MARSHALLS NUCLEAR FUND EXPECTED TO HAVE LARGE "NEST EGG"

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MAJURO, Marshall Islands (May 3, 1998 - Marshall Islands Journal)---More than $208 million (US) has been paid out of the Marshall Islands nuclear trust fund as of Tuesday last week. With just $62 million left to pay, and close to $100 million still in the investment fund, it appears that the Marshall Islands will have a sizable "nest egg" left when the Compact expires in 2001.

Four phenomenal years on the stock market have improved the Marshalls overall investment performance to a 13 percent rate of return, said Salomon Smith Barney Vice President Dan Roland, who oversees the investments from his Guam base.

"Since the nuclear fund started (in 1987), we've been blessed with a good market," Roland said. "The return has been so far above expectation." This is particularly so in the last four years.

Although the last three months of 1997 were flat, the Marshalls hadn't had a bad quarter since 1994, Roland said.

An example of the upbeat market is shown in the first quarter returns for 1998 of 9.2 percent, which would translate into a huge 36.8 percent return if it continued for the entire year.

After paying out $3.7 million in late April (to Bikini, Enewetak, Rongelap, Utrik, and the 177 Health Program), the fund stands at $97.2 million, Roland said.

Despite annual pay-outs of $18 million, the fund principal has remained close to $100 million for the past four years because of the huge returns these investments have been earning on Wall Street.

"Historically, the equity (stock) market has earned 10-12 percent a year," Roland said. "Our equities are over 16 percent since we started."

Since the Marshalls returned the entire investment fund to Roland's management in February 1997, the fund has earned at a 25 percent clip, he said. For about a year prior to last February, 75 percent of the fund was given to another fund manager to supervise. But when that move didn't pan out as well as envisioned, the government returned the entire fund to Smith Barney, now Citicorp, management.

The amount of money that is left in the nuclear fund when the Compact ends in 2001 depends on how well the stock market does in the next three years, and no one can predict that, Roland said. During his visit to Majuro this week, however, he provided government leaders with various scenarios. For example, if the investments earn at an eight percent pace, there will be $59 million left in 2001. If the investments earn 12 percent a year, there would be $73 million left, he said.

"The projection we made several years ago of $40 to $60 million being left in 2001 looks like a reasonable number," he said, adding that "if we can earn 10-12 percent a year for the next three years, I'll be very happy."

While he expects the market to remain strong through the rest of 1998, Roland is also a realist. Because the stock market in the past four years has been so far ahead of the historical norm for the market, he anticipates that it will have to slow down sooner or later.

MARSHALL ISLANDS JOURNAL Box 14, Majuro, Marshall Islands 96960 E-mail: journal@ntamar.com Fax: 692-625-3136 Tel. 692-625-8143 Subscriptions (weekly): 1 year: US $87.00; International $227.00 (air mail)

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