Chairman's Letter

Augusta Capital Limited (Augusta) has today announced that it intends to raise approximately NZ$45 million via a fully underwritten NZ$12.4 million placement to certain institutional investors, followed by an approximately NZ$32.6 million fully underwritten 1 for 1.9 pro-rata accelerated non-renounceable entitlement offer (the “Offer”).

Augusta is pleased to announce that Centuria Capital and Centuria Funds Management (together Centuria) will take up an initial holding of 15.6% of Augusta under the placement. Centuria has committed to Augusta to fully subscribe for all of its entitlements under the Offer, as well as partially sub-underwrite the Offer.  Centuria is expected to have a minimum shareholding of 19.0% following completion of the institutional component of the Offer.  Centuria’s shareholding will not exceed 24.99% of Augusta’s shares on issue after completion of the Offer (and is in accordance with the COVID-19 Takeovers Code exemption notice and the terms of the consent granted to Augusta under the Overseas Investment Act).

COVID-19 has had a significant impact on our business, including two new fund offerings that did not proceed; the Augusta Tourism Fund and the Augusta Property Fund, resulting in additional strain on our balance sheet and lost offeror and underwriting fees.

Augusta is taking decisive action to strengthen our balance sheet by raising $45 million of equity. The proceeds from the equity raise will be used to repay debt, restore financial flexibility for future property fund offerings and will allow Augusta to defer development activity and retain property assets until offering conditions improve.

The business is also taking steps to materially reduce overheads and defer non-essential expenditure and cash outflows. Against this backdrop the Board has decided not to pay a Q4 dividend, with future dividends to be determined by the Board having regard for a sustained recovery in profitability.

Augusta’s core business is to create wealth through property investment by actively managing properties for its fund investors.  Our team has a history of accessing deals across a range of property sectors, providing management services via the NZX-listed Asset Plus as well as other unlisted funds and single asset vehicles. Augusta has a strong retail investor following across New Zealand.  The Board notes Augusta’s lender remains very supportive of the business.

With the financial flexibility provided by the Offer, Augusta will be able to maximise outcomes from the assets on its balance sheet and is ready to access new opportunities as they become available.  While we intend this to be sooner rather than later, the capital raising provides us with a great deal of flexibility regarding the timing of future offering activity, whilst Augusta continues to manage the existing portfolio over this uncertain period.

I am therefore pleased to offer you the opportunity to participate in the Offer. Under the Offer, eligible shareholders may apply for 1 new share for every 1.9 existing shares held as at 5.00pm on the Record Date of 7 May 2020, at an application price of $0.55 per new share. The application price reflects a 31.3% discount to $0.80, being the last closing price of Augusta’s shares traded on the NZX on 1 May 2020, and a 19.2% discount to the theoretical ex-rights price (TERP) of $0.681.¹

The placement will be conducted on 5 May 2020 and the institutional component of the Offer will be accelerated and will close on 6 May 2020.

Eligible retail shareholders have until 5.00pm on 19 May 2020 to subscribe for new shares. Online application at www.augustashareoffer.co.nz is strongly encouraged given the likelihood of delays with the postal system at this time.

I am pleased to confirm that Mark Francis, managing director, has committed to subscribe for $3 million of new shares, with the balance of the placement and the Offer fully underwritten by Jarden Partners Limited and Forsyth Barr Group Limited. Under the Offer, there will be no trading of entitlements or any shortfall bookbuild of new shares not taken up. Those shareholders who do not exercise their entitlements, or who are ineligible to do so, will have their shareholdings diluted.²

Please read this Offer Document carefully before deciding what to do. If you have any questions about how to deal with your entitlements, you are encouraged to talk to a professional adviser.

We also encourage you to read through all of Augusta’s recent announcements, particularly the Investor Presentation and other materials released on 5 May 2020 at www.nzx.comOpens in new window under the ticker "AUG". In particular, you should refer to section 5 of the Investor Presentation ("Key Risks") before making an investment decision. You can also access information, including the Investor Presentation and details regarding the Offer, on the following website at www.augustashareoffer.co.nz

On behalf of the Board, thank you for your continued support, and we welcome your consideration of, and participation in, the Offer.

Yours sincerely,

Paul Duffy
Chair

1. The TERP is the Theoretical Ex-Rights Price at which Augusta ordinary shares would trade immediately after the ex-rights date for the Offer. TERP is calculated with reference to Augusta’s closing share price of $0.80 on 1 May 2020 and includes all new shares issued under the placement and Offer. TERP is a theoretical calculation only and the actual price at which Augusta ordinary shares will trade immediately after the ex-rights date for the Offer will depend on many factors and may not be equal to TERP.

2. Eligible Shareholders who take up 100% of their Entitlements in the Offer will be diluted by approximately 20%.