u t o f
a n n u a l
r e p o r t
“Your equal opportunity fund for creating & growing wealth”
ANNUAL REPORT
U n i t
T r u s t
o f
F i j i
u t o f
a n n u a l
r e p o r t
Corporate Vision “Your Equal-Opportunity Fund for Creating and Growing Wealth” Corporate Mission Our Customers We will create customers’ value by: • providing consistent returns; • managing a well diversified investment portfolio within acceptable risk parameters; • developing unique products; • using modern technology to provide timely and accessible services; and • exceeding expectations through excellent service. Our People We will build a motivated, committed and empowered team by: • creating equal opportunities; • providing a safe and enthusiastic working environment; • communicating effectively; • training and encouraging self-development; and • rewarding outstanding performance. Our Stakeholders We will build a stakeholders’ value by: • complying with relevant regulatory and other requirements; • delivering best possible returns; and • Fulfilling mandated social responsibilities. Corporate Values • • • • • •
Professionalism; Integrity; Equality; Loyalty; Trust; and Transparency.
u t o f
20 09
a n n u a l
r e p o r t
CONTENTS
“Your equal opportunity fund for creating & growing wealth”
Chairman’s Report
2-3
Trustee’s Report
5-6
Dividend cut-off and payment timetable Interim Dividend Cut-off date:
31 March 2009
Payment:
15 June 2009
General Manager’s Report
Financial Statements
8-10
11-28
Final Dividend Cut-off date:
30 September 2009
Payment:
15 December 2009
u t o f
a n n u a l
20 09
r e p o r t
Chairman’s Report
General Overview 2009 was undoubtedly a challenging year for Unit Trust of Fiji (“UTOF” and/or “The Trust”) and the experiences drawn for this period will now pave the way for major changes in the next financial year. My message to my fellow board directors, management and staff for this financial year is best reflected in this adage “it is no longer business as usual” this has been the driving force for UTOF. Since the new Board was appointed, we had to rehabilitate/ restructure the non-performing investments that include UTOF’s $12 million and $1 million exposure with Muainarewa Resorts Limited (Momi Bay Stage 2 Project) and the Royal Davui Island Resort, respectively. There were other non-performing investments that are currently going through the recovery process. As to the Muainarewa Resorts Limited, we have initiated all legal procedures to recover our investment. All necessary process to necessitate these changes has been completed and will be made public in the next financial year. We continue to be vigilant with our investments and appropriate measures are in place to safeguard the interest of our unit holders and stakeholders. Such measures
have led to the formulation of new policies, 3 years Corporate Plan for the planning period 2010 to 2012 and launching of UTOF’s new logo. This exercise was necessary to add value to the overall growth of the Trust. In addition, it will be an “on-going” exercise for the Board, Management and the Trustees to continuously improve the financial performance of the Trust.
Growth UTOF was back on the growth track towards the end of the 2009 financial year and this was indicative of perseverance and the unswerving support from the unit holders. Although in the early months of 2009 the Trust recorded a $15 million decline in the total funds under management, there was a dramatic turnaround towards the end of this financial period. This was best reflected in the increased dividend payout to unit holders by 152% from an interim dividend of 0.03 cents per unit to a final dividend of 3.50 cents per unit. Overall for this planning period, the Trust declared and/or paid out 3.53 cents per unit to the unit holders, recording a dividend yield of 2.50%. Based on our market analysis and reform that is currently
being implemented by the board and management, we envisage positive growth in the next financial year especially with the unit trust market now heading towards a rather settled period.
Corporate Governance During this financial period, the Unit Trust of Fiji (Management) Limited (“UTOFML”) Board has been able to review and establish series of policies that will govern the affairs of the Trust in the many years to come. These policies are of international standards and will take into account related government reform programmes, wholly aimed at assisting the Board and the Trustees in future deliberations. During this planning period under review, the following polices were formulated: •
Accounting & Control Policy
Internal
•
Operational Policy
•
Investment Policy Statement
•
Risk Management Policy & Framework
•
Procurement Policy
•
Human Resource Policy
The other important policy currently being formulated is the Corporate Governance Policy and historically this will be a first for UTOF since inception. Its implementation will safeguard
Mr. Aisake Taito Chairman Unit Trust of Fiji (Management) Limited
u t o f
a n n u a l
r e p o r t
.........increased dividend payout to unit holders of 152% from an interim dividend of 0.03 cents per unit to a final dividend of 3.50 cents per unit the interest of unit holders and shareholders from contemporary crimes such as corruption and fraud in the work force. In terms of the Trust Deed, it is relatively archaic and as such, we have engaged our legal counsel to review and amend the Trust Deed and we are adamant that this review will be completed by the third quarter of 2010.
Risk Management The UTOFML Board remain firm with its fiduciary duties when it comes to risk management which is deeply embedded in our daily affairs. We recognise its principles and relevancy in ensuring continuity of our operations. We have systematically analysed our systems and processes to further enhance our due diligence process, and importantly to allow the Trust to invest prudently.
Key Investments and Projects There have been many discussions and market misinformation about UTOF’s loan to Muainarewa Resorts Limited. The Board would like to clarify that the $12 million loan to Muainarewa Resorts Limited is secured against the first registered mortgage over 322 acres of freehold land, adjacent to stage 1 of the Momi Bay integrated resort development.
