receivables, tax receivables, capitalisation of rental incentives, vendor loan and prepayments are managed on a group basis and are not allocated to operating segments. For the year ended 31 March 2016 Investment Assets () Funds Management () Cleaning () Unallocated () Elimination () Total () Revenues Third party 8,980 12, ,933 Inter segment 2, (2,876) - Total gross revenues 11,757 12, (2,876) 21,933 Total net revenues 6,664 10, ,104 Overheads (1,630) (5,458) (74) - - (7,162) EBIT 5,034 4, ,942 Net Funding Costs (2,471) (459) (2,930) Profit before Fair Value Movements,Gains / (Losses) on Disposal and Taxation 2,563 4, ,012 Capital Gain/ (Loss) on Disposal Revaluation of Investment Property 7, ,071 Other adjustments (432) - (432) Profit before taxation 10,596 4, (432) - 14,613 Total Assets 117,143 19, ,833 Total Liabilities 44,753 7, ,176-54,786 Other Disclosures Investment Property 106, ,800 Capital Expenditure Intangible Assets & Goodwill - 16, ,380 A reconciliation of the unallocated segment is as follows; Contingent consideration discount adjustment 33 Unrealised profit / (loss) on the fair value of interest rate swaps (465) Loss before tax of unallocated segment (432) During the year ended 31 March 2016; 7 City Road was sold for $22.8 million on 19 August Including disposal costs and recognition of the fair value of the rental underwrite position there was a gain on sale of $0.96 million attributable to the sale. During the year ended 31 March 2016 the Company charged overheads costs incurred to both Augusta Funds Management Limited and Metroclean Limited, being the subsidiary Companies. This overhead cost allocation was based on various factors, the most material being personnel costs as well as the administrative costs of running each business. Borrowings and all other liabilities such as income received in advance, trade payables, accruals, the fair value of interest rate swaps and all tax liabilities are managed on a group basis and are not allocated to operating segments. All other assets, aside from investment property, funds management assets and fixed assets, such as cash in hand, trade receivables, tax receivables, capitalisation of rental incentives, vendor loan and prepayments are managed on a group basis and are not allocated to operating segments.

61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Net Revenue Net Revenue shown in the consolidated statement of comprehensive income comprises amounts received and receivable by the Group for: Net Revenue Rentals charged to tenants in the ordinary course of business 6,750 7,393 Income from recurring management fees 5,310 4,063 Transactional income 1,948 1,251 Income from new offers 5,451 5,119 Income from underwriting new offers 1,425 1,903 Cleaning services income - Discontinued Distributions and dividends received (Investment Income) Operating cost recoveries from tenants and customers 1,295 1,485 Less Operating costs incurred (4,272) (4,829) Net Revenue 19,045 17,104 Rental revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured, on a straight line basis over the lease term. Recoveries from tenants are recognised as revenue in the year the applicable costs are accrued. Income derived from establishment of new Offers is recorded when a new Offer has been completed, the Scheme has commenced trading and the settlement of the relevant property has occurred. Income from the management of the new Scheme is recorded on an annual basis and based on the terms of the relevant management agreements. Transactional Income is additional income derived from leasing, project management, sales, refinancing and secondary sale facilitation activity in the managed schemes. Investment Income includes dividend income received from listed investments and distributions from managed schemes which the Group has invested in, including distributions received from underwrite positions in schemes. Income from cleaning services is recognised once the service has been completed. The cleaning service contracts were sold to a third party in December Operating cost recoveries represent the costs recovered from tenants during the year in respect to contractual rental agreements whereby the tenant is responsible for specific operating costs. These recoveries are not netted off against the operating costs incurred. In respect to cleaning supplies, certain cleaning supply costs are recovered from customers Operating costs Property operating costs (1,896) (2,132) Property management fees (1,555) (1,634) Metroclean operating costs - Discontinued (451) (608) Costs of sale transactional income (217) (406) Bad debt expense (133) - Leasing costs (20) (49) Total Operating Costs (4,272) (4,829) Operating costs relate to costs incurred in running the directly owned portfolio including insurance, utilities and maintenance costs. Tenants are responsible for maintenance and holding costs associated with their tenancy, where they have contracted to do so in their tenancy agreements. Non recoverable operating expenses are the responsibility of the Group. Property management fees are paid to Bayleys Property Services in relation to managing the portfolio. Further costs of sale relate to the generation of transactional income from the managed portfolio.

62 62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Cost & Expenses Administration costs Personnel costs (5,411) (4,172) Depreciation and amortisation (171) (383) Auditors Remuneration (1) (160) (149) Director fees (299) (305) Professional fees (582) (655) Other administration costs (1,515) (1,498) Total administration costs (8,138) (7,162) Finance Income / (Expenses) Bank loans and overdrafts interest (2,069) (2,688) Bank loan facility fees (368) (360) Bank interest earned Total net finance costs (2,164) (2,930) (1) Auditors remuneration as follows: Expenses incurred to Ernst & Young for; Audit of the Annual Report (103) (85) Tax compliance/consulting (57) (64) The annual audit fee includes the fees for both the annual audit of the consolidated financial statements and a review of the interim financial statements. Tax services include annual tax compliance, advice on PIE status, GST, restructuring, dividends and imputation credits. EY also performs the audits of a number of syndicates managed by the group as well as the Augusta Value Add Fund No. 1 Limited. They are paid $43k for this service. EY also provides tax advice to the Augusta Value Add Fund No. 1 Limited to the value of $12k in relation to lease surrender payments, property revaluations, capitalised interest and GST. Other administration costs include IT and telecommunication, property and opex, marketing and sponsorship, travel and other office related costs. Accounting Policy Employee Benefits Liabilities for wages and salaries, including non-monetary benefits, Kiwisaver employer contributions and annual leave that are expected to be settled within 12 months of the reporting date are recognised in respect of employees services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Goods and Services Tax (GST) Income, expenses and assets are recognised net of the amount of GST except: where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the item as applicable; and receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Finance Income Finance income consists of interest income and is recognised as interest accrues on cash deposits held using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate which exactly discounts the future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Finance Expenses Finance expense, including borrowing costs, interest payable on borrowings and gain/loss on interest rate swaps are recognised as an expense in the profit or loss when incurred. Borrowing costs incurred do not relate to qualifying assets and hence are treated as an expense and are not capitalised. Other expenses and costs Operating and administration costs are recorded as an expense in profit and loss when incurred.

