Background and Overview
THE SINPF was established under the SINPF Act 1973. The vision of the institution is to provide comfortable life after retirement through a sustainable contribution growth. The vision is founded on this mission statement:
“Protecting and preserving contribution savings of members. In this connection, the Fund attempts to optimise growth through prudent investment and effective risk management strategies to deliver high returns and service delivery to our members with satisfaction”.
As the Fund grew in strength, both in membership and financially, its position and importance in the economy and country also grew. With its massive size and growth in relation to assets and investment, most importantly its influence in the economy need the institution to be prudentially and professionally managed. There is a need for the Fund to rigorously address issues that come with changes in laws, regulations, government policy and standards in the industry. Members need to benefit from their contributions with the Fund and most importantly realise their investment after retirement from work.
The Fund had just released its 2015 financial report and is still to complete its 2016 and 2017 financials reports.
Above is a summary of the Funds Financial and Non-Financial status, including Assets, Liabilities and Investments as stated in its latest financial reports for the period that ended 31st June 2015.
To date, the organisation has grown in membership, status, and financial capacity and has become a very important institution to the financial system of Solomon Islands. In 2015, total membership was 180,265 and members with credit balances was 122,334. Active employers grew from 2,176 in 2014 to 2,534 in 2015 and expected to grow in 2016/2017. Female employees comprised 30% of membership and male constitute 70% of membership. Active members increased by 10% from 63,362 in 2014 to 69,698 in 2015. There is no other benefits to members apart from the death benefit and 2/3 NPF pledge.
Membership contributions to the Fund grew by 13% from $2.05 billion in 2014 to $2.3 billion in 2015. Domestic equities was recorded at $1.3 billion and offshore investments at $118 million. As a means to attain maximum revenue, the Fund has also invested in high risk investments, with $1.4 billion in high risk high return category, $668 million in medium risk medium return and $686 million in low risk low return category. The Fund invested in companies, properties, government securities, loans and bonds locally, and invested funds with recognised capital fund institutions mostly in Singapore, Australia, US and Europe. The Funds total assets stood at $2.8 billion in 2015, an increase of 6% from $2.6 billion in 2014.
The net margin (net of assets minus liabilities – coverage), decreased by 17% to $456 million in 2015 from $553 million in 2014. Net come (Income less Expenses – Actual) was $84.7 million in 2015, an increase of 8% from $78.4 million in 2014. Bad loans and advances (including receivables) amounted to $55.6 million, an increase of 45% from $53 million in 2014. Allowances for doubtful debts was $20.9 million in 2015, a decrease of 5% from $22 million in 2014. The high volume of impaired loans reflected the high turnover of bad loans and non-repayment by borrowers. In 2015, government securities amounted to $35.5 million, and dues owed to the Fund of $55.5 million was restructured and rescheduled to be repaid over a period of 7 to 14 years.
Investment in General
· In 2015, Total on-shore investment was $2.8 billion, comprised of 51% risky, 24% medium risk, and 25% low risk investment.
· Also in 2015, Domestic investment returns was only $80.7 million, made up of dividend payments of $$39 million from Telekom, $40.8 million SPOL, Home Finance $0.200 million and Heritage Park Hotel $0.625 million.
· Dividend Receivable was $115.3 million in 2015, a decrease of 17% from $138.7 million in 2014. The report failed to disclose the composition of the outstanding dividend payments. Interesting to note that the annual dividend received was only $80.7 million compared to dividend receivable of $115.3 million in 2015.
· The Fund recorded substantial amount of unpaid loans of $55.6 million in 2015, and $53.3 million in 2014 respectively. The report also failed to disclose the recipients of these loans. Total gross loans in 2015 was $93.9 million and $100 million in 2014. The figures indicated that most borrowers have failed to consistently repay their loans.
· The investment in Sasape International Shipyard Limited was a bad investment decision. SINPF had paid 25% shares in a joint-venture agreement with Silent World & Logistics, an unknown investor. The investment saw SINPF lending some money to the SISL. Outstanding loan of $5.9 million is perceived to be currently in arrears. Fair value of the SISL shares was reduced markedly from 882,834 in 2013 to merely 25,000 in 2014/2015, reflecting the depreciation and downgrading in the market value of the company as an entity.
· Controversial loan approved for Tavanipupu in 2012 (John Sullivan & Colleagues) has not been serviced since the day it was paid to Sullivan and his colleagues. Total cumulative outstanding loan balance as at 22 February 2017 was $24.4 million. I presume the only option is to write off part of the debt as bad debt at the end of 2017 financial year since the current market value of the Tavanipupu Resort is far too low to adequately cover the loan even if the property is sold to any interested buyers.
· Loan to Heritage Park Hotel remained the same at $16.9 million in 2014 and 2015 respectively. Are there any problems with this loan?
Other Issues in General
· Purchase of 25% shares for $156.4 million from GRP & Associates Limited remains questionable. GRP & Associates comprise of Mike Hemmer and his family. Sales of shares are taxable, has this been done to this payment.
· The salary increase in 2017 raised complaints from general staff. The salary increase was made to a total of 11 staff of management including General Manager and Assistant General Manager. Total increase to basic salary (excluding allowances) was around $1.03 million per annum. Average salary increase was 39%, the highest was a 75% salary increase to an officer who had a basic salary of $154,500 per annum granted a new salary increase of $116,463 to a new basic salary of $270,962 per annum. The second highest salary increase was 65% or $108,567 to an officer who had an old basic salary of $167,633 to a new basic salary of $276,199. The General Manager’s salary was increased by 38% or $178,867 from the old basic salary of $475,125 per annum to a new basic salary of $653,992 per annum. The question raised by staff was, “was the salary increase an adjustment of Management staff’s salary structure or merely a salary increase to reflect increase in cost of living?” Average headline inflation in 2016 was only 1.06% and 2017, -0.13% respectively compared to the 39% average salary increase.
· Bauro Koraua was the Chairman of the SINPF Board from 7 March 2012 to 7 March 2015 after which he was engaged (Bauro & Associates) to do appraisal and revaluation of the Fund’s Investments for 2015. The work which was reflected in the 2015 financial accounts does imply compromising the need to maintain independence and integrity of those doing professional work of this nature and importance. It also gave rise to conflict of interest and biasness on the side of the consultant since he has just completed his term as a Director and Chairman of the Board. This practice actually reflects corrupt practices by the Board and Management of the Fund.
I hope the above summarised information and analysis would assist memberships to understand the non-financial and financial status of the Fund including the investments done during the year that are stated in the Financial Report for 2015. Let’s hope that the new management address issues that are important to members including making sure annual reports are produced on time. Looking forward to the 2016/2017 financial reports.
By GEORGE KOSUI