UNIT TRUST OF FIJI
Annual Report 2011
together, we grow
OUR VISION “Your Equal-Opportunity Fund for Creating and Growing Wealth”
OUR 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.
OUR VALUES Professionalism; Integrity; Equality; Loyalty;
Trust; and
Transparency.
ANNUAL REPORT 2011
Unit Trust of Fiji
CONTENTS
Manager & Trustee’s Report
2
General Manager’s Report
4
Charts & Graphs
5
Staff Directory
6
Directors’ Report
9
Statement by Directors
9
Independent Audit Report
10
Statement of Comprehensive Income
11
Statement of Financial Position
12
Statement of Changes in Equity
13
Statement of Cash Flows
15
Notes to and forming part of the Financial Statements 16-27
1
Unit Trust of Fiji
ANNUAL REPORT 2011
MANAGER AND TRUSTEE’S REPORT
“2011 was the year we realised the fruition of our strategies and this was reflected in the taxfree dividend payout of $3,176,434 for the year under review. UTOF paid 5.80 cents per unit to the unit holders which represented a dividend yield of 5.14%” As the Manager and Trustee of Unit Trust of Fiji, we are pleased to present the 2011 annual report and audited financial statements for the period from 1st January 2011 to 31st December 2011. For the year 2011, the total funds under management were recorded at $72.9 million, a positive growth of 7.40% compared to the year 2010. This was mostly attributed to UTOF’s continuous effort in realigning its investment portfolio and investing in stocks which generated growth and investment income. However, UTOF is mindful of the continuous challenges in the capital and financial markets, particularly the performance of our investee companies which are listed on the South Pacific Stock Exchange. The Manager and Trustee will be guided by the Investment Policy Statement “IPS” and have adopted the “prudent investor rule” in monitoring the performance of UTOF’s investment portfolio. As for new investments of unit holders’ capital funds, UTOF invested in good yield and growth securities in accordance with the perimeters outlined in the IPS, hence achieved a well balanced and diversified investment portfolio. The rehabilitation and recovery of non-performing investments will continue after the successful recovery of UTOF’s $12 million investment in Muainarewa Resorts Limited. At the date of this reporting, the $12 million was invested in securities which will generate a desirable level of investment income and growth in the portfolio. UTOF paid out a tax-free dividend of 5.80 cents per unit to its unit holders and recorded a dividend yield of 5.14%. The appreciation in the UTOF’s investment portfolio provided a capital growth of 4.34%, thus a total return for the year 2011 was 9.48%. Comparatively, UTOF’s dividend yield in 2011 was increase by 0.10% from 2010 and the capital growth significantly increased from -10.44% in 2010 to 4.34%. These are indicative of UTOF’s commitment to provide its loyal unit holders’ a competitive return by adopting prudent investor guidelines as set forth in our Investment Policy Statement “IPS”. 2
UTOF continues to register a positive growth in the number of unit holders. In 2011, UTOF achieved a growth of 1.02% with a total unit holder base of 12,616. The number of active unit holders continues to increase every year and has been a steady trend which is indeed an encouraging sign for UTOF and its key stakeholders. As reported in 2010, UTOF created new investment products and services to accommodate the evolving investment needs of our unit holders and other potential investors. The Attorney-General and Minister for Justice, Anti-Corruption, Public Enterprises, Communications, Civil Aviation, Tourism, Industry and Trade endorsed the implementation of new Income Fund and its Investment Plans i.e. Income Plus Plan and Children Investment Plan. As a result, UTOF compiled a new Prospectus for the period 2011-2014 in accordance with the specifications outlined in RBF’s Management Investment Scheme “MIS”. The ICT platform was also enhanced to manage both the Income & Growth Fund and new Income Fund with its investment plans. This has also created a platform for UTOF’s future business expansion and development of new investment products. Finally, UTOF’s key focus in the next financial year is to provide necessary stimulus for growth predominantly in the total funds under management by growing the existing Income & Growth Fund and promoting the new Income Fund with its
ANNUAL REPORT 2011
Unit Trust of Fiji
UTOF will continuously monitor the market performance and realign its investment portfolio to provide more competitive return to the unit holders
Unit Trust of Fiji (Management) Limited
Mrs Shaenaz Voss Mr. Maciusela N Lumelume Acting Chairperson/Director Director Unit Trust of Fiji (Trustee Company) Limited two investment plans namely Income Plus Plan and Children Investment Plan. UTOF will continue to modernise its product and services and streamlining the business processes to meet the unit holders’ and shareholder’s expectation. Given the encouraging prospects of business growth and development, UTOF remains steadfast in its commitment to shareholders and unit holders in providing competitive returns and also reinforcing our position in the financial and capital market as the preferred investment institution in Fiji.
