FNPF Annual Report 2012 by Keep The Faith

Lautoka Branch Drasa Avenue, Lautoka Phone: (679) 666 1888 Fax: (679) 666 5232

Labasa Branch Rosawa Street, Labasa Phone: (679) 881 2111 Fax: (679) 881 2741

Phone: (679) 330 7811 Fax: (679) 330 7611 Email: information@fnpf.com.fj Website: www.myfnpf.com.fj

Nadi Agency Shop 2, Lot 13, Concave Subdivision, Namaka, Nadi Phone: (679) 323 8018, 323 8006 Fax: (679) 672 8982

Savusavu Agency PO Box 89, Savusavu Main Street, Savusavu Phone: (679) 885 3396 Fax: (679) 885 3397

Valelevu Agency Valelevu Complex Building, Saqa Place, Nasinu Phone: (679) 334 3670 Fax: (679) 334 3670

Ba Agency Ganga Singh Street, Ba CBD Phone: (679) 667 0009 Fax: (679) 667 0009

www.myfnpf.com.fj

ID F CON

PI RI NG

Suva - Head Office Provident Plaza Two 33 Ellery Street, Suva Private Mail Bag, Suva, Fiji.

EN CE

EATING VAL R C UE

S IN

ANNUAL REPORT

EN CE

EATING VAL R UE C

PI RI NG

ID F CON

S IN

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

ABOUT THE FUND

TABLE OF CONTENT

he Fiji National Provident Fund is Fiji’s largest financial institution. It is the only superannuation fund in the country that is mandated by law to collect compulsory contributions from employees and employers towards the retirement savings of all workers in Fiji. Apart from retirement savings, the FNPF also provides pre-retirement benefits to members such as housing, medical and education assistance. We have branches and agencies in Suva, Lautoka, Labasa, Nadi, Ba, Savusavu and Valelevu.

Bay Resorts Limited, Holiday Inn Suva and 25 per cent of the Grand Pacific Hotel.

2012 HIGHLIGHTS 4

FNPF was founded in 1966 under the FNPF Act. Over the years the Act has been amended to address the changing needs of members inclusive of the introduction of the Pension Scheme in 1975, allowances for members’ to withdraw their contributions for housing assistance in 1976 and 1982, the introduction of the Village Housing Scheme in 1985, and the review of pension in 1999. The FNPF Decree 2011 was promulgated in November, 2011 introducing major structural changes to the Fund including the adoption of the new pension business based on actuarially fair and sustainable rates.

Our vision is to secure our members’ future by growing their retirement savings. We have strong values, which are well embedded in our culture. We believe that these values will help us deliver our strategy:

BOARD MEMBERS 7

As at 30 June 2012, FNPF’s total assets were valued at $3.9 billion and total membership stood at 368,186. FNPF is a major investor in Fiji and one of the country’s largest property owners. We own 58 per cent of Amalgamated Telecom Holdings Limited, 75 per cent of Home Finance Company Limited, and fully own the FNPF Investment Limited (FIL) that owns the Natadola

FNPF ORGANISATION STRUCTURE 6 CHAIRMAN’S REPORT 8 EXECUTIVE MANAGEMENT 10 CHIEF EXECUTIVE OFFICER’S REPORT

• Accountability – being answerable and having the courage and honesty to take ownership of our actions • Fairness – treating everyone in an equitable and non-discriminatory manner • Team work – supportive of others efforts, loyal to one another personally and professionally • Integrity – being honest and fair to all our stakeholders • Innovation – continuously developing and improving our services and products • Excellence – always striving to maintain the highest standards

MANAGEMENT TEAM 13 YEAR IN REVIEW 14 Board 14 Corporate Governance 15 Internal Audit 17 Investment 18 Fixed Income 19 Equities 20 Treasury 20 FNPF Subsidiaries 21 Operations 22

THE FNPF GROUP COMPRISES STRONG LOCAL AND INTERNATIONAL BRANDS SUCH AS:

Legal 24

Information Communication & Technology

Administration & Archives 26

Human Resources & Development

PRIME Services 28

FINANCIAL STATEMENT 31

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

2012 HIGHLIGHTS

SUMMARY OF KEY INDICATORS FY2008-2012

2008

2009

Employers 6,701 Membership 352,358 Members’ Funds ($billions) 2.6 Contributions ($millions) 281.7 Interest paid to members ($millions) 131.1 Interest rate credited to Members (%) 6% Withdrawals ($millions) 297.7 Investment Portfolio ($billions) 3.1 Annuity payments ($millions) 41.2 Investment Income ($millions) 194.0 Total Assets ($billions) 3.5

6,944 357,662 2.7 288.5 113.6 5% 352.3 3.2 43.4 227.4 3.3

2010

2011

7,105 364,717 2.8 292.3 121.2 5% 277.5 3.4 46.8 219.5 3.5

SUMMARY OF MEMBER WITHDRAWALS FY2008-2012

Total assets increased to

2012

7,508 368,186 3.0 303.5 133.6 5.25% 309.5 3.5 49.1 238.8 3.8

7,840 372,831 3.2 317.27 132.8 5% 318.2 3.5 43.2 249.9 3.9

GROUNDS OF WITHDRAWALS

2008

2009

2010

2011

2012

55 years and over ($millions) Death ($millions) Disability ($millions) Migration ($millions) Marriage ($millions) Non-Citizens migrating ($millions) Partial ($millions) Housing transfers ($millions) Special Death Benefit ($millions)

58.0 12.3 4.3 33.3 1.0 7.4 97.0 36.1 8.1

75.4 12.5 2.3 39.8 2.0 6.3 135.7 30.6 6.3

86.9 11.6 2.4 24.7 1.0 5.6 61.7 29.1 8.7

120.7 10.7 3.6 31.9 0.0 5.1 45.2 33.3 9.8

117.5 15.1 3.5 37.8 0.0 6.5 45.5 40.2 8.7

$3.9 billion compared with $3.8 billion in 2011

Member’s balance totaled from $3.0 billion last year

implemented by the Fund to ensure the fund’s continuing sustainability, benefits to members and building public awareness on financial issues. This included the Fund’s efforts in promoting, implementing and bench

marking good international practices. FNPF was selected by an independent, international jury co-ordinated by ISSA. Mr Taito said the award is a testament of the FNPF Reform programme, specifically the resolve and sacrifices made by the Board, Management and staff with the unwavering support of Government. He added that he was humbled by this recognition, given that FNPF is the first superannuation in the region to receive this award from ISSA, an international body founded in 1927. Mr Kodagoda commended management and staff for their efforts during the Pension Reform implementation, stating that the awards were indeed a milestone despite the challenges faced during the financial year.

282,239

$3.2 billion

Total benefit payments to members (including pension and SDB) was

FNPF RECEIVES INTERNATIONAL AWARDS FOR PENSION REFORM FNPF became the first superannuation fund in the Pacific islands to receive two merit awards from the International Social Security Association (ISSA). The awards were presented by the President of ISSA Mr Errol Frank to FNPF Chairman Mr Ajith Kodagoda and CEO, Mr Aisake Taito. The ISSA with its headquarters in Geneva consists of 360 member organizations representing 160 countries. The ISSA Good Practices and Merit award programme is organized over a three year cycle and has gained international attention from social security institutions. The extension of Social security is a central priority of the ISSA. ISSA recognised the good practices

Fund’s active members increased by 1,953 to

$318.3 million, an increase of $8.7million from last year

Implementation new FNPF Pension Scheme

Opening of

Total investment income was

new Namaka Agency

$249.9 million

Interest credited to members on

in 2012

30 June 2012,

FNPF’S THE OWNER OF THE AWARD-WINNING INTERCONTINENTAL FIJI GOLF RESORT & SPA, RECOGNISED FOR THE FOLLOWING: South Pacific

• September 2012

• February 2012 - Fiji Excellence in Tourism

• Hotel Management ‘Best Fijian Property’

Awards 2011

Award 2012

• Incentive Events, Tours and Transport: Intercontinental Fiji Golf Resort & Spa

• Hotel Management ‘ Service to the Community’ Award 2012

• Accommodation Deluxe: InterContinental Fiji Golf Resort & Spa

• Best International Hotel/Resort New Zealand Travel Industry Awards

• Restaurants & Dining: Navo at the

2012

InterContinental Fiji Golf Resort & Spa • February 2012 - Spice Magazine Hot 100:

• September 2012 - World Travel Award Nominations:

Hotels and Resorts • April 2012 – Luxury Travel Gold List 2012

• Best Hotel for Relaxation/Spa (ranked 9)

Australasia’s Leading Resort 2012 Australasia’s Leading Family Resort 2012

– South Pacific

• Best Overseas Family Resort (ranked 3)

Australasia’s Leading Golf Resort 2012

• Best Hotel for Luxury (ranked 12) –

• Best Overseas Golf Resort (ranked 4)

• February 2012- Trip Advisor

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

5% totaling

$132.8 million Contributions collected was

$317.3 million, from $303.5 million in 2011

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

6 ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

Direct Reporting Lines Core Functionalities for Reporting Lines

Treasury

Projects

Properties

Fixed Income

Member Benefits

Branches & Agencies

Information Centre

Customer Services

Employer Services

Equities (Listed & Unlisted) Commercial Loans/Credit

AGM Member Services

Chief Investment Officer

Finance

Chief Financial Officer

Project Management

Computer Operations

Systems Development

Chief Information Officer

CHIEF EXECUTIVE OFFICER

BOARD

FNPF ORGANISATION STRUCTURE

Research & Product Development

Actuary

Public Relations & Corporate Communications

Strategic Planning, Monitoring & Evaluation

AGM PRIME

Board Secretariat

Human Resources

Administration & Procurement

Legal

Risk & Corporate Governance

Internal Audit

Change Management

FNPF ORGANISATION STRUCTURE BOARD MEMBERS

MR AJITH KODAGODA CHAIRMAN

MR TOM RICKETTS DEPUTY CHAIRMAN

MR TEVITA KURUVAKADUA

www.myfnpf.com.fj www.myfnpf.com.fj

MR TAITO WAQA

MR SASHI SINGH

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

“

FNPF Decree 2011 Promulgated on 25 November 2011, the Decree provided the framework that enabled the Fund to commence the implementation of two key reform initiatives – the restructuring of the Pension Scheme and the strengthening of the Fund’s governance standards.

Pension Restructure The priority of the Fund’s reform agenda was the restructure of the pension scheme to protect the future of our members, which was achieved through the following changes:

New Pension Scheme On 1 March 2012, a new actuarially fair age-based life Pension scheme was introduced to replace the old scheme. Given the challenges encountered in this change, it is humbling for me to report that 68 per cent of pensioners opted to join the new scheme while the remainder exited the scheme with a total lump sum payment of $126.7 million.

Separation of Business In line with industry best practices, the Fund separated its Pension business from the Contribution business through the creation of the Retirement Income Fund (RIF) to support annuity payments. Assets worth $252.7 million were set aside in RIF for this purpose.

Solvency Requirement In compliance with Section 32 of the FNPF Decree ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

”

CHAIRMAN’S REPORT

012 has been a historic year for the Fiji National Provident Fund as it took decisive actions to address the long-unresolved issue of pension sustainability. Underpinning this change was the promulgation of the new FNPF legislation that placed the pension scheme onto a sustainable platform, strengthening Corporate Governance, with the aim to grow member value through excellent services and prudent investment management. In striving to achieve our goals, we will work alone where necessary or together with others where it is in the best interests of our members. At all times our commitment to maintaining the highest ethical standards has been paramount. The Board and Management continuously review the strategic direction of the FNPF in a country that is stable and in a position to offer enormous opportunity for a fund of this nature.

Even under adverse circumstances, FNPF will still have enough assets to meet pension payments without having to call on subsidy from members’ assets.

2011, the Fund provided assets of 10 per cent of member balances in General Reserves as a solvency requirement, as reflected in the financial statement. The pupose of this reserve is to ensure that the Fund would not declare a negative interest rate on member balances, even if investment returns are be poor in a particular year. The Fund, as required under Section 88 of the Decree and through its actuary, has complied with the requirement for a Funding and Solvency certificate for the separate sections of the Fund other than that covering member balances. The actuary has given a certificate as at 30 June 2012 covering the period up to 1 September 2013, stating that the value of the assets together with other assets accumulated during the period of the certificate, will be sufficient to enable the Board to meet the liabilities of the RIF. This certificate is reviewed by the Reserve Bank of Fiji to ensure it meets appropriate professional standards and has also been peer reviewed by Mercer, a consulting actuary from Australia. A major objective of the issuance of the certificate is to demonstrate that even under adverse circumstances, which the actuary will need to consider under professional standards , the RIF will still have enough assets to meet pension payments without having to call on subsidy from members’ assets. This is an essential part of ensuring long term sustainability of the pension business.

New Pension Product A new term annuity product was also introduced, providing monthly payment for fixed terms of 5, 10 and 15 years.

www.myfnpf.com.fj

Strengthening Corporate Governance Following a comprehensive consultation process with key stakeholders, new measures were introduced as part of the legislation to strengthen the Fund’s governance framework. In particular, the following key changes were adopted:

Appointment of Board Members A transparent appointment process is now in place to ensure that members have the appropriate skills and expertise to govern the FNPF effectively. A “fit and proper test” for Board members is conducted independently by the Reserve Bank of Fiji in compliance with the Decree.

Code of Conduct A new code of conduct that governs ethics and business dealings is now in force for Board and Management.

Supervisory Role The Reserve Bank of Fiji’s supervisory role has been strengthened with specific guidelines and new regulatory standards.

Appointment of Actuary As a new requirement of the Decree, the Fund appointed an actuary responsible for valuing the FNPF’s liabilities, assessing solvency requirements, on-going monitoring of pension products, and issuing the financial condition reports.

Total funds attributable to members is $3.9 billion. Under extreme conditions we have recorded a net surplus after tax of $115.6 million. This is after paying out a massive $126.7 million to pensioners who opted to take the lump sum payment.

Interest to Members In a challenging operating environment, the Board was able to declare a competitive interest of 5 per cent, resulting in the distribution of $132.8 million to members.

Future Outlook In 2013 we would be making substantial investments,and the rewards of such investments are expected to be reaped mostly in future years. While growing organically, the strategy would also include growth through acquisitions and also expanding beyond our geographical borders.

Acknowledgement I wish to take this opportunity to thank and convey my gratitude to my co-directors for their dedication, cooperation and guidance. We are fortunate to have in the Fund a capable and committed Management team and employees who have excelled in their performance in a challenging environment. We are also much obliged to our members for their understanding, trust, confidence and patience for having understood the changes that had to be done for the long term stability and the sustainability of the fund. We owe a debt of gratitude to the regulators and the government for their guidance and advice.

Improved Disclosure to Members Forums will now be held annually to update members on financial performance, achievements, and other areas of interest to members. This is a new opportunity for members to interact directly with the FNPF Board and Management.

AJITH KODAGODA Chairman

Financial Performance The performance of FNPF for 2012 is reviewed extensively in this report, and I would only highlight a few achievements. All key financial indicators have improved and is above industry average in this part of the world. www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

EXECUTIVE TEAM

CHIEF EXECUTIVE OFFICER’S REPORT

he financial year has been extensively engaging for the Fund, with the enactment of the FNPF Decree 2011 and the introduction of the new Pension Scheme. Given the complexity and sensitivity of implementing these two critical reforms, wide consultation and proper planning were essential to ensure successful execution. Whilst there were some challenges, I am pleased with our achievements so far, as we continue on our reform journey towards a sustainable future and the delivery of quality services.

Pension Reform The restructure of the Pension Scheme dominated our reform activities for the year. As at 30 June 2011, total liabilities for the 11,000 pensioners amounted to $565 million compared with $312 million set aside for pensions. The shortfall in pension income against pension payment meant that investment returns on current members’ savings were used to pay for this difference, as shown in the graph below.

AISAKE TAITO CHIEF EXECUTIVE OFFICER

3,223 pensioners exited through lump sum withdrawals. The Fund had set aside $57 million for top-ups. For those who qualified for this, 1,450 received a higher monthly pension capped at $100 per month, 2,820 continued to receive the same monthly pension as in the old scheme and only 15 pensioners suffered a reduction in pension by more than 50 per cent. POSITIVE IMPACT OF PENSION REFORM

JAOJI KOROI CHIEF INVESTMENT OFFICER

ALIPATE WAQAIRAWAI ASSISTANT GM MEMBER SERVICES

4,000

$50

3,500 3,000 $ MILLIONS

$40 $30 $20 $10 2058

2056

2054

2052

2048

2046

2050

2044

2042

2038

2040

2036

2034

2032

2028

2030

2026

2024

2022

2018

2020

2016

AVAILABLE FROM REMAINING PENSIONER NET BALANCES SUBSIDY FROM MEMBERS

The new scheme has addressed this with the adoption of actuarially fair age-based pension conversion rates. To effect the new scheme, the old pension business was terminated. Existing pensioners were provided the opportunity to re-exercise their pension options based on their initial pensionable amounts. These options included life pension and term annuity products under the new scheme, and lump sum withdrawals. To mitigate the impact of the adjusted life pension rates, the Fund offered top-ups to those who opted for full life pension.

Pension Choices PRAVINESH SINGH CHIEF FINANCIAL OFFICER

TEVITA NAGATALEKA ASSISTANT GM PRIME SERVICES

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

SITIVENI NABUKA ACTING CHIEF INFORMATION OFFICER

www.myfnpf.com.fj

2,500 2,000 1,500 1,000

2014

2012

PENSION CASH FLOW IN $M

EFFECT OF UNSUSTAINABLE PENSION RATES $60

Of the 10,113 validated pensioners, 6,875 opted to reinvest $168 million into the Fund’s new scheme, whilst

www.myfnpf.com.fj

500 0

2011

MEMBER ASSETS

MEMBER BALANCES

2012

MEMBER SOLVENCY

This graph shows that in 2011, member assets were less than the member balances and required solvency. By 2012, as a result of the reform, member assets were in excess of the member balances and required solvency, even after declaring 5% interest.

Structural Reforms The implementation of other provisions of the Decree is in progress and to be completed by 2014. Apart from the Pension reform, some of the key changes that will affect members include: • The establishment of two accounts for all members – the Preserved account will comprise 70 per cent of member’s balance, which will be set aside for retirement; and the other 30 per cent will be assigned to the General account, which members can access for pre-retirement withdrawals on approved grounds. First time property buyers can acess the Preserved account to purchase their

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

“

Despite the challenges faced, the Fund recorded a net surplus of $115.6 million, contribution grew by 4.5%, we achieved a 7.2% return on investment

home/land. The two accounts will be implemented in 2014. • Uncapped Contributions from members – Members wishing to contribute more than the mandatory 8 per cent contributions, can do so to accumulate more savings for a meaningful retirement. • A new age limit for Voluntary members – To encourage the accumulation of savings for retirement, the age limit for voluntary members has been reduced from 16 to 6 years old from 2013.

Investment Rehabilitation The Fund continued its investment rehabilitation reform with the following progress: • Natadola Bay residential development – the Fund appointed a Project Manager, who is now undertaking development and market feasibility for the hotel’s residential lots. • Momi – the Fund has entered into an Memorandum of Understanding and is now in contract negotiations with an international hotel operator. Legal and financial consultants have been engaged and a Project Management firm will be appointed to commence the development work. Construction work for this project is expected to start in mid-2013. • Grand Pacific Hotel – the extensive reconstruction of this heritage site has commenced, with the hotel expected to open towards the end of 2013.

ICT Reform The preparation for the ICT Reform continued during the year. As this is a major project, the Fund treaded carefully in choosing vendors to assist with the design of this wholly-integrated Members IT System. The newly established Project Management Office continues with refining key processes that will be automated by the new system.

• an increase in the Fund’s offshore investments to $212.3 million from $114.4 million, as we continued diversification of the investment portfolio. • a 4.5 per cent growth in contributions to $317.3 million, reflecting strong enforcement and compliance; this, however, was offset by total withdrawals of $318.2 million, resulting in a negative net contribution of $0.9 million . • a $4.8 million distribution to members affected by the flood early this year. • a loan of $145.7 million advanced to Air Pacific – a strategic initiative to add-value to our investment in the tourism industry. • the Fund, in partnership with NASFUND and Lamana Hotels of Papua New Guinea, commenced the re-development of the Grand Pacific Hotel, which is scheduled to open at the end of 2013. • the opening of the new Namaka office to meet the growing demand of members.

Appreciation and Acknowledgement

MANAGEMENT TEAM

”

UDAY SINGH

VERA MADIGIBULI

MILLIE LOW

EDWARD ROXBURGH

SHANDIYA GOUNDER

LAISA SAUMAKI

SULIANO RAMANU

WAINIKITI BOGIDRAU

AJITH KARUNATHILLEKE

TIMOCI VESIKULA

PENI GONELEVU

EPENESA MOTOKULA

JONETANI TONAWAI

On behalf of the Management Team, I wish to express my sincere appreciation to the Chairman and members of the Board for their insights, guidance and support throughout a year of challenges and opportunities. I also wish to convey my gratitude to the FNPF staff for the spirit of cooperation and team work that they have shown in undertaking their duties. To all members and pensioners of the Fund and employers, I thank you for your support and understanding. We are also thankful to the Government, the Ministry of Finance, the Reserve Bank of Fiji and other government agencies for their steadfast and continuous support in the last year.

