Annual Report 2010
UNIT TRUST OF FIJI
CORPORATE VISION, MISSION & VALUES
Corporate Vision “Your Equal-Opportunity Fund for Creating and Growing Wealth” Corporate Mission The mission statements are grouped around the most important stakeholders to the Trust’s business: Our Customers; Our People; and Our Stakeholders. Our Customers ;I [MPP GVIEXI GYWXSQIVW´ ZEPYI F] » TVSZMHMRK GSRWMWXIRX VIXYVRW » QEREKMRK E [IPP HMZIVWM½IH MRZIWXQIRX TSVXJSPMS [MXLMR EGGITXEFPI VMWO TEVEQIXIVW » HIZIPSTMRK YRMUYI TVSHYGXW » YWMRK QSHIVR XIGLRSPSK] XS TVSZMHI XMQIP] ERH EGGIWWMFPI WIVZMGIW ERH » I\GIIHMRK I\TIGXEXMSRW XLVSYKL I\GIPPIRX WIVZMGI Our People ;I [MPP FYMPH E QSXMZEXIH GSQQMXXIH ERH IQTS[IVIH XIEQ F] » GVIEXMRK IUYEP STTSVXYRMXMIW » TVSZMHMRK E WEJI ERH IRXLYWMEWXMG [SVOMRK IRZMVSRQIRX » GSQQYRMGEXMRK IJJIGXMZIP] » XVEMRMRK ERH IRGSYVEKMRK WIPJ HIZIPSTQIRX ERH » VI[EVHMRK SYXWXERHMRK TIVJSVQERGI Our Stakeholders We will build a stakeholders’ value by: » GSQTP]MRK [MXL VIPIZERX VIKYPEXSV] ERH SXLIV VIUYMVIQIRXW » delivering best possible returns; and » *YP½PPMRK QERHEXIH WSGMEP VIWTSRWMFMPMXMIW MQTVSZI GYWXSQIV WIVZMGI MRXVSHYGI RI[ ERH IJ½GMIRX GYWXSQIV SVMIRXIH W]WXIQW Corporate Values 8LI :EPYIW MRGPYHI » Professionalism; » Integrity; » Equality; » Loyalty; » Trust; and » 8VERWTEVIRG]
Unit Trust of Fiji 2010 Annual Report
1
Contents Pages
Manager & Trustee’s Report
2-3
General Manager’s Report
4-5
Trustee’s and Manager’s Report and Approval of Financial Statements
8
Independent Audit Report
9
Statement of Comprehensive Income
10
Statement of Financial Position
11
Statement of Changes in Equity
12
Statement of Cash Flows
13
Notes to and forming part of the Financial Statements
14 - 24
2
Unit Trust of Fiji 2010 Annual Report
Manager and Trustee’s Report "Our reward has been based on understanding our unit holders investment needs and our ability to deliver where it matters the most, your return on investment". As the Manager and Trustee of Unit Trust of Fiji, we are
has achieved the targeted dividend income from other well
pleased to present the 2010 Annual Report and audited
performing listed stocks which positively contributed to the
financial statements for the period from 1st October 2009
investment income and the dividend payout to the unit holders.
to 31st December 2010. This is 15 months reporting due to
The movement in value of listed stocks are to a great extent
change of UTOF's financial year from 30th September to 31st
beyond our control, however UTOF will continuously monitor
December.
the market performance and realign its investment portfolio to provide more competitive return to the unit holders.
Leading the Unit Trust Market With the backdrop of macroeconomic challenges in the
Investment Portfolio
financial and capital market, UTOF remained focused and the
As one of the key deliverables, we initiated moves in
team worked vigilantly and produced some good results for
recovering UTOFs non performing investment of $12 million in
the year under review. The changes / enhancement in UTOF's
Muainarewa Resorts Limited. During last financial year, UTOF
operational and investment segment continues to add value to
initiated the legal proceedings to recover the investment. In
the key deliverables such as:
the current financial year, UTOF as a 1st registered mortgage
1.
