Cash

The Fund’s domestic cash portfolio comprises on-call accounts and Interest Bearing Deposits of terms less than 182 days. As at 31 December 2015, the Fund held K279.3 million, which represents 5.7% of the total portfolio.The Fund has been keeping its allocation to cash streamlined and focussed on forecast cash flow demands, such as approaching investment activities, such as remittance of cash offshore, government bond auctions, property project expenditures, and also to meet short term liquidity demand. Low returns in this asset class continued in 2015, due to persistency high levels of domestic liquidity.

Fixed Interest

The Fund’s fixed interest allocation (Fixed Interest Portfolio) comprises bank term deposits, government securities and loans, with term equal or more than 182 days to maturity, at the time of issue. As at 31 December 2015, the value of Fixed Interest Portfolio was K1,635.2 million, which represented 33.4% of the total investment portfolio.

This result is below the target allocation of 36.0% outlined in the Investment Strategy.This asset class is made up mostly of government securities and the Fund continues to monitor the market for suitable opportunities to acquire.

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

Equities

The domestic equities allocation (Domestic Equities Portfolio) consists of listed and unlisted equities. As at 31 December 2015, the Fund’s allocation to this asset class was at K976.0 million. This represents an decrease of K260.8 million or 21.1% from the K1,236.8 million total from the previous year.

Listed Equities

As at 31 December 2015, this sub-class (Domestic Listed Equities) was valued at K600.0 million which represented 12.2% of the Fund. The Domestic Listed Equities decreased by K26.9 million for the year, which was primarily due to the decrease in share prices of Credit Corporation Limited (CCP) and City Pharmacy Limited (CPL), but this was offset by a rise in share price of Bank South Pacific Limited (BSP).

Table 2: Domestic Listed Equities as at 31st December 2015

Unlisted Equities

As at 31 December 2015, this sub-class (Domestic Unlisted Equities) was valued at K976.0 million, which represented 19.9% of the Fund.

The Fund is currently working on a number of strategic initiatives, which are targeted at optimising the allocation of this asset class, including the following:

1. reducing exposure risk to selected entities;
2. crystallising the returns of those entities that have significantly appreciated; and
3. divesting those equities that are relatively small in terms of the overall portfolio, and which are not yielding robust risk adjusted return.

Table 3: Domestic Unlisted Equities as at 31st December 2015

Unquoted Ordinary Shares	Industry/Sector	Holdings (%)
Alotau International Hotel Ltd	Hotel	34
Brian Bell & Co. Ltd	Wholesale / Retail / Merchant	34
Capital Insurance Group Ltd	Insurance	34
Capital Way Holdings Ltd	Telecommunications	10
Gazelle International Hotel Ltd	Hotel	65
Kumul Hotels Ltd	Hotel	55
Pacific Management Services Ltd	Building Maintenance	50
Paradise Foods Ltd	Food & Snacks / Manufacturing	85
PNG Water Ltd	Utilities	30
Post Courier Ltd	Media / Advertising	21
SP Brewery Ltd	Manufacturing	20
Toyota Tsusho (PNG) Ltd	Motor Vehicle	4
Westpac Banking Corporation (PNG) Ltd	Bank / Finance	7

Properties

The Fund’s properties (Domestic Properties Portfolio) is comprised of commercial, residential, industrial and land investments. As at 31 December 2015, this asset class was valued at K623.6 million, which represented 12.7% of the Fund, which is below the target allocation (partly due to the poor outlook for property value in PNG and a divestment strategy). The Fund has continued the implementation of the property strategy of divesting non-core and underperforming assets, upgrading existing key assets and remains focussed on optimising profitability on core assets. This ‘divestment’ initiative is underway and it is expected to further stream line, and improve the composition of this asset class; leading to an improved risk-return profile for the Fund, and a diminished exposure to sub-optimal holdings.

Property Holding Companies are reported under the Properties asset class in portfolio reporting, however, in financial reporting, they are included under Unlisted Equity asset class.