Mr. Iowane Naiveli Mr. Anil K Tikaram Director/Secretary Director
Once again we would like to acknowledge the tremendous support and guidance from our line Minister, shareholding Ministries, regulators and most importantly our loyal unit holders in making the year 2011 a successful one. Thank you and Vinaka vakalevu!
3
Unit Trust of Fiji
ANNUAL REPORT 2011
GENERAL MANAGER’S REPORT
Unit Trust of Fiji continued to improve its “tax-free” dividend payout to the unit holders since 2009 whilst restructuring the investment portfolio to achieve a positive capital appreciation in unit holders’ funds. As reflected in Table 1, the investment portfolio grew from $67.8 million to $72.9 million in the year under review which provided a capital growth of 4.34%. On the other hand, UTOF recorded a dividend yield of 5.14% after paying out a “tax-free” dividend of 5.80 cents per unit to the unit holders. The total return for the year 2011 was 9.48%, as illustrated on Table 6. In terms of asset allocation, the investment portfolio was managed in accordance with the UTOF’s Investment Policy Statement & Guideline “IPS” where specific asset allocation is based on risk/return analysis. UTOF continued to focus on maintaining a well diversified and balanced portfolio with an adequate level of liquidity. Customer centricity continues to be valued in our daily operations and we are pleased to report that we will be upgrading our ICT system in the next financial year to improve our key deliverables that includes turnaround time and effective management of our unit holders’ data. This new platform will also assist UTOF in managing both the Income & Growth Fund and new Income Fund with its investment plans. The total number of unit holders continues to increase and for 2011, it was recorded at 12,616 compared to 12,488 in the year 2010. The majority of UTOF’s unit holder base is individuals and Clubs & Associations. As part of UTOF’s business and product development, UTOF will introduce new Income Fund with its investment plans i.e. Income Plus Plan and Children Investment Plan to the investors. Most of the preparatory work has been completed and the product shall be made available in the market early next year. The Income Fund has been approved for implementation by Minister of Public Enterprises on 19th December 2011. Overall, we have noted that investor sentiment was prone to market movements and this in fact has been the focal point for our investment decisions simply to invest in low risk securities with reasonable level of return. We will continue to advocate this in the next financial year through the support and guidance provided by our Board of Directors, Trustees, Shareholders and regulator, Reserve Bank of Fiji.
4
In addition, UTOF has also achieved the following key milestones during the 2011 financial year:
§ Introduced UTOF’s new Prospectus for the period 2011-2014 in accordance with Reserve Bank of Fiji’s new Managed Investment Scheme (MIS).
§ Amended UTOF’s Business Rules, controls and processing of unit holder’s transaction.
§ Developed and implemented four (4) new policies
namely Procurement, Corporate Governance, Motor Vehicle and Training & Development.
§ Introduced script-less unit certificates and six monthly account statements.
§ Established Vodafone’s M-PAiSA Money Transfer services to directly benefit existing unit holders (at no cost to our unit holders).
§ Initiated the recovery process on non-performing investments such as Muainarewa Resorts Limited ($12m) and Royal Davui Island Resort ($0.5m – bad debts).
UTOF will continuously work towards improving its business processes, systems and develop innovative investment products for our unit holders. Finally, I would like to commend our unit holders for their trust and confidence in the last financial year and our Board of Directors, Trustees and our stakeholders for their continuous support and guidance. I would like to also extend my appreciation to UTOFML Team for their commitment and effort during the last financial year. Thank you and vinaka vakalevu!