The successful implementation of key policies to safeguard
holder made an effort to dispose the 312 acres of freehold land
the interest of our shareholders and unit holders;
via international tender campaign and mortgagee sale. This
Introduction of an on-line investment system via our
resulted in UTOF entering into a Sale & Purchase Agreement
website: www.unittrustfiji.com.fj (first for the unit trust
allowing the purchaser to complete its due diligence and work
market);
towards settlement. A 10% deposit was paid and the full
Restructure/rehabilitation of non-performing investments;
settlement is expected to be completed in November, 2011.
and
We will provide further update to the unit holders once the
The imminent establishment of an entirely new fund called
settlement is effected.
2.
3. 4.
the "Income Fund" with its investment plans. Dividend to Unit holders The proposed Income Fund has been enthusiastically supported
UTOF has significantly improved its dividend payout to the unit
by key players in the market and is designed to accommodate
holders and this has been a cornerstone of our objective for
the evolving investment needs of our unit holders. Hence, we
this period, to deliver where it matters the most, your return
encourage existing and potential unit holders to take note of this
on investment.
latest development in order to create and grow your wealth. In the year 2010, UTOF paid out a total dividend of $3.7 million Total Funds under Management
which was equivalent to 6.85 cents per unit. The dividends
The total funds under management had reduced from $73.6
were paid out on 15th June 2010, 15th December 2010 and
million in 2009 to $67.9 million in the year 2010, a reduction
15th March 2011 since UTOF changed its financial year. UTOF
of 7.8%. This was attributed to a number of factors related to
will continue to benchmark its investment portfolio against the
capital market and the market performance of our investee
Investment Policy Statement to maintain the dividend payout or
companies, mainly the ones listed on South Pacific Stock
provide competitive return to the unit holders.
Exchange. The market value of some listed stocks were reduced due to trading, hence this directly affected the value of UTOF's investment portfolio. On the other hand, UTOF
Unit Trust of Fiji 2010 Annual Report
Positive Growth in the number of unit holders
3
Unit Trust of Fiji (Management) Limited
The number of unit holders continues to increase every year. In 2010, the total number of unit holders grew from 12,391 to 12,488, providing a growth of 0.8%. This is indeed rewarding
................................... ......... .................
... ................................... ...... ...............................
and indicative of your growing support and confidence. We are
Mrs. Shaenaz Voss
Mr. Mac a iusela N Lumel Maciusela Lumelume
optimistic that this trend will continue in the next financial year.
Director
Director
A look ahead UTOF is looking forward to the introduction of the Income Fund in the next financial year. This will be an historical milestone because it will create an ideal investment conduit for moms & dads, children, institutions and other groupings, thus making
Unit Trust of Fiji (Trustee Company) Limited
investment with UTOF not only affordable but will also allow UTOF to personalise the investment needs of our existing and prospective unit holders in relation to risks and benefits of
...................................
........................ ................................... ................
investing with UTOF.
Mr. Iowane Naiveli
Mr. Anil K T ik karam Tikaram
Director
Director
Overall, we will continue to be vigilant and explore avenues to ensure competitive returns on your investment. Finally, we would like to acknowledge the support of our shareholders, regulators and unit holders to assist UTOF in streamlining the business processes and gearing for future growth.
4
Unit Trust of Fiji 2010 Annual Report
General Manager’s Report Year 2010 in Review
UTOF is determined to grow its total funds under management
The last 15 months have been mostly rewarding for UTOF,
with the utilisation of some specific strategies which are outlined
where we have made remarkable development in the areas of
in the 3 year Corporate Plan.
investment, business processes & reform, dividend payout to unit holders, implementation of key policies and new products
Asset Allocation
for the beneficial of existing and potential unit holders.