63 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Income Tax Major components of income tax expense for the year ended 31 March are; Statement of profit and loss Current Tax Continuing Operations - Current income tax charge (1,986) (1,515) Prior year tax adjustment (12) - Current Tax (1,998) (1,515) Net deferred income tax Depreciation claimed for taxation Net change on revaluation of interest rate swap (154) 130 Accruals not deductible 4 3 Prior year tax adjustment Net deferred income tax Income taxation expense reported in Statement of Comprehensive Income (1,990) (1,096) A reconciliation of the income tax expense applicable to net profit before income tax at 28%, to the income tax expense in the Statement of Comprehensive for the year ended 31 March is as follows; Net profit (loss) before tax 11,916 14,613 Adjust for revaluations of investment land (4,121) (7,071) Adjust for capital loss on disposal of property 19 (985) Adjust for contingent consideration - (33) Adjust for excluded dividend payments (151) - Adjust for deductible expenditure (28) (207) Adjust for non deductible expenditure 1, Adjusted net profit / (loss) before tax 9,312 6,493 Income taxation expense (28%) (2,607) (1,818) Adjustment for deferred tax (depreciation) Adjustment for depreciation Adjustment to the prior year taxation expense Income taxation expense recorded in the Statement of Comprehensive Income (1,990) (1,096) Deferred Income Tax Deferred income tax at 31 March relates to the following; Deferred Income Tax Liabilities Depreciation claimed for taxation - Augusta House Depreciation claimed for taxation - Remainder of Finance Centre 1,050 1,551 Gross deferred income tax liabilities 1,393 1,551 Deferred income tax assets Revaluation of interest rate swap (424) (577) Accruals not deductible (36) (34) Gross deferred income tax assets (460) (611) Net deferred income tax

64 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH 2017 Accounting Policy - Income Tax Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax on the taxable income for the year, using rates enacted or substantially enacted at balance date, and any adjustment to income tax payable in respect of previous periods. Deferred tax is provided using the liability method on all temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except: When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor the taxable profit or loss In respect of the taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised, except: When the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. When the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of any deferred income tax asset is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at balance date. The Group has applied the rebuttable presumption under NZ IAS 12 that deferred tax on investment property measured using the fair value model in NZ IAS 40 is determined on the basis that its carrying amount will be recovered through sale. Judgement is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the statement of financial position. Deferred tax assets, including those arising from tax losses and deductible temporary differences, are recognised only when it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Assumptions about the generation of future taxable profits focus on future forecast and cashflow projections. Judgements are also required in respect to the application of income tax legislation. The judgements and assumptions are subject to risk and uncertainty and hence there is a possibility that changes in circumstances will alter expectations, which may then alter the amounts of deferred tax assets and liabilities recorded on the Statement of Financial Position and that may also lead to a corresponding adjustment to profit or loss.

65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Earnings per Share The following reflects the income and share data used in the calculation of basic and diluted earnings per share computations; 2017 Net Profit After Tax Attributable to Shareholders of the Group 7,751 13,517 Weighted Average Number of Ordinary Shares 87,529 87,418 Earnings / (Loss) Per Share (cents) - Basic and Fully Diluted Accounting Policy - Basic Earnings Per Share Earnings per share is calculated by dividing the Net Profit After Tax Attributable to Shareholders by the weighted average number of shares on issue during the year. In the current year both basic earnings and diluted earnings are equivalent. 11. Dividends Paid and Proposed to Shareholders Date Paid Date Paid Q4 prior year net dividend of 1.25 cps 1, /05/2016 1, /05/2015 Q1 net dividend of cps 1, /08/2016 1, /08/2015 Q2 net dividend of cps 1, /11/2016 1, /11/2015 Q3 net dividend of cps 1, /02/2017 1, /02/2016 Total paid during the year 4, ,370.0 Supplementary dividends for investors eligible for non-resident tax exemption of $2,669 were also paid in the year ended 31 March 2017 ($Nil 2016). The Group s current distribution approach is to retain sufficient operating funds to cover business as usual capital expenditure as well as funding the contingent consideration (earn out) payments arising from the purchase of the funds management business. The dividend for the quarter ended 31 March 2017 was announced on 1 May 2017 and is as follows; (Note this dividend is not recognised as a liability as at 31 March 2017). Dividends on ordinary shares, paid on 22 May 2017; Final imputed dividend for 2017, cents per share Imputation Credit Account At 31 March the imputation credits available for use in subsequent reporting periods are Accounting Policy - Provision for Dividends Provisions for dividends are recognised in the period that they are authorised and declared.

66 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Cash and Cash Equivalents 2017 Cash at bank 6,079 5,150 Cash at bank earns interest at floating rates based on daily bank deposit rates. 13. Trade and Other Receivables 2017 Trade receivables Other receivables 1,051 1,974 Total Trade and Other Receivables 1,541 2,779 Trade receivables are non-interest bearing and are on <30 day terms, and rent is due on the first day of every month. Management fees are also paid on the first day of every month Deposits Paid (Purchases of Property) - 4, Accounting Policy - Trade and Other Receivables Trade and other receivables are initially recognised at fair value plus transaction costs and subsequently carried at amortised costs using the effective interest rate method less an allowance for any impairment losses. Due to their short term nature trade and other receivables are not discounted. Collection of trade receivables is reviewed on an ongoing basis at an individual debtor level. An impairment loss is recognised when there is objective evidence the Group will not be able to collect the receivable, which is due to either financial difficulties of the debtor, default payments or debts that are more than 60 days overdue.