UTOF has commenced its preparatory work to proceed with the mortgage sale of stage 2 property in order to recover the investment. This was a direct result of the suspension of development and the non payment of principal and interest since September 2008. Based on our recent valuation, the Trust was not required to make any provisioning for impairment as the market value of the 322 acres of freehold land was in excess of the loan amount.
Way Forward Looking ahead, 2010 will see major changes in the overall operation of the company and through our collective efforts, we are confident that these changes will come into full effect in the next financial year. Some of these changes will include the establishment of a new website and the improvement of our services to the unit holders. The UTOFML Board has redefined its key outcomes that will carry forward its work in the 20102012 financial years. We have also identified indicators to monitor the achievement of these outcomes.
proposed corporate plan for the planning periods with the interest of unit holders and shareholders being the overriding concern. The Board of Directors under the guidance of our shareholders, the Ministry of Public Enterprises, Tourism and Communications and the Ministry of Finance are working towards providing the best possible returns to our loyal unit holders. Finally, I would like to acknowledge the support of our shareholders, regulators, trustees, management and most importantly our unit holders for their continuing support and commitment as we endeavour to develop the Trust to become predominantly the preferred investment company in Fiji.
Vinaka Vakalevu!
Mr. Aisake Taito Chairman Unit Trust of Fiji (Management) Limited
We will continue to review and align our results with the
u t o f
a n n u a l
r e p o r t
“Thinking about your future! Start investing now with Unit Trust of Fiji.”
u t o f
20 09
a n n u a l
r e p o r t
Trustee’s Report
Trustees’ Report to Unit Holders for the period from 1st October 2008 to 30th September 2009 The Directors of Unit Trust of Fiji (Trustee Company) Limited (“UTOFTCL”) have the pleasure of presenting the 2009 Annual Report and audited financial statement for the period from 1st October 2008 to 30th September 2009. It has been less than a year since our appointment and we have been working closely with the Board and Management of Unit Trust of Fiji (Management) Limited to introduce and implement new policies, actively monitor the investments and develop UTOF’s 3 Year Corporate Plan.
Market Overview Generally, the Trust noted a decrease in the Total Funds under Management to $73.6 million when compared to the $88.5 million for the same period last year. This is also reflected in a reduction in the active number of units in issue from over 66 million to 55 million. However, we noted a steady increase in the total
number of active unit holders to just over 12,000.
Unclaimed Dividend and Redemptions
The confidence demonstrated by the unit holders is attributed towards the improved 2009 final dividend of 3.50 cents per unit. This was a dramatic recovery from the 0.03 cents paid out as interim dividend thus making the total dividend payment of 3.53 cents per unit for the year 2009.
Currently we have more than $70,000 uncollected dividend by the unit holders for various reasons. A notice to this effect will be circulated to our unit holders, as the Trust Deed dated 31st March 1978 Clause 20 provides:-
We are optimistic that such trend will continue with active portfolio management and guidance from the Board and Management of UTOFML.
Investment and related Polices
other
The Directors of the UTOFTCL noted effort made by UTOFML Board to review and implement new policies relating to investment, risks, accounting, record keeping and operation. This in turn impacts on both Management and Trustees in the day-to-day operation of the Trust and its future directions. This will be an on-going process to safeguard the best interest of the unit holders.
“…Any distribution payment which shall remain unclaimed after a period of 12 years from the date of payment of the same shall then be transferred to and become part of the deposited property and henceforth neither the payee nor any successor in title or assign of his shall have any right thereto or therein except as part of the deposited property”
Mr. Iowane Naiveli Director Unit Trust of Fiji (Trustee Company) Limited
Way Forward The Trustees have taken a new approach to improve quality of service to unit holders. We will be working closely with the Board and Management of UTOFML in providing more unit holder orientated services.
Mr. Anil Tikaram Director Unit Trust of Fiji (Trustee Company) Limited
Internal processes will be improved and streamlined for the convenience and delivery of services to unit holders.
u t o f
a n n u a l
r e p o r t
We have been and continue to be diligent with regards to the interest of our unit holders, in that their interest is paramount in our decision making.
Acknowledgment We as your Trustees would like to acknowledge and commend the Ministry of Public Enterprises, Tourism and Communications, the Ministry of Finance and the Reserve Bank of Fiji for their continuing support and guidance in these challenging times. We would also like to express our gratitude to Board of Directors and Management of UTOFML for their support and hard work during the year. To our loyal unit holders, we would like to sincerely commend your continuing trust. We note with gratitude your growing support and such growth is indeed rewarding as it shows your confidence in our work.
Thank you!
Mr Iowane Naiveli Director Unit Trust of Fiji (Trustee Company) Limited
Mr Anil Tikaram Director Unit Trust of Fiji (Trustee Company) Limited
u t o f
“Are you working for your family? Consider investing with Unit Trust of Fiji.”
a n n u a l
r e p o r t
u t o f
a n n u a l
20 09
r e p o r t
General Manager’s Report
it’s financial performance and to maintain consistent returns to it’s unit holders and shareholders.
Mr Vilash Chand Acting General Manager & Company Secretary
Year 2009 in Review 2009 has proven to be a challenging year for Unit Trust of Fiji in light of the global financial crisis and the devaluation of the Fiji dollar. During the year under review, the Trust recorded a reduction in the total deposited property by $15 million attributed to factors such as low returns from invested income and the social impact of the financial crisis and the devaluation. The Trust noted a moderate recovery towards the end of the financial year which is reflected in the 2009 final dividend payout to the unit holders. In response to such conditions, the Trust with the guidance of the shareholders and regulators has set in motion strategies to improve
10
The management team would like to commend the Board of Directors of the Management Company and new directors of the Trustee Company Messrs Anil Tikaram and Iowane Naiveli for their support and guidance during the year.
in the invested income during the early period of 2009, however, there was a turnaround towards the end of the financial year. The chart below presents a snapshot of where the Trust’s total funds under management of over $73 million were invested, as at 30th September 2009.
