The Solomon Islands National Provident Fund, SINPF, has obviously felt the impact of the global downturn. After a whopping 18% increment across the board for its member contributions in the last financial year, it has released a somewhat modest increment this year. The global recession or the Our Telekom strike in the last year may have greatly impacted revenue. However, a reliable NPF source did acknowledge that the fund’s offshore investments have also negated any strides in revenue made locally. Now I am not a finance geek so this is where I stop; having said that read on and make your own assessment of this announcement by the Finance Minister, Honorable Snyder Rini.
TO MEMBERS OF THE SOLOMON ISLANDS NATIONAL PROVIDENT FUND
By the Minister of Finance & Treasury, Honorable Snyder Rini
SINPF Board Room, 12 noon, 30th June 2009
1 Contributing members of the Fund
2 All employers, and
3 Media present here today
Last year in June 2008, when I announced the crediting rate of 18% for our members, it was made on the back of a good performance from our investments portfolio both in our local and offshore exposures in the US, Europe, Australia, United Kingdom, and Papua New Guinea.
At that time, the US economy was already in recession, and the problems of the US sub-prime mortgage crisis had extended its tentacles to other major economies in Western Europe.
The collapse of the giant investment firm Lehman Brothers in September 2008 triggered the collapse of many banks and other investment firms that further deepened the credit crunch.
With no access to funds, many businesses’ closed down and workers laid off, setting off recessions in the world’s major developed economies.
Today, the world is now in the midst of the worst economic downturn since the great depression of the 1930’s. This severe downturn has impacted negatively on your Fund’s offshore investments on two (2) fronts.
1.The price of your shares in Bank South Pacific and the price of our units in the 3 managed funds had dropped because many investors have been doing large selling to pay for their debts and commitments, causing their values to fall.
2.Except for the US dollar, the exchange rates of the Australian dollar, British pound, and Euro declined during the year causing the value of our investments in these currencies to fall when restating them back into our local currency.
However, as I was advised by your Board and Management, these are unrealized losses not actualized and it is your Board’s strategy and policy to hold these investments for the long term.
On the domestic front the effects of the global economic downturn is now being felt negatively in our economy and on our local investments. Furthermore, the industrial strike by Solomon Telekom Company Limited staff had caused the company to incur substantial reduction in its profitability.
Despite all these gloom, with unrealized offshore losses and generally lower levels of domestic income, I am pleased to note that the Fund is expected to record a gross income of $ 62.9 million for the year against an income level of $ 97.5 million that was projected for the year.
Deducting expected cost for normal board operations of $ 22.9 million, $ 8.5 million for refurbishment costs of SINPF properties, $ 4.2 million for financial charges, and additional interest paid to withdrawing members during the year of $ 3.3 million, the Fund is left with a net operating surplus of $ 21.9 million.
Against this surplus of $ 21.9 million available for crediting, I have the pleasure in announcing an interest rate of two point seven percent (2.7%) for this financial year. This is just slightly above the minimum legal required interest rate of 2.5%.
This will amount to just under $ 20 million that will be applied to your contribution balances in the next few days.
An expected balance of $ 1.9 million after deducting members’ interest will be set aside for your fund’s general reserves that should lift the reserve balances up to $ 36 million.
Though this rate compared very poorly against last year’s crediting rate, against the performance of other superannuation and retirement funds in the region, your fund has stood firm in the midst of all these external difficulties.
You do not have to look far, but to our richest and biggest neighbor Australia, where most of its superannuation and retirement funds have negative reserves.
The returns on your investments in South Pacific Oil Limited, Solomon Telekom Company Ltd, and interest on domestic fixed term deposits provided the bulk of the investment return that supported your crediting rate today.
Before closing, I would also like to announce on the advice of your Board that the members’ special death benefit (SDB) will now be $ 5,000 for the next financial year, an increase of $ 1,500 on the current level of $ 3,500.
In concluding, I would once again like to put on record my appreciation and thanks to your Board of Trustees, Management, and staff of the Fund for their hard work, commitment, and dedication as trustees of your contributions.
They have performed their responsibilities remarkably in one of the worst economic recession that has hit our world in the last eighty years.
To all employers, thank you for your cooperation and support in financing the required payments for your employees’ contributions.
You have done so as required by law, in a very difficult domestic economic situation.
And finally to you the members for the support to your fund.
I would expect next year, will be a better year for our members.
Thank you all
Honorable Snyder Rini
Minister of Finance & Treasury
Department of Finance & Treasury