National Insurance Board of Trinidad and Tobago Annual Report 2016 - 2017

www.nibtt.net

CONTENTS

National Insurance Mandate/Vision/Mission

2

Core Values

3

Corporate Information/Service Centres

4

National Insurance Benefits

5

Chairman’s Review

6

Corporate Governance Structure

9

Executive and Senior Management Structure

13

Executive Director’s Report

16

Financial Statements

29

Year in Review

66

1

NATIONAL INSURANCE MANDATE The National Insurance Act (as amended), Chapter 32:01 of 1971 mandates that the Board “...operate and manage a system of National Insurance.”

VISION “To efficiently deliver social protection through a sustainable and innovative National Insurance System.”

MISSION STATEMENT “To maximise contributions and pay relevant benefits in a timely manner through good governance and quality customer service from an empowered staff, cutting-edge technology, and prudent fund management.”

2

CORE VALUES “In serving our valued customers we are guided by our Core Values which identify what is truly important to us.”

TRANSPARENCY We are honest, open, clear, and timely in communicating and conducting our business affairs with each other, our customers, and business associates.

EMPLOYEE DEVELOPMENT & RECOGNITION We support and value our employees whose commitment and drive demonstrate a loyalty to the NIBTT’s traditions of yesterday and the vision of tomorrow.

CUSTOMER SATISFACTION We recognise that meeting and exceeding the expectations of our customers must guide our decision-making and behaviour.

INTEGRITY We are committed to high standard of personal and professional integrity and ethical behaviour.

LOYALTY We are committed to protecting the assets and ensuring the best interests of NIBTT, and will avoid doing anything to tarnish our reputation and corporate image.

SERVICE DELIVERY We are committed to timely, high quality service.

MUTUAL RESPECT We value and respect each other as persons, professionals, and team members, subscribing to the same mission, vision and values.

TRUSTWORTHINESS We will be a company that is trusted by our stakeholders.

FAIRNESS We strive to be fair and equitable in our treatment of all customers.

TEAMWORK We promote collaborative development as we work, learn and strive for excellence together.

3

CORPORATE INFORMATION

SERVICE CENTRES

HEAD OFFICE

Arima Collection Centre Shops of Arima

14-19 Queen’s Park East, Port of Spain Trinidad and Tobago, W.I. Tel: (868) 625-2171-8 NIBTT Hotline: 625-4NIS (4647) Email: customercare@nibtt.net Website: www.nibtt.net BANKERS First Citizens 9 Queen’s Park East Port of Spain Trinidad and Tobago, W.I. Republic Bank Limited 9-17 Park Street Port of Spain Trinidad and Tobago, W.I. AUDITORS PricewaterhouseCoopers 6A Victoria Avenue, Port of Spain Trinidad and Tobago, W.I.

Arima Cor. Woodford and Sorzano Streets Barataria 35-36 Fifth Street Chaguanas Market and Ramsaran Streets Couva 2 Captain Watson Street Exchange Lots Point Fortin 7A Techier Main Road Princes Town Marlson’s Building Charlotte & High Streets Rio Claro 2461 Naparima/Mayaro Road St. James Collection Centre Western Main Road Sangre Grande Henderson Street Siparia Grell Street South Regional 27 Harris Promenade, San Fernando Tobago Rapid Response Building Mount Marie Road, Scarborough Tunapuna Eastern Main Road Woodbrook 4 Luis Street

4

NATIONAL INSURANCE BENEFITS There are 23 benefits in seven categories:

SICKNESS The Sickness Benefit is paid to an insured person who is employed but unable to work and suffers loss of pay as a result of illness not related to an accident on the job. The period of illness must be certified by a registered medical practitioner and must be for four or more days. This benefit is intended to provide financial assistance during certified periods of illness. The benefit you receive, however, may not cover full loss of earnings.

MATERNITY The Maternity Benefit is paid to a pregnant insured woman using her National Insurance contributions. A special maternity grant, however, is paid to a pregnant woman using the father’s contributions when the mother does not have sufficient contributions for the benefit. The pregnancy must have lasted at least 26 weeks or have resulted in a live birth. Both the maternity benefit and the special maternity grant are paid as a lump sum. The maternity benefit consists of an allowance for up to 14 weeks and a grant per child, while the special maternity grant is a single payment per child.

RETIREMENT The Retirement Benefit is paid to an insured person who has made contributions to the NIBTT and has attained retirement age. This benefit is intended to supplement one’s retirement income and can either be in the form of a pension, payable for life, or a lump sum/one-time grant payment. The number of contributions made over an insured’s working life determines whether a pension or grant is paid. A pension is paid where the insured has a minimum of 750 contributions and a grant where the insured has contributed less than 750 contributions. The minimum pension or grant payable is $3,000.00.

FUNERAL GRANT The Funeral Grant is a lump sum, one-time payment that is made to the person who met the costs of the funeral expenses for a deceased insured. It is intended to ease the funeral-related costs for a deceased insured and does not include the cost of items such as food, flowers, rental of chairs, etc.

SURVIVORS INVALIDITY The Invalidity Benefit is paid to an insured person who is medically certified as unable to work for a year or more because of a mental or bodily disease or illness, not caused by a jobrelated injury.

EMPLOYMENT INJURY The Employment Injury Benefit is paid to an insured person who is injured in the course of and as a result of his/her employment and comprises a range of individual benefits including Injury Benefit, Disablement Benefit, Death Benefit and Medical Expenses. These benefits are intended to provide financial assistance for various contingencies in the case of a job-related injury or accident. An insured person does not have to experience any loss of earnings in order to access these benefits.

The Survivors’ Benefit is paid to certain dependents of a deceased insured person who has died other than by a job-related accident.

If the insured person died as a result of a jobrelated accident or injury, an application for Death Benefit can be made. The benefit is payable to a widow, widower, child, stepchild, disabled child, orphan or dependent parent of a deceased insured person who has made a least 50 contributions. Survivor’s Benefit is intended to provide financial assistance in the event of the death of a breadwinner.

5

Michael Toney

CHAIRMAN’S REVIEW FINANCIAL YEAR ENDED JUNE 30, 2017

I

n the 2016 Annual Report, I communicated that the National Insurance Board of Trinidad and Tobago (NIBTT) was focused on two integral aspects of the National Insurance System (NIS), Sustainability and Service. I am pleased to report that in the past year, we have continued in our efforts to seek Fund sustainability and progressed our plan to transform service delivery at the NIBTT.

With the Board of Directors, Executive Management and other resources focused on rapid implementation of these strategic objectives over the implementation period 2017 to 2019, it is anticipated that the longevity of the Fund will be enhanced, customers will experience improved service from us and we will emerge as a more authoritative partner in the national policy toward socioeconomic development.

STRATEGY – VISION 2019

For the financial year ended June 30, 2017, Management was tasked to meet ‘stretch’ goals for Year 1 of the Strategic Plan. Based on the Year 1 corporate results, the outlook for achieving our Strategic Objectives remains optimistic.

Vision 2019 focuses squarely on remaining sustainable and delivering on the mandate of the NIBTT through excellence in service to our stakeholders, with the following Strategic Objectives, which relate either to Sustainability or Service: 1. Maximise contribution income; 2. Maximise investment income; 3. Align contributions and benefits to enhance the long-term actuarial balance of the National Insurance system; 4. Optimise the earnings potential of the

NIBTT’s subsidiaries; 5. Optimise the operating cost of the National

Insurance Fund; and 6. Enhance service delivery to improve

customer service.

6

ENSURING SUSTAINABILITY The general nature of the National Insurance System is that contributors pay money to the NIBTT with the expectation that beneficiaries will receive a benefit well into the future. As such, the actuarial alignment of the System to ensure fund sustainability is integral.

As the findings of the ninth Actuarial Review (AR) illustrate, many factors impact the sustainability Fund. These include, among other things, the contribution rate, the minimum pension amount, population demographics and the retirement age.

As predicted by the ninth and previous ARs, due to the current mix of these and other factors in the context of our NIS, Benefit Expenditure in recent years has almost always been higher than Contribution Income. This financial year was no different.

BENEFIT EXPENDITURE, CONTRIBUTION INCOME, INVESTMENT INCOME $4,748,499

2016/2017

$4,608,236 $935,940 $4,513,239 $4,251,701

2015/2016 $1,007,273

$4,215,552 $4,261,469

2014/2015 $774,598

$3,915,782 $3,624,030

2013/2014 $699,283

0.0

1.0

2.0

3.0

4.0

5.0

Millions Benefit Expenditure Contribution Income Investment Income (Realised)

This gap between Income and Expenses has been funded from Investment Income, which is only a short-term funding solution. The disparity between contribution collection and benefit expenditure must be addressed.

Of utmost importance to the Board and Management during the 2016-2017 financial year was garnering the required support from our stakeholders (Government, Business and Labour) to implement certain important recommendations arising out of the findings of the 9th AR.

The NIBTT engaged in consultations with stakeholder interest groups and continued to lobby for the necessary changes to the system.

While some issues may be easily addressed, other measures (such as reviewing the retirement age) are more complicated, with long- and far-ranging effects. Nonetheless, the NIBTT will remain steadfast in the pursuit of the necessary changes that will ensure the viability of the NI System for the benefit of the public it serves.

SERVICE EXCLLENCE Select metrics related to service to our customers

June 2017

June 2016

Number of Benefit Recipients Number of Long-Term Beneficiaries Claims Received Claims Determined Employers Surveyed Number of Employers Registered for Online Submission of Contribution Data and Contribution Payments

191,840 160,420 45,550 46,496 4,512 756

186,839 153,823 46,687 48,796 4,589 721

7

Two critical customer service initiatives which span the life of the NIBTT’s strategic plan period are: (a) ensuring the completeness of customer contribution records; and (b) design/implement an end-to-end ICT system.

These initiatives are expected to transform the operations of the NIBTT and the Board continues to closely monitor their progress.

Initiatives successfully completed during the 2016-2017 financial year in our pursuit of service excellence include: (a) the mapping/redesigning of our processes; and (b) the design/implementation of a Business

Continuity Management Framework.

CLOSING REMARKS The Board, Management and Staff are committed to the vision of the NIBTT and firmly believe that with the support of all key stakeholders, we will efficiently deliver social protection through a sustainable and innovative NIS. I humbly thank my fellow Directors for their commendable service to this esteemed institution and commend the tireless efforts of Management and Staff over this 2016-2017 financial year.

Michael Toney Chairman

8

Corporate Governance Structure The NIBTT is governed by a tripartite Board with its investments managed by the Investment Committee.

Board of Directors The Board of Directors is a tripartite body with equal representation by Government, Business and Labour, an independent Chairman and the Executive Director, who is an ex-officio member. Directors are appointed for a period of not more than two years but may be reappointed. The NIBTT reports to Parliament through the Ministry of Finance.

Michael Toney Chairman

Ruben McSween Director/Deputy Chairman (Business)

Walton Hilton-Clarke Director – Business

Keston Nancoo Director – Business

Marilyn Gordon Director – Government

Selby Leslie Director – Government

Pradeep Subrian Director – Government

Ermine De Bique-Meade Director – Labour

John Boisselle Director – Labour

Ann Chan Chow Director – Labour

Niala Persad-Poliah Executive Director

David Millette Corporate Secretary

9

Committees of the Board The Board is responsible for the development of an appropriate framework to govern the operations of the NIBTT and do so through a number of measures including the establishment of Board Committees.

These committees guide the development of specific functions and make recommendations to the Board.

Investment Committee

Michael Toney Chairman

Sylvan Wilson Non Director – Labour

Brendon Nelson Executive Manager, Finance & Accounting (Ex Officio Member)

10

Ruben McSween Director – Business

Marilyn Gordon Director – Government

Peter Clarke Sharaz Ahamad Non Director – Business Non Director – Government

Niala Persad-Poliah Executive Director

Ermine De Bique-Meade Director – Labour

Navin Rajkumar Executive Manager, Investments (Standing Invitation)

Colin Santana Executive Manager, Risks (Standing Invitation)

Audit, Risk & Compliance Committee

Nominations Committee

Member – Labour

Ann Chan Chow

Chairman

Michael Toney

Member – Business

Walton Hilton-Clarke

Member – Labour

Ann Chan Chow

Member – Government

Ex Officio Members:

Selby Leslie

Member – Business

Walton Hilton-Clarke

Executive Director

Niala Persad-Poliah

Member – Government Selby Leslie

Ex Officio Members:

Executive Manager, Finance & Accounting

Brendon Nelson

Executive Director

Niala Persad-Poliah

Executive Manager, Risk Colin Santana Internal Auditor

Davendra Maharaj

Consultant

Deryck Rutherford

Auditors PwC

Riverwoods Management Committee Member – Labour

Ermine De Bique- Meade

Member – Business

Walton Hilton-Clarke

Member – Government Selby Leslie

Ex Officio Members:

Tenders Committee Member – Labour

Clyde Elder

Member – Business

Ruben McSween

Member – Government

Ex Officio Members:

Pradeep Subrian

Executive Director

Niala Persad-Poliah

Executive Manager, Legal Services

Note: Standing Invitations

Sarah Baboolal

Manager, Procurement

Rishi Ramrattan

Human Resources Committee Member – Labour

John Boiselle

Member – Business

Keston Nancoo

Member – Government

Ex Officio Members:

Pradeep Subrian

Executive Director

Niala Persad-Poliah

Executive Manager, Corporate Services

Sherma Gidaree

Executive Director

Niala Persad-Poliah

Executive Manager, Investments

Navin Rajkumar

Executive Manager, Legal Services

Sarah Baboolal

Actuarial Review Committee Member – Labour

Sylvan Wilson

Member – Business

Keston Nancoo

Member – Government Selby Leslie

Ex Officio Members: Executive Director

Niala Persad-Poliah

Executive Manager, Policy, Planning and Actuarial Services

Feyaad Khan

11

Financial Year The financial year of the NIBTT is the 12-month period ending June 30.