Cash at Bank - 0.5% Interest Bearing Deposit - 1.5% Loans & Receivables - 16% Bonds - 32% Equities - 50%
We have been able to establish a Joint Working Committee between the Management and Trustees to specifically identify and resolve issues of interest to the Trust and its unit holders. This forum allows the Trustee Directors and Management to review the current practises and re-strategise the way forward. As such we will be reviewing our systems and processes to improve our services for the benefit of our unit holders and shareholders.
Portfolio Overview Unit Trust of Fiji recorded a decline in the investment portfolio by $15 million for the year ended 30th September 2009. This was attributed to the impact of the global financial crisis and the devaluation of the Fiji dollar, which led to higher withdrawals by the unit holders during the year. The Trust noted a reduction
Investment Portfolio - Total Value of Deposited Property Asset Classes
Market Value - FJD
Equities
36,967,135
Bonds
23,211,838
Loans & Receivables
12,000,000
Interest Bearing Deposits Cash at Bank TOTAL
1,050,000 360,954 73,589,927
u t o f
a n n u a l
r e p o r t
Total Funds under Management The data below shows the total value of funds managed by the Trust over the last 5 years.
Total Funds Under Management Year
Value of Funds - FJD
FJD100,000,000
2005
88,633,531
FJD80,000,000
2006
94,433,693
FJD60,000,000
2007
90,943,660
FJD40,000,000
2008
88,529,429
FJD20,000,000
2009
73,589,927
Investments & Projects The Trust is currently rehabilitating and/or restructuring it’s nonperforming investments such as Muainarewa Resorts Limited – Momi Bay Stage 2 and Royal Davui Island Resort to recover its investment and diversify the funds in other asset classes. Appropriate measures have been undertaken to recover these investments and this process will be carried forward to the next financial year. We have also disposed a number of low or non-performing investments and redirected funds to other securities and investments to improve returns to the unit holders.
Investment Strategy The Trust has embarked on strengthening its investment decisions and portfolio management. A new investment policy statement is currently being drafted with the guidelines formulated by the Board of Directors, Trustees, Shareholders and the Regulator that will advocate prudent investment practises and active portfolio management. Some of these guidelines include limiting the total cost of an investment in any one company or security to 20% of UTOF’s total funds under UTOF Dividend Distribution per Unit – Class A Units Year
Dividend
Tax-free Dividend
2005 2006 2007 2008 2009
management. In addition, UTOF will be actively monitoring its investment portfolio based on provisions stipulated under the investment policy statement and risk management policy.
Funds Performance For the financial year ended 30th September 2009, the Trust declared a final dividend of 3.50 cents per unit compared to an interim dividend payout of 0.03 cents per unit for the same period. A total sum of $1,921,368 was paid out to unit holders on 15th December 2009. This represents an increase of 152%, a positive growth indeed when compared to last year’s final dividend of 1.39 cents per unit. The total sum declared and/or paid out to the unit holders for the year under review was $4,425,763. The tables below show the total amount of dividend distributed to the unit holders and the total returns, respectively, over the last 5 years. The negative capital growth for the year 2009 was mainly due to reduction in the value of investment portfolio as a result of decline in investment market values and higher withdrawals by the unit holders during the financial year.
Total Returns (%) Year
Dividend Yield
Capital Growth
Total Return
$4,221,561
2005
4.67
9.01
13.68
6.35c
$5,453,603
2006
4.70
1.61
6.31
3.55c
5.90c
$3,951,218
2007
4.30
0.40
4.70
2.35c
1.39c
3.74c
$2,499,767
2008
2.75
-0.30
2.45
0.03c
3.50c
3.53c
$4,425,763
2009
2.50
-2.68
-0.18
Interim
Final
Total
Distributed
2005
2.30c
3.50c
5.80c
2006
2.35c
4.00c
2007
2.35c
2008 2009
11
u t o f
a n n u a l
r e p o r t
Unit holders
for their confidence and support in appointing me as General Manager Designate & Company Secretary.
The data below shows the growth in the number of unit holders by just over 12,000 whereas a declining trend in the number of units in issue for the year 2009.
The Management Company also recruited two additional staff for the Sales & Marketing and Investment section. There are plans to recruit further staff in the field of Finance and Investment.
The growth in unit holders is a welcoming trend and we envisage a steady growth in the next financial year since the Trust has loyal, committed and long term unit holders and most importantly, the Trust has improved its dividend payout to the unit holders.
UTOFML continues to invest considerably in staff training and capacity building to enhance skills and knowledge in respective segments of the business.
