Pouwhakarae Report

Tēnā tātou

Te Kīwai Mauī o Ngāruahine Limited (Mauī) is the commercial arm of Te Korowai o Ngāruahine Trust, responsible for managing and growing the pūtea of Te Korowai o Ngāruahine.

Our role is to support the strategic plans and operations of Te Korowai by providing stable long-term income growth and investing to deliver outcomes for Ngāruahine consistent with the values and strategies of Te Korowai.

Our investment strategy is to build a portfolio of highquality direct investments in asset classes where we have competitive advantage as a long-term iwi investor, focussed on delivering sustainable returns for Ngāruahine.

We are pleased to report another strong financial performance this year, delivering a comprehensive profit return on investment of 11%, despite the challenges presented by Covid and other market factors.

During the year, we completed a number of key strategic investments across our target asset classes, particularly in agriculture, horticulture and property, providing greater portfolio diversification and reducing our risk exposure to financial market uncertainty.

We are also excited about the opportunities we are progressing in our rohe, which are focussed on delivering social, cultural, mahi and other impact outcomes for Ngāruahine, in addition to delivering commercial returns.

During the year, we committed to rebuilding our lodge on the Maunga at Te Rere o Kapuni. This is an investment of major cultural significance for Ngāruahine, and will help us share our Ngāruahine culture and manaakitanga with and kāinga projects at initial planning stages manuhiri.

In addition, we are also progressing landmark opportunities to develop new Iwi-community facilities and kāinga for our whānau, investments that we believe will have a major impact for our whānau and rohe.

KEY HIGHLIGHTS

Key highlights for the year included:

• Total FY22 comprehensive income of $11m (combined Mauī and Ngāruahine Fisheries Limited)

• Return on opening net assets of 11%

• Net asset growth of $8.5m, over and above FY22 dividend payments of $1.96m

• Very strong returns on property investments, with Tai Hekenga returning 44% and Hāpai iwi investment vehicles achieving a return of 19.5%

• 12.4% return on agriculture / horticulture investments through Pūainuku iwi investment vehicle

• $24m committed to new direct investments in property, agriculture and private equity, reducing our managed funds exposure to listed markets uncertainty

• Increased focus on local rohe investments, commencing with the rebuild of our lodge at Te Rere o Kapuni. As of July 2022, the cost is estimated at 8.2m. Work has started, with a target opening in the 2nd half of next year (2023)

• Impact investment opportunities in Ngāruahine rohe also being progressed – with Iwi-community facilities and kāinga projects at initial planning stages.

FUNDS UNDER MANAGEMENT

Our progress in growing the Ngāruahine pūtea is shown in figure 1 below.

FIG 1: MARKET VALUE GROUP ASSETS

As shown, since our first year of operations in FY18, we have now grown our iwi assets to over $105m, in addition to providing annual distributions to Te Korowai. In FY22, we grew the pūtea by $8.0m, in addition to making a distribution of $1.96m to Te Korowai.

As noted above, our investment strategy is to build a portfolio of diversified high-quality direct investments in asset classes where we have competitive advantage, transitioning from passive managed funds where we have greater exposure to listed financial markets.

Figure 2 below shows our progress in building our portfolio of direct investments, transitioning from passive managed funds and cash.

FIG 2: NGĀRUAHINE GROUP PORTFOLIO

As shown, our commitments this year will further strengthen our direct investment portfolio, increasing to almost 80% of our total asset portfolio, once implemented.

A breakdown of our asset portfolio is detailed in figure 3 below.

FIG 3: NGĀRUAHINE GROUP PORTFOLIO ($MILLION)

Please note: graphs can only be viewed in the flipbook version of the Annual Report.

As shown, in FY22 our investment in property and diversified agriculture increased, funded through the reduction in passive managed income funds and cash holdings.

Further commitments this year in Te Rere o Kapuni, horticulture and private equity will (once implemented) provide further diversification, with an emphasis on increasing our allocation to growth assets to support our growth objectives, consistent with our long-term portfolio objectives.

FY22 FINANCIAL PERFORMANCE

The financial performance of the Mauī Commercial Group (including Ngāruahine Fisheries Limited) is set out in figure 4 below.

FIG 4: PROFIT AND LOSS PORTFOLIO ($MILLION)

Please note: table of financial performance can only be viewed in the flipbook version of the Annual Report.

Overall, the Mauī group delivered a total pre-tax FY22 return of 11% on opening assets (FY21: 14%).

As shown above, the strong performance has been boosted by returns on a number of key investments implemented, detailed further below.

