2017 Annual Report – Focusing on the Future


2017 has been a year of change and consolidation for the Pacific Balanced Fund, and one that despite the disappointments of last year is a year that we are proud of. Unit holders should be reassured that despite the sale of shares in Associated Mills, an action that we had no control over, compounded by a write-down in the valuation of other assets, we are now on the road to recovery.

The 2017 Annual Report is our 15th report of the audited financial statements of the Pacific Balanced Fund and I’m glad to say that it will shortly be followed by audited statements for 2018 and 2019.

I know that many Fund investors almost gave up hope or lost contact with the Fund in the 1990’s, but their units continued to grow in value and earned dividends. Nearly 85% of the ownership of the Fund has now been identified and as “missing” unit holders continue to come forward and are verified they receive their accrued entitlements. All verified unit holders can look forward to the distributions expected to be declared for the 2017, 2018 and 2019 financial years.

More efficient operations
Since 2015 we have focused on modernising our records and ensuring that dividends reach the bank accounts of unit holders swiftly. Electronic banking and improved electronic record keeping have helped achieve this efficiency.

This year we relocated the PBF customer service centre to better respond to queries from our many thousands of unit holders. We have upgraded our financial systems and are now able to automatically make electronic dividend payments to unit holders, directly to their nominated bank accounts, including those who are MiBank customers, an institution in which we are looking at increasing our shareholding in.

Additionally, we became aware that fortnightly deductions from the salaries of hundreds of public servants, intended as investments in the PBF, had not been reaching the Fund since 2008. We have traced these contributions and this year have started the necessary dialogue to ensure that investors receive their rightful entitlements.

PBF Agro-Business
This subsidiary of the Fund is looking at how to best develop its Koitaki Park property, so that this valuable piece of rural real estate can increase its cash flow through sale of livestock and vegetables. The intention is to cover the costs of operation and maintenance activities and then generate a commercial return for the Fund.

PBF Properties
The Fund owns a range of real assets through this subsidiary company in Port Moresby, Lae, Madang and Goroka. Property will always be a solid long-term investment and we are looking at how we can increase short term income generation from the industrial land that we have in Malahang near Lae and the Konebada Petroleum Park, a rapidly expanding light industrial area between Port Moresby and the ExxonMobil LNG Plant, an area that is set to thrive in years to come.

Other investments
As can be seen in this report the returns from the Fund’s other investments is in most cases less than in previous years but this is a result of a short-term downturn in the Papua New Guinea economy and we are confident that these important service companies’ fortunes will improve as the economy grows in the years to come. We are also investigating what is required technically, financially and managerially to re-open the MRO gold refinery operation.

External Challenges
Unfortunately, we have recently had to address the efforts of certain individuals to direct the Fund into investments which were not in the best interests of the unit holders. Those efforts have been strenuously resisted. We are not prepared to permit the Fund to be diverted again in ways which see the best interests of its unit holders ignored. We remain focused on providing good returns to PBF investors and have refocused on meeting our statutory obligations during a time of legislative transition. We will ensure that investment decisions remain focused on the interests of the unit holders, a focus which required us to engage in legal action in 2017 to protect the Fund.

These 2017 financial statements have been delayed due to our activities in addressing some of the serious issues noted and we regret this. Importantly though they also reflect the ongoing growth of the Fund, demonstrating its recovery from the setbacks of 2016. They provide an important indication of an increasing value of the Fund, something that unit holders can look forward to.

As the PBF Trustee and Manager we present these statements with the greatest confidence in the future of the Fund and with a determination to continue managing its investment portfolio to provide good capital growth and unit holder income in the years ahead.

Lawrence Stephens
Chief Executive Officer
Melanesian Trustee Services Limited

Formerly known as Investment Corporation Fund Papua New Guinea (ICFPNG)