Number of Unitholders and Units in Issue
The Year Ahead
Year
Unit Holders
Unit in Issue
2005
9,224
65,274,202
2006
10,821
68,723,107
2007
11,681
67,418,220
2008
12,186
66,494,097
2009
12,391
55,392,358
Growth in Number of Unit Holders
Growth in Number of Units in Issue
14000
80,000,000
12000
70,000,000
10000
60,000,000
8000
50,000,000
6000
40,000,000
4000
30,000,000
2000
20,000,000 2005 2006 2007 2008 2009
The Trust will be implementing a new 3 year Corporate Plan for the planning period 2010-2012. Incorporated in this plan are strategies that we expect to actively manage the investment portfolio, improve our rate of returns and develop appropriate systems & internal processes to streamline the business operation. Our key objective remains to provide investors with maximum consistent earnings with a relatively low level of risk. We are adamant that the year ahead will usher in new changes for the Trust. Looking ahead, I am confident that UTOF along with guidance of the Board of Directors, Trustees, Ministry of Public Enterprises, Tourism & Communications and Reserve Bank of Fiji will continue to explore avenues to grow the Trust and maximise the returns to the unit holders and the shareholders.
Conclusion I would like to take this opportunity to thank all our existing unit holders for their confidence and support throughout the financial year. Also, I would like to compliment the staff members for their hard work and commitment to the company.
10,000,000 2005 2006 2007 2008 2009
Thank you !
Human Resources & Staff Development During this year, my predecessor Dr Peter Mario completed his employment term with Unit Trust of Fiji (Management) Limited after 9 consecutive years of unwavering dedication and commitment. I would also like to commend the Board of Directors and Shareholders
12
Vilash Chand Acting General Manager & Company Secretary
u t o f
a n n u a l
r e p o r t
Financial Statements
Contents
Page
Trustee’s and Manager’s Report and Approval of Financial Statements
12
Independent Audit Report
13
Income and Distribution Statement
14
Balance Sheet
15
Statement of Changes in Equity
16
Cash Flow Statement
17
Notes to and forming Part of the Financial Statements
18-28
13
u t o f
a n n u a l
20 09
r e p o r t
Trustee’s and Manager’s Report
30 SEPTEMBER 2009
Date of Formation
The trust was established on 25th April 1978.
Principal activity The principal activity of the Trust during the financial year was to provide an investment vehicle that allowed investors to pool their funds and have them invested by the Fund Manager across a range of investments in accordance with the investment guidelines contained in the prospectus. Approval of financial statements The financial statements for the year ended 30 September 2009 together with the accompanying notes set out on pages 14 to 28 are approved as being in accordance with the books and records of the Unit Trust of Fiji. The balance sheet, income and distribution statement, statement of changes in equity and statement of cash flows of the Unit Trust of Fiji fairly represent the state of affairs as at 30 September 2009, and results, changes in equity and cash flows for the year ended on that date. Signed in accordance with resolution of the Trustee and Manager.
Unit Trust of Fiji (Trustee Company) Limited Trustee of the Unit Trust of Fiji
Dated at Suva this 23rd day of December 2009.
14
Unit Trust of Fiji (Management) Limited Manager of the Unit Trust of Fiji
u t o f
a n n u a l
r e p o r t
20 09 14 to 28.
15
u t o f
a n n u a l
20 09
r e p o r t
Income and Distribution Statement
YEAR ENDED 30 SEPTEMBER 2009
Notes
2009 $
2008 $
1,804,787 1,843,159 1,448,393 1,892,851 6,989,190
1,394,955 2,846,996 (77,527) 176,153 4,340,577
-
(1,403,259)
Income Available for Distribution
6,989,190
2,937,318
Net Equalisation
(314,492)
(47,773)
6,674,698
2,889,545
Manager’s Remuneration
1,310,935
1,359,199
Net Income Available for Distribution
5,363,763
1,530,346
Declared for distribution – 30 September 2008
(938,000)
31,421
4,425,763
1,561,767
197,629 1,921,368 2,118,997
1,582,393 917,374 2,499,767
2,306,766
(938,000)
4,425,763
1,561,767
Nil
Nil
Interest Income Dividend Income Exchange /Gains (Losses) Gains on Disposal of Investments
Less: Impairment Losses
8
Less:
Less: Interim Distribution Paid Proposed Final Distribution
Declared for Distribution
Balance – 30 September 2009
The Income and Distribution Statement is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 18 to 28. 16
u t o f
20 09
Balance Sheet
a n n u a l
r e p o r t
30 SEPTEMBER 2009
2009 $
2008 $
53,699,991 20,271 15,762,070
67,018,650 20,271 22,669,096
69,482,332
89,708,017
483,513 23,495 884,395 61,228,973 12,000,000
4,911,782 1,365,597 1,495,753 74,216,862 12,500,000
74,620,376
94,489,994
835,417 74,493 2,306,766 1,921,368
3,799,990 64,613 917,374
5,138,044
4,781,977
69,482,332
89,708,017
EQUITY
Unit holders’ equity 54,896,282 Class A units fully paid (2008: 65,998,021) 496,076 Class B units fully paid (2008: 496,076) Income reserve Fair value reserve
2 2
Represented by: ASSETS Cash at bank Other receivables Accrued income Available-for-sale financial assets Loans and receivables
LIABILITIES Payables Unclaimed distribution Declared for distribution Proposed final distribution
3 4 5 6 7
9
10
Net Assets Signed in accordance with a resolution of the Trustee and the Manager.
