Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697788505113.pdf (Fiji)
Annual Report 2018 TransformationTransfor-mationTransformationTransfor-mationTransformationTransfor-mationTransformationTransfor-mationTransformationTransfor-mation Corporate Statement VISION Securing your future MISSION To understand our customers, offer quality services and ensure sustainable returns for meaningful retirement VALUES E T H I C Excellence We are committed to being the best and to deliver the best Teamwork We work effectively within and across teams to deliver results Humility We act in a manner that reflects our respect, willingness and inclusion of others Integrity We resolve to do what is right for our customers and colleagues even when no one is looking Courage We challenge ourselves to think big, be decisive and persevere to make a difference About FNPF The Fiji National Provident Fund is a defined contribution fund that provides superannuation services to its members.
The operations of the Fund is guided by the FNPF Act 2011.

FNPF collects compulsory contributions from employees and employers towards the retirement savings of all workers in Fiji.

The Fund also provides pre-retirement benefits such as housing, medical and education assistance.

FNPF is a major investor in Fiji and one of the country’s largest property owners.
The Fund also owns majority shares in Amalgamated Telecom Holdings Limited, Vodafone Fiji Limited, Home Finance Company Limited, and fully-owns the Natadola Bay Resort Limited (InterContinental Fiji Golf Resort & Spa), Holiday Inn Suva, Momi Bay Resort Pte Limited (Fiji Marriott Resort), Marriott Denarau Hotels (Sheraton Resort, Westin Resort and Denarau Golf Course and the Grand Pacific Hotel.
Contents Highlights Board of Directors Chairman’s Report Management Team CEO’s Report Strategic Priorities Corporate Governance Investment • Highlights - 22 • Investment Policy Statement - 25 • Equity - 25 • Properties - 26 • Fixed Income - 26 • Commercial Lending - 27 • Treasury - 27 • Projects - 28 • Subsidiaries - 29 Customers • Members - 30 • Employers - 30 • Customer Services - 30 • Pension - 32 • E-channels - 33 People • Performance Management -35 • Recruitment & Retention- 35 • Employment Relations - 35 • Learning & Development - 35 • Corporate Social Responsibility - 36 Corporate Diary 2 6 7 10 12 16 18 22 30 34 38 2 Highlights Total Assets Net Profit Investment Income $6.6b from $5.8b (restated*) in 2017 $538.7m compared with $422.4m (restated*) Grew to $564.3m from $461.8m (restated*) in 2017 Members’ Funds Return on Investment Contributions $5.5b from $4.9b in 2017 9.6% This is partly a result of the revaluation gains booked from the adoption of fair market value of investment properties and subsidiaries under IFRS 9.
$599.9m or $49.9m per month.

Increase of 9.8% from $546.2m General Reserve Interest Credited Interest Rate $1.2b $1.0b 5.75% 6.0% 6.25% 6.35% 6.35% from $0.95b (restated*) in 2017 credited to members accounts in the last four years, $297m was distributed to members’ accounts this financial year.
2014 2015 2016 2017 2018 *The FY2017 figures were restated given the change in accounting policy FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 3 Highlights Membership Profile Member balances by age Member Balances < 15 yrs 15 - 24yrs 25 - 34yrs 35 - 44yrs 45 - 54 yrs > 55yrs Total $0 Less than $5,00 0 $5,000 - $9,999.99 $10,000 - $49,999.99 $50,000 - $99,999.99 $100,000 - $249,999.99 $250,000 - $499,999.99 $500,000 & above Total 429,936* *This includes 19,022 of voluntary members Share of Wealth by Gender Ratio female to male members Count Share of Wealth 40% 33% 60% 67% 1 1.4 179,405 250,531 Derived from members with positive balances Based on total membership of 429,936 Member balances <$10,000* 2016 2017 2018 75% 73% 71% Active* compulsory members 236,058 38% 62% Active* voluntary members 4,864 48% 52% *Based on total membership of 429,936 *Active members are those who contributed at least once during the financial year FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 4 Highlights Pensioners Pensioners by Age Group & Gender Employers Active Employers > 95 yrs 90 - 94 yrs 85 - 89 yrs 80 - 84 yrs 75 - 79 yrs 70 - 74 yrs 1103 65 - 69 yrs 60 - 64 yrs 55 - 59 yrs < 55 yrs 828 874 772 1 2 1 5 43 28 93 108 272 403 566 832 780 571 244 29 Net Contributions Contributions less Withdrawals 1,200 1,000 s n o i l l i m $ 800 600 400 200 0 (200) 265.4 280.6 566.1 140.5 291.5 432.2 480.6 546.2 112.2 263.8 375.7 284.2 314.8 599.9 2014 2015 (85.1) 2016 2017 2018 Contributions Withdrawals Net Contributions 8000 7000 6000 5000 4000 3000 2000 1000 0 7,968 7,062 7,500 1,332 1,134 936 2016 2017 2018 Active* employers Active* new employers *These employers are those that paid their employees contribution at least once during
 the financial year.
Additional Contributions These are the number of members who pay and/or receive above the mandated 18% (10% employers & 8% members) contribution.

Some employers pay above 10% as part of staff benefits.

These contributions boost these members’ retirement savings.
Paid by Members Paid by Employers Paid by both Members and Employers 248 494 1,029 2,473 53 88 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 5 Highlights Investment Asset Allocation 2010 2014 2018 58% 45% 40% 10% 10% 13% 2% 6% 1% 5% 10% 10% 4% 14% 12% 4% 24% 11% 5% 7% 9% Fixed Income vs Growth Investment Fixed Income Growth 2010 2014 2018 88% 85% 71% 12% 15% 29% Government Securities Properties Other Fixed Interest Equities Commercial Lending Cash Term Deposit Withdrawals Members withdrew $314.8m Retirement Housing Disability $144.0m $137.3m in 2017 $44.2m $32.8m in 2017 $4.8m $4.6m in 2017 Small Account* Death Migration Early** $2.2m $0.3m in 2017 $22.5m $21.9m in 2017 $33.3m $36.2m in 2017 $63.8m $47.5m in 2017 *Small account withdrawals are allowed for members over 50 years old who have balances of less than $5,000 **Refer to page 31 for early withdrawal types.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 6 Board of Directors Ms MAKERETA KONROTE Mr SANJAY KABA DIRECTOR DIRECTOR Mr AJITH KODAGODA CHAIRMAN Member since January 2016.

Chairperson of Board Human Resources Committee.

Member of the Board Audit and Risk Committee.

Board Member Reserve Bank of Fiji (RBF) and Fiji Revenue & Customs Service (FRCS).

Member since January 2016.


Board Member FNPF Hotel Resorts Limited (FHRL), Natadola Bay Resort Limited (NBRL), Momi Bay Resort Limited (MBRL), Amalgamated Telecom Holdings Limited (ATH), Telecom Fiji Limited (TFL), Fiji Ports Corporation Limited (FPCL) and Fiji Roads Authority (FRA).

Member of the Constitutional Offices Commission and Fiji Institute of Engineers.

Member since June 2009.

Member of the Board Investment Committee.


Also Board Chairman Fiji Revenue & Customs Service (FRCS), Amalgamated Telecom Holding Limited (ATH), & Vodafone Fiji Limited.

Director Fiji International Telecommunication Limited (FINTEL), Home Finance Company Limited (HFC).

Chairman Bio Security Authority and Member of the Constitutional Offices Commission.

Mr TEVITA KURUVAKADUA DEPUTY CHAIRMAN Member since January 2010.
Chairman Board Audit & Risk Committee, Chairman Board Information Technology Committee and Chairman of Board Investment Committee.

Board Member Reserve Bank of Fiji (RBF), Fiji Sugar Corporation Limited (FSC) and Momi Bay Resort Limited (MBRL).

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 7 Chairman’s Report The Fund delivered another strong financial performance for the 12 months ended 30 June 2018.
Although critical, this does not really capture the impact the Fund had on the lives of our members during the year.

Guided by our core purpose of helping members save for a meaningful retirement, we launched and began to implement our three-year Strategic Plan.

The focus has been on steering the Fund for future success by rebuilding from the inside.

This has resulted in the articulation of a clear sense of purpose and the review of our values to embed a culture of stewardship.
Creating Value for Members One of our key strategies is to extend our role in social security.

We believe that we are well- placed to make a difference in the lives of all Fijians given our purpose, size and reach in the local economy.

As such, we have adopted a holistic approach to ensure the financial and social wellbeing of our members during their working life and also in retirement.
In the last 12 months, we provided housing related assistance to 4,890 members, approved education applications for 18,710 members and their families, completed medical assistance for 584 members, provided immediate relief to 14,073 members affected by Tropical Cyclones Josie and Keni and also approved unemployment assistance for 8,579 members.

These are part of our ongoing early withdrawal benefits.
>$10,000 balance (% total membership) 29% The Fund continues to manage the ongoing challenge of low member balances.

As of 30 June 2018, a total of 29% of our members had balances above $10,000.

Of those with balances below $10,000, about 57,000 are over 50 years old and eligible to exercise their retirement option within the next five years.

Issues such as irregular work patterns, relatively low income and general reliance on FNPF to finance other expenses are reasons for these low balances.
The challenge for the Fund is to strike a balance between assisting members achieve a better quality life and in saving for retirement.

42,889 82,785 This makes the need to instil a savings culture much more critical for our members.

During the year, the Fund also conducted retirement planning and awareness sessions at 154 workplaces attended by 5,850 members.

A total of 816 members signed up for additional contributions in these sessions to boost their retirement savings.
As part of the National Financial Inclusion Taskforce, the Fund co-hosted the first ever Retirement Expo in Suva.

This was a collaboration of 22 stakeholders joining forces to raise awareness on retirement planning and the types of financial products available for members.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 One of our key strategies is extending our role in social security.
We believe that our purpose, size and reach in the local economy makes us well-placed to make a difference in the lives of all Fijians.

8 The Expo was also well received in the Western and Northern divisions and is expected to be an annual event.

in the Fijian As part of our strategy, we also recognize changes labour market demographics and the rise in informal employment.

Both the skilled and unskilled workers in this sector are not usually covered by formal work arrangements or by a retirement scheme.
Efforts are being made to extend our coverage to the different occupational groups in this sector.

We are also taking steps to collaborate and partner with government ministries and other private organizations to put together suitable products and to simplify our services that would appeal to these segments.
Growth Strategy As a long term investor, the Fund continues to pursue an active investment growth strategy that balances risks and returns, provides a sustainable income and positions the Fund to take advantage of growth through capital appreciation.

This is evident in the shift in the portfolio mix over the years from a Growth to Fixed Income allocation of 12% to 88% in 2010 to 29% to 71% in 2018.
The Board further revised the Fund’s Investment Policy Statement (IPS), resetting the asset allocation strategy from 45% to 55% and 60% to 40% in the next 5 to 10 years, respectively.

The Investment division was restructured to provide more resources to make it fluid to respond to new opportunities and to strengthen investment risk and governance, working actively to identify large value high yielding investments that could lift the overall return to the portfolio.
The focus was mostly on identifying local investment opportunities given the restrictions inhibiting expansion to offshore investments.

This culminated in the acquisition of the Marriott Denarau properties namely the Westin Fiji Resort, Sheraton Fiji Resort and the Denarau Golf and Racquet Club along with surrounding land.
Financial Performance Net surplus grew by a record 27.5% to $538.7 million driven by 8.9% growth in investment income and a voluntary change in the application of accounting policies in preparation for full compliance with International Financial Reporting Standards (IFRS) 9 applicable from June 2019.

IFRS 9 requires an entity to recognise certain of its financial assets in the statement of financial position at fair value rather than cost less impairment as previously recorded.
This resulted in the Fund revaluing our investment in subsidiaries which led to a $66.8 million gain in 2018 and $165.4 million was retrospectively applied to 2016 and 2017.

In addition, the value of investment properties also increased by $82.9 million to reflect its fair value.

It is expected that the Fund would be fully compliant with IFRS 9 in 2019.
Recognising that these gains are usually one-off changes and expected to increase volatility in the reported value of assets in future years, the Fund adopted a more prudent approach in its decision to smoothen the benefits of these gains and to cushion the impact of possible future fluctuations.

As such, the Fund declared a crediting interest rate of 6.35% for the financial year similar to last year, resulting in the distribution of $297 million to our members.
We believe that this decision is in the best interest of our members and will serve them well in future.

The Fund’s total assets increased by 13.5% to $6.6 billion from $5.8 billion in 2017 whilst member funds grew by 12% to $5.5 billion.

This also marked accelerated growth over the last six, post-reform, years.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 9 Appointment of Chief Executive Officer and Actuary A key priority for the Board was finding the right person to lead the Fund in our new direction and to drive the culture of stewardship.

Mr Jaoji Koroi was appointed the Chief Executive Officer in March of this year following a competitive and thorough selection process.
Mr Koroi was the Chief Operating Officer overseeing Member Services, Investment, Finance, Human Resources, Information Technology and Business Transformation for two years.

Prior to that, he held the role of Chief Investment Officer for seven years and was instrumental in the Fund’s investment rehabilitation strategy.

We have full confidence in his ability to lead the Fund in its new strategic direction.

The Fund also appointed Mr Peter Martin as the Fund Actuary.
He is a fellow of the Institute of Actuaries of Australia and was previously the Actuary to the Australian Government.

He has over 20 years of actuarial experience and the Board welcomes a professional of his calibre.