67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Investment Properties Held For Sale On 25 July 2016, the sale of the Finance Centre properties for $96.0 million was approved as a special resolution at the special shareholder meeting held. The transaction will be staged with the four titles being sold at different dates through to April Transaction costs of $1.4m relating to the future sale of the Finance Centre were recognised in the year ended 31 March A $9.6 million non-refundable deposit was received in July The table below outlines the movements in the carrying values for all directly owned investment properties held for sale for the year ended 31 March Property Valuation Capex Revaluation Acquisition/ Disposal Valuation Sale Date Sale Price Apr-16 Mar-17 Mar-17 Mar-17 Mar-17 $000 $000 $000 $000 $000 $000 Finance Centre Carpark 28, (256) 28,490 April ,000 Finance Centre Podium 9, ,445 April , Victoria St West (Augusta House) 28, ,063 30,000 June ,000 Retail Title 21, ,842 24,350 April ,000 Total Finance Centre 88, ,121-93,285 96,000 Silverdale Land* 1, (1,400) - 36 Kitchener Street** 16, (16,500) - Total 106, ,121 (17,900) 93,285 During the year ended 31 March 2017; *On 31 March 2017, the Silverdale Land was sold at carrying value for $1.4 million. **36 Kitchener Street was purchased on 30 October 2015 for $16.5 million. This property has subsequently been sold at carrying value on 1 April 2016 to the Augusta Value Add Fund No.1. The table below outlines the movements in the carrying values for all directly owned investment property for the year ended 31 March Property Registered Valuer Valuation Revaluation Capex Acquisition/ Disposal Valuation Mar-15 Mar-16 Mar-16 Mar-16 Mar-16 $000 $000 $000 $000 $000 Finance Centre Carpark CBRE 25,500 3, ,700 Finance Centre Podium CBRE 9, , Victoria St West (Augusta House) CBRE 25,400 2, ,800 Retail Title CBRE 20,200 1, ,500 Total (as at 31 March 2016) 80,500 7, , Kitchener St n/a ,500 16,500 Silverdale Land n/a 1,600 (200) - - 1,400 7 City Road* n/a 19, (19,630) - Total 101,700 7, (3,130) 106,800 During the year ended 31 March 2016; *7 City Road was sold on the 19 August 2015 for $22,800,000.

68 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Investment Properties Held For Sale (Continued) Below is a table of effective net market yields, occupancy and weighted average lease information by property as at balance date for the Group. Property Carrying Value Net Market Rent Net Yield (Market) Occupancy WALE Mar-17 Mar-16 Mar-17 Mar-17 Mar-17 $000 $000 $000 $000 Years Finance Centre Carpark 28,490 1, % Finance Centre Podium 10, % Victoria St West 30,000 2, % Retail Title 24,350 1, % Total (as at 31 March 2017) 93,285 6, % As these investment properties are held for sale, Directors valuations have been assessed using market rental and cap rates. No independent valuations were completed as at 31 March Therefore the net market rents used in the net yield calculated were as at 31 March 2016, being the date of the most recent independent valuation. Accounting Policy - Investment Properties, Including Investment Properties Held for Sale Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at balance date. Fair value is determined by an independent valuation performed annually for investment properties, unless they are held for sale. Gains and losses arising from changes in the fair values of investment properties are recognised in profit or loss in the year in which they arise. The Group classifies investment property as held for sale when the carrying amount will be recovered through a sale transaction. The assets and liabilities must be held for immediate sale and the Group must be committed to selling the asset either through the entering into a contractual sale and purchase agreement or by entering into a campaign to market the property for sale with the clear intention of disposal. The sale must be highly probable, an active programme to locate a buyer must be in place and the disposal plan must have been initiated. Investment properties are derecognised either when they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the disposal of an investment property are recognised in profit or loss in the year of disposal. Fair values are based on market conditions, being the estimated amount at which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm s length transaction at the date of valuation. For Augusta Capital Limited s properties there is an absence of current prices in an active market, for similar property in the same location and in the same condition with similar lease terms. Therefore the valuations are prepared following the discounted cash flow method and the capitalisation approach. When an investment property is held for sale, an independent valuation may not be required. In cases where there is no independant valuation undertaken, a directors valuation will be completed to assess the fair value of the property. The discounted cash flow method is based on the expected net rental cash flows applicable to each property, which are then discounted to their present value using a market determined, discount risk-adjusted rate applicable to the respective property. The capitalisation approach is also used as a valuation method which is based on the current contract rental and market rental and an appropriate yield for that particular property. The market value is a weighted combination of both the discounted cash flow and the capitalisation approach. The valuations also consider market assumptions of internal rates of return, rental growth, average lease terms, occupancy rates, and the costs associated with the initial purchase of the property and yield. All these assumptions are then compared, where possible, to market based evidence and transactions for properties in similar locations, condition and quality of accommodation.

