Portfolio Composition by Asset Class

Cash

The Fund’s domestic cash allocation (Domestic Cash Portfolio) comprises bank and finance company at call accounts and term deposits, with a term less than 182 days to maturity at the time of issue. As at 31 December 2017, the Fund has around 9.7% of the portfolio in cash.

The Fund has achieved a significant benefit from holding substantial amounts of offshore cash, and international equity assets against a backdrop of a weakening Kina. Domestically high levels of cash reflected the following: (i) advance planning for cash flow needs for approved investment projects that will come to fruition in the next 12 months. In particular, the Fund has pre-approved property development activities that will move into the construction phase later in 2018. The Fund is also investigating some larger unlisted equity investments, which if they come to fruition will also absorb a component of the cash held, (ii) an inability to obtain adequate foreign exchange from the controlled exchange rate scheme, as adopted by BPNG in order to further diversify the Fund’s investment into international assets.

Fixed Interest

The Fund’s fixed interest allocation, or fixed interest portfolio, comprises bank term deposits, government securities and corporate loans, with a term equal, or more, than 182 days to maturity, at the time of issue. As at 31 December 2017, the value of Fixed Interest Portfolio was approximately 37.4% of the total investment portfolio. This is an increase over the previous year for reasons noted above.

 This asset class is made up mostly of government securities and the Fund continues to monitor the market for opportunities to acquire government bonds at suitable yield levels. The Fund remains a regular participant in auctions of both long and short term government securities, subject to the yield on offer being suitable to the Funds requirements and view of risk.

In addition to government securities, the asset class also includes investments in commercial loans for subsidiary companies construction projects and syndicated infrastructure loans.

Domestic Equity

The domestic equities allocation, or the Domestic Equities Portfolio, consists of listed and unlisted equities. As at 31 December 2017, the Fund’s allocation to this asset class was 26.3% of the Fund value, a modest increase on the prior year value.

Listed Equity

As at 31 December 2017, domestic listed equity was around 10.5% of the Fund. The Domestic Listed Equities increased value, compared to 2016, which was primarily due to the increase in share prices of Bank of South Pacific (BSP). However, these gains were partially offset by a drop in share price of Credit Corporation Limited (CCP) and City Pharmacy Limited (CPL). CPL undertook a capital rising during the year and the Fund elected not to participate.

The figure below shows the holdings of the Fund, in terms of domestic listed equity. BSP also provided strong income to the Fund through another good dividend, a reflection of its good financial performance during the year.

 

Listed Equities
Stock Exchange
Industry/ Sector
Bank South Pacific Ltd POMSoX Banking/Finance
Credit Corporation Ltd POMSoX Finance/Property
City Pharmacy Limited POMSoX Health/Retail
Unlisted Equity

As at 31 December 2017, domestic unlisted equity was roughly 15.8% of the Fund.

The Fund reviewed a number of investment proposals during the year. Lead times for unlisted investments tend to be quite long and information intensive and as such many of these proposals remained work in progress at the end of the year. In addition the Fund works closely with its investees to assist the growth of those businesses through strategies to finance opportunities through activity such as mergers and acquisitions, which in turn will be of benefit to the Fund.

During the year the Fund acquired further holdings in both Westpac Banking (PNG) Limited and Toyota Tsusho (PNG) Ltd.  Both companies have strong market positions in PNG and provide good levels of dividend income to the Fund.

Domestic Unlisted Equities as at 31 December 2017

Unquoted Ordinary Shares
Industry/Sector
Alotau International Hotel Ltd Hotel
Brian Bell & Co. Ltd Wholesale/Retail/Merchant
Capital Life Insurance Company Ltd Insurance
Gazelle International Hotel Ltd Hotel
Kumul Hotels Ltd Hotel
Pacific Management Services Ltd Building Maintenance
Paradise Foods Ltd Food & Snacks/Manufacturing
PNG Water Ltd Utilities
Post Courier Ltd Media
SP Brewery Ltd Manufacturing
Toyota Tsusho (PNG) Ltd Motor Vehicle
Westpac Banking Corporation (PNG) Ltd Banking /Finance

Property

The domestic properties portfolio is comprised of commercial, residential, industrial properties and unimproved land. As at 31 December 2017, this asset class was approximately 11.6% of the Fund.

The Fund has continued the implementation of the property strategy, which involves the following activities: (i) divesting non-core and underperforming assets while providing adequate maintenance to all properties, and (ii) upgrading existing key assets.

During the year, the construction of the second stage of Nambawan Plaza precinct was approximately 50.0% completed, and is on time and on budget. When complete, the precinct will consist of a word class mixed use office, residential, entertainment and retail complex with green areas for outdoor entertainment and recreation.  Leasing of the first building in the complex, what is now known as Deloitte Haus, progressed well during the year.  The building was approximately 60% leased at the end of December 2017 and the Fund expects it to be close to fully leased over the first half of 2018.  This building is providing excellent levels of income to the Fund.