Trustee
Manager
The Balance Sheet is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 18 to 28. 17
u t o f
a n n u a l
20 09
r e p o r t
Statement Of Changes In Equity
30 SEPTEMBER 2009
Reserves Income $ Balance at 30 September 2007 Creations during the year Equalisation on creations Repurchase of units Equalisation on repurchases Expenditure on prospectus Transfer of fair value re-measurements upon disposal of investments Fair value re-measurements
Declared for distribution 2007 Income for the year Interim distribution paid Proposed final distribution Balance at 30 September 2008 Creations during the year Equalisation on creations Repurchase of units Equalisation on repurchases Transfer of fair value re-measurements upon disposal of investments Fair value re-measurements
Income for the year Interim distribution paid Proposed final distribution Declared for distribution Balance at 30 September 2009
Fair Value $
Unit holders Equity $
Total
20,271 -
21,115,063 -
69,028,476 6,340,852 (117,768) (7,443,502) 165,541 (16,949)
90,163,810 6,340,852 (117,768) (7,443,502) 165,541 (16,949)
-
(162,131) 1,716,164
-
(162,131) 1,716,164
20,271
22,669,096
67,956,650
90,646,017
-
-
31,421 1,530,346 (1,582,393) (917,374) (938,000)
31,421 1,530,346 (1,582,393) (917,374) (938,000)
20,271 -
22,669,096 -
67,018,650 4,973,501 (80,261) (19,544,652) 394,753
89,708,017 4,973,501 (80,261) (19,544,652) 394,753
-
(712,456) (6,194,570)
-
(712,456) (6,194,570)
20,271
15,762,070
52,761,991
68,544,332
-
-
20,271
15,762,070
5,363,763 (197,629) (1,921,368) (2,306,766) 938,000 53,699,991
5,363,763 (197,629) (1,921,368) (2,306,766) 938,000 69,482,332
$
The Statement of Changes in Equity is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 18 to 28.
18
u t o f
20 09
Statement of Cash Flows
a n n u a l
r e p o r t
30 SEPTEMBER 2009
Note
2009
2008
$
$
6,670,981
2,897,249
Cash flows from operating activities
Cash receipts in course of operations
Cash payments in course of operations
Proceeds from sale of financial assets
Purchase of financial assets
Net cash from operating activities
(1,785,694)
(682,859)
8,836,152
1,779,522
(2,200,000)
(434,340)
11,521,439
3,559,572
(19,701,849)
(7,017,031)
6,415,350
7,495,182
(2,663,209)
(2,758,255)
(15,949,708)
(2,280,104)
(4,428,269)
1,249,468
4,911,782
3,632,314
483,513
4,911,782
Cash flows from financing activities
Repurchase of units
Proceeds from issue of units
Distribution paid to unit holders
Net cash used in financing activities Net (decrease) / increase in cash Cash at the beginning of the year Cash at the end of the year
3
The Statement of Cash Flows is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 18 to 28.
19
u t o f
a n n u a l
20 09 1.
r e p o r t
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
YEAR ENDED 30 SEPTEMBER 2009
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unit Trust of Fiji (“the Trust”) is a unit trust incorporated and domiciled in Fiji. The address of its registered office and principal place of business are disclosed in note 13 to the financial statements. Principal Activity The trust is an investment vehicle that allows investors monies to be pooled with other unit holders’ monies that in return are re issued with units and become unit holders in the unit trust. The pooled funds in the trust are then invested by the manager in accordance with the investment guidelines contained in the prospectus. The significant accounting policies which have been adopted in the preparation of these financial statements are set out below. The financial statements were authorised for issue by the Trustees and Managers on 23rd December 2009.
(a)
Statement of compliance
The financial statements have been drawn up in accordance with the Unit Trust Act 1978, the Trust Deed, Trust Act 1966, the Capital Markets Development Authority Act 1996 and International Financial Reporting Standards (“IFRS”)
(b)
Basis of preparation
The financial statements have been presented in Fiji dollars, rounded to the nearest dollar. They have been prepared under the historical cost convention, except where stated. The accounting policies have been consistently applied during the year.
(c)
Use of estimates and judgments
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and assumptions. It requires the Trustees and Managers to exercise their judgments in the process of applying the Trust’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements including the following notes:
Note 1(d) – Financial assets
(d)
Financial assets
Note 1(e) – Revenue recognition
Financial assets are classified into the following categories: loans and receivables and available-for-sale financial assets. The classification is dependent on the purpose for which the financial assets are acquired. The Manager determines the classification of financial asset at the time of the purchase and re-evaluates such designation at every report date.
20
u t o f
20 09
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
(d)
Financial Assets (Cont’d)
(i)
a n n u a l
r e p o r t
YEAR ENDED 30 SEPTEMBER 2009
Available-for-sale financial assets
Available-for-sale financial assets are non derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the Trust intends to dispose of the investment within 12 months of the balance sheet date. Purchases and sales of investments are recognised on trade-date – the date on which the Trust commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets Unrealised gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised in the fair value reserve. When available-for-sale financial assets are sold or impaired, the accumulated fair value adjustments are included in the income and distribution statement as gains or losses. The fair values of quoted investments are based on current market prices. Other unlisted equities are valued by independent valuers approved by the Fund Manager and Trustee as per the Trust Deed. The valuation takes into account the following methodologies: 1. 2. 3.
Discounted Cash Flow (DCF) Price to Earnings EV/ EBITDA (Earnings before income tax, depreciation and amortisation)
The Trust assesses at balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from fair value reserve and recognised in the income and distribution statement. Impairment losses recognised in the income and distribution statement on equity instruments are not reversed through the income and distribution statement when the impairment condition reverses.