Related Bodies The National Insurance Appeals Tribunal The National Insurance Appeals Tribunal (NIAT) is an independent body comprising 11 members appointed by the President of the Republic of Trinidad and Tobago in accordance with Section 60 of the National Insurance Act. This body functions as a tribunal of fact for persons aggrieved by decisions of the Board with respect to their claims.

Subsidiaries of the NIBTT National Insurance Property Development Company Limited (NIPDEC) NIPDEC is a fully owned subsidiary of the NIBTT. Its mission is to develop, manage and sell property, goods and services in partnership with the NIBTT and other organisations in Trinidad and Tobago, utilising a project management approach to bring value to their shareholders and stakeholders.

100%

Home Mortgage Bank (HMB) HMB is a subsidiary of the NIBTT. Its purpose is to develop and maintain a mortgage market in Trinidad and Tobago, contribute to the mobilisation of long-term savings to support the development of a system of real property and housing finance, provide leadership in the home finance industry and promote growth of the capital market.

100%

Trinidad & Tobago Mortgage Finance Company Limited (TTMF) TTMF is a subsidiary of the NIBTT. Its mission is to provide mortgage financing for the purchase of residential properties.

12

51%

Executive and Senior Management Structure The Executive Director is the Chief Executive Officer of the NIBTT and is responsible for carrying out the decisions of the Board of Directors. The Executive Director leads a team of executive managers who oversee the operations of the NIBTT.

Operational Structure The operations of the NIBTT are divided into eight Business Units as follows: • Investments • Finance & Accounting • Insurance Operations • Planning, Policy & Actuarial Services • Human Resources • Legal Services • Technology • Risk

Executive Management Team

Niala Persad-Poliah Executive Director

Navin Rajkumar Executive Manager, Investments

Brendon Nelson Executive Manager, Finance & Accounting

Feyaad Khan Executive Manager, Policy Planning and Actuarial Services

Sherma Gidaree Executive Manager, Human Resources

Greta Stephen-Henry Executive Manager, Insurance Operations

Ramlakhan Seecharan Executive Manager, Technology

Colin Santana Executive Manager, Risk

Sarah Baboolal Executive Manager, Legal Services

13

There are four departments that report to the Executive Director: • Corporate Projects • Corporate Secretariat • Corporate Communications • Facilities, Services and Security

Senior Management Team Office of the Executive Director David Millette Corporate Secretary Lauren Sandiford Assistant Corporate Secretary Debra Modeste Executive

Assistant (Ag) Clint Connelly Corporate Project Manager Theresa Taitt Manager, Property &

Support Services Jennilynn Howe-Dopwell Manager, Corporate Communications

Policy, Planning & Actuarial Services Business Unit Bernard Smith Manager, Research & Development Andy Edwards Actuarial Associate

Insurance Operations Business Unit Emrice Henry Manager, Insurance Operations Patricia George-Lezama Area Operations

Manager – Area I Sherwin Williams Area Operations

Manager – Area II Hilarie Hoyte Area Operations

Manager – Area III Ryan Isava Manager, Customer Relations Patricia Charles Manager, Contribution Income

Investments Viveka Goolcharan Manager, Investments

(Fixed Income) Christopher Clarke Manager, Investment (Equities) Amrit Seunarine Senior Investment Analyst Cheryl Moreno-Archer Manager, Mortgages (Ag)

Corporate Services Business Unit Michael Gopaul Manager,

Organisational Development Jules Moore Manager, Industrial/

Employee Relations

Legal Services Business Unit Finance and Accounting Business Unit

14

Karen Davis-Holder Financial Accountant Jennifer Creese Manager, Budgets & Controls Annabelle Holder Senior Accounting Analyst

Ashook Balroop Manager, Claims Investigation Rishi Ramrattan Manager, Procurement Roger St. Rose Legal Officer Valini Dhanraj Chadee Legal Officer Nera Narine-Ramdeen Legal Officer Edmund Christo Legal Officer

Risk Business Unit

Technology Business Unit

Jacqui Castillo Enterprise Risk Manager Donna Lawrence Manager, Compliance Moses Mohammed Manager, Business

Continuity, Risk (Ag)

Curtis Richards Manager, IT Infrastructure Kervyn Greaves Database Administrator Mikhail Noel Manager, IT Development Adrian Fortune Manager, IT Security

“

...despite the current macroeconomic challenges in Trinidad and Tobago, we continued “to efficiently deliver social protection through a sustainable and innovative National Insurance System.

Niala Persad-Poliah Executive Director

15

Niala Persad-Poliah

EXECUTIVE DIRECTOR’S REPORT FOR THE FINANCIAL YEAR JULY 01, 2016 TO JUNE 30, 2017

T

his financial year marked the completion of the first year of our Corporate Strategic Plan, Vision 2019.

Our focus continues to be enhancing customer service, improving the financial sustainability of the National Insurance System (NIS) and implementing strategies that improve processes, engage employees and harness innovative technology. Our achievements during this financial period would not have been possible without the requisite people, culture and structural framework which are embodied by the theme of Vision 2019 – ‘From Strategy to Action – Working Together’.

After 45 years of NIBTT’s existence, inherent pride in our organisation remains resolute and despite the current macroeconomic challenges in Trinidad and Tobago, we continued to efficiently deliver social protection through a sustainable and innovative National Insurance System. The overall experience of our large and diverse customer base showed a 92.5% customer satisfaction rating, based on an independent survey. We anticipate that over the next three (3) years, our customers will benefit from easier and more efficient access to our services as we continue to implement our Strategic Plan.

16

With regard to financial sustainability, we continue to make operational and parametric changes as recommended in the ninth Actuarial Review. During this financial year, we increased contribution rates from 12% to 13.2% and increased the maximum insurable earnings limit from $12,000 to $13,600, with the shortterm objective of improving Fund sustainability.

These changes were necessary to ensure the continuity of benefits for generations to come.

We continue to lobby for further amendments to the NIS in order to improve long-term viability.

During the reporting period, significant strides were made in promoting NIS Reform through the media, where we co-hosted two seminars on – “Equal Opportunity and Non-Discrimination in National Budgeting” and “Pension Reform in Trinidad and Tobago – National Insurance System”.

We also continued engagement with our key stakeholder groups, representing government, business and labour.

In order to ensure that our stakeholders are cognisant of our performance, we present to you an overview of our Key Performance Indicators (KPI’s) for financial year 2017 (FY2017):

Performance FY2015 FY2016 FY2017 Indicators

% Increase/ Decrease 2015-2016

% Increase/ Decrease 2016-2017

Claims Benefit Recipients

177,607

186,839

191,840

5.20%

2.68%

Long-Term Beneficiaries

144,804

153,823

160,420

6.23%

4.29%

New Claims Paid

43,565

43,554

40,948

-0.03%

-5.98%

Compliance Customer Base

669,366

673,606

644,410

0.63%

-4.33%

Contributors

516,926

514,561

479,036

-0.46%

-6.90%

Employers

20,829

20,479

21,342

-1.68%

4.21%

Employers Surveyed

4,126

4,589

4,512

11.22%

-1.68%

Financial Contribution Income

$4,261.47Mn $4,251.70Mn $4,608.24Mn -0.23%

8.39%

Investment Income Realised

$774.6Mn

Miscellaneous Income $1.84Mn

$1,007.27Mn $935.94Mn

30.04%

-7.08%

$2.32Mn

26.09%

-92.24%

$0.18Mn

Benefit Expenditure

$4,215.55Mn $4,513.24Mn $4,748.50Mn 7.06%

5.21%

Administrative Cost

$204.99Mn

$225.99Mn

$214.05Mn

10.24%

-5.28%

Administrative Cost as a % of Contribution Income

4.81%

5.32%

4.64%

0.51*

-0.68*

Administrative Cost as 4.66% a % of Total Income

5.35%

3.50%

0.69*

-1.85*

Net Yield of Investment Portfolio 2.59%*** 1.81% (realised & unrealised)/ Overall Investment Portfolio Return ***

6.26%

Total Funds

$25.74 Bn

$25.24Bn

$26.40Bn

-1.94%

4.60%

Total Assets

$25.93 Bn

$25.49Bn

$26.61Bn

-1.70%

4.39%

*Percentage Points *** Return based on Investment Portfolio – Excludes Cash Balances from NIBTT’s Pension Plan a/c, MAT Securities (Mortgages), Funeral Grant Cash Account and other cash accounts related to Insurance Operations

Some of our key operational statistics include: 1. The customer base decreased by 29,196 persons or (4.33%) to a total of 644,410 in FY2017.

2. Active employer population increased by 863 or 4.21% during the financial year 2017 to a total of 21,342.

3. Contribution income in FY2017 was $4,608.24Mn, an increase of 8.39% or $356.54 Mn over the figure recorded for the previous year.

4. The number of beneficiaries increased by 5,001 or 2.68% to 191,840 in FY2017 compared with FY2016.

5.

Benefit Expenditure amounted to $4,748.50Mn and represented an increase of 5.21% or $235.26Mn over the previous year.

6. Total Funds increased by 4.60% from $25.24Bn as at June 30, 2016 to $26.40Bn in 2017.

7. Total assets increased by 4.39% from

$25.49Bn in 2016 to $26.61Bn in 2017.

17

8. Administration expenses as a percentage of contribution income decreased from 5.32% to 4.64% in FY2017.

•

Upgrades to Information technology with the purchase of new hardware and software to improve data access and improve processes.

CUSTOMER SERVICE DELIVERY During the reporting period, we continued to adopt collaborative strategies aimed at further improvement in the quality of our service and enhancement of customer satisfaction.

These strategies included: • The maintenance of arrangements under a Memorandum of Understanding (MOU) with the Ministry of Legal Affairs, to provide information on the death of claimants who were recipients of the Retirement Benefit.

This resulted in the removal of the need for claimants to produce life certificates every 6 months, with the exception of non-nationals who reside abroad.

• Provision of online access so that insured persons can now request contribution statements online.

• Provision of online access that allows employers to register their businesses within one day and to remit contributions to the NIBTT on behalf of its employees.

• The registration of new employees has now

been reduced to five days.

• Digitisation of contribution records, thereby improving the turnaround time for the processing of claims.

• Increased emphasis on ‘Pension Ready’ activities to provide pre-emptive support to potential claimants who are about to retire.

Three-Year Benefit Expenditure

18

EMPLOYEE AND EMPLOYER REGISTRATION Our Service Centre network received 24,074 employee registration applications during this reporting period, a decrease of 5,589 or 18.8% when compared with the previous year’s figure of 29,663. Of the 24,074 applications for processing in the financial year, all or 100% were determined. Of these, 15,519 or 64.5% were newly insured persons who were added to the database this year.

During FY2017, 2,221 employers submitted applications for registration, a decrease of 610 or 21.5% when compared with the previous year’s receipt of 2,831. A total of 2,221 applications were available for processing, 100% of which were determined. 2,216 or 99.8 % were registered as new employers.

Currently, the total employer population stands at 21,342 – an increase of 4.21% when compared to the previous reporting period of 20,479.

BENEFIT ADMINISTRATION Beneficiaries received a total of $4,748.50Mn in benefit payments. This represented an increase in expenditure of 5.21% over the previous reporting period.

Long-Term Benefits Concomitant with population ageing and projections for evolution of the NIS, the longterm benefits branch showed an increase in the number of recipients and the value of benefits paid. This group consists of Retirement Pension,

Retirement Grant, Invalidity and Survivors’ Benefit recipients, whose number increased by 6,597 or 4.29% from 153,823 in the previous year, to 160,420 in FY2017. Payment to this group totalled $4,423.23Mn or 93.15% of total benefit expenditure.

Benefit Number of Benefit Type Beneficiaries Expenditure

% of Total Long-Term Beneficiaries

% of Total Long-Term Expenditure

Retirement Pension

108,116

$3,778,457,153.21

67.4%

85.42%

Retirement Grant

5,526

$203,138,424.54

3.44%

4.59%

*Survivors’ Benefit

42,812

$368,282,996.12

26.69%

8.33%

Invalidity Benefit

3,966

$73,353,826.17

2.47%

1.66%

Total

160,420

$4,423,232,800.04

% of Total Beneficiaries

83.62%

% of Total Benefit 93.15% Expenditure *Survivors’ Benefit plus Survivors’ Grant

3,966 (2.47%) $73.3 Mn 42,812 (26.69%) $368.2 Mn 5,526 (3.44%) $203.1 Mn

108,116 (67.4%) $3,778.4 Mn

Long-Term Benefits Retirement Pension Retirement Grant Survivors’ Benefit Invalidity Benefit

19

Short-Term Benefits The short-term benefits branch showed a decrease in the number of recipients, but an increase in the value of benefits paid. This group consists of Sickness Benefit, Maternity Benefit, Special Maternity Grant and Funeral Grant.