69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Investment Assets Property Valuation Acquisition Disposals Reval. available for sale financial assets Reval. Investments Valuation Apr-16 Mar-17 Mar-17 Mar-17 Mar-17 Mar-17 $000 $000 $000 $000 $000 $000 Listed Investments - 10,950 - (2,175) - 8,775 Investments in Associates 50 6,000 (50) ,780 Total Investment Assets 50 16,950 (50) (2,175) ,555 On 1 April 2016, the Company purchased a 10% holding in the Augusta Value Add Fund No. 1 for $6.0 million (Investment in Associates). On 29 September 2016, the Company purchased 15 million shares or a 9.26% stake in NPT Limited (Listed Investments). Accounting Policy Listed Investments Listed Investments are measured at fair value using a quoted market price method (Level 1). Available-for-sale financial assets (IAS 39) are those non-derivative financial assets that are designated as available for sale or are not classified as: a) loans and receivables, b) held-for trading investments or c) financial assets elected to be recorded as fair value through profit or loss. A gain or loss on an available-for-sale financial asset (listed investments) shall be recognised in other comprehensive income. Accounting Policy - Investments in Associates Investment in associates are entities over which the Group has significant influence. The Group have taken advantage of the exemption in IAS 28 paragraph 8 to value the equity investments at fair value. These investments are equity accounted and are measured at fair value but not quoted in active markets (Level 2). Fair value movements are recognised in the Profit and Loss Statement as Unrealised Gain / (Loss) on Investments. 16. Fixed Assets Fixed Assets Computer Equipment Fixed Assets Cleaning Equipment - 4 Fixed Asset Motor Vehicle - 19 Fixed Assets Furniture and Fittings 1, Accumulated Depreciation (398) (571) Fixed Assets Closing Balance 1, Accounting Policy - Fixed Assets Fixed assets are measured at historical cost, less accumulated depreciation and impairment losses. Depreciation is calculated using the diminishing balance method to allocate the cost at depreciation rate as follows: Depreciation rate Method Computer Equipment 30-60% Diminishing Balance Motor Vehicle 40% Diminishing Balance Furniture and Fittings 10-20% Diminishing Balance

70 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Intangible Assets and Goodwill Intangible Assets - Funds Management 6,558 7,386 Intangible Asset - CRM Software Goodwill 8,836 8,994 Total 15,535 16,380 Intangible Assets relating to the Funds Management business were derecognised by $0.83 million due to the termination of a number of management contracts primarily as a result of the sale of the properties and in some cases the property management was handed back to the owners which were included in the intangible asset(s) associated with the KCL, IPT and AFM acquisitions. Goodwill reduced in the period ended 31 March 2017 by $158,000 as a result of the sale of the cleaning business to a third party in December The intangible assets represent the funds management assets purchased, which consists of management contracts at the time of acquisition. The goodwill represents the future value to be generated out of the funds management assets. The intangible assets and goodwill will be allocated across the funds management business as they represent a cash-generating unit. The intangible assets are not amortised as the intangible assets are deemed to have an indefinite life. Impairment of the intangible assets and goodwill is assessed using an internal discounted cash flow model. The discount rate applied is 7.25% on the unleveraged pre-tax nominal cash flows. Based on the above assumptions, $0.83 million of impairment losses have been recognised in the period (2016: $nil). Any adverse changes in actual performance of the products and/or future rates of growth in the business, will reduce the calculated recoverable amount and may result in recognition of impairment in the carrying values of assets in future periods. Accounting Policy - Goodwill and Intangible Assets Goodwill acquired in a business combination is initially measured at cost of the business combination, being the excess of the consideration transferred over the fair value of the Group s net identifiable assets acquired and liabilities assumed. After initial recognition, goodwill is measured at the amount recognised at acquisition date less any accumulated impairment losses. For the purposes of impairment testing, goodwill is allocated to each of the Group s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each cash-generating unit represents the lowest level within the Group at which the goodwill is monitored for internal management purposes. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. The Group performs its impairment testing as at 31 March each year using the discounted cash flows method based on expected future contracted management fee income. When the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. Intangible assets acquired are initially measured at cost, and then following initial recognition, are measured at cost, less any impairment losses and amortisation. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level consistent with the methodology outlined for goodwill above. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis. When individual assets managed by the company are sold or the management contract of that asset is handed back to the owners, the intangible asset value associated with that contract is to be derecognised immediately. The intangible assets with a definite life are amortised over the life of the asset. (CRM software is amortised at an amortisation rate of 60% using the diminishing balance method).

71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Trade Payables and Accruals Trade payables Accruals 1,484 1,459 Interest accrued GST Payable Trade Payables and Accruals 2,212 2,226 Trade payables are non-interest bearing and are normally settled on the 20th of the month following invoice date. Interest payable is settled quarterly throughout the financial year. Accounting Policy Trade Payable and Accruals Trade payables and accruals are initially measured at fair value less any transaction costs and subsequently carried at amortised cost and due to their short term nature and are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect to the purchase of these goods and services. 19. Interest-Bearing Loans and Borrowings Secured bank loan (ASB) Loan Maturity 30/06/ ,900 Secured bank loan (ASB) Loan Maturity 29/03/ ,000 - Total 35,000 48,900 The drawn down facilities total $35.0 million at balance date with an expiry of 29 March 2019 in respect to total facilities of $37.0 million. The facilities are subject to annual review and can then be extended by one year post review. The current bank margin is 1.82% above the floating or hedged interest rate. $12.5 million of debt is hedged (36% of the total debt) via interest rate swap agreements and these are tabled below; $8.5 million hedged until November 2018 at rate of 3.70% plus bank margin of 1.82% $8.5 million hedged until November 2020 at rate of 5.35% plus bank margin of 1.82% $5.5 million hedged until April 2021 at rate of 5.00% plus bank margin of 1.82% $12.5 million of the debt (36% of the total debt) is currently unhedged and the current floating rate including margin is 3.79% as at balance date. Below is a summary of the loan movements made during the year; Repayments ($32,400) Drawdowns $18,500 Net Movement ($13,900) Drawdowns of debt were used for deposits for new properties, short term underwrite positions and acquisitions of investments. Repayments were made from funds received from sale of assets, refunds of deposits and underwrite positions as well as positive operating cash flows. Financing facilities available At reporting date, the following financial facilities had been negotiated and were available; Total facilities - Secured bank loan (ASB) 37,000 50,900 Facilities used at reporting date - Secured bank loan (ASB) 35,000 48,900 Facilities unused at reporting date- Secured bank loan (ASB) 2,000 2,000