(ii) Loans and receivables
Loans and advances are recognised at recoverable amount, after assessing required provisions for impairment. Impairment of a loan is recognised when there is reasonable doubt that not all the principal and interest can be collected in accordance with the terms of the loan agreement. Impairment is assessed by specific identification in relation to individual loans and estimation of expected losses in relation to loan portfolios where specific identification is impracticable. Bad debts are written off when identified. If a provision for impairment has been recognised in relation to a loan, write-offs for bad debts are made against the provision. If no provision for impairment has previously been recognised, write-offs for bad debts are recognised as expenses in the income and distribution statement.
21
u t o f
a n n u a l
20 09 1.
(e)
r e p o r t
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
YEAR ENDED 30 SEPTEMBER 2009
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Revenue recognition
Income is generally brought to account on an accrual basis. However effective from September 2008 interest income including penalty interest charged on loans to Muainarewa Resorts Limited (Muainarewa) was recognised on a cash receipt basis. Income from offshore investments is recorded on an accrual basis net of any withholding tax deducted at source. Dividend income from listed or quoted securities is recognised when a market announcement is made. Dividend from unlisted and private equities is recognised when it is formally notified that dividend is declared and the right to receive dividends is established.
(f)
Manager’s remuneration
Under the terms of the Trust Deed, the Manager is entitled to receive manager’s remuneration being 1.5% of the value of the deposited property.
(g)
Distributions upon divestment
Clause 19 of the Trust Deed permits the Managers in their absolute discretion to determine annually such amounts being the surplus from disposal of investments that year as being available for distribution. Any balance of the surplus from disposal of investments is then transferred to unitholders equity.
(h)
Income tax
The Trust is not subject to income tax provided the distributable income is declared for distribution to unit holders.
(i)
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprises of cash at bank.
(j)
Other receivables and accrued income
Other receivables include cash receivable from sale of units and bank charges receivable from the “Management company”. Interest receivable and dividend declared but unpaid on shares owned are included under accrued income.
(k)
Payables
Payables are recognised for amounts to be paid in the future for goods and services recorded, whether or not billed to the Trust. Payables are stated at cost as they are expected to be settled within next twelve months.
22
u t o f
20 09
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
(l)
Foreign exchange translation
(i)
a n n u a l
r e p o r t
YEAR ENDED 30 SEPTEMBER 2009
Functional and presentation currency
The financial statements are presented in Fiji dollars, which is the functional and presentation currency of the Trust.
(ii)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency assets are translated into the functional currency using the exchange rate prevailing at the balance sheet date. Foreign exchange gains and losses arising from translation of non monetary items, such as equities classified as held for sale financial assets, are included in the Fair Value Reserve. In the opinion of managers and trustees, this accounting policy is more appropriate and suitable for Unit Trust of Fiji. 2.
RESERVES
Reserves consist of changes in the fair value of investments classified as available-for-sale, and an amount being an income reserve. The latter represents interest earned on funds advanced by the Government of Fiji prior to the establishment of the Trust. Government approval has been received for an amount of $8,069 transferred to the distribution statement in 1979 to be reimbursed and the total to be utilised as deemed necessary by the Board of the Managers. 3.
CASH AT BANK
Cash at bank comprise of the following bank accounts:
Income account Distribution account Capital account
4.
OTHER RECEIVABLES Receivable from management company
5.
ACCRUED INCOME Accrued interest income Accrued dividend income
2009 $
2008 $
116,577 78,455 288,481
1,126,026 1,034,549 2,751,207
483,513
4,911,782
23,495
1,365,597
494,535
655,759
389,860
839,994
884,395
1,495,753
23
u t o f
a n n u a l
20 09 6
r e p o r t
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
YEAR ENDED 30 SEPTEMBER 2009
AVAILABLE - FOR - SALE FINANCIAL ASSETS
Available-for-sale investments are valued in accordance with note 1(d) of the financial statements. Available-for-sale investments included in the financial statements comprise:
a) Term deposits Local Offshore
b) Listed equities Shares quoted on stock exchanges: South Pacific Stock Exchange Stock exchanges overseas c)
Shares
d) Managed funds Local Offshore
e)
Unlisted equities
Bonds Local
Total Available –for –sale financial assets
7
LOANS AND RECEIVABLES
Loans to Muainarewa Resorts Limited (a) Syndicated Loan to Suva Private Hospital (b)
2009 $
2008 $
1,050,000 1,050,000
937,399 815,895 1,753,294
26,399,188 26,399,188
27,175,233 2,160,637 29,335,870
10,567,947
15,216,513
-
505,533 212,263
-
717,696
23,211,838
27,193,489
61,228,973
74,216,862
12,000,000 -
12,000,000 500,000
12,000,000
12,500,000
(a) The loan to Muainarewa Resorts Limited is secured by first registered mortgages over freehold lands adjacent to and forming part of the Momi Bay integrated resort development. The developers have suspended development. The principal and interest were due for settlement on 30 September 2008, and are now past due. No interest on this loan has been brought to account. An independent valuation was obtained by the Trust during the year, which valued the securities at $13.3m. The Trust has made no provision for impairment as the Trustees and Managers believe that the security value is adequate to cover the loan balance of $12m. (b) The Syndicated Loan with Suva Private Hospital (SPH) was fully paid during the year ended 30 September 2009. 24
u t o f
20 09 8
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
r e p o r t
YEAR ENDED 30 SEPTEMBER 2009
INVESTMENT FEASIBILITY
2009 $
a n n u a l
Funds advanced to Fiji Wai Limited Less: Provision for impairment
2008 $
-
1,403,259
-
(1,403,259)
-
-
The Trust had expended funds amounting to $1,403,259 in evaluating and developing proposed investment opportunities in the mineral water industry for Fiji Wai Limited. Neither the Trust nor Fiji Wai Limited has the ability to bring the funds expended in this project to fruition. Under the current economic conditions, the likelihood of locating a Joint Venture partner in the foreseeable future is uncertain and accordingly, the amount was fully provided for during the year ended 30 September 2008. 9
PAYABLES
2009 $
2008 $
Managers’ remuneration payable
514,665
682,264
Repurchase of units payable
312,867
470,064
7,885
2,647,662
835,417
3,799,990
Other sundry payables 10
DISTRIBUTIONS
Proposed final distribution
The manager has proposed a final distribution of $1,921,368 (2008: $917,374) or 3.5 cents per unit (2008:1.39 cents per unit). 11
CONTINGENT LIABILITIES AND COMMITMENTS
The Trustee and the Manager are not aware of any contingent liabilities or commitments at year end (2008: Nil).