AJAY NAND

As we embark on another year, we would like to assure you all that we will continue to build on our core business and strengthen our operational efficiencies.

Highlights for the Year Despite the challenges faced and lump sum payment of $126.7 million to pensioners, the Fund recorded a net surplus of $115.6 million. Other key highlights include: • a steady growth in Investment income from $238.8 million in 2011 to $249.9 million, representing a 7.2 per cent Return on Investment (ROI).

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

Aisake Taito Chief Executive Officer

OLITA TALEMAIBAU

www.myfnpf.com.fj

JOVILISI SOVITA

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

“

2012 IN REVIEW

The Board is responsible for the excellent stewardship of members’ funds through prudent investment ... the Board’s oversight role has been further strengthened with the approval of the Corporate Governance Policy that enforces good corporate governance practice benchmarked to international standards.

”

FNPF BOARD

Board member Mr Taito Waqa and Independent Members Ms Rosie Fong and Dr Rohit Kishore.

he FNPF Board, established under the FNPF Act, continued its existence as a body corporate as it transited into the new FNPF Decree 2011 late last year. The Decree stipulates that the Board shall consist of seven members appointed by the Minister of Finance subject to a fit and proper assessment by the Reserve Bank of Fiji. Currently, there are five Board members, of whom four have been appointed for a four-year term and one for a year.

In consultation with the Ministry of Finance, the Fund continues to seek potential candidates with appropriate skills and expertise in investment management, corporate governance, accounting, auditing, finance and banking for appointment to the Board.

Board Meetings The Board is required to meet at least 8 times in a financial year. For 2012, the Board met on 25 occasions, which included ordinary and special meetings held to deliberate and approve reform-related matters, in particular the implementation of the new FNPF Decree and the Pension Reform.

The Board members are Chairman Mr Ajith Kodagoda, Deputy Chairman Mr Tom Ricketts, Mr Sashi Singh, Mr Taito Waqa and Mr Tevita Kuruvakadua.

Board Committees As required under the Decree, the Board may from time to time appoint Board Sub-Committees with such membership and terms of reference as the Board deems appropriate. The permanent Board Sub-committees of the Fund are: 1. Audit and Risk 2. Investment 3. Human Resources and Remuneration, and 4. Information Technology.

In pursuance of excellent stewardship of members’ funds through prudent investment, the Board’s oversight role has been further strengthened with the approval of the Corporate Governance Policy that enforces good corporate governance practice benchmarked to international standards.

Board and Board Committee Meetings and Attendance for the period 1 July, 2011 to 30 June, 2012 BOARD COMMITTEES BOARD BOARD MEMBERS

No of meetings

BARC

BIC

No of meetings

held

attended

held

Mr Ajith Kodagoda

attended -

Mr Taito Waqa

Mr Tom Ricketts

Mr Sashi Singh

Mr Tevita Kuruvakadua

held

BHR

attended

No of meetings held

attended

BIT No of meetings held

4 -

Other Board committee members Mr Raj Sharma

Ms Rosie Fong

Dr Rohit Kishore

Mr Janaka Nishantha

Mr Eliki Salusalu

* Attended BIC meeting on invitation from the Chairman

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

The Sub-Committee members consist of at least one Board Member and independent members with the right skills mix and appropriate technical expertise. All issues requiring Board approval need to be reviewed by these committees before they are referred to the Board. Board Audit and Risk Committee (BARC) This committee of the Board comprises Mr Tevita Kuruvakadua as Chairman, Mr Tom Ricketts and Independent member Mr Raj Sharma. The central role of the sub-committee is to assist the Board fulfil its statutory and judiciary responsibilities by exercising its oversight function to provide assurance on the effectiveness of the Fund’s internal controls, compliance and risk management framework. The committee met 7 times during the 2012 financial year. Board Investment Committee (BIC) The Board Investment Committee is chaired by Mr Tom Ricketts and includes other Board members Mr Ajith Kodagoda and Mr Tevita Kuruvakadua.

attended

5 -

The BHR reviews, assesses and endorses remuneration policies and related matters relevant to the effective management of the Fund’s human resources. The Committee met on 9 occasions this year.

www.myfnpf.com.fj

The Committee assists the Board in meeting its statutory and governance responsibilities in relation to the management of the Fund’s investments. These include compliance to Investment Policies, endorsement and review of investment strategies and monitoring the implementation of non-performing investments under rehabilitation. The Committee met on 5 occasions to discuss, evaluate and endorse key investment proposals and projects. Board Human Resources Sub-committee (BHR) The Committee, chaired by Mr Sashi Singh, includes

www.myfnpf.com.fj

Board Information Technology Sub-committee (BIT) The Committee is chaired by Mr Tevita Kuruvakadua. It also includes Independent Members Mr Janaka Nishantha and Mr Eliki Salusalu. The primary responsibility of this subcommittee is to oversee IT-related issues, in particular the implementation of the Fund’s IT reform. The BIT met 7 times during the financial year. Board Fees The Board Members are paid remuneration and allowance as approved by the Minister of Finance. Of the five Board members, two do not receive any remuneration, whilst the Board fee for the Government appointee is paid directly to the Ministry of Finance.

CORPORATE GOVERNACE Risk Management is an integral part of the Fund given our size and importance in Fiji’s financial system. The underlying risk for FNPF was the sustainability of its Pension Scheme. This has been addressed with the implementation of the new actuarially fair age-based pension conversion rates including structural changes in the administration of the pension scheme. A dedicated unit facilitates and coordinates the management of risks. A risk management framework has been established to monitor all strategic and operational risks. The framework outlines the roles and responsibilities of key stakeholders and risk owners,

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

“

The Fund takes seriously its role as custodian of members’ hard-earned savings ... Board, Management and staff continue to be coached and guided on ethical standards required for the achievement of key objectives.

These measurements are based on standards of right and wrong, principles of conduct, behaviour, fairness and integrity, accountability, professionalism, innovation and excellence. Awareness programmes were conducted for staff to reinforce ethical standards. Policy-Based Governance The Board, in accordance with its overarching philosophy of good corporate governance, approved nine policies during the financial year. These include:

and the risk management system and processes for the Fund. A review of the Fund’s risk profile was carried out in November 2011 that included a risk management workshop for the Management Team. A revised risk profile was endorsed by the Board Audit and Risk Committee to implement risk treatment plans. Progress reports on the implementation of treatment plans are tabled to the Management Taskforce on Audit and Risk and the Board Audit and Risk Committee on a quarterly basis. A Business Continuity Plan is in place to ensure that FNPF can restore its business in minimal time should a disaster or crisis occur. Simulation tests were carried out to evaluate the effectiveness of the plan. On disaster preparedness and management, FNPF staff undertook fire drill exercises and disaster evacuation drills to prepare them for such calamities. Compliance Management The Fund continued to meet its regulatory and statutory requirements provided under the laws of Fiji and the Reserve Bank of Fiji (RBF) Prudential Supervision Policy Statements. The FNPF established a Compliance Unit under the Corporate Governance department. A Compliance Management Framework is in place to enforce, monitor and report compliance in the Fund. Compliance checks on the regulatory and statutory requirements were carried out and reported to the Board Audit and Risk Committee. Action plans with specific timelines were identified to address areas of non-compliance. Reserve Bank Of Fiji Prudential Supervision The Fund strengthened its relationship with the RBF

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

through monthly meetings to discuss prudential matters and updates on the reforms. The Bank conducted an on-site examination in November 2011 and provided a report of its findings and recommendations for implementation by the Fund, which is managed by the Management Taskforce on Audit and Risk and the Board Audit and Risk Committee. Quality Assurance And Complaints A quality assurance framework was established to assist in the successful implementation of a quality system for the Fund, benchmarked to the ISO standards. Action plans have been identified to set the platform for the ISO project to be undertaken. Business units continued to standardize and document operational procedures to ensure consistency in service delivery throughout the organisation.

• FNPF Corporate Governance Policy – this policy establishes the key principles that form the basis of the Fund’s governance framework to deliver good governance, sound business practices and stakeholder confidence at all levels of the organization, benchmarked to international standards. • Finance Manual – this sets out the financial and accounting policies and procedures necessary to control and record members’ funds, properties, assets and liabilities. It also establishes the financial responsibility and commitment of the Fund and the necessary controls to ensure that financial risks are mitigated. • Pension Policy – the policy sets standard guidelines for the changes that were implemented through the pension reform beginning 26 November 2011 to 29 February 2012 and the new pension scheme that came into effect on 01 March 2012. • Conflict of Interest Policy – this will ensure good governance through effective management of conflict of interest in the Fund and proper disclosure of interest as required under section 21 of the FNPF Decree 2011. • Policy on Audit of Subsidiaries – the policy allows the Internal Audit Department to carry out internal audits of all those entities in which the Fund holds 51 per cent or more of the equity shareholding.

Member complaints were also managed and resolved through the Fund’s complaints management system within the targeted processing time of 5 working days. The system includes an escalation process to ensure the complaints are resolved on time. Monthly complaints reports are circulated to the management team and quarterly reports RBF. During the year, the Fund registered a total of 131 complaints, which was a 49 per cent reduction from last year.

www.myfnpf.com.fj

he audit planning methodology was revised from activity-based high-risk areas to departments with high risk being prioritized in the annual work plan for assurance audits. Changes in audit conduct were made in departmental audits with emphasis placed on compliance, internal control, risk management and administration areas. A grading system supported by an Audit Grading Policy was also introduced, with rewards for high achievers and penalties for those whose grade was below satisfactory. Necessary changes arising from these changes were effected in the Internal Audit Policy and Procedures Manual. Fraud and Corruption Plan During the year, a Fraud and Corruption plan was developed and endorsed by BARC, in accordance with the Australian Standard (AS) 8001-2008 Fraud and Corruption Control and modified to suit the requirements of the Fund. The plan is driven by a detailed Action Plan and the establishment of a Fraud and Corruption Control Management and Ethics Committee, which is chaired by the Chief Executive. It allows the Fund to deal with fraud and corruption issues from prevention, detection and investigation, and process improvement perspectives. Pension Reform Internal Audit played a consulting role in the planning and management of the the pension reform project. This role was performed on agreed-upon procedures with the project sponsor. Audit reviews were carried out on data migration to the Pension Counselling Application and Pension Administration Systems, which were built inhouse by the Fund’s Systems Development team. The Fraud and Corruption team also provided assurance on cases that were classified as critical during the pension registration process.

Subsidiaries and Controlled Entities The formalisation of the policy on audit of subsidiaries led to assurance audits of the majority of the whollyowned subsidiaries and reviewed monthly bank reconciliations. The audits were also graded in accordance with the Audit Grading Policy of the Fund.

Ethical Standards The Fund continued to coach and guide staff on ethical standards required of all employees, which defines the behaviour required for the achievement of key objectives.

INTERNAL AUDIT

Audit Consultations Audit consulting activities such as review of monthly bank reconciliations, prudential reports, observing stocktakes and cash surveys, review of withdrawals from the Unclaimed Deposits Accounts prior to payment and carried out follow-up audits. Executive and Management Balance Score Cards, staff job-fit index rewards, finance manual and draws for the Fund’s SUPERTxt promotion also came under review.

Meetings and brainstorming sessions were carried out with Business Units to ensure reduction in recurring complaints and improvements to service delivery.

”

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

INVESTMENT

he investment environment continued to challenge the Fund in 2012. The financial system was characterised by high liquidity that prevailed for the entire year and the pension reforms. The high liquidity in the market caused the huge reduction in interest rates. The portfolio, however, benefitted from the high rates locked in from 2011, particularly on Fixed Income securities, attributing to the increase in income this year to $249.9 million that produced a resultant increase in Return on Investment of 7.2 per cent. The Pension Reforms had a major impact on the Investment portfolio as pension funds were separated from the current members’ funds. Asset were transferred to the Retirement Income Fund (RIF) account for current annuitants and to the Supplementary account for those who opted to take lump sum payments. Total transfers amounted to $440 million, comprising cash and bonds, therefore reducing the investment portfolio to $3.48 billion from $3.52 billion last year. Following the separation, the RIF account will be maintained for current annuitants and will be managed separately under its own policy. Other factors that influenced the performance of the investment portfolio during the year include: • reduced borrowing by government and quasi- government bodies. • early redemption of bonds. • income earned from 2 of the major loan accounts. • additional offshore allocation by RBF.

• a continuing rehabilitation process on the affected accounts in the portfolio. Asset Allocation The graphs below show the asset allocation for the Fund for the year ended 30 June 2012. The figures are reflective of the changes that occurred during the year as a result of the separation of funds. Income Income for the Fund was $242.7 million compared with $238.8 million last year. The increase was a result of high yielding investments in both domestic and offshore bonds, term deposits, which were locked from 2011. Two major loan accounts under Commercial Loans commenced servicing their debts. The Fund structured its current account rates to earn maximum returns on the cash balances.

As a result, the return on investment was 7.2 per cent compared with 6.8 per cent in 2011. This enabled the Fund to credit 5 per cent to members’ accounts on 30 June 2012. The income from the Retirement Income Fund totalled $7.2 million (reflecting 4 months of operations), bringing the consolidated investment income to $249.9 million. Interest Rates The interest rates continued on a declining trend as liquidity levels remained high. Strong competition for government bonds added to the downward spiral of rates as public tenders continued to be oversubscribed. The table below, outlines the interest rate movements in the year. Fixed Income The fixed income portfolio makes up approximately 84 per cent of the investment portfolio. Total income from this portfolio was $231 million compared with $222 million last year. This equated to 92 per cent of the total investment income for the financial year. FDL RATES

30-09-2011 30-12-2011 31-03-2012 30-06-2012

3 years

2.60%

6 years

5.75%

5.45%

8 years

5.60%

5.45%

10 years

6.60%

6.40%

15 years

5.80%

7.00%

6.95%

0.80%

0.75%

TREASURY BILLS

FNPF ASSET ALLOCATION FY2012

91 days

1.10%

1.00%

1month

0.50%

0.10%

3 months

0.50%

0.25%

6 months

0.75%

1.00%

0.75%

0.50%

9 months

0.75%

1.25%

1.00%

0.50%

12 months

1.50%

2.00%

1.25%

TERM DEPOSITS GOVERNMENT SECURITIES

CASH

PROPERTIES EQUITIES

LOANS & ADVANCES

OTHER FIXED INCOME SECURITIES

TERM DEPOSIT

Government Securities Government securities remained the dominant asset class, making up approximately 58 per cent of the investment portfolio. A total of $240 million in government bonds was transferred to the Retirement Income Fund as part of Pension Reforms. Investments in government bonds for the financial year were $77.6 million, compared with $237 million last year. Total portfolio closed at $1.98 billion compared with $2.06 billion in 2011.

RIF ASSET ALLOCATION FY2012

Quasi-government securities This portfolio consists of government guaranteed securities in statutory bodies. The portfolio closed at $231 million compared with $331 million last year.

Government Securities Cash

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

“

Return on investment was 7.2 per cent compared with 6.8 per cent in 2011. This enabled the Fund to credit 5 per cent to members’ accounts.

”

Total investments in quasi-government securities totalled $5 million compared to $51 million the previous year. The significant decline in the total floats by quasi-government securities is attributed to competitive lower rates offered by commercial banks. Local Term Deposits The local rates continued to decline during the financial year. The portfolio closed at $104 million compared with $173 million the previous year. Offshore Investments The Board continued dialogue with RBF for additional approval of offshore investments, resulting in the approval of $40 million for the 2012 calendar year. This was in addition to the $150 million approved in the 2011 calendar year. A total of $90 million was invested mainly in foreign equities, bonds and term deposits during the year. Fiji Government US Denominated Bonds The Fund continued its acquisition of these high yielding bonds. Total investments in 2012 were US$11.69 million bringing the total portfolio to US$31.65 million compared with US$20.24 million last year. Foreign Term Deposits A total of $20 million was invested in foreign term deposits. The portfolio closed at $86 million, compared with $59 million last year. The deposits were predominantly in US dollars. Commercial Loans The loan portfolio grew to $415.0 million from $272.8 million, with a mix of financing to both existing and new clients. Income mirrored the growth in the portfolio and grew by $17.6 million, contributing returns to members.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

“ The rehabilitation process from last year continued into this year with the Momi project being transferred from the loan portfolio to be developed as a separate project. The Natadola Development Project commenced the process of developing residential lots, whilst foreclosure proceedings were observed for Savusavu Harbourside. Equities Offshore Equities The Fund made a significant decision to actively manage the offshore equities portfolio from previously maintaining a passive stance. This move was attributed to the need to diversify the investment portfolio, foreign exchange approval received by the RBF and higher yields generated offshore. The Fund appointed Legg Mason Asset Management Australia Limited as Fund Manager to actively manage the Australian equities portfolio and benchmarked to the S&P/ASX 200 Accumulation Index. A total of FJ$50 million was invested in the financial year. The offshore equities portfolio closed at $68.1 million compared to $20.1 million last year. Local Equities The year again focused on rehabilitation efforts targeting the non-performing companies and the result is evident in the stagnant local portfolio value from last year. The market value of the Fund’s local equity portfolio at year’send was $336.1 million compared with $319.7 million in 2011. The increase was due mainly to the reversal of impairment in subsidiary investments. Treasury Liquidity in the banking system remained at around the same high levels as in June 2011 to close at $533 million in June 2012. With high liquidity, interest rates continued

on a sharp decline to low rates at the end of June as highlighted in the table above. This was underpinned by the low Overnight Policy Rate (OPR) which remained at 0.5 per cent from October 2011.

ATH’s financial performance improved to a net profit after tax of $33.1 million from $17.6 million in 2011. The increase is attributed to better performance by Vodafone Fiji Limited.

”

FNPF SUBSIDIARIES

The low rates posed a major challenge for the Fund, as the majority of assets are interest-rate sensitive. The Board and Management were continually advised on the liquidity status of the Fund, the impact of interest rates movement on its assets and the Fund’s strategies in managing its financial risks. Properties The Property Investment Portfolio consists of 16 properties with a current market value of $88.1 million as at 30 June, 2012. A yield of 7.5 per cent was achieved compared with 7.2 per cent in 2011. Of the 16 properties, one is a car park and one is an undeveloped lot in Lautoka that has been leased with the intention by the lessor to construct a building complex. The major challenge faced by the portfolio, as with previous years, is the subdued economic conditions and the impact this has on rent serviceability and vacancy levels. As this economic climate persists, the vacancy levels may not drastically improve in the short-term. Projects Projects provided technical and project management services and support worth $2.3 million during the financial year, with $440,000 that was accrued as at 30 June, 2012 for works still in progress. Some of the works completed in the financial year include Internal upgrading to the Robinson complex new wing, the FNPF’s, Employers department office upgrading, Holiday Inn roof upgrading, FNPF Place fire alarm system upgrading, Boulevard roof upgrading, Robinson old wing level one upgrading and Harbour Centre drainage upgrading.

Amalgamated Telecom Holdings (ATH)

The Group results showed an improved performance from last year. The highlight of the year was ATH’s acquisition of Fiji International Telecommunications Limited (FINTEL) for $18.6 million. Vodafone Fiji Limited continued to perform well in a competitive environment with Telecom Fiji Limited still facing some operational issues due to the deregulation of the telecommunication industry. Overall, the Group profit before tax of $45.8 million was a 40 per cent improvement from $32.6 million in 2011. While the net profit after tax was $33.1 million from $17.6 million last year, the increase can be attributed to better performance in Vodafone Fiji Limited and the inclusion of profits from FINTEL. Dividends of 3 cents per shares was maintained with the acquisition of FINTEL yet to be recognized in dividends.

FNPF Investments Limited (FIL)

FIL is a wholly-owned subsidiary of FNPF and continued its rehabilitation process over the past year. FIL posted a profit of $14.4 million compared with a profit of $1.1 million last year. The increase is attributed to booking of significant interest due to an early settlement by a major client and increased dividends from subsidiaries. FIL paid FNPF its first dividend of $1 million for the year ended 2012. FIL will continue to build on its strong growth and increased shareholder value. Rehabilitation under the FNPF reforms programme continued in the financial year for projects such as Natadola, GPH and other investments.

Grand Pacific Hotel Ltd

FIL acquired Fiji Investment Corporation Limited’s 17 per cent to hold 100 per cent shares in GPH, after which it sold 50 per cent to NASFUND and 25 per cent to CGA Properties Limited – both domiciled in Papua New Guinea – leaving FIL with minority shares of 25 per cent in GPH. During the year, construction work on the rebuilding of GPH began and is expected to be completed in 2013.