Mr Martin replaces Mr Geoffery Rashbrooke who was first engaged as the consulting actuary in 2011 to establish and build capacity in the Actuarial team.
Mr Rashbrooke was instrumental in assisting the Board formulate reform options during the review of the Pension Scheme in 2011 and then ensuring the Fund’s compliance to the actuarial requirements in the FNPF Act.

The Board thanks him for his immense contribution and counsel during his tenure as the Fund Actuary.

Reduction in Complaints The number of complaints declined by 64% when compared with last year’s figures.
This is a reflection of the Board’s continued commitment towards improving our service delivery to our customers.

We believe that the reduction in complaints is a clear indication that our staff are living the value of providing excellent services to our members.

Outlook We have made good progress in the first year of implementation of our three year strategy, yet much more remains to be done.

The environment remains challenging and stakeholder expectations are high.
The Board’s priorities for the next financial year include exploring further opportunities for public private partnership with Government and international institutions on medical hospitals and low cost housing, capitalizing on the tourism value chains and other synergies, extending coverage to the informal sector through our voluntary scheme and continued work on enhancing our digital channels to provide a wider range of services to our members that is more meaningful, simple and easier to access.
The Board will continue to support the drive towards creating a digital workforce, staff training and development and in embedding a culture of stewardship.

Acknowledgement Sheer hard work and perseverance has been the key to the Fund’s success this year.

I thank my fellow Directors for both Fund and subsidiary boards for your valued contributions and continued support during the year.

We saw the departure of Board member Ms Bhavna Narayan and I also thank her for her service and wish her well.
I also acknowledge the CEO and his leadership team for their commitment and perseverance to achieving our vision.

My utmost appreciation and thanks to our staff who continue to work hard and strive for better outcomes for our members.

To our members and other stakeholders, we thank you for your continued support.

We continue to appeal to you to actively engage with the Fund to make it the best organization it can be.
Ajith Kodagoda CHAIRMAN FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 10 Management Team 2 3 4 6 7 8 11 12 9 13 1 10 5 1.

Farnaz Queet 2.

Shivam Chand 3.

Tevita Lomalagi 4.

Alipate Waqairawai 5.

Jonetani Tonawai 6.

Siteri Saro 7.

Ravinesh Krishna 8.

Millie Low 9.

Suliano Ramanu 10.

Makereta Korovusere 11.

Jaoji Koroi 12.

Shandiya Gounder-Pillay 13.

Uraia Goneyali FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 11 15 14 19 16 20 21 17 18 22 23 24 25 26 14.

Pravinesh Singh 15.
Pravinesh Singh 15.

Peni Gonelevu 16.

Sitiveni Nabuka 17.

Wainikiti Bogidrau 18.

Nabotuiloma Komaisavai 19.

Ashwin Pal 20.

Pretty Pritika 21.

Asim Mohammed 22.

Ying Yang 23.

Uday Singh 24.

Seema Shandil 25.

Viliame Vodonaivalu 26.

Laisa Saumaki FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 12 CEO’s Report It is indeed an honour to present my first report as Chief Executive Officer.
The results over the last few years continue to confirm the successful outcomes of the reforms, which has created the necessary infrastructure and building blocks for the Fund’s future.

I consider myself fortunate to be leading this organization that is now in a much stronger position than it was a decade ago.

However, for the benefits of the reforms to be fully realised, the Fund must have the right people.

This is our leadership agenda.


Creating the right culture and empowering our employees are essential.

We started by defining our stewardship ethos that embodies our commitment to our members.

As stewards of members’ funds our duty of care goes beyond collecting, investing and growing their savings for their retirement.

It is about positively impacting our society by providing quality and relevant products and services.

It is also about creating an enabling environment for our people to grow.
We are under no illusion that this will be easy.

This is our transformation journey and the focus is our people.

Change in Accounting Policy 2018 was another year of consolidation.

The move to record our investments in subsidiaries at fair value is major change for the Fund.

Apart from the one-off effects in the Fund’s performance during the year, changes to investment valuations will also be a major source of volatility into the future.
As denoted in Figure 1, income arising from changes in asset valuations totalled $200.7 million for the year, which accounted for some 35.5% of total income.

This compares with $134.6 million or 29.1% in 2017.

This one-off impact contributed to the Fund posting a record profit of $538.7 million during the year, an increase of 27.5% from last year.

It also contributed to the growth in the balance sheet, with total assets growing by $788 million to close at a record $6.6 billion.
However, because we are adopting the change for the first time, these positive effects are one-off and will not be realized in the new financial year.

Underlying performance, excluding the one-off effects, was also strong and broadly based, with income from all other asset classes recording positive growth.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 13 Total underlying income grew by 11.1% to $363.6 million during the year.
Underlying net profit was $363.0 million compared with $287.8 million in 2017– a growth of 26.1%.

Go Digital We now live in a digital world, where consumers expect products and services to be delivered digitally.

To meet this expectation, we must change how we do business.

Not only do we have to review our business processes, operating systems and IT capabilities, we must also empower our people to drive these transformations.
In line with our digital strategy, we introduced a number of initiatives to make engaging and accessing the Fund much easier and seamless.

The key objectives of these initiatives are to empower our employees; engage our customers; optimise our operations; and transform our products.

We are pleased to report that the following were implemented and launched during the year: • An enhanced myFNPF mobile App that allows members to view their annual statement or email it to themselves.
The same could be done to members’ interim statement, which shows the members’ balance as per statement request date.

Members can also update their personal records using the App.

• New Complaints Management System “MyfnpfHub” – this integrated system offers members with real-time updates from the registration of their complaints, escalation and resolution.

• Launch of SMS Alert to update members of the status of their withdrawal applications.
• A new Employee Portal called Engage was launched to improve connection, communication and collaboration for staff.

This allowed us to share information and collaborate on discussion to actively contribute to key issues for the Fund.
Figure 1: Investment Income by Asset Class 600 500 400 300 200 100 0 (100) 2013 2014 2015 2016 2017 2018 Interest Revenue Dividends Property Rental Income Realised Gains/(Loss) Operational Performance Contributions collected totalled $599.9 million compared with $546.2 million last year, an increase of 9.8%.

This is an outstanding achievement, averaging $49.9 million collected per month.

Members’ funds grew from $4.9 billion in 2017 to $5.5 billion this year.
Total undistributed funds decreased from $12.0 million to $9.3 million, a record achievement and largely driven by the employers’ submitting their contribution schedule online.

Registered FNPF members at the end of June 2018 were 429,936 compared with 417,886 last year.

Of these, active members totalled 240,922.

These are members who contributed at least once during the financial year.

About 64,000 members have zero balances.

Member withdrawals totalled $314.8 million.


This also accounted for the 14,073 members that withdrew $11.9 million under the natural disaster assistance.

Revaluation Gains A total of $10.4 million was invested by new annuitants who purchased pension products this year.

As at 30 June 2018, the total number of annuitants was 7,555 compared with 7,410 last year.

Total annuity payments amounted to $23.8 million.

Pension take up rate was 5.1% compared with 5.5% in 2017.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 14 CEO’s briefing with FNPF subsidiaries Investment Marriott Denarau Hotels The Fund acquired the Marriott Denarau tourism assets during the year, which includes the 297 room Sheraton Resort, 246 room Westin Resort, and the 111 Hectare Denarau Golf Course and development land for $277 million, comprising $157.8 million equity and $119.2 million debt.
FNPF acquired the assets from Marriott International and this adds to FNPF’s existing impressive stable of hotel assets, which currently includes the recently-opened Fiji Marriott Resort Momi Bay, the Intercontinental Fiji Golf Resort & Spa, Natadola Bay Championship Golf Course – home of the Fiji International Golf Tournament, Holiday Inn Suva and the Grand Pacific Hotel.
BSP Shares The Fund also bought additional shares worth $60 million from the Bank of the South Pacific; and given that BSP is one of the fastest growing banks in the region, FNPF will continue to consider purchasing additional shares as and when they are made available.

Grand Pacific Hotel Subsequent to year end, the Board approved the acquisition of the remaining 75% shares of GPH from National Superannuation Fund and CGA Property Limited from Papua New Guinea (PNG).
The sale and purchase agreement was signed in July 2018, with completion of the acquisition expected by 31 December 2018.

Pensioner Satisfaction Survey An independent survey by Price Waterhouse Coopers has revealed that pensioners are generally satisfied with the services provided to them by the Fund.

An index of 4.16 out of 5 was achieved in the Pensioner Satisfaction survey compared with 4.08 recorded for a similar survey in 2014.
The Fund is aware though that it needs to continuously upgrade its services to pensioners.

In addition, a survey on the Employer Portal use undertaken by an independent consultant revealed a score of 65.7 based on the Standard Net Promoter score.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 15 Strategic Alliances Pursuing strategic alliance is part of the Fund’s objective to engage with other entities to work towards common goals.
During the year, the Fund negotiated and signed Memorandums of Understanding with the following: • Fiji Sugar Corporation & Sugar Cane Growers Council - providing opportunities for 12,000 growers to sign-up for voluntary membership.

• Extending partnership with ANZ on the Money Minded program for another three years.

• Ministry of Employment, Productivity and Industrial Relations for data information sharing.
• Real Estate Board (REALB) to ensure compliance by real estate companies towards their employees contributions that also covers commissions paid.

Investment Fiji to share information on the registration and implementation of foreign investment projects with number of employment generated and to identify default in employers.

• Corporate Culture and Leadership We want to move away from merely executing tasks and instead deliver experiences that our members will tell others about.
We want a work place that allows our people to fulfil their potential in a nurturing environment that encourages the right behaviour.

To this end, we have rolled out several trainings and professional development programs that will equip our staff with the tools to meet this obligation.

Whilst it is important to drive and achieve good results, it is equally important that we do so in a fair and transparent way.
We are committed to holding ourselves to account in meeting that aim, and to being accountable to our stakeholders for our actions.

Acknowledgment We have been privileged to have had the counsel and support of our Chairman, Board members and the Board’s Sub-committees.

On behalf of the Management Team, I would like to thank all our staff for their dedication throughout the year.
Our staff continue to show passion, pride and a sense of duty and I am grateful for their demonstrated professionalism, dedication and commitment.

Finally, to our members, employers and pensioners, we acknowledge your understanding and continued support.
Jaoji Koroi CHIEF EXECUTIVE OFFICER FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 16 Strategic Priorities Strengthen our Role in Social Security Strengthen our Corporate Culture To play a broader role in providing for the social wellbeing of our members in pre and post retirement.
FY 2018 progress: • Signed an MOU with the Fiji Sugar Corporation and the Sugarcane Growers Council providing opportunities for 12,000 growers to sign up for the voluntary scheme; • Commenced negotiations on Private Public Partnership (PPP) opportunities for the public hospitals with Government.

This is still being actively pursued.
FY 2019 initiatives: • Raise awareness and actively market our voluntary product to specific groups in the informal sector; • Explore opportunities for PPP in low cost housing initiatives • Explore strategic alliances with Government ministries and private sector organisations to extend coverage to the informal sector Digital Transformation To enable the Fund to effectively engage with our members, anytime and anywhere and at the same time creating operational efficiencies to compete in our business FY 2018 progress: • Enhancement of the mobile App to also include member statements • Launch of the SMS alert to update members of withdrawal payment • Launch of the bill payment system and M-PAiSA as new modes of payments for employers and voluntary members • Launch of the Complaints Management System • Launched the Staff intranet ‘Engage’ where staff can connect, communicate and collaborate FY 2019 initiatives: • Provide other services through mobile Apps and portals, including applications for partial withdrawals, payment of voluntary contributions and registration of voluntary members • Extend member self-service capability through the member and employer kiosks • Digitise debt management capacity • Enhance data analytic capabilities Build a culture of stewardship, promote and live our values ETHIC and invest in our leaders and people to create an organi- sation with a strong sense of purpose and will act in the best interests of our members at all time.
FY 2018 progress: • Review and established new values ETHIC; • Established a Social Committee to drive staff participation and engagement • Launched the STARS recognition program.
The programme has recognized more than 15 staff since its launch • Review of HR policies to align them to the new values and culture FY 2019 initiatives: • Continue to drive the new culture of stewardship • Implement the Innovation pilot program • Enhance leadership skills for all current and upcoming leaders Investment Diversification and Optimisation To diversify and optimise our investment portfolio focusing on increasing offshore investments and growth assets in the telecommunications, financial, infrastructure, tourism, property Term Deposit Properties Growth Cash Offshore IPS Loans development, housing and medical sectors.
FY 2018 progress: • Changes to the Investment Policy statement.

From a previously 30% Growth Assets to 70% Fixed or Defensive Assets strategy, the Board has approved a more Growth- centric allocation whilst maintaining focus on income by approving a 45% Growth Assets to 55% Fixed Income Assets target for the next 5 years, with a 10 year target to increase the Growth Assets allocation to 60%.
• Increase in equity offshore portfolio from 17% to 21% • Increase in the property portfolio by 41% • Purchase of the Marriott Denarau properties increasing our tourism portfolio by $277 million • Purchase of shares in the banking sector (BSP shares) FY 2019 initiatives: • Continue implementation of the growth and diversification strategy FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 17 Stewardship Statement “We care deeply about our members.
We act in their best interest and have a duty to collect, invest and manage member’s funds to ensure that they have a sustainable future.
We will build effective leaders to inspire and motivate our people to deliver results.” We strive to provide excellent services to our members FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 18 Governance FNPF Board The Board provides strategic guidance and advice to Management to ensure the sound management and investment of members’ funds as stipulated in the FNPF Act 2011.
Board Board Committees Members • Mr Ajith Kodagoda • Mr Tevita Kuruvakadua • Mr Sanjay Kaba • Ms Makereta Konrote • Ms Bhavna Narayan (resigned 18 Sept 2017) Audit and Risk (BARC) Provides assurance on the effectiveness of the Fund’s internal controls, compliance and risk management.