25
u t o f
a n n u a l
20 09 12
r e p o r t
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
YEAR ENDED 30 SEPTEMBER 2009
RELATED PARTIES
Manager The Manager of the Trust is Unit Trust of Fiji (Management) Limited. The directors of the management company are: Aisake Taito
Marika Luveniyali
Shaenaz Voss
Saula Sovanivalu (Retired on 23rd September 2009)
Manager’s fees Under the terms of the Trust Deed, the Manager is entitled to receive manager’s remuneration being 1.5% of the value of the deposited property, manager’s rounding being the lower of 1% of the value of each unit created or 1.25 cents per unit and preliminary charges being 2% of total funds available for transfer to capital. During the year the Manager received $1,310,935 as Manager’s Remuneration (2008: $1,359,199).
Trustee The Trustee of the Trust is Unit Trust of Fiji (Trustee Company) Ltd. The present directors of the Trustee Company are: Iowane Naiveli (appointed on 8 June 2009)
Anil Kumar Tikaram (appointed on 27 May 2009)
The previous directors of the Trustee Company were Gilbert Veisamasama Jr, and Ulamila Fa-Tuituku.
Trustee’s fee The Trustee is currently entitled to receive a fee of 1/8 of 1% of the value of the deposited property capped to $50million, and 1/16 of 1% of the deposited property in excess of $50million. During the year the Trustee was paid $97,420 VIP (2008: $79,352 VIP) for its services by the Managers. Related party balances
Net amount (owing to) Managers
26
2009 $
2008 $
(604,141)
( 918,531)
u t o f
20 09 13
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
a n n u a l
r e p o r t
YEAR ENDED 30 SEPTEMBER 2009
TRUST DETAILS
Date of Formation Unit Trust of Fiji was established on 25th April 1978.
Registered Office The Trust’s registered office is located at level 2, Provident Plaza 2, Ellery Street, Suva. 14
RISK MANAGEMENT POLICIES
The Trust’s activities expose it to a variety of financial risks: market risk (including interest rate risk, credit risk, performance risk, foreign exchange risk, and price risk), liquidity risk and operational risk. The Trust’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Trust’s financial performance. The Manager has the overall responsibility for the establishment and oversight of the Trust’s risk management framework. The Trust’s risk management policies are established to identify and analyse the risks faced by the Trust, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Trust’s activities.
Market risk
i)
Interest rate
This is the risk borne by interest bearing assets such as loans and bonds due to the changes in interest rates. Through its investment policy the Trust aims to balance its portfolio through short term deposits and loans, and medium to long term Government and semi-government bonds. At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was:
Fixed rate instruments Carrying Amount
Term deposits Bonds
2009 $
2008 $
1,050,000
1,753,294
23,211,838
27,193,489
24,261,838
28,946,783
Fair value sensitivity analysis for fixed instruments The Trust does not account for any fixed rate financial assets and liabilities at fair value through profit and loss. Therefore a change in interest rates at the reporting date would not affect income.
27
u t o f
a n n u a l
20 09
r e p o r t
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
14
RISK MANAGEMENT POLICIES - continued
ii)
YEAR ENDED 30 SEPTEMBER 2009
Credit risk
This refers to the risk of losing investment funds due to companies, banks and financial institutions the Trust has deposits and provided short term loans defaulting on their repayments of principal or interest or both. For deposits with banks and financial institutions, only reputable parties with known sound financial standing are accepted. The Trust minimizes credit risk by conducting thorough due diligence on any investments its makes, ensure that there are guarantees on these investments by principal directors or sister companies, limit the amount that is given as loans and implement certain conditions and obtaining securities to secure funds advanced.
The total exposure of credit risk in the Trust’s portfolio is as follows: 2009 $
2008 $
483,513
4,911,782
23,495
1,365,597
1,050,000
1,753,294
23,211,838
27,193,489
24,768,846
35,224,162
Cash at bank Other receivables Term deposits Bonds
ii)
Credit risk
The Trust monitors credit risk by sector. An analysis of concentrations of credit risk is shown below:
2009 $
2009 %
2008 $
2008 %
Concentration by sector Central banks Financial Institutions Government Others
28
483,513
2%
4,911,782
14%
1,050,000
4%
1,753,294
5%
23,211,838
94%
27,193,489
77%
23,495
0%
1,365,597
4%
24,768,846
100%
35,224,162
100%
u t o f
20 09 14
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
a n n u a l
r e p o r t
YEAR ENDED 30 SEPTEMBER 2009
RISK MANAGEMENT POLICIES - continued
iii)
Performance risk
This risk relates to the performance of the investment in which the Trust has invested. The return on a particular investment such as a share, is affected by the performance of the issuer of the investment, and in the case of bonds the movement in interest rates and the ability of the Trust to hold the bond to maturity in the normal course of its operations. Different investments tend to perform differently under the same operating environment. Therefore, the Trust at all times will try to have different types of investments in its portfolio.
iv)
Foreign exchange risk
The Trust has investments and holds funds offshore and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Australian dollar. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities.
v)
Price risk
Price risk is the risk that the value of an investment will fluctuate as a result of changes in market prices, whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the market. Different investments (cash, shares, bonds, property) tend to perform differently under the same operating environment.