Home Finance Company (HFC)

FNPF has a 75 per cent shareholding with HFC whilst Unit Trust of Fiji (UTOF) holds the remaining 25 per cent. The company is an established licensed financial institution, serving the people of Fiji in the home lending market for the past 45 years. HFC’s net profit increased by 50 per cent compared with the previous year. The net operating income increased by 13 per cent to $10.9 million. FNPF received a dividend of $1.7 million compared with $1.1 million last year.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

Subsidiary companies include:

l Natadola Bay Resort Limited (100%) l Dareton Limited (100%) l FNPF Hotel Resorts Limited – trading as Holiday Inn (100%) l Penina Limited (51%).

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

OPERATIONS

t was a fully engaging and intensive year operationally. Apart from the mammoth task of implementing the new Pension Scheme, the Fund also activated the natural disaster scheme on two occasions during this period to assist those affected by the floods in the Western Division. Both these services were provided via mobile units, with pension counseling and validation nation wide and dedicated teams visiting flood affected areas to assist members with their applications. Significant improvements were recorded in contributions collection, membership and the opening of the new Namaka Agency. Membership Total members for this financial year were 372,831, as compared with 368,186. This is an increase of 1.3 per cent from the previous year. Employers The Fund’s active employers totalled 7,840 for this year, compared with 7,508 in 2011. New employers numbering 580 were registered and 248 employers’ accounts were closed.

“

”

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

SUPERTxt (Sms) A further 3,838 members were registered in 2012, bringing the total registered for this service to about 20,000. FNPF members who are Vodafone and Inkk customers receive a monthly update of their FNPF balance through the SUPERTxt service. This service provides members the opportunity to receive their balances monthly.

Full withdrawals A total of 11,112 members fully withdrew their savings, totalling $180.4 million, compared with $172.1 million withdrawn by 12,648 members the last year.

Members’ Balance The total balance for all members’ accounts grew by $168 million or 5.6 per cent to $3.1 billion as at 30 June 2012, compared with $3.0 billion in 2011.

FNPF membership grew by 1.3 per cent, contribution increased by 4.5 per cent, total Members’ Balance grew by $168 million to $3.1 billion.

Memorandum of Administration (MOA) This product allows relatives of deceased members to access $2,000 from the members’ Special Death Benefit payment to administer their funeral arrangements. During this financial year, 805 members registered their MOA.

Withdrawals In total, 54,662 withdrawal applications were received during the year. These applications included those applying for pre-retirement withdrawals and those opting to withdraw fully from the Fund.

Contributions Total contributions collected were $317.3 million – averaging $26 million per month. This is an increase of 4.5 per cent from the previous year’s collection of $303.5 million.

Contribution Debtors The balance of unpaid contributions was $8.9 million at the end of the financial year compared with $8.2 million in 2011. This is an increase of 8.5 per cent. The Fund is working with government agencies and employers in pursing smarter ways of compliance.

with 20,624 in 2011. The Fund continues to remind members to file member’s nominations as it allows them to choose who shall receive their FNPF savings upon death.

Unidentified Contributions A total of $5.4 million was transferred to unidentified contributions during the year. This is an increase of 32 per cent compared with the June 2011 balance of $4.1 million. The increase is attributed to insufficient and inaccurate information supplied by employers for its contributing workers and unregistered members that are in the workforce. The Fund continues to work with employers to ensure that these unidentified contributions are minimized through proper identification of the owners of these funds. Another $3.2 million was transferred to the Unclaimed Deposits Account for members over 65 years of age, whose accounts have been inactive for more than 10 years. Nomination During the year, 17,255 nominations were filed compared

www.myfnpf.com.fj

55 years Members are eligible to withdraw their funds once they are 55-years-old. They have the option of joining the pension scheme or taking lump sum and/or a combination of pension products and lump sum payment. Given the changes to the scheme – all those who withdrew before the promulgation of the FNPF Decree in November 2011, were offered a refund of their principal pension amount, whilst those that chose a pension option after this became transitional pensioners until the new scheme came into effect on 1 March 2012.

TOTAL MEMBERSHIP: FY2008-FY2012

370,000 360,000 350,000 340,000 330,000 320,000

FINANCIAL YEAR

can withdraw their savings. 190 members’ applications under this ground were processed, totalling $3.55 million compared with $3.61 million paid out in 2011. Death Nominees of deceased members are allowed to withdraw members’ savings upon the death of the member. In the absence of a valid nomination, funds are sent to High Court for distribution in accordance with the Law. Where the beneficiary is under 18 years, funds are sent to Fiji Public Trustee Corporation Ltd (FPTCL), who administers the funds until the beneficiary comes of age. In 2012, $15.1 million was paid out for members who died during the year; of this, $14.1 million was paid to nominees, while $6.4 million was paid to the High Court. The remainder of the funds was paid to FPTCL Special Death Benefit (SDB) Under SDB, $8.7 million was paid out compared with $9.8 million in 2011. All eligible members pay a premium of $35 annually to qualify for SDB. A sum of $8,500 is added to the deceased members’ account and paid out to the nominees. In January 2011, the Fund allowed the deceased member’s next of kin to collect $2,000 from the $8,500 to assist with funeral expenses of the deceased member.

Some $117.5 million was withdrawn by 5350 members eligible for retirement during the year, compared with $120.7 million paid out for 7686 applications. However, 344 members chose to pension their savings; of these, 59 opted after the implementation of the new age-based scheme.

Pre-retirement Members can access their funds only for housing, education, medical, unemployment and funeral assistance. Members, who have rejoined the Fund after withdrawing on retirement grounds, are allowed partial withdrawal of their funds once every 6 months.

Migration Members who leave Fiji to settle permanently overseas can withdraw their FNPF savings and $37.8 million was paid out to 2512 members withdrawing under this scheme.

The total paid out for these grounds was $45.5 million for 39,636 members, compared with $45.2 million for 32,950 members in 2011. Of these, $ 25.1 million was for education, $2.4 million for unemployment, $2.7 million for funeral assistance and $ 4.8 million was paid to 6,166 members for flood assistance.

Incapacitation Members who are not able to secure any further employment because of their physical or medical condition, as approved by the FNPF Medical Board,

www.myfnpf.com.fj

”

380,000

Count

“

A major challenge is the unidentified contributions received from employers, the Fund will continue to work with them to ensure that these contributions are minimized through proper identification of the owners of these funds.

Housing The total paid out under Housing withdrawals in 2012 was

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

“ TOTAL MEMBERS’ BALANCE: FY2008-FY2012

NUMBER OF EMPLOYERS: FY2008-FY2012

3.00

8,000

2.50

6,000 Count

$ Billions

3.50

2.00

2,000

1.00

0.00

7,105

7,508

7,840

4,000

1.50

0.50

6,944

6,701

08 09 10 11 12

CONTRIBUTION VS WITHDRAWAL: FY2008-FY2012

eligibility statements.

$350.00 $300.00

Pension Centre The total number of customers served at the Pension Centre this year was 26,623, an increase of 3 per cent compared with 25,835 the previous year. Of these customers, 30 per cent filed their pension renewal certificates and were issued pension identification cards, 11 per cent sought partial withdrawal for over 55 years of age and 10 per cent sought pension advice.

$ Millions

$250.00 $200.00 $150.00 $100.00 $50.00 08 09 10 11 12

Contribution

FINANCIAL YEAR

Withdrawals (including Pension Annuity& SDB Payouts

$40.2 million for 3,914 members, compared with the $33.3 million for 3,662 members in 2011. Of the applications approved, 43 per cent were for members applying under the village housing scheme totalling $5.1 million. Customer Services A total of 449,854 customers were served during the year, compared with 539,628 last year. Of these, 398,847 visited the Fund’s branches and agencies, while the remaining customers were served via the telephone or online. The significant reduction of 16.6 per cent of customers served in comparison with the previous year is attributed to changes to the withdrawal policy, which encourages a retirement-savings culture for our members, the doorto-door customer service approach that was offered to members who were affected by the flood and our pension team that travelled to districts to consult and counsel pensioners on changes to the scheme. Personalised Services Of those members that visited the Fund, 15 per cent sought Education Assistance, 2 per cent Funeral Assistance, 3 per cent Unemployment Assistance, 5 per cent Housing, 3 per cent other Partial Withdrawals including medical assistance, 14 per cent membership card applications, 8 per cent for changes to members’ records, 2 per cent filed nomination forms, 3 per cent sought assistance in relation to Memorandum of Administration benefits and 16 per cent for balance and

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

Surcharges recovered amounted to $77,200. Total recovery through prosecution was $3.3 million and five members were prosecuted for fraud and falsely producing documents to support their withdrawals.

Business Process Re-engineering (BPR) An internal BPR methodology and tools were developed to ensure the Fund utilises the untapped abilities that Information Systems can offer.

Discharges for Withdrawn Members The Fund received 270 applications for discharge of Title for Withdrawn Members; of these, 200 cases were completed and the other 70 cases are still in process.

These tools were applied to two BPR workshops and the outcomes revealed the detailed documentation of existing processes as well as the development of the business requirements that would form the core of the new Provident Fund Administration Platform.

INFORMATION COMMUNICATION & TECHNOLOGY

Proof of Concept (POC) The Fund implemented a Proof Of Concept (POC) phase as part of its procurement process. It successfully ran the POC of the new Provident Fund Management Information system (ProMIS). Three ProMIS shortlisted solutions were tested (from an initial listing of about 20 vendors that provided proposals) to determine its suitability.

FINANCIAL YEAR

08 09 10 11 12

FINANCIAL YEAR

A total of 449,854 customers were served during the year - of these 398,847 visited the Fund’s branches and agencies .

Information Centre The total number of calls received at the Information Centre was 58,945 compared with 49,531 last year. The 19 per cent increase is attributed to pensioners who used this medium to seek information on changes to the pension scheme. A special team was mobilized and trained to cater for all pension queries as part of the Pension Support team. Of the total calls received, 44,804 (81 per cent) members were served by information centre personnel, whilst 16 per cent were calls re-directed to other departments.

LEGAL SERVICES The Legal Services department is responsible for all legal matters inclusive of prosecution, civil litigation, corporate conveyance and procurement, providing opinions and advice to the Board and Management, maintaining ethical standards and promoting good governance. In February 2012, a new Manager Legal was recruited to fill the position left vacant since August 2009.

CT Strategic Review and Governance Framework The three-year ICT Strategic Review developed in 2010 was reviewed to adopt a pragmatic approach to the process. This review led to a revised Business Plan and an IT Reforms Programme Initiation report inclusive of revised baselines. Two major ICT governance frameworks were developed to address the need for improved governance and sustainability of operations. These were the Project Management Office (PMO) and IT Infrastructure Library (ITIL) frameworks. These frameworks are being gradually applied on all projects undertaken by ICT, with positive outcomes during the period. Capacity and Capability This year ICT recruited senior and experienced personnel for the Project Management Office, Business Analysis, Development and Systems and Network Team, which increased the ability and capacity to sustain its support services. In addition, a new Information Security position was established improving the Fund’s information security capabilities.

”

The POC includes provision for users to have a hands-on testing of the functionality of the proposed processes; an evaluation of the performance of the three solutions and its flexibility & scalability; an evaluation of the abilities of the vendors and FNPF project teams; and to test the software development life-cycle to be adapted. Pension Software Application The Pension Administration System (PAS) was developed internally to administer the payment system for the new pension scheme. The development of this new software included requirements gathering, infrastructure setup, software development and testing (performance and functional). Although there were some challenges, the system was in place for the roll out of the first cycle of pension payments.

Corporate A total of 65 civil litigation cases were handled by the Fund. Of these, 24 were completed while 41 are still pending in court. A total of 85 contracts vetted and approved and 40 legal opinions were provided to Board and Management. Prosecution Some 561 employers’ cases were registered with the Courts around Fiji amounting to $2.7 million; 282 cases were completed, with $3.2 million being recovered.

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

“

The Fund continues to build capability and manage costs through careful review of the current pool of knowledge and skills to maximize potential to meet our short, medium and long-term goals.

Fleet Management 10 company vehicles have been installed with the Global Positioning Vehicle Tracking Systems. The system not only provides the exact location of the vehicle but other information such as speed limits, duration of stoppages and direction of travel. This has considerably reduced deviation from authorized journeys.

HUMAN RESOURCES

Data Recovery A major project undertaken was the review of the Disaster Recovery plan to ensure the availability of data and improvements from the former plan.

This is achieved through flexible communications and extensive negotiations to obtain the best value for money. Services required periodically, where the annual volume is above $20,000 is tendered as per governance requirements.

A solution-based approach ensured that data from key systems were copied to a secure site. This ability to copy data on a real-time basis ensures that there would always be up-to-date copies of data safely kept on this site, should disaster strike the main server in Suva.

In all, 32 tenders and expressions of interest were advertised, evaluated and completed during the year. The Fund continues to tender a majority of services to ensure that transparency and good corporate governance are upheld.

Infrastructure Upgrade Several other initiatives were undertaken this year in upgrading the infrastructure to ensure reliability, availability, security, integrity and serviceability. These include the upgrading data storage capabilities to improve serviceability. In addition, the communications network upgrade made to the existing infrastructure ensured not only high availability of services, but cost savings. New hardware infrastructure had been purchased to improve ICT services and its existing customers.

Leadership training was also conducted for the Management team to ensure professional development during this challenging reform journey. 94 per cent of staff also received at least one training opportunity during the year with 35 local trainings organized locally and 15 conducted abroad.

Human Capital The Fund continues to build capability and manage costs through careful review of the current pool of knowledge and skills to maximize potential to meet our short, medium and long-term goals.

rocurement and Tender Facilitation All services and goods utilized by the Fund are administered via a strict procurement and tender process to ensure cost-effective, high quality goods and services, delivered in a timely manner.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

Tender Recalled Tender Re-Advertisement Tender Completed Tender in Progress Total

Occupational Health and Safety FNPF is committed to providing a safe and healthy workplace for all staff, business tenants and visitors, in accordance with the Occupational Health and Safety Act 1996 (OHS Act). A two-tier committee was established comprising a committee that strategizes and ensures compliance through training and awareness and subcommittees to ensure conformance. Mandatory trainings on First Aid, OHS Modules, HIV/Aids and Fire Safety were successfully executed this year. Health and Wellness On average, FNPF employees spend 40 hours per week at work, therefore a majority of their time is spent in office. This reality, plus the advent of technology, is a

2 26 3 31

Staff numbers grew from 318 to 371 through the first year of Reform. These numbers are expected to fall considerably after the full implementation of the IT reform and the BPR project. Employment Relations The Fund employs a proactive strategy of meeting regularly with staff to ensure issues of concern are addressed. In line with the Employment Relation Promulgation, the HR Policy was revamped to incorporate changes that saw the inclusion of five policies, namely Sexual Harassment; Occupational Health and Safety; Disciplinary; Grievance; and HIV and Aids Policy. The Leave Policy has gone through changes to reflect a more productivity-based model as opposed to reward for years of service.

Office Security and CCTV The Fund continues to upgrade its security operations including a Closed Circuit Television (CCTV) facility and the upgrading of door locks. The current security arrangement for Downtown Boulevard is managed by internal security officers, while security for all branches and agencies are outsourced.

ADMINISTRATION & ARCHIVES

SUMMARY OF TENDERS FY2012

challenge for any responsible employer to ensure the individual staff health “life wheel” is kept in balance. Current wellness programmes organized by the Fund include the CEO’s walk every Wednesday, team building exercises, afternoon sports and aerobics. Staff also participated in the nationwide-organized Protex Fitness Competition. Educational articles on healthy lifestyles and healthful food selections are published through the internal newsletter. Market Relativity Observing the staff policy to keep the staff remuneration in line with the market, a Job Evaluation exercise was carried out in 2011 resulting in FNPF staff remuneration being aligned to the Banking and Finance market. This exercise was cleared by the Board and implemented on 1 March 2012.

raining and Development Capacity building through training and development programmes remains a critical strategic goal for the Fund, especially in specialized areas such as Finance, Investment, Information Technology, Audit, Governance and Risk.

”

Archiving and Weeding Project The Weeding Project, which was set up to sort out and weed over 20 million files of member documents, is scheduled to be completed soon. This will pave the way for the Electronic Document Management Systems Project.

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

“

The Fund’s strategic themes are to grow and accumulate members’ funds, strengthen member focus, operational efficiency, governance and risk protection, and recruit, develop and retain talent.

30 June 2012 to announce the interest declaration to members.

PRIME SERVICES

n Actuary Team has been set up under the guidance of the actuary appointed by the Board to develop capacity, build actuarial and analytical skills and advise on future initiatives. The team comprises representatives from Investment, Finance and Corporate Governance and will work on strategy implementation aimed at enhancing pensioner data and profiling the pensioner mortality rates. This is a major development for the Fund as actuarial service had always been outsourced, since the initiation of the pension scheme to the International Labour Organization, World Bank, Mercer (Aus) and Towers Watson. The Fund embarked on carrying out liability valuation and on-going reviews of the new term annuity pension product and other related analysis in-house. It will work to ensure new products designed for pensioners and members are actuarially validated and to ensure assets are aligned to meet liabilities and related commitment. Research and Product Development The availability of quality data and information to enable accurate projections of the Fund’s major products continued to be enhanced during this period inclusive of pension products take-up and expected payout. The Fund utilizes various data mining tools on member data and survey responses to produce a better understanding of members’ needs and service expectations to stimulate innovative and higher value-adding products, processes and services.

embarked on a process to review its current Strategic Plan and to strategize for its next phases.The Fund held a number of strategic planning review workshops with the Management team to review the status of implementation of the Strategic Plan FY 2011 – FY 2013, to analyze the current operating environment and brainstorm on strategies in moving the Fund forward. The results of these workshops provide the basis for the formulation of the new Plan. The new Strategic Plan focuses on three main strategic objectives: (i) delivery of excellent services to our members, (ii) diversification of the Fund investment portfolio and (iii) compliance with the FNPF Decree. These objectives will be achieved through the implementation of five strategic themes: (i) grow and accumulate; (ii) strengthen member focus; (iii) operational efficiency; (iv) governance and risk protection; and (v) recruit, develop and retain talent.

FNPF will continue to assess, develop, implement and research new product and service initiatives to leverage stakeholder benefits. It is important for the Fund to remain abreast of market and economic trends conceptualizing and researching new and innovative ideas in readiness for market competition.

Media relations Changes to the Pension Scheme dominated discussions and questions from the media during the year. The Fund actively sought to clarify all related issues, reinforcing the objectives behind the reforms, specifically that the changes would ensure the Fund remains sustainable and relevant in the long-term. The media were fully informed of major developments in regard to this issue; with several media conferences and releases issued during the ensuing months.

Strategic Plan FY 2013-2015 Following the endorsement of the FNPF Decree 2011 and the implementation of the pension reforms, the Fund

Timely response to other issues such as investment performance and withdrawal policies were also addressed. The final media conference for the year was held on

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

Website Management The FNPF website, www.myfnpf.com.fj, registered 98,058 visits during the financial year, compared with 91,527 for last year. The increase in traffic is attributed to pensioners visiting the site to gather information on the review of the Pension Scheme. There were 401,109 page views during this period. Visits to the sites were sourced from 160 countries and territories. A majority of these visitors were from Fiji and there more than 16,400 visitors from New Zealand and Australia, with 6,251 from the United States. The others included those from India, Canada, the United Kingdom and Malaysia. The Fund is aware that the website is a critical medium for the dissemination of information and will continue to update its content to keep our members and all stakeholders informed of progress and changes at the Fund. Public Awareness The effort to inform pensioners and members of the changes to the Pension Scheme was a major public awareness exercise. After the initial announcement on 26 November 2011, the Fund undertook several information sessions in Suva, Nadi, Lautoka and Labasa. The Chief Executive Officer led the information presentations, which is indicative of the importance placed on accurate information being passed on in regards to the rationale and transitional procedures into the new scheme. More than 3,000 pensioners and members attended these sessions. Dedicated pension teams were deployed around the country to counsel and validate pensioners. These teams also visited outer islands, including Rotuma. For overseas pensioners, a three-member team was on hand to guide our overseas-based pensioners through the changes and also to validate them via Skype. Fiji diplomats based at various overseas missions also assisted in the validation

www.myfnpf.com.fj

”

process. Details of pensioner requirements, mobile team visits and overseas validation were highly publicized in local and overseas media. Strategic Alliance In our efforts to accurately inform members and pensioners about the FNPF Reforms, the Fund worked closely with the Ministry of Information’s Public Affairs/ Relations team. We capitalized on opportunities provided by the two radio and television stations to be part of their talkback shows to answer queries from members/ pensioners. Public Events The Fund participated in numerous public events including the Fiji Showcase held in May 2012, which saw 3400 people served at the FNPF Booth, the Westpac Retirement Information Seminar, and the Fiji Head Teachers and Principals conferences. Regional Cooperation A team from the Retirement Fund Board of Tonga were on a 5-day work attachment in mid-July, 2011, reflecting the high regard in which the Fund is held by its regional counterparts. Corporate Social Responsibility As one of the country’s largest financial institutions, the Fund is aware of its corporate social responsibility and strives towards cintributing positively towards the less fortunate. Given the floods that affected the Western Division, the FNPF made two donations towards the Prime Minister’s Flood Appeal. A donation of $40,000, inclusive of contributions from the Fund-owned hotels, the Holiday Inn Suva and the InterContinental Natadola, was presented in February; while further donation raised by staff was handed over to the Prime Minister and Minister of Finance in May. Two blood drives were also conducted during the year, in response to the blood appeal from the Fiji Blood Bank.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

YATULE BEACH RESORT LTD 100%

NATADOLA LAND HOLDINGS LTD 100%

DARETON LTD 100% PENINA LTD 51%

FINANCIAL

statements

PACIFIC EMERGING TECHNOLOGIES LTD 100%

Board members’ report Independent auditor’s report

37 – 38

Statements of changes in net assets

Statements of net assets

Statements of cash flows

Notes to and forming part of the financial statements

42 – 89

FIJI DIRECTORIES LTD 90%

FINTEL 49%

ATH TECHNOLOGY PARK 100% ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

TRANSTEL

XCEED

CONNECT

TELECOM FIJI LTD 100% VODAFONE FIJI LTD 51%

AMALGAMATED TELECOM HOLDINGS LTD 58% 30

32 – 35

Statement by Board members

ATH CALL CENTRE LTD 100%

NATADOLA BAY RESORT LTD 100%

HOME FINANCE COMPANY LTD 75%

FNPF

FNPF GROUP STRUCTURE

HOLIDAY INN 100%

FNPF INVESTMENT LTD 100%

FNPF GROUP STRUCTURE

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

Fiji National Provident Fund and its subsidiaries BOARD MEMBERS’ REPORT (continued) For the year ended 30 June 2012

BOARD MEMBERS’ REPORT For the year ended 30 June 2012

The board members present their report together with the financial statements of Fiji National Provident Fund (“the Fund”) and its subsidiaries (“the Group”) for the year ended 30 June 2012 and report as follows: Board Members

Significant Events during the year Enactment of the Fiji National Provident Fund Transition Decree and Fiji National Provident Fund Decree 2011 The Fiji National Provident Fund Transition Decree and Fiji National Provident Fund Decree 2011 were gazetted on 25th November, 2011. The new laws encompassed best practice provisions, in particular in the area of corporate governance, retirement income policy and prudential supervision.