Investment (BIC) Deliberates and assesses key investment projects in line with the Fund’s objectives to grow members’ funds within the investment parameters approved by the Board.
Mr Tevita Kuruvakadua Mr Raj Sharma Mr Geoffrey Rashbrooke Ms Makereta Konrote Mr Tevita Kuruvakadua Mr Ajith Kodagoda Mr Sanjay Kaba Human Resources (BHR) Ensures FNPF is sufficiently resourced to meet its current and future targets.

Information Technology (BIT) Focuses on improving the delivery of FNPF’s services through greater utilization of technology and to promote greater online access for members.
Ms Makereta Konrote Mr Taito Waqa Ms Bhavna Narayan (resigned 18 Sept 2017) Mr Tevita Kuruvakadua Mr Janaka Dishantha (resigned 18 Jan 2018) Mr Timoci Tuisawau Mr Vilash Chand Mr Chinthake Ranasinghe Table 1: Board and Board Committee meetings and attendance for the Financial Year 2018 Board Members BOARD BARC BIC BHR BIT No of meetings No of meetings No of meetings No of meetings No of meetings Held Attended Held Attended Held Attended Held Attended Held Attended 1 J U LY 2017 TO 30 J U N E 2018 Mr Ajith Kodagoda Mr Tevita Kuruvakadua Mr Sanjay Kaba Ms Bhavna Narayan Ms Makereta Konrote 10 10 10 10 10 10 9 10 1 5 5 5 5 1 6 6 6 5 5 6 OT H E R B OA R D CO M M I T E E M E M B E R S Mr Raj Sharma Mr Taito Waqa Mr Janaka Dishantha Mr Timoci Tuisawau Mr Vilash Chand Mr Geoffrey Rashbrooke Mr Chinthake Ranasinghe 5 5 4 3 6 6 6 1 6 6 5 4 5 5 5 5 2 4 4 1 Board Chairman Mr Ajith Kodagoda and member Mr Sanjay Kaba have both opted not to take any Board fees and allowances.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 l S upervisi o n RBF There were six prudential meetings held with the Reserve Bank of Fiji (RBF) to obtain relevant updates for its assessment.

These meetings focused on investments, financial performance, compliance, governance and risk management.

The meetings served as a follow-up to previous on- site examination recommendations.
denti a u r P IMF As part of the International Monetary Fund’s (IMF) Financial Sector Stability, it met with FNPF to discuss issues pertaining to improving pension coverage, return on investments, insurance provision and the results of effective governance.

There was also a Financial Sector Review mission that visited the Fund for governance and reforms related issues.
ana g M k s i R e m ent and B The Fund uses an integrated approach to risk management, International u s i n e s s C the aligned to Standard ISO 31000:2009, and performed following activities: •Full review of the Fund’s risk profile •Establishment the risk registers of of risk investment ontin u ity • Establishment management matrix for large projects • High-level risk reports information technology for investments and To ensure that we continue to operate in crisis situations, the Fund regularly reviews our business continuity guidelines, conducts simulation tests and reviews our co-location agreement with Vodafone.
The simulation tests provides assurance on the status of the availability of the Fund’s services at the secondary location.

19 The Fund continues to review and develop its policies to strengthen governance and ensure that this is aligned to relevant standards and legislations.
Polic y D evelop m e n t The Fund reviewed the following policies during the year: • Housing Withdrawal Policy; • Early Withdrawal Policy; • Full Withdrawal Policy; • Complaints Management Policy; • Code of Fair Practice; • Capital Works Policy; • Delegation Limits of Authority Policy; • Physical Security & CCTV Policy; and • Motor Vehicle Policy.
In our efforts to align the organisation to international best practice and standards, we conducted compliance checks against the three ISSA Guidelines for Promotion of Sustainable Employment, Service Quality and Prevention of Occupational Risk.

I n s urance The FNPF Group Insurance Scheme, which covers the assets, profits, and life liabilities and and its insurances, medical was successfully renewed on 30 June 2018.
The renewal of the Industrial Special Risks (ISR) Insurance faced some challenges as the main underwriter withdrew its capacity due to unprecedented global losses.

The world’s major insurance and reinsurance markets normally writing Fijian risks suffered unprecedented losses from natural catastrophes around the globe.
The renewal of the ISR Policy was achieved through discussions with its broker, Insurance Holdings Limited and meetings with their International Partners in replacing the unavailable insurers, with new insurers, in the international insurance markets.

The Funds’ insurable assets, profits, and liabilities, and its life and medical insurances, are adequately insured.
C o m p liance FNPF conducted detailed compliance checks on the following: • The FNPF Act 2011 and FNPF Regulations 2014; • Financial Transactions Reporting (FTR) Act 2004, Regulations 2007 and guidelines and policy advisories issued by the Financial Intelligence Unit (FIU); and Conflict of Interest.

The results from the compliance check indicated a reasonable degree of compliance with improvements being implemented on an on-going basis.
In an effort to strengthen compliance monitoring, a compliance register was developed to increase efficiency and reduce the risk of non-compliance.

The Fund is also required to meet the obligations of the FTR Act and Regulations on reporting of suspicious and cash transactions above $10,000 to the FIU.

In order to increase awareness on these obligations, the FIU made a presentation on the requirements under the FTR Act and Regulations to our staff.
The Fund continued to look for ways to strengthen compliance by building relationships with stakeholders.

For this to happen, critical information needs to be exchanged between parties concerned and a Memorandum of Understanding (MOU) was signed with the Fiji Revenue and Customs Services.

The Fund is pursuing similar partnership with other key stakeholders.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 20 p Co m The Fund reviewed the Complaints Management policy establishing the appetite and tolerance targets for l a i nts Ma n complaint types.

a g e m e n t The total number of complaints declined by almost 64% from last year.

This is due to the implementation of lean work processes, customer oriented “mind-set”, analysis of the root cause of complaints, implementation of preventative measures and effective collaboration between business units.
The establishment of the risk appetite and tolerance levels helped with monitoring, reporting and resolving complaints.

Almost all the complaints received during the year were resolved.

The complaints trend for the past 3 financial years is shown in Figure 2.
Figure 2: Complaints Trend (FY2016-FY2018) Table 2: Complaints received and resolved Complaints Received Resolved within the month Resolved in later months Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun 10 9 15 8 10 1 14 8 7 4 5 5 Total for FY 96 5 6 10 5 7 0 10 4 3 1 2 2 55 5 3 5 3 3 1 4 4 4 3 3 3 41 4 of the 41 complaints were carried forward to the next FY 600 500 400 300 200 100 0 s t n i a l p m o c f o .
o N 522 267 96 2016 2017 2018 t e r nal Au d it I n Assurance Audits & Consulting Engagements Real-time audits using computer-assisted audit tool and audit command language were conducted during the end of year interest crediting process.

Continuous control monitoring program on employers and member services including the TC Josie and Keni Natural Disaster assistance were also carried out.
The concept of cyclical audit continued where consulting engagements were conducted with business units to ensure the implementation of audit recommendations of assurance audits carried out in 2017.

Audit findings Significant audit findings and results of fraud and related investigations were reported to the FNPF Board Audit and Risk Management sub-committee (BARC).

Follow-up audits were conducted, with progress reports provided to BARC at the end of each quarter.
Quality Assurance & Business Excellence A satisfaction index of 3.17 out of 5 was recorded in an independently validated client survey questionnaires sent to business units subsequent to audits for this financial year.

The survey is part of the ongoing quality assurance and improvement program.
The FNPF Audit team won the team impact award at the Institute of Internal Auditors Fiji Awards 2018 to recognise the value addition contribution and importance placed on governance, risk and control processes in the Fund.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 21 Dino, the dinosaur, continues to attract young ones at MyFNPF Centre in Suva FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 22 Investment The 2018 financial year was a challenging one due to various factors including: i) Anticipation of general election which normally leads to subdued investment sentiments, ii) Continued high liquidity in the financial system combined with RBF monetary policy, keeping interest rates low, iii) Intense competition from other financial institutions, iv) Exchange control restrictions inhibiting expansion of offshore investment and v) Confusing and contradictory policy stances taken by the US Government, leading to volatility of the US dollar Factors that worked in our favour included the nine years of consecutive economic growth experienced by Fiji, accommodative policies of the Government, robust consumption indicators, and growth in private sector lending.
Investm e n t P o r t f o l i o The Fund worked actively to identify large value, high yielding investments which could lift the overall return to the portfolio, and the focus has been on identifying local investment opportunities.

Highlights Key achievements during the year included: 1) New Investment Structure A revised structure was approved by the Board that better reflected the resources required to spearhead the growth strategy, support current investments and those to be pursued in future.
The new structure is expected to be implemented over a period of 3 years for optimal resourcing.

2) Growth of Investment Portfolio The Investment portfolio grew from $5.8 billion in 2017 to $6.6 billion in 2018.

The total growth of $788 million (13.8%) was partly due to revaluation gains booked from adoption of fair market value of subsidiaries of $232.2 million and adoption of fair market gains of investment properties of $82.9 million.
The total gains of $232.2 million from the fair market valuation of subsidiaries was retrospectively applied as $47.1 million for 2016, $118.3 million for 2017 and $66.8 million for 2018.

3) Review of Investment Policy Statement The Investment Policy Statement (IPS) was revised in alignment to the Strategic Plan 2018–2020, with more focus on growth strategies that would lead to greater capital appreciation opportunities for the members’ funds.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 23 4) Acquisition of Marriott Denarau properties The Fund acquired 3 iconic tourism properties - Westin Fiji Resort, Sheraton Fiji Resort and Denarau Golf and Racquet Club along with surrounding land.

This acquisition followed the sale process by former owners Marriott International.

The acquisition brought the number of hotels in the FNPF portfolio to 6 and golf courses to 2.
With tourism being one of the key backbones of Fiji, investment into this thriving industry will further enhance the returns to our members.

5) Acquisition of Bank of South Pacific (BSP) shares The Fund acquired additional shares in BSP (listed in the PNG Stock Exchange) bringing the share holding to 2.7%.

This investment tapped into the strong financial performance of the bank, which is one of the top performing listed securities in PNG.
policy resulted in the adoption of fair market value of investments in subsidiaries of $1.1 billion, as well as, an unrealised gain of $232.2 million.

8) Investment in Green Bonds The Fund invested in the first ever Green Bonds, launched by the Fiji Government, in line with its aspirations for COP 23.

A total of $58.8 million was invested.


The Green Bonds, the first for the Pacific Region, were issued in November 2017 and the proceeds from the float will be utilized towards sustainable development to combat initiatives and climate change issues.

9) Fiji Marriott Momi Bay Resort project This was one of the key rehabilitation projects this year.

The Resort, which opened in April 2017, completed its first year of operations and was issued a final completion certificate.
The Resort has been voted the best over water resort in the Pacific.

6) Approval of Investment Valuation Policy 10) Natadola Land Estates A new Investment valuation policy was approved by the Board in line with the requirements of the International Financial Reporting Standards (IFRS) standards.

7) Change in Accounting Policy for recording of Investments in Subsidiaries The change in accounting policy saw a shift from booking at amortized cost to that of the current market valuation.
The market valuations were determined through an independent process undertaken by external valuation firms.

This change in Located at Natadola and adjacent to the world-renowned Intercontinental Golf Resort & Spa and Natadola Bay Championship Golf Course, the residential lots continued to garner interest.

The land prices for the first 44 lots were reviewed and revised in line with the market, which re-ignited the interest of buyers.
The construction of a model home commenced during the year, which will showcase the luxurious setting that a buyer could expect.

The fencing and gating project was also approved and is currently underway.
Sheraton Fiji Resort was acquired by FNPF during this financial year FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 24 11) Reversal of Impairment of $25.1 million During the year, impairment reversal of $25.1 million related to the Natadola project was booked, bringing the total reversal for the Natadola project to $116.5 million.

12) Growth of loan portfolio The commercial loans portfolio grew by 37.0%, underpinned by several high yielding loans approved by the Board.
13) Acquisition of Property Additional property acquisitions were pursued, with approval by Board to acquire three new properties from the Fiji Sugar Corporation amounting to $45.5 million.

The process of acquisition is underway and is expected to be completed in the next financial year.
14) Approval of Offshore Framework The Board approved an offshore investment framework, to assist the Fund access global opportunities, achieve greater country & sector exposures, diversify overall portfolio and spread the currency risk.

15) Review of policies Relevant investment policies were reviewed, including Treasury Policy, Properties Policy, Land Bank Policy, Retirement Income Fund Investment Policy Statement and Special Death Benefit Fund Investment Policy Statement.
Income Stellar performance of investee companies increased from $62.4m in 2017.

Attributed to higher dividend declaration from Bank of South Pacific, Vodafone Fiji Ltd, FNPF Hotel Resorts Ltd and other investments.

$268.7m grew from $246.3m in 2017.

The demand for short-term deposits grew, leading to increased placements at high yields.