Liquidity risk This is the risk that the Trust will not be able to facilitate its unit holders’ redemption request. The Trust aims to maintain a buffer fund in liquid assets at all times to meet expected normal redemptions. Under the Trust Deed, the manager, with the concurrence of the Trustee, may suspend the redemption of units for such time as may be necessary to realise sufficient liquid funds to meet any unusual redemption requests. The table below analyses the Trust’s financial assets into relevant maturity groupings based on the remaining period at the balance date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
No specific At 30 September 2009
Maturity
Term Deposits Listed and unlisted securities
Less than 1 year $’000s
Between 1 and 2 years $’000s
Between 3 and 5 years $’000s
Over 5 years $’000s
1,067,437
Total $’000s 1,067,437
39,748,485
39,748,485
Managed funds
-
-
-
-
-
-
Bonds
-
4,743,693
5,028,770
3,757,694
11,314,260
24,844,417
5,811,130
5,028,770
3,757,694
11,314,260
Loans and receivables
12,000,000 51,748,485
12,000,000 77,660,339
29
u t o f
a n n u a l
20 09 14
r e p o r t
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
YEAR ENDED 30 SEPTEMBER 2009
RISK MANAGEMENT POLICIES - continued
Liquidity Risk
No specific Maturity
Less than 1 year $’000s
Between 1 and 2 years $’000s
Between 3 and 5 years $’000s
Over 5 years $’000s
$’000s
Term Deposits
-
1,758,526
-
-
-
1,758,526
Listed and unlisted securities
-
44,572,383
-
-
-
44,572,383
Managed funds
-
717,796
-
-
-
717,796
At 30 September 2008
Bonds Loans and receivables
Total
-
1,508,110
6,379,990
4,701,040
16,380,428
28,969,568
12,500,000
-
-
-
-
12,500,000
12,500,000
48,556,815
6,379,990
4,701,040
16,380,428
88,518,273
Operational risk
i)
Data risk
This is the risk of losing information including unit holder account details even though there is dual system storage of a hard copy filing system and electronic database. The Manager ensures confidentially and security of all unit holders information. The Trust has developed a database system to adequately store information, conducts daily backups of electronic information and has developed a Disaster Recovery Plan.
ii)
Legal risk
Legal risks refer to the risk of being legally non compliant due to changes in Government and Regulators current policies and regulations. The Manager has an independent compliance officer who reports directly to the General Manager and Board of Directors.
iii) Operational risk
Operational risk is defined as the risk arising from the Trust’s and its related entities business functions and from the practical implementation of the Manager’s strategy for growing the Trust. The Manager has developed a three year strategic plan and annual key performance indicators to ensure performance of the Trust. The Manager also conducts third party due diligence on new investments before recommending any investment to Trustees. 15
EVENTS AFTER BALANCE SHEET DATE
The Trustees and Managers consider that the current political situation will not affect the ability of the Trust to continue as a going concern. The financial statements do not reflect any uncertain implications, if any, arising from this event. There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Trustees and Managers, to affect significantly the operations of the Trust, the results of those operations, the changes in net assets of those operations, or the state of affairs of the Trust in future financial years.
30
Directory Unit Trust of Fiji (Management) Limited Board of Directors Mr. Aisake Taito
Chairman
Mrs. Shaenaz Voss
Director Mr. Saula Sovanivalu Mr. Marika Luveniyali
Director Director – retired on 23rd September 2009
Acting General Manager & Company Secretary Mr. Vilash Chand Registered Office
Level 2, Provident Plaza 1, Ellery Street G P O Box 14451, Suva
Telephone
330 1052, 330 9698, 331 4544
Facsimile
331 5376
info@unittrust.com.fj
Customer Service Office
Shop 4, 12 Marine Drive, Reddy Diamond Building P O Box 3578, Lautoka Ph: 666 3663 Fax: 666 1661
Agents
Fiji Development Bank Post Fiji Branches Kontiki Stockbroking Limited Fiji Stock Brokers
Auditor
KPMG Chartered Accountants Suva Central, Renwick Road, Suva
Solicitors
R Patel & Company, Mitchell & Keil, Neel Shivam
Bankers
Australia & New Zealand Bank, Bank of South Pacific
Unit Trust of Fiji (Trustee Company) Limited Board of Directors Mr. Iowane Naiveli
Director and Company Secretary
Mr. Anil Tikaram
Director
Registered Office
Level 2, Provident Plaza 1, Ellery Street G P O Box 14451, Suva
www.unittrustfiji.com.fj
Level Two, Provident Plaza One, Ellery Street, G.P.O Box 14451, Suva, Fiji Islands. Telephone (679) 330 1052, 330 9698, 331 4544, Facsimile (679) 331 5376 E-mail info@unittrust.com.fj