The Board members of the Fund during the year and up to the date of this report were: Mr Ajith Kodagoda (Chairman) Mr Tom Ricketts (Deputy Chairman) Mr Sashi Singh Mr Taito Waqa Mr Tevita Kuruvakadua

The new FNPF Pension Scheme The termination of the former pension scheme and implementation of the new pension scheme designed to address the sustainability of the Fund came into effect in March 2012. The Fund undertook validation and counseling from December 2011 to March 2012 for the existing pensioners who were required to choose new options under the new scheme. Included in the options made available to existing pensioners was the payment of their original Pension Conversion Amount.

Operation of the Fund The Fund is a defined benefit fund and the operation of the Fund has been carried out in accordance with the provisions of the Fiji National Provident Fund Act, Trustee Act, Fiji National Provident Fund Decree 2011 and the Fiji National Provident Fund Transition Decree 2011. Principal Activities The principal activity of the Fund during the financial year was the provision of superannuation services to its members. The principal activities of the subsidiary entities during the year were those of investment, provision of telecommunications services, the ownership and operation of hotel and resort facilities, commercial and home mortgage lending and provision of finance for home ownership, other personal loans and acceptance of term deposits and insurance agency business. Operating Results The benefits accrued as a result of operations for the year ended 30 June 2012 amounted to a surplus of $115,556,000 (2011: surplus of $242,612,000). The consolidated results for the Group for the year ended 30 June 2012 was a surplus of $108,853,000 (2011: surplus of $236,487,000).

The implementation saw the introduction of actuarially age based life pension conversion rates and Term Annuity pension. Momi Bay Project The Board has decided to develop the property itself rather than to sell the same. During the year the Fund signed a memorandum of understanding with an international hotel chain to develop the hotel. Presently the Fund is in search of a project manager. The Fund has also purchased additional land at Momi Bay for $13m, which will be developed as part of the Momi Bay Development. Acquisition of Fiji International Telecommunications Limited (FINTEL) On 15 March 2012, Amalgamated Telecom Holdings Limited (ATH), a subsidiary, acquired 49% shareholding in FINTEL for a consideration of $18.6million. While ATH owns 49% in FINTEL, they also manage the 51% shareholding of the Government of Fiji in FINTEL in accordance with a management agreement.The results of FINTEL have been incorporated in the Group financial statements from the date of acquisition. Three-year Reform Project

Reserves

The Fund started its 3 year Reform Project in 2010 with the overall objectives of “Delivering Excellent Services and Ensure Sustainable Returns” to the Fund Stakeholders. The Reform Project designed under the following categories with the following major projects and objectives:

The Board approved the transfer from the statement of changes in net assets to the following reserves during the year:

• • • •

$9,768,000 (2011: $10,071,000) to the Special Death Benefit Reserve. $8,115,000 (2011: $23,266,000) to the Pension Buffer Reserve. $97,841,000 (2011: $108,443,000) to the General Reserve $3,383,000 (2011: Nil) to the Retirement Income Fund

a) Investment Rehabilitation Various investment rehabilitation programs, aimed at recovering value from impaired assets, continued during the reporting period. Some progress was made including the redevelopment of the Grand Pacific Hotel and the decision to complete Momi where a comprehensive selection process was undertaken for a suitable hotel operator. Preliminary work was also undertaken for the Natadola Bay Resort Limited residential project.

Bad and Doubtful debts

The board members took reasonable steps before the Fund’s and the Group’s financial statements were made out to ascertain that all known bad debts were written off and adequate provision was made for doubtful debts. At the date of this report, the board members are not aware of any circumstances which would render the amount written off for bad debts, or the amount of the provision for doubtful debts, inadequate to any substantial extent.

b) Structural Reform i) Pension Scheme reform with the objectives of implementing a scheme that is actuarially sound, viable and self sustaining in the long run. In December 2010, the Board appointed Mercer (Australia) Pty Ltd and Tower Watson Australia Pty Ltd for the actuarial exercise.The project was taken forward by Promontory Financial Group Australasia and the FNPF Decree and Transition Decree were gazetted on 25th November 2011. Significant work has been undertaken up to June 2012 to implement the pension reform aspects of the Decree and Transition Decree, including validation of all entitled pensioners who came forward. ii) The FNPF Decree now promulgated as above has strengthened the governing laws by encompassing best practice provisions, in particular the area of corporate governance, retirement income policy and prudential supervision.The provisions of the Decree were developed with the assistance of Promontory Financial Group Australasia following extensive consultation on reforms.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries BOARD MEMBERS’ REPORT (continued) For the year ended 30 June 2012

Significant Events during the year (continued)

Other circumstances

Three-year Reform Project (continued)

At the date of this report, the board members are not aware of any circumstances not otherwise dealt with in this report or financial statements which render any amounts stated in the financial statements misleading.

c) Internal Reform i) Information Technology Strategic Review and Reform to provide the Fund with an integrated system and support interactive services to its members.The Strategic Review part of the reform was completed during the financial year. A review of the original IT Strategic Plan was done and documented to describe the approach for managing the rollout of the various projects identified from the initial IT Strategic Review.This review took into consideration the results of the various vendor proposals received, the results of the Proof of Concept phase completed successfully, the need to await the new Chief Information Technology Officer to be on board to take ownership of the IT Reforms Program, and the revision in timelines accordingly. As a first also for the Fund, a Proof of Concept (POC) phase of the program for Project ProMIS (Provident Fund MIS) was completed successfully for three vendors/ solutions short-listed. An external consultant was also engaged on a short-term basis to assist with review and critically examine the revised approach. As a part of the IT Strategic Review, the Project Management Office (PMO) was established and its governance framework also piloted. In addition, about 70% of the supporting infrastructure requirements have been completed and the new Pension Decree has been supported by an new IT System developed in-house. ii) Business Process Re-engineering (BPR) exercises are re-engineering work in the operations area and document work processes. The coverage of the BPR exercise has been extended to other divisions in the Fund to ensure delivery of excellent services to the stakeholders. The review of the Operation functions was done within the year with 80% completion. Including in the realignment process including the job description and reviewing of staff resources. Given that the new Decree had been finalized and the Regulations are still in Draft form, there will be a need to revisit the BPR exercise completed. The first two waves (or phases) BPR exercise had been completed and implemented, but only the initial parts of the final wave which includes the automation component had been completed.This BPR of the final wave is being revisited to consider the new Decree, the draft Regulations and the sort of automation solution (ProMIS) that is available in the market to enable the successful implementation of the BPR exercise. Additional qualified & senior resources have also been recruited specifically to spearhead this third wave of the BPR exercise. Event Subsequent to the Balance Date Apart from those disclosed in the notes to the financial statements, there has not arisen in the interval between the end of the financial year and the date of this report, transactions or events of a material and unusual nature likely, in the opinion of the Board members, to affect significantly the operations of the Fund and of the Group, the results of those operations or the state of affairs of the Fund and of the Group. Basis of preparation

Unusual transactions The results of the Fund and its subsidiaries’ operations during the financial year have not in the opinion of the board members been substantially affected by any item, transaction or event of a material and unusual nature other than those disclosed in the financial statements. Board member’s interest No board member of the Fund has, since the end of the previous financial year, received or become entitled to receive a benefit (other than a benefit included in the total amount of emoluments received or due and receivable by board members as shown in the Fund’s financial statements) by reason of a contract made by the Fund or related corporation with the board member or with a firm of which he is a member, or with a entity in which he has substantial financial interest.

Dated at Suva this 28th day of September 2012. Signed in accordance with a resolution of the Board:

The financial statements of the Fund and of the Group have been drawn up in accordance with the International Financial Reporting Standards and the requirements of law. Related party transactions In the opinion of the board members all related party transactions have been recorded in the books of the Fund and its subsidiaries and adequately disclosed in the attached financial statements.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

STATEMENT BY BOARD MEMBERS

INDEPENDENT AUDITOR’S REPORT

In the opinion of the board members: (a) the accompanying statements of changes in net assets are drawn up so as to give a true and fair view of the movements in net assets available to pay benefits for the year ended 30 June 2012; (b) the accompanying statements of net assets are drawn up so as to give a true and fair view of the state of the affairs of the Fund and the Group at 30 June 2012; (c) the accompanying statements of cash flows are drawn up so as to give a true and fair view of the cash flows of the Fund and the Group for the year ended 30 June 2012; (d) at the date of this statement there are reasonable grounds to believe that the Fund and the Group will be able to pay its debts as and when they fall due; and

Independent Auditor’s Report To the Members of the Fiji National Provident Fund Report on the financial statements

(e) all related party transactions have been recorded and adequately disclosed in the attached financial statements.

We have audited the accompanying financial statements of Fiji National Provident Fund (the ‘Fund’) and the consolidated financial statements of the Fund and its subsidiaries (together the ‘Group’). The financial statements comprise the statements of net assets of the Fund and the Group as at 30 June 2012 and the statements of changes in net assets and cash flows for the year then ended and a summary of significant accounting policies and other explanatory explanatory notes as set out on pages 35 39 to 85 89. The Board Members' and Management’s Responsibility for the Financial Statements The Board and Management are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and with the requirements of the Fiji National Provident Fund Act, 1966 and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Dated at Suva this 28th day of September 2012.

Auditor’s Responsibility Our responsibility is to express an opinion on these these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether hether the financial statements are free from material misstatement.

Signed in accordance with a resolution of the Board:

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the ap appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board and management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion the financial statements give a true and fair view of the financial position of the Fund and the Group as at 30 June 2012 and of the changes in net assets and cash flows of the Fund and the Group for the year then ended in accordance with International Financial Reporting Standards.

PricewaterhouseCoopers, Level 8 Civic Tower, 272 Victoria Parade, Suva, Fiji. GPO Box 200, Suva, Fiji. T: (679)3313955 / 3315199, F: (679) 3300981 / 3300947 PricewaterhouseCoopers is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

INDEPENDENT AUDITOR’S REPORT (continue)

STATEMENTS OF CHANGES IN NET ASSETS

Consolidated The Fund Notes 2012 2011 2012 2011 $000 $000 $000 $000 Investment revenue

Independent Auditor’s Report (continued) Report on other legal and regulatory requirements In our opinion: a) proper books of account have been kept by the Fund, so far as it appears from our examination of those books, and b) the accompanying financial statements are in agreement with the books of account and to the best of our information and according to the explanations explanations given to us give the information required by Section 12 of the Fiji National Provident Fund Act,1966 in the manner so required. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the he purposes of our audit. Restriction on Distribution or Use This report is made solely to the Fund’s members, as a body, in accordance with Section 12 (1) of the Fiji National Provident Fund Act, 1966. Our audit work has been undertaken so that we might state to the Fund’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Fund and the Fund’s members mem bers as a body, for our audit work, for this report, or for the opinions we have formed.

28 September 2012 Suva, Fiji

PricewaterhouseCoopers Chartered Accountants

Interest income 6 242,075 228,791 231,045 221,903 Net property income 9,603 9,246 6,616 6,181 Dividends 4,364 3,192 4,335 3,168 Dividends from subsidiaries 16(a) - - 10,071 8,506 Change in net market values of investment 7 848 3,744 (2,177) (961) Total investment revenue 256,890 244,973 249,890 238,797 Other revenue Sales revenue 301,713 295,977 - Other revenue 8 20,128 10,301 3,272 2,407 321,841 306,278 3,272 2,407 Contributions revenue Contributions from employers and members 317,272 303,518 317,272 303,518 896,003 854,769 570,434 544,722

Benefits paid and expenses incurred Airtime and PSTN charges 35,965 34,320 - Benefits paid 31(c) 444,942 309,509 444,942 309,509 Depreciation and amortisation 63,275 63,358 1,772 1,538 Investment expenses 2,475 2,288 2,475 2,288 Equipment and ancillary charges 30,395 31,526 - Interest expense 8,697 6,466 - Administrative and other expenses 9 163,523 137,041 5,689 (11,225) Total expenses and benefits paid 749,272 584,508 454,878 302,110 Share of loss of associates 16(b) (43) - - Change in net assets for the year before income tax 146,688 270,261 115,556 242,612 Income tax expense 10(a) 14,759 17,791 - Change in net assets for the year after income tax 131,929 252,470 115,556 242,612 Non controlling interest (23,076) (15,983) - 108,853 236,487 115,556 242,612 Net assets available to pay benefits at the beginning of the year 3,785,856 3,551,495 3,768,383 3,525,771 Acquisition/transfer of non – controlling interest - (2,522) - (Decrease)/increase in available for sale reserve 30(c) (80) 311 - Others (5) 85 - Net assets available to pay benefits at the end of the year 30 3,894,624 3,785,856 3,883,939 3,768,383 The statements of changes in net assets are to be read in conjunction with the notes to and forming part of the financial statements set out on pages 42 to 89.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

STATEMENTS OF NET ASSETS

STATEMENTS OF CASH FLOWS

Consolidated The Fund Notes 2012 2011 2012 2011 $000 $000 $000 $000 Investments Financial investments Term deposits 11 201,359 244,228 190,162 232,435 Government securities 12 2,048,423 2,133,192 1,979,859 2,063,397 Other fixed interest securities 13 289,384 365,867 289,384 365,867 Loans and advances 14 379,746 235,969 477,583 393,494 Equities 15 119,498 72,820 112,355 63,540 Investment in subsidiaries 16(a) - - 291,875 276,209 Investment in associates 16(b) 4,132 3,103 - Non-financial investments Investment properties 17 140,049 138,415 88,066 85,755 Property held for development 18 7,992 7,841 - Other non financial asset 25 57,619 44,712 57,619 44,712 3,248,202 3,246,147 3,486,903 3,525,409 Other assets Cash and cash equivalents 19 424,280 223,559 334,383 182,072 Trade receivables 20 27,190 23,108 - Other receivables and assets 24 82,471 88,946 57,374 58,896 Inventories 21 11,325 11,482 - Property, plant and equipment 23 448,932 445,404 12,565 12,001 Intangible assets 22 148,535 154,085 242 347 Deferred tax assets 10(d) 8,281 17,407 - 1,151,014 963,991 404,564 253,316 Total assets 4,399,216 4,210,138 3,891,467 3,778,725 Liabilities Creditors and borrowings 26 260,703 206,381 5,544 4,670 Other liabilities 27 37,278 34,022 1,102 2,548 Employee entitlements 28 8,588 9,311 882 3,124 Income tax payable 10(b) 8,111 7,524 - Deferred tax liabilities 10(c) 27,985 32,993 - Total liabilities (excluding net assets available to pay benefits) 342,665 290,231 7,528 10,342 Net assets 4,056,551 3,919,907 3,883,939 3,768,383 Less: Non controlling interest 161,927 134,051 - Net assets available to pay benefits 30 3,894,624 3,785,856 3,883,939 3,768,383

C onsolidated The Fund Notes 2012 2011 2012 2011 $000 $000 $000 $000 Cash flows from operating activities Contributions received from employers and members 316,626 304,279 316,626 304,279 Cash receipts from customers 311,980 308,836 - Interest received 247,321 223,869 234,786 217,002 Dividends received 4,913 3,319 11,933 14,394 Property rentals received 7,326 10,944 8,217 7,890 Other income received 7,666 1,673 3,004 1,997 Withdrawal payments to members (444,942) (309,447) (444,942) (309,447) Payments to suppliers and employees (237,461) (228,168) (24,848) (23,897) Interest paid (6,338) (11,668) - Income taxes paid 10(b) (10,054) (9,435) - Net cash from operating activities 197,037 294,202 104,776 212,218 Cash flows from investing activities Government securities matured/(acquired) 81,765 (94,500) 83,538 (91,718) Other securities matured/(acquired) 76,483 (9,386) 76,483 (9,386) Loans and advances (provided)/repaid (159,921) 39,343 (84,089) 50,743 Term deposits matured/(invested) 89,093 1,742 41,161 (15,299) Shares in subsidiaries (acquired)/disposed - 6,514 (2,250) Shares and units (acquired)/ disposed (49,813) (649) (49,880) (1,544) Proceeds from sale of property, plant and equipment 537 188 158 61 Purchase of property, plant and equipment (43,197) (63,016) (2,279) (1,445) Amount spent on other non-financial assets (12,907) - (12,907) Proceeds from sale of investment properties - 1,150 - 1,150 Acquisition of intangible assets (2,224) (1,821) (85) (300) Amount spent on investment properties (2,315) (3,326) (2,315) (3,326) Net cash (used in)/from investing activities (22,499) (123,761) 47,535 (71,064) Cash flows from financing activities Proceeds from borrowings 51,162 - - Repayment of borrowings (3,460) - - Receipt from share issue 7 - - Dividends paid (15,942) (22,273) - Net cash from/(used in) by financing activities 31,767 (22,273) - Net increase in cash and cash equivalents Effect of exchange rate movement Cash and cash equivalents at beginning of the financial year Cash and cash equivalents at end of the financial year 33(a)

Signed in accordance with a resolution of the Board:

206,305 6 217,969 424,280

148,168 (257) 70,058 217,969

152,311 141,154 - 182,072 40,918 334,383 182,072

The statements of cash flows are to be read in conjunction with the notes to and forming part of the financial statements set out on pages 42 to 89. The statements of net assets are to be read in conjunction with the notes to and forming part of the financial statements set out on pages 42 to 89.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

1 General Information

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

2. Summary of significant accounting policies (continued)

The Fiji National Provident Fund (the “Fund”) is a superannuation fund domiciled in Fiji. The Fund is constituted by the Fiji National Provident Fund (“FNPF”) Act, Cap 219, to provide superannuation benefits for workers in Fiji. Its head office is located at Provident Plaza 2, 33 Ellery Street, Suva, Fiji Islands.

2.2 Changes in accounting policies and disclosures (continued)

IFRS 10 Consolidated Financial Statements

The financial statements were authorised for issue by the Board of Members on 28th September 2012.

IFRS 10 Consolidated Financial Statements establishes a new control model and is effective for the year beginning 1 July 2013. The new control model broadens the situations when an entity is considered to control another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. Management does not expect this will have a significant impact on the Group’s financial statements.

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Statement of compliance

IFRS 13 was released in September 2011. It explains how to measure fair value and aims to enhance fair value disclosures. Application of the new standard will impact the type of information disclosed in the notes to the financial statements.

The financial statements of the Fund and the Group (being the Fund and its subsidiaries) have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The financial statements have been prepared under the historical cost convention, as modified by the revaluation of land and buildings, investment properties, financial assets at fair value through profit or loss and available for sale assets. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Fund’s and the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4.

2.2 Changes in accounting policies and disclosures The following new standards and amendments to standards relevant to the Group have been adopted from 1 July 2011 and have been applied in the preparation of these financial statements:

Amendments to IFRS 7 Financial Instruments: Disclosures These amendments enhance the transparency of the disclosure requirements for the transfer of financial assets. There are no such transfer of financial assets for the Group and therefore no impact on the financial statements.

