Pouwhakarae Report

" This is a long-term plan; however I am pleased with our progress to-date, and confident we are making the right steps towards our mission of enabling Ngāruahine to be a healthy, wealthy and culturally vibrant iwi."

I am proud to report on the second full year of operations of Te Kīwai Mauī o Ngāruahine Limited (Mauī). We are the commercial arm of Te Korowai o Ngāruahine Trust (Te Korowai), and our vision is to be an outstanding investment company enabling Ngāruahine to be a healthy, wealthy and culturally vibrant iwi.

OUR FOCUS

EXCELLENCE Achieve leading sector risk-adjusted returns on investment.

GROWTH Achieve continual longterm asset and distribution growth via investment returns.

LEADERSHIP Lead and exert rangatiratanga through successful performance.

INTEGRITY Enhance the reputation of Ngāruahine as a responsible member of te ao Māori and the community.

OUR PŪTEA

In total, Mauī now oversees $83.2 million in tribal pūtea (FY18: $80.2m), including the fisheries assets held by Ngāruahine Fisheries Ltd (NFL).

Given our relatively recent settlement timing, our asset portfolio is currently predominantly made up of conservative managed fund portfolio investments, supplemented by cash term deposits until we execute our investment strategy of building a balanced resilient portfolio of direct investments.

2019 PERFORMANCE

The financial performance of the Mauī Commercial Group (including NFL) is set out below. Overall, the Mauī group delivered a total pre-tax FY19 return of 5.4% on opening assets (FY18: 4.7%).

We are pleased with this return, which is consistent with the risk profile of the portfolio, given the significant cash and conservative managed funds components. As asset diversification is gradually implemented in accordance with our direct investment strategy we would expect to see this return rise overtime.

INVESTMENT STRATEGY

Our investment strategy is to progressively build over time, a portfolio of high-quality direct investments to increase our investment returns and pūtea forNgāruahine, consistent with the following principles:

• We will take a long-term commercially disciplined approach to investment decisions, thus being patient in waiting for the right opportunities and will only invest where we believe it can generate appropriate risk-adjusted returns on capital.

• We will seek a balanced portfolio that generates the necessary cash flow to sustain distributions for Te Korowai but also provides for long-term capital growth.

• Our direct investments will centre on opportunities that play to our strengths, including our settlement rights, and opportunities that arise from our relationships and partnerships, including within Māoridom.

• We will partner with other like-minded entities, in particular iwi in Taranaki, enabling access to a greater range of investment opportunities and to larger scale investments which are more likely to have the required quality of structure, governance and management.

Our progress to-date in implementing our investment strategy has involved developing the following key opportunities:

Te Pūia Tāpapa

We have committed to investing alongside other iwi and Māori investment groups in a collective direct investment vehicle, “Te Pūia Tāpapa”, which together with major NZ investors will target premium large-scale local investments. Strategically this participation should give us access to good quality, operational direct investments supported by high-quality investment analysis.

Mauī has committed $2.5m to Te Pūia Tāpapa, and expects that this will be called over three to five years.

Tai Hekenga

We are also progressing the participation in the “Tai Hekenga” joint venture together with Taranaki Whānui and Port Nicholson Block Settlement Trust to acquire a large portfolio of Crown settlement leaseback properties in Wellington that offer high quality secure low-risk rental returns. Our intended investment in this opportunity is $11 million. We expect part of this investment to be activated in July 2019.

Crown property

Te Korowai has access to a range of properties for purchase from the Crown as part of its settlement. Mauī has been delegated responsibility for managing the commercial assessment of these properties and facilitating the exercise of the settlement right process on behalf of Te Korowai.

Mauī has been conducting an assessment of a number of properties available for purchase and working with Te Korowai and Hapū in relation to the acquisition process under the Deed of Settlement.

Oriens Capital

Mauī has made an investment commitment of $2.55m in the Oriens Capital Private Equity Fund Limited Partnership, which invests in privately owned New Zealand businesses which have succession or growth capital opportunities. The Partnership has to-date called 45% of committed capital, investing in four portfolio companies, including an anchor investment in apple company; Rockit Global Limited.

The fund has been operating for two and a half years. On a market valuation basis and accounting for expenses to date, the fund has maintained its net asset value at just above par (1.02x paid-in capital). Given the early stage of the fund’s development and level of capital called, this is viewed as a positive result, with returns expected to increase as the fund matures. To-date, Mauī has invested $1.15m of its $2.55m commitment.

AMP Capital Australasian Diversified Infrastructure Trust

Mauī has been reviewing an investment into AMP Capital’s Australasian Diversified Infrastructure Trust. This is an unlisted c $1.5bn fund, domiciled in Australia but investing in both Australian and New Zealand infrastructure assets covering rail, airports, energy and student accommodation. One of their major assets is local energy distribution company, PowerCo.

This fund provides exposure to low-volatility cash flows, backed by solid assets available at a more competitive entry price than comparable listed entities, which help to provide diversification and also insulation in the event of a downturn.

The fund has delivered returns (on average) of just over 15% over the past five years. We consider this opportunity a long-term investment into a portfolio of quality infrastructure assets with a proven track record of good performance, akin to a direct investment consistent with Mauī’s long-term investment strategy approach. The Mauī Board approved an investment of AUD $5m (NZ $5.3m) in May, so the effect of the investment will only be visible in 2020.

Dawson Falls Lodge

The above opportunities complement our acquisition in 2016 of the Dawson Falls Lodge, which in addition to forming part of our commercial portfolio, represents a site of very high cultural importance for Ngāruahine. During the year, new live-in management Dean and Bernie Kira came on-board. Together with their team, Dean and Bernie have done a great job in making the lodge a fantastic experience for our guests. This has reflected in the feedback received and sales, with revenue for the six months to March 2019 15% up over the equivalent period last year (and continuing to grow into the new financial year). We are passionate about further developing the lodge as a first-class cultural and tourist attraction on the maunga.

CONCLUSION

Given the relatively recent timing of the settlement, we are still very early in our journey of building the pūtea and investment returns for Ngāruahine. This is a long-term plan; however I am pleased with our progress to-date and confident we making the right steps towards our mission of enabling Ngāruahine to be a healthy, wealthy and culturally vibrant iwi.

I am very grateful for the contributions of my fellow directors Taari Nicholas, Bev Gibson, Te Aroha Hohaia and associate director Dion Maaka, together with the work of our management team in achieving our progress to-date. I would also like to thank the trustees and staff of Te Korowai for their support, and in particular the Pouhautū, Allie Hemara-Wahanui.

Ngā mihi nui

Hinerangi Raumati-Tu'ua, Chair

TE KĪWAI MAUĪ O NGĀRUAHINE LIMITED

Hinerangi Raumati-Tu’ua (Pouwhakarae)

Taaringaroa Nicholas (Director)

Bev Gibson (Director)

Te Aroha Hohaia (Director)

Dion Maaka (Associate Director)