Issue link: https://maltatoday.uberflip.com/i/1517228
MATTHEW VELLA mvella@mediatoday.com.mt 9 NEWS maltatoday | SUNDAY • 10 MARCH 2024 MALTA'S golden passport sovereign fund, financed by millions paid out by the global elite acquiring Maltese pass- ports, suffered a marginal loss in its investments due to the COVID impact on the profits of Bank of Valletta and Lombard Bank in 2021. The details emerge in the 2021 ac- counts of the National Development and Social Fund, the publication of which has long been delayed over a change in auditors. Despite their publication, NDSF chief executive Ray Ellul is refusing to di- vulge the recipient of a $25 million loan from the fund during that year. The fund says in its accounts that it loaned a Malta government-owned company $25 million in the form of a transferable loan note instrument. The loan had to be fully paid back by July 2023 at an annual 3.75% interest rate. But Ellul told MaltaToday the infor- mation requested – specifically which company was extended the loan facility – "is commercially sensitive". The NDSF has in the past acquired a majority stake in Lombard Bank in a bid to retain its domestic status but has so far not commented on the loan it has extended to a government entity. Ellul said the loan had an investment purpose, with the NDSF accounts say- ing the fund "acquired a short-term Transferable Loan Note Instrument" and which it defined as a "non-listed debt security" – or a private bond with hybrid characteristics, in Ellul's words. "For any non-listed debt security such as the TLNI in question, the NDSF is required to calculate the expected credit loss on the investment as well as carry out a fair value assessment. A €168,554 loss (in 2021) was simply a provision for risk in the accounts at year-end 2021… in actuality, the TLNI was repaid in full including all interests thereon in January 2023." Posterity fund's assets in 2021 valued at €608m Money received from the sale of pass- ports is hived off to the NDSF, while 30% is directly paid into Malta's con- solidated fund. Of the 70% that is paid to the posterity fund, one-third gets invested in global equities and finan- cial instruments. This cash is held in the NDSF's two discretionary portfo- lios, which are separately managed by the Central Bank of Malta and Bank of Valletta Asset Management: in total €118.5 million. A directed portfolio invests cash in government stocks and corporate bonds, which is also used for social and development purposes. This is valued at €288 million, and holds equity in BOV, Lombard Bank, as well as other bonds. Unallocated monies, currently total- ling €152 million, are held in a Central Bank account. In 2021, the NDSF received €15.2 mil- lion from the sale of passports, a dip that started from the COVID year of 2020 with €27.8 million, which itself was just a fraction of the €100.6 million received in 2019. Overall, by end of 2021, investments by the NDSF produced a net €2.2 mil- lion loss – marginally a negative re- turn of -0.02%. The reason was mainly due to negative market movements in Bank of Valletta equity (-3% or a loss of €840,000) and in Lombard Bank of €7.9 million (-16%). These were however mitigated by very positive returns from the Central Bank-Allianz investments (€3.79m, or 4%) and BOVAM (€2m, or 21%). Other local equities and corporate bonds de- livered returns of over €750,000 (6%). Altogether the total amount of pro- ceeds from inception to date amount to €614 million, but the resulting total assets currently stand at €608 million. Social projects funding While the NDSF has committed over €109 million as of 2021 for projects related to health, social accommoda- tion, sports and urban greening, the total contributions paid out in the year were of €5 million. Just over €1 mil- lion was paid in donations to the Com- munity Chest Fund (€500,000), Dar tal-Providenza (€350,000) and Caritas (€150,000). The main spend in 2021 was €66 mil- lion in social housing, and then various other grants for 58 primary healthcare centres (€10m), the St Michael Hospice (€8m), the Puttinu Cares apartments in London (€5m), as well as €4.9m for the GSSE 2023 games and €4.5 million in urban greening projects. NAO audit of fund Malta's posterity fund spends millions collected from the sale of so-called golden passports, but it has no estab- lished policies for the selection of pro- jects that get funding from this mul- ti-million kitty, according to a recent audit from the National Audit Office. Recently having acquired a majority stake in Lombard Bank, the NAO said the fund had no formal documented policy or standard operating procedure on which projects get funding. Neither is there a formal register for declined projects. The NDSF's management conceded that the withdrawals from the Fund had to date been governed by its invest- ment policy, "but the evolution of the Fund now requires a separate policy on withdrawals, planned to be introduced by year-end and which will include the obligation to maintain a formal register for declined projects." In 2022, the agency received €30 mil- lion from the sale of passports to global elites for over €1 million, apart from having invested €55 million of its accu- mulated wealth in shares in local banks, government stocks, and 15 projects val- ued at €14 million. The NAO also said NDSF's €15,000 in donations to two beneficiaries in 2022, had not been regulated with a docu- mented policy – these were €10,000 to a charity organisation telethon on 15 April 2022, and a €5,000 request from the Maltese Ambassador to the Vati- can, to finance part of the costs to bring over from the Holy City and exhibit the vestment of St Pope Pius V in Vallet- ta, for a whole month from 10 October 2022. COVID hit on BOV, Lombard impacts golden passport fund NDSF refuses to disclose government recipient of $25 million loan it issued in 2021 Money received from the sale of passports is hived off to the NDSF, while 30% is directly paid into Malta's consolidated fund