Lucrative arrangements were negotiated with the Banks.

compared with $461.8m in 2017 Other Income $9.5m Growth in foreign exchange gains and other income.
Property Revaluation Strong growth in fixed income market Changes in Fair Market Value Uplift in rental properties Valuation were also undertaken for investment properties, resulting in a revaluation gain of $82.9 million accounted for in FY2018.

compared with $16.4m last year.

Mainly from recovery of rental from previous years, new income generated from My FNPF Center tenancy and other rental reviews.
Adoption of fair market value as per changes in accounting policy, to reflect the true value of the subsidiary investments in FNPF’s financial statements and growth in share prices of local listed equities.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 Table 3: Net Performance Interest Dividends Property Rental 2018 2017 Restated $268,733 $246,344 $66,884 $ 62,449 $18,426 $ 16,449 Net Changes in Fair Value of Investments $117,837 $ 134,600 Changes in Property Valuation Net foreign exchange gain Other Investment Income Total Less Direct Investment Expenses $82,871 $5,693 $3,834 - - $1,937 $564,278 $461,779 ($16,605) ($5,300) Less Direct Property Expenses ($4,539) ($5,950) Add/(less) Foreign Exchange gains/(losses) Add Reversal of Impairment $25,055 ($831) - Net Performance $568,189 $449,698 Net performance of the investment portfolio was $568.2 million compared with $449.7 million the previous year, leading to a Gross Return on Investments of 9.6%.
Investment Policy Statement The Board approved changes to the Fund’s Investment Policy Statement (IPS) the over arching policy by which the Fund manages its investments through strategic and tactical asset allocations.

The Fund’s IPS is broadly categorized into 2 core asset classifications, Growth Assets and Fixed or Defensive Assets.
Growth Assets comprise of assets that have a capital growth component such as shares and properties, while Fixed or Defensive Assets do not have a capital growth element as the income return is fixed.

These include securities such as bonds, promissory notes, loan notes, term deposits and commercial loans.
From a previously 30% Growth Assets to 70% Fixed or Defensive Assets strategy, the Board has approved a more Growth-centric allocation whilst maintaining focus on income by approving a 45% Growth Assets to 55% Fixed Income Assets target for the next 5 years, with a 10 year target to increase the Growth Assets allocation to 60%.
This allocation is in line with the Fund’s Strategic Investment Plan 2018-2020, specifically on Diversification and Optimization, focusing on increasing the Fund’s growth investments both locally and offshore.

Growth Assets capital growth component Fixed Assets income return is fixed Previously Next 5yrs 10 yrs target 30% 45% 60% 70% 55% 40% 25 Growth Investments As at 30 June 2018, the Growth Portfolio stood at 29.3%, compared with 23.4% for the same period in 2017.
The growth is attributed to new investments, capital appreciation noted in the listed equities and adoption of fair market valuation for FNPF subsidiaries and investment properties.

in its exposure Equity the Diversifying telecommunication sector continues to be one of the key objectives for the Fund.

As such, a number of opportunities were pursued that resulted in new and additional investments amounting to around $257.1 million in both the local and offshore equities portfolio.
Local Equities The local equities portfolio closed at $1.3 billion at the end of the financial year; an increase of 26.4% when compared with the 2017 portfolio of $1.0 billion.

The increase was driven by the acquisition of the Marriott Denarau tourism assets which includes the Sheraton Fiji Resort, the Westin Fiji Resort & Spa and the Denarau Golf & Racquet Club for about $157.8 million through the holding company; Farleigh Ltd.
This acquisition added to the existing tourism portfolio which includes the Intercontinental Natadola, Momi Marriott Resort, Holiday Inn Suva, Grand Pacific Hotel and Natadola Championship Golf Club.

Investment in HFC Bank, Fiji’s first locally- owned bank, also increased through a dividend re-investment amounting to $5.1 million.
in anticipation of IFRS Furthermore, requirements and in compliance with the Investment Valuation Policy, all FNPF subsidiaries were revalued at fair value, noting a growth of $232.2 million.

Similarly, the increase of $32 million from investments in shares listed on the South Pacific Stock Exchange aided as well.

In terms of dividend income, the local equities portfolio generated around $50.4 million in 2018 compared with $54.1 million in 2017.
Offshore Equities The offshore portfolio grew by 60.9% to $294.3 million compared with $182.9 million last year.

This was a result of a capital injection of $33.9 million into The Hastings Infrastructure Fund (TIF) in Australia and acquisition of additional shares in the Bank FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 26 Geographic Spread of Equities Portfolio Local 79% Offshore 21% AUD 15% PGK 5% 1% USD of South Pacific, PNG (BSP) amounting to $60 million.
These investments have further diversified the offshore equities portfolio and is in line with FNPF’s intention to increase our exposure to growth assets.

The offshore dividend income nearly doubled to $16.4 million in 2018, mostly due to the additional dividend income received from BSP.

Properties The FNPF property portfolio consists of 22 properties, which includes 18 commercial (retail and office) buildings, 2 properties under redevelopment and 2 vacant land under land bank.
The property portfolio value increased from $231.2 million last year to close at $326.5 million in 2018.

The growth in portfolio is the result of the market valuation exercise undertaken by Rolle & Associates.

An appreciation in value of $82.9 million was booked, which equates to an increase of 41.2% in the property value.

Occupancy rate of the Fund’s property portfolio stood at 99.0% at the end of the financial year.
Rental growth was 12.0%, and achieved a gross income of $18.4 million from 71,135 square metres leased compared with $16.4 million last year.

The growth in the leasable area was due to the successful completion of My FNPF Centre in 2017.

Total net return on property of 29.6% was driven by capital growth.

Nadi Retail is undergoing re-development and should be available next year.
Fixed Income Investments As at 30 June 2018, the Fixed or Defensive Assets portfolio comprised 70.7% of the investment portfolio.

Constantly challenged with high liquidity and the competitive participants in the local bonds market, the Fund still managed to broaden its domestic government bond holdings.

During the year, substantial decreases were also noted in the offshore term deposit and offshore bonds portfolio as investments were liquidated for re-investment in higher yielding growth assets.
Government Securities The government securities portfolio opened with $2.3 billion in 2017 and closed at $2.6 billion as at 30 June 2018.

Total investments in government securities for the review period were $382.7 million while maturities totalled $80.1 million.

The Government introduced benchmark bonds in 2017, key features of which are a predetermined coupon and the ability for the bond to be re- opened within the term of the bond.
The purpose of introduction of the benchmark bonds was mainly to: - boost government bonds liquidity set a reference rate for bonds; and - establish an effective benchmark yield curve - Government also floated Green Bonds, in line with its aspirations under COP 23.

Fiji is among the first in the world to issue sovereign green bonds, the proceeds of which will finance the transition to a low carbon and climate resilient economy.

The Fund subscribed to $58.8 million worth of Green Bonds.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 Quasi Government Securities The quasi-government securities portfolio consists of borrowings by statutory bodies, such as Housing Authority, Energy Fiji Limited (EFL), Fiji Development Bank (FDB) and Fiji Sugar Corporation Ltd (FSC).

The lending to these institutions are guaranteed by the Government.

The portfolio closed at $144.1 million compared with $139.3 million last year.

This increase stemmed from new investments in FDB Bonds.
Local Term Deposits The local term deposits portfolio increased from $461 million in 2017 to $577.4 million in 2018.

The increase was due to demand of short-term borrowings from commercial banks.

Offshore Term Deposits & Cash The foreign term deposits and cash portfolio closed at $65.9 million in the review period compared with $217.7 million in 2017.
The decrease is a result of the Fund liquidating our portfolio to meet our offshore obligations related to acquisition of Growth Assets such as shares in the Starwood entities and the acquisition of BSP shares.

27 Fiji Government US Denominated Bonds The portfolio closed at $103.9 million compared with $121.5 million last year.
Together with the effect of exchange rate movements, the reduction in the overall portfolio is the result of the sale of US$10 million in bonds to settle our investment in offshore equities.

Commercial Lending The commercial lending portfolio closed at $682.7 million (after impairment) compared with $498 million (after impairment) in 2017.
The growth is the result of new lending to Bank of South Pacific (BSP), University of South Pacific, Fiji Sugar Corporation, Lotus Garments Limited, novation of Barton Limited and Farleigh Limited loans for the Starwood properties acquisition as well as reversal of $25.1 million in impairment.

Total interest earned in the year was $26.7 million compared with $25.1 million last year.

The increase was the result of interest earned on new lending.
The impairment provision of $25.1 million for the Natadola Bay Resort Limited loan was reversed.

Telecom Fiji Ltd settled its loan while new loans were also approved for Fiji Airways Limited and Amalgamated Telecom Holdings Ltd which remain undrawn at balance date.

Overall the lending portfolio continues to face challenges relating to low interest rates in the market, financial liquidity and aggressively competitive stances taken by the commercial banks.
Treasury The major investment outflows spanned from equity lending.

investments to commercial Investments in cash and short term instruments peaked.

The banks interest rates saw a rise mainly due to tightening liquidity levels.

As at 30 June 2018, liquidity in the banking system stood at $470 million against $736 million for June 2017.

The decrease is attributed to a fall in foreign reserves coupled with a decrease in statutory reserve deposits and outflows of funds offshore.
The Fund’s cash holdings in June 2018 was $481.8 million compared with $550.4 million for the same period last year.

The decrease is largely attributed to investment outflows.

The Fund’s offshore investments in equity and fixed income portfolio were denominated in several major currencies.

At the end of the financial year, total of FJD$464 million of investments were held offshore denominated in Australian, US Dollar and PNG Kina.
Playing golf at the Natadola Championship Golf Club FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 28 Projects The Fund undertook several major projects during the last financial year to create value and improve operational efficiencies in the portfolio.

These major works included: Fiji Marriott Momi Bay Resort Since completion last year, the Projects team shifted the focus to completing all remedial works during the defect liability period that ended in January 2018.
All defects have been rectified and final completion achieved by the end of the financial year.

The Fund has also undertaken additional works in the resort to protect the property and improve the Momi experience.

Other normal annual capital works continue to enhance property returns and sustain the performance of this Marriott hotel.

Marriott Denarau Properties Preparatory works for the upgrade and hotel refurbishment is being undertaken for the two new properties in Denarau.
These included the appointment of the primary consultants and undertaking scoping for the upgrade of the refurbishment of these properties.

The construction works are expected to commence in 2019.

Holiday Inn Suva The third phase of upgrade which involved major works to the reception, lobby, bar and rear courtyard was carried out.

This followed upgrades to the conference rooms and restaurant.
The public area upgrade is aimed at improving the arrival experience with more space and improved ambience at the reception area.

The bar upgrade would provide patrons a modern bar setting with its new look and feel.

Additional external works involved the relocation of meeting and pizza bures to increase seating capacity as well as installation of vergola covering to provide shelter from the rain and sun.
Nadi Retail Development The re-development of the new Nadi Retail complex offering 2 levels of retail and 1 level of office spaces continued during the year with an extension in completion program to the first quarter of 2019.

The new complex will also feature a shopping mall and a food court.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 29 Subsidiaries HFC Bank and Vodafone Fiji Limited are both subsidiaries of FNPF Amalgamated Telecom Holdings Limited (ATH) ATH noted a group net profit after tax of $96.6 million for the financial year ended 31 March 2018; a growth of 13.3% in respect to 2017.

Similarly, a dividend of $18.9 million was declared for the 2018 financial year.
During the financial year, the Group pursued the restructure of Telecom Fiji Limited and FINTEL with the Fiji Competition & Consumer Commission (FCCC).

Similarly, ATH received formal regulatory approval in the respective jurisdictions for change of control in Telecom Cook Islands Ltd and Bluesky Samoa Ltd from Amper SA to ATH.

FNPF’s equity investment in ATH was revalued to $530.9 million during the year In line with the change in accounting policy adopted for recording of subsidiaries.
This is driven by the improved earnings of the Group and in line with growth in the share price on the South Pacific Stock Exchange to $2.85 per share as at 30th June 2018, an increase of 90.0%.

HFC Bank HFC Bank achieved a net profit after tax of $11.8 million in 2018 compared with $7.7 million last financial year; a growth of 53.0%.

Similarly, a dividend of $8.2 million was declared during the year, compared with $4.7 million declared in the last financial year.
investment Moreover, within the financial year an additional in the bank was done through a dividend reinvestment, however, not changing the ownership stake of FNPF.

Meanwhile, a revaluation of FNPF’s investment in the bank was done in the current financial year, in line with the change in accounting policy adopted for recording of subsidiaries, noting a fair value of $77.3 million.
The FNPF Group comprises strong local & international brands such as: FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 30 Customers Total Customers Served Customers Served by Divisions Central Western Northern 345,969 169,660 36,917 Customers Served in 2018 was 552,546 compared with 511,966 in 2017 Customers Served by Contact Types Membership The Fund’s total membership at the end of the year was 429,936.

Of these, 22,041 were newly-registered members, an increase of 2.9% from 2017.
These new members included 1,240 registered under the voluntary membership scheme.

Total Contribution Total contributions collected was $599.9 million averaging $49.9 million per month.

This is an increase of 9.8% from last year’s collection of $546.2 million.

Of the total contributions collected, $5.4 million was from voluntary members.

Employers Active employers totalled 7,968 compared with 7,500 in 2017.
Active employers are those employers that paid their employees’ contributions at least once during the financial year.

Contribution Debtors The balance of unpaid contributions was $8.5 million at year end, compared with $6.2 million in 2017.