The asset allocation was determined in accordance with UTOF's Investment Policy Statement ("IPS"), specifically
UTOF has also changed its financial year from 30th September
focusing on the risk/return analysis. For the year 2010, 47%
to 31st December; hence the year under review had 15 months
of the funds were invested in equity (2009 - 50%), 49% was
reporting.
in fixed income securities (2009 - 48%) and the remaining 4% was in term deposits and cash at bank (2009 - 2%). The tables
During the year, UTOF further enhanced the services to our
and the chart below illustrate the asset allocation in terms of
unit holders by introducing a platform for on-line investment,
market value of the investment portfolio.
implementing script-less unit certificate and issuing six-monthly account statements. We recognised our services to the unit holders as paramount and will continue to explore options to make your investment with UTOF more accommodating and enjoyable. Total Funds under Management The total funds under management reduced from $73.6 million in 2009 to $67.9 million in the year 2010. The decline in the
Asset Allocation
Value of Funds (F$)
Cash
$2,545,210
Fixed Income
$33,357,273
Public Equity
$20,082,003
Private Equity
$11,879,455
Property
-
Total
$67,863,941
market value of UTOF's investment portfolio was directly related to the market performance of some listed stocks. Some stocks experienced a decline in value in the fourth quarter of 2010 where UTOF's investment portfolio reduced from $72.2 million to $67.9 million. For 12 months comparison, the investment portfolio was reduced by 1.85% compared to a decline of 16.9% for the period 2008 - 2009. The table and chart below shows the total value of funds managed by UTOF over the last 3 years. Total number of Unit Holders and its Composition Total Funds Under Management Value of Funds ($) $88,529,429 $73,589,927 $72,222,027 $67,863,941
Year 2008 2009 2010 2010-15months
It is indeed rewarding to note that the total number of unit holders continued to steadily increase to 12,488 (2009: 12,391) despite the competitive market environment and decline in market value of investment portfolio. This trend was largely attributed to the improved unit holder services and increase in dividend payout from 3.53 cents per unit to 6.85 cents per unit.
Total Funds Under Management Number of Unitholder and Units in Issue $100,000,000
Year 2008 2009 2010 2010-15months
$80,000,000 $60,000,000 $40,000,000 $20,000,000 $ 2008
2009
2010
2010-15months
Unit Holders 12,186 12,391 12,473 12,488
Unit in Issue 66,494,097 55,392,358 54,707,049 54,566,961
Unit Trust of Fiji 2010 Annual Report
Unit Holder Composition - 31 December 2010 9,047 4 18 3,380 39 12,488
Individual Institutions/Companies Provincial Councils Clubs and Associations Tikina Trust Total
Total Return UTOF's significant improvement in dividend payout to unit holders contributed to the dividend yield of 5.04% compared to 2.50% in the year 2009. Total Return (%) Dividend Yield Capital Growth Year 2008 2.75 -0.30 2009 2.50 -2.68 2010 4.30 -4.34 2010 - 15months 5.04 -10.44
Growth in Number of Unit Holders 12,550 12,500 12,450 12,400 12,350 12,300 12,250 12,200 12,150 12,100 12,050 12,000
5
Total Return 2.45 -0.18 -0.04 -5.40
On the other hand, UTOF recorded a capital loss in excess of 10% due to decline in the market value of its investment portfolio which provided a total return of negative 5.40%. This was mainly attributed by market movement in the listed stocks and government guaranteed bonds. The capital appreciation 2008
2009
2010
2010-15 months
of the fund's investment portfolio is directly linked to the performance of capital and financial markets.
As illustrated above, the unit holder growth is a direct indication of their investment objective of having a regular tax - free dividend income (applicable to resident investors only) and capital appreciation in a long term horizon.
The Year Ahead We are optimistic that the next financial year will see the fruition of a number of strategies that the Fund had initiated from 2009 as outlined in its Corporate Plan for the planning period 20112013.
Dividend Distribution UTOF had three (3) dividend distributions for the period under review due to change in its financial year from 30th September to 31st December. As illustrated in the table below, UTOF experienced low income from investment in the year 2008, hence a lower payout to the unit holders. However, this result improved significantly in the year 2009 and 2010 where UTOF paid a final dividend of 3.50 cents per unit compared to 2008 final dividend payout of 1.39 cents per unit. As such, UTOF was able to meet its dividend payout objective of maintaining or paying competitive dividend to the unit holders.
