Report to Appointors 2015 - 2016 Chairperson’S Report to Appointors 2016

CROWN FORESTRY RENTAL TRUST REPort to APPOIntors 2015 - 2016 Chairperson’s Report to Appointors 2016 Kau ki te tai e kau ki te tai e kau ra e Tane Wahi atu ra te ngaru hukahuka o Marerei - ao Aupiki atu te aurere kura o Taotaorangi Tapataparuru ana te kakau o te hoe E au heke ana, e tara tutu ana I te huka o Tangaroa Ka titiro ahau ki te pae o uta, ki te pae o waho Piki tu Rangi ana te kakau ote hoe Kumea te uru o Taku waka Ka tangi te Putatara o te mate Ka titiro aku kamo ki te tihi o maunga Taniwha Ka whakaarahia te tangi taukuri mo te matua ka ngaro Me he kahui kuaka aue ko koe tena e Pa E tiraha mai ana koe ki te hui o nga kahurangi Ka mahue pani iho te ao i muri nei, kia tangi tikapa ana i te aoturoa Tangi hotuhotu aku kamo e waipukehia No reira moe mai e te Papa Kua oti ou mahi katoa ka huri te ao Waiho ma te hunga o enei rangi kia hikina Moe mai i roto i te ariki Poroporoaki Before I proceed I would first like to acknowledge the recent passing of Ta Graham Latimer. Ta Graham played an instrumental role in the establishment of the Crown Forestry Rental Trust. Simply put, the protection of Māori interests in the lands on which Crown forests were planted while Treaty of Waitangi claims were worked through is the reason we are here and have been able to assist claimants in the way that we have and continue to do. His death came less than a year after the death of his wife, Lady Emily. It is important to also acknowledge the role that she played in this kaupapa, for she agreed to Ta Graham mortgaging the family farm to fund the court action against the Crown which included the issue of Māori rights in Crown Forest Licensed Lands. His passing serves as a salient reminder of why we are here and of our obligation to complete the work that was started by him and others in the 1980s. On that note, I am pleased to present the 2015-16 Annual Report of the Crown Forestry Rental Trust to our Appointors, New Zealand Māori Council, the Federation of Māori Authorities and the Hon Bill English, Minister of Finance in accordance with clause 7.1(c) of our Trust Deed. This report covers the accounts and activities of the Crown Forestry Rental Trust for the period 1 April 2015 to 31 March 2016. The Trust’s Unique Role The Trust receives the Rental Proceeds from Crown Forest Licensed Land (CFLL) and makes the interest earned from the investment of these proceeds available to eligible Maori claimants to prepare, present and negotiate claims before the Waitangi Tribunal which involve or could involve Crown Forest Licensed Land. Since the inception of the Trust in 1990 right up until July 2009 the Trust had steadily built up surpluses as the interest it was able to earn from investing Rental Proceeds exceeded the costs of providing funding to assist claimants to prepare, present and negotiate claims. The surpluses over this period also reflected the slower rate of settlements involving CFLL’s. For the period 1990 to June 2009 there were only 5 settlements which involved the transfer of approximately $56m of Rental Proceeds. Since July 2009 there have been 21 settlements which have involved the transfer of over $470m of Rental proceeds. The largest of these settlements occurred in July 2009, where the Rental Proceeds held by the Trust were almost halved with the distribution of just under $289 million in accumulated rentals as part of the Central North Island Iwi Collective and Affiliate Te Arawa Iwi and Hapu settlements (CNI). With a much lower level of Rental Proceeds now available for the Trust to invest, the interest earned in the 2010 Financial year was half the interest earned in the previous Financial year before the CNI transfer. Following the CNI transfer Trustees made the positive decision to drawdown on the surpluses which had been built up over many years when settlements were progressing at a much slower rate. This decision has resulted in drawdowns every year since the CNI transfer, and this approach has continued over this Financial Year with the Trust providing more toward claimant assistance and the administration of that assistance than it was able to earn in interest from its investments. The Trust is unique in its role and approach in purposefully drawing down on surpluses. Trustees however believe this is the right path to take and are committed to using the surpluses built up prior to the CNI settlement to assist eligible Maori claimants in their path to settlement. Work programme The Trust has had a busy and productive 2015-2016 year. There were two substantial transfers of accumulated rentals to claimants totalling $23.4m. Funds held in Trust stood at $137.5m on balance date, down from $154.6m the previous year. $13m of funding assistance was provided to Approved Clients and total Trust expenditure for the year was $16.1m. Both figures were down on the previous year. However, this was expected and was in line with a reduction in workload. 