The increase is attributed to compliance checks with enforcement for the payment of employees’ rightful contributions.

Previously, some employers had underpaid their employees’ contributions.
Unidentified Contribution A total of $5.4 million unidentified contributions was collected but not distributed to member’s account because of insufficient information supplied by employers.

This is a decrease of 51.8% when compared with last year’s balance of $8.2 million.

The Fund Face to Face 478,818 Email 22,579 Phone 51,149 continues to emphasise the importance of employers’ registering their employees within the first month of their employment and providing accurate details of their workers.
Unclaimed Deposits Account In 2017, the Fund transferred a total of $1.4 million of unidentified contributions to the Unclaimed Deposits Account (UDA) after reasonable due diligence.

A further $0.8 million was also transferred to UDA for members over 65 years whose accounts have been dormant for the last 10 years.

Legal Recovery of Contributions A total of 52 employers cases were registered in the criminal jurisdiction with Magistrates Courts around Fiji during the year.
The total debt for all prosecution cases in court was $1.34 million.

Cases prosecuted were initiated based on the following offences with penalties prescribed under the FNPF Act, 2011; a) Failing to pay contributions for workers b) Failing to produce documents on demand c) Giving false or misleading statements to FNPF d) Deduction of 8% from workers without remittance to FNPF At the close of the year, 74 court cases that included some new cases were completed.
This enabled the recovery of $1.7 million in outstanding contributions.

In addition to its powers of enforcement, the Fund also actively pursues civil recovery against directors FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 31 and business owners.

A total of 17 cases have been initiated against company directors and business owners amounting to about $450,000 for unpaid contributions.
Member Account Transfers- Family Court Orders A total of 91 court orders issued by the Family Court valued at $0.2 million were processed for transfers between member accounts this year.

Discharge of Property Title FNPF continues to discharge property titles for members who withdrew under housing assistance prior to November, 2014.

A total of 767 property titles were released this year.
About 3,000 property titles were cleared and are ready for collection by members, while 1,803 are awaiting the endorsement of the Registrar of Titles before they are released.

Employers Portal A total of 2,676 employers registered for the employer’s portal compared with 3,600 employers in 2017.

Employers can now submit their remittance statement online at the beginning of every month.

Customers Served We served a total of 552,546 customers during the financial year compared with 511,966 in 2017.
This was an increase of 7.9% .

The average number of customers served per month is 46,046 compared with 42,664 last year.

Of the total customers served, 87% personally visited FNPF offices while 9.3% and 4.1% accessed our services via phone and email respectively.

Customers who visited our office during the year increased by 12.2% due to the Fund’s revised withdrawal guidelines.

Members who contacted us via information@fnpf.

com.fj totalled 8,926 an increase by 65.4% from 2017.
Our staff take pride in their work Early Withdrawals Education Medical Unemployment Funeral Natural Disaster $63.8m $32.5m $2.7m $10.9m $5.7m $11.9m FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 32 Of the total number of customers served 62.6% visited our offices in the Central Division including those who accessed the Fund’s services via the telephone and email.

Meanwhile, 30.7% visited our offices in the Western Division while 6.6% visited our offices in the Northern Division.
Services Type Analysis Summary Education assistance recorded the highest number of service demand this year.

This is attributed to changes in the education assistance policy.

Education assistance demand rose to 29% this year.

Other services demand includes balance, eligibility and detailed statements that accounted for 24%, new employee membership registration 3.8%, urban housing 4.8%, Joint ID card services 2.4%, unemployment assistance 5.1%, nomination 2% and retirement 3.9%.
Pension services queries made up 5.3%.

This includes those enquiring for pension renewal certificates, pension advisory and other pension services.

For full withdrawal grounds significant increases were recorded for retirement and pension advisory services, which increased by 28.4%, retirement withdrawal increased by 46.6% and small account balance increased by 41.5%.

On the contrary death of a member withdrawal by nominee reduced by 19.7% and migration withdrawal services reduced by 34.9%.
Early withdrawals grounds recorded an increase for unemployment assistance by 42.5%.

Increases were also recorded for urban housing by 18% and education assistance by 13.6%.

There was a decline for village housing assistance, Special Death Benefit (SDB) funeral and funeral assistance by 63.7% and 39% respectively.

Pension Services Our centres served a total of 29,532 customers for pension related services compared with 31,266 in 2017.
Of the total customers served, 10% collected payments, 81.2% renewal certificates, 3.5% sought pension advice while 5.3% came in for pension orders.

Figure 4: Services demand by members by % 29% % 3 3 1 .

n o i t a c u d E 24% 22.3% 3.8% 4.8% 2.4% % 2 4 .

g n i s u o H n a b r U % 9 3 .

d r a C D I t n o J i % 5 4 .

R M e e y o l p m E w e N 5.1% % 2 3 .


t n e m y o l p m e n U 3.9% 2% % 3 % 3 n o i t a n m o N i t n e m e r i t e R FY2017 FY2018 s e i t i l i b g i l E i & t n e m e t a t S r e b m e M 30% 20% 10% 0% Pension Take Up Rates Pension take-up rate refers to the number of members purchasing any combination of FNPF’s pension products over the total number of members that opt to withdraw their funds under approved grounds.

The pension take up rate for 2018 was 5.1%.


A total of 5,644 members and nominees were eligible for pension in 2018.

Of this total, 92.5% had turned 55 and were eligible for retirement, 4.0% qualified as sole nominees and spouses of deceased members while 3.5% were eligible for pension under medical incapacitation.

Comparison figures are provided in Figure 3 and Table 4.
Figure 3: Pension Services FY2018 3.5% Retirement Pension Advisory 15.5% Pension Services 81% Table 4: Pension take up by numbers FY2018 Month FY2016 FY2017 FY2018 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun FYT Pension Renewal Value $10.7m $11.7m $10.4m FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 33 Go Digital is one of our key strategic priorities E-Channels The take-up rate for the e-channels, namely Member Portal, MyFNPF mobile App, and MyFund SMS services continues to be encouraging with more members expected to register for these services next year.
follows: The uptake for each are as Active Portal Users 8,602 Members 11,762 Employers MyFNPF Mobile App users 10,231 Website users myfnpf.com.fj 521,625 page views Recorded 95,065 users Member Forums attendees Increased by 27% Media Relations Building a strong relationship with the media is an important communication approach for the Fund.

This year the Fund released 31 media statements and answered 134 media queries ranging from natural disaster assistance to investment acquisitions.
Journalists also published articles released through the FNPF quarterly member newsletters.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 34 34 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 People The Fund continues to place a lot of emphasis on the transformation of our culture to one that espouses the values and spirit of Stewardship.

Given that people are at the core of any change, managing their expectations and perceptions is a leadership priority.
The dynamics surrounding our people have changed.

Therefore, the adoption of the Stewardship culture, will ensure the evolution of the Fund going into 2020 and beyond.

It is envisaged that our people will be empowered with the right skills sets and attributes to achieve our vision.

Our People At the end of the financial year, the Fund had a total of 443 staff compared with 409 last year.

Of these, 383 personnel held permanent positions, including 30 managers, whilst 59 were employed as temporary staff.
represent 49.9% of our Women total workforce, with 46.3% in leadership positions, including team leaders.

This augurs well with national efforts to provide women with equal representation leadership and decision making roles.
in Our people are an integral part of our organisation Figure 5 : Age range for staff by Gender (average age has dropped to 34 years compared with 2017) Age 21-30 31-40 41-50 51-60 % of staff 28.2% 47.6% 20.3% 3.9% % % 16.9% 11.3% 22.3% 9.0% 1.6% 25.3% 11.3% 2.3% Performance Management Strategic priorities and initiatives are clearly defined, formulated, and cascaded to the leadership team, and to department’s and staff‘s key performance indicators (KPIs).
Ongoing communication, monitoring and reviews enables employees to track their performance against strategic objectives.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 The Fund also launched the STARS recognition programme in April, specifically designed to help recognize and value the efforts of staff, who portray and live our values through their work during our cultural transformation journey.

The programme has recognized 15 staff and reinforces a culture of engagement and high performance.
Recruitment and Retention A key feature in the revised HR Policy is the inclusion of head hunting and hiring internally.

This places a lot of emphasis on the development and retention of our personnel by mapping clear career pathways for them.

Interestingly, this has resulted in a drop in the Fund’s labour turnover rate from 16% to 7.3%, which reflects the Fund’s engagement efforts over the year.
About 90% of the 31 staff that exited the Fund, last year migrated or left for other employment opportunities.

In spite of these losses, the average years of service in the Fund has increased, which means that the various retention and engagement activities are working.

Employment Relations The Fund conducted a number of awareness sessions in an effort to acquaint staff with the revised HR Policy, to ensure they are well versed with issues that may impact them.
As a result, there has been a reduction of 28.6% in the number of employment relations cases during the 12 months.
The CEO briefs our Labasa team on the new corporate culture journey 35 Figure 6: Years of Service by Gender (average has increased to 7.5 years from 2017) Years of Service % of staff % % 30+ 25-29 20-24 15-19 10-14 6-9 1-5 0.7% 1.1% 4.5% 14.8% 0.2% 0.9% 2.9% 2.7% 24.4% 9.9% 0.9% 1.1% 2.3% 2.9% 8.1% 14.8% 11.3% 12.6% 47.4% 21.9% 22.1% Learning and Development The Fund heavily invests in human capital, evident implementation of various training with the programmes over the last 12 months.
This was coordinated and formulated through the development and review of training plans to attract the best people so we can continue to develop them.

Our capacity building and upskilling programs are aimed at ensuring that our employees add value to their the Fund.

A total of 23 staff attended overseas training programmes in order to harness international best practises and benchmarks to complement our four strategic priorities.
To date, the Fund has trained 70% of our workforce as we continue with capacity development to ensure that we have a competent workforce.
Figure 7 : Total training spend by Count Training Type Investment In-house $43,000 Local External $110,000 Overseas $364,000 54 31 23 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 36 A number of training sessions were carried out in collaboration with Health & Safety personnel attended by staff and tenants to standardize safety requirements to mitigate risks and incidents.

Furthermore, we developed an OHS management system as part of a structured approach to monitoring and reporting all OHS issues.
A key highlight was the engagement of the Ministry of Health and JICA to jointly carry out health checks as part of intervention efforts to mitigate the onset of Non Communicable Diseases.

This is also in line with government’s agenda of creating awareness in order to combat NCDs.

Staff Engagement Staff engagement is now an important activity under our transformation journey.

The Fund’s engagement programmes are specifically tailored to get our people’s buy-in and commitment to our goals.
Key to these programmes was the establishment of a social committee to work in collaboration with management to spearhead our engagement activities.

Zumba is part of our engagement activity to combat NCDs The Fund has also engaged Dale Carnegie Training to spearhead our leadership development capabilities to empower our leaders to mentor staff during this cultural transformation journey.
OHS and Wellbeing OHS continues to be a top priority for the Fund for it ensures a safe and healthy environment for staff, members, contractors, tenants and the public at large.

Corporate Social Responsibility FNPF takes its Corporate Social Responsibility seriously and several activities are included in the Fund’s annual calendar.

This year, FNPF staff donated blood through the Ministry of Health’s initiatives.

FNPF staff also responded to urgent requests for blood donation.
A group visited the Father Law Home in Wailekutu, Lami to clean and spend time with the residents.

They took groceries and provided lunch, which they shared with the residents.

When the adverse weather and two cyclones (TC Josie and TC Keni) caused widespread flooding in the Western and Northern divisions, FNPF’s Social Committee organized a cyclone appeal for those affected.

Staff donated 40 cartons of clothes and linen to the Fiji Red Cross Society.
In May, as the cold and dry weather set in, another team distributed blankets and food packs to the homeless around Suva city.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 37 Staff are continually trained and upskilled to serve our customers FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 38 Corporate Diary JULY OCTOBER 1st – FNPF deducts $35 premium for Special Death Benefit from members’ accounts 1st - 8th - FNPF Team provides various services at the Fiji Showcase held at the Vodafone Arena 10th - Free Wifi activated @ MyFNPF Centre 6th – FNPF declared winner of Best Content for Unlisted Organisation’ category for the 2016 FNPF Annual Report at the 2017 SPSE Annual Report Competition.
10th – FNPF joins US Fiji Day Celebrations.

For the first time the Fund travelled abroad to promote our services to members who were residing/employed overseas.

11th – Annual Member Forum Labasa 16th – Annual Member Forum Suva 18th – Annual Member Forum Rakiraki 23rd – Annual Member Forum Nadi 24th – Annual Member Forum Lautoka 30th - New pocket-size Pension Renewal Date booklets introduced by FNPF to help pension- ers keep track of their renewal dates.
pension renewal dates 11th – FNPF supports climate change initia- tive by displaying a masi scroll at My FNPF Centre inviting members of the public to scribe messages that was then taken to Bonn, Germany DECEMBER 6th - Launch of Digital Payment for Voluntary members through M-Paisa (pilot) 2nd Quarter, member newsletter published JANUARY 25th - New Pension cards issued - this was in response to concerns raised by pensioners at member forums, requesting that Pension ID cards be maintained.
26th – Supporting local artists (Fiji Arts Council) Fine Art Exhibition at Downtown Boulevard 1st Quarter, member newsletter published NOVEMBER 2nd – FNPF launches employer helpline to as- sist users of the employer E-services portal 4th – FNPF Sports Day - This was held in Suva, Lautoka & Labasa.