Vilash Chand General Manager & Company Secretary
CHARTS & GRAPHS Table 1 - Total Funds Under Management
Table 4 - Unit Holder Composition - 31 December 2011
Year
Individual
Value of Funds ($)
9,145
2009
$73,589,927
Institutions/Companies
2010
$72,222,027
Provincial Councils
2010-15months
$67,863,941
Clubs and Associations
2011
$72,872,710
Tikina Trust
4 18 3,411 38
Total
12,616
($Million)
Chart i - Total Funds under Management 78
Table 5 - Dividend Distribution
76
Year
Interim
Final
Total
Tax-Free Dividend Distributed
2009
0.03
3.50
3.53
$2,118,997
2010
2.35
3.50
5.85
$3,176,444
2010 (15 mths)
2.35
4.50
6.85*
$3,722,114
2011
2.30
3.50
5.80
$3,176,444
74 72 70 68 66 64
2009
2010
2010(15)
2011
* included a special dividend of 1 cent per unit (15 months reporting)
Table 2 - Asset Allocation Value of Funds ($) Cash & Equivalents
$11,597,488
Fixed Income
$27,758,328
Public Equity
$20,257,134
Private Equity
$13,259,760
Property
-
Total
Chart iv - Dividend Distribution 10
5
$72,872,710 0
Chart ii - Asset Allocation
2009
2010
Interim Cash Fixed Income Public Equity Private Equity
Table 3 - Number of Unitholder and Units in Issue Unit in Issue
2011
Total
Table 6 - Total Return Year
Dividend Yield
Capital Growth
Total Return
2009
2.50%
-2.68%
-0.18
2010
4.30%
-4.34%
-0.04%
2010 (15 months)
5.04%
-10.44%
-5.40%
2011
5.14%
4.34%
9.48%
Year
Unit Holders
2009
12,391
55,392,358
2010
12,473
54,707,049
15
2010-15months
12,488
54,566,961
10
2011
12,616
54,899,354
Chart iii - Growth in Number of Unit Holders
Final
2010(15)
Chart v - Total Return
5 0 -5
2009
2010
2010(15)
2011
-10 -15
12,700
Yield
12,600
Growth
Total Return
12,500 12,400 12,300 12,200 12,100 12,000
2009
2010
2010(15)
2011
5
Unit Trust of Fiji
ANNUAL REPORT 2011
Sakiusa Bolaira Business Development Manager
Gyanesh Rueben Acting Financial Controller
Reema Chand Accountant
Abhisakh Kumar Investment Analyst
Keresi Tuinabunawa Team Leader Registry
Poonam Bhavsar Risk Audit and Compliance Officer
Elizabeth Waqanisau Senior Registry Officer
Unaisi Tawake Senior Registry Officer
Ronish Raj Graduate Accountant
Laniana Bale Customer Service Officer
Jacqueline Joseph Customer Service Officer
Makelesi Suraki Customer Service Officer
STAFF DIRECTORY
Vilash Chand General Manager & Company Secretary
6
Unit Trust of Fiji
W
FU ND
ANNUAL REPORT 2011
NE
together, we grow
I N T R O D U C I N G
Income Fund
Unit Trust of Fiji
will soon unveil its new
TAX-FREE* investment product FIND OUT MORE‌
*Applicable to resident investors only.
Level 2 Provident Plaza 1, Ellery Street G.P.O. Box 14451, Suva, Fiji T (679) 330 1052 F (679) 331 5376 E info@unittrust.com.fj W www.unittrustfiji.com.fj
7
Unit Trust of Fiji
ANNUAL REPORT 2011
FINANCIALS 2011
For the year ended 31 December 2011
8
FINANCIAL STATEMENTS 2011
Unit Trust of Fiji
DIRECTORS’ REPORT
YEAR ENDED 31 DECEMBER 2011
Date of formation The trust was established on 25th April 1978. Principal activity The principal activity of the Trust during the financial period 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 and the investment policy statement. Approval of financial statements The financial statements for the year ended 31 December 2011 together with the accompanying notes set out on pages 16 to 27 are approved as being in accordance with the books and records of the Unit Trust of Fiji. The statement of financial position, statement of comprehensive income, statement of changes in equity and statement of cash flows of the Unit Trust of Fiji fairly represent the state of affairs as at 31 December 2011, 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
Unit Trust of Fiji (Management) Limited Manager of the Unit Trust of Fiji
Dated at Suva this 30th day of March 2012.