OUR INVESTMENTS

Tai Hekenga

In FY20, Mauī completed an investment of c$11m as part of Tai Hekenga, a consortium of Taranaki Whānui linked iwi that collectively purchased a large portfolio of Crown leaseback land in Wellington. This investment provides secure low risk rental returns and capital gains.

In FY22, Tai Hekenga delivered a total return of 44.1% comprising land rentals of 8.3% and capital revaluation gains of 35.8%. The value of Mauī’s investment in Tai Hekenga at March 2022 was $21.2m.

Hāpai Whānau

The Hāpai Whānau is a group of iwi collective investment vehicles that provides access to diversified leading sector returns in commercial property, build-to-rent housing and property development investment opportunities.

Mauī was one of six foundation investors to establish Hāpai. All Hāpai investment vehicles are governed by a single Board. As a founding investor, Mauī has directorship representation on the Hāpai board, providing Mauī with good governance oversight across our Hāpai property investments.

Hāpai Commercial Property

Mauī committed an investment of $11.2m in Hāpai Commercial Property LP (‘Hāpai Commercial’) that invests in a highly diversified, investment grade commercial property portfolio to deliver dependable income and capital growth.

Hāpai Commercial has invested in six properties to-date, with the focus on assets with strong tenant covenants, location and usage diversity. The portfolio was relatively unaffected by Covid, in part reflecting the quality of the portfolio.

During FY22, Hāpai Commercial delivered an operating return of 8.3% (FY21 9%), and capital revaluation gains of 21.6%.

Hāpai Housing

Hāpai Housing invests in build-to-rent housing sector. Mauī has committed $5m to this vehicle. In addition to providing leading sector returns on investment, this investment provides the opportunity to deliver wider outcomes such as delivering much needed quality, warm and healthy housing with preferential access for iwi members.

During FY22 Mauī invested $1.4m of its commitment, with the first project expected to be delivered next year (2023).

Hāpai Development

Mauī has also committed $5m in Hāpai Development. During 2022, this vehicle purchased land in Iport, Rolleston and entered into an investment joint venture to develop property at Formosa (Beachlands). During FY22, we invested $3.1m of our commitment.

Pūainuku Whānau

The Pūainuku whānau consists of iwi collective investment entities that are focussed on key primary sector categories; agriculture (Pūainuku Pastures), horticulture (Pūainuku Pastures), viticulture (Pūainuku Vines) and seafood (Pūai Tangaroa). Mauī has committed as a foundation investor in each of these vehicles.

Pūainuku Pastures

Pūainuku Pastures has dairy interests in prime irrigated farms located throughout the South Island. During FY22, Mauī invested $5m in this entity, which delivered an operating return during the year of 17%.

Pūainuku Vines

Pūainuku Vines has vineyards and hop gardens in prime growth regions namely Nelson and Marlborough. We have committed $3m to this entity, of which $1.5m has been called to date. Pūainuku Vines achieved operating returns during the year of 8% (annualised).

Pūai Tangaroa

Pūai Tangaroa has invested in kōura quota and rolling leases with Port Nicholson. We have committed $750k and to date have invested $325k.

Te Pūia Tāpapa

In FY20, we committed $2.5m alongside other iwi and Māori investment groups in a collective direct investment vehicle, “Te Pūia Tāpapa”, which together with major NZ investors targets premium large-scale local investments. Strategically this commitment gives us access to good quality, operational direct investments supported by high quality investment analysis.

Approximately 28% of our commitment to the fund has now been invested by FY22 year end to support investments to date in the transportation, finance and healthcare sectors. Our remaining commitment is expected to be fully invested over the next two - three years.

Our investment in Te Pūia Tāpapa is a long-term growth investment with returns expected to crystallise in the longer-term after the fund is fully invested. In FY22, the investment portfolio delivered a total return of 19.2%.

Orien’s Capital

Orien’s Capital Private Equity Fund Limited Partnership invests in privately owned New Zealand businesses which have succession or growth capital opportunities.

Mauī previously committed to $2.55m in the first of Orien’s funds, which has performed very strongly, delivering a net internal rate of return (IRR) of 31.2% to-date. During FY22, Mauī committed a further $2.5m in Orien’s 2nd fund, 20% of which has been drawn-down to-date.

Continuity Capital Private Equity

To increase access to long-term high growth assets, in FY22 Mauī also committed an investment of $7.5m in Continuity Capital, which invests in private equity funds with a proven track record of delivering attractive returns. To date Mauī has invested $1.5m of its commitment.