UTOF's continues to regularly review its investment strategies as stipulated in the Investment Policy Statement "IPS" to create a well diversified and balanced investment portfolio in order to improve the return on investment and dividend payout to the unit holders. Conclusion I would like to take this opportunity to commend and acknowledge the growing support and confidence from our existing unit holders, Board of Directors, Trustees, Shareholders and Reserve Bank of Fiji. Also, I would like to extend my appreciation to the staff of Unit Trust of Fiji for their hard work and dedication to the company.
UTOF Dividend Distribution per Unit - Class A Units Year
Dividend Paid Interim Final 2008 2.35 1.39 2009 0.03 3.50 2010 2.35 3.50 2010 - 15months 2.35 4.50
Total 3.74 3.53 5.85 6.85
Tax-free Dividend Distribution $2,499,767 $2,118,997 $3,176,444 $3,722,114
Thank you and Vinaka Vakalevu!
. ........... .. . ....... ................................... Vila lash C la ha Vilash Chand General Manager Designate & Company Secretary
6
Unit Trust of Fiji 2010 Annual Report
UNIT TRUST OF FIJI Financial Statements For the period 1 October 2009 to 31 December 2010
Unit Trust of Fiji 2010 Annual Report
7
Financial Statements
Contents
Pages
Trustee’s and Manager’s Report and Approval of Financial Statements
8
Independent Audit Report
9
Statement of Comprehensive Income
10
Statement of Financial Position
11
Statement of Changes in Equity
12
Statement of Cash Flows
13
Notes to and forming Part of the Financial Statements
14 - 24
8
Unit Trust of Fiji 2010 Annual Report
Trustee’s and Manager’s Report Period from 1 October 2009 to 31 December 2010
Date of Information 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 period ended 31 December 2010 together with the accompanying notes set out on pages 3 to 17 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 2010, 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
Unitt Trust of Fi Fijiji (Management) Limited F Limite Manager of o the Unit Trust of Fiji
Dated at Suva this 31st day of May, 2011.
Unit Trust of Fiji 2010 Annual Report
Suva Central Renwick Road Suva
9
PO Box 32 Suva Fiji Islands
Telephone: Fax: Email:
(679) 330 1155 (679) 330 1312 suvaoffice@kpmg.com.fj
INDEPENDENT AUDITOR’S REPORT TO THE UNITHOLDERS 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 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash flow for the period then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 14 to 24. 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 the 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 2010 and of its financial performance, its changes in equity and its cash flows for the period 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.
31st May, 2011 Suva, Fiji Islands
KPMG Accountants Chartered Acc ccountan
KPMG, a Fiji Islands partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative.
10
Unit Trust of Fiji 2010 Annual Report
Statement of Comprehensive Income Period from 1 October 2009 to 31 December 2010
Notes
Period from 1 October 2009 to 31 December 2010
2009
$
$
Interest Income
1,976,386
1,804,787
Dividend Income
1,613,450
1,843,159
1,790
1,448,393
107,100
1,892,851
Exchange Gains Gains on Disposal of Investments Bad Debts Recovered Income Available for Distribution Net Equalisation
265,944
-
3,964,670
6,989,190
6,501
(314,492)
3,971,171
6,674,698
Less: 215,000
-
Manager’s Remuneration
1,372,879
1,310,935
Net Income Available for Distribution
2,383,292
5,363,763
Profit for the year attributable to unit holders
2,383,292
5,363,763
(5,152,349)
(712,456)
2,459,159
(6,194,570)
(2,693,190)
(6,907,026)
(309,898)
(1,543,263)
Investment Expenses
Other Comprehensive Income Transfer of fair value re-measurements from fair value reserve upon realisation of investments Fair value re-measurements Total other comprehensive income for the period Total Comprehensive Income
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 14 to 24.