The number of recipients of these benefits decreased by 1,496 or -5.43% from 27,530 in the previous year to 26,034 in FY2017. Payment to this group totalled $240.19Mn or 5.06% of total benefit expenditure.

Benefit Number of Benefit Type Beneficiaries Expenditure

% of Total Short-Term Beneficiaries

% of Total Short-Term Expenditure

Sickness Benefit

10,360

$58,591,445.23

39.80%

24.40%

Maternity Benefit

7,321

$122,635,882.19

28.12%

51.06%

Special Maternity Grant 998

$3,849,302.67

3.83%

1.60%

Funeral Grant

7,355

$55,111,674

28.25%

22.94%

Total

26,034

$240,188,304.65

% of Total Beneficiaries

13.57%

% of Total Benefit 5.06% Expenditure

Short-Term Benefits 10,360 (39.80%) $58.5 Mn 7,355 (28.25%) $55.1 Mn

998 (3.83%) $3.8 Mn

Sickness Benefit Maternity Benefit Special Maternity Grant Funeral Grant

7,321 (28.12%) $122.6 Mn

20

Employment Injury Benefits The Employment Injury benefits branch showed a decrease in the number of recipients and an increase in the value of benefits paid. This group comprises Disablement Pension and Grant, Death Benefit, Medical Expenses and

Employment Injury. The number of recipients of these benefits decreased by 2,638 or 32.88% from 8,024 in the previous year to 5,386 in FY2017. Payment to this group totalled $85.08Mn or 1.79% of total benefit expenditure.

Benefit Number of Benefit Type Beneficiaries Expenditure

% of Total EIB Beneficiaries

% of Total EIB Expenditure

Disablement Pension

3,184

$52,093,670.94

59.12%

61.23%

Disablement Grant

100

$1,841,875.77

1.86%

2.16%

Death

458

$10,264,349.14 8.50%

12.06%

Medical Expenses

63

$77,752.07

1.17%

0.10%

Injury Allowance

1,581

$20,800,593.87

29.35%

24.45%

Total

5,386

$85,078,241.79

% of Total Beneficiaries

2.81%

% of Total Benefit Expenditure

1.79%

Employment Injury Benefits 1,581 (29.35%) $20.8 Mn

3,184 (59.12%) $52.0 Mn 63 (0.11%) $0.07 Mn

Disablement Pension

458 (8.50%) $10.2 Mn

Disablement Grant Death Medical Expenses Injury Allowance

100 (1.86%) $1.8 Mn

21

APPEALS In accordance with Section 62 of the National Insurance Act (NI Act), our customers maintained their right to refer decisions on claims to the Appeals Tribunal. As such, during the financial year, 213 appeal notices were received from the Appeals Tribunal. Of these, we responded to 207. The table below records the Appeals received by year and responses issued for the period 2014/2015, 2015/2016 and 2016/2017 as follows: Year

No. of Appeals Received

Responses Issued

2014/2015 196 166 2015/2016 215 153 2016/2017 213 207 Total 624 526 Appeal Hearings During the reporting period, a total of 15 hearings were scheduled, compared to two in the last financial year. A total of 164 matters were heard from a listed 167 for hearing, a significant increase over that of 2016, which totalled 10 heard out of the 20 listed for hearing. From the matters heard, 47 were allowed, 20 were dismissed, 90 were adjourned and seven withdrawn.

Reciprocal Agreements Canada and Trinidad and Tobago During the financial year, 11 applications were made by persons in Canada accessing benefits from Trinidad and Tobago through Service Canada, with 230 applications made through NIBTT’s Service Centres. In accordance with the reciprocal agreement, Trinidad and Tobago nationals as well as other non-nationals who contributed to this country’s NIS system, can access Retirement and Survivors’ Benefit from Canada. These types of claims resulted in 215 enquiries for contribution data transfer to assist applicants in qualifying for benefits provided

by Service Canada. At the end of the financial period, 199 applications remained outstanding, awaiting contribution data information from

22

Service Canada for persons who applied for Retirement, Funeral, Survivors’ Benefits and Death Benefit in Trinidad and Tobago.

CARICOM and Trinidad and Tobago During the financial period, five applications were made through CARICOM Offices by persons accessing benefits from Trinidad and Tobago, in addition to which, 50 enquiries were received from CARICOM in respect of Trinidad and Tobago’s benefits. A total of 57 applications were made through the Service Centres apart from the CARICOM applications accessing Trinidad and Tobago benefits. To date, there have been approximately 37 responses from persons applying for benefit under this agreement.

REVENUE Contribution Income Contribution income for FY2017 increased to $4,608.24Mn or 8.39% over the $4,251.70Mn collected in FY2016. In this regard, contributions were paid by 21,342 employers on behalf of 479,036 contributors, an increase of 863 employers and a decrease of 35,525 contributors over FY2016.

Thus, in FY2017 the increase in contribution income is primarily due to an increase in the contribution rate from 12% to 13.2% and an increase of the maximum insurable earnings from $12,000 to $13,600.

Additionally, we have continued to apply new strategies to enhance the NIBTT experience when employers contact our offices in person or online. This included improving our online payment facility by expanding online banking arrangements with two major banking institutions within the reporting period. During FY2017, 237 employer applications for use of the online facility were received. To date, 756 employers were approved to utilise this facility.

An average of 233 or 31% of these employers remit contributions on behalf of 7,500 employees, monthly. We will continue to market these online facilities to make it easier for employers to conduct business with the NIBTT.

Three-Year Contribution Income

Overall Asset Allocation as at June 2017 51%

Fixed Income

33%

Equity Real Estate Mutual Fund Cash and Cash Equivalents

1% 11%

Asset Class Fixed Income Equity

4%

Amount

% of Portfolio

$8,367,763,000

33.14%

$12,893,768,000 51.07%

Real Estate

$328,750,000

1.30%

Mutual Fund

$925,514,000

3.67%

$2,730,401,000

10.81%

$2,635,000

0.01%

$25,248,831,000

100.00%

Cash and Cash Equivalents Mortgages

Total

23

The NIBTT’s investment portfolio as at June 30, 2017 had a market value of $25.25Bn, reflecting a 3.77% or $918Mn increase over the Fund size, as at June 30, 2016, which stood at $24.33Bn. Overall, the portfolio generated a yield of 6.26% over the financial year. This uptick experienced in the Fund’s market value was attributable to realised income from the fixed income and equity portfolio, in excess of $768Mn, in addition to unrealised gains from foreign equities which amounted to $443Mn and foreign exchange gains on US-Dollar-Denominated investments of approximately $90Mn. This increase however, was partially offset by $440Mn in withdrawals from the Investments Cash Account, for payment of benefits. There continues to be a shortfall in contribution income to meet Insurance Operation’s liquidity requirements, which has a negative impact on the Fund’s ability to grow.

As at June 30, 2017 the equity portfolio stood at $12.89Bn and fixed income at $8.37Bn. The Equity portfolio accounts for 51.07% of the total portfolio, while Fixed Income accounts for 33.14%. Both sub-portfolios experienced year on year growth of 12.83% ($1.47Bn) and 0.64% ($53.45Mn), respectively.

The equity portfolio was negatively affected by the local stock market, with holdings in RBL and Massy experiencing significant market value declines over the year. However, the portfolio received a boost from new investments in the foreign equities portfolio, as well as an overall market value increase on foreign equity ($443Mn). During the year, the NIBTT participated and was successful in the First Citizens Additional Public Offering (APO).

Returns on the equity portfolio was 8.57% as at June 30, 2017, compared to the previous year’s return of negative 0.28%. Foreign equities accounted for the bulk of the increase in returns experienced by the Equity portfolio. For the 2016/2017 financial year, the locally listed equities portfolio underperformed the All T&T Index by 225bps. This was mainly due to the allocation factor, where NIBTT is overweight in some stocks which performed poorly over the year, such as RBL and Massy. Additionally, during this period, the NIBTT invested in one new Foreign Fund Manager, CIBC, bringing the total Foreign Fund Managers to three. The total return on the Foreign Fund Manager portfolios was 17.67% for the financial year ended June 30, 2017.

24

Revaluation of NIBTT’s subsidiaries resulted in an upward market value adjustment of approximately $149Mn over the financial period.

The NIBTT’s Mutual Fund portfolio declined year on year by 10.18% or $105Mn on account of both a decline in the overall market value of the local funds as well as redemption of approximately $150Mn from Roytrin Mutual Income and Growth Fund, which was invested in higher yielding instruments. The overall decline was partially offset by an increase in the foreign mutual Fund portfolio of approximately $8Mn. The Fixed income portfolio increased marginally by 0.64% or $53.45Mn to $8.37Bn and had a purchase yield to maturity of 5.08%. During the financial year $1.88Bn in new fixed income instruments were added to the portfolio, while $1.39Mn of the portfolio matured during the year. Of the $1.88Bn of new fixed income investments, approximately 60% was invested in the Government of Trinidad and Tobago (GOTT) or GOTT-related instruments and 40% in Corporates. Approximately 50% of new fixed income instruments were invested in TT Dollar investments and 50% in US-Dollar-denominated investments. US Dollar investments consist of local corporate US Dollar issued and internationally issued bonds. Internationally issued bonds account for a small portion (2.62%) of the total fixed income portfolio.

In April 2017, both Moody’s and Standard & Poor’s downgraded the Trinidad and Tobago economy, with Moody’s moving the country to non-investment grade status at Ba1 and S&P lowering the credit rating one notch down to BBB+. As a result, the local fixed income portfolio which accounts for over 97% of the fixed income portfolio, was affected by an increasing TT Dollar yield curve, mainly over the longer end of the curve, which resulted in negative movements for several bonds held in the portfolio with 10-20-year maturity profiles.

The overall yield on the fixed income asset class portfolio as at June 30, 2017, was 5.08%, compared to 5.05% for the previous financial year. In addition to the maturing of some high coupon fixed income securities, held in the portfolio and the overall low interest rate environment, there also continues to be a dearth of suitable local investment opportunities from both the government and private sector.

The NIBTT’s Real Estate Portfolio as at June 30, 2017 stood at $328.75Mn and accounts for 1.30% of the portfolio. NIBTT’s new Corporate Headquarters around the Queen’s Park Savannah, is now completed, with staff occupying three floors. This Queen’s Park East (QPE) building is acclaimed as being the first Leadership in Energy and Environmental Design (LEED) GOLD certified building in the Englishspeaking Caribbean, which means that the NIBTT has achieved the second highest LEED certification.

Our QPE Corporate Headquarters also has the capacity to house several retail and office spaces on the two lower floors. Thus, NIBTT is currently seeking suitable tenants to occupy these spaces with an aim to earn a targeted return on this investment.

Year-on-Year Total Unrealised Investment Income Asset Class

2017-2016

2016-2015

Equity

$256,157

($922,822)

Bonds

$66,479 ($441,654)

Subsidiaries $149,433

$103,434

Other

$70,433

$213,082

Total

$542,502

($1,047,960)

Year-on-Year Realised Investment Income

2017-2016

2016-2015

Interest Income

$391,044.00

$359,134

Dividend Income

$440,929.00 $399,948

Gain on sale of securities

$132,959.00

$201,079

$6,301.00

$74,059

$41,842.00

$27,582

Gain/(loss) from Foreign exchange Other Income

Total realised Investment Income $1,013,075

$1,061,802

OPERATIONAL HIGHLIGHTS Actuarial Review The ninth Actuarial Review as at June 30, 2013, was conducted to assess the balance between the rates of contribution and benefits, with the aim of ensuring sustainability of the Fund.

This review made both short and long-term recommendations that were meant to stymie the impact of the ageing population. Two shortterm measures were implemented:

•

•

An increase in the contribution rate from 12.0% to 13.2% An increase in the maximum insurable earnings from $12,000 to $13,600

During the reporting period, as previously mentioned, we also made significant strides in promoting NIS Reform via the media and through the co-hosting of two seminars on – “Equal Opportunity and Non-Discrimination in National Budgeting” and “Pension Reform in Trinidad and Tobago – National Insurance System.” These were done in collaboration with the Equal Opportunity Commission and the Trinidad and Tobago Chamber of Commerce respectively.

During this reporting period, we also commenced the conduct of the tenth Actuarial Review as at June 30, 2016. Notwithstanding, although we are legislatively mandated to conduct these reviews within five-year cycles, we have adopted the more prudent approach of three-year review cycles in keeping with international norms.

Process Mapping In our pursuit of optimising the efficiencies within the organisation, we embarked on a process redesign exercise where 134 critical processes were mapped and re-engineered to improve efficiency, ultimately resulting in lower administrative costs and enhanced customer service delivery.

Customer Satisfaction Surveys Given the organisation’s continued focus on customer feedback, we commissioned the conduct of two customer satisfaction surveys, as well as a mystery shopper study during the financial year. These studies are used to inform strategies to enhance the quality of NIBTT’s service delivery. The outcome of the survey analysis showed an overall customer satisfaction rate of 92.5%.

