Portfolio Composition by Asset Class

Cash

The Fund’s domestic cash allocation comprises bank, at call accounts, and term deposits, with a term less than 182 days to maturity, at the time of issue. As at 31 December 2016, the Fund has around 13.10% of the total portfolio in cash. The Fund has achieved a significant benefit from holding substantial amounts of offshore cash, against a backdrop of a weakening PNG Kina. Domestically, high levels of cash reflected the following:

  1. advance planning for cash flow needs for approved investment projects that will come to fruition in the next 12 to 18 months,
  2. a general lack of suitable investment opportunities that met the Fund’s strict investment criteria, and
  3. an inability to obtain adequate foreign exchange from the controlled exchange rate scheme, as adopted by BPNG.

Fixed Interest

The Fund’s fixed interest allocation, or fixed interest portfolio, comprises bank term deposits, government securities, and corporate loans, with term equal, or more, than 182 days to maturity, at the time of issue. As at 31 December 2016, the value of Fixed Interest Portfolio was around 31.70% of the total investment portfolio.

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

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

Domestic Equity

The domestic equity allocation, or the domestic equity portfolio, consists of listed and unlisted equities. As at 31 December 2016, the Fund’s allocation to this asset class was roughly 28.70% of the Fund value; a modest increase on the prior year value.

The domestic equity allocation, or the domestic equity portfolio, consists of listed and unlisted equities. As at 31 December 2016, the Fund’s allocation to this asset class was roughly 28.70% of the Fund value; a modest increase on the prior year value.

Listed Equity

As at 31 December 2016, domestic listed equity was around 11.60% of the Fund. The domestic listed equity portfolio decreased somewhat in value, compared to 2015, which was primarily due to the decrease in share prices of Credit Corporation Limited (CCP), and City Pharmacy Limited (CPL). However, these declines were offset by a rise in the share price of Bank South Pacific Limited (BSP).

The the below table shows the holdings of the Fund, in terms of domestic listed equity:

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
Kina Securities Limited POMSoX/ASX Banking/Finance
Unlisted Equity

As at 31 December 2016, domestic unlisted equity was roughly 17.10% 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 under consideration at the end of the calendar year.

In addition to new investments, the Fund constantly reviews those investments already held by it. During the year the Fund exited some investments. Typically, such exits will be to do the following:

  1. to reduce exposure to selected entities, due to governance related issues,
  2. to crystallise the returns of those entities that have significantly appreciated, and
  3. to divest those investments that are relatively small in terms of the overall portfolio, and which are not yielding an adequate risk adjusted return.

Domestic Unlisted Equities as at 31 December 2016

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 property portfolio is comprised of commercial, residential, industrial, and unimproved land. As at 31 December 2016, this asset class was approximately 11.3% of the Fund.

The Fund has continued the implementation of the property strategy, which involves the following activities:

  1. divesting non-core and underperforming assets while providing adequate maintenance to all properties, and
  2. upgrading existing key assets.

During the year, the Fund completed the first stage of the Nambawan Plaza precinct, with Port Moresby’s leading office facility, now known as ‘Deloitte Haus’, well established on the site of Old Parliament House. Leasing of the space has progressed well, with Deloitte signed most recently as a tenant. Other significant tenants have recently been secured for ‘Deloitte Haus’.

Development of the area continues, on time and on budget, with construction of the second stage of the Nambawan Plaza precinct now well underway. When complete, the precinct will consist of a word-class mixed use office, residential, entertainment, and retail complex, complete with green areas for outdoor entertainment and recreation.
Specifically, the Fund remains focussed on optimising profitability on core property asset holdings. The ‘divestment’ initiative, which is currently underway, is expected to further streamline, and improve the composition of this asset class. In turn, this procedure will lead to an improved risk-return profile for the Fund, and a diminished exposure to sub-optimal holdings.

Property Portfolio as at 31 December 2016

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
Touaguba Apartments (S63 L22 Daugo Drive) Port Moresby New 12 unit residential construction and completed in 2016.
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
Cedar Units (S33 L11 Hibiscus St.) Lae 8 x 3-Bedroom Units
Hibiscus Street, Eriku (S41 L3) Lae 6 Residential Units
Portion 212 (Portion 212, Boundary Road) Lae 40x 2&3 bedroom residential units
VACANT PROPERTY
Ex-post PNG (4 mile, Boroko) (S387 L20) Port Moresby Undeveloped land with few buildings and the land is zone for “Special Use”.
Malolo Estate (8 mile) Port Moresby Residential development land for sale
Koki land (Portion 176) Port Moresby NSL’s staff housing development
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
Bomana Property (9 Mile Land) (Portion2157, , 2156 & 2159 Port Moresby Vacant Blocks of Land at 9 mile.