AMP Infrastructure fund

In FY20, Mauī invested c$5m in New Zealand and Australian infrastructure via the AMP Capital managed Australasian Diversified Infrastructure Trust. This is a long-established fund with significant scale assets in New Zealand and Australia including PowerCo, Melbourne airport, the Sydney rail network and student accommodation.

Covid-19 has impacted the fund, resulting in no distributions being paid out during the year. However, the fund had a reasonable value uplift in FY22 with a total return at 6.9%. With the re-opening of borders, distributions are expected to return in FY23.

Mercer Socially Responsible Managed funds

During FY22, our investments in Mercer’s Socially Responsible funds were impacted by the challenges faced by financial markets, returning 2% across our investment in the funds.

Our managed funds exposure reduced during the year, as we repositioned $5m of our investment with Mercer into new direct investments, outlined above. Our exposure to managed funds is expected to reduce to under 10% of our portfolio (currently c35%) as we implement our direct investment strategy as described above.

Ngāruahine Fisheries Limited (NFL)

NFL is a streamlined operation managed by Mauī, with all quota leased out and income also coming from ownership of shares in Moana New Zealand (formally Aotearoa Fisheries Limited).

FY22 continues to present challenges in the fisheries sector, with Covid impacting demand in our export markets. Overall, we delivered a return of 5% on our investment in fisheries assets, which we consider is a reasonable result in the context of the challenging year.

Te Rere o Kapuni (formally Dawson Falls Lodge)

Te Rere o Kapuni is a place of significant cultural and historical importance to Ngāruahine and Taranaki.

During the year, we committed to rebuild the lodge to help us share our Ngāruahine culture, stories and manaakitanga with manuhiri. In doing so, we will have the opportunity to provide greater training, mahi and growth opportunities for our uri.

Construction is now underway, targeting completion in the second half of next year (2023). We are very excited to open the doors to a brand-new facility and welcome manuhiri again on the Maunga.

Further investment opportunities in Ngāruahine rohe

In addition to our investment in Te Rere o Kapuni, we are also progressing landmark opportunities in our rohe to develop new Iwi-community cultural spaces and kāinga for our whānau. We believe these investments will have a major positive impact for our uri, whānau, Hapū and within our rohe, in addition to providing a commercial return on our investment.

Project Tūkau is a business case for a combined multipurpose, multi-use Iwi and community facility in Manaia. As part of our assessment of options, we identified a need for something more than just a head office, but a cultural creative space to support large Iwi activities and which complements the role and mahi of our Hapū at a pā level.

The investment, should it progress, would include a sale, development and long-term lease back with the South Taranaki District Council. It may also include a management contract for the civic facilities (library, hall, pools). The business case will be finalised at the end of 2022.

The other key strategic investment focus in our rohe is developing kāinga opportunities for our whānau. Uri access to warm, healthy, affordable housing is a key issue, and Poua te Pātūtū (Kāinga) is a strategic pou of Te Korowai. Working with Ka Uruora (our iwi collective charitable housing trust), we are developing opportunities to offer quality affordable housing solutions for Ngāruahine uri. These opportunities are in the planning stages at this point, with our objective to commence development next year.

Both the above investment opportunities are being developed through a co-design approach, based heavily on understanding the needs of our uri, whānau, and Hapū through wānanga, hui, surveys and reference ohu that guide the business case and development process.

CONCLUDING REFLECTIONS

Looking back on our achievements of the past five years, it is satisfying to see the progress we have made to grow the pūtea, and build a diversified portfolio of quality direct investments that positions Ngāruahine well for the future.

Our financial performance in recent years has been exceptionally strong, and while current market headwinds will likely see this drop back next year, I am confident that we are building a strong resilient portfolio and have the team in place that will continue to deliver long-term strong returns for Ngāruahine and support iwi aspirations into the future.

I’m also pleased to see our progress in developing opportunities that will deliver outcomes for Ngāruahine well beyond financial return. I’m particularly excited about the future impact our local rohe investments will have in terms of supporting the cultural objectives of Te Korowai, providing kāinga, mahi and growth opportunities for Ngāruahine uri.

I will be resigning my position as chair on 30 June 2022 but feel I am leaving the organisation in a very good state. I wish to take this opportunity to thank the contributions of my fellow directors Taari Nicholas, Paula Carr, Te Aroha Hohaia, Dion Maaka and associate director, Ngawai Hernandez-Walden together with the work of

our management team in achieving our progress to-date. It has been a real pleasure to work with a great team of governors and managers. I am also grateful to the trustees and staff of Te Korowai for their support.

Ngā mihi nui

Hinerangi Raumati-Tu'ua

Pouwhakarae