Unit Trust of Fiji 2010 Annual Report
11
Statement of Financial Position 31 December 2010
Notes
2010
2009
$
$
EQUITY Unit holders’ equity 54,566,961 Class A units fully paid (2009: 54,896,219) 496,076 Class B units fully paid (2009: 496,076)
53,263,682
53,699,991
Income reserve
2
20,271
20,271
Fair value reserve
2
13,068,880
15,762,070
66,352,833
69,482,332
Represented by: ASSETS Cash at bank
3
2,221,025
483,513
Other receivables
4
54,011
23,495
Accrued income
5
261,243
884,395
Available-for-sale financial assets
6
54,818,732
61,228,973
Loans and receivables
7
12,000,000
12,000,000
69,355,011
74,620,376
1,420,030
835,417
LIABILITIES Payables
8
Unclaimed distribution Declared for distribution Proposed final distribution
9
Net Assets
68,534
74,493
967,944
2,306,766
545,670
1,921,368
3,002,178
5,138,044
66,352,833
69,482,332
Signed in accordance with a resolution of the Trustee and the Manager.
Trustee T t
Manager Manag ger e
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 14 to 24.
15,762,070 15,762,070 (5,152,349) 2,459,159 (2,693,190)
13,068,880
20,271 20,271 -
20,271
Balance at 30 September 2009
Balance as at 1 October 2009 Total comprehensive income for the period Profit for the year attributable to unitholders Transfer of fair value re-measurements upon disposal of investments Fair value re-measurements Total comprehensive income for the period Transactions with unitholders, recorded directly in equity Contributions by distributions to unitholders Dividends to unitholders Expenditure on prospectus Creations during the year Equalisation on creations Repurchase of units Equalisation on repurchases Declared for distribution - 2009 1st Interim distribution paid 2nd Interim distribution paid Proposed final distribution Declared for distribution Total contributions by and distributions to unitholders 53,263,682
(31,446) 4,812,506 67,403 (5,210,868) (73,914) (436,309)
-
53,699,991
53,699,991
4,973,501 (80,261) (19,544,652) 394,753 938,000 (13,318,659)
-
Unit holders Equity $ 67,018,650
-
2,383,292 2,306,766 (1,278,908) (1,897,536) (545,670) (967,944) -
-
-
-
5,363,763 (938,000) (197,629) (1,921,368) (2,306,766) -
-
$ -
Dividend
-
(2,383,292) (2,383,292)
2,383,292 2,383,292
-
-
(5,363,763) (5,363,763)
5,363,763 5,363,763
Retained Earnings $ -
The Statement of Changes in Equity is to be read in conjuction with the notes to and forming part of the financial statements set out on pages 14 - 24.
Balance at 31 December 2010
(712,456) (6,194,570) (6,907,026)
Reserves Income Fair Value $ $ 20,271 22,669,096 -
Balance at 30 September 2008 Total comprehensive income for the period Profit for the year attributable to unitholders Transfers of fair value re-measurements upon disposal of investments Fair value re-measurements Total comprehensive income for the period Transactions with unitholders, recorded directly in equity Contributions by and distributions to unitholders Dividends to unitholders Creations during the year Equalisation on creations Repurchase of units Equalisation on repurchases Declared for distribution - 2008 Interim distribution paid Proposed final distribution Declared for distribution Total contributions by and distributions to unitholders
Period from 1 October 2009 to 31 December 2010
Statement of Changes in Equity
66,352,833
(31,446) 4,812,506 67,413 (5,210,868) (73,914) 2,306,766 (1,278,908) (1,897,536) (545,670) (967,944) (3,034,601)
2,383,292 (5,152,349) 2,459,159 (309,898)
69,482,332
69,482,332
4,973,501 (80,261) (19,544,652) 394,753 (197,629) (1,921,368) (2,306,766) (18,682,422
5,363,763 (712,456) (6,194,570) (1,543,263)
$ 89,708,017
Total
12 Unit Trust of Fiji 2010 Annual Report
Unit Trust of Fiji 2010 Annual Report
13
Statement of Cash Flow Period from 1 October 2009 to 31 December 2010
Note
Period from 1 October 2009 to 31 December 2010
2009
$
$
Cash flows from operating activities Cash receipts in course of operations
4,598,955
6,670,981
Cash payments in course of operations
(858,066)
(1,785,694)
Proceeds from sale of financial assets
10,652,349
8,836,152
Purchase of financial assets
(6,950,000)
(2,200,000)
7,443,238
11,521,439
(5,523,734)
(19,701,849)
Net cash from operating activities Cash flows from financing activities Repurchase of units Proceeds from issue of units
4,921,779
6,415,350
Distribution paid to unit holders
(5,103,771)
(2,663,209)
Net cash used in financing activities
(5,705,726)
(15,949,708)
1,737,512
(4,428,269)
483,513
4,911,782
2,221,025
483,513
Net increase/(decrease) 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 14 to 24.