Improvements to IFRS 2010 Includes various amendments effective for periods beginning on or after 1 January 2011. As a result of the improvements made to IFRS 7 Financial Instruments: Disclosures additional information has been disclosed on maximum credit exposures and credit enhancements related to these exposures. This information is disclosed in Notes 14, 20 and 24

IAS 24 Related Party Disclosures (Revised) is effective for the year beginning 1 July 2011 It changes the definition of a related party to remove inconsistency and asymmetry of relationships. There has been no material impact on the financial statements. Related party transactions are disclosed in Note 35.

The Fund does not intend to adopt the new standard before its operative date, which means that it would be first applied in the annual reporting period ending 30 June 2014. There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

2.3 Basis of consolidation

Subsidiaries Subsidiaries are all entities over which the Fund has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Fund controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Fund. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Fund. The cost of an acquisition is measured as the fair value of the assets acquired, equity instruments issued and liabilities incurred or assumed at the date of the purchase. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non controlling interest. Investments in subsidiaries are accounted for as cost less impairment. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost or acquisition is less than fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the statement of changes in net assets.

The following new standards and amendments to standards relevant to the Group have been issued.The Group does not intend to apply these standards until their effective dates:

IFRS 9 Financial Instruments replaces part of IAS 39 Financial Instruments IFRS 9 Financial Instruments replaces part of IAS 39 Financial Instruments: Recognition and Measurement and will be mandatory for the Group’s financial statements for the year beginning 1 July 2015. IFRS 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. IFRS 9 permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not traded. The Fund is in the process of evaluating the potential effect of this standard.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

IFRS 13 Fair Value Measurement is effective for the year beginning 1 July 2013

Inter-entity transactions, balances and gains/losses on the transactions between Group entities are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Fund and the Group.

Associates Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. The Fund carries investments in associates at cost less impairment.The Group statements of net assets include the Group’s share of the total recognized gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influences ceases. When the Group’s share of losses exceeds its interest in an associate, the equity accounted carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an associate. Refer Note 16(b) for details on the associates. Where an associate’s accounting policies differ significantly to that of the Fund, adjustments are made to the associate’s gains and losses to conform to the Fund’s accounting policies before they are incorporated into the Group statement of net assets.

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

2. Summary of significant accounting policies (continued)

2.4 Foreign currency translation

2.6

(a) Functional and presentation currency

Investment properties, principally comprising freehold and leasehold land and buildings, are held for long-term rental yields and are not occupied by the Group. Investment property is measured initially at its cost, including related transaction costs. After initial recognition, investment property is carried at fair value, determined by external independent valuers who have appropriate recognised professional qualification and recent experience in the location and category of property being valued. Changes in fair values are recorded in the statement of changes in net assets.

The Fund and the Group operate principally in Fiji and hence the financial statements are presented in Fiji dollars, which is both the functional and presentation currency. Amounts have been rounded to the nearest thousand dollars except where otherwise noted.

(b) Transaction and balances Foreign currency transactions are translated into the Fiji currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of changes in net assets. Translation differences on revalued or non-monetary assets and liabilities held at fair value are recognised in the statement of changes in net assets.

2.5 Property, plant and equipment Freehold land is shown at cost. All other property, plant and equipment is stated at historical cost less depreciation/ amortisation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of changes in net assets during the financial period in which they are incurred. Property that is being constructed for future use as investment property is accounted for as property, plant and equipment until construction or development is complete, at which time it is re-measured to fair value and reclassified as investment property. Any gain or loss arising on re-measurement is recognised in the statement of changes in net assets. When the use of a property changes from owner-occupied to investment property, the property is re-measured to fair value and reclassified as investment property. Any gain or loss arising on re-measurement is recognised directly in the statement of changes in net assets. Freehold land is not depreciated; cost of leasehold land is amortised over the term of the lease. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

Leasehold land Term of lease Buildings 40 – 80 years Building – Freehold Properties 9 – 13 years Exchange plant and telecommunication infrastructure 10 – 15 years Subscriber equipment 10 – 20 years Trunk network plant 15 years Plant and machinery 4 – 15 years Vehicles 4 – 7 years Furniture, fittings and equipment 3 – 8 years Computer equipment and software 3-5 years

2.7

Property held for development

Property held for development is stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated selling expenses. 2.8

Intangible assets

(a) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in ‘intangible assets’ and is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less cost to sell. Any impairment is recognised immediately as an expense and subsequently cannot be reversed. (b) Management rights The Fund paid management rights to the Fiji Government pursuant to a management agreement entered in 1998 between the Fiji Government and a subsidiary company, Amalgamated Telecom Holdings Limited (ATH).The agreement provides ATH the right to manage all of the issued shares in Fiji International Telecommunications Limited (FINTEL) owned beneficially by the Fiji Government, for a period of 20 years with an option of a further 10 years. In return ATH is entitled to receive 80% of the Government of Fiji’s share of dividends from FINTEL. The control over the transfer of this right lies with the Fund.

Acquired computer software licences, which have a finite life, are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives (three to five years).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the statement of changes in net assets.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the statement of changes in net assets during the financial period in which they are incurred.

The amount paid for these management rights is amortised over a 20 year period.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year end. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.9). Upon impairment, the revised carrying value of the asset is depreciated over the remaining estimated useful life of the asset.

Investment properties

www.myfnpf.com.fj

Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with the development of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs include the software development employee costs and an appropriate portion of relevant overheads. Computer software development costs recognised as assets are amortised over their estimated useful lives (not exceeding three years).

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

2. Summary of significant accounting policies (continued)

2 Summary of significant accounting policies (continued)

2.12 Inventories

2.16 Employee entitlements (continued)

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of realisation.

(c) Bonus incentive The Group pays bonuses to employees based on performance of the Group and achievement of individual objectives by the employees.The Group recognises a provision where contractually obliged or where there is a past practice, subject to performance valuation.

The cost of inventories has been determined on a weighted average cost basis and first-in-first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Allowances for inventory obsolescence are raised based on a review of inventories. Inventories considered obsolete or un-saleable are written off in the year in which they are identified.

2.13 Trade receivables Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. Allowances are made for impairment, further details on which are in note 2.11.Trade receivables are categorised as loans and receivables under financial assets.

2.15 Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Where the Group is the lessee, the lease rentals payable on operating leases are recognized in the statement of changes in net assets over the term of the lease.

2.16 Employee entitlements

(a) Wages and salaries and sick leave Liabilities for wages and salaries and incentives expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employeesâ&#x20AC;&#x2122; services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Payments for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

(b) Annual Leave, long service leave, gratuity benefits and retirement benefits Gratuity and retirement benefits are paid in respect of services provided up to the reporting date by employees and on retirement and/or on completion of their contractual term. The liability for annual leave, long service leave, gratuity benefits and retirement benefits is recognised in employee entitlements measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

2.17 Trade payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.18 Borrowing costs The borrowing costs that are directly attributable to the acquisition or construction of the capital assets are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are recognised as an expense in the year in which they are incurred.

2.14 Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Groupâ&#x20AC;&#x2122;s cash management are included as a component of cash and cash equivalents for the purpose of the statements of cash flows. Cash and cash equivalents are categorised as loans and receivables under financial assets.

2.19 Income tax The Fund is exempt from income tax under section 16 (26) of the Income Tax Act 1976. Hence income tax is not separately accounted for in the Fundâ&#x20AC;&#x2122;s financial statements. In respect of the subsidiaries, the balance sheet liability method of tax effect accounting has been adopted to arrive at the tax balances in the consolidated financial statements. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the financial year end. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the balance sheet liability method, on temporary differences arising between the tax bases of the assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss or for goodwill. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the financial year end and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences and the eligible tax losses can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Current and deferred tax is recognised as an expense or income in the statement of changes in net assets, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity.

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (continued)

2.20 Provisions

2.23 Revenue recognition (continued)

Provisions are recognised when the Fund 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. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation.

2.21 Liability for accrued benefits The liability for accrued benefits is the Fund’s present obligation to pay benefits to members and beneficiaries, and has been calculated as the Fund’s net assets as stated on the statement of net assets less the general reserve account as at reporting date.

2.22 Contributions Contributions from employers and members are recorded when control of the asset is ascertained which is upon receipt of the CS forms from the employers and the registration of the forms by the Fund. The Fund does not accrue for contributions for which no CS forms are received or received but not registered as it is not able to reliably estimate the contributions balance. Under the FNPF Act, mandatory contributions of 16% was required to be made by the employer, who may recover 8% of such contribution from the employee’s wages. Under the FNPF Decree, the amount of contributions for an employee for a month is the amount equal to 16% of the total wages payable to the employee by the employer for the month. The contribution shall be paid as a 8% deduction from the total wages of the employee and an 8% contribution by the employer. Both legislation allow for additional contributions to be made. The contributions revenue shown in the Statements of changes in net assets represents total contributions received from employers and members. Other than an insignificant amount which relates to the additional contributions which are received, the balance is largely represented by equal amounts of contributions from the employer and the employee.

2.23 Revenue recognition

(a) Sale of telecommunication and related services Revenue is recognized based on billing cycles through the month. Unbilled revenue from the billing cycle date to the end of each month is recognized as revenue in the month the service is provided. Revenue from prepaid products and fixed monthly charges billed in advance is deferred and recognized as revenue when the related service has been provided or when the product date has expired, which ever falls earlier.

Interest income is earned from investments such as government securities, other fixed securities, loans and advances and term deposits. Interest income is recognized on an accrual basis.

Property rental income from operating lease is recognised on a straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.

(e) Dividend income Dividend income from investments is recognised when the right to receive payment is established, which is when it has been declared.

(f) Fees Fees comprise housing application, withdrawal, voluntary contribution application, documentation, investment application, loan confirmation, commitment and computer service fees. Revenue from fees and commissions is recognised on an accrual basis when related services have been provided.

(g) Revenue from hotel and golf activities Revenue from rooms, food and beverage, and golf activities is recognised on an accruals basis. Revenue from the rendering of service and sale of goods is recognised when the significant risks and rewards of ownership have been transferred to the guest or customer on provision of services or sale of goods.

2.24 Expenses

(a) Benefits paid Benefits paid include member withdrawals, pension annuity and other member payments. These are recognised upon payment of such benefits.

Revenue from the provision of internet services is recognized upon the use of service by its customers.

(b) Other Expenses Expenses are recognised in the statement of changes in net assets on an accrual basis.

Revenue from publication of telephone directories is recognised upon dispatch of the directories for distribution. Advance billings and monies collected in advance are deferred. Revenue from fixed-priced contracts in relation to on-line directory is recognised over the term of the contract. Revenue earned from the publication of the telephone directory is stated net of allowances.

(d) Property rentals

(b) Sale of equipment Sale of equipment is recognised when risks and rewards are transferred to the customer. Revenue is recognised at the point the product is dispatched from the warehouse or sold at a group retail outlet.

2.25 Comparative figures Where necessary, amounts relating to prior years have been reclassified to facilitate comparison and achieve consistency in disclosure with current year amounts.

3 Financial risk management

3.1 Financial risk factors The Group’s objective is to take a strategic and consistent approach to managing risks across the Group through risk management and associated activities that assists in the safeguarding of the Group’s assets and seeks to avoid potential adverse effects on the Group’s financial performance. The respective Board of Directors and Board Audit Risk Committees are responsible for the risk management, monitoring and reporting functions. At the Fund level, they are supported by: • FNPF’s Board Investment Committee; • FNPF’s Corporate Governance and Enterprise Risk Department; and • FNPF’s Internal Audit Department.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

3 Financial risk management (continued)

3.1 Financial risk factors (continued)

Risk management is carried out by executive management under policies approved by the individual Group entities’ Board of Directors.

(a) Market risk (continued)

FNPF caters for the retirement funding of its members and invests significantly to cater for this fund. The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

(ii) Price risk (continued)

(a) Market risk

(i) Foreign exchange risk

Group Fund Impact on net assets Impact on net assets

The Group has investments in foreign currencies and procures certain services from abroad and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US, Australian and NZ dollar. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities. The individual Group entities’ Treasury department manages its foreign exchange risk against their functional currency, in this case the Fiji dollar. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency other than the Fiji Dollar. For significant settlements, the Group is required to seek quotations from recognised banks and use the most favourable exchange rate for purposes of the settlement. At the reporting dates, had the Fijian dollar strengthened/weakend by the implied volatility of 5% against the respective currencies, with all other variables held constant, the Fund’s net assets would have been higher/lower as follows:

2012 $000

AUD 5,584 USD 4,008 NZD 474 10,066

Index

South Pacific Stock Exchange Australian Securities Exchange

2012 $000

2011 $000

1,385 1,627 3,359 960 4,744 2,587

2012 $000

2011 $000

1,367 1,375 3,359 960 4,726 2,335

The net surplus/deficit would increase/decrease as a result of gains/losses on equity securities classified at fair value through profit or loss.

(iii) Cash flow interest rate risk and fair value interest rate risk The Group has significant interest-bearing assets in the form of short and long-term cash deposits, fixed interest securities, and loans and advances. These are at fixed interest rates and hence there are no cash flow interest rate risks arising from fluctuations in market interest rates during the period of investment or loan. Consequently there is very limited cash flow interest rate risk. Since these assets are either measured at cost or at amortised cost, fair value interest rate risk is also very limited.

2011 $000 3,360 481 1,875 5,716

For re-investment of short and long term cash deposits, the Group negotiates an appropriate interest rate with the banks and invests with the bank which offers the highest interest return. For fixed interest securities, the prices and terms are usually set by the issuer and the terms are determined and agreed at the start. Terms for loans and advances are set by the Group and agreed at the start. Apart from fixed term and at call deposits, the Group does not have any other significant interest-bearing borrowings.The fixed term deposits are at interest rates which are fixed at the time of the investment/renewal.

(ii) Price risk The Group is exposed to equity securities price risk because of investments held by the Group and classified in the statement of net assets at fair value through profit or loss. The Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group and restrictions by RBF over offshore investments.The Group’s investments in equities are largely those which publicly trade on the South Pacific Stock Exchange (for local investments) and Australian Stock Exchange (for offshore investments). The table below summarises the impact of increases / decreases of the above two exchanges on the Fund and Group’s net assets, assuming that the equity investments listed on the South Pacific Stock Exchange increased / decreased in value by 5% and for the offshore investments, the equity indexes for the Australian Stock Exchange increased / decreased by 5%. Shares in a listed subsidiary, ATH, which are not included in this analysis, is recorded by the Fund at cost less impairment.

Given the fixed nature of interest rates described above, the cash flow interest rate risk is minimal.

(b) Credit risk Credit risk is the potential risk for loss arising from failure of a debtor or counterparty to meet their contractual obligations. The Group is subject to credit risk through its lending and investing and provision of goods and services. The Group’s primary exposure to credit risk arises through the provision of lending facilities. The amount of credit exposure in this regard is represented by the carrying amounts of the loans and advances on the statement of net assets. In addition, the Group is exposed to off balance sheet credit risk through commitments to extend credit. Deposits are only made with banks known to have sound financial standing. Investment in fixed interest securities with Government of Fiji or Government related entities are guaranteed by Government. Loans and advances are made after appropriate credit and security checks and they are monitored and reviewed.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

3 Financial risk management (continued)

3.1 Financial risk factors (continued)

(b) Credit risk (continued) Credit risk concentration on loans and advances disclosed in note 14 are as follows: Consolidated The Fund 2012 2011 2012 $000 % $000 % $000 %

2011 $000

Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities when they fall due and to replace member funds when they are withdrawn. The consequence may be the failure to meet obligations to repay members and fulfil commitments to lend. %

Agriculture 19,585 5 14,923 6 11,839 2 12,785 2 Construction 7,778 2 6,832 3 - - - Financial institution 1,182 - - - 44,742 7 60,891 11 Government and statutory bodies 17,632 5 24,289 10 17,632 3 24,289 4 Telecommunications - - - - 88,777 13 108,915 18 Energy - - - - - - - Manufacturing 16,419 4 8,015 3 335 - 474 Mining 2,741 1 1,903 1 - - - Private motor vehicle (includes staff loans) 6,521 2 1,069 - 24 - 31 Private others (includes staff loans) 99,356 25 97,714 40 10,201 2 12,501 2 Professional and business services 15,509 4 17,715 7 - - - Public enterprise - - - - - - - Real estate development 23,120 6 62,646 25 56,754 8 57,490 10 Transport and storage 153,937 39 2,848 1 142,976 21 201 Wholesale and retail 13,724 4 8,876 4 - - - Other (Hotels & Restaurants) 10,095 3 1,093 - 304,615 44 316,845 53 Total 387,599 100 247,923 100 677,895 100 594,422 100

The Group is restricted by the exchange controls of RBF in terms of offshore investments (RBF has imposed limit on amounts that can be invested offshore). As Fiji’s capital market is not mature, the majority of the Group’s local investments do not have any significant sizable trading activities. These investments include Fiji Government and quasi government securities which are held to maturity and there is very little opportunity for the Group to dispose or trade these investments. The Group also engages in commercial mortgages and property investments. These investments have limited liquidity within the local markets and significant sell down of positions may not be practicable. Additionally, these investments also have different maturity horizons which may not be in line with the timing of member withdrawals which are allowed under the circumstance of retirement, death or incapacitation. As a result, the Group is susceptible to a risk that these investments may not be readily liquidated as the capital market in Fiji is not developed enough due to the limited number of major financial market players (inadequate volume for an active market for these instruments). Also, the sale of large blocks of investments may be difficult or may result in the sale of these investments at a price which is a discount to the perceived market price. The individual Group entities’ Treasury department manages the above liquidity risk through: • monthly reporting on the position of these investments to the Board and Board Investment Committee (“BIC”); • an established prudent asset allocation strategy which has been approved by the Board; and • monitoring of maturities of investments and investment outflows including the forecasting of the availability of funds. For maturity analysis on Creditors and Borrowings, refer Note 26.

The carrying amount of financial assets represents the maximum credit exposure.The maximum exposure to credit risk at the reporting date is:

3.2 Capital risk mangement

Notes

The capital of the Fund is represented by the net assets available to pay benefits to its members. The amount of net assets available to pay benefits to its members can change significantly on a daily basis as the Fund receives contributions and pays benefits to members on a daily basis. The Fund’s objective when managing capital is to safeguard the Fund’s ability to continue as a going concern in order to provide returns and benefits to its members and to maintain a strong capital base to support the development of the investment activities of the Fund.

Group 2012 $000

The Fund 2011 $000

2012 $000

2011 $000

Financial investments Term deposits 11 201,359 244,228 190,162 232,435 Government securities 12 2,048,423 2,133,192 1,979,859 2,063,397 Other fixed interest securities 13 289,384 365,867 289,384 365,867 Loans and advances 14 379,746 235,969 477,583 393,494 Equities 15 119,498 72,820 112,355 63,540 Investments in subsidiaries 16(a) - - 291,875 276,209 Investment in associate 16(b) 4,132 3,103 - Cash and cash equivalents 19 424,280 223,559 334,383 182,072 Trade receivables 20 27,190 23,108 - Other receivables and assets 24 82,471 88,946 57,374 58,896 Total 3,576,483 3,390,792 3,732,975 3,635,910

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

In order to maintain or adjust the capital structure, the Fund’s policy is to, monitor the level of monthly contributions income and benefits payable relative to the assets it expects to be able to liquidate and adjust the amount for investments and interest credited to the members account at the end of each reporting period. The Board members and executive management monitor capital on the basis of the value of net assets available to pay benefits. 4. Critical accounting estimates and judgments Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

4. Critical accounting estimates and judgments (continued)

5. Fair value estimation

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

(a) Fair value of private equity instruments Management uses judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at each financial year end. Valuations are carried out either in-house or by the independent experts. Methods used are a combination of discounted cash flow analysis, net assets, capitalization of dividends and capitalization of future maintainable earnings.

(b) Estimated impairment of investment in movie productions The investment in movie productions by the Group comprises of a guaranteed and a non-guaranteed portion. The guaranteed portion is recovered through minimum return guaranteed by the producers or promoters of the movie. Part of the non-guaranteed portion is recovered through tax savings benefits. The Group has assumed that other than tax savings benefits and minimum guaranteed returns, investment is not likely to be recovered, and accordingly has made impairment provisions once tax benefits or the guaranteed returns are recognised.

(c) Impairment of trade receivable Impairment of trade receivable balances is assessed at an individual as well as on a collective level. At a collective level all debtors in the + 90 days category (excluding those covered by a specific impairment provision) are estimated to have been impaired and are accordingly provided for.

(d) Impairment of property, plant and equipment The Group assesses whether there are indicators of impairment of all property, plant and equipment at each reporting date. Property, plant and equipment are tested for impairment and when there are indicators that the carrying amount may not be recoverable, reasonable provision for impairment is created.