Risk The NIBTT remained committed to establishing a sound system of risk oversight and management, to identify, assess, monitor and manage material risks related to the conduct of its activities.

This commitment was demonstrated via the continued implementation of its Enterprise Risk Management Framework, which was developed in accordance with the ISO and COSO guidelines.

(International Organisation, for Standardisation and Committee of Sponsoring Organisations of the Treadway Commission).

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As the NIBTT worked towards our mandate of Fund sustainability within the reporting period, we continued to implement and maintain management systems for all material risks so as to enable us to: • Identify, assess and manage risks in an

effective and efficient manner • Integrate the outputs of Business Unit risk assessments into a Corporate Risk Register which represents an overall risk profile that was actively managed and monitored • Embed risk management into all our business activities, with an awareness of risk instilled in all employees • Make risk-based decisions that will ensure consideration of the reward-to-risk balance •

Provide greater certainty of the delivery of strategic and operational objectives; and

•

Satisfy our corporate governance requirements.

The NIBTT maintains a level of risk oversight that involves the Board, the Audit, Risk and Compliance Committee (ARCC), the Executive Management Risk Committee (EMRC), the Risk Business Unit (which includes a compliance section) and the Internal Audit Department. The independence of the Risk and Internal Audit functions is maintained via a direct reporting line to the ARCC. The ARCC supports the Board in its risk oversight responsibilities, by providing oversight of the governance, risk management, compliance and financial reporting responsibilities of the NIBTT, making recommendations to the Board in relation to its responsibilities. The Risk Business Unit is charged with the responsibility for implementation and continuous improvements to the Enterprise Risk Management Framework and the EMRC is responsible for the formulation and implementation of risk policies and the review of risk reports for presentation to the ARCC/ Board. The Audit function is responsible for reviewing the ERM framework and providing assurance that it continues to be relevant and fit for its purpose.

The Risk Governance Structure of the NIBTT ensures a balance between the level of risk control and the need for enterprise and innovation, whilst maintaining compliance to sound risk management and corporate governance principles.

26

Technology In ongoing efforts to further improve operational efficiency, our Technology Business Unit is working to meet the ICT needs of the NIBTT’s full staff complement, which in turn will result in the enhancement of our customers’ experience.

During the financial year 2017, significant projects undertaken and completed included: • In-house programme upgrades for the implementation of the ninth AR recommendations, • Evaluation and Implementation of the new Network Monitoring System. This will allow for a proactive approach to increasing efficiency and mitigating downtime instances, • Planning and execution of the relocation of all hardware and communications equipment to the new Corporate Headquarters at QPE. Phase II – Relocation of the computer room systems is in its planning phase.

Over the next three years, we will undertake an ICT transformation initiative which will involve the designing, procuring and implementation of an end-to-end ICT enterprise-wide solution for the entire organisation. This project, which commenced in November 2016, is envisioned to better employ ICT at the NIBTT to improve the efficiency and effectiveness of service offerings for both internal and external stakeholders. This system will cater primarily to the requirements of the core Social Insurance System including web-based access to client businesses and individuals and feature either optional functionalities, or integration with, other areas of business needs such as Human Resources, Accounting, Investments and Customer Relations Management.

Legal Services Our Legal Services Business Unit was restructured in the first quarter of FY2017 to better serve the business needs of the organisation through a closer alignment with the required functions.

Thus, our Claims Investigation function was reassigned to the Insurance Operations Business Unit, while the Appeals Section was assigned to Legal Services.

During the reporting period, there was an increasing number of legal claims made against the NIBTT outside of the appeals process, in respect to NIBTT’s decisions in processing claims and personal injury matters. Hence, for the financial year ending June 30, 2017, a total of 259 new requests were received to commence legal proceedings regarding National Insurance

debt, contract review/preparation, legal services, review of conveyancing deeds and other legal instruments. The unit was able to resolve 195 matters during the reporting period.

Securing court agreements, as well as nonlitigation and litigation approaches resulted in the recovery of $1,418,933.91 in contribution arrears, penalties and interest from 29 noncompliant employers. The figure recovered for the previous year’s figure was $2,455,981.80.

A total of $695,465.44 was recovered in mortgage debt payments. A further $2,997,319.15 was recovered from judgements – contribution arrears. Through the use of alternative dispute resolution techniques, in-house counsel secured three promissory notes valued at $470,362.64.

Human Resources During the reporting period, the staffing complement for the approved structure stood at 710 persons. Employees were exposed to a range of training programmes throughout the financial year in a number of different areas.

A key initiative undertaken was an in-depth Leadership Development Programme for Executive and Senior Managers, which exposed participants to a 12-week programme consisting of Communication, Staff Motivation, Coaching, Performance Management, Team Building, Decision Making and Ethics. Other members of staff at varying levels were exposed to training which included Foundational Training, Robbery Response Training, Insurance Operations Product Training, Coaching and Mentoring.

Professional enhancements programme for specific specialised areas were also conducted in the areas of Fraud Risk Management, Corporate Governance, Six Sigma Tools for Internal Audit, Procurement Training, IT Auditing and Financial Modelling.

Staff Negotiations The collective bargaining process with the recognised majority union was concluded on June 15, 2016 for the period 2011 to 2013. As per the NIBTT’s agreement with the Public Services Association, bargaining unit employees were paid their new salaries and allowances in July 2016 and retroactive salaries in August 2016.

Accommodations A key aspect of NIBTT’s transformation during the reporting period was the relocation from our old familiar Head Office, NIB House 2A Cipriani

Boulevard, Port of Spain to our new Corporate Headquarters at 14 – 19 Queen’s Park East, Port of Spain. The construction of this building was commissioned in 2014 and completed two years later within cost, time and quality as part of NIBTT’s investment strategy. I am proud to further report that this new building is the first LEED Gold certified building in the country and exemplifies our commitment to long-term sustainability and efficiency.

Additionally, the Tunapuna Service Centre was upgraded and reopened on February 09, 2017.

This provides convenient access and enhanced service delivery to customers of Tunapuna and environs.

REGIONAL SOCIAL SECURITY INITIATIVES The International Labour Organisation (ILO) hosted a four-day training programme titled, ‘Extension of Social Protection in the Context of Formalisation Policies’ in March 2017, at the Kapok Hotel, Port of Spain. The NIBTT was represented at the training, which was attended by senior social security representatives from 16 countries in the region. Participation in the event was also seen as an occasion to strengthen relationships among regional social security institutions.

APPRECIATION I wish to express my heartfelt appreciation to employees of the NIBTT, both past and present, and to thank them sincerely for their tireless dedication and commitment to this organisation over its 45 years of service administration to the people of Trinidad and Tobago; from our humble beginnings when only four NIS benefit types were provided, to where the system has now evolved into one that currently delivers 23 types of benefits, testament to our faithfulness in providing relevant coverage to the working population and their dependents.

Prior to the introduction of social insurance coverage in Trinidad and Tobago, this gap in coverage was provided by Friendly Societies and other voluntary and charitable organisations.

Since 1972, the NIBTT has assumed this role and today provides this essential service to approximately 192,000 benefit recipients.

However, the ageing population and global economic downturn, have challenged the sustainability of the system. In this regard, the NIBTT has ensured that the requisite actuarial assessments are conducted at least within five-

27

year periods, to analyse at frequent intervals, the impact of the ageing population on the sustainability of the system and to consider the key recommendations.

The success of the NIS today is testimony that our policies, strategies and internal, as well as external stakeholder support throughout the years, have combined to assure protection of the working population and their dependents against contingencies. I am therefore confident that a true appreciation and acceptance of the interconnectedness of our core values, such as customer service and teamwork, will continue to place the NIBTT in good stead and guarantee the prudent operation and management of the NIS .

I must take this opportunity to express my sincerest gratitude to our Chairman and Board of Directors whose support during the transformation process, have been exceptional.

It is through the combined efforts of all stakeholders coming together synergistically, that the NIBTT is therefore poised to face future challenges.

Niala Persad-Poliah Executive Director November 24, 2017

28

29

STATEMENT OF MANAGEMENT’S RESPONSIBILITIES

Management is responsible for the following: • Preparing and fairly presenting the accompanying special purpose financial statements of the National Insurance Board of Trinidad and Tobago (‘the Board’ or ‘NIBTT’) which comprise the statement of financial position as at 30 June 2017 and the statements of comprehensive income, cash flows and changes in funds for the year then ended, and a summary of significant accounting policies and other explanatory information; •

Ensuring that the Board keeps proper accounting records;

•

Selecting appropriate accounting policies and applying them in a consistent manner;

• Implementing, monitoring and evaluating the system of internal control that assures security of the Board’s assets, detection/prevention of fraud, and the achievement of entity’s operational efficiencies; •

Ensuring that the system of internal control operated effectively during the reporting period;

•

Producing reliable financial reporting that comply with laws and regulations, including the National Insurance Act 35 of 1971; and

•

Using reasonable and prudent judgement in the determination of estimates.

In preparing these audited special purpose financial statements, management utilised the financial reporting provisions of the National Insurance Act. Where the financial reporting provisions of the National Insurance Act is not clear reference is made to International Financial Reporting Standards, as issued by the International Accounting Standards Board and adopted by the Institute of Chartered Accountants of Trinidad and Tobago to determine the Board’s alternative accounting treatments.

Where International Financial Reporting Standards presented alternative accounting treatments, management chose those considered most appropriate in the circumstances.

Nothing has come to the attention of management to indicate that the Board will not remain a going concern up to the date the accompanying special purpose financial statements have been authorised for issue.

Management affirms that it has carried out its responsibilities as outlined above.

Niala Persad-Poliah Executive Director 31 October 2017

30

Brendon Nelson Executive Manager Finance and Accounting 31 October 2017

INDEPENDENT AUDITOR’S REPORT ON SPECIAL PURPOSE FINANCIAL STATEMENTS

To The Directors of The National Insurance Board of Trinidad and Tobago Our opinion In our opinion, the special purpose financial statements of The National Insurance Board of Trinidad and Tobago are prepared, in all material respects, in accordance with the accounting policies described in Note 4 to the special purpose financial statements and the requirements of the National Insurance Act. What we have audited The Board’s special purpose financial statements comprise: • statement of financial position • statement of comprehensive income • statement of cash flows • statement of changes in funds • notes to the special purpose financial statements.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the special purpose financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence We are independent of the National Insurance Board of Trinidad and Tobago in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.

Emphasis of Matter – Basis of accounting and restriction on distribution and use We draw attention to Note 4 of the special purpose financial statements, which describes the basis of accounting. The special purpose financial statements are prepared to assist the Finance Minister of The National Insurance Board of Trinidad and Tobago in meeting their reporting requirements under the National Insurance Act. As a result, the special purpose financial statements may not be suitable for another purpose.

Our report is intended solely for the Finance Minister of The National Insurance Board of Trinidad and Tobago, and may be made available to the Inspector of Financial Institutions of the Central Bank of Trinidad and Tobago and should not be distributed to or used by parties other than those stipulated. Our opinion is not modified in respect to this matter.”

Responsibilities of the Board for the special purpose financial statements The Board is responsible for the preparation of these special purpose financial statements in accordance with the accounting policies set out in Note 4 to the special purpose financial statements and the requirements of the National Insurance Act, and for such internal control as the Board determines is necessary to enable the preparation of special purpose financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the special purpose financial statements, the Board is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so.

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INDEPENDENT AUDITOR’S REPORT ON SPECIAL PURPOSE FINANCIAL STATEMENTS (Continued)

Auditor’s responsibilities for the audit of the special purpose financial statements Our objectives are to obtain reasonable assurance about whether the special purpose financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these special purpose financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: •

Identify and assess the risks of material misstatement of the special purpose financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 Board’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by The Board.

• Conclude on the appropriateness of The Board use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Board’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the special purpose financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Board to cease to continue as a going concern.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

31 October 2017 Port of Spain Trinidad, West Indies

32

STATEMENT OF FINANCIAL POSITION (Expressed in Trinidad and Tobago Dollars) As at 30 June

Notes 2017 2016

$’000 $’000 Assets Property, plant and equipment Investment properties Investment in subsidiary companies Financial assets at fair value through profit or loss Mortgage advances Property being developed for sale Other assets Cash and cash equivalents

5 6 7

526,954 328,750 2,000,488

348,670 351,224 1,843,255

8 9 10 11 12

20,186,557 2,635 18,709 819,576 2,730,401

18,928,936 5,929 31,997 782,858 3,201,399

Total assets Funds, reserves and liabilities Long-term benefits fund Short-term benefits fund Employment injury benefit fund

13 13 13

Total funds Revaluation reserve

14

Total funds and reserves Other liabilities Post-employment benefit

15 16

Total liabilities Total funds, reserves and liabilities

26,614,070 25,494,268 24,840,004 502,439 1,058,687

23,875,856 468,284 900,416

26,401,130 25,244,556 72,624

72,624

26,473,754 25,317,180 129,182 11,134

157,276 19,812

140,316 177,088 26,614,070 25,494,268

The notes on pages 37 to 65 are an integral part of these special purpose financial statements.

These special purpose financial statements have been authorised for issue on 31 October 2017.

