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Money Managers to wind down $456 million First Step trusts

Published 6 December 2006

Money Managers Ltd said yesterday it would close the 4 First Step trusts set up 6 years ago, paying $456 million back to investors, because the original tax efficiency had been lost and new international tax rules would disadvantage those investors.

The First Step trusts were set up using Australian unit trusts, but Money Managers managing director Alasdair Scott said the advantage of that scheme had ended in 2004.

“Back in 2000, part of the tax law stated that if you had an AUT, if they didn’t distribute income as cash but distributed income as bonus shares, those bonus shares were not taxable in the hands of New Zealand investors. That was applicable until late 2004 and that no longer provides investors in those structures with a tax advantage.”

However, Money Managers didn’t close the trusts then because there was also no disadvantage, although the structures were complex. Now, Mr Scott said, investors asked why they should invest in such a complex structure and there were new, more effective structures in place.

The First Step money has been lent short-term on a range of investments, mostly property-related and all short-term, through Matrix Funding Ltd. Loans include first & second debentures and mezzanine debentures for rest homes & apartment developments.

Money Managers will pay the first $100 million to 7000 investors in 2 tranches in January & March, and the rest as loans mature. Mr Scott expected the whole wind-down would be completed in 2 years, possibly less.

Newer schemes Matrix operates include Money Managers’ Orange Finance and the Orange Insurance tax-paid bonds.

Money Managers has $2 billion of investors’ money under management.

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Attribution: Company release, phone interview with Mr Scott, story written by Bob Dey for this website.

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