The Rangeview Heights development, which was approved by the Fund in 2016, has made progress during the year.  The mobilisation payment has been undertaken and construction is expected to commence in the latter half of 2018.

The Fund undertook extensive maintenance programs for a number of properties including Revenue Haus Morobe Haus (Vele Rumana) and Aopi Centre during the year.

Specifically, the Fund remains focussed on optimising profitability on core property asset holdings. The ‘divestment’ initiative, which is currently underway, is expected to further stream line, and improve the composition of this asset class. In turn, this will lead to an improved risk-return profile for the Fund, and a diminished exposure to sub-optimal holdings.  During the year the Fund completed its divestment of its 50% share in Lawes Road, the Cedar Apartment and Hibiscus Apartment.

Property Portfolio as at 31 December 2017

Properties

Location

Description

COMMERCIAL BUILDINGS
Era Rumana
(S20 L12 Champion Parade)
Port Moresby 7 Level Commercial Office Complex in the CBD
Mogoru Moto
(S20 L13 Champion Parade)
Port Moresby 9 Level Commercial Office Complex in the CBD
Aopi Centre
(S405 L15 Waigani Drive)
Port Moresby A 6 Level Twin Tower Office Complex on Waigani Drive.
Vulupindi Haus
(S390 L12,13&14 Waigani Drive)
Port Moresby 6 Level Commercial Office Complex in Waigani
Revenue Haus
(S20 L11 Champion Parade)
Port Moresby 9 Level Commercial Office Complex in the CBD
Burns House
(S20 L3,4&5 Champion Parade)
Port Moresby 4 Level Mixed Office & Retail Space in the CBD
Port Tower
(S3 L21 Hunter Street)
Port Moresby 9 level Mixed Use Commercial/ Residential Complex in the CBD
Morobe Haus (Vele Rumana)
(S6 L47 4th Street, Top Town)
Lae 6 Level Commercial Office Complex in the CBD.
Nambawan Super Haus (S49 L3,4,5,6 & 7) Lae 7 level Mixed Use Commercial/Residential Complex in CBD.
INDUSTRIAL PROPERTIES
S15, 16& 17 L64 (Bowmans and Gordons Warehouse) Port Moresby Partly, NSL Data Storage  & archive facility
Voco point S42 L5 &6 Lae Industrial Wharehouse.
RESIDENTIAL APARTMENTS
Bayside Apartments (Portion 178) Port Moresby 42 x 2&3 Bedroom Residential Units
Lawes Road (S7 L24) (50%) Port Moresby 20 x 2&3 Bedroom Units
Pacific Vista (S42 L14) Port Moresby 7 x 3 Bedroom Executive Apartments
Portion 212 (Portion 212, Boundary Road) Lae 40x 2&3 bedroom residential units
Pinnacle Apartments (Touaguba Apts) (S63 L22 Daugo Drive) Port Moresby Residential apartment with 8 levels containing, 11 apartments and a penthouse apartment
VACANT PROPERTY
9 Mile Land (portion 2156,2157 & 2159) Port Moresby Vacant undeveloped Agricultural Land
Ex-Angco (L1 S6, L2, 3 & 5 S6 and L1 S5 Banz The properties are located on L1 S5, Banz, L 1 S6, Banz and L 2, 3 & 5 S 6, Banz. Vacant undeveloped land
Ex-post PNG (4 mile, Boroko) (S387 L20)) Port Moresby Vacant undeveloped land
Malolo Estate (S22 L 7 & 8) Port Moresby Housing Estate
Koki land (Portion 176) Port Moresby Staff Housing
PROPERTIES IN HOLDING COMPANIES
Coastwatchers Court Limited Port Moresby Holding company that owns 31 constructed apartments on Touaguba Hill. NSL owns 65% of the company.
Waigani Asset Limited Port Moresby Holding company that owns two multi-level commercial properties, Eda Tano HausLands Department Building and The Treasury buildings. NSL owns 65% of the company.
Old Parliament House Limited Port Moresby Holding company that owns Nambawan Plaza a multi-level commercial development including Deloitte Haus) and additional structures still under construction and anticipated to be completion in 2018. NSL owns 65% of the company
Moki Ltd Australia Vacant Land between TISA Haus & Telikom Rumana.
Morobe Front Holdings Ltd Lae Holding company that owns  Lae Waterfront Land as its sole asset.
UPCOMING DEVELOPMENTS
Rangeview Heights Limited Port Moresby Rangeview is a joint venture company between Lamana, Nambawan Super Limited (NSL) and National Capital District Commission (NCDC) that proposes to bring to market a mixed use commercial and apartment’s development on 6,009 sqm of vacant land situated between NCDC City Hall and Savannah Heights along Waigani drive.