3rd - New corporate uniforms are worn by staff 22 – Sale and Purchase Agreement for BSP Group Shares signed.
26th - Sale and Purchase Agreement for the Ac- quisition of Sheraton and Westin and Golf Course signed.

21th - The newly established Member Education and Advocacy team conducts its first awareness session at the President’s Office.

AUGUST 1st - FNPF 51st Anniversary 22nd - Health and wellness programme initiated by JICA, starting with screening of selected staff between August 22-25 23rd – FNPF distributes e-statements to 14,375 members for the first time.
* Appointment of Viliame Vodonaivalu as Chief Investment Officer SEPTEMBER 22nd – FNPF and Fiji Sugar Cane Growers Council sign an MOU allowing FNPF to register inter- ested cane growers as voluntary members under the voluntary membership scheme.

26th – FNPF launches new Bill Pay system making it easier and convenient for stakeholders to pay contributions online.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 39 FEBRUARY 1st - Implementation of revised with- drawal guidelines for unemployment, funeral, medical, housing and education 16th - IMF Financial Sector Stability meeting 18th - FNPF acquired $11.39m shares in BSP Group 16th - Engage Portal –a new Employee Portal 24th - New FNPF Valelevu Branch 1st Anniversary 28th - FNPF submission to the Parliamentary Standing Committee on Social Affairs.
MAY 6th - Acceptance of Momi Camp Site New Lease 22nd - FNPF Acceptance to Acquire FSC Land in Lautoka 28th - Media Awareness with FNPF Executives workshop APRIL 17th - FNPF CSR activity blanket drive and dinner for the homeless in Suva.

MARCH 1st - Launch of new SMS alert for with- drawal payments to FNPF members 1st - FNPF numbers now included on Joint ID Card.

Issued first in 2013, the card only had the Tax Identification Numbers (TIN).
The FNPF numbers are now included at the back of the card; which are being printed and distributed from all FNPF branches and agencies around the country.

5th – Annual Report 2017 (Parliamentary Paper No.

114 of 2017) tabled in Parlia- ment.
3rd - Cyclone Josie assistance – FNPF allows up to $1000 withdrawal for West, North and Kadavu 7th - Jaoji Koroi appointed Chief Executive Officer 9th – MOU between FNPF and the Ministry of Employment, Productivity and Industrial Relations signed on information sharing 15th - One year anniversary of the Fiji Marriott Resort Momi Bay 17th MOU’s signed with Momi and Sanasana landowning units 23rd - FNPF purchases Marriott Denarau Tour- ism Assets (Sheraton Resort, Westin Resort, Denarau Golf Course and Development Land) JUNE 13th - Launch of the new Complaints Management System, MyFNPF Hub.
15th – FNPF Internal Audit team awarded the Team Impact Award at the Institute of Internal Auditors Fiji Awards 2017 24th - FNPF Family Fun Day 30th – FNPF credits 6.35% interest to FNPF Members’ accounts Interest Credited $297m for 2018 compared with $270m in 2017 15th - FNPF signs up for ANZ Transactive 15th - ANZ and FNPF announce 3 year extension of their partnership to drive a savings culture in Fiji through the delivery of Money Minded.
23rd – 27th Retirement Expo in Suva organised by the FNPF, RBF and PFIP 3rd Quarter, member newsletter published 4th Quarter, member newsletter published FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 40 Financial Statement Contents Board of members’ report Statement by board of members 41 – 42 43 Independent auditor’s report to the members of Fiji National Provident Fund 44 – 45 Income statements Statements of financial position Statements of changes in member benefits Statements of changes in reserves Income statement by Fund Statement of financial position by Fund Statements of cash flows 46 47 – 48 49 50 – 51 52 53 – 54 55 Notes to and forming part of the financial statements 56 – 121 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 41 Fiji National Provident Fund and its subsidiaries Board of Members’ Report For the year ended 30 June 2018 The Board members present their report together with the financial statements of Fiji National Provident Fund (“the Fund”) and the consolidated financial statements of the Fund and its subsidiaries (“the Group”) for the year ended 30 June 2018 and report as follows: Board Members The Board members of the Fund during the year and up to the date of this report were: Mr. Ajith Kodagoda (Chairman) Mr. Tevita Kuruvakadua Ms. Makereta Konrote Ms. Bhavna Narayan (Resigned 18 September 2017) Mr. Sanjay Kaba Operation of the Fund The Fund is a defined contribution fund and the operation of the Fund has been carried out in accordance with the provisions of the Fiji National Provident Fund Act 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 telecommunication services, the ownership and operation of hotel and resort facilities, insurance agency business and the provision of comprehensive banking and related financial services.

Operating Results The profit after tax of the Group attributable to members for the year ended 30 June 2018 was $472,212,000 (2017 Restated: $353,646,000) and for the Fund was $538,662,000 (2017: $422,402,000).
Reserves The Board approved the allocation of profit to member’s accounts from the Fund’s income statement as annual interest at a rate of 6.35% (2017:6.35%).

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.

Significant events during the year (i) During the year, the directors and shareholders of HFC Bank approved that dividends payable be converted to shares.
(ii) Amalgamated Telecom Holdings Limited (ATH) commenced the integration of its subsidiary Fiji International Telecommunications Limited (FINTEL) with fellow subsidiary Telecom Fiji Limited (TFL) as part of ATH Group restructuring.

It is envisaged, the proposed integration will involve TFL acquiring FINTEL’s business on a going concern basis together with FINTEL’s assets, liabilities, rights and obligations.
This transaction is subject to regulatory approvals and the completion of required regulatory and other required formalities.

(iii) On 26 June 2017, Amalgamated Telecom Holdings Limited received the formal approval from the Office of the Regulator in accordance with section 31 of the Samoan Telecommunication Act for the transfer of shares authorizing the change of control for various telecommunications licenses and permits granted to Bluesky Samoa Limited.
Furthermore, on 1 November 2017, approval from the Business Trade Investment Board (BTIB) for registration as a foreign enterprise and to carry on business in the Cook Islands was also received.
However, share transfers of Bluesky Samoa Limited and Telecom Cook Islands Limited and appointment of ATH Nominee directors to replace AST Nominee directors for the above two entities (effective change of control) was not transferred, given the US approvals for Bluesky transactions by the Federal Communication Commission of USA (FCC), Committee of Foreign Investments in United States (CFIUS) and security review of the transaction by Team Telecom remained pending as of the date of this report and the parties agreed in principle to complete the transaction at the eLandia group level instead of on a piecemeal basis.
(iv) On 24 May 2018, FNPF acquired 100% share holding in Farleigh Limited (the holding company) from Fiji Caymans Holdings for a consideration of $157,808,000.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 42 Fiji National Provident Fund and its subsidiaries Board of Members’ Report Report (continued) For the year ended 30 June 2018 Events Subsequent to the Balance Date On 22nd May, 2018, FNPF Board approved the acquisition of the remaining 75% shares of GPH from National Superannuation Fund and CGA Property Limited from Papua New Guinea (PNG).
The Sale and Purchase Agreement was signed on July 2018, with completion of the acquisition to be done by 31 December 2018.

In 2017, ATH paid Amper SA of Spain and Elandia International Inc. of USA a refundable deposits of USD 30,000,000 (FJD 61,218,243) while the final payment and settlement is awaiting certain consents from the Federal Communication Commission of USA and approvals and waivers from the Committee of Foreign Investments in the United States (CFIUS).
As at the date of signing, 31 August 2018, ATH did not have control of Bluesky Group and therefore the payments have been recognised as ‘Refundable Deposits’ in the financial statements.

Upon completion of the transaction, the deposit amount is expected to be transferred to investment in subsidiaries.
Apart from the matters noted above, there has not arisen in the interval between the end of the financial year and the date of this report, any 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 The financial statements of the Fund and of the Group have been drawn up in accordance with International Financial Reporting Standards and the requirements of Fiji National Provident Fund Act 2011.

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.
Other circumstances 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.
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 an entity in which he has a substantial financial interest.
Dated at Suva this 31 day of August 2018.
Signed in accordance with a resolution of the Board: Chairperson Director FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 43 Fiji National Provident Fund and its subsidiaries Statement by Board of Members For the year ended 30 June 2018 In the opinion of the Board members: (a) The accompanying income statements are drawn up so as to give a true and fair view of the results of the Fund and the Group for the year ended 30 June 2018; (b) The accompanying statements of financial position 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 2018; (c) The accompanying statements of changes in member benefits are drawn up so as to give a true and fair view of movement in member benefits of the Fund and the Group for the year ended 30 June 2018; (d) The accompanying statements of changes in reserves are drawn up so as to give a true and fair view of movement in reserves of the Fund and the Group at 30 June 2018; (e) (f) 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 2018; At the date of this statement there are reasonable grounds to believe that the Fund and the Group will be able to pay their debts as and when they fall due; and (g) All related party transactions have been recorded and adequately disclosed in the attached financial statements.
Dated at Suva this 31 day of August 2018.
Signed in accordance with a resolution of the Board: Chairperson Director FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 44 Independent Auditors’ Report To the Members of Fiji National Provident Fund Report on the Audit of the Financial Statements Opinion 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 (the “Group”), which comprise the statements of financial position of the Fund and the Group, and statement of financial position by Fund as at 30 June 2018, and the income statements, the income statement by Fund, the statements of changes in member benefits, the statements of changes in reserves and the statements of cash flows for the year then ended, and Notes 1 to 40 comprising a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund and the Group as at 30 June 2018, and of their financial performance, changes in member benefits, changes in reserves and their cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS).

Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs).
Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report.
We are independent of the Group and the Company in accordance with International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, the Fiji National Provident Fund Act 2011 (Act No.

52) 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.
In preparing the financial statements, management is responsible for assessing the Fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Fund’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit.
We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s and Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 45 Independent Auditors’ Report To the Members of Fiji National Provident Fund Report on the Audit of the Financial Statements - (continued) Auditors’ Responsibilities for the Audit of the Financial Statements opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report.

However, future events or conditions may cause the Fund to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements.

We are responsible for the direction, supervision and performance of the group audit.