72 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Interest-bearing Loans and Borrowings (Continued) Loan Security The loans are secured by a registered first mortgage over the investment property and assets of the Group, an assignment of leases over all present and directly acquired properties mortgaged to the ASB Bank and a first general security interest over the assets of the Group. Loan Covenants ASB Bank The current loan covenants with ASB are: 1. Loan to Value Ratio (LVR) core debt (the Company) must represent no more than 55% of the mortgaged security value. The core debt relates solely to the directly owned portfolio. 2. Interest Cover Ratio earnings before interest and tax to represent no less than 2.75 times interest costs (the Group) and net rental income to represent no less than 1.75 times interest cost of core debt (Parent). 3. Augusta Funds Management Limited covenant EBITDA: not less than $1.75 million for the previous and the next 12 month periods. 4. The WALE for the total Augusta Capital Limited portfolio must not be less than 3 years. Accounting Policy - Interest-Bearing Loans and Borrowings Interest bearing loans and borrowings are initially recognised at fair value of the consideration less directly attributable transaction costs. Subsequent to initial recognition, interest-bearing loans and borrowings are stated at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer the settlement of the liability for at least 12 months after balance date. Borrowing costs are recognised as an expense when incurred and not capitalised, as they do not relate to qualifying assets. See Note 8 for the accounting policy for Finance expenses.

73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Financial Assets and Financial Liabilities Set out below is a comparison by category of carrying amounts and fair values of all of the Group s financial assets in the financial statements. Carrying Amount 2017 Fair Value 2017 Available-for-sale investments Investment in associate 6,780 6,780 Quoted equity shares 8,775 8,775 Other Financial Assets Interest Rate Swaps 1,357 1,357 Carrying Amount 2016 Fair Value 2016 Available-for-sale investments Investment in associate Quoted equity shares - - Set out below is a comparison by category of carrying amounts and fair values of all of the Group s financial liabilities in the financial statements. Carrying Amount 2017 Fair Value 2017 Financial liabilities Interest rate swaps core debt 1,514 1,514 Contingent consideration - - Carrying Amount 2016 Fair Value 2016 Financial liabilities Interest rate swaps core debt 2,063 2,063 Contingent consideration The carrying amount of all other financial instruments approximates their fair value. During the year ended 31 March 2017, the Company has purchased three interest rate swaps which it will novate to its latest Scheme, 33 Broadway Trust, in July The fair value of these swaps, which are a financial asset, is $1,357,000. Fair Value The following table provides the fair value movement hierarchy of the Group s financial assets and liabilities. Refer to Note 14 for the fair value measurement disclosures relating to investment properties. Year ended 31 March 2017 Year ended 31 March 2016 Quoted Marktet Market Observable Non Market Quoted Marktet Market Observable Non Market Price (Level 1) Outputs (Level 2) Observed Outputs (Level 3) Price (Level 1) Outputs (Level 2) Observed Output (level 3) Interest rate swaps - (1,514) - - (2,063) - Contingent consideration (112) Investment in associate - 6, Quoted equity shares 8, Interest rate swaps syndication - 1,

74 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Financial Instruments and Fair Value Measurement (Continued) The quoted market price method (Level 1) represents the fair value determined based on quoted prices in active markets as at the reporting date. For financial instruments not quoted in active markets (Level 2) the Group uses present value techniques, with a comparison to similar instruments for which market observable prices exist and other relevant models used by market participants, which includes current swap rates on offer and also the current floating interest rate. For financial instruments which are based on non-market observed inputs (Level 3), the Group uses present value techniques based on a forecasted future earnings. Accounting Policy - Financial Instruments Loans and Receivables and other Financial Liabilities at Amortised Cost Loans and receivables and other financial liabilities at amortised cost are initially recognised at fair value and then subsequently held at amortised cost using the effective interest rate method. Derivatives The Group uses derivative financial instruments (interest rate swaps) to economically hedge some of its exposure to interest rate risk arising from borrowings (see Note 4). The interest rate swaps convert certain variable interest rate borrowings to fixed interest rates reducing the exposure to fluctuations in floating interest rates. Such derivative financial instruments are carried at fair value. Any resulting gain or loss on re-measurement is recognised in profit or loss. The fair value of interest rate swaps is the estimated amount the Group would receive or pay to terminate the swap at balance date, taking into account current interest rates and the current creditworthiness of counterparties to the swap. The Group does not undertake speculative trading transactions or hold derivative financial instruments for trading purposes. Contingent Considerations The Group recognises contingent consideration liability at its fair value as part of the consideration transferred in exchange for the acquiree and subsequently re-measures at fair value through profit or loss. Accounting Policy - De-recognition of Financial Instruments The de-recognition of a financial instrument takes place when the Group no longer controls the contractual rights that comprise the financial instrument, which is normally the case when the instrument is sold, or all the cash flows attributable to the instrument are passed through to an independent third party. A financial asset is derecognised when: The rights to receive cash flows from the asset have expired The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without delay to a third party under a pass-through arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the profit or loss.