(e) Actuarial present value of accrued benefits The Fund determines the actuarial present value of the accrued benefits in the Retirement Income Fund (“RIF”) using economic and demographic assumptions, and taking into account likely future macroeconomic conditions and the recent experience of the Fund (if applicable). Using the demographic assumptions, the annual benefits payable from the RIF are projected year by year, allowing for expected annuitant deaths, until all benefits in respect of annuitants in force at the valuation date have been paid. The projected annual benefit payments are then discounted to the valuation date, based on the assumed rate of future investment returns after allowance for expenses incurred in administering the RIF. Future investment return is assumed to be 6.5% (2011: 7%) and the discount rate used after the allowance for expenses is 6.0% (2011: 6.5%). The actuarial present value of the accrued benefits for the Fund has been determined by Mr. Geoffrey Rashbrooke, Fellow of the Institute of Actuaries, United Kingdom.

• • •

Quoted price (unadjusted) in active markets for identical assets or liabilities (level 1). Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). Inputs for the assets or liability that are not based on observable markets data (that is unobservable inputs) (level 3).

Level 1 Level 2 Level 3 Total $000 $000 $000 $000 Consolidated Balance as at 30 June 2011 Financial assets at fair value through profit & loss 47,281 16,816 15 64,112 Available for sale financial assets 4,467 3,154 1,087 8,708 51,748 19,970 1,102 72,820 Balance as at 30 June 2012 Financial assets at fair value through profit & loss 95,798 16,898 15 112,711 Available for sale financial assets 3,698 3,074 15 6,787 99,496 19,972 30 119,498 The Fund Balance as at 30 June 2011 Financial assets at fair value through profit & loss 46,709 16,816 15 63,540 Balance as at 30 June 2012 Financial assets at fair value through profit & loss

94,442

16,898

112,355

The following table reconciles the Fund’s and the Group’s Level 3 fair value measurement from 30 June 2011 to 30 June 2012. Balance at 1 July Gains/(loss) included in statements of changes in net assets Reclassified to investment in associates Balance at 30 June

Consolidated 2012 2011 $000 $000 1,102 4,147 - (3,045) (1,072) - 30 1,102

The Fund 2012 2011 $000 $000 15 15 - - 15 15

6. Interest Fixed interest securities l Government 150,905 161,615 151,019 161,772 l Other 30,560 25,458 30,560 25,458 Loans and advances 37,338 24,082 29,627 20,891 Term deposits 11,916 11,594 11,418 10,864 Other interest income 11,356 6,042 8,421 2,918 242,075 228,791 231,045 221,903

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

Consolidated The Fund 2012 2011 2012 2011 Notes $000 $000 $000 $000 7. Change in net market values of investment Change in net market values of investment consist of the following: Unrealised gains/(losses) on revaluation of investment properties 17 - (1,385) - (1,385) Unrealised gains on other investments 1,744 1,180 1,893 1,227 Realised (losses)/gains on investments (2,958) 2,565 (2,958) (292) Unrealised exchange (losses)/gains (334) 549 (928) (511) Realised exchange (losses)/gains 2,396 835 (184) 848 3,744 (2,177) (961) 8. Other revenue Other revenue includes the following specific items: Gain on sale of fixed assets and investment property 316 402 27 Bad debts recovered 51 478 - Fair value gain on acquisition of FINTEL 8,175 - -

333 -

9. Administrative and other expenses Auditors’ remuneration: w Auditors –PwC 153 167 93 78 w Audit – Other firms 163 138 - w Other services – PwC 7 53 - 45 w Other services – Other firms 60 165 - 37 Bad and doubtful debts (884) 1,637 624 (22,408) Directors fees 353 377 42 50 Electricity 6,212 5,904 370 511 Hotel operating expenses 13,198 12,291 - Insurance 4,451 3,995 590 431 Impairment expenses: w Impairment on equity investments 15 - 3,652 - w Reversal of impairment on investment in subsidiary 16(a) - - (13,416) (6,529) w Reversal of impairment on property, plant and equipment 23 (7,603) (30,166) - w Impairment on property held for development 18 952 1,518 - w Impairment on intangibles 22 3,023 2,502 - Licence fees 11,216 5,520 - Loss on sale of property, plant and equipment - 200 - Marketing and promotion 8,275 9,756 - Operating leases 6,720 6,255 - Provision for stock obsolescence (1,021) 548 - Personnel expenses: w Salaries and wages 53,385 49,861 8,927 7,560 w Other staff benefits and expenses 10,432 12,799 719 2,691 Repairs and maintenance 3,727 4,233 672 955 Reform expenses 3,091 2,162 3,091 2,162 Other operating and general expenses 47,613 43,474 3,977 3,192 163,523 137,041 5,689 (11,225)

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

Consolidated 2012 2011 $000 $000

The Fund 2012 2011 $000 $000

10. Income tax (a) Income tax expense Prima facie income tax expense calculated at 28% on change in net assets 41,073 75,673 32,356 67,931 add/(deduct): Income not subject to tax/expenses not deductible (28,048) (55,693) (32,356) (67,931) Export income allowances (487) (326) - Effect of change in tax rate (7,618) - - Investment allowances (3,065) (9,934) - Tax losses and temporary differences not recognized as deferred tax assets 15,834 7,706 - Tax losses and temporary differences not previously brought to account (2,243) (78) - (Over)/under provision in prior year (683) 403 - Others (4) 40 - 14,759 17,791 - Income tax expense is made up of: Current income tax expense 11,324 11,031 - Deferred tax expense 11,736 6,357 - Effect of change in tax rates (7,618) - - Under provision in prior years (683) 403 - 14,759 17,791 - (b) Provision for Income tax Movements during the year were as follows: Balance at the beginning of the year Income taxes paid (Over)/under provision in prior years Current income tax expense Balance at the end of the year

7,524 (10,054) (683) 11,324 8,111

5,525 (9,435) 403 11,031 7,524

- - - - -

(c) Deferred tax liabilities Provision for deferred income tax comprises the following at 20% (2011: 28%): Deferred expense 16 22 - Difference in depreciation for accounting and income tax purposes 27,832 32,674 - Unrealised exchange (loss)/gain 137 297 - 27,985 32,993 -

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000 10. Income tax (continued) (d) Deferred tax assets Provision for deferred income tax comprises the following at 20% (2011: 28%): Provision for inventory obsolescence 503 976 - Deferred revenue 114 119 - Employee entitlements 1,426 1,685 - Provision for impairment and doubtful debts 2,590 3,048 - Tax losses 3,397 11,018 - Other 251 561 - 8,281 17,407 - All movement in temporary differences relating to deferred tax assets and deferred tax liability are recorded through the statement of changes in net assets.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000 12. Government securities Fiji Government Registered Stock 2,048,423 2,123,482 1,979,859 2,053,687 Treasury Bills - 9,710 - 9,710 2,048,423 2,133,192 1,979, 859 2,063,397

Represented as: Less than or equal to 3 months 3 to 12 months 1 to 5 years Greater than 5 years

27,877 49,095 52,931 113,578 406,691 439,199 1,560,924 1,531,320 2,048,423 2,133,192

27,877 49,095 52,611 112,158 402,258 434,769 1,497,113 1,467,375 1,979,859 2,063,397

The above investments are accounted for as held-to-maturity and valued in accordance with note 2.10 to the financial statements. The carrying values of treasury bills reflect their fair value as these investments are short term. Fair values for the securities, determined by indicative prices quoted by the Reserve Bank of Fiji are as follows:

From the 2012 tax year, the income tax rate changed from 28% to 20%. Accordingly, the deferred tax balances are stated at 20%. (e) Deferred tax assets not brought to account Tax losses carried forward 22,281 16,217 - Provision for impairment and doubtful debts - 17,249 - Depreciation of property, plant and equipment 11,688 795 - 33,969 34,261 - -

Fiji Government Registered Stock 2,412,954 2,448,515 2,344,390 2,386,402 13. Other fixed interest securities Promissory notes 4,877 10,380 4,877 10,380 Bonds 226,412 320,616 226,412 320,616 Foreign Bonds 58,095 34,871 58,095 34,871 289,384 365,867 289,384 365,867

The above deferred tax assets have not been brought to account as their realisation is not probable.

Represented as:

Pursuant to a letter from the Minister of Finance dated 16 September 2010 approving full SLIP to one of the Company’s subsidiary, Natadola Bay Resort Limited, the subsidiary is exempt from income tax on profits derived from its resort operations for a period of 20 years. The final approval took effect from 18 May 2009 which was the first day of the commercial operations for the resort.

Less than 3 months 3 to 12 months 1 to 5 years Greater than 5 years

Given that the subsidiary is exempt from income tax for a period of 20 years, no deferred tax assets in relation to accumulated tax losses have been brought to account. Under the existing income tax laws, tax losses may only be carried forward for 4 years in succession effective 1 January 2012 in accordance with the amendments to the Income Tax Act. The Directors of the subsidiary believe that by virtue of the resort profits being exempt from income tax for the above period, the above losses would expire before the end of the tax exemption period. Consequently the subsidiary will not be able to generate sufficient taxable profits in order to utilise the tax losses. For these reasons, the tax losses are also not reflected in the above tax losses carried forward amount. 11. Term deposits Local banks and financial institutions– local currency 115,263 184,793 104,066 173,000 Other banks – foreign currency 86,096 59,435 86,096 59,435 201,359 244,228 190,162 232,435 Represented as: Less than or equal to 3 months 21,573 24,007 21,573 24,007 3 to 12 months 121,918 162,351 111,589 150,926

1 to 5 years

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

57,868 201,359

4,910 35,828 31,151 36,942 157,023 150,926 96,300 142,171 289,384 365,867

Promissory notes and bonds are guaranteed by the Government of Fiji. The above investments are accounted for as held-to-maturity as they are considered likely to be held to maturity in line with the fixed investment objectives and the fixed price nature of the investments. They are hence stated at amortised cost. The carrying values of promissory notes reflect their fair value as these investments are short term. The fair value of foreign bonds largely represents its carrying value as the yield rates have mainly remained stable. Fair values for Fiji bonds, determined by indicative prices quoted by the Reserve Bank of Fiji are as follows: Bonds

259,891 387,251

57,870 57,000 57,502 244,228 190,162 232,435

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000 14. Loans and advances Loans and advances (quasi-government) 22,878 23,210 18,884 23,210 Loans to subsidiaries (Note 35(b)) - - 483,732 523,864 Customer term loans 362,399 221,400 174,634 45,704 Staff loans 2,322 3,313 645 1,644 387,599 247,923 677,895 594,422 Provision for impairment (7,853) (11,954) (200,312) (200,928) 379,746 235,969 477,583 393,494 Represented as: Less than or equal to 3 months 9,941 22,709 2,422 21,156 3 to 12 months 33,605 93,350 48,367 145,730 1 to 5 years 175,024 47,518 134,383 118,372 Greater than 5 years 169,029 84,346 492,723 309,164 387,599 247,923 677,895 594,422

The carrying values of loans and advances are considered to be a reasonable approximation of their fair values. The maximum exposure to credit risk at the reporting date before collateral held or other credit enhancements is the fair value of each class of the asset above. Collaterals held against each of the above category of loans and advances are as follows: L oans and advances – For quasi government loans, a government guarantee or a debenture over all the assets. Loans to subsidiaries – Usually a first charge and third party mortgage is obtained. For a subsidiary, Natadola Bay Resort Limited, the loan is largely unsecured. Refer below for further comments. l Customer term loans – The head security is first registered mortgage over property and improvements. During the year the Fund provided loans to Air Pacific Limited, further details of which are below. l l

A loan is assessed as impaired if the loan is non-performing and the loan balance is greater than the security value. An impairment provision is created for the difference between the loan and the security value.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

14. Loans and advances (continued) Movements in the provision for impairment – Consolidated are as follows:

Loans & Advances $000

Loans to subsidiaries $000

Customer term loans $000

Staff loans $000

Total $000

Collectively Assessed Provisions Balance as at 1 July 2010 - - 127 1,031 1,158 New and increased provisioning - - 16 144 160 Bad debts written off - - (69) - (69) Provisions no longer required - - - (179) (179) Balance as at 30 June 2011 - - 74 996 1,070 New and increased provisioning - - 240 - 240 Bad debts written off - - - (616) (616) Balance as at 30 June 2012 - - 314 380 694 Individually Assessed Provisions Balance as at 1 July 2010 5,406 - 61,199 - 66,605 New and increased provisioning - - 1,121 - 1,121 Bad debt written off - - (786) - (786) Provisions no longer required (512) - (55,544) - (56,056) Balance as at 30 June 2011 4,894 - 5,990 - 10,884 New and increased provisioning - - 962 - 962 Bad debts written off (1,996) - (68) - (2,064) Provisions no longer required (1,364) - (1,259) - (2,623) Balance as at 30 June 2012 1,534 - 5,625 - 7,159 Total provision for impairment at 1 July 2010 Total provision for impairment at 30 June 2011 Total provision for impairment at 30 June 2012

5,406 4,894 1,534

- - -

61,326 6,064 5,939

1,031 996 380

67,763 11,954 7,853

Natadola Bay Resort Limited (NBRL) FNPF has provided loans totaling $302,835,111 (2011: $302,830,241) to NBRL. There are no loan agreements executed as at year end for any of the loans to NBRL and security over the loans is limited to comprehensive insurance cover over the property and improvement thereon with FNPF’s interest noted thereon. Further details of the loan are in Note 35(b). As at year end, the Fund is carrying a provision for impairment against the loan of $197,635,240 (2011: $197,635,240).The provision is based on an independent valuation of NBRL’s property, plant and equipment which was undertaken on 30 June 2011. Air Pacific Limited (APL) FNPF provided loans totaling $145,697,239 to APL during the year.The loans are for a 15 year period and attract 8.75% per annum interest, which are payable in advance on a six monthly installment basis.The loans have been provided for the acquisition of aircrafts by APL and the principal repayments (amounts to be determined) will commence upon the delivery of the aircrafts to APL on March 2013, May 2013 and November 2013. The loans are principally secured by the following: i) A first ranking aircraft mortgage in respect of each mortgaged aircraft. ii) An assignment of the insurance proceeds over each mortgaged aircraft. iii) A first ranking security over the borrower’s shares in Richmond Limited. iv) Security from the Fiji Government.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

14. Loans and advances (continued)

15. Equities (continued)

Movements in the provision for impairment â&#x20AC;&#x201C; The Fund are as follows: Loans & Loans to Customer Staff Total Advances Subsidiaries term loans loans $000 $000 $000 $000 $000 Collectively Assessed Provisions Balance as at 1 July 2010 - - - 1,031 1,031 New and increased provisioning - - - - Provisions no longer required - - - (35) (35) Balance as at 30 June 2011 - - - 996 996 New and increased provisioning - - - - Bad debt written off - - - (616) (616) Balance as at 30 June 2012 - - - 380 380 Individually Assessed Provisions Balance as at 1 July 2010 1,802 220,911 56,007 - 278,720 New and increased provisioning - - - - Provisions no longer required (512) (23,276) (55,000) - (78,788) Balance as at 30 June 2011 1,290 197,635 1,007 - 199,932 New and increased provisioning - - - - Provisions no longer required - - - - Balance as at 30 June 2012 1,290 197,635 1,007 - 199,932

Movements in the accumulated impairment provision are as follows:

Total provision for impairment at 1 July 2010 Total provision for impairment at 30 June 2011 Total provision for impairment at 30 June 2012

1,802 1,290 1,290

220,911 197,635 197,635

56,007 1,007 1,007

1,031 996 380

279,751 200,928 200,312

Total impairment provisions as at balance date are: Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000 Collectively assessed provisions Individually assessed provisions 15. Equities Local equities Unit trusts Kula Fund â&#x20AC;&#x201C; foreign currency Overseas equities Accumulated impairment provision

694 7,159 7,853

1,070 380 996 10,884 199,932 199,932 11,954 200,312 200,928

36,470 16,898 910 67,173 (1,953) 119,498

42,761 29,327 28,602 16,816 16,898 16,816 872 910 872 19,203 67,173 19,203 (6,832) (1,953) (1,953) 72,820 112,355 63,540

Equity investments are valued in accordance with Note 2.10 to the financial statements.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

Balance at the beginning of the year Additional impairment recognised Reclassified to investment in associates Balance at the end of the year

www.myfnpf.com.fj

6,832 - (4,879) 1,953

The Fund

3,180 3,652 - 6,832

2012 $000

2011 $000

1,953 - - 1,953

1,953 1,953

16. (a) Investment in subsidiaries Investments in subsidiaries Accumulated impairment provision

- - -

- 449,958 - (158,083) - 291,875

447,708 (171,499) 276,209

Investment in subsidiaries consists of the following: Name Principal activities Balance 2012 2012 2011 2011 Date Cost Impairment Cost Impairment $000 $000 $000 $000 Amalgamated Telecom Holdings Limited (ATH) Telecommunications 31 March 295,823 83,300 295,823 83,300 Home Finance Company Limited Financing 30 June 12,884 - 10,634 FNPF Nominees Limited Nominee services 30 June 98 - 98 FNPF Investments Limited Investments 30 June 141,153 74,783 141,153 88,199 449,958 158,083 447,708 171,499 Dividends received from the above entities for the year ended 30 June 2012 amounted to $10,070,818 (2011: $8,506,383). For ownership interests, refer Note 35 (c). Impairment of investment in FNPF Investments Limited The Fund has written down its investment in a subsidiary company, FNPF Investments Limited by $74,783,000 (2011: $88,199,000).The Fund received a dividend of $1,000,000 during the year. Impairment of investment in Amalgamated Telecom Holdings Limited (ATH) The above impairment was recorded in 2006. Based on an independent assessment carried out in June 2012, the Board has reassessed the recoverable amount of the investment and have concluded that no further impairment is necessary.

Consolidated 2012 2011 $000 $000

The Fund 2012 2011 $000 $000

16. (b) Investment in associates At cost Allowance for impairment

Consolidated 2012 2011 $000 $000

www.myfnpf.com.fj

9,693 (5,561) 4,132

3,609 (506) 3,103

- - -

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000

16. (b) Investment in associates (continued) Movements in the allowance for impairment are as follows:

2012 $000

Balance at the beginning of the year Reclassified from investment in subsidiary Reclassified from investment in equities Reclassified from other receivable Balance at the end of the year

506 - 4,879 176 5,561

Consolidated The Fund 2011 2012 2011 $000 $000 $000 - 506 - - 506

- - - - -

17. Investment properties Balance as at 1 July Acquisitions Net transfers from property, plant and equipment Work in progress Disposals Depreciation Fair value adjustments Balance as at 30 June

138,415 138,494 85,755 84,684 2,117 3,326 2,117 3,326 18 - 18 198 - 198 (22) (1,333) (22) (870) (677) (687) - - (1,385) - (1,385) 140,049 138,415 88,066 85,755

Investment in associates are those equity investments in which the Group has significant influence. This is typically where the Group has more than 20% ownership and some board representation. During the year, some investments which were previously classified as investment in equities were reclassified as investment in associates. These investments were previously managed by a fund manager whereas the Group is now directly involved in the investments through director appointments (previously none) and thus allowing for greater influence over these investees. Share of loss of associates for an amount of $42,920 has been recorded in the Group’s statement of changes in net assets, relates to investment in Grand Pacific Hotel Limited.

Investment properties are typically revalued by an independent valuer at the end of each financial year.This year however no valuation was done by the Group as there has been no major change in the market conditions and/or much change in the property tenancy and rentals.

Investment in associates consists of the following:

18. Property held for development Opening carrying value Additions Impairment recorded during the year

Name Interest 2012 2012 Cost Impairment $000 $000 Grand Pacific Hotel Limited 25% Western Dairy Limited 32% Tropic Health Incorporated (Fiji) Limited 46% Active (Fiji) Co. Limited 23% Halabe Investments Limited 25% Bligh Water Shipping Limited 26%

3,566 500

2012 2011 2011 2011 Carrying Cost Impairment Carrying value $000 $000 value $000 $000

506 -

1,090 750 884 2,903 9,693

1,077 750 325 2,903 5,561

3,060 500

3,609 -

13 - - - 559 - - - 4,132 3,609

Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000

7,841 9,290 1,103 69 (952) (1,518) 7,992 7,841

- - - - -

3,103 -

Pursuant to the Natadola Bay Decree 2010 which came into effect in 2010 financial year, land held for development which was previously under the control of Natadola Land Holding Limited (NLHL) was deemed to have been transferred to Natadola Bay Resort Limited’s (NBRL) ownership. The titles, which are still under NLHL’s name, are in the process of being transferred to NBRL’s name.

- - - - 506 3,103

The last independent valuation of the Residential land held for development was carried out by Mr Allen Beagley (ANZIV), of Bayleys Valuation Limited as at 30 June 2011. The basis of valuation for land held for development was fair market value less cost to sell. There has not been much development activity in the last year nor much change in the market generally. Hence the Group has not undertaken a fresh valuation as the directors and management believe that the above carrying value continues to reflect fairly the fair value / recoverable value of the assets as at the balance date.

506 -

A number of associates have been fully or substantially written down as they are making losses and have negative net assets position. The investee companies have different financial year ends compared to the Fund and a number of them do not have financial statements as at 30 June or if available, are not reliable, as they are not audited.

Due to the director appointments late in the financial year, that is, May 2012 and for the reasons noted above the Group has not equity accounted its associates and the Board believes that the impact of equity accounting is not significant to the current year Group results.