9
Independent Audit Report To the Unit holders of Unit Trust of Fiji
We have audited the accompanying financial statements of Unit Trust of Fiji, which comprise the statement of financial position as at 31 December 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 16 to 27. Directors’ and Management’s Responsibility for the Financial Statements Directors of the Trustee Company and Management Company (“directors”), and management are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and for such internal control as the directors and management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including our assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of Unit Trust of Fiji as at 31 December 2011 and of its financial performance, its changes in equity and its cash flows for the year then ended in accordance with International Financial Reporting Standards. Report on Other Legal and Regulatory Requirements We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; In our opinion, the accompanying financial statements give the information required by the Unit Trust Act 1978, provisions of the Trust Deed, and the Capital Markets Decree 2009 in the manner so required.
30th March , 2012 Suva, Fiji
10
KPMG Chartered Accountants
FINANCIAL STATEMENTS 2011
Unit Trust of Fiji
STATEMENT OF COMPREHENSIVE INCOME YEAR ENDED 31 DECEMBER 2011
Period from 1 October 2009 to 31 December Notes 2011 2010 $ $ Interest Income 1,642,031 1,976,386 Dividend Income 1,406,396 1,613,450 Exchange Gains - 1,790 Gains on Disposal of Investments 32,483 107,100 Bad Debts Recovered 500,000 265,944 Income Available for Distribution
3,580,910
3,964,670
Net Equalisation
8,221
6,501
3,589,131 3,971,171
Less: Investment Expenses Manager’s Remuneration
38,977 1,046,599
215,000 1,372,879
Net Income Available for Distribution
2,503,555 2,383,292
Profit for the year attributable to unit holders
2,503,555 2,383,292
Other Comprehensive Income Transfer of fair value re-measurements to/(from) fair value reserve upon realisation of investments 526,272 (5,152,349) Fair value re-measurements Other comprehensive income for the period
4,432,305 2,459,159 4,958,577 (2,693,190)
Total Comprehensive Income
7,462,132 (309,898)
The Statement of Comprehensive Income is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 16 to 27.
11
Unit Trust of Fiji
FINANCIAL STATEMENTS 2011
STATEMENT OF FINANCIAL POSITION 31 DECEMBER 2011
Notes 2011 2010 $ $
EQUITY Unit holders’ equity 54,899,354 Class A units fully paid (2010: 54,566,961) 496,076 Class B units fully paid (2010: 496,076)
53,768,279 53,263,682
Income reserve Fair value reserve
2 2
20,271 20,271 18,027,457 13,068,880 71,816,007 66,352,833
Represented by:
ASSETS Cash at bank Other receivables Accrued income Available-for-sale financial assets Loans and receivables
3 4 5 6 7
1,754,588 2,221,025 4,000,193 54,011 414,866 261,243 67,915,971 54,818,732 - 12,000,000 74,085,618 69,355,011
LIABILITIES Payables Unclaimed distribution Declared for distribution Proposed final distribution
8 9
Net Assets
12,294 1,420,030 40,785 68,534 295,055 967,944 1,921,477 545,670 2,269,611 3,002,178 71,816,007 66,352,833
Signed in accordance with a resolution of the Trustee and the Manager.
Trustee
Manager
The Statement of Financial Position is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 16 to 27.