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

Report on Other Legal and Regulatory Requirements We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of the audit.
In our opinion: i) The financial statements are prepared in accordance with the Fiji National Provident Fund Act 2011(No.52); and ii) The Board, Board members and staff members have given all the information, explanations and assistance necessary for the purposes of the audit.
KPMG 31 August, 2018 Suva, Fiji Steve Nutley, Partner FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 46 Fiji National Provident Fund and its subsidiaries Income statements For the year ended 30 June 2018 Notes Consolidated 2018 The Fund 2017 2018 Superannuation activities Revenue Interest income Dividends from other equities Dividends from subsidiaries Property rental income Change in fair value of investment properties Net change in fair values of investments Net foreign exchange gain Sales revenue Net interest income Gain on disposal of subsidiary Other income Total revenue Expenses Airtime and PSTN charges Investment expenses Property expenses Interest expenses Equipment and ancillary charges General administration expenses Depreciation and amortization Net foreign exchange losses Reversal of impairment of loans to subsidiaries Total expenses 6 16(a) 17 7(a) 7(b) 9 7(b) $000 $000 $000 251,945 22,251 - 23,595 82,249 51,047 8,491 579,051 26,595 - 36,895 1,082,119 65,239 16,604 4,539 8,249 73,396 350,382 75,316 - - 593,725 231,886 13,180 - 20,579 - 16,253 2,653 471,211 24,639 - 24,698 805,099 60,025 5,300 5,950 2,387 59,862 246,932 59,465 - - 439,921 268,733 22,351 44,533 18,426 82,871 117,837 5,693 - - - 3,834 564,278 - 16,605 4,539 - - 26,425 3,102 - (25,055) 25,616 2017 $000 (Restated)1 246,344 19,452 42,997 16,449 - 134,600 - - - 20 1,917 461,779 - 5,300 5,950 - - 24,205 3,091 831 - 39,377 Share of profit of associates, net of tax 16(b) 11,375 14,480 - - Profit before tax Income tax expense Profit after tax Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign operations – foreign currency translation differences Other comprehensive income, net of tax Total comprehensive income Net profit available for allocation Non-controlling interest Net benefits allocated to member’s account Net profit taken to reserves 499,769 379,658 538,662 422,402 10(a) (27,557) (26,012) - - 472,212 353,646 538,662 422,402 29(d) ` 31(a)(ii) 437 437 472,649 552 552 354,198 - - 538,662
 472,649 (20,719) 451,930 (296,983) 154,947 354,198 (16,894) 337,304 (270,049) 67,255 538,662 - 538,662 (296,983) 241,679 - - 422,402 422,402 - 422,402 (270,049) 152,353 The income statements are to be read in conjunction with the notes to and forming part of the financial statements 1 Refer note 16 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 Fiji National Provident Fund and its subsidiaries Statements of financial position For the year ended 30 June 2018 47 Assets Cash and cash equivalents Cash and cash equivalents Receivables Investment income receivable Trade receivables Other receivables Investments Term deposits Government securities Other fixed interest securities Equities Loans and advances Investment in subsidiaries Investment in associates and joint venture Investment properties Property held for development Other assets Inventories Property, plant and equipment Intangible assets Deferred tax assets Total assets Liabilities Creditors and borrowings Other liabilities Employee entitlements Current tax liability Deferred tax liabilities Total liabilities Notes Consolidated 2018 $000 2017 $000 2018 $000 The Fund 2017 $000 (Restated)1 2016 $000 (Restated)1 19 786,580 824,863 481,825 550,396 337,005 25 20 24 11 12 13 15 14 16(a) 16(b) 17 18 21 23 22 10(d) 26 27 28 10(b) 10(c) 77,959 58,264 141,447 64,313 56,220 123,034 109,009 - 29,954 84,052 - 28,805 92,207 - 22,184 466,505 2,650,278 248,009 434,979 948,240 - 106,999 306,392 9,745 633,678 2,325,875 275,729 287,483 811,756 - 95,801 205,002 7,144 577,400 2,582,641 248,009 431,645 686,253 1,059,355 75,857 326,487 - 678,603 2,275,534 275,729 284,205 508,449 829,680 75,857 231,199 - 634,506 2,114,966 273,681 198,017 489,521 682,747 75,857 238,343 - 37,609 879,801 263,362 13,756 7,429,925 31,892 714,699 162,277 6,428 6,626,194 - 14,559 9,171 - 6,632,165 - 10,862 10,352 - 5,843,723 - 12,120 10,623 - 5,181,777 946,767 99,342 12,935 4,115 54,260 1,117,419 920,270 71,622 16,521 3,961 20,478 1,032,852 13,994 3,522 1,914 -
 - 19,430 16,497 3,149 2,261 - - 21,907 10,984 2,717 1,014 - - 14,715 Net assets available for member benefits Less: non-controlling interest Net assets available to pay benefits 6,312,506 104,346 6,208,160 5,593,342 89,123 5,504,219 6,612,735 - 6,612,735 5,821,816 - 5,821,816 5,167,062 - 5,167,062 Member benefits Allocated to members Unallocated to members Total member benefits 5,445,448 14,631 5,460,079 4,863,653 11,735 4,875,388 5,445,448 14,631 5,460,079 4,863,653 11,735 4,875,388 4,349,692 12,853 4,362,545 Total net assets 748,081 628,831 1,152,656 946,428 804,517 The statements of financial position are to be read in conjunction with the notes to and forming part of the financial statements.
1 Refer note 16 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 48 Fiji National Provident Fund and its subsidiaries Statements of financial position (continued) As at 30 June 2018 Equity Investment reserve Solvency reserve Accumulated losses Other equity reserve Credit loss reserve Foreign currency translation reserve Total equity Notes 29(a) 29 29(c) 29(d) Consolidated 2018 $000 2017 $000 2018 $000 The Fund 2017 $000 (Restated)1 2016 $000 (Restated)1 339,802 636,078 (60,603) (171,996) 5,470 (670) 748,081 275,977 560,465 (40,097) (171,996) 5,470 (988) 628,831 516,578 636,078 - - - - 1,152,656 385,963 560,465 - - - - 946,428 310,879 493,638 - - - - 804,517 These financial statements have been approved in accordance with a resolution of the Board of Directors.
For and on behalf of the Board Chairperson Director The statements of financial position are to be read in conjunction with the notes to and forming part of the financial statements.
1 Refer note 16 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 Fiji National Provident Fund and its subsidiaries Statements of changes in member benefits For the year ended 30 June 2018 Consolidated and the Fund Opening balance of members’ benefit Contributions: Employers Members Total contribution Benefit payment to members Pension payment to pensioners Benefits allocated to members’ account, comprising: Net investment income Current year investment returns - SDB - RIF Transfer to solvency reserve - SDB - RIF Transfer from general reserve Closing balance of members’ benefits 49 Notes 2018 $000 2017 $000 4,875,388 4,362,545 328,081 271,774 599,855 298,092 248,145 546,237 29(e) 31(a)(ii) (323,816) (289,571) 29(b) (23,782) (24,314) 31(a)(ii) 296,983 270,049 32 32 31(b) 31(b) 31(a) 2,221 24,826 (5,324) (11,749) 25,477 1,860 24,121 (4,459) (11,080) - 5,460,079 4,875,388 The statements of of changes in member benefits are to be read in conjunction with the notes to and forming part of the financial statements.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 50 2 6 5 2 7 5 , ) 2 9 3 1 ( , 0 5 1 5 , ) 6 9 9 1 7 1 ( , ) 8 3 6 6 1 ( , 8 3 6 3 9 4 , 0 0 8 3 6 2 , - 9 5 4 4 , 0 8 0 1 1 , 6 2 3 0 4 , - - - - 4 0 4 4 0 4 - - - - 0 2 3 - - - - - - ) 9 5 4 3 2 ( , - - - - - 9 5 4 4 , 8 8 2 1 5 , 0 8 0 1 1 , ) 8 8 2 1 5 ( , - - - 5 6 4 3 6 , , 1 3 8 8 2 6 ) 8 8 9 ( 0 7 4 5 , ) 6 9 9 1 7 1 ( , ) 7 9 0 0 4 ( , 5 6 4 0 6 5 , 7 7 9 5 7 2 , - 4 2 3 5 , 9 4 7 1 1 , ) 7 7 4 5 2 ( , 6 3 3 7 2 1 , - - - - - 8 1 3 8 1 3 - - - - - - - - - - - - - - - - - ) 6 0 5 0 2 ( , - - - 0 4 5 8 5 , 4 2 3 5 , 9 4 7 1 1 , ) 0 4 5 8 5 ( , - - - ) 7 7 4 5 2 ( , 2 4 8 7 4 1 , 1 8 0 8 4 7 , ) 0 7 6 ( 0 7 4 5 , ) 6 9 9 1 7 1 ( , ) 3 0 6 0 6 ( , 8 7 0 6 3 6 , 2 0 8 9 3 3 , n g i e r o F y c n e r r u c r e h t O 0 0 0 $ 0 0 0 $ 0 0 0 $ 0 0 0 $ e v r e s e r e v r e s e r e v r e s e r 0 0 0 $ s e s s o L 0 0 0 $ 0 0 0 $ - / s t i f e n e b r e b m e m m o r f / - - F I R - s e v r e s e r / s t i f e n e b r e b m e m m o r f / - - F I R - t i f o r P .
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 Fiji National Provident Fund and its subsidiaries Statements of changes in reserves (continued) For the year ended 30 June 2018 The Fund Balance at 1 July 2016 as previously reported Adjustment (refer note 16) Restated balance at 30 June 2016 Net transfers to/from member benefits/reserves - FNPF - SDB - RIF Profit Restated balance at 30 June 2017 Net transfers to/from member benefits/reserves - FNPF - SDB - RIF Transfer to liability due to members Profit Balance at 30 June 2018 51 Investment Solvency Total Reserve1 reserve (Restated)1 $000 $000 $000 263,800 493,638 757,438 47,079 - 47,079 310,879 493,638 804,517 (51,288) 51,288 - - 4,459 11,080 - 4,459 11,080 126,372 - 126,372 385,963 560,465 946,428 (58,540) 58,540 - - 5,324 11,749 (25,477) 214,632 - - - 5,324 11,749 (25,477) 214,632 516,578 636,078 1,152,656 The statements of changes in reserves are to be read in conjunction with the notes to and forming part of the financial statements.
1 Refer note 16 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 52 7 1 0 2 0 0 0 $ 1 ) d e t a t s e R ( l a t o T 8 1 0 2 0 0 0 $ 7 1 0 2 0 0 0 $ 8 1 0 2 0 0 0 $ 7 1 0 2 0 0 0 $ 8 1 0 2 0 0 0 $ ) ” F B D S “ ( d n u F ) ” F I R “ ( d n u F 7 1 0 2 0 0 0 $ 1 ) d e t a t s e R ( F P N F 8 1 0 2 0 0 0 $ s e t o N - - 2 5 4 9 1 , 7 9 9 2 4 , 9 4 4 6 1 , 0 0 6 4 3 1 , 7 3 9 1 , , 9 7 7 1 6 4 - - 0 0 3 5 , 0 5 9 5 , 1 9 0 3 , 5 0 2 4 2 , 1 3 8 7 7 3 9 3 , - 2 0 4 2 2 4 , 9 4 0 0 7 2 , , 3 5 3 2 5 1 4 4 3 6 4 2 , , 3 3 7 8 6 2 0 6 8 1 , 1 2 2 2 , 1 9 3 4 2 , 9 9 1 5 2 , 1 5 3 2 2 , 3 3 5 4 4 , 6 2 4 8 1 , 1 7 8 2 8 , 7 3 8 7 1 1 , 3 9 6 5 , 4 3 8 3 , - - - - - - - - - - - - - - - - - - - - - - - - - - - - , 8 7 2 4 6 5 0 6 8 1 , 1 2 2 2 , 1 9 3 4 2 , 9 9 1 5 2 , - 5 0 6 6 1 , 9 3 5 4 , 2 0 1 3 , 5 2 4 6 2 , - 6 1 6 5 2 , ) 5 5 0 5 2 ( , - 2 6 6 8 3 5 , , 3 8 9 6 9 2 9 7 6 1 4 2 , - - - - - - - - - - - - - - - - - - 6 1 4 5 2 - - - - - 1 1 2 6 3 - - - - - 0 6 8 1 , 0 6 8 1 , - - - - - - 1 2 2 2 , 1 2 1 4 2 , 6 2 8 4 2 , 1 2 2 2 , 1 2 1 4 2 , 6 2 8 4 2 , - , 1 2 4 6 9 3 9 4 0 0 7 2 , 2 7 3 6 2 1 , 0 7 2 3 7 3 7 0 1 9 3 , - 2 5 4 9 1 , 7 9 9 2 4 , 9 4 4 6 1 , 3 9 0 0 2 2 , 0 0 6 4 3 1 , - 7 3 9 1 , 8 2 5 5 3 4 , - - 0 0 3 5 , 0 5 9 5 , 1 5 9 3 2 , 5 7 0 3 , 1 3 8 3 1 3 1 4 2 , 6 1 5 3 2 2 , 3 3 5 4 4 , 6 2 4 8 1 , 1 7 8 2 8 , 7 3 8 7 1 1 , 3 9 6 5 , 4 3 8 3 , 8 5 8 6 3 5 , - 5 0 6 6 1 , 9 3 5 4 , 1 9 0 3 , 3 6 0 6 2 , - 3 4 2 5 2 , ) 5 5 0 5 2 ( , - 5 1 6 1 1 5 , , 3 8 9 6 9 2 , 2 3 6 4 1 2 ) a ( 6 1 7 1 ) a ( 7 ) b ( 7 9 ) b ( 7 ) a ( e
– - ) n i a g ( / : , 3 5 3 2 5 1 9 7 6 1 4 2 , 0 6 8 1 , 1 2 2 2 , 1 2 1 4 2 , 6 2 8 4 2 , 2 7 3 6 2 1 , , 2 3 6 4 1 2 ) b ( 9 2 s e v r e s e r o t n e k a t t i f o r p t e N .
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 .
, 7 5 8 5 7 I n v e s t m e n t p r o p e r t i e s , 3 2 6 4 8 7 , 2 3 1 1 9 9 2 3 8 3 4 3 , , , 6 2 6 4 7 6 2 , , 5 4 9 0 2 0 1 , , 4 8 5 0 9 4 8 , , 3 1 0 4 6 2 2 9 8 9 9 5 , , 2 8 7 4 2 8 , 3 7 5 1 1 , 3 2 6 2 0 , 2 8 6 8 6 , 6 6 1 2 7 3 5 , , 5 8 2 1 8 1 6 , , 5 1 6 7 0 6 2 , , 1 0 5 9 7 , 1 2 8 6 8 , 1 3 5 3 4 , 1 9 1 4 , 3 5 2 2 , 5 1 6 1 , 2 2 6 1 , 3 1 2 4 , 7 4 8 3 , 1 0 1 4 , 2 7 0 6 , 9 8 1 4 7 1 - - 7 1 1 2 0 2 5 9 5 - , 1 1 8 1 , 8 7 6 2 , 8 9 1 9 , 1 1 7 0 , 8 7 6 2 , 8 9 1 9 1 1 - - - - - - - - - , 1 9 4 3 0 , 1 9 1 4 , 3 5 2 2 , 1 3 9 9 4 , 2 1 9 0 7 , 2 2 6 1 , 3 1 4 9 , 1 6 4 9 7 , 1 4 7 1 5 , 1 0 1 4 , 2 7 1 7 , 1 0 9 8 4 , 6 2 7 5 3 5 9 , , 5 5 0 3 0 6 9 , , 4 8 6 4 4 8 2 , , 3 1 0 5 3 3 , 2 9 9 1 1 5 , 2 8 8 6 0 9 , 4 6 2 7 3 , 4 1 5 3 9 , 2 8 6 8 6 , 6 6 3 2 1 6 5 , , 5 8 4 3 7 2 3 , , 5 1 8 1 7 7 7 , , 1 4 5 0 8 , 9 1 7 1 , 1 0 3 5 2 , 1 0 8 0 0 , 1 0 6 2 3 , 1 2 0 7 9 , 1 0 5 9 3 5 5 , 6 8 6 2 5 3 , , 4 3 1 6 4 5 , 2 4 8 0 0 9 , 2 2 4 3 4 8 4 , , 8 2 9 6 8 0 , 5 0 8 4 4 9 2 8 4 2 0 5 , , 2 7 5 7 2 9 , 7 5 8 5 7 6 8 2 7 4 7 , 4 8 9 5 2 1 , , 1 9 8 0 1 7 , 2 7 3 6 8 1 , 7 5 8 5 7 , 1 9 5 8 5 4 5 , , 1 8 2 0 5 1 1 , , 5 7 7 4 0 0 , 6 7 4 6 0 3 , 6 3 3 5 0 6 - 5 1 - - - - - - - 6 2 - - - - - - - 4 1 - - - - - - - - - - - - - - - , 2 9 7 7 5 2 2 8 4 9 8 9 , 2 7 2 4 5 5 , , 4 1 4 0 5 - - - - - - - - , 3 2 0 0 0 , 4 0 0 0 - - - -
 - - - - , 2 2 0 0 0 , 1 4 5 5 9 , 9 1 7 1 , 1 0 3 5 2 , 1 0 8 6 2 , 1 0 6 2 3 , 1 2 1 2 0 , 3 2 6 4 8 7 , 2 3 1 1 9 9 2 3 8 3 4 3 , , 1 0 5 9 3 5 5 , , 7 5 8 5 7 6 8 6 2 5 3 , , 4 3 1 6 4 5 , 2 4 8 0 0 9 , 8 2 9 6 8 0 , 5 0 8 4 4 9 2 8 4 2 0 5 , , 2 7 5 7 2 9 , 7 5 8 5 7 6 8 2 7 4 7 , 4 8 9 5 2 1 , , 1 9 8 0 1 7 , 2 7 3 6 8 1 , 7 5 8 5 7 , 2 5 8 2 6 4 1 , , 2 2 7 5 5 3 4 , , 2 1 1 4 9 6 6 , - , 5 7 7 4 0 0 , 6 7 8 6 0 3 , 6 3 4 5 0 6 53 fi , 4 7 1 5 2 9 , 5 3 7 9 2 0 3 2 2 8 7 4 , , 6 7 4 3 , 8 2 1 7 , 9 9 8 8 , 3 5 5 3 , 4 2 5 9 , 4 1 4 3 4 8 1 8 2 5 , , 5 5 0 3 9 6 , 3 3 7 0 0 5 A s s e t s ( R e s t a t e d ) 1 ( R e s t a t e d ) 1 $ 0 0 0 2 0 1 8 F N P F $ 0 0 0 2 0 1 7 $ 0 0 0 2 0 1 6 $ 0 0 0 2 0 1 8 ( “ R I F ” ) $ 0 0 0 2 0 1 7 $ 0 0 0 2 0 1 6 $ 0 0 0 2 0 1 8 $ 0 0 0 2 0 1 7 ( “ S D B F ” ) $ 0 0 0 2 0 1 6 $ ( R e s t a t e d ) 1 ( R e s t a t e d ) 1 T o t a l $ 0 0 0 2 0 1 7 $ , , 2 9 2 3 4 , 2 8 1 8 5 , 7 7 5 4 5 , 1 9 9 5 8 , 8 6 7 6 5 , 5 9 8 7 , 5 8 4 7 7 2 0 5 9 5 6 2 0 6 6 0 , 2 2 2 6 3 1 7 , 1 0 9 0 0 9 , 2 9 9 5 4 , 2 8 8 0 5 , 8 4 0 5 2 , 2 2 1 8 4 , 9 2 2 0 7 - - , 1 0 0 0 , 5 1 2 5 - FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 6 1 0 2 0 0 0 $ 7 1 0 2 0 0 0 $ l a t o T 1 ) d e t a t s e R ( 1 ) d e t a t s e R ( 8 1 0 2 0 0 0 $ 7 1 0 2 0 0 0 $ 8 1 0 2 0 0 0 $ 7 1 0 2 0 0 0 $ 8 1 0 2 0 0 0 $ 6 1 0 2 0 0 0 $ h t a e D l a i c e p S d n u F t i f e n e B ) ” F B D S “ ( e m o c n I t n e m e r i t e R ) ” F I R “ ( d n u F 1 ) d e t a t s e R ( 1 ) d e t a t s e R ( 7 1 0
 2 0 0 0 $ F P N F 8 1 0 2 0 0 0 $ - 4 5 5 , 3 4 5 5 , 3 3 5 8 , 2 1 5 3 7 , 1 1 1 3 6 , 4 1 7 8 9 , 3 1 4 3 , 8 8 4 7 , 7 7 7 0 , 1 1 2 9 6 , 9 4 3 , 4 3 5 6 , 3 6 8 , 4 8 4 4 , 5 4 4 , 5 - 5 8 1 , 1 3 2 3 0 9 , 0 3 2 4 9 9 , 8 1 1 , 4 8 6 4 , 2 3 6 , 4 5 4 5 , 4 1 2 , 5 5 4 5 , 2 6 3 , 4 8 8 3 , 5 7 8 , 4 9 7 0 , 0 6 4 , 5 7 8 9 , 3 5 8 1 , 1 3 2 3 0 9 , 0 3 2 5 3 3 , 7 2 1 , 4 6 1 2 , 0 4 6 , 4 2 2 6 , 5 2 2 , 5 - - - - 9 7 8 , 0 1 3 8 3 6 , 3 9 4 7 1 5 , 4 0 8 3 6 9 , 5 8 3 5 6 4 , 0 6 5 8 2 4 , 6 4 9 8 7 5 , 6 1 5 8 7 0 , 6 3 6 - - 3 3 6 , 8 2 7 5 9 , 3 3 6 5 6 , 2 5 1 , 1 3 3 6 , 8 2 7 5 9 , 3 3 0 1 8 , 7 6 0 1 8 , 7 6 9 5 5 , 9 7 9 5 5 , 9 7 9 7 8 , 0 1 3 4 3 7 , 2 1 4 3 1 6 , 3 2 7 3 6 9 , 5 8 3 2 2 0 , 4 6 4 5 8 9 , 9 4 8 8 7 5 , 6 1 5 2 6 5 , 2 2 5 0 4 1 , 9 3 0 , , 4 0 8 8 2 4 , 6 4 9 6 5 6 , 2 5 1 , 1 3 3 6 , 8 2 7 5 9 , 3 3 0 1 8 , 7 6 9 5 5 , 9 7 3 1 6 , 3 2 7 5 8 9 , 9 4 8 0 4 1 , 9 3 0 , 1 s t e s s a t e n l a t o T 6 1 0 2 0 0 0 $ 7 1 0 2 0 0 0 $ l a t o T 1 ) d e t a t s e R ( 1 ) d e t a t s e R ( $ 6 1 0 2 0 0 0 $ 7 1 0 2 0 0 0 $ ) ” F B D S “ ( 8 1 0 2 0 0 0 $ 6 1 0 2 0 0 0 $ 7 1 0 2 0 0 0 $ ) ” F I R “ ( 8 1 0 2 0 0 0 $ 6 1 0 2 0 0 0 $ 7 1 0 2 0 0 0 $ F P N F 8 1 0 2 0 0 0 $ 1 ) d e t a t s e R ( 1 ) d e t a t s e R ( 54 ) d e u n i t n o c ( d n u F y b n o i t i s o p l a i c n a n fi , 5 3 7 1 1 , 1 3 6 4 1 , , 2 9 6 9 4 3 4 , , 3 5 6 3 6 8 4 , , 8 4 4 5 4 4 5 , - 2 1 5 4 , 2 1 5 4 , - 7 8 9 3 , 7 8 9 3 , - 4 5 5 3 , 4 5 5 3 , , 9 7 0 0 6 4 5 , 8 9 6 0 3 2 , 5 8 1 1 3
 2 , , 3 0 9 0 3 2 , 5 3 3 7 2 1 4 , , 6 1 2 0 4 6 4 , , 2 2 6 5 2 2 5 , , 8 9 6 0 3 2 5 8 1 1 3 2 , , 3 0 9 0 3 2 , 4 9 9 8 1 1 4 , , 8 6 4 2 3 6 4 , , 5 4 5 4 1 2 5 , - - - 1 4 3 8 , 8 4 7 7 , 7 7 0 1 1 , s r e b m e m o t d e t a c o l l a n U , 5 4 5 2 6 3 4 , , 8 8 3 5 7 8 4 , , 7 1 5 4 0 8 , 8 2 4 6 4 9 9 7 8 0 1 3 , 8 3 6 3 9 4 , , 7 1 5 4 0 8 3 6 9 5 8 3 , , 5 6 4 0 6 5 , 8 2 4 6 4 9 , 6 5 6 2 5 1 1 , 4 7 1 4 2 , 3 3 6 8 2 , 7 5 9 3 3 , 0 3 7 6 5 , 0 1 8 7 6 , 9 5 5 9 7 , 3 1 6 3 2 7 , , 5 8 9 9 4 8 , 0 4 1 9 3 0 1 , 8 7 5 6 1 5 , - - - - - , 8 7 0 6 3 6 , 6 5 6 2 5 1 1 , 4 7 1 4 2 , 4 7 1 4 2 , 3 3 6 8 2 , 7 5 9 3 3 , 0 3 7 6 5 , 0 1 8 7 6 , 3 3 6 8 2 , 7 5 9 3 3 , 0 3 7 6 5 , 0 1 8 7 6 , - 9 5 5 9 7 , 9 5 5 9 7 , 9 7 8 0 1 3 , 4 3 7 2 1 4 , 3 1 6 3 2 7 , 3 6 9 5 8 3 , , 2 2 0 4 6 4 , 5 8 9 9 4 8 8 7 5 6 1 5 , 2 6 5 2 2 5 , , 0 4 1 9 3 0 1 , .
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 55 Fiji National Provident Fund and its subsidiaries Statements of cash flows For the year ended 30 June 2018 Notes Consolidated 2018 $000 2017 $000 The Fund 2018 $000 2017 $000 10(b) Cash flows from operating activities Cash receipts from customers Interest received Dividends received Property rentals received Other income received Loans and advances (provided)/repaid Statutory reserve deposit Payments to suppliers and employees Interest paid Income taxes paid Net cash from operating activities Cash flows from investing activities Government securities matured/(acquired) Other securities matured/(acquired) Loans and advances (provided)/repaid Term deposits matured/(invested) Shares in subsidiaries (acquired)/disposed Shares and units (acquired)/ disposed Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Acquisition of intangible assets Advances to related entities Payment for business acquisition Investment in joint venture Amount spent to acquire/develop investment properties Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings, net Finance lease repayments Contributions received from employers Contributions received from members Withdrawal payments to members Pension annuity paid to members Dividends paid Net cash from financing activities Net (decrease)/increase in cash and cash equivalents Effect of exchange rate movement Addition of cash and cash equivalents from acquisition of shares in subsidiary Cash and cash equivalents at beginning of the financial year Cash and cash equivalents at end of the financial year 33(a) 717,221 293,215 20,090 14,596 14,512 (96,966) (20,000) (443,462) (31,231) (26,379) 441,596 (333,476) 27,720
 (160,170) 101,225 (157,808) (91,871) 5,163 (95,232) (1,759) 2,500 - 685 (13,611) (716,634) (22,833) (373) 331,015 266,602 (323,817) (23,782) (23,830) 202,982 (72,056) (298) 11,292 752,870 691,808 568,118 279,719 18,099 12,743 11,269 (78,232) (9,500) (318,971) (20,197) (21,765) 441,283 (157,768) (3,389) 20,735 (39,105) (45,428) (74,696) 2,589 (120,059) (3,406) - (74,956) 106 (21,102) (516,479) 110,813 (2,992) 296,668 248,145 (289,571) (24,314) (8,250) 330,499 255,303 136 9,773 487,658 752,870 - 258,904 36,346 17,107 5,624 - - (37,088) - - 280,893 (307,077) 27,720 (152,749) 101,203 (157,808) (91,871) - (4,996) (293) - - - (13,611) (599,482) - - 331,015 266,602 (323,817) (23,782) - 250,018 (68,571) - - 550,396 481,825 - 243,622 73,461 14,809 5,325 - - (34,036) - - 303,181 (160,548) (3,389) (17,025) (42,888) - (74,696) 1,790 (1,666) (1,194) - - - (21,102) (320,718) - - 296,668 248,145 (289,571) (24,314) - 230,928 213,391 - - 337,005 550,396 The statements of cash flows are to be read in conjunction with the notes to and forming part of the financial statements.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 56 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 1 General Information The Fiji National Provident Fund (the “Fund”) is a defined contribution superannuation fund domiciled in Fiji.