19. Cash Cash at bank Cash on hand and with agents Deposits at call

Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000

415,219 221,909 2,561 351 6,500 1,299 424,280 223,559

332,133 181,721 2,250 351 - 334,383 182,072

20. Trade receivables Trade receivables Unearned income Allowances for doubtful debts

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

45,902 41,634 (1,415) (1,337) (17,297) (17,189) 27,190 23,108

- - - -

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000 20. Trade receivables (continued) Movements on the allowance for doubtful debts are as follows: Balance at the beginning of the year 17,189 17,282 - New and increased provisioning 828 - - Bad debts written off (137) - - Provisions reversed (583) (93) - 17,297 17,189 - The maximum exposure to credit risk at the reporting date is the fair value of receivables mentioned above.The Group generally obtains security deposits for all new LAN line and Internet connections. Apart from this, it does not hold any collateral as security. The total carrying amount of security deposits in relation to the above trade receivables carried by the Group is $4,838,000 (2011: $4,879,000). Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000 21. Inventories Consumables and finished goods Allowances for obsolescence Goods in transit

13,489 (2,516) 10,973 352 11,325

14,447 (3,537) 10,910 572 11,482

- - - - -

22. Intangible assets Software costs 7,204 9,677 242 347 Movie productions and audio visual copyright - - - Goodwill on consolidation 115,860 115,860 - Management rights 10,500 12,000 - Indefeasible rights of use capacity 14,971 16,548 - 148,535 154,085 242 347 Represented by: Software costs Costs Balance at the beginning of the year 35,350 33,847 3,594 3,294 Additions during the year 740 1,503 85 300 Balance at the end of the year 36,090 35,350 3,679 3,594 Amortisation and impairment Balance at the beginning of the year 25,673 23,039 3,247 3,115 Amortisation charge for the year 190 132 190 132 Impairment charge for the year 3,023 2,502 - Balance at the end of the year 28,886 25,673 3,437 3,247 Carrying amount At the beginning of the year 9,677 10,808 347 179 At the end of the year 7,204 9,677 242 347

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

22. Intangible assets (continued) Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000

Movie productions and audio visual copyright Gross carrying amount Opening balance 18,272 18,272 - Movements during the year - - - Closing balance 18,272 18,272 - Accumulated impairment allowance Opening balance 18,272 18,272 - Impairment allowance - - - Balance at end of year 18,272 18,272 - Net carrying amount At beginning of the year - - - At end of the year - - - Movie productions Investments in movie productions comprise of investments in “Straight Edge”, “Smiladon”, “The Great North Pole Elf Strike” and “Pirate Islands 2” movie projects. All movie projects have been granted F1 Provisional Certificates by the Fiji Audio Visual Commission and thereby incentives by way of 150% tax deductions are available. They have been valued at cost and reduced by an impairment charge to arrive at a carrying amount which is an amount the Group expects to recover from the exploitation of the copyright in accordance with the Production Investment Agreement. Audio visual copyright Proceeds from the exploitation of the copyright in an audio visual production are brought to account when received in accordance with the copyright’s related Investment Agreement.

Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000

Goodwill on consolidation Cost Balance at the beginning of the year 205,116 205,116 - Acquisition through business combinations - - - Balance at the end of the year 205,116 205,116 - Accumulated impairment allowance Balance at the beginning of the year 89,256 89,256 - Impairment charge for the year - - - Balance at the end of the year 89,256 89,256 - Carrying Value At the beginning of the year 115,860 115,860 - At the end of the year 115,860 115,860 - The carrying value of the goodwill comprises of $110,636,465 (net of $89,051,000 of impairment) in relation to the Fund’s investment in Amalgamated Telecom Holdings Limited and $5,223,535 in relation to FNPF Hotel Resort Limited. The Board is of the opinion that, after appropriate assessment, no further impairment is considered necessary.

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000

Cost Balance at the beginning of the year 17,145 - - Additions during the year 1,484 17,145 - Balance at the end of the year 18,629 17,145 - Amortisation Balance at the beginning of the year 597 - - Amortisation charge for the year 3,061 597 - Balance at the end of the year 3,658 597 - Carrying amount At the beginning of the year 16,548 - - At the end of the year 14,971 16,548 - Indefeasible Rights of Use (“IRU”) relates to the lease of IRU network capacity by a sub-subsidiary, Telecom Fiji Limited for a period of 3 years (for IP Transit) and 10 years (for STM-1 and STM-4) via Australia and USA links. The IRU network capacity is capitalized to intangible assets, and is amortised over the contract periods.Where estimated useful lives or recoverable values have diminished due to technological change or market conditions, amortization is accelerated.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

23. Property, plant and equipment – Consolidated

Indefeasible rights of use capacity

www.myfnpf.com.fj

$000

Cost Balance at the beginning of the year 37,178 50,668 234,709 674,425 1,614 4,631 60,819 20,222 34,813 33,511 1,152,590 Disposals - - - - - - (165) (507) (166) (6,562) (7,400) Acquisitions - 5,565 4,296 26,951 2,542 226 2,954 771 2,054 18,968 64,327 Consumed during the year - - - - (2,318) - - - - - (2,318) Transfers - - - 34,094 - - 1,489 - 104 (35,687) Transfer to investment property - - - - - - (18) - - - (18) Reversal of prior year accruals - (111) - - - - - - (20) (1) (132) Balance at the end of the year 37,178 56,122 239,005 735,470 1,838 4,857 65,079 20,486 36,785 10,229 1,207,049 Accumulated impairment Balance at the beginning of the year 25,263 - 162,943 9,561 146 18 310 - 7,162 - 205,403 Reversal of impairment - - - (7,603) - - - - - - (7,603) Balance at the end of the year 25,263 - 162,943 1,958 146 18 310 - 7,162 - 197,800 Accumulated depreciation/amortisation Balance at the beginning of the year 432 22,442 7,251 395,787 - 2,581 41,678 15,423 16,189 - 501,783 Depreciation/amortisation charge for the year 113 1,432 2,698 42,002 - 460 6,868 2,661 2,963 - 59,197 Disposals - - - - - - (477) (163) (23) - (663) Balance at the end of the year 545 23,874 9,949 437,789 - 3,041 48,069 17,921 19,129 - 560,317 Carrying amount At the beginning of the year 11,483 28,226 64,515 269,077 1,468 2,032 18,831 4,799 11,462 33,511 445,404 At the end of the year 11,370 32,248 66,113 295,723 1,692 1,798 16,700 2,565 10,494 10,229 448,932

A management agreement between the Fiji Government and a subsidiary company, Amalgamated Telecom Holdings Limited (ATH), was entered into in 1998 which provided ATH the right to manage all of the issued shares in Fiji International Telecommunications Limited (FINTEL) owned beneficially by the State. The right is for a period of 20 years with an option of a further 10 years. ATH is entitled to 80% of the Government of Fiji’s share of dividends from FINTEL. The management right was paid to the Government of Fiji by the Fund as part of the Fund’s acquisition of ATH, accordingly control over the transfer of this right lies with the Fund.

$000

Telecommunication Capital equipment spares and plant $000 $000

Cost Balance at the beginning of the year 30,000 30,000 - Movements during the year - - - Balance at the end of the year 30,000 30,000 - Amortisation Balance at the beginning of the year 18,000 16,500 - Amortisation charge for the year 1,500 1,500 - Balance at the end of the year 19,500 18,000 - Carrying value At the beginning of the year 12,000 13,500 - At the end of the year 10,500 12,000 - -

$000

Plant & Office Motor Furniture Machinery equipment vehicles & fittings

Management rights

$000

Work in progress

The Fund 2012 2011 $000 $000

Buildings Building at at Cost Valuation $000 $000

Consolidated 2012 2011 $000 $000

Land $000

$000

22. Intangible assets (continued)

$000

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

Total

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

Assets owned by Natadola Bay Resort Limited (NBRL) An independent valuation of the Intercontinental Fiji Golf Resort and Spa, Golf Course and Residential Development was carried out by Mr Allen Beagley (ANZIV) of Bayleys Valuation Limited as at 30 June 2011.The basis of valuation for Leasehold Land, Buildings and Furniture and Fittings was fair market value based on existing use. The impairment balance reflects the results of the valuation. NBRL has not undertaken any similar valuation in the current year as the directors and management believe the market conditions have remained largely unchanged since the last valuation and hence the existing carrying value of the assets reflects fair value / recoverable value.

23. Property, plant and equipment – The Fund

The land on which the Hotel and Golf Course has been constructed is registered under a related company.The Natadola Bay Decree 2010 which came into effect in 2010 financial year provides for the deemed transfer of all titles and leases granted previously to related companies to Natadola Bay Resort Limited. As at balance date, the titles and leases are in the process of being transferred to the NBRL’s name.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

Freehold Leasehold Buildings Office Motor Furniture Work in Total Land Land at Valuation Equipment Vehicles & fittings progress $000 $000 $000 $000 $000 $000 $000 $000 Cost Balance at the beginning of the year 371 119 11,121 5,781 1,470 1,471 75 20,408 Additions - - 8 1,832 265 174 - 2,279 Transfer to investment property - - - (18) - - - (18) Reversal of prior year accruals - - (111) - - - (1) (112) Disposals - - - (99) (88) (19) - (206) Balance at the end of the year 371 119 11,018 7,496 1,647 1,626 74 22,351 Accumulated depreciation/amortisation Balance at the beginning of the year - 100 2,583 3,961 805 958 - 8,407 Depreciation /amortisation charge for the year - 2 205 901 273 201 - 1,582 Disposals - - - (97) (87) (19) - (203) Balance at the end of the year - 102 2,788 4,765 991 1,140 - 9,786 Carrying amount Balance at 1 July 2011 371 19 8,538 1,820 665 513 75 12,001 Balance at 30 June 2012 371 17 8,230 2,731 656 486 74 12,565

23. Property, plant and equipment – Consolidated (continued)

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

Consolidated 2012 2011 $000 $000

The Fund 2012 2011 $000 $000

24. Other receivables and assets Contributions receivable 8,980 8,210 8,980 8,210 Provision for impairment (5,905) (5,257) (5,905) (5,257) 3,075 2,953 3,075 2,953 Interest receivable 45,757 49,551 45,734 49,475 Dividends receivable 127 677 6,737 4,264 Rent receivable 151 142 151 142 Provision for impairment (47) (71) (47) (71) 104 71 104 71 Accrued revenue 3,479 4,734 - Receivable from related parties 1,850 1,664 392 730 Deferred expense 80 78 - Other deposits and receivables 29,738 31,465 1,332 1,403 Provision for impairment (1,739) (2,247) - 33,408 35,694 1,724 2,133 82,471 88,946 57,374 58,896 The carrying value of other receivables and assets is considered to be its reasonable approximation of its fair value. The maximum exposure to credit risk at the reporting date is the fair value of each class of the asset above. There is no collateral held as security against any of the above receivable balances. Movements on the provisions for impairment – Consolidated are as follows:

Contributions receivable $000

Rent Others receivable $000 $000

Balance as at 1 July 2010 3,888 80 1,978 New and increased provisioning 1,369 46 269 Provisions reversed - (55) Balance as at 30 June 2011 5,257 71 2,247 New and increased provisioning 648 - Provisions reversed - (24) (332) Reclassified to investment in associates - - (176) Balance as at 30 June 2012 5,905 47 1,739

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

24. Other receivables and assets (continued) Movements on the provisions for impairment – The Fund are as follows:

Contributions Rent receivables receivables $000 $000 Balance as at 1 July 2010 3,888 80 New and increasing provisioning 1,369 46 Bad debts written off - (55) Balance as at 30 June 2011 5,257 71 New and increased provisioning 648 Provision no longer required - (24) Balance as at 30 June 2012 5,905 47 Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000 25. Other non-financial asset Foreclosed Momi Bay assets Balance as at 1 July 2011 44,712 44,712 44,712 Additions 12,907 - 12,907 Balance as at 30 June 2012 57,619 44,712 57,619

44,712 44,712

The above represents the fair value of the assets underlying the Momi Bay Development. The assets consist of an incomplete hotel and golf development and residential land for resale. The Fund has undertaken to complete this project itself and is currently working with various parties on the development plans.The current year additions largely represent additional land bought to be developed as part of the overall development. The management and the Board have assessed the above to be the fair value of the assets at the balance date. Consolidated The Fund 2012 2011 2012 2011 Note $000 $000 $000 $000 26. Creditors and borrowings Sundry creditors and accruals Bank overdraft 33(a) Due to related parties Borrowings Customer deposits – unsecured

97,851 - 1,599 22,354 138,899 260,703

100,539 6,590 3,390 - 95,862 206,381

5,544 - - - - 5,544

4,670 4,670

Represented as: At call 359 - - Less than or equal to 3 months 38,360 38,566 5,544 3 to 12 months 119,412 112,259 - 1 to 5 years 95,613 18,945 - Greater than 5 years 6,959 36,611 - 260,703 206,381 5,544

4,670 - 4,670

The fair value of creditors and borrowings equal its carrying value. Customer deposits are fixed term and at call deposits with Home Finance Company Limited. It is subject to interest at market interest rate, hence the carrying value represents its fair value.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

26. Creditors and borrowings (continued) Bank overdraft The bank overdraft of sub-subsidiary, Vodafone Fiji Limited, is unsecured and repayable on demand and subject to an effective interest rate of 5.96% per annum. The facility was not utilised by the company at balance date. Borrowings During the year, Amalgamated Telecom Holdings Limited, a subsidiary, borrowed $5 million from Bank of South Pacific and $10 million from Westpac Banking Corporation Limited at the rate of 4.7% and monthly repayments of $157,003. These loans are unsecured.

Consolidated 2012 2011 $000 $000

27. Other liabilities Deposits Deferred revenue Provision for dividends Pensions payable Other payables

5,783 12,521 17,267 157 1,550 37,278

The Fund 2012 2011 $000 $000

5,797 13,297 12,048 1,630 1,250 34,022

945 - - 157 - 1,102

918 1,630 2,548

29. Pension reform The Fund undertook a review of the previous pension scheme with the objective of implementing a scheme that the Board believes to be actuarially sound, viable and self sustaining in the long term. The Board, in consultation with appointed consultants, Mercer (Australia) Pty Ltd and Tower Watson Australia Pty Ltd carried out a review to assess the previous pension scheme and to implement actuarially sound conversion rates. In addition to the above, the Fund undertook a review of the Fiji National Provident Fund Act with a view to strengthen the governing laws. The new FNPF Decree 2011 came into effect on 25 November 2011. The Decree was supplemented by FNPF Transition Decree 2011, which came into effect on the same date. To bring about these changes and to implement a new pension scheme, the Fund underwent a transition process where the existing pensioners were validated and new options made available under the new pension scheme were selected. The FNPF Transition Decree 2011 provided current pensioners with a number of new options, such as a lump sum payout of their initial converted amount and new life or term pension (which included ‘top-up’ options to support the current pensioners).The new pension options came into effect on 1 March 2012 and upon registration of existing pensioners in the new pension scheme, lump sum and pension payments were made from 19 April 2012 onwards. Two separate funds, Supplementary Fund (“SF”) and Retirement Income Fund (“RIF”) were established by the Fund pursuant to FNPF Decree 2011 and FNPF Transition Decree 2011. The SF was established as a transitional fund to cater for lump sum payments at the initial converted amounts to be made to existing pensioners. RIF was established to make annuity payments to existing and new pensioners under the new pension scheme.

The fair value of other liabilities equals its carrying value due to its short term nature. 28. Employee entitlements Annual leave Long service leave and gratuity Retirement benefits Bonus

Pursuant to the FNPF Decree 2011, the Fund also allocated assets (not inadmissible assets) to SF and RIF to the values as required under the FNPF Decree 2011. Current year returns generated by those allocated assets were also transferred to the respective funds. 1,930 278 924 5,456 8,588

2,221 186 2,285 4,619 9,311

532 150 200 - 882

340 107 2,061 616 3,124

As at 1 July 2011 9,567 10,963 3,124 Additional provisions recognised 6,521 4,410 449 Paid during the year (5,971) (6,062) (1,162) Provisions no longer required (1,529) - (1,529) Carrying amount as at 30 June 2012 8,588 9,311 882 Current 7,440 8,095 532 Non-current 1,148 1,216 350 Total 8,588 9,311 882

2,289 1,211 (376) 3,124 2,157 967 3,124

(a) A nnual leave – generally annual leave is taken within one year of entitlement and accordingly it is expected that a significant portion of the total annual leave balance will be utilised within the next financial year.

An amendment Decree has been drafted to clarify certain aspects of implementation not explicitly covered by the FNPF Decree 2011 and the FNPF Transition Decree 2011.

Notes 30. Net assets available to pay benefits

Consolidated 2012 2011 $000 $000

The Fund 2012 2011 $000 $000

Net assets available to pay benefits 3,894,624 3,785,856 3,883,939 3,768,383 Represented by: Liability for accrued benefits 31 3,165,727 2,997,319 3,165,727 2,997,319 Retained earnings 30 (a) (347,441) (353,718) - General Reserve Account 30 (b) 1,074,158 1,140,424 718,212 771,064 Available for sale reserve 30 (c) 138 218 - Credit loss reserve 30 (d) 2,042 1,613 - 3,894,624 3,785,856 3,883,939 3,768,383

(b) Long service leave, retirement benefit and gratuity – is accrued in accordance with the accounting policy as outlined in Note 2.16. The Group expects a significant portion of the above balance to be settled in the next 5 years.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

Notes

Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000

30. Net assets available to pay benefits (continued) (a) Retained earnings Balance at the beginning of the year (353,718) (375,195) - Add transfers (to)/from statements of changes in net assets 6,277 21,477 - Balance at the end of the year (347,441) (353,718) - (b) General Reserve Account (GRA) Balance at the end of the year

1,074,158

1,140,424

718,212 771,064

GRA comprises the following reserves: Special death benefit reserve 19,169 18,073 19,169 18,073 Pension buffer reserve - 81,447 - 81,447 Supplementary fund reserve 60,725 - 60,725 Retirement income fund reserve 257,147 - 257,147 General reserve 737,117 1,040,904 381,171 671,544 1,074,158 1,140,424 718,212 771,064 The movements in the above reserves are as follows: Special death benefit reserve Balance at the beginning of the year 18,073 15,822 18,073 15,822 Add/(less) transfers from/(to) statements of changes in net assets: Transfer from 32 9,768 10,071 9,768 10,071 Transfer to 32 (8,672) (7,820) (8,672) (7,820) Balance at the end of the year 19,169 18,073 19,169 18,073 The amounts transferred to the Special Death Benefit Reserve of $9,768,000 (2011: $10,071,000) represent deductions of $35 (2011: $35) or less from the accounts of each entitled member. The amounts transferred from the Special Death Benefit Reserve of $8,672,000 (2011: $7,820,000) represent disbursements to the nominees of those members who died during the year of $8,500 (2011: $8,500) per member. These disbursements are in addition to the amounts standing to the deceased member’s credit.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

30. Net assets available to pay benefits (continued) (b) General Reserve Account (GRA) (continued) Notes

Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000

Pension buffer reserve Balance at the beginning of the year 81,447 107,284 81,447 107,284 Add/(less) transfers from/(to) statements of changes in net assets: Transfer from 32 8,115 23,266 8,115 23,266 Transfer to 32 (37,707) (49,103) (37,707) (49,103) Less transfer to general reserve (51,855) - (51,855) Total - 81,447 - 81,447 The amounts transferred to the Pension Buffer Reserve relate to members who have opted for annuities during the year of $8,115,000 (2011: $23,266,000). The amounts transferred from the Pension Buffer Reserve of $37,707,000 (2011: $49,103,000) represent payment of annuities up to 29 February 2012. Pursuant to the pension reform, the pension buffer reserve has been discontinued. Balance existing at the introduction of the new pension scheme has been transferred to the Fund’s general reserve. Note

Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000

Supplementary fund reserve Balance at the beginning of the year - - - Add transfer from general reserve to establish supplementary fund 187,419 - 187,419 Less transfer to statements of changes in net assets 32 (126,694) - (126,694) 60,725 - 60,725 -

Refer Note 29 for information on the above fund. The balance remaining at the end of the year relates to pensioners not validated or who were validated but had not selected their options. It also includes extra funds which had been initially transferred from the general reserve. Subsequent to balance date, the balance in the supplementary fund would be transferred to the Fund’s general reserve.The transfer amounts would be made up of pensioners not validated or those who were validated but had not chosen any options.These unclaimed funds would be paid to pensioners as lump sum once a claim is made in future and paid directly out of the Fund’s general reserve.