14
Unit Trust of Fiji 2010 Annual Report
Notes to and forming part of the Financial Statements Period from 1 October 2009 to 31 December 2010
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 31st May 2011. (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. Commencing from 1 October 2009, the Trust has changed its accounting policies in the following area: (i)
Presentation of financial statements
The Trust applies revised IAS 1 Presentation of Financial Statements (2007), which became effective as at 1 January 2009. As a result, the Trust presents in the statement of changes in equity all owner changes in equity whereas all nonowner changes in equity are presented in the statement of comprehensive income. (ii)
Fair value hierarchy
The Trust applies amendments to IFRS 7: Financial Instruments: Disclosures, which became effective as at 1 January 2009. As a result, the Trust classifies fair value measurements into a fair value hierarchy by reference to the observability and significance of the inputs used in measuring fair value. Comparative information has been re-presented so that it is also in conformity with the revised standard. It does not change the recognition, measurement or disclosure of specific transactions and other events required by other IFRSs. Except for the above, the accounting policies have been consistently applied during the year. (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 2010, 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, which becomes mandatory for the Trust’s 2013 financial statements and could change the classification and measurement of financial assets. The Trust does not plan to adopt this standard early and the extent of the impact has not been determined. (d) 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.
Unit Trust of Fiji 2010 Annual Report
15
Notes to and forming part of the Financial Statements - continued Period from 1 October 2009 to 31 December 2010
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued (d) Use of estimates and judgments - continued 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 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 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 profit or loss. Impairment losses recognised in the profit or loss on equity instruments are not reversed through the profit or loss when the impairment condition reverses.
16
Unit Trust of Fiji 2010 Annual Report
Notes to and forming part of the Financial Statements - continued Period from 1 October 2009 to 31 December 2010
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued (e) Financial assets - continued (i) 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 generally brought to account on an accrual basis. However effective from September 2008 interest income including penalty interest charged on loans to Mauainarewa 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.
(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 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. (i)
Income tax The Trust is not subject to income tax provided the distributable income is declared for distribution to unit holders.
(j)
Cash and cash equivalents For the purpose of the cash flow statement, 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 bank charges receivable from the “Management company”. Interest receivable and dividend declared but unpaid on shares owned are included under accrued 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.
Unit Trust of Fiji 2010 Annual Report
17
Notes to and forming part of the Financial Statements - continued Period from 1 October 2009 to 31 December 2010
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued (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. (n) Change in balance date The balance date of the Trust has changed from 30 September to 31 December due to a directive from the Ministry of Public Enterprise for alignment to the government financial year. As a result of said change, the financial statements are not entirely comparable.
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 Subscription account
4.
2009
$
$
-
116,577
71,039
78,455
2,149,577
288,481
409
-
2,221,025
483,513
54,011
23,495
261,243
494,535
-
389,860
261,243
884,395
OTHER RECEIVABLES Receivable from management company
5.