21 approved clients were engaged in, or completed, the settlement negotiation process and a further 10 approved clients are currently involved in the Waitangi Tribunal process. A great deal of work has been done on streamlining systems and processes to make it easier, more efficient and more transparent for claimants to make applications for funding support and to work through the process to become approved clients. There is more detailed information on these points in the Chief Executive’s report. It is prudent to acknowledge that the Trust has faced some challenges over the last two years as differing views on aspects of the trust deed and some representation issues were worked through the courts. These matters have been resolved by the High Court and the associated costs finalised. I would note that the management and staff of the Trust remained focussed and committed to the kaupapa and continued to work extremely hard on behalf of approved clients and funding applicants during this time. Future challenges As we have signalled previously the Trust is moving in to its final phase of work. As the number of claims still to be completed shrinks, so do the Trust’s cash reserves and the ability to generate revenue. The figures laid out in this table clearly illustrate how the Trust’s financial position is changing as settlements are completed. Over the last 7 years the capital the Trust has available to invest has shrunk 66% to $224.2m for the reasons outlined above. Similarly the ability of the Trust to generate revenue from this capital base has been further constrained by interest rates falling to record lows. As outlined in the table below revenue has fallen by 80% to $9.7m over this period. Type 2009 2016 % change Funds Held in Trust $517.6M $137.5M 73% ↓ Retained Earnings $144.3M $86.7M 40% ↓ Total Capital $661.9M $224.2M 66% ↓ Income $49.7M $9.7M 80% ↓ Fit for purpose The Trust’s future challenges means that our governance, management, structure and planning disciplines all need to be of a high calibre and fit for purpose to ensure we are able to meet our commitment to claimants eligible for support from the Trust. Over the last year Trustees have strived to achieve positive results on all these fronts. The Trust carries out detailed financial modelling to keep an up to date assessment of our financial position relative to the progress of the remaining claims. Although we are mindful that there are many factors out of the Trust’s control which can impact on the time it takes settlements to be completed. As a result the Trust’s work programmes often need to be revised. All operations are reviewed annually to ensure the Trust has the right number of staff and the right mix of skills to carry out the work required in that year. For example staff numbers have dropped approximately 60% in the last two-and-a-half years as the Trust’s workload has dropped. However, we retain a highly experienced, skilled and dedicated team. Summary In conclusion, the Trust is well run, fit for purpose, with robust systems and processes, and we believe it is well placed to complete its final tranche of work in an expedient and efficient manner. I wish to thank the management, staff and trustees for their dedication and hard work to help the Trust assist claimants with interests in Crown Forest Licensed lands. Rakihia Tau CHAIRPERSON Chief Executive’s Report to Appointors 2016 The 2015-16 financial year saw two significant transfers totalling $23.4m in accumulated rentals to Confirmed Beneficiaries. $13.7m transferred related to the Te Hiku settlement in the far north for the Aupouri forest and $9.7m transferred to Te Kawerau a Maki for the Riverhead Crown Forest Licensed land. The transfer of the accumulated rentals above was the major contributor to the $17.1m or 11% reduction in Funds Held in Trust from $154.6m in the 2014-15 financial year to $137.5m for the 2015-16 financial year. Financial Performance Table 1 below provides a summary of the Income and Expenditure Statement for the 2014- 15 and 2015-16 financial years. Total Income for the year to 31 March 2016 of $9.7m was $2.2m (18.2%) lower than the previous year.

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