Chairman Executive Director Executive Manager

Finance and Accounting

33

STATEMENT OF COMPREHENSIVE INCOME (Expressed in Trinidad and Tobago Dollars) Year ended 30 June

Notes 2017 2016

$’000 $’000 Income Contributions Employers in compliance Employers in arrears Voluntary

4,044,981 565,176 79

Refunds

4,610,236 (2,000)

Total net contributions

4,608,236 4,251,701

Net realised investment income 17 Net unrealised investment income/(loss) 18 Revaluation of subsidiaries Penalties and interest Miscellaneous income Loss on disposal Total income

935,940 393,069 149,433 23,594 175 (4)

3,868,193 383,803 145 4,252,141 (440) 1,007,273 (1,151,394) 103,434 12,870 2,315 –

6,110,443 4,226,199

Expenditure Benefits expenditure Long term Short term Employment injury

4,423,233 240,188 85,078

Total benefits expenditure

4,748,499 4,513,239

Administrative expenditure Staff salaries, allowances and benefits 19 Board of Directors expenses Depreciation Other expenses 20 Total administrative expense Other Pension expense

16

Total other Total expenditure Surplus/(shortfall) of income over/(under) expenditure Remeasurement of defined benefit liability Revaluation of property, plant and equipment

16 5

Total comprehensive income/(loss)

4,195,365 236,263 81,611

134,963 148,310 1,031 671 5,792 6,069 72,262 70,945 214,048 225,995 13,476

11,497

13,476 11,497 4,976,023 4,750,731 1,134,420 22,154 –

(524,532) 27,634 30,306

1,156,574 (466,592)

The notes on pages 37 to 65 are an integral part of these special purpose financial statements.

34

STATEMENT OF CASH FLOWS (Expressed in Trinidad and Tobago Dollars) Year ended 30 June

2017 2016

$’000 $’000 Cash flows from operating activities Surplus/(shortfall) of income under expenditure Adjustments: Unrealised investment (income)/loss Depreciation Pension expense Revaluation of subsidiaries Sale of property, plant and equipment profit Surplus before working capital changes Decrease in mortgage advances Decrease investment property Decrease in property being developed for sale Increase in other assets (Decrease)/increase in other liabilities Net cash generated by operating activities Cash flows from investing activities Proceeds from the sale of fixed assets Purchase of property, plant and equipment Purchase of investments Sale/maturity of investments

1,134,420

(524,532)

(393,069) 1,151,394 5,792 6,069 13,476 11,497 (149,433) (103,434) – (157) 611,186 540,837 3,294 1,224 13,288 (36,718) (28,094)

3,688 – 14,934 (29,748) 48,373

564,180 578,084 – (184,080) (4,624,596) 3,773,498

155 (5,948) (5,631,008) 4,823,917

Net cash used in investing activities

(1,035,178) (812,884)

Net decrease in cash and cash equivalents

(470,998) (234,800)

Cash and cash equivalent at beginning of the period

3,201,399

3,436,199

Cash and cash equivalent at the end of the period

2,730,401

3,201,399

The notes on pages 37 to 65 are an integral part of these special purpose financial statements

35

STATEMENT OF CHANGES IN FUNDS (Expressed in Trinidad and Tobago Dollars)

Long-term Short-term Employment Total

benefits benefits injury benefits funds

June

2017 2016 2017 2016 2017 2016 2017 2016

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Fund at beginning of year 23,875,856 24,495,067 468,284 463,841 900,416 782,546 25,244,556 25,741,454 Income Contribution 4,101,330 3,784,014 276,494 255,102 230,412 212,585 4,608,236 4,251,701 Penalty income 23,073 12,575 162 93 359 202 23,594 12,870 Revaluation of subsidiaries 149,433 103,434 – – – – 149,433 103,434 Realised investment income 915,253 984,157 6,443 7,320 14,244 15,796 935,940 1,007,273 Unrealised investment income 380,138 (1,124,972) 4,027 (8,367) 8,904 (18,055) 393,069 (1,151,394) Miscellaneous income 175 2,315 – – – – 175 2,315 Loss on disposal of property, plant and equipment (4) – – – – – (4) – Total income

5,569,398 3,761,523 287,126 254,148 253,919 210,528 6,110,443 4,226,199

Expenditure Benefits Expenditure Retirement benefit 3,778,457 3,564,493 – – – – 3,778,457 3,564,493 Survivors’ benefit 368,283 351,636 – – – – 368,283 351,636 Invalidity benefit 73,354 73,477 – – – – 73,354 73,477 Retirement grant 203,139 205,759 – – – – 203,139 205,759 Funeral grant – – 55,112 51,711 – – 55,112 51,711 Sickness benefit – – 58,591 49,666 – – 58,591 49,666 Maternity benefit – – 122,636 130,681 – – 122,636 130,681 Special maternity – – 3,849 4,205 – – 3,849 4,205 Employment injury – – – – 85,078 81,611 85,078 81,611

Administrative expense Pension expense

4,423,233 4,195,365 240,188 236,263

85,078

81,611 4,748,499 4,513,239

190,503

201,136

12,843

13,559

10,702

11,300

214,048

225,995

13,178

11,234

93

83

205

180

13,476

11,497

Total expenditure 4,626,914 4,407,735 253,124 249,905 95,985 93,091 4,976,023 4,750,731 Excess 943,424 (646,212) 34,002 4,243 157,934 117,437 1,134,420 (524,532) O/C Income 21,664 27,001 153 200 337 433 22,154 27,634 Transfers – – – – – – – – Fund at end of year 24,840,004 23,875,856 502,439 468,284 1,058,687 900,416 26,401,130 25,244,556

The notes on pages 37 to 65 are an integral part of these special purpose financial statements.

36

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 1

Incorporation and principal activity The National Insurance Board of Trinidad and Tobago (NIBTT) was incorporated under the National Insurance Act No. 35 of 1971 (The National Insurance Act), as subsequently amended, and commenced operations in 1972. The principal activity of NIBTT is to carry out the requirements of The National Insurance Act in providing social security benefits to the insurable population of Trinidad and Tobago. The registered office is located at 2a Cipriani Boulevard, Port-of-Spain, Trinidad and Tobago.

2 Actuarial review Section 70 (1) of The National Insurance Act requires an Actuarial Review of the National Insurance System (NIS) at intervals not exceeding five years. The 9th Actuarial Review was conducted as at 30 June 2013 and was completed by École Nationale d’Administration Publique International (ENAP) on 30 June 2015. The main objectives of this review were to assess the long-term financial condition of the National Insurance Fund and recommend possible ways to improve contribution and benefit provisions.

In general, contribution payments and benefit calculations are based on a system of wage classes.

The contribution amount is paid by the employer and the employee in a proportion of twothirds/one-third. Benefits are grouped into three funds: long-term benefits, short-term benefits and employment injury benefits. Each fund is credited with contribution income and investment income from which benefit expenditures and administrative expenses are met.

The report was accepted by management and the Board of Directors and forwarded with management recommendations to the Minister of Finance and the Economy for his consideration in August 2015. Presently, the fund is meeting all of its obligations. The 10th Actuarial Review is carded to start in October 2017.

3 Legislative amendments During the period the following legislative amendments were proposed in line with recommendations of the ninth Actuarial Report: a. The increase in the maximum insurable earnings from $12,000 to $13,600, this increase is in the order of 13.3 percent and is intended to cover an additional $1,600 of insured income which is in line with the increase in the national wage; b. Maintenance of the minimum monthly retirement pension at its present level of $3,000, at least

until the beginning of 2017; and c. Increase in the contribution rate by 13.2 percent.

The increase in the contribution maximum earnings and the increase in the contribution rates were announced in the national budget to take effect from 4 July 2016. However, this amendment only took effect on 5 September 2016 due to legislative delays.

37

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 4 Summary of significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all years presented, unless otherwise stated. a. Basis of preparation These special purpose financial statements are prepared in accordance with the financial reporting provisions of The National Insurance Act. In cases where the financial reporting provision is not clear or does not address particular situations, reference is made to International Financial Reporting Standards (IFRS) for guidance in determining NIBTT’s accounting policy. The Board and management of NIBTT are currently reviewing its financial reporting framework to determine whether it can in the future prepare its special purpose financial statements in accordance with IFRS. These special purpose financial statements are the parent company unconsolidated financial statements of the NIBTT. NIBTT does not prepare consolidated financial statements. Further, these special purpose financial statements are prepared on the historical cost basis, except for the following items in the statement of financial position: - - - -

-

Financial assets at fair value through profit or loss are measured at fair value; Investment properties are measured at fair value; Investments in subsidiary companies are measured at fair value; Artwork and freehold properties classified as property, plant and equipment are measured at fair value; The defined benefit asset/liability is recognised as plan assets, plus unrecognised past service cost, less the present value of the defined benefit obligation and based on actuarial valuations.

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Information about critical estimates in applying accounting policies that have the most significant effect on the amounts recognised in the audited special purpose financial statements is included in Note 4 n. b. Investments in subsidiary companies Subsidiaries are all entities over which the NIBTT has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. These are as follows: Companies

National Insurance Property Development Company Limited (NIPDEC) Trinidad and Tobago Mortgage Finance Company Limited (TTMF) Home Mortgage Bank (HMB)

38

Percentage Ownership 2017 2016 100%

100%

51% 100%

51% 99.38%

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 4 Summary of significant accounting policies (continued) b. Investments in subsidiary companies (continued) Investments in subsidiaries are initially recorded at cost and adjusted to fair market value based on valuations conducted by an independent professional valuator. Gains and/or losses arising from the change in fair value are included in the statement of comprehensive income.

Investments in subsidiaries are valued by an independent valuator and are based on the assumption that they will continue to operate as going concerns and that the principal activities and legal structure of the companies will remain unchanged. c. Foreign currency (i) Functional and presentation currency Items included in these financial statements are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”).

The financial statements are presented in Trinidad and Tobago dollars, which is NIBTT’s functional and presentation currency, unless otherwise stated. (ii) Foreign currency Transactions in foreign currencies are initially recorded at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are expressed in Trinidad and Tobago dollars at the rate of exchange ruling on the reporting date as obtained from the Central Bank of Trinidad & Tobago. All differences arising are taken to the statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. d. Cash and cash equivalents Cash and cash equivalents, for the purpose of the statement of cash flows, represent cash and bank balances and highly liquid investments with a maturity period of three months or less. e. Financial assets NIBTT’s financial assets and financial liabilities are recognised in the statement of financial position when it becomes party to the contractual obligation of the instrument. A financial asset is derecognised when the right to receive the cash flows from the asset has expired or where NIBTT has transferred all the risks and rewards of ownership of the asset. A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. All “regular way” purchases and sales are recognised at settlement date. (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are subsequently carried at fair value based on quoted prices for investments traded in active markets; or valuation techniques, including recent arm’s length transactions, discounted cash flows analysis and other valuation techniques commonly used by market participants, for investments not traded in active markets. Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate is a market related rate at the reporting date for an instrument with similar terms and conditions.

39

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 4 Summary of significant accounting policies (continued) e. Financial assets (continued) (i) Financial assets at fair value through profit or loss (continued) Held for trading securities are initially recognised at cost and subsequently remeasured at fair value based on quoted bid prices at the reporting date. Where the instrument is not actively traded or quoted on an active market, fair value is determined using discounted cash flow analysis.

Gains and losses arising from sales and changes in fair values of these financial assets are recognised in the statement of comprehensive income in the period in which they arise.

All related unrealised gains and losses are included in the statement of comprehensive income. Interest earned is reported as interest income. (ii) Loans and advances Loans and advances are financial assets with fixed or determinable payments and are not quoted in an active market created by NIBTT providing money to a debtor other than those created with the intention of short-term profit sharing. Such assets are stated at amortised cost, net of any advances for credit losses using the effective interest method.

Loans and advances include mortgage advances. Mortgage advances are measured net of provisions for impairment. A mortgage advance is classified as impaired (nonperforming) when there is objective evidence that NIBTT will not be able to collect all amounts due according to the original contractual terms of the loan. Objective evidence of impairment includes observable data that comes to the attention of NIBTT such as: • • • •

Significant financial difficulties of the borrower Actual delinquencies Adverse change in the payment status of a borrower Bankruptcy or reorganisation by the borrower.

If there is objective evidence that an impairment loss on mortgage advance has been incurred, the amount of the allowance for impairment is measured as the difference between the carrying amount and the recoverable amount, being the present value of expected future cash flows, including amounts recoverable from guarantees and collateral, discounted at the original effective interest rate of loans.

The allowance which is made during the year, less amounts released and recoveries of bad debts previously written off, is charged against the revenue and expenditure accounts.

When a loan is deemed uncollectible, it is written off against the related allowance for losses. f. Impairment of financial assets The carrying amounts of NIBTT’s assets that are not carried at fair value, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated and an impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.

Impairment losses are recognised in the statement of comprehensive income.

40

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 4 Summary of significant accounting policies (continued) f. Impairment of financial assets (continued) (i) Losses on loans and advances NIBTT reviews its problem loans and advances at each reporting date to assess whether an allowance for impairment should be recorded in the audited statement of comprehensive income. In particular, judgement by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required.

Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.