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

Consolidated The Fund Notes 2012 2011 2012 2011 $000 $000 $000 $000

30. Net assets available to pay benefits (continued) (b) General Reserve Account (GRA) (continued) Retirement income fund reserve Balance at the beginning of the year - - - Add initial transfer from general reserve to establish retirement income fund 252,650 - 252,650 Add/(less) transfers from/(to) statements of changes in net assets: Transfer from 32 3,383 - 3,383 Transfer to 32 (5,503) - (5,503) Current year investment returns 32 6,617 - 6,617 257,147 - 257,147 -

31. Liability for accrued benefits

The Retirement Income Fund (RIF) has been established pursuant to Section 63 (1) of the FNPF Decree 2011. Balance at year end represents converted pensionable amounts transferred for existing pensioners opting for annuities, as well as the new pensioners under the new pension scheme. Amounts transferred from the Fund’s general reserve were increased to meet the solvency requirements and to cater for top-up options available to the existing pensioners. Investment returns earned on the RIF assets have been transferred to RIF, while payment of annuities under new pension scheme have been made out of RIF.

The liability for accrued benefits is the Fund’s present obligation to pay benefits to members and beneficiaries and has been calculated in accordance with Note 2.21. Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000

Consolidated The Fund Notes 2012 2011 2012 2011 $000 $000 $000 $000 General reserve Balance at the beginning of the year Add transfers from liability for accrued benefits 31 Add transfers from statements of change in net assets 32 Add transfer from pension buffer reserve Less transfer to retirement income fund Less transfer to supplementary fund Balance at the end of the year

1,040,904 952,160 - 10,104 84,427 78,640 51,855 - (252,650) - (187,419) - 737,117 1,040,904

671,544 552,997 - 10,104 97,841 108,443 51,855 (252,650) (187,419) 381,171 671,544

(c) Available for sale reserve Balance at the beginning of the year 218 (93) - Fair value movements (80) 311 - Balance at the end of the year 138 218 - (d) Credit loss reserve Balance at the beginning of the year 1,613 1,510 - Movements during the year 429 103 - Balance at the end of the year 2,042 1,613 - -

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

Balance at the beginning of the year Less transfers to general reserve 30(b) Add transfers from statements of changes in net assets 32 Balance at the end of the year

2,997,319 - 168,408 3,165,727

2,849,668 (10,104) 157,755 2,997,319

2,997,319 2,849,668 - (10,104) 168,408 157,755 3,165,727 2,997,319

(a) Allocation of Benefits Allocated to Members’ Accounts 3,157,125 2,989,860 3,157,125 2,989,860 Unallocated to Members’ Accounts 8,602 7,459 8,602 7,459 3,165,727 2,997,319 3,165,727 2,997,319

(b) Benefits accrued during the year Contributions received Benefits paid Interest credited on members’ accounts Interest on withdrawals Net amounts transferred from ‘Special Death Benefit’, ‘Pension Buffer’ and ‘Retirement Income Fund’ reserve

317,272 (318,248) 132,828 5,940

303,518 (309,509) 133,627 6,533

30,616 23,586 168,408 157,755

317,272 303,518 (318,248) (309,509) 132,828 133,627 5,940 6,533 30,616 23,586 168,408 157,755

The Board has declared an annual interest rate of 5% to be credited to the members’ accounts as at reporting date (2011: 5.25%). Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000 (c) Benefits paid during the year 155 years and over 117,472 120,679 117,472 120,679 2Death 15,069 10,739 15,069 10,739 3Disability 3,546 3,613 3,546 3,613 4Migration 37,804 31,931 37,804 31,931 5Marriage - - - 6Non-Citizens migrating 6,515 5,132 6,515 5,132 7-8 - Partial 45,480 45,171 45,480 45,171 9Housing transfers 40,153 33,324 40,153 33,324 Pension annuity – under previous pension scheme 37,707 49,103 37,707 49,103 Special death benefit costs 8,672 9,817 8,672 9,817 Unclaimed – Over 65 years 327 - 327 Pension annuity – under new pension scheme 5,503 - 5,503 318,248 309,509 318,248 309,509 Lump sum payments made pursuant to the transition provision of the new pension scheme 126,694 - 126,694 444,942 309,509 444,942 309,509

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

31. Liability for accrued benefits (continued)

33. Notes to the statements of cash flows

The Fund 2012 2011 $000 $000

(a) Reconciliation of cash

(d) Actuarial valuation Net assets available for benefits 3,883,939 3,768,383 Actuarial present value of accrued benefits Vested benefits for current workers 3,165,727 3,015,107 Vested benefits for pensioners 230,500 565,220 Non-vested benefits - 64,097 Total actuarial present value of accrued benefits 3,396,227 3,644,424 Excess

487,712 123,959

The actuarial valuation has been calculated by Mr Geoffrey Rashbrooke, Fellow of the Institute of Actuaries, United Kingdom as required under International Accounting Standards 26 “Accounting and Reporting by Retirement Benefit Plans”.

For the purposes of the statements of cash flows, cash includes cash on hand and ‘at call’ deposits with other financial institutions. Cash at the end of the reporting period as shown in the statements of cash flows is reconciled to the related items in the statements of net assets as follows: Consolidated The Fund Notes 2012 2011 2012 2011 $000 $000 $000 $000 Cash and short term liquid assets 19 Short term deposits Bank overdraft 26 Cash at end of financial year

424,280 - - 424,280

223,559 1,000 (6,590) 217,969

334,383 - - 334,383

182,072 - 182,072

635

1,074

(b) Cash flows presented on a net basis Cash flows arising from the following activities are presented on a net basis in the statements of cash flows: (i) sales and purchases of maturing fixed interest securities; and (ii) Investment and maturity of term deposits.

32. Net change for the year The net change for the year has been appropriated to accrued benefits, reserves and retained earnings as follows:

34. Commitments and contingent liabilities

The Fund 2012 2011 $000 $000 Change in net assets for the year attributable to members of the Fund 115,556 242,612 (Less)/ Add net transfers to/from: Liability for accrued benefits (168,408) (157,755) Special death benefit (1,096) (2,251) Pension buffer 29,592 25,837 General reserve (97,841) (108,443) Supplementary fund 126,694 Retirement income fund (4,497) (115,556) (242,612)

(a) Commitments Capital expenditure commitments Capital Commitments approved by the directors but not yet contracted Undrawn facilities in relation to mortgage loans

46,408

28,064

- 460 42,208 11,531 88,616 40,055

- 460 37,086 3,967 37,721 5,501

225 225 3,726 730 1,991 2,077 2,124 2,490 8,066 5,522

- 3,357 357 357 - 3,714 357

(b) Contingent liabilities Performance bonds Litigation Guarantees Movie investment tax incentive allowance

The Fund has provided a written undertaking to financially support Natadola Bay Resort Limited (NBRL), a subsidiary of the Fund that, it will not request repayment on any of it’s debts totaling $302,830,000 to NBRL in the next twelve months other than those repayments due in 12 months, amounting to $930,711 and to provide sufficient financial assistance to NBRL as and when it is needed to enable NBRL to continue its operations and fulfil all its obligations now and in the future. The support is provided for a minimum period of twelve months from 19th September 2012.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

34. Commitments and contingent liabilities (continued)

35. Related parties (continued)

(b) Contingent liabilities (continued) Various claims have been brought against the Fund and the Group by third parties. The Board members have obtained legal advice on these claims and are confident that no significant liability other than those that have been brought to account will eventuate. In particular one such matter relates to arbitration of construction dispute for FRCA building complex.The construction of the FRCA office building was completed by Raghwan Neo Joint Venture (“RNJV”) on 1 September 2008. A number of issues arose between FNPF and RNJV which were put to arbitration under the arbitration provisions of the construction contract between FNPF and RNJV.The arbitration took place on the 11 and 12 June 2010 and the arbitrator gave his award on 22 June 2011. The award was almost entirely in favour of the case put forward by RNJV and based (in FNPF’s opinion) on a number of legal and procedural errors. After receiving external legal advice on the merits of the awards FNPF made the decision to file an originating motion with High Court in Fiji appealing the Award. The hearing on the matter took place in May 2012, where all written submissions were filed and presently is awaiting court ruling.

(b) Transactions with related parties Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000

Consolidated The Fund 2012 2011 2012 2011 $000 $000 $000 $000 (c) Operating lease commitments Total commitments for future base lease rentals are as follows: Not later than 1 year 3,993 3,259 - Later than 1 years but not later than 5 years 7,962 7,310 - Greater than 5 years 43,747 39,845 - 55,702 50,414 - (d) Operating lease revenue Non cancellable operating lease rentals are receivable as follows: Not later than 1 year 10,114 13,869 6,245 9,983 Later than 1 years but not later than 5 years 31,824 37,999 16,350 22,455 Greater than 5 years 33,422 50,278 6,341 17,476 75,360 102,146 28,936 49,914

35. Related parties

Directors* Directors remuneration - fees and allowances 353 377 42 Other services provided to the Fund - - - 353 377 42

50 50

Any director who is a member of the Fund contributes and receives benefits on the same terms and conditions as those available to other members. * - Directors remuneration includes amounts paid to the directors of the Fund and its subsidiary companies. No remuneration is paid to Mr.Ajith Kodagoda and Mr.Sashi Singh. Remuneration for Mr.Taito Waqa is paid directly to Ministry of Labour. Key management personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. During the reporting period the following persons were the executives identified as key management personnel, with the greatest authority and responsibility for the planning, directing and controlling of activities. The following were the Key Management Personnel of the Fund at any time during the reporting period: Mr Aisake Taito – Chief Executive Officer Mr Jaoji Koroi – Chief Investments Officer l Mr Alipate Waqairaiwai – Assistant General Manager Member Services l Mr Pravinesh Singh – Acting Chief Financial Officer l Mr Tevita Naqataleka – Assistant General Manager Prime Services l Mr Sitiveni Nabuka – Acting Chief Information Technology Officer l l

The aggregate compensation of the key management personnel for the Fund comprises of short-term benefits and is set out below:

(a) Related parties

Short-term benefits

Board Members The Board members of the Fund during the year and up to the date of this report were:

6,801

6,113

848

790

Any management personnel who is a member of the Fund contributes and receives benefits on the same terms and conditions as those available to other members (except in some instances the Fund contributes over and above the minimum statutory levels in line with the individual’s employment contract).

Mr Ajith Kodagoda (Chairman) Mr Sashi Singh Mr Taito Waqa Mr Tevita Kuruvakadua Mr Tom Ricketts

During the year, FNPF charged a subsidiary FNPF Investment Limited $440,742 (2011: $347,481) in management fees.These fees represent costs recovered by FNPF in relation to time spent by the FNPF executives on matters which relate to the subsidiary. The transactions undertaken with related parties during the financial year were on normal commercial terms and conditions.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

35. Related parties (continued)

(b) Transactions with related parties (continued)

Transactions with other related parties

Natadola Bay Resort Limited (NBRL) (continued)

All transactions with other related parties and controlled entities except for loans to NBRL are conducted on normal commercial terms and conditions.These transactions principally arise out of the provision of loans, debenture, promissory notes and deposits with subsidiaries.

viii. An equitable mortgage over the bank accounts of the Mortgagor and assignment of income arising out of the Golf Operations to be effective when arrears of obligations are outstanding. The security has not been executed as at the balance date. ix. FNPF is to be assured that prior to the disbursement of any funds by FNPF, the Golf & Hotel Operator under their respective Management Agreement will not be entitled to terminate such agreement if FNPF should exercise any of its power as mortgagee or debenture holder. The obligation under this clause will also extend to any agreements entered into with any manager, agent, or other relevant parties connected with the management of the golf and phase one of the project. x. Assignment of the performance bond by ANZ Bank for Heritage Golf (Fiji) Ltd. This is no longer relevant as the works on the Golf project has been completed. xi. Corporate Guarantee by Asia Pacific Resort International Limited, (Fiji) (APRIL). This is no longer relevant as APRIL is no longer associated with the project.

For amounts due to and receivable from related parties, please refer to Notes 24 and 26. The investments and ownership interests in subsidiary companies are disclosed in Note 16. Loans provided to subsidiaries as contained in Note 14 are as follows: Natadola Bay Resort Limited Telecom Fiji Limited Amalgamated Telecom Holdings Limited FNPF Investments Limited Home Finance Company Limited Penina Limited Less: provision for impairment

2012 2011 $000 $000 302,830 302,830 68,546 79,518 20,234 29,397 9,778 10,887 43,560 60,890 38,784 40,342 483,732 523,864 (197,635) (197,635) 286,097 326,229

Restructure of debts During 2011, the debts were proposed to be restructured as follows effective from 1 August 2011.

Natadola Bay Resort Limited (NBRL) Loans were advanced to the subsidiary, NBRL for the construction of the Intercontinental Hotel and Golf Course at Natadola. The loan agreements for these loans have not been executed as of the balance date. According to the loan offer documents, the loan period ranges between 15 to 19 years at interest rates between 9% to 13%, which were to be reviewed after the completion of the projects. Thereafter the interest rates were to be revised to reflect 1% above the 15 year FDL bond rate prevailing at the time of review. As of balance date, there has been no movement in the interest rate. Interest charged by FNPF in the current financial year is $7,333,333 (2011 $110,136). According to the offer documents, the loans are to be secured by: i. Stamping and upstamping of first registered mortgage with improvement thereon over NLTB ref. No. 50035997, part of Sanasana, Natadola Beach, Malomalo. The security has not been executed as at the balance date. ii. First registered mortgage with improvement thereon over CL 9379. The security has not been executed as at the balance date. iii. Stamping and upstamping of first registered debenture over NBRL. The security has not been executed as at the balance date. iv. First Registered Mortgage over all undeveloped land owned by Natadola Land Holdings Limited. This mortgage will be discharged once the hotel is completed. Partial discharge will not be withheld when needed. The security has not been executed as at the balance date. By virtue of the Natadola Bay Decree which came into effect during the last financial year, the undeveloped land was deemed to be transferred to NBRL. v. Comprehensive insurance cover over the property with improvement thereon and FNPFâ&#x20AC;&#x2122;s interest noted thereon; vi. Loan agreement to supersede all contract agreement relating to the development of the Phase one of the Natadola Project. vii. Contractors Side Deed. This has ceased to apply as the project works have been completed.

Name Amount ($) Term of loan Interest rate Interest plus principal Loan 1 $60,000,000 26 years 8.00% Interest only for first 12 months and principal plus interest repayment to commence from 1 August 2012. Loan 2 $40,000,000 26.5 years 8.00% Interest only for first 18 months and principal plus interest repayment to commence from 1 February 2013. Loan 3 $202,830,111 Indefinite Interest free All surpluses from Natadola Residential Development shall be applied to the outstanding balance. All cash surpluses that are not required by NBRL for expenses other than the normal course of the business shall be applied to the outstanding balance. FNPF reserves the right to commence charging interest and capitalizing against the balance outstanding at any time in the future. The principal payable by NBRL over the next financial year is $970,711. The loan agreements in respect of the above restructure are in draft and have not been executed as at balance date. The carrying value of the loan has been reassessed for impairment at balance date. Amalgamated Telecom Holdings Limited (ATH) and Telecom Fiji Limited (TFL) Loans to TFL are secured by 2nd registered mortgage debenture over all the assets and undertakings of TFL. The interest rate on this loan varies from 3.3% to 9% per annum. Loans to ATH consist partly of $10million which ATH has on lent to Vodafone Fiji Limited, a subsidiary of ATH at an interest rate of 7.95% and is secured by promissory note given by Vodafone Fiji Limited. ATH has also borrowed $9 million from the Fund which is secured by an assignment of Fiji Government Registered Stocks of $9.6 million which will mature between 2012 and 2013.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

Fiji National Provident Fund and its subsidiaries

For the year ended 30 June 2012

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

35. Related parties (continued)

(b) Transactions with related parties (continued)

(c) Group enterprises – significant subsidiaries Country of Incorporation Amalgamated Telecom Holdings Limited* Fiji l Telecom Fiji Limited* l Fiji Directories Limited* l Vodafone Fiji Limited* l Internet Services Fiji Limited* l Transtel Limited* l Xceed Pasifika Limited* l Amalgamated Telecom Nominees Limited* l ATH Technology Park (formerly Reach Fiji Limited) * l ATH Call Centre Limited * l FINTEL* l FINTEL Internet Services Limited* Home Finance Company Limited* Fiji FNPF Nominee Company Limited Fiji FNPF Investments Limited Fiji l Natadola Land Holding Limited* l Yatule Beach Resort Limited* l Natadola Bay Resort Limited l FNPF Hotel Resorts Limited l Penina Limited* l Dareton Limited*

Penina Limited Loans were advanced to Penina Limited for the construction of a shopping complex. They are made up of the following:

Repayment terms

Interest rate

FNPF Loan No.1 12 years, with repayments based on 6% loan amortised over 20 years FNPF Loan No.2 1 year, due to mature on 31 July 2012 6.62%

2012

2011

29,998,197

$31,020,523

8,785,944

$ 9,321,670

$38,784,141

$40,342,193

During the year, FNPF Loan 1 and FNPF Loan 2 were secured by the following: 1. First registered mortgage over title CT39184, and improvements thereon. 2. First registered debenture over assets of the company 3. Insurance cover over the properties with FNPF’s interest noted thereon. FNPF Investments Limited Loans to FNPF Investments Limited are for a period of 15 years at a fixed interest rate of 6% for the first 5 years. Thereafter the interest rate is to be revised to reflect 1% above the 15 year FDB bond rate prevailing at time of review. The loan is secured by a first registered mortgage over the property described as Holiday Inn Suva together with all improvements thereon. Home Finance Company Limited (HFC) The loan is secured by HFC’s undertaking on all its property. The amount is made up of a loan of $4,809,826 (2011: $13,890,936) and convertible notes of $38,750,000 (2011: $47,000,000). Interest rates for the loan vary from 2.5% to 6.75% and repayments vary up to 7 years. For the convertible notes, interest rates are pegged to the current market rate decided by the Fund and is subject to adjustment and review on an annual basis. Six monthly interest repayments with principal repayments for the convertible loans due over a period of 15 years.

The Fund is a compulsory superannuation scheme legislated by the FNPF Act and continuing under the FNPF Decree 2011. Section 13 of the FNPF Act and Section 37 of the FNPF Decree 2011 requires every employer and employee to make contributions to the Fund. The Fund’s External Auditors, PwC, are considered to be related party by virtue of the members of the audit team being members of the Fund. Team members of the audit team contribute and receive benefits on the same terms and conditions as those available to other members.

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

75% 100% 100% 51% 100% 100% 100% 51% 100%

* Not audited by PwC A subsidiary company of Amalgamated Telecom Holdings Limited (ATH) is Amalgamated Telecom Nominees Limited (ATN). The principal activity of Amalgamated Telecom Nominees Limited (ATN) is to hold the shares of Amalgamated Telecom Holdings Limited for the qualifying employees of the ATH Group under Employee Share Option Plan. Accordingly, the financial statements of ATN are not consolidated in the consolidated financial statements. In accordance with the Employee Share Option Plan Trust Deed dated 8 October 2002 and amendments thereto, any surplus balance in the Cash Fund upon liquidation of ATN and after satisfaction of all obligations will be paid to ATH. On 15 March 2012, Amalgamated Telecom Holdings Limited (ATH), a subsidiary, acquired 49% shareholding in FINTEL for a consideration of $18.6million. While ATH owns 49% in FINTEL, they also manage the 51% shareholding of the Government of Fiji in FINTEL in accordance with a management agreement.The results of FINTEL have been incorporated in the Group financial statements from the start of acquisition. 36. Event Subsequent to the Balance Date

Auditors

Ownership Interest 58%

www.myfnpf.com.fj

(i)

Penina Loan Loan 1 and 2 were consolidated into one loan of $38,784,141 effective from 1st August 2012.The loan has a term of 20 years at a variable rate of 4% p.a subject to annual review.

(ii) Acquisition of additional shares in Grand Pacific Hotel Limited FNPF Investments Limited, a subsidiary, acquired additional 9.25m shares at $1 each in Grand Pacific Hotel Limited (GPHL).The Group has maintained its 25% interest in GPHL.

www.myfnpf.com.fj

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2012

ANNUAL REPORT 2012 - FIJI NATIONAL PROVIDENT FUND

www.myfnpf.com.fj

Lautoka Branch Drasa Avenue, Lautoka Phone: (679) 666 1888 Fax: (679) 666 5232

Labasa Branch Rosawa Street, Labasa Phone: (679) 881 2111 Fax: (679) 881 2741

Phone: (679) 330 7811 Fax: (679) 330 7611 Email: information@fnpf.com.fj Website: www.myfnpf.com.fj

Nadi Agency Shop 2, Lot 13, Concave Subdivision, Namaka, Nadi Phone: (679) 323 8018, 323 8006 Fax: (679) 672 8982

Savusavu Agency PO Box 89, Savusavu Main Street, Savusavu Phone: (679) 885 3396 Fax: (679) 885 3397

Valelevu Agency Valelevu Complex Building, Saqa Place, Nasinu Phone: (679) 334 3670 Fax: (679) 334 3670

Ba Agency Ganga Singh Street, Ba CBD Phone: (679) 667 0009 Fax: (679) 667 0009

www.myfnpf.com.fj

ID F CON

PI RI NG

Suva - Head Office Provident Plaza Two 33 Ellery Street, Suva Private Mail Bag, Suva, Fiji.

EN CE

EATING VAL R C UE

S IN

ANNUAL REPORT