2010
ACCRUED INCOME Accrued interest income Accrued dividend income
18
Unit Trust of Fiji 2010 Annual Report
Notes to and forming part of the Financial Statements - continued Period from 1 October 2009 to 31 December 2010
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:
a)
2010 $
2009 $
1,500,000
1,050,000
20,082,003
26,399,188
11,879,455
10,567,947
500,000
-
Local
20,857,274
23,211,838
Total Available –for –sale financial assets
54,818,732
61,228,973
Term deposits Local
b)
Listed equities Shares quoted on stock exchanges: South Pacific Stock Exchange
c)
Unlisted equities Shares
d)
Convertible notes Local
e)
Bonds
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.
Unit Trust of Fiji 2010 Annual Report
19
Notes to and forming part of the Financial Statements - continued Period from 1 October 2009 to 31 December 2010
6.
AVAILABLE - FOR - SALE FINANCIAL ASSETS – continued Valuation of financial instrument - continue 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 categorized: Level 1 $
Level 2 $
Level 3 $
Total $
Local listed equities Unlisted equities Term deposits Local bonds Convertible notes
20,082,003 1,500,000 500,000
11,879,455 20,857,274 -
-
20,082,003 11,879,455 1,500,000 20,857,274 500,000
Balance as at 31 December 2010
22,082,003
32,736,729
-
54,818,732
During the financial period ended 31 December 2010, there were no transfers in and out of fair value hierarchy levels mentioned above. 7.
LOANS AND RECEIVABLES
Loans to Muainarewa Resorts Limited
Note
2010 $
2009 $
14
12,000,000
12,000,000
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. 8.
PAYABLES Managers’ remuneration payable Repurchase of units payable Deposit Investment expense payable Other sundry payables
9.
14
1,200,000 215,000 5,030
514,665 312,867 7,885
1,420,030
835,417
DISTRIBUTIONS Proposed final distribution The manager has proposed a final distribution of $545,670 (2009: $1,921,368) or 1 cent (2009:3.50cents per unit for all unit holders as at 31 December 2010). 1st Interim Dividend $1,278,908 (2.35 cents per unit) 2nd Interim Dividend $1,897,536 (3.50 cents per unit) Proposed Final Dividend $545,670 (1.00 cent per unit)
20
Unit Trust of Fiji 2010 Annual Report
Notes to and forming part of the Financial Statements - continued Period from 1 October 2009 to 31 December 2010
10. CONTINGENT LIABILITIES AND COMMITMENTS The Trustee and the Manager are not aware of any contingent liabilities or commitments for the period ended 31 December 2010 (2009: 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: Aisake Taito Marika Luveniyali Shaenaz Voss Maciusela N. Lumelume
Retired 23/04/10 Retired 23/04/10 Reappointed 23/04/10 Appointed 12/05/10
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 $1,372,879 as Manager’s Remuneration (2009: $1,310,935). 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 $78,741 VIP (2009: $97,420 VIP) for its services by the Managers. Related party balances
Net amount owing by/(owing to) Managers 12. 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.
2010 $
2009 $
54,011
(604,141)
Unit Trust of Fiji 2010 Annual Report
21
Notes to and forming part of the Financial Statements - continued Period from 1 October 2009 to 31 December 2010
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. At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was: Fixed rate instruments Term deposits Bonds
2010 $ 1,500,000 20,857,274
2009 $ 1,050,000 23,211,838
22,357,274
24,261,838
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 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 2010 $ $ 483,513 2,221,025 Cash at bank 23,495 54,011 Other receivables 26,399,188 20,082,003 Listed equities 10,567,947 11,879,455 Unlisted equities 1,050,000 1,500,000 Term deposits 500,000 Convertible notes 23,211,838 20,857,274 Bonds 12,000,000 12,000,000 Loans and receivables 69,093,768
73,735,981
22
Unit Trust of Fiji 2010 Annual Report
Notes to and forming part of the Financial Statements - continued Period from 1 October 2009 to 31 December 2010
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:
Concentration by sector Central banks Financial Institutions Government Others
2010 $
2010 %
2009 $
2009 %
2,221,025 2,000,000 20,857,274 44,015,469 69,093,768
3% 3% 30% 64% 100%
483,513 1,050,000 23,211,838 48,990,630 73,735,981
1% 2% 31% 66% 100%
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 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. 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.