In addition to specific allowances against individually significant loans and advances, NIBTT also makes a collective impairment allowance where applicable, against exposures which, although not specifically identified as requiring a specific allowance, have a greater risk of default than when originally granted. This takes into consideration factors such as any deterioration in country risk, industry, and technological obsolescence, as well as identified structural weaknesses or deterioration in cash flows. g. Investment properties Investment properties are properties held by NIBTT to earn rental income or for capital appreciation or both. Property held for a currently undetermined future use is regarded as investment properties as such property is regarded as held for capital appreciation.

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions can be sold separately or leased out separately under a finance lease, the entity accounts for the portions separately as investment properties or property plant and equipment (Note 4 h.) respectively. If the portions cannot be sold separately, the property is investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Otherwise it is considered property plant and equipment (Note 4 h.)

Investment properties are initially measured at cost. After initial recognition, investment properties are measured at fair value based on valuations conducted by an independent professional valuator. Gains and losses arising from the change in fair value are included in the statement of comprehensive income.

The valuators have adopted standard valuation methods and assumed good title, vacant possession and no unduly restrictive covenants or onerous or unusual outgoings running with the land. h. Property, plant and equipment Property held for future use as owner-occupied property, property held for future development and subsequent use as owner-occupied property, property occupied by employees and owner-occupied property awaiting disposal are deemed to be property, plant and equipment.

41

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars)

4 Summary of significant accounting policies (continued) h. Property, plant and equipment (continued) Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses except for artwork and freehold properties which are stated at valuations conducted by independent professional valuators every three years. Freehold properties were professionally valued in June 2016 using the investment method, Note 14. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, only when it is probable that future economic benefits associated with the item will flow to NIBTT and the cost of the item can be measured reliably.

All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

If an asset’s carrying value is increased as a result of a revaluation, the increase is credited directly to reserve under the heading revaluation reserve. If an asset’s carrying value is decreased as a result of a revaluation, the decrease is debited directly to equity to the extent of any credit balance existing in the revaluation reserve in respect of that asset. Any decrease in excess of this amount is recognised in the statement of comprehensive income.

Additionally, for those assets that are revalued as at the statement of financial position date, the accumulated depreciation for the revalued assets are credited to the revaluation reserve.

The accumulated depreciation for revaluated assets is therefore brought to zero.

Depreciation is provided on a straight-line basis at varying rates sufficient to write-off the cost/market value respectively of the assets over their estimated useful lives. The rates used are as follows: Freehold and leasehold properties – 2% on buildings Improvements to premises: Owned – Equal annual instalments over a period of ten years.

Leased – Equal annual instalments over the period of the lease.

Machinery, equipment, furniture and fixtures Machinery – 7.5% - 25% Artwork and motor vehicles – 25% Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds with their carrying amount and are recognised in the revenue and expenditure accounts. i.

Properties being developed for sale (Inventory) Properties available for sale are carried at cost less provisions for impairment. The provision is estimated as the difference between the cost and the selling price of the units available for sale less the estimated cost to complete the units.

42

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 4 Summary of significant accounting policies (continued) j. Provisions Provisions for environmental restoration, restructuring costs and legal claims are recognised when: the NIBTT has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using pretax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. k. Basis of allocation Contribution income and other income have been allocated to the various fund accounts on the basis set out in the Actuarial Review. (i) Contribution income Contribution income is allocated as follows:

Long-term benefits fund Short-term benefits fund Employment injury benefit fund

2017 %

2016 %

89 6 5

89 6 5

100 100

(ii) Other income Other income comprising investment income less expenses, penalty income and pension asset income is allocated to the benefit funds in the ratio of their opening fund balances. Investment expenses comprise direct staff costs and overhead expenses of the investments department and other direct expenses including mortgage management fees and provisions for diminution in value of investments. (iii) Fund ratios Based on the recommendations of the Eighth Actuarial Review and maintained in the Ninth Actuarial Review, NIBTT implemented the following: short-term benefit fund and employment injury benefit fund balances will be maintained at 2.0 times and 10 times the respective benefits incurred during the current year, the remaining excess of income over expenditure is to be allocated to the long-term benefit fund.

These fund allocations are based solely on the ratios recommended by the independent actuary and do not represent NIBTT’s liability to beneficiaries at 30 June 2017.

43

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 4 Summary of significant accounting policies (continued) l.

Revenue recognition (i) Contribution and benefits Contribution income is generally accounted for on the cash basis. An accrual is made at the balance sheet date to take account of all collections up to 15 July of the following year that relate to the current year. Contribution arrears and related penalty and interest are recognised when received as a result of uncertainty in collection and the challenge in estimating and determining contributors in default.

Benefit expenditure is generally accounted for on a cash basis. Benefits paid in the final month of the year which relate to the following year are reflected as a prepayment at the statement of financial position date. (ii) Investment income Income from investments is accounted for on the accrual basis. Interest from commercial loans and debentures is not accrued where instalments are in arrears for more than twelve months.

m. Employee benefits (i) Short term Employee benefits are all forms of consideration given by NIBTT in exchange for service rendered by its employees. These include current or short-term benefits such as salaries, bonuses, NIS contributions, annual leave, and non-monetary benefits such as medical care and loans; post-employment benefits such as pensions; and other long-term employee benefits such as termination benefits.

Employee benefits that are earned as a result of past or current service are recognised in the following manner: short-term employee benefits are recognised as a liability, net of payments made, and charged as expense. Post-employment benefits are accounted for as described below. (ii) Post employment NIBTT contributes to a defined benefit staff pension plan which covers all qualifying employees. Members contribute 5% (2016: 5%) of their pensionable salaries to the Plan whilst NIBTT currently contributes 14% (2016: 14%). All permanent employees are eligible for membership and temporary employees under certain conditions.

The liability recognised in the statement of financial position in respect of defined benefit pension plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on the government bonds are used. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which the arise. Past-service costs are recognised immediately in income.

44

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 4 Summary of significant accounting policies (continued) n. Determination of fair values A number of NIBTT’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods.

When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. (i) Financial assets at fair value through profit or loss As stated in Note 4 e, financial assets at fair value through profit or loss are measured at their fair values based on quoted market prices. Where the instrument is not actively traded or quoted on recognised exchanges, fair value is determined using discounted cash flow analysis recent arm’s length transaction and other valuation techniques. Professional valuations are also used to value these securities. Where fair value cannot be reliably measured, the investment is stated at cost less impairment losses.

The NIBTT uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques.

Level 1 Included in the Level 1 category are financial assets and liabilities that are measured in whole or in part by reference to published quotes in an active market. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

Level 2 Included in the Level 2 category are financial assets and liabilities that are measured using a valuation technique based on assumptions that are supported by prices from observable current market transactions and for which pricing is obtained via pricing services, but where fair values based on broker quotes, investments in private equity funds with fair values obtained via fund managers and assets that are valued based using its own models whereby the majority of assumptions are market observable.

Level 3 Included in the Level 3 category are financial assets and liabilities that are not quoted as there are no active markets to determine a price. These financial instruments are held at cost, being the fair value of the consideration paid for the acquisition of the investment, and are regularly assessed for impairment.

45

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 4 Summary of significant accounting policies (continued) n. Determination of fair values (continued) (i) Financial assets at fair value through profit or loss 30 June 2017

Investment securities Bonds Equities Mutual funds

Level 1 $’000

356,359 7,895,171 116,233 8,367,763 10,457,678 378,851 56,751 10,893,280 873,526 – 51,988 925,514

11,687,563

30 June 2016

Investment securities Bonds Equities Mutual funds

Level 1 $’000

Level 2 $’000

8,274,022 Level 2 $’000

Level 3 $’000

224,972 Level 3 $’000

Total $’000

20,186,557 Total $’000

311,410 7,453,672 549,232 8,314,314 9,154,986 372,445 56,742 9,584,173 979,221 – 51,228 1,030,449 10,445,617

7,826,117

657,202

18,928,936

Movements in Level 3 financial instruments measured at fair value

2017 $’000

2016 $’000

Balance beginning of period 657,202 1,396,897 Foreign asset cash – – Bond adjustment correction – 24 Purchases 117,582 1,054,702 Repayments (549,232) (1,789,638) Transfer out – – Net unrealised (loss)/gain (580) (4,783) Balance at end of period

224,972

657,202

Transfers between Level 2 and 3 (ii) Investment in subsidiaries An external, independent valuation company, having appropriate recognised professional qualifications and experience was contracted to value NIBTT’s investment in subsidiaries.

In determining the value of subsidiaries, three (3) valuation methods were considered.

Under the market approach, the trading multiples method was applied; under the cost approach, the based valuation method and under the income approach, the excess return model was used. The values derived from these approaches were considered baseline.

The baseline values were then applied using an average of the lows and highs of each method. A price range was created and from these scenarios a point estimate was derived using probability estimates for each scenario.

46

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars)

4 Summary of significant accounting policies (continued) n. Determination of fair values (continued) (iii) Investment properties and property, plant and equipment at fair value An external, independent valuation company, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, was used by NIBTT to value its investment property portfolio. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly. (iv) Other The carrying amounts of financial assets and liabilities, included under other assets, cash and cash equivalents and other liabilities, approximate their fair values because of the short-term maturities on these instruments. The carrying values of fixed deposits are assumed to approximate fair value due to their term to maturity not exceeding one year.

30 June 2017

Level 1 $’000

Level 2 $’000

Level 3 $’000

Properties, plant and equipment Investment properties Investment in subsidiaries

– – –

511,625 328,750 –

–

840,375 2,000,488

30 June 2016

Level 1 $’000

– – 2,000,488

Level 2 $’000

Level 3 $’000

Total $’000 511,625 328,750 2,000,488 2,840,863 Total $’000

Properties, plant and equipment Investment properties Investment in subsidiaries

– 333,112 – 350,872 –

– 352 1,843,255

333,112 351,224 1,843,255

–

1,843,607

2,527,591

683,984

Movements in Level 3 financial instruments measured at fair value

2017 $’000

2016 $’000

Balance B/F 1,843,607 1,801,232 Adjustment 156,881 42,375 Balance at end of period

2,000,488

1,843,607

47

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 5 Property, plant and equipment

Land freehold/ leasehold buildings $’000

Machinery equipment furniture and fittings $’000

Motor vehicles $’000

Art $’000

Total $’000

Year ended 30 June 2017 Cost/valuation at beginning of year 340,886 67,152 3,045 1,295 412,378 Purchases 180,096 3,731 254 – 184,081 Transfers (16,978) 16,978 – – – Revaluation/(disposal) – (2,363) – – (2,363) Adjustments/transfers – – – – – At the end of year Accumulated depreciation at beginning of year Current year charge Revaluation Disposal/adjustments At the end of year Net book value

504,004

85,498

3,299

1,295

594,096

9,069 53,317 1,322 – 63,708 1,580 3,435 774 3 5,792 – – – – – – (2,358) – – (2,358) 10,649

54,394

2,096

3

67,142

493,355

31,104

1,203

1,292

526,954

Year ended 30 June 2016 Cost/valuation at beginning of year 88,397 64,593 3,043 1,260 157,293 Purchases 2,935 2,559 454 – 5,948 Transfer from investment property 222,304 – – – 222,304 Revaluation 27,250 – – 35 27,285 Adjustments/transfers – – (452) – (452) At the end of year

340,886

67,152

3,045

1,295

412,378

Accumulated depreciation at beginning of year Current year charge Revaluation Disposal/adjustments

9,608 50,222 1,036 249 61,115 2,231 3,095 740 3 6,069 (2,770) – – (252) (3,022) – – (454) – (454)

At the end of year

9,069

53,317

1,322

–

63,708

331,817

13,835

1,723

1,295

348,670

Net book value Note:

Valuation of land and freehold and leasehold buildings has been expressed by way of open market values as determined by valuations conducted by independent professional valuators every three years.

48

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 5 Property, plant and equipment (continued) In 2014, the National Insurance Board of Trinidad and Tobago initiated the development of lands previously held for investment situated at Queens Park East, Port of Spain. A decision was taken that the development will see about 40% of the structure being used for Head Office operations and the other 60% to generate rental revenue. As a result, reclassification of the investment property to property, plant and equipment was made. The construction started in March 2015, with the structure being a Class A building with Leed Silver certification and projected to cost $372 million with the construction completed in January 2017 and the building officially occupied in February 2017.

6 Investment properties

Appreciation/

depreciation Reclassified

1 July 2016 Additions in fair value to PPE

$’000 $’000 $’000 $’000

2017 $’000

Buildings

114,500

– (16,650)

– 97,850

Land

236,724

–

(5,824)

– 230,900

351,224

– (22,474)

– 328,750

Appreciation/

depreciation

1 July 2015 Additions in fair value Adjustments

$’000 $’000 $’000 $’000 85,245

2016 $’000

Buildings

193,059

(17,500) (146,304) 114,500

Land

226,724

– 86,000 (76,000) 236,724

419,783

85,245 68,500 (222,304) 351,224

Rental income from investment properties during the year amounted to $5 million (2016: $6.7 million). Direct operating expenses incurred on investment properties during the year amounted to $3.48 million (2016: $5 million).

