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Retirement Fund net assets down $19 Mil in FY 2011

Enough to meet current ongoing obligations says audit report
fili@samoanews.com

ASG Employees Retirement Fund (ASGERF) net assets in trust for pension benefits decreased by $19 million due to domestic and international equity market conditions, according to an independent audit report of the ASGERF Comprehensive Annual Financial Report for the last fiscal year.

The audit report, by the accounting firm of Moss Adams LLP, states that it has issued “an unqualified opinion”, or clean opinion, of the Retirement Fund’s statements of plan net assets for Sept. 30, 2011 and 2010.

According to the auditors, the net assets for ASGERF at the close of fiscal year 2011 (which ended Sept. 30, 2011) are $181.72 million and all of the net assets — which are held in trust for the pension benefits — are available to meet ASGERF’s ongoing obligations to plan members and their beneficiaries.

“ASGERF’s total net assets held in trust for pension benefits decreased by $19,437,428 (or $19.43 million) - or 9.7% between 2011 and 2010, primarily as a result of domestic and international equity market conditions,” the reports says.

The report went on to say that FY 2011 proved to be a challenging investment market both domestically and overseas, adding that the fears of the Euro and U.S. debt crisis had a strong impact on all asset classes. For example, there was instability in Europe, particularly in Greece and the possibility of the European debt crisis spreading to other countries.

In the U.S., there was a slight repeat of the 2008 market crash with the volatility of the housing market, oil prices, the Wall Street crisis and budget struggles on Capitol Hill, the report points out.

“Despite these factors that have had an impact on the investment market” the ASGERF board “continues to make decisions based on a long-term investment strategy and does not overreact to financial and political news,” the report notes.

“The commitment of a long-term strategy has resulted in the Fund’s portfolio remaining strong and capable of meeting the Fund’s financial obligations with a solid actuarial funding status.”

There are two local investments for the Retirement Fund:

The three-story Centennial Office Building, which has an original cost of $7.3 million, and currently has an estimated fair market value of $5 million, and this is a real estate investment.

Two loans to the American Samoa Government, which were just over $22 million in FY 2011. One is for $20 million enacted in 2007 — with a balance of $14.05 million in FY 2011 — and the other is for $10 million to LBJ Medical Center, which was approved several years ago and had a balance of $7.95 million in FY 2011.

According to the report, loans to ASG are stated at the outstanding principal balance, which approximates fair value.

It was made clear in the report that the Fund’s Investment Policy guidelines prohibit investments in securities that are not denominated in U.S. dollars or that are traded solely on an exchange outside of the United States.

Additionally, the Fund does not hold any direct investments, hedges, or derivative instruments denominated in foreign currency.

Samoa News will report later in the week on other issues covered in the report.



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