75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Issued Capital and Reserves Ordinary Shares Number of issued and fully paid shares as at 31 March 2017 Thousands 2016 Thousands 87,529 87,418 Ordinary shares have no par value. Fully paid and ordinary shares carry one vote per share and carry the right to dividends. # of shares Thousands Movement in ordinary shares on issue As at 1 April ,418 84,529 Issue of shares At 31 March ,529 84,654 On 16 May 2016 a further 111,208 shares were issued at $1.12 being the fair value increasing the share capital by $0.12 million. Capital Management When managing capital, the Directors objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders. As the market is constantly changing, management and the Board of Directors consider capital and management initiatives. The Directors have the discretion to change the amount of the dividends to be paid to the shareholders accordingly, issue new shares or sell investment property to reduce debt. Management monitor capital through the gearing ratio (debt/investment assets). Loan-to-value ratio Total Group Debt 35,000 48,900 Total Group Assets 131, ,793 Gearing Ratio 26.6% 36.6% The ASB Bank Limited holds no security over any cash deposits as at 31 March 2017 (March 2016 $nil). Group Assets consist of cash, deposits paid, investment properties, investment assets, intangible assets, goodwill and fixed assets. Accounting Policy - Share Capital The costs associated with raising equity (including non-claimable GST) in the Group are deducted from the proceeds of the share capital issued and are recorded as a deduction from equity. The costs associated with repurchasing shares are also deducted from the proceeds of share capital. These deduction costs are directly and incrementally incurred with any equity transactions. 22. Commitments and Contingencies Capital commitments At 31 March 2017 the Group has capital commitments of $183,000 (2016 : $140,000). Guarantees The Company has the following contingent liabilities at 31 March 2017; ASB has provided a bond to the New Zealand Stock Exchange for the sum of $75,000, being the amount required to be paid by all Issuers listed on the New Zealand Stock Exchange, and the Company has provided a General Security Agreement over its assets in favour of ASB as security for this bond (2016 : $75,000).

76 76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Remuneration Key management personnel costs Salary and other short term benefits 2,397 2,163 Share based payment expenses Total 2,570 2,163 Key management personnel includes M.E Francis, B.R Barnett, P.M. Hinton, S.W.J Woollams, L.J. Fitzgibbon, H.N. Bryant and S.M. Brown-Thomas. Long term share incentive plans Augusta operates a long term share incentive (LTI) scheme for the senior management team. It is the Board s view that the LTI scheme strongly aligns the interests of key employees with the interests of shareholders and ties remuneration outcomes to long-term investment performance. The senior management will receive share based payments only if specific hurdles, relating to the performance of the company, are achieved. The share performance rights are measured at fair value at grant date and expensed over the period during which the employee becomes unconditionally entitled to the shares, based on an estimate of shares that will eventually vest. The fair value of the share performance rights which are either vested or forfeited are transferred from the options reserve to retained earnings. Two schemes have been implemented under the plan. The key features of the two schemes are: Each Share Right entitles you to one fully paid ordinary share in Augusta Capital Limited, if vested The individual must remain an employee of Augusta at the relevant vesting date for any rights to vest If the above conditions are satisfied, employees have a period of six months after the applicable vesting to exercise their Eligible Share Rights in accordance with the procedure in the Plan Rules. Rights are split into two tranches with half of the rights subject to a Total Shareholder Return (TSR) relative performance hurdle against an NZX50 performance and half to a NZX Property Index performance. Tranche 1 - NZX50 Performance Hurdle The NZX50 Performance Hurdle requires that the Company s total shareholder return (TSR), over the period from the Commencement Date to the Vesting Date, exceeds the 50th percentile of the TSRs for those companies in the NZX50 as at the Commencement Date (the NZX50 Peer Group). If the Company s TSR does exceed the 50th percentile of the NZX50 Peer Group, then all Share Rights for Tranche One will become eligible to be exercised. If the Company s TSR is equal to or less than the 50th percentile of the NZX50 Peer Group, then none of the Share Rights for Tranche One will become eligible to be exercised. Measurement of TSR is described below. Tranche 2 - The NZX Property Index Performance Hurdle The NZX Property Index Performance Hurdle requires that the Company s TSR, over the period from the Commencement Date to the Vesting Date, exceeds the 50th percentile of the TSRs for those companies in the NZX Property Index as at the Commencement Date (the NZX Property Peer Group). If the Company s TSR does exceed the 50th percentile of the NZX Property Peer Group, then all Share Rights for Tranche One will become eligible to be exercised. If the Company s TSR is equal to or less than the 50th percentile of the NZX Property Peer Group, then none of the Share Rights for Tranche One will become eligible to be exercised. TSR hurdle TSR measures the total return received by shareholders from the increase in the market value of an ordinary share of the relevant entity and the receipt of dividends and other distributions, from the Commencement Date to the Vesting Date. For the issuers in the relevant peer groups and the Company, market value on the Commencement Date or Vesting Date (as applicable) means the quoted financial product s market price as quoted on the NZX Main Board. To minimise the impact of short term volatility on the market price of financial products on the Commencement Date or Vesting Date (as applicable), the TSR will be calculated using the volume weighted average market price of the relevant financial product reported on the NZX Main Board over the ten trading days either up to and including or after the relevant date. The TSRs will be calculated by a recognised independent party, being an investment bank, firm of chartered accountants or other person or body whom the Board considers has the expertise, experience and access to the necessary data to carry out the calculation (Recognised Independent Party). The Board reserves the right to adjust the TSR for the Company or any other entity, on the recommendation of the Recognised Independent Party, to take account of any capital reconstructions, corporate transactions or other circumstances which materially alter the balance between the interests of the Company s shareholders and the Participant, so as to ensure that the balance between the interests of Participants and the shareholders of the Company is repositioned in line with the original intention of the Performance Hurdle. Details of each performance period FY15-FY19 FY16-FY20 Performance period start date 1 April April 2016 Number of rights issued 642, ,086 Testing date for vesting 31 March March 2020

