 How
do the recent changes to the Income Tax Act 2004 affect
Barramundi and its Shareholders?
There are two new tax ‘regimes’:
- the Portfolio
Investment Entity or “PIE” regime, which
commenced on 1 October 2007; and
- the new Foreign
Investment Fund or “FIF” regime, which
commenced on 1 July 2007 for Barramundi.
PIE Regime
Barramundi has registered for the Portfolio Investment
Entity (PIE) tax regime which commenced on 1 October
2007. The regime has significant advantages for shareholders:
Natural person Shareholders or Trustees do not have
to include dividend income from Barramundi in their
tax return (although if you are on 19.5% marginal tax
rate you can elect to include dividends, to take advantage
of any imputation credits attached at the higher rate
of 33%). Other shareholders only have to include fully
imputed dividends in their income, in which case the
imputation credits will usually fully offset any tax
liability.
There is no longer a restriction on the distribution
of capital gains to shareholders.
The Manager, Fisher Funds, will have more flexibility
to undertake one-off 'short-term' transactions (however,
overall they will maintain their long term buy and hold
strategy).
FIF Regime
Barramundi will be taxed on most of its investments
under the new foreign investment fund ("FIF")
regime. Under the regime, Barramundi will apply the
fair dividend rate ("FDR") method to calculate
its annual income tax liability in respect of its investments.
Barramundi will generally be treated as deriving taxable
income each year equal to 5% of the market value of
its investments (excluding those not subject to the
FIF regime). Barramundi will generally not be taxed
on any actual dividend received or any captial gains
from selling shares subject to the FIF regime.
The above comments do not constitute tax advice to
investors, as tax implications will depend on each investor’s
tax profile and circumstances. We encourage shareholders
to seek their own tax advice.
What is the level and criteria for the Manager’s
eligibility for the Management Fee and the Performance
fee?
In return for the performance of its duties as Manager
of the Company’s Portfolio, the Manager is entitled
to be paid:
| a) |
A Management Fee equal to 1.25% per annum of the
Gross Asset Value, calculated weekly and payable
monthly in arrears. The Management Fee for each
financial year of the Company will be reduced by
0.10% for each 1.0% per annum by which the Gross
Return for that financial year is less than the
change in the NZX 90 Day Bank Bill Index over the
same period, but subject to a minimum Management
Fee of 0.75% per annum of the Gross Asset Value
for that period. |
| |
|
| b) |
The Company will pay the Manager a Performance
Fee for providing excess returns over and above
the Benchmark Rate. The Manager will be paid 15%
of the lesser of: |
| |
|
| |
| (i) |
the excess return (being the dollar amount
by which the Net Return per share exceeds
the product of the Benchmark Rate multiplied
by the Net Asset Value per share at the start
of period) for the applicable period multiplied
by the number of shares on issue at the end
of the period; or |
| |
|
| (ii) |
the dollar amount by which the Net Asset
Value per share exceeds the greater of: |
| |
|
| |
| (A) |
the highest Net Asset Value per share
previously achieved at the end of any
previous calculation period in respect
of which a performance fee was payable;
and |
| |
|
| (B) |
the Net Asset Value as at the commencement
date of the Management Agreement, being
the offer proceeds less all liabilities
of the Barramundi Group at that date,
multiplied by the number of shares on
issue at the end of the period (the
High Water Mark). |
|
|
The calculation of the Performance Fee is also subject
to certain rules set out in the Management Agreement,
including making adjustments for changes in the number
of shares on issue and dividends paid etc. and the timing
of those changes. The Performance Fee will be calculated
for the first period from the commencement date to 30
June 2007 and annually to 30 June each year thereafter,
although the Company may elect to provide for any Performance
Fee more regularly in calculating
the Net Asset Value. Any Performance Fee will be paid
to the Manager in July each year.
The Performance Fee will be paid to the Manager in
cash. However, the Manager will be obliged to immediately
use half of any such Performance Fee to subscribe for
ordinary shares in Barramundi, which shares shall be
issued at an issue price per share equal to the volume
weighted average traded price of ordinary shares in
the Company over the five trading days ending on the
calculation date.
The Manager may not sell those shares issued to it
in accordance with these provisions within 180 days
of issue (other than with the prior approval of the
Company) and must in any event comply with all relevant
legal requirements (including under the Securities Markets
Act 1988) in so doing.
All fees are exclusive of GST, which will be added
where applicable.
Will I receive Imputation Credits and Tax Credit for
Australian Franking Credits?
There is a requirement under the PIE regime for Barramundi’s
imputation and foreign dividend withholding payment
credits to be attached to distributions, regardless
of shareholders no longer needing them to minimise tax
payable.
Under current tax rules, Barramundi, its shareholders
and subsidiaries will not be entitled to any New Zealand
tax credit for Australian franking credits that are
attached to dividends received from the Australian companies
making up the Barramundi portfolio.
My address has changed. Who should I tell?
Please write to Computershare Investor services at
the following address:
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna
Private Bag 92119
Auckland
Telephone: 09 488 8777
Fax: 09 488 8787 |