12
FINANCIAL STATEMENTS 2011
Unit Trust of Fiji
STATEMENT OF CHANGES IN EQUITY YEAR ENDED 31 DECEMBER 2011
Unit Reserves holders Retained Total Income Fair Value Equity Dividend Earnings $ $ $ $ $ $
Balance as at 1 October 2009 20,271 15,762,070 53,699,991 - - 69,482,332 Total comprehensive income for the period Profit for the year attributable to unitholders - - - - 2,383,292 2,383,292 Transfer of fair value re-measurements upon disposal of investments - (5,152,349) - - - (5,152,349)
Fair value re-measurements - 2,459,159 - - - 2,459,159 Total comprehensive income for the period - (2,693,190) - - 2,383,292 (309,898) Transactions with unitholders, recorded directly in equity Contributions by and distributions to unitholders Dividends to unitholders - - - 2,383,292 (2,383,292) - Expenditure on prospectus - - (31,446) - - (31,446) Creations during the year - - 4,812,506 - - 4,812,506 Equalisation on creations - - 67,413 - - 67,413 Repurchase of units - - (5,210,868) - - (5,210,868) Equalisation on repurchases - - (73,914) - - (73,914) Declared for distribution – 2009 - - - 2,306,766 - 2,306,766 1st Interim distribution paid - - - (1,278,908) - (1,278,908) 2nd Interim distribution paid - - - (1,897,536) - (1,897,536) Proposed final distribution - - - (545,670) - (545,670) Declared for distribution -2010 - - - (967,944) - (967,944) Total contributions by and distributions to unitholders - - (436,309) - (2,383,292) (2,819,601) Balance at 31 December 2010
20,271
13,068,880 53,263,682
-
-
66,352,833
Balance as at 1 January 2011 20,271 13,068,880 53,263,682 - - 66,352,833 Total comprehensive income for the period Profit for the year attributable to unitholders - - - - 2,503,555 2,503,555 Transfer of fair value re-measurements upon disposal of investments - 526,272 - - - 526,272 Fair value re-measurements - 4,432,305 - - - 4,432,305 Total comprehensive income for the period - 4,958,577 - - 2,503,555 7,462,132
13
Unit Trust of Fiji
FINANCIAL STATEMENTS 2011
STATEMENT OF CHANGES IN EQUITY (Cont’d) YEAR ENDED 31 DECEMBER 2011
Unit R eserves holders Retained Total Income Fair Value Equity Dividend Earnings $ $ $ $ $ $
Transactions with unitholders, recorded directly in equity Contributions by and distributions to unitholders Dividends to unitholders - - - 2,503,555 (2,503,555) - Expenditure on prospectus - - (5,000) - - (5,000) Creations during the year - - 3,855,801 - - 3,855,801 Equalisation on creations - - 61,005 - - 61,005 Repurchase of units - - (3,337,983) - - (3,337,983) Equalisation on repurchases - - (69,226) - - (69,226) Declared for distribution – 2010 - - - 967,944 - 967,9441 Interim distribution paid - - - (1,254,967) - (1,254,967) Proposed final distribution - - - (1,921,477) - (1,921,477) Declared for distribution -2011 - - - (295,055) - (295,055) Total contributions by and distributions to unitholders - - 504,597 - (2,503,555) (1,995,958) Balance at 31 December 2011
20,271
18,027,457 53,768,279
-
-
71,816,007
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 16 to 27.
14
FINANCIAL STATEMENTS 2011
Unit Trust of Fiji
STATEMENT OF CASH FLOWS YEAR ENDED 31 DECEMBER 2011
Period from 1 October 2009 to 31 December Notes 2011 2010 $ $ 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
3,438,050 (6,497,489) 13,250,226 (9,395,968)
4,598,955 (858,066) 10,652,349 (6,950,000)
784,819 7,443,238
Cash flows from financing activities Repurchase of units Proceeds from issue of units Distribution paid to unit holders
(3,337,984) 3,905,114 (1,828,387)
(5,523,734) 4,921,779 (5,103,771)
Net cash used in financing activities
(1,261,257)
(5,705,726)
Net (decrease)/increase in cash
(466,437) 1,737,512
Cash at the beginning of the year
2,221,025 483,513
Cash at the end of the year
3
1,754,588 2,221,025
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 16 to 27.
15
Unit Trust of Fiji
FINANCIAL STATEMENTS 2011
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2011
1
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 12 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 30 March, 2012. (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 and adoption of new and revised standards
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. (c)
New standards and interpretations not adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2011, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Trust, except for: •
IFRS 9 Financial Instruments provides guidance on recognition, classification and measurement of financial assets. It does not change the scope of IAS 39 or its guidance on when a financial asset should be recognised. The standard becomes mandatory for the Trust’s 1 January 2015 financial statements and could change the classification and measurement of financial assets.
•
IFRS 13 Fair Value Measurement provides guidance on how fair value is measured and applied when fair value is required or permitted under other IFRSs. The framework clarifies the factors to be considered is estimating fair value in accordance with IFRSs. The standard becomes mandatory for the Trust’s 1 January 2013 financial statements and could change fair value measurement.