The address of the Fund’s registered office is at 33 Ellery Street, Suva.
The consolidated financial statements of the Fund as at and for the year ended 30 June 2018 comprise the Fund and its controlled entities (“the Group”).
The financial statements of the Fund as at and for the year ended 30 June 2018 comprise of three Funds set out below: (i) The ‘FNPF’ – a defined contribution superannuation scheme, including reserves for members benefits as yet unallocated; (ii) The ‘Special Death Benefit Fund’ (SDBF) – a life insurance scheme for FNPF members; (iii) The ‘Retirement Income Fund’ (RIF) – a fund which accepts retirement benefits from FNPF members in return for a commitment to pay life or term annuities.
The Fund is constituted by the Fiji National Provident Fund (“FNPF”) Act 2011 to provide superannuation benefits to employees in Fiji.

The financial statements were authorised for issue by the Board of Members on 31 August 2018.

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.
2.1 Statement of compliance The financial statements of the Fund and the Group (being the Fund and its subsidiaries) are general purpose financial statements and have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board including International Accounting Standard (“IAS”) 26 Accounting and Reporting by Retirement Benefit Plans and the requirements of the Fiji National Provident Fund Act 2011.
The financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, investment in subsidiaries at fair value through profit or loss and available for sale assets that are measured at fair value.

IFRSs form the basis of International Accