News Release 1/2020 - 09 April 2020

NDSF REGISTERS A NET PROFIT OF €3.25M IN 2019

The National Development and Social Fund (“NDSF” and “Fund”) registered a net profit of €3.25 million for the year ended 31 December 2019, compared to a loss of (€3.14) million in the previous year, as the positive investment returns on the Fund’s foreign investments in 2019 reversed the fair value losses registered in the difficult market conditions of 2018.

During 2019, NDSF received €106 million from the Malta Individual Investor Programme (2018: €100.6 million) so that the total amount of proceeds received from 2015 to 31 December 2019 amounted to €572.1 million.

The total assets of the Fund increased by 24% from €461.87 million in 2018 to €570.58 million in 2019. Total assets include €195.29 million held in foreign and domestic financial investments and €371.87 million in cash and cash equivalents. The assets of the Fund are held in three portfolios, namely a Discretionary Portfolio, a Directed Portfolio and an Unallocated Portfolio.

The net asset value of the Discretionary Portfolio amounted to €103.11 million at 31 December 2019 (2018: €97.55 million).  The Discretionary Portfolio consists mainly of a balanced portfolio of quality foreign bonds and foreign equities with an average rating of A+. The overall objective of the discretionary portfolio is the preservation of capital and the re-investment of investment returns over the long term. The total return from the Discretionary Portfolio amounted to a gain of €5.56 million compared with a loss of (€2.45) million in 2018 reflecting the strong gains in foreign markets from both equities and bonds during 2019. The Discretionary Portfolio is placed with the Central Bank of Malta who has in turn outsourced the investment management of the portfolio to a leading global investment manager.

The net asset value of the Directed Portfolio, as at 31 December 2019, amounted to €95.21 million (2018: €89.18 million). The Directed Portfolio consists solely of domestic assets and at year-end consisted of 93% in local equities, which include the Fund’s holdings in Bank of Valletta p.l.c and Lombard Bank Malta p.l.c. The other 7% is held in local corporate bonds.  The Directed Portfolio is managed in-house. During 2019, the Fund continued to invest substantially in local listed securities on the Malta Stock Exchange and apart from its two main holdings in mentioned above, established an income portfolio consisting of 18 locally listed equity holdings and 15 locally listed corporate bonds. The total return from the Directed Portfolio amounted to a loss of (€2.31) million compared with a loss of (€0.69) million in 2018. This negative return was largely attributable to the negative fair value movements in the two largest holdings mentioned above. The Directed Portfolio is used to fund social and economic initiatives, which may or may not have a direct financial return to the Fund.  In those instances when social and economic initiatives undertaken by the Fund do not have

a direct financial return to the Fund, the investment will be considered as a grant with a “social or economic return”. All investment proposals in respect of which there is no direct financial return to the Fund are evaluated by the Board of Governors to ensure that such investments generate a positive social or economic impact.

The Unallocated Portfolio holds the cash balance held with the Central Bank of Malta in a segregated account in the name of NDSF as at the 31st December 2019 and this stood at €371.87 million.

During 2019, NDSF committed over €90.5 million towards the wellbeing of society that range from health, social accommodation to sports. The major part of this allocation will be directed towards providing a substantial number of social housing units over a three-year period. The second largest allocation of funds was committed to the Primary Healthcare sector.

On the 29 January 2020, Heritage Malta on behalf of the NDSF, successfully participated in an on-line auction by Sotheby’s New York to acquire Mattia Preti’s monumental oil on canvas, "Boethius and Philosophy" for a total consideration of  $1.49 million.  This painting was the property of the state before it ‘mysteriously disappeared’ as confirmed by a watercolour painted by Charles de Brockdorff (1775-1850), an artist active in Malta by 1810.  The watercolour, which is preserved today in the Museum of the Order of Saint John, shows the Mattia Preti masterpiece hanging in the North West corner of the antechamber in the Grand Master’s Palace in Valletta. This acquisition falls within one of the aims of the NDSF, to protect and enrich the cultural and artistic heritage of our country.  The NDSF will own the asset but will lend the masterpiece for an indefinite period to Heritage Malta for the benefit of present and future generations.

Finally, the Board of Governors wishes to express its gratitude and appreciation to the management and staff of NDSF for their commitment and contribution to another satisfactory year and to the members of the Advisory Board for their continued support.

The audited 2019 Annual Report and Financial Statements of NDSF will shortly be available on the NDSF web portal.