Unit Trust of Fiji 2010 Annual Report
23
Notes to and forming part of the Financial Statements - continued Period from 1 October 2009 to 31 December 2010
13. RISK MANAGEMENT POLICIES - continued Liquidity risk - continued 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.
At 31 December 2010 Term Deposits Listed and unlisted securities Managed funds Bonds Convertible notes Loans and receivables At 30 September 2009 Term Deposits Listed and unlisted securities Managed funds Bonds Loans and receivables
No specific
Less than 1 year
Between 3 and 5 years $ 5,209,587 535,000 5,744,587
Over 5 years
Total
$ 1,551,048 1,953,775 35,000 8,000,000 11,539,823
Between 1 and 2 years $ 4,945,825 35,000 4,000,000 8,980,825
Maturity 31,961,458 31,961,458
$ 13,263,350 13,263,350
$ 1,551,048 31,961,458 25,372,537 605,000 12,000,000 71,490,043
39,748,485 12,000,000 51,748,485
1,067,437 4,743,693 5,811,130
5,028,770 5,028,770
3,757,694 3,757,694
11,314,260 11,314,260
1,067,437 39,748,485 24,844,417 12,000,000 77,660,339
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.
24
Unit Trust of Fiji 2010 Annual Report
Notes to and forming part of the Financial Statements - continued Period from 1 October 2009 to 31 December 2010
14. EVENTS AFTER BALANCE SHEET DATE Further to Sale & Purchase Agreement dated 29th November 2010, a Deed of Variation was executed subsequent to balance date whereby the secured property against the loan to Muainarewa Resort Limited was purchased by FNPF under the “mortgagee sale� subject to conditions precedent. The consideration sum is $12,000,000 and UTOF agreed to pay a sum of $215,000 (VIP) to FNPF for certain rehabilitation costs. Except for the above, there has not arisen in the interval between the end of the financial period and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Trustees and Managers, to affect significantly the operations of the Trust, the results of those operations, the changes in net assets of those operations, or the state of affairs of the Trust in future financial years.
CORPORATE DIRECTORY
The Fund Unit Trust of Fiji
The Trustee Unit Trust of Fiji (Trustee Company) Limited
The Manager Unit Trust of Fiji (Management) Limited
6IKMWXIVIH 3J½GI Level 2, Provident Plaza 1 Ellery Street Suva, Fiji
6IKMWXIVIH 3J½GI Level 2, Provident Plaza 1 Ellery Street Suva, Fiji Postal Address G P O Box 14451 Suva, Fiji Customer Care Centre Level 2, Provident Plaza 1 Ellery Street Suva, Fiji Tel: (679) 3301052, 3309698, 3314544 Fax: (679) 3315376, 3307071 Website LXXT [[[ YRMXXVYWX½NM GSQ JN Email MRJS$YRMXXVYWX GSQ JN &SEVH SJ (MVIGXSVW Mrs. Shaenaz Voss 1V 1EGMYWIPE 2 0YQIPYQI +IRIVEP 1EREKIV 'SQTER] 7IGVIXEV] Mr.Vilash Chand Auditor 3J½GI SJ XLI %YHMXSV +IRIVEP 8th Floor, Ratu Sukuna House 1EG%VXLYV 7XVIIX Suva, Fiji
Postal Address G P O Box 14451 Suva, Fiji &SEVH SJ (MVIGXSVW Mr. Iowane Naiveli Mr. Anil K Tikaram Auditor KPMG Level 8, Suva Central Pratt Street Suva, Fiji 7SPMGMXSVW 1MXGLIPP /IMP 10 Gorrie Street Suva, Fiji 6 4EXIP 'S :MGXSVME 4EVEHI Suva, Fiji Bankers %YWXVEPME 2I[ >IEPERH &ERO %2> ,SYWI :MGXSVME 4EVEHI Suva, Fiji ;IWXTEG &EROMRK 'SVTSVEXMSR 1 Thomson Street Suva, Fiji
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 [[[ YRMXXVYWX½NM GSQ JN