Nasfund Performance Overview. Growth of Super Industry in PNG. Challenges, Opportunity & Way-forward

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2 Agenda Points Nasfund Performance Overview Super Accounting & Industry Challenges Growth of Super Industry in PNG Challenges, Opportunity & Way-forward Super Challenges and Opportunities CPA Conference, Port Moresby November 2017 PRESENTED BY IAN TARUTIA & RAJEEV SHARMA Super Challenges and Opportunities

3 Net Assets of PNG Superfunds NSL, NFL, CTSL, AMT % % 20% PNG Super industry is approx. 16% of the GDP % 9% 9% 15% 10% PNG GDP 2016 approx. Kina 65 Billion PNG Super net assets 10.3 Bn 2 5% Net Assets Rate of Growth Linear (Net Assets) 0% PNG Super Assets

4 PNG Super Funds Total Members 800, , , , , , , , ,932 5% 6% 9% 697, ,058 10% 8% 6% 4% 2% PNG Super Members represent in approx. 8.5% of the total population Total Population approx. 8 Million Super Members 684, ,000-2% 0% 100,000-2% - -4% Total Members Rate of Growth Linear (Total Members) PNG Super members

5 NASFUND - Ten Year Review : ,000,000 4,000,000 3,000,000 2,000,000 1,000,000 - Net Asset Value ('000) 4,219,072 2,388, , K' , , , , , ,000 50, , , Net Income After Tax 5

6 Five Year Review: Total Membership No of Active Employers

7 NASFUND CREDITING RATE % AVERAGE CREDITING RATE OF 8.15 % OVER LAST FIVE YEARS & 11.7 % OVER THE LAST TEN YEARS PNG GDP, Average of last 5 Years 7.88 %

8 ANNUAL INTEREST PAID K1.2 BILLION PAID IN 144 INTEREST OVER THE LAST FIVE YEARS

9 Reducing gap between CHART TITLE contributions received and benefit Payment (Paid K 1.47 bn during retirement, 13% Other, 15% Disability, 1% Death, 4% Unemployment, 72% Housing, 8% Others, 2% Unemployment Disability Housing retirement Death Others Con pmts Cont recd

10 SUPER ACCOUNTING Cash Income Valuation Income Property valuations Interest Dividend Rent FX Other income Listed Equity Valuations Unlisted Equity Valuations Bond Valuations

11 million Kina Earnings After Tax Cash Income Valuation income

12 6000 HOW MEMBERS BALANCE IS BUILT UP EAT AND NET CONTRIBUTION EAT Net contribution total -1000

13 Reserves Reserve of K 92 Million as at 31 Dec equivalent to 2.20 % of Net Assets or 2.50 % of FY 16 crediting rate

14 External Audit Process Completion of Audit as per IFRIS and regulatory requirements Appointment of External Auditor by Board in line with regulatory requirements ( Review Partner to change after maximum 5 yrs ) Reporting and Presentation to Board ( including separate session excluding management) Independent reporting to BPNG Issuance of Management letter and Audit Report by Auditor

15 Governance Compliance with PNG laws Monitoring, Risk evaluation and improvements Robust IT system PPM BPNG - Regulator Board and Committees External Audit Governance Internal Audit Outsourced Property Management External Valuer's for Property, Equity and GIS External Fund Admin and Investment Manager

16 Governance - Major Acts, Legislations We Follow Companies Act Income Tax Act GST Act Employment Act Superannuation Act Workers compensation Act IFRS RISK FRAMEWORK

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18 LOGO

19 Enduring problem for PNG investors hard to hit the bullseye Illiquid POMSoX Poor Governance of Listed Companies Large investor with few alternative purchasers

20 Super Industry Story Board FINANCIAL SECTOR REFORMS WAY FORWARD Expanding Coverage [CATEGORY NAME] [CATEGORY NAME] Investment choice and financial literacy NPF Enquiry [CATEGORY NAME] Private sector Super Ongoing Way forward

21 PNG Super industry is approx. 16% of the GDP PNG Super Members represent approx. 8.5% of the total population PNG GDP 2016 appr ox. Kina 65 Bill PNG Super net assets 10.3 Bn Total Populati on approx. 8 Million Super Member s 684,058 PNG Super members PNG Super Assets Australia GDP AUD 1.2 Trn AND Super Funds approx. AUD1.8 Trn

22 Reducing gap between CHART TITLE contributions received and benefit Payment retirement, 13% Disability, 1% Death, 4% 300 Other, 15% Unemployme nt, 72% Housing, 8% Others, 2% Unemployment Disability Housing retirement Death Others Con pmts Cont recd

23 Un Employment withdrawal change in law By change in % of withdrawal / Category (employee contribution only) Partial : changing time frame 3 months to 1 year. Full 1 to 3 years

24 Opportunities and Way forward Early withdrawals should be curtailed by change in habit and legislation Sole Purpose Test - Retirement fund as opposed to Savings Fund Use of Saving and loan societies for short term needs Super Annuation as long term enabler to improve financial freedom Improve quality of Medical, Life, compulsory housing

25 Life Expectancy 1975, 1990, 2000, Australia NZ PNG FIJI SOLOMON Life Expectancy movement between 1975 and Australia NZ PNG FIJI SOLOMON

26 Life Expectancy movement between 1975 and Increase in life expectancy also means we need to save for Post Retirement Life of close to a decade

27 Active Secondary Market Operations for GIS. This will turn illiquid portfolios to liquid fund Will help fund to invest in other long term assets due to improved liquidity

28 NASFUND STRATEGIC TIMELINE COMPLETED Investment returns are uncertain In Progress Not all Investments do well all the time But in the long run, share prices and property prices increase The Government pays interest on its bonds You need to take SOME risk, [CATEGORY it s a matter NAME] of balancing those risks Not all years will have positive returns But don t panic if and when we have negative returns Biggest risk is not having enough when you retire Smaller risk that members might lose money in one year Take over, Review and Mapping phase NASFUND will keep to a sensible Investment Strategy With members long term interests in mind [CATEGORY NAME] YET TO START Efficiencies and consolidation

29 NASFUND STRATEGIC TIMELINE COMPLETED In Progress YET TO START Expanding Coverage and Financial Literacy Take over, Review and Mapping phase [CATEGORY NAME] [CATEGORY NAME]