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Trust continues strong investment performance

West Coast Development Trust continues strong investment performance

The West Coast Development Trust (WCDT) has produced its third successive year of returns which have outperformed industry benchmarks for its asset allocation. The Development Trust was capitalised with $92 million received from the Crown in 2001 – this was its part of the $120 million adjustment package distributed to the region to compensate for the loss of access to indigenous forestry in the 1990s.

In the last three years The Development Trust has realised net profits totalling just under $16 million, and held significant unrealised gains in its equity portfolio at year end.

“The Development Trust again outperformed its income budgets and industry benchmarks,” says chairman Frank Dooley. “The Development Trust remained cashed up until April 2003, avoiding the sharemarket and New Zealand dollar losses that impacted on many other funds and investment portfolios in 2002 and 2003,” he said.

The majority of The Development Trust’s portfolio is invested in fixed interest and money markets. Decisions are made in conjunction with Bancorp Treasury Services which also advises The Development Trust on foreign exchange hedging of its international equity portfolio. The fixed interest and foreign exchange decisions are finalised in house, and have yielded excellent results.

From April 2003 The Development Trust entered equity markets in three tranches. It has since made very good annualised returns on its equity investment portfolios utilising the advice of Goldman Sachs JBWere as its investment adviser and broker. More recently, MacQuarie Equities has provided additional access to IPO’s and equity parcels.

The Development Trust utilises fund managers for international equities and has a spread of over ten fund managers. By using fixed fee adviser contracts, it has kept its management expense ratio under 0.25% in total.


Statement of Investment Policy and Objectives TARGET ASSET ALLOCATION LEVELS
Class 2003-04 2004-05
Australasian Equities 10% 5%
Australasian Listed Property 10% 5%
International Equities 10% 10%
Active Trading Fund - 5%
Alternative Investments - 5%
NZ Fixed Interest 60% 60%
Cash 10% 10%
Total 100% 100%

The Development Trust has chosen to emphasise stability of income, absolute positive returns and the maintenance of liquidity in its capital portfolio, to ensure it has an earning stream and capacity to undertake its private equity and lending portfolios within the West Coast region.

Last year The Development Trust invested a total of $7.3 million into 14 clients. Since its establishment, The Development Trust has processed over 300 enquiries, investigated 60 client applications and has approved $23.3 million investments within the region.

These investments have promoted over 190 direct and 300 indirect jobs. Major investments to date have included: $3 million into Forever Beech Ltd, a sustainably managed beech processing and marketing company; $4.6 million into Roa Mining, New Zealand’s largest privately owned mining company; and $2.5 million into Franz Josef Developments which have constructed a large commercial and residential subdivision in the Franz Josef township.

Other sector investments include fishing, horticulture, manufacturing, tourism, and service industries.

The balance of distributions totalling over $1 million were to areas that are supportive of community and social development, as The Development Trust recognises these are essential to enhance the environment for business and economic progress. They included education and training, industry groups, tourism promotion, economic development, research, and cultural community and heritage grants.

The West Coast region has had its 16th successive quarter of growth and in the last National Bank Survey was New Zealand’s second fastest growing region. “This is an outstanding turnaround over past performance and reflects our region’s strong and diverse economy,” says Development Trust chair Frank Dooley.

“However this growth leads to its own set of challenges which are around meeting shortages of skills, labour, housing and in supporting enhancement in infrastructure services such as transport, health and education.”

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