2010 Annual Report
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Our Vision Securing your future Our Mission To deliver excellent services and ensure sustainable returns for stakeholders Our Values 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 maintaining highest standards Miss FNPF 2009, Merewalesi Nailatikau Miss Fiji Hibiscus, Miss South Pacific “Our investment, our future, nothing’s more important” 2 2010 FIJI NATIONAL PROVIDENT FUND annual report Table of Contents FINANCIAL HIGHLIGHTS 2 BOARD MEMBERS 3 CHAIRMAN’S REPORT 4 CHIEF EXECUTIVE OFFICER’S REPORT 6 2010 in Review 7 Operations 8 Investments 10 Fixed Income 10 Equities 11 Treasury 11 Properties 11 Projects 11 FNPF Subsidiaries 11 Corporate Governance 12 Internal Audit 12 Information Technology 13 Administration and Archiving 14 Human Resources & Development 14 Prime Services 15 FINANCIAL STATEMENTS 17 2010 FIJI NATIONAL PROVIDENT FUND annual report 1 Financial Highlights • A net surplus of $209.49 million was recorded during the year compared with a net loss of $181.15 million in 2009. • Contributions collected during the year was $292.27 million compared with $288.49 million – an increase of 1.31% • Total benefit payments to members (including pension and SDB) was $277.49 million from $352.30 million in 2009 • Total investment income was $219.53 million • Investment portfolio increased by 6.8% from $3.21 billion last year to $3.43 billion. • The Fund’s active members increase to 282,144 compared with 279,512 in 2009. • Interest credited to members on 30 June 2010 at 5% was $121.17 million • Members’ balance totaled $2.85 billion from $2.69 billion in 2009. 2 2010 FIJI NATIONAL PROVIDENT FUND annual report Board Members Front left: Mr Taito Waqa, Mr Ajith Kodagoda, Mr Tom Ricketts Back left: Mr Sashi Singh, Mr Tevita Kuruvakadua 2010 FIJI NATIONAL PROVIDENT FUND annual report 3 Chairman’s Report Ajith Kodagoda The Fund’s total asset as at June 30, 2010 increased to $3.54 billion from $3.33 billion in 2009. 4 2010 FIJI NATIONAL PROVIDENT FUND annual report The financial year ending 30 June 2010 marked the Contribution increased during the year as a result of commencement of the reform programs for the Fiji National better compliance. The Fund collected $292.27 million in Provident Fund. Whilst the need to undertake these contribution, an increase of $3.78 million from 2009. Benefits reforms has been recognized for some time, the urgency to paid to members normalized in 2010 totalling $277.49 million address them was brought to the forefront by the imminent from $352.30 million the previous year. sustainability risks it poses the Fund if these reform issues are not addressed immediately. The Fund’s total asset as at June 30, 2010 increased to $3.54 billion from $3.33 billion in 2009. Directed by the Prime Minister and Minister for Finance in November 2009, these reforms will address the long-term Interest paid to Members sustainability of the current life pension scheme, as well as The Board resolved and paid interest of 5 per cent to members the overall improvements in the delivery of services to our for 2010, which is equivalent to last year’s payment. This saw stakeholders. These reforms, both structural and operational, the distribution of $121.17 million to members’ accounts. underpin the direction and activities the Fund will take in the next three years. A new 3-Year Strategic Plan was developed Natadola Forensic Investigation The Board engaged Deloitte Touche Tomatshu (Australia) to capture this focus and the Balance Scorecard system to conduct a forensic investigation on the Natadola Hotel adopted to monitor and evaluate its implementation. Project. The recommendations have been forwarded to the The reforms include the review of the life pension scheme, Fiji Independent Commission Against Corruption (FICAC) review of the FNPF Act, the streamlining of withdrawal for further investigations. At the same time, the Board grounds, the rehabilitation of the non-performing investments, is pursuing civil action against those responsible for the internal process re-engineering and the overhaul of the core project. The report is sub judice and cannot be released until IT systems. I am pleased to report that there has been legal clearance has been given. progress to these reforms, which are elaborated in detail by the CEO in his report. Looking Ahead The road ahead will focus on the reforms. Whilst change is never always easy, it is imminent that these reforms are Operating Environment The operating environment remained challenging during undertaken now. The Fund is not unique in this challenge. the