77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Further share performance rights under the long term share incentive plan may be issued on an annual basis. However, the terms of the plan, eligible participant, and offers of further share performance rights may be modified by the Board from time to time, subject to the requirements of the NZX Main Board Listing Rules and applicable laws. 24. Related Party Disclosures Schemes under Management Augusta Funds Management Limited, a subsidiary of the Company, owns the management contract rights of the Schemes. There are a number of different Scheme structures used. Transactions with these Schemes are deemed to be related parties because Augusta Funds Management Limited is the funds manager of these schemes. The following table total the amount of transactions between the Group and these Schemes: Revenue Management Fees 5,310 4,063 Transactional Income 1,948 1,251 Offeror fees 5,451 5,119 Underwriting fees 1,425 1,903 Total 14,134 12,336 Amounts owed by Related Parties In most cases Mark Francis, John Loughlin, Bryce Barnett or Phil Hinton who are the Director(s)s of the Group are also a Director(s) of these Nominee Companies. In other cases where a vehicle under management is structured as a Company, Bryce Barnett and Phil Hinton are Directors. In some cases a limited partnership structure has been used. In such cases the General Partner is a subsidiary of Augusta Funds Management Limited. number of Augusta Funds Management Limited schemes being required to transition to compliance with the Financial Markets Conduct Act 2013 (as a result of the schemes having previously been offered to the public). For those schemes, the shareholdings in the Nominee Company were transferred to the Statutory Supervisor of the Schemes, where not already held by the supervisor. For those nominee companies where Augusta Funds Management is still the sole shareholder, while they are strictly subsidiaries of Augusta Capital, it has no beneficial interest in or control over a Scheme s assets. In respect to each Scheme, such a Nominee Company is established to act as the registered proprietor in respect of the relevant investment property on behalf of the Subscribers within each Scheme. Transactions with Directors Bryce Barnett and Phil Hinton, shareholders and directors of the Group, have interest in certain Schemes. All transactions between those Schemes and the Group were entered into arm s length at both normal market prices and normal commercial terms. The contingent consideration paid in the year ended 31 March 2017 related to the acquisition of KCL Property Limited are payable to Bryce Barnett and Phil Hinton. On 16 May 2016 the contingent consideration was settled by issuing 111,208 shares. Director remuneration paid for the year ended 31 March is as follows; P.J. Duffy J.J. Loughlin M.G. Goldfinch R.M. Petersen P.D. Wilson - 75 Total Subsidiaries who are nominee or custodian companies The Company has a number of subsidiary companies which are appointed by the Subscribers as their bare trustee to take and hold the Property on behalf of all the Subscribers in accordance with the terms of the management contracts. During the year ended 31 March 2017, the number of such subsidiaries decreased by 39. This change was a result of a

78 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 MARCH Lease Commitments Operating Lease Receivables Substantially all of the property owned and leased by the Company is leased to third party tenants. Future minimum rental revenues under non-cancellable operating property leases are as follows: Due within one year 4,675 6,388 Due between one and five years 3,571 18,320 Due after five years - 19,274 The Group s leasing arrangements are made with third party tenants, and are supported by relevant lease documentation. The lease terms vary between properties and individual tenants within those properties. The Group as the lessor grants the use of the space within these properties to a lessee (tenant) in return for a consideration, being a rental payment made by the lessee. 26. Events After the Balance Date On 1 April 2017 the Group paid a $5.0 million deposit in relation to 33 Broadway, Newmarket, Auckland. Debt of $5.0 million was drawn down to fund the deposit. On 11 April 2017 the Group purchased an additional 15,529,933 shares in NPT Limited taking the companies stake in NPT Limited to 18.85%. Total cost, including brokerage was $10.6 million, and was funded by cash reserves and a debt drawdown of $8.0 million. On 13 April 2016 the Group registered a product disclosure statement for an offer of units in 33 Broadway Trust. On 1 May 2017 The Directors of the Company declared a final dividend on ordinary shares in respect to the year ended 31 March The total cash amount of the dividend is cents per share and has been paid on 22 May The dividend has not been provided for in the 31 March 2017 financial statements. The reduction in operating lease receivables in 2017 is due to the sale of the Finance Centre. There are no contingent rentals. Operating Lease Payable Due within one year Due between one and five years Due after five years 1,582 - A new lease has been entered into for the Group s new Auckland office at 30 Gaunt Street, Wynyard Quarter. Accounting Policy Leases The Group has entered into commercial property leases on its investment property portfolio. The Group has determined that it retains all the significant risks and rewards of ownership of these properties and has thus classified the leases as operating leases. Judgement is involved in the determination of whether an arrangement is or contains a lease is based on the substance of the arrangement. This requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and that the arrangement conveys a right to use the asset. Group as Lessor Rental leases, in which the Group retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the rental income.

79 79

80 80 INDEPENDENT AUDITOR S REPORT INDEPENDENT AUDITOR S REPORT To the Shareholders of Augusta Capital Limited Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Augusta Capital Limited ( the company ) and its subsidiaries (together the group ) on pages 50 to 78, which comprise the consolidated statement of financial position of the group as at 31 March 2017, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended of the group, and the notes to the consolidated financial statements including a summary of significant accounting policies. In our opinion, the consolidated financial statements on pages 50 to 78 present fairly, in all material respects, the consolidated financial position of the group as at 31 March 2017 and its consolidated financial performance and cash flows for the year then ended in accordance with New Zealand equivalents to International Financial Reporting Standards and International Financial Reporting Standards. This report is made solely to the company s shareholders, as a body. Our audit has been undertaken so that we might state to the company s shareholders those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company s shareholders as a body, for our audit work, for this report, or for the opinions we have formed. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the group in accordance with Professional and Ethical Standard 1 (revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Ernst & Young provides tax compliance services to the Group, and taxation advice services in relation to GST, PIE status and breaches, restructuring, dividends and imputation credits, and the setup of the Augusta Value Add Fund. We also perform the audit of a number of syndicates and the Augusta Value Add Fund No. 1 Limited, which are managed by the Group. We also provide taxation advice services to the Augusta Value Add Fund No. 1 Limited directly. Partners and employees of our firm may deal with the group on normal terms within the ordinary course of trading activities of the business of the group. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

