M.F.L. returns 12.5p.c.

Press, 30 November 1978, Page 21

M.F.L. returns 12.5p.c.

The net income of the M.F.L. mutual fund, renamed from N.Z. Mutual Fund, rose. 43 per cent to $3,883,012 in( the year to August 31, the! chairman (Mr J. R. Maddren) j said in the annual report. Shared proportionately amongst members this results in a return of 12.54 per cent .on monies invested in the fund for a full year. This is a new peak of return achieved by the fund for members since commencement. Previous full year earning rates achieved have been: —1971 10.36 per cent; 1972 10.29 per cent; 1973 10.23 per cent; 1974 10.47 per cent; 1975 10.48 per cent; 1976 10.35 per cent; 1977 12.31 per cent. The fund is now valued at. 537.2 M — an increase of SB.IM on the previous year.

Rental income, at $2,804,000 was $610,000 higher, while appreciation on revaluation of properties rose $382,000 to $1,122,000.

During the year contributions were received from members amounting to $5,930,125 compared with $4,493,990. In addition to this sum $3,806,452 was received last year from DMS members who elected to join the fund after the purchase of the DMS Funds properties and public securities. The increase in normal contributions of some 32 per cent reflects the increasing number of members joining the Fund as well as the confidence of our existing members

Benefits amounting to $1,304,743 were paid out to members in circumstances permitted by the Contributors Trust Deed. During the year a substantial portion of cash flow

was directed to the purchase > of public securities. A sum of $3,984,792 was invested! enabling the fund to meet! its ratio requirement of 34 j (per cent of net assets, as laid (down by the Reserve Bank.! The acq’uisition of the DMS fund assets meant that a heavier than normal investment in securities was necessary this year.

The regulations require the fund to invest a further 2 per cent a year of net assets each year until 1980 when a total of 40 per cent of the net assets of the fund will be required to be invested in public securities. While it is appropriate that the interest obtained on these securities has now been raised to a reasonable level ! the directors believe that (the 40 per cent requirement lis excessive and that 30 per ! cent would enable more funds I to be directed to the fund’s ; property-base — providing members with higher maturities on retirement. Only properties, with leases : that have had rent increases i during the financial year have (been revalued under the conditions laid Cwn in the Contribute's Trust Deed. By this policy the increased rental income maintains a market re-

turn on the revalued property. Seven properties have been revalued during the year on the basis of reports received from Registered Public Valuers. The sale of the Queenstown Hotel to Vacation Hotels, Ltd, was at a figure showing a profit of some $450,000 over book value. As the settlement took place outside the fund’s financial year this profit will accrue in the 1979 accounts. During the last financial year only $358,121 was in-

vested in property. This was because the majority of the mortgages taken over as a result of the DMS integration were repaid as well as the substantial investment in public securities referred to above. With $2,438,607

mortgage finance repaid in the last year the fund is steadily reducing its borrowings. Mortgages now represent only 8 per cent of gross assets. While interest rates charged on commercial mortgages remain at 12 per cent - 13 per cent the directors do not intend to finance properties from this source, Mr Maddren said.

During the latter part of the financial year the Fund found the market for industrial and commercial property limited — the economic recession causing a lack of new tenant confidence. At balance date some sums were placed on temporary deposit awaiting property investment.

During the year two properties were sold producing substantial profits for the fund, in excess of the revaluations previously obtained from Registered Public Valuers’ certificates.