The valuation of the investment properties was conducted as at June 2017 by an independent professional valuator in accordance with the Royal Institute of Chartered Surveyors valuation – professional standards.

The Income Approach which considers a property’s potential cash flow and analyses the present worth of the anticipated future benefits to the owner over an assumed holding period was the methodology used to value the buildings.

49

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 6 Investment properties (continued) The Market Approach and Residual technique were utilised for the valuation of land. The Market Approach measures the value of a property by comparing recent sales or offerings of similar or substitute property and related market data. The Residual Technique begins with an estimate of gross proceeds of sale that are expected from the sale of developed lots in the proposed subdivision. All costs (hard and soft) associated with the development of the proposed subdivision, together with an allowance for entrepreneurial profit are then deducted from the estimated gross proceeds of sale. Development costs obtained from engineers and entrepreneurial profit is based on discussions with developers. This technique was utilised in the valuation of the lands at Palmiste.

For all other properties where the market approach was adopted, the value in the audited financial statements is based on its highest and best use.

7 Investment in subsidiary companies The investments in subsidiary companies comprise the following companies reported at fair value:

NIPDEC TTMF HMB

2017 $’000

2016 $’000

263,314 550,134 1,187,040

208,580 449,966 1,184,709

2,000,488

1,843,255

Movement in the carrying value of investments in subsidiaries is as follows:

50

2017

NIPDEC $’000

TTMF $’000

HMB $’000

Total $’000

Balance as at 30 June 2016 Purchases Market value adjustments

208,580 – 54,734

449,966 – 100,168

1,184,709 7,800 (5,469)

Balance as at 30 June 2017

263,314 550,134 1,187,040 2,000,488

2016

NIPDEC $’000

TTMF $’000

HMB $’000

Total $’000

Balance as at 30 June 2016 Purchases Market value adjustments

202,467 – 6,113

420,224 – 29,742

1,117,130 – 67,579

1,739,821 – 103,434

Balance as at 30 June 2015

208,580

449,966

1,184,709

1,843,255

1,843,255 7,800 149,433

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars)

7 Investment in subsidiary companies (continued) The cost of investment in subsidiaries is as follows:

NIPDEC 2017 $’000

TTMF $’000

HMB $’000

Total $’000

Balance as at 30 June 2016 Purchases

25,000 –

7,200 –

488,604 7,800

520,804 7,800

Balance as at 30 June 2017

25,000

7,200

496,404

528,604

HMB $’000

Total $’000

2016

NIPDEC $’000

TTMF $’000

Balance as at 30 June 2015 Purchases

25,000 –

7,200 –

488,604 –

520,804 –

Balance as at 30 June 2016

25,000

7,200

488,604

520,804

Shares were purchased in March 14, 2017 in HMB to the value of $7.8 million dollars.

8 Financial assets at fair value through profit or loss

Investments comprise: Bonds (8 a.)

Equities (8 b.)

Mutual funds (8 c.)

2017 $’000 8,367,763 10,893,280 925,514

20,186,557

2016 $’000 8,314,314 9,584,173 1,030,449 18,928,936

The analysis below shows the composition of the various investment categories. a. Bonds Foreign 285,129 69,953 Government 5,550,586 5,959,144 Corporate 2,532,048 2,285,217

8,367,763

8,314,314

Local and corporate bonds earn interest at rates varying between 0.21% and 12.25% (2016: 0.89% and 12.25%). b. Equities Quoted Foreign 3,879,097 2,582,420 Local 6,578,582 6,572,566 Unquoted 435,601 429,187 10,893,280

9,584,173

51

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars)

8 Financial assets at fair value through profit or loss (continued)

c. Mutual funds

2017 $’000

2016 $’000

Quoted Foreign 86,045 80,321 Local 787,481 898,900 Unquoted 51,988 51,228

9 Mortgage advances

925,514

1,030,449

2017 $’000

2016 $’000

Mortgage balances are stated net of the provisions for impairment as follows: Gross mortgage advances Provision for non-performing advances

54,381 (51,746) 2,635

57,675 (51,746) 5,929

The movement in the provision for non-performing advances was as follows: Provisions as at 1 July Movement for the year

51,746 –

51,997 (251)

Provisions at end of period

51,746

51,746

Mortgage advances earn interest at an average effective rate of 8.00% (2016: 8.00%).

10 Property being developed for sale In 2004, the NIBTT commenced development of a residential gated community in D’Abadie, Omeara known as Riverwoods, comprising single-family homes and townhouses. The construction of the single family homes were divided into four (4) phases, two (2) of which have been completed. The two (2) remaining phases were successfully completed in 2017.

The carrying value of properties being developed for sale was arrived at as follows:

2017 $’000

2016 $’000

Cost as at 1 July Previous cost allocated for completion Less provision for diminution in value

31,997 (8,618) (4,670)

59,625 – (27,628)

18,709

31,997

The movement in the provision for diminution in value of property being developed for sale:

52

Provisions as at 1 July Cost written-off in the period Estimated increase/(decrease) in costs to completion

27,628 (22,958) –

12,694 (2,029) 16,963

Provisions at end of period

4,670

27,628

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 11 Other assets

a. Other assets

2017 $’000

2016 $’000

Investment income receivable 68,013 Sundry debtors 89,844 Prepayments 324,200 Contributions receivable 337,518 Claims receivable –

59,734 61,709 325,787 335,628 –

782,858

819,575

Claims receivable: Clico Investment Bank Limited (CIB) Gross amount Provision for impairment

739,965 (739,965)

Carrying amount

–

728,234 (728,234) –

Over the period September 2008 to January 2009, the NIBTT deposited sums of money with Clico Investment Bank Limited (CIB) as Investment Note Certificates (INC). In November 2009, legal action was initiated by the NIBTT due to breach on the part of CIB claiming the sums of US$102,506,129 and TT$46,493,563. On 27 September 2011, judgement was awarded in favour of the NIBTT in the sums of both claims with interest at the rate of 6% per annum from the dates of maturity of each deposit to the date of judgement.

On or about October 2011, CIB was placed in compulsory liquidation and Deposit Insurance Corporation (DIC) appointed Liquidator.

By letters dated 31 July 2017, the DIC acknowledged and admitted the NIBTT’s claims up to date of appointment of the Liquidator (October 17, 2011) as follows: (i) TT$45,200,876 and TT$6,577,051 principal and interest respectively; and (ii) US$99,652,121 and US$14,943,218 principal and interest respectively.

DIC also advised that these amounts have been admitted by the Liquidator and are listed among the other unsecured creditors of Clico Investment Bank Limited – In Compulsory Liquidation for which settlement can take place only after the secured creditors have been settled. In light of this, the NIBTT has adopted a prudent approach and maintained the full provision on this debt established in 2013. The NIBTT remains committed to exhausting all efforts to recover this debt.

12 Cash and cash equivalents

2017 $’000

2016 $’000

Cash at bank Cash at bank (US$) Money Market Fund (TT$) Money market fund (US$)

2,450,562 97,012 2,461 180,366

1,595,662 1,526,942 2,437 76,358

2,730,401

3,201,399

53

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 13 Benefits fund The benefits fund comprise the following funds: •

•

•

Long-term benefits fund which is held to cover retirement pensions, retirement grants, invalidity and survivor’s benefits in respect of qualifying persons.

Short-term benefits fund which is held to cover sickness and maternity benefits and funeral grants in respect of qualifying persons.

Employment injury benefits fund which is held to cover employment injury benefits to eligible insured persons.

As described in Notes 2 and 4, the benefits fund balances do not represent NIBTT’s liability to beneficiaries but instead reflect the allocation of the accumulated fund based on the application of certain ratios as advised by NIBTT’s Actuary.

14 Revaluation reserve The revaluation reserve reflects gains or losses on revaluation of freehold properties.

2017 $’000

2016 $’000

Opening balance for the period Revaluation of property Write-back of depreciation

72,624 – –

42,317 27,285 3,022

Closing balance for the period

72,624

72,624

2017 $’000

2016 $’000

Sundry creditors and accruals Provision for other payables

116,868 12,314

144,837 12,439

129,182

157,276

15 Other liabilities

16 Post-employment benefit The amounts recognised in the statement of financial position are as follows:

Net liability in balance sheet Present value of defined benefit obligation Fair value of assets Deficit Effect of asset ceiling

2017 $’000 960,938 (949,804) 11,134 –

2016 $’000 933,290 (913,478) 19,812 –

Net defined benefit liability 11,134 19,812

54

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 16 Post-employment benefit (continued)

2017 $’000

2016 $’000

Movement in present value of defined benefit obligation Defined benefit obligation at start of year 933,290 993,455 Current service cost

24,222 19,846 Interest cost 50,197 48,906 Members’ contributions 4,112 3,501 Past service cost – – Remeasurements -Experience adjustments (9,076) (31,047) -Actuarial (gains)/losses from changes in demographic assumptions – – -Actuarial gains from change in financial assumptions – (70,325) Benefits paid (41,807) (31,046) Defined benefit obligation at end of year

960,938

933,290

The defined benefit obligation is allocated between the Plan’s members as follows: Active Deferred members Pensioners The weighted average duration of the defined benefit obligation.

54% 1% 45%

60% 1% 39%

15.6 years

15.4 years

97% of the value of the benefits for active members is vested.

21% of the defined benefit obligation for active members is conditional on future salary increases.

Movement in fair value of plan assets Fair value of plan assets at start of year Interest income Return on plan assets, excluding interest income Board contributions Members’ contributions Benefits paid Administrative expense allowance

2017 $’000

2016 $’000

913,478 49,527 13,078 11,416 4,112 (41,807) –

957,505 47,438 (73,738) 9,818 3,501 (31,046) –

Fair value of plan assets at end of year 949,804 Actual return on plan assets

913,478

62,605

26,300

Asset allocation Regionally listed equities (prices quoted on regional exchanges) 234,546 Overseas equities (developed markets outside of CARICOM) 128,682 TT$ Gov’t and Gov’t Guaranteed bonds (no quoted market prices) 455,697 TT$ corporate bonds (no quoted market prices) 83,717 US$ bonds (no quoted market prices) 11,417 Mortgages (no quoted market prices) 85 Local equity/income mutual fund 3,761 Cash and cash equivalents 31,899

229,046 105,009 436,342 87,129 11,145 79 3,559 41,169

Fair value of plan assets at end of year

949,804

913,478

55

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 16 Post-employment benefit (continued) All asset values as at 30 June 2017 were provided by the Plan’s Investment Manager (First Citizens Asset Management Limited).

The majority of the Plan’s government bonds were issued by the Government of Trinidad and Tobago, which also guarantees many of the corporate bonds held by the Plan.

2017 $’000

2016 $’000

Expense recognised in profit or loss Current service cost Net Interest on net defined benefit liability Past service cost Administrative expense allowance

24,222 670 – –

19,846 1,468 – –

Net pension cost

24,892

21,314

Remeasurements recognised in other comprehensive income Experience gains Effect of asset ceiling

(22,154) –

(27,634) –

Total amount recognised in other comprehensive income

(22,154)

(27,634)

Reconciliation of opening and closing balance sheet entries Opening defined benefit liability Net pension cost Remeasurements recognised in other comprehensive income Board contributions paid

19,812 24,892 (22,154) (11,416)

35,950 21,314 (27,634) (9,818)

Closing defined benefit liability 11,134 19,812

Summary of principal assumptions as at 31 December Discount rate General salary increases Salary increases due to age, merit and promotion Total individual salary increases Future pension increases Life expectancy at age 60 for current pensioner in years -Male -Female Life expectancy at age 60 for current members age 40 in years -Male -Female

56

2017 5.5% 4.0% 1.0% 5.0% 3.0%

2016 5.5% 4.0% 1.0% 5.0% 3.0%

21.0 25.1

21.0 25.1

21.4 25.4

21.4 25.4

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars)

16 Post-employment benefit (continued) Sensitivity analysis

1%pa lower 1%pa higher

$’000 $’000 Discount rate Future salary increases Future pension increases

162,589 (30,800) (97,564)

(127,086) 35,339 117,892

An increase of one (1) year in the assumed life expectancies shown above would increase the defined benefit obligation at 30 June 2017 by $21.7 million.

These sensitivities were calculated by recalculating the defined benefit obligations using the revised assumptions.

Funding The Board meets the balance of the cost of funding the defined benefit Pension Plan and the Board must pay contributions at least equal to those paid by members, which are fixed. The funding requirements are based on regular (at least every three (3) years) actuarial valuations of the Plan and the assumptions used to determine the funding required may differ from those set out above. The Board expects to pay contributions of $11.9 million to the Pension Plan during 2017/18. This increase is based on the completion of the negotiations for the outstanding period.