The Trust does not plan to adopt these standards early and the impact has not been determined.
16
FINANCIAL STATEMENTS 2011
Unit Trust of Fiji
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (cont’d) YEAR ENDED 31 DECEMBER 2011
1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
(d)
Use of estimates and judgements
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 judgements 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(e) – Financial assets Note 1(f) – Revenue recognition (e)
Financial assets
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. (i)
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 or the investment has a maturity date 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 profit or loss 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 valuations take into account the following methodologies: 1. 2. 3. 4. 5. 6.
Discounted Cash Flow (DCF) Price to Earnings EV/ EBITDA (Earnings before income tax, depreciation and amortisation) Future Maintainable Earnings Net Tangible Assets Capitalisation of Dividends
17
Unit Trust of Fiji
FINANCIAL STATEMENTS 2011
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (cont’d) YEAR ENDED 31 DECEMBER 2011
1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
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 profit or loss. Impairment losses recognised in profit or loss on equity instruments are not reversed through the profit or loss 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 profit or loss. (f)
Revenue recognition
Income is brought to account on an accrual basis. 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. (g)
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. (h)
Distributions upon divestment
Clause 19 of the Trust Deed permits the Manager in its 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. (i)
Income tax
As per Section 9A of the Income Tax Act, the Trust is not subject to income tax provided the distributable income is declared for distribution to unit holders.
18
FINANCIAL STATEMENTS 2011
Unit Trust of Fiji
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (cont’d) YEAR ENDED 31 DECEMBER 2011
1
(j)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprises of cash at bank. (k)
Other receivables and accrued income
Other receivables include cash receivable from sale of units and interest income accrued and not received and dividends but not yet received on equity investments are included as accrual income. (l) 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. (m)
Foreign exchange translation
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. 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.
19
Unit Trust of Fiji
FINANCIAL STATEMENTS 2011
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (cont’d) YEAR ENDED 31 DECEMBER 2011
3
CASH AT BANK
Cash at bank comprise of the following bank accounts:
2011 2010 $ $
Distribution account Capital account Subscription account Online Subscription Account
45,549 1,708,018 980 41
71,039 2,149,577 409 -
1,754,588
2,221,025
4
OTHER RECEIVABLES
Other receivable
4,000,193
54,011
Other receivables includes a amount of $4,000,000 due from FNPF in respect of the sale of the of Muniarewa Resorts Limited (refer note 7). 5
ACCRUED INCOME
Accrued interest income Accrued dividend income
354,866 60,000
261,243 -
414,866
261,243
6
AVAILABLE - FOR - SALE FINANCIAL ASSETS
Available-for-sale investments are valued in accordance with note 1(e) of the financial statements. Available-for-sale investments included in the financial statements comprise:
20
FINANCIAL STATEMENTS 2011
Unit Trust of Fiji
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (cont’d) YEAR ENDED 31 DECEMBER 2011
6
AVAILABLE - FOR - SALE FINANCIAL ASSETS - continued
2011 2010 $ $ a) Term deposits Local 5,480,000 1,500,000 b) Listed equities Shares quoted on stock exchanges: South Pacific Stock Exchange 20,257,135 20,082,003 c) Unlisted equities Shares 14,420,508
11,879,455
d) Convertible notes Local 591,428
500,000
e) Bonds Local
27,166,900 20,857,274
Total Available –for –sale financial assets
67,915,971
54,818,732
Valuation of financial instrument The Trust measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements: Level 1: Quoted market price (unadjusted) in active market for an identical instrument. Level 2: Valuation technique based on observable inputs, either directly (i.e. as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using: quoted market prices in active market for similar instrument; quoted prices for identical of similar instrument in the market that are considered less than active; or other valuation techniques where all significant inputs are directly inputs are directly or indirectly observable from market data. Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable date and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted price for similar instruments where significant unobservable adjustments or assumption are required to reflect differences between the instruments. The table below analyses financial instruments, measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised:
