Expanding mortgage unit trust

Press, 27 June 1989, Page 29

Expanding mortgage unit trust

Tower Trust services, Ltd, has recently released "Prospectus Number Three” for the mortgage income trust. The trust was established last year when mortgage trusts became viable with the introduction of dividend imputation. This meant, in effect, that returns to investors were no longer subject to ■double-taxation.

According to the new prospectus, the trust’s investments consit of a welldiversified, well-secured range of more than 4000 residential and commercial mortgages. Total mortgage loans of $lOO million are backed by mortgage security of about twice that amount. During the next few months the trust intends to diversify its lending ; into high quality farm • mortgages. ’ Mark Pickering of Tower Trust Services says the trust managers have r been considering the rural sector for some time and in spite of droughts and floods, there is evidence of good incomes from farming that will continue for the next two years or so.

“A few farm morgages

in the portfolio should improve the returns to unit holders,” Mr Pickering says. With the move into the rural sector, the trust’s total commercial and rural component will amount to about 35 per cent of the mortgage loans. The remaining 65 per cent or so will remain in residential mortgages which are still considered to provide the most secure investments.

“In all our lending, however, we stress that the trust must be in a position a deal with liquidity,” Mr Pickering says. . Returns for unit holders have been comfortably above bank term deposits. In April 1989 the return was 14.75 per cent per annum (inclusive of imputation credit). “We have always been in a position to anticipate what is going to happen for our investors,” Mr Pickering says. “We expect that by July the rate will flatten out to 14 per cent and stabilise.

“The Morgage Income Trust, with $6O million subscribed by investors, is New Zealand’s, largest and fastest growing unit trust.”