17 Net realised investment income

2017 $’000

2016 $’000

Interest income Dividend income Rental income Miscellaneous income Income – mutual funds Income – foreign equity Income – foreign bonds Gain on sale of foreign equities Gain/(loss) from foreign exchange Gain on sale of bonds

386,548 382,362 6,702 7,142 27,998 58,567 4,496 117,411 6,301 15,548

356,668 377,129 6,697 8,923 11,962 22,819 2,466 192,019 74,059 9,060

Total realised investment income Investment expense

1,013,075 (77,135)

1,061,802 (54,529)

Net realised investment income

935,940

1,007,273

Local equity Foreign equity Mutual funds Gains from foreign exchange Investment property valuation Foreign bonds Local bonds

(186,572) 442,729 4,533 87,150 (21,250) 115 66,364

(702,537) (220,285) (20,827) 165,409 68,500 1,956 (443,610)

393,069

(1,151,394)

18 Net unrealised investment losses

57

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars)

19 Staff salaries, allowances and benefits

Pension contributions Salaries and other related expenses Group health plan National insurance contributions Training Travelling and subsistence Other

2017 $’000

2016 $’000

11,246 10,757 111,639 125,826 2,179 2,012 6,904 5,580 1,081 1,384 1,348 2,247 566 504 134,963

148,310

20 Other expenses Janitorial Data processing services Advertising and publicity Bank charges Electricity Insurance Legal and professional Printing stationery and office supplies Rent Repairs and maintenance – equipment Repairs and maintenance – premises Security Pension administration Telephone Other

3,445 – 3,265 1,534 2,761 2,081 10,909 3,282 8,349 2,652 6,477 8,997 2,694 6,016 9,800

72,262

2,606 2,963 6,927 1,361 2,940 1,704 9,668 1,888 8,350 2,713 8,523 8,527 3,544 5,910 3,321 70,945

As at 30 June 2017, administrative expenses amounted to 4.64% (2016: 5.31%) of contribution income and this did not exceed the limit established by NIBTT of 7.5%.

21 Contingent liabilities and capital commitments a. Pending litigation and outstanding appeals As at 30 June 2017, there were certain legal proceedings outstanding against NIBTT. No provision has been made as professional advice indicates that it is unlikely that any significant loss will arise. b. Industrial relations A provision of $13.4M (2016: $6.5M) has been made in the accounts for wage negotiations up to June 2017 for bargaining units A & B staff.

2017 2016

$’000 $’000

58

13,382

6,501

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars)

21 Contingent liabilities and capital commitments (continued) c. Capital commitments Capital commitments originally consist principally of amounts relating to the completion of the construction of the head office building of the National Insurance Board of Trinidad and Tobago at a total cost of $372 million and the commencement of the construction of the Tobago office and mall facility in 2016/2017 at an estimated cost of $220 million. The Tobago project never started as the returns on the project did not meet the organisation minimum requirements. Further, the Board executed contracts in the sum of $29.9 million for the completion of phases 3 and 4 of the Riverwoods Housing Development Project, which was completed in 2017. At the end of this financial year, there continues to be small commitments as it relates to the retention on the completed head office building ($18.9 million) and the Riverwoods Housing Development Project ($4.6 million).

Capital commitments

2017 $’000

2016 $’000

23,642

374,900

22 Related party transactions and balances Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operating decisions.

These transactions were carried out on normal terms and conditions at market rates.

The following table provides the total amount of balances and transactions, which have been entered into with related parties for the relevant financial year. a. Transactions with related parties During the years ended 30 June 2017 and 2016, NIBTT carried out the following significant transactions with related parties during the course of normal operations:

2017 $’000

2016 $’000

Net investments/(redemptions) in debt of subsidiary companies Interest received

17,323 60,836

62,024 38,829

391,026

395,014

b. Balances due from related parties The amounts due from related companies comprise the following: Balance due c. Transactions with key management personnel In addition to their salaries, NIBTT also provides non-cash benefits to executive officers and contributions to a post-employment defined benefit plan on their behalf. The key management personnel compensations are as follows: Short-term employee benefits Post-employment benefits

3,784 1,206

3,654 806

59

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 23 Taxation The fund was established under the laws of Trinidad and Tobago and is not subject to income, capital gains or other corporate taxes. The fund’s operations do not subject it to taxation in any other jurisdictions, except for withholding taxes imposed by certain countries on investment income and capital gains for investments domiciled in those countries.

24 Financial risk management The NIBTT’s activities expose it to credit risk, liquidity risk and market risk. Its principal financial instruments comprise investment securities, mortgage advances, fixed deposits, cash and cash equivalents and borrowings. Income earned from investments, together with the excess of contributions after benefits are paid, are used to earn above average interest rate margins through the investing in high-quality, high-yielding assets with acceptable levels of risk.

Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. NIBTT is mainly exposed to credit risk with respect to its mortgage portfolio, bonds and deposits. NIBTT limits its exposure with respect to its bond portfolio by investing in only bonds issued by the Government of Trinidad and Tobago or institutions with high credit worthiness.

In respect to the Mortgage portfolio, constant monitoring is also employed. The necessary contact with mortgagors is maintained to ensure that payments are received in a timely manner, where necessary mortgage rescheduling is done, which considers the borrowers new financial position. In the event where recovery may seem doubtful, provisions are set aside to cover any potential losses.

The carrying amount of loans and advances, investment securities, matured deposits and cash balances at banks represent the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Loans and advances

2017

2016

Mortgage advances Gross amount

54,381

57,675

Impaired Gross amount Allowance for impairment

51,746 (51,746)

51,746 (51,746)

Past due but not impaired Gross amount Past due comprises 30-60 days 61-90 days 91-180 days Over 180 days

–

–

4,096

4,824

3,063 566 127 340

3,289 443 288 804

Carrying amount

4,096

4,824

Neither past due nor impaired Gross amount

2,365

4,494

NIBTT granted mortgages based on evaluations of the mortgagees’ financial situation, and reports monthly on the exposure of potential losses from mortgages.

60

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 24 Financial risk management (continued) Investment securities The amounts in relation to investment securities are neither past due nor impaired. As such, no provisions have been made against the amounts.

NIBTT holds collateral to cover its credit risks associated with specific investment securities considered most at risk.

The maximum exposure to credit risk for investment securities at the reporting date by sector was:

Concentration by location

2017 $’000

2016 $’000

Trinidad and Tobago North America Caribbean Territories Emerging markets

10,787,390 216,600 68,529 28,280

11,425,903 69,953 – 25,786

Total geographic concentration

11,100,799

11,521,642

The maximum exposure to credit risk for investment securities at the reporting date by location was: Concentration by industry type Cash and cash equivalent Bonds Mortgage advances

2,730,401 8,367,763 2,635

3,201,399 8,314,314 5,929

Total credit risk exposure

11,100,799

11,521,642

The Board has established a credit quality review process involving regular analysis of the ability of borrowers and other counterparties to meet interest and capital repayment obligations. a. Bonds The Board limits its exposure to credit risk by investing in liquid securities and with counterparties that have high credit quality. As a consequence, management’s expectation of default is low.

The Board has documented investment policies which facilitate the management of credit risk on investment securities and resale agreements. The Board’s exposure and the credit ratings of its counterparties are continually monitored. b. Cash and cash equivalents Cash and cash equivalents are held in financial institutions which management regards as strong and there is no significant concentration. The strength of these financial institutions is continually reviewed by the Mark to Market Committee. c. Receivables Exposure to credit risk on receivables is managed through regular analysis of the ability of continuing customers and new customers to meet repayment obligations.

61

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 24 Financial risk management (continued) Liquidity risk Liquidity risk is the risk that NIBTT will encounter difficulty in meeting obligations associated with financial instruments when they fall due under normal and stress circumstances. To mitigate this risk the daily liquidity position for both operational and the payment of benefits is monitored to ensure that the bank accounts are adequately serviced. Transfers are done between bank accounts and the excess of contribution income over benefit payments are taken up and invested to earn above average interest rate margins through investing in high quality, high yielding assets with acceptable risk.

The following are the contractual maturities of financial liabilities:

As at 30 June 2017 Other liabilities As at 30 June 2016 Other liabilities

Up to one year $’000

One to five years $’000

Over five years $’000

Total $’000

129,182

–

–

129,182

157,276

–

–

157,276

Parliament mandated that benefit payments be made from current monthly contributions as per the National Insurance Act. Market risk Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. NIBTT is primarily exposed to interest rate risk with respect to its fixed rate debentures, government securities and bonds.

At the reporting date, the interest rate profile of NIBTT’s interest-bearing financial instruments was:

3 mths- 1 yr- Over Asset allocation – <1 mth 1-3 mths 1 yr 5 yrs 5 yrs 2017 $’000 $’000 $’000 $’000 $’000

Noninterest bearing $’000

Grand total $’000

Bonds (local) 161,500 190,449 797,970 2,171,700 4,644,782 – 7,966,401 Bonds (foreign) – – – 216,600 68,529 – 285,129 OMO’s – 101,457 – 14,776 – – 116,233 Equities (local) – – – – – 7,014,183 7,014,183 Equities (foreign) – – – – – 3,879,097 3,879,097 Mutual funds (local) – – – – – 839,469 839,469 Mutual funds (foreign) – – – – – 86,045 86,045 Investment income receivables – – – – – 68,013 68,013 Cash and cash equivalents 2,202,851 182,827 – – – 344,723 2,730,401 Total

62

2,364,351 474,733 797,970 2,403,076

4,713,311 12,231,530 22,984,971

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars)

24 Financial risk management (continued)

3 mths- 1 yr- Over Asset allocation - <1 mth 1-3 mths 1 yr 5 yrs 5 yrs 2016 $’000 $’000 $’000 $’000 $’000

Noninterest bearing $’000

Grand total $’000

Bonds (local) 211,842 169,609 831,884 2,600,415 3,881,378 – 7,695,128 Bonds (foreign) – – – 69,952 – – 69,952 OMO’s 406,845 75,000 67,387 – – – 549,232 Equities (local) – – – – – 7,001,753 7,001,753 Equities (foreign) – – – – – 2,582,420 2,582,420 Mutual funds (local) – – – – – 898,899 898,899 Mutual funds (foreign) – – – – – 80,321 80,321 Investment income receivables – – – – – 59,734 59,734 Cash and cash equivalents 2,860,760 78,795 – – – 261,844 3,201,399 Total

3,479,447 323,404 899,271 2,670,367 3,881,378 10,884,971 22,138,848

Fair value sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates at the year-end would have increased/ (decreased) the total funds by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2015.

2017 2016 100bp increase 100bp decrease

$’000 $’000 June 2017

(431,814)

431,814

June 2016 (400,198)

400,198

Currency risk The NIBTT is exposed to currency risk with respect to its investments in cash and cash equivalents denominated in United States dollars. Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.

The portfolio is monitored on a monthly basis.

63

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 24 Financial risk management (continued) Currency risk (continued) NIBTT’s exposure to foreign currency risk based on notional amounts was as follows:

As at 30 June 2017 Assets Cash and cash equivalents Local bonds Foreign bonds Foreign equities Local equities Mutual funds Mortgage advances Other assets

2,453,023 6,869,398 – 53,830 6,634,804 811,189 2,635 819,575

277,378 1,213,236 285,129 3,825,267 379,379 114,325 – –

Total financial assets

17,644,454

6,094,714 23,739,168

Liabilities Other liabilities Total financial liabilities Net currency risk exposure

US $’000

Total $’000 2,730,401 8,082,634 285,129 3,879,097 7,014,183 925,514 2,635 819,575

129,182

–

129,182

– 129,182

17,515,272

129,182

6,094,714 23,609,986

As at 30 June 2016 Assets Cash and cash equivalents Local bonds Foreign bonds Foreign equities Local equities Mutual funds Mortgage advances Other assets

TT $’000

US $’000

Total $’000

1,598,100 7,501,952 – 49,000 6,628,789 924,342 5,929 782,858

1,603,299 742,408 69,953 2,533,420 372,964 106,107 – –

3,201,399 8,244,360 69,953 2,582,420 7,001,753 1,030,449 5,929 782,858

Total financial assets

17,490,970 5,428,151 22,919,121

Liabilities Other liabilities Total financial liabilities Net currency risk exposure

64

TT $’000

157,276

–

157,276

– 157,276

17,333,694

157,276

5,428,151 22,761,845

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 24 Financial risk management (continued) The following significant exchange rates were applied during the year:

USD

Average mid rate 30 June 30 June 2017 2016 6.7652

6.6508

Reporting date spot rate 30 June 30 June 2017 2016 6.7652

6.6508

Sensitivity analysis A 1% strengthening of TTD against USD at year end would have increased/(decreased) the total funds by the amount shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2014.

TTD

Total funds year ended 30 June 2017 2016 $’000 $’000 (58,810)

(54,281)

A 1% weakening of the TTD against USD at year end would have had the equal but opposite effect to the above currencies on the amounts shown above, on the basis that all other variables remain constant.

2017 2016

$’000 $’000 TTD

58,810

54,281

25 Staff complement The staff complement as at 30 June 2017 was 651 (2016: 649).

26 Subsequent events There were no subsequent events noted by management up to the date of authorisation of the special purpose financial statements that require adjustment to or disclosure in these special purpose financial statements.

65

YEAR IN REVIEW

Opening Ceremony of NIBTT Headquarters at QPE, Port of Spain

EDâ&#x20AC;&#x2122;s End of Year Open House

Customer Appreciation

66

NIBTT Corporate Headquarters

Awarded Gold certification under the LEED 2009 New Construction and Major Renovations rating system as a showcase example of sustainability.

NIBTT Key Hand-Over Ceremony

67

Tunapuna Reopening Ceremony

Divali

Childrenâ&#x20AC;&#x2122;s Christmas Party

68

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