Level 1 Level 2 Level 3 Total $ $ $ $
Local listed equities Unlisted equities Term deposits Local bonds Convertible notes
20,257,135 - 5,480,000 - 591,428
- 14,420,508 - 27,166,900 -
Balance as at 31 December 2011
26,328,563 41,587,408
- - - - -
20,257,135 14,420,508 5,480,000 27,166,900 591,428
-
67,915,971
During the financial period ended 31 December 2011, there were no transfers in and out of fair value hierarchy levels mentioned above. 21
Unit Trust of Fiji
FINANCIAL STATEMENTS 2011
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (cont’d) YEAR ENDED 31 DECEMBER 2011
7
LOANS AND RECEIVABLES
Loans to Muainarewa Resorts Limited
2011 2010 $ $
-
12,000,000
During the year the Trust received $8m dollars from the above investment which was reinvested mainly in high yield Bonds, Equities and IBDs, the remaining balance of $4m is included in “other receivables” (refer note 4) was received on the 15th February 2012, hence the above principal was fully settled. 8 PAYABLES Deposit Investment expenses payable Other sundry payables (due within one year)
- - 12,294
1,200,000 215,000 5,030
12,294
1,420,030
9 DISTRIBUTIONS Proposed final distribution The manager has proposed a final distribution of $1,921,477 (2010: $545,670) or 3.50 cents per unit (2010:1.00 cent per unit) for all unit holders as at 31 December 2011. Accordingly, distribution for the year ended 31 December 2011 comprises: Interim Dividend $1, 254,967 (2.30 cents per unit) Proposed Final Dividend $1,921,477 (3.50 cents per unit) 10
CONTINGENT LIABILITIES AND COMMITMENTS
The Trustee and the Manager are not aware of any contingent liabilities or commitments for the year ended 31 December 2011 (2010: Nil). 11
RELATED PARTIES
Manager The Manager of the Trust is Unit Trust of Fiji (Management) Limited. The directors of the management company during the financial period were: Shaenaz Voss
Maciusela N. Lumelume
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 $1,046,599 as Manager’s Remuneration (2010: $1,372,879).
22
FINANCIAL STATEMENTS 2011
Unit Trust of Fiji
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (cont’d) YEAR ENDED 31 DECEMBER 2011
11
RELATED PARTIES - continued
Trustee The Trustee of the Trust is Unit Trust of Fiji (Trustee Company) Ltd. The present directors of the Trustee Company are: Iowane Naiveli
Anil Kumar Tikaram
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 $74,862 VIP (2010: $78,741 VIP) for its services by the Managers. Related party balances Net amount owing by/(owing to) Managers 12
2011 2010 $ $ 6,704
54,011
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. 13
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.
23
Unit Trust of Fiji
FINANCIAL STATEMENTS 2011
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (cont’d) YEAR ENDED 31 DECEMBER 2011
13
RISK MANAGEMENT POLICIES - continued
i)
Interest rate - continued
At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was: Fixed rate instruments
2011 2010 $ $
Term deposits Convertible notes Bonds
5,480,000 591,428 27,166,900
1,500,000 591,428 20,857,274
33,238,328
22,948,702
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. ii)
Credit risk
This refers to the risk of losing investment funds due from banks and financial institutions the Trust has deposits 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 minimises 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: Cash at bank Other receivables Listed equities Unlisted equities Term deposits Convertible notes Bonds Loans and receivables
24
2011 2010 $ $
1,754,588 4,000,193 20,257,135 14,420,508 5,480,000 591,428 27,166,900 -
2,221,025 54,011 20,082,003 11,879,455 1,500,000 500,000 20,857,274 12,000,000
73,670,752
69,093,768
FINANCIAL STATEMENTS 2011
Unit Trust of Fiji
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (cont’d) YEAR ENDED 31 DECEMBER 2011
13
RISK MANAGEMENT POLICIES - continued
ii)
Credit risk - continued
The Trust monitors credit risk by sector. An analysis of concentrations of credit risk is shown below:
2011 2011 2010 2010 $ % $ %
Concentration by sector Central banks Financial Institutions Manufacturing Communication Government Insurance Retail Shipping Telecommunication Other
1,754,588 13,984,121 13,064,428 1,998,864 27,166,900 2,249,326 2,089,653 787,058 6,575,814 4,000,000
73,670,752
iii)
2% 2,221,025 19% 8,307,500 18% 11,494,994 3% 2,094,515 37% 20,857,274 3% 1,634,916 3% 1,810,000 1% 787,085 9% 7,832,448 5% 12,054,011 100% 69,093,768
3% 12% 18% 3% 30% 2% 3% 1% 11% 18% 100%
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 does not have investments nor holds funds offshore and is not exposed to foreign exchange risk arising from currency exposures. 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.