year, underscored mainly by the flow-on-effects of the Recent experiences from developed countries like France weak economic performances of our key trading partners, and Greece show that the need to cater for retirement exacerbating an already subdued domestic trading sustainably is not only confined to developing countries like condition. Monetary policy remained tight to preserve Fiji’s Fiji. In this regard, the Board has taken a conscious choice, foreign exchange position. However, this was not reflected albeit maybe unpopular, to address this issue now rather in the interest rate environment as the yield curve fell, driven than to be forced upon us by financial failures in future. by the contraction in commercial banks’ lending together We therefore plead to all our members to look beyond their with the direct controls on the bond rates. There is no doubt individual and short-term interests and to understand that that the domestic economy needs some impetus to revive these changes are necessary to safeguard the interest of investment and economic activity. all. The Board also recognizes the critical role FNPF plays Over 99% of our investments are domiciled locally because in our country and these changes will have both social of the restrictions under the Exchange Control Regulations. and economic consequences. We will therefore ensure Apart from the diversification risks, this restriction has also that proper consultations are undertaken with our key placed the Fund with immense challenge of generating the stakeholders. appropriate return that is viable for the long-term sustainability I also plead to our employees, who will be the drivers for of the Fund. We will continue to work with the Reserve Bank these changes, to have an adaptable mind to embrace to find an acceptable level of offshore investments. recommendations to improve the Fund’s operations. Financial Performance Against this backdrop and following the write-down of some Acknowledgement To my fellow Board members, Management and Staff, I of our major investments in 2009, the financial result for the thank you for your support as we continue on the dedicated year ending June 2010 was a turnaround. Underlying this journey towards reform and change. performance was a positive net contribution of $14.78 million – reversing a negative trend for the last three years, stability in our interest income portfolio and a marked reduction in our total expenses and benefits paid. The Fund recorded a net surplus of $209.49 million during AJITH KODAGODA the year compared with a net loss of $181.15 million in Chairman 2009. Net investment income fell marginally as a result of reduction in dividend income from ATH to $219.53 million, whilst operating expenses increased mainly as a result of the reform costs. 2010 FIJI NATIONAL PROVIDENT FUND annual report 5 Chief Executive’s Report Aisake Taito The Fund recorded a net surplus of $209.49 million during the year compared with a net loss of $181.15 million in 2009. 6 2010 FIJI NATIONAL PROVIDENT FUND annual report Summary of Key Indicators FY2006 FY2007 FY2008 FY2009 FY2010 Investment Portfolio ($billions) 3.15 3.16 3.12 3.21 3.43 Interest rate credited to Members 6.5% 6.3% 6.0% 5.0% 5.0% Interest paid to members ($millions) 124.57 128.35 131.07 113.63 121.17 Employers 6,227 6,647 6,701 6,944 7,105 Inflation 2.03% 4.03% 5.8% 5.0% 4.0% Membership 331,050 343,453 352,358 357,662 364,717 Contributions ($millions) 267.66 289.63 281.68 288.49 292.27 Members’ Funds ($billions) 2.32 2.47 2.61 2.68 2.85 Investment Income ($millions) 240.04 199. 29 194.04 227.39 219.53 Total Assets ($billions) 3.25 3.38 3.50 3.33 3.54 Withdrawals ($millions) 250.62 292.33 297.70 352.30 277.49 Withdrawal Gounds ($millions) FY2006 FY2007 FY2008 FY2009 FY2010 55 years and over 46.77 58.25 57.95 75.43 86.86 Death 9.32 11.98 12.35 12.36 11.57 Disability 3.45 3.46 4.25 2.35 2.38 Migration 33.03 33.10 33.33 39.79 24.69 Non-Citizens migrating 7.53 6.73 7.36 6.27 5.61 Partial/Small Business Equity Scheme 73.10 99.70 97.05 135.66 61.74 Housing transfers 35.17 37.10 36.09 30.55 29.13 Pension Annuity 37.43 38.30 41.20 43.45 46.76 Special Death Benefit costs 4.84 3.71 8.12 6.25 8.74 2010 in Review • Pension Review – To design an actuarially-sound pension scheme that is financially sustainable The major focus for the financial year was creating an • Review of the FNPF Act – To strengthen the governing enabling environment to support the reforms that will laws, encompass best practice provisions, and to successfully address the Fund’s sustainability and deliver review legislative frameworks excellent services to all stakeholders.