81 81 INDEPENDENT AUDITOR S REPORT (CONTINUED) We have fulfilled the responsibilities described in the Auditor s Responsibilities for the Audit of the Financial Statements section of the audit report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements. 1. Valuation of investment properties held for sale Why significant The valuation of the investment properties held for sale carried at $93.3 million on the consolidated statement of financial position is important to our audit as it represents a judgment area and a significant percentage of the total assets of the group (69%). The valuation of the investment properties is dependent on forecasts and estimates. We therefore identified the valuation of investment properties as a significant audit risk. These investment properties held for sale comprise four properties which are subject to an executed sale and purchase agreements which have a deferred settlement date where title will pass to the purchaser on defined future dates. As a result of title not passing to the purchaser as at balance date ACL continues to control the properties held for sale and must value these properties in accordance with NZ IAS 40 Investment Property. The Group has made an assessment of the fair value of these properties using property rental income and market capitalisation rates. How our audit addressed the key audit matter In obtaining sufficient audit evidence we: assessed the sale and purchase agreements to determine whether the properties met the requirements to be disclosed as properties held for sale ; evaluated the group s assessment of fair value and reconciled the net market rental used in the valuation analysis to rental income in our revenue testing to ensure that the income used for the fair valuation assessment was complete; compared the capitalisation rates used by the group to market rates; involved our real estate valuation specialists to evaluate the work performed by the group including the underlying key assumptions and methodology. The key assumption being capitalisation rates; and assessed the adequacy of the disclosures made in respect of the valuation of investment properties. Disclosures surrounding this item are included in note 14 to the consolidated financial statements. 2. Goodwill and other intangible assets impairment assessment Why significant The goodwill and other intangible assets carried at $8.8 million and $6.7 million respectively are important to our audit because they represent a significant component of total assets (12%) and the process of considering potential impairment requires judgment. The group performs impairment tests annually and are reliant on forecasts and estimates. We therefore identified the valuation of this item as a significant audit risk. The impairment test is performed by the group using a value in use calculation which contains cashflow forecasts for 2018 as approved by the Board, with future cashflow projections for 10 years and a terminal value post that. Assumptions have been made around growth rates on revenue and costs and discount rate. There is an element of judgment and subjectivity in each of these assumptions. How our audit addressed the key audit matter In obtaining sufficient audit evidence we: involved our valuation specialists to assist us in analysing the underlying valuation methodology; performed sensitivity analysis, on key assumptions, including alternative cashflows, growth rates and discount rates to determine if a reasonably possible change would materially impact the outcome; assessed the forecast revenue streams for 2018, and compared these to 2017 actuals; and assessed the adequacy of the disclosures made in respect of the impairment testing of goodwill and intangible assets. Disclosures surrounding this item are included in note 17 to the consolidated financial statements.

82 82 INDEPENDENT AUDITOR S REPORT (CONTINUED) 3. Underwriting and offeror revenue Why significant The group recognised $5.5million of offeror fee revenue, and $1.4million of underwriting fee revenue for the year ended 31 March Recognition of these streams of revenue, including, interpreting and accounting for the various obligations and commitments between the group and the funds it manages, is considered a key audit matter given the materiality of these revenue streams to the overall consolidated financial statements. There is also judgment required when assessing the timing of when revenue relating to offeror and underwriting fees should be recognised. Revenue recognition depends on the timing of the syndication and the terms of the individual arrangement. How our audit addressed the key audit matter In obtaining sufficient audit evidence we; agreed a sample of underwriting and offeror fee revenue recorded in the year to product or investment disclosure statements to determine whether the revenue recognised was in accordance with the underlying documentation; and assessed the timing of the recognition of the revenue against the terms in the contract, to test whether the revenue was recognised in the correct period. Disclosures surrounding this item are included in note 7 to the consolidated financial statements. 4. Classification of investment in Augusta Value Add Fund Why significant How our audit addressed the key audit matter The group acquired a 10% investment in the Augusta Value In obtaining sufficient audit evidence, we; Add Fund No1 ( the fund ) during the year. The group assessed the constitution of the fund and the has determined that it exerts significant influence over the management agreement between the fund and ACL; fund resulting in the investment being accounted for as an associate. Accordingly, the group has applied the equity method of accounting to the fund results in the consolidated financial statements. Classification of this investment as a subsidiary or an associate requires significant judgment due to the complexity of the relationship between the group and the fund. We therefore identified the classification of this investment as a significant audit risk. Disclosures surrounding this item are included in note 15 to the consolidated financial statements. considered the information obtained from the constitution and the management agreement alongside guidance in NZ IFRS10 Consolidated Financial Statements to assess if the group had adopted the appropriate accounting treatment for this investment; and assessed the adequacy of the disclosures made in respect of the investment in the Augusta Value Add Fund.

83 83 INDEPENDENT AUDITOR S REPORT (CONTINUED) Information Other than the Financial Statements and Auditor s Report The directors of the company are responsible for the Annual Report, which includes information other than the consolidated financial statements and auditor s report. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated. If, based upon the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Directors Responsibilities for the Financial Statements The directors are responsible, on behalf of the entity, for the preparation and fair presentation of the consolidated financial statements in accordance with New Zealand equivalents to International Financial Reporting Standards and International Financial Reporting Standards, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the directors are responsible for assessing on behalf of the entity the group s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or cease operations, or have no realistic alternative but to do so. Auditor s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (New Zealand) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of the auditor s responsibilities for the audit of the financial statements is located at External Reporting Board s website: https: This description forms part of our auditor s report. The engagement partner on the audit resulting in this independent auditor s report is Susan Jones. Auckland 30 May 2017