25
Unit Trust of Fiji
FINANCIAL STATEMENTS 2011
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (cont’d) YEAR ENDED 31 DECEMBER 2011
13
RISK MANAGEMENT POLICIES - continued
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 As at 31 December 2011 Maturity
Less than Between 1 Between 3 1 year & 2 years & 5 years $ $ $
Over Total 5 years $ $
Term Deposits Listed and unlisted securities Managed funds Bonds Convertible notes
- 2,076,498 3,651,309 290,596 - 6,018,403 34,677,643 - - - - 34,677,643 - - - - - - - 4,959,471 1,697,536 6,521,958 21,336,569 34,515,534 - 35,000 70,000 511,858 - 616,858
34,677,643 5,285,000 3,785,000 5,605,000 17,000,000 75,828,438
At 31 December 2010
26
Term Deposits Listed and unlisted securities Managed funds Bonds Convertible notes Loans and receivables
- 1,551,048 - - - 1,551,048 31,961,458 - - - - 31,961,458 - - - - - - - 1,953,775 4,945,825 5,209,587 13,263,350 25,372,537 - 35,000 35,000 535,000 - 605,000 - 8,000,000 4,000,000 - - 12,000,000
31,961,458 11,539,823 8,980,825 5,744,587 13,263,350 71,490,043
FINANCIAL STATEMENTS 2011
Unit Trust of Fiji
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (cont’d) YEAR ENDED 31 DECEMBER 2011
13
RISK MANAGEMENT POLICIES - continued
Operational risk vi)
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. vii)
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. viii)
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. 14
EVENTS AFTER BALANCE SHEET DATE
Unit Trust of Fiji will be introducing its new Income fund with its Investment plans [Children Investment Plan and Income Plus Plan] in the next financial year. This will provide investors with more investment options when compared against the existing Income and Growth Fund UTOF has been operating on a single fund since 25th April 1978). The Income Fund was approved by Cabinet in it’s deliberations in April 2011 and to be made effective from January 2012.
27
Unit Trust of Fiji
NOTES
28
NOTES 2011
Corporate Directory
The Fund Unit Trust of Fiji
The Trustee Unit Trust of Fiji (Trustee Company) Limited
The Manager Unit Trust of Fiji (Management) Limited
Registered Office Level 2, Provident Plaza 1 Ellery Street Suva, Fiji
Registered Office Level 2, Provident Plaza 1 Ellery Street Suva, Fiji Postal Address G P O Box 14451 Suva, Fiji Customer Care Centre Level 2, Provident Plaza 1 Ellery Street Suva, Fiji Tel: (679) 3301052, 3309698, 3314544 Fax: (679) 3315376, 3307071 Website www.unittrustfiji.com.fj Email info@unittrust.com.fj Board of Directors Mrs. Shaenaz Voss Mr Maciusela N. Lumelume General Manager & Company Secretary Mr.Vilash Chand Auditor Office of the Auditor General 8th Floor, Ratu Sukuna House MacAuthur Street Suva, Fiji
Postal Address G P O Box 14451 Suva, Fiji Board of Directors Mr. Anil K Tikaram Mr. Iowane Naiveli Auditor KPMG Level 8, Suva Central Pratt Street Suva, Fiji Solicitors Mitchell & Keil 10 Gorrie Street Suva, Fiji R Patel & Co 360 Victoria Parade Suva, Fiji Bankers Australia & New Zealand Bank ANZ House Victoria Parade Suva, Fiji Westpac Banking Corporation 1 Thompson Street Suva, Fiji
Invest Online - www.unittrustfiji.com.fj
Level 2, Provident Plaza 1, 33 Ellery Street, GPO Box 14451, Suva, Fiji T (679) 3301052, 3309698, 3314544 F (679) 3315376, 3307071 E info@unittrust.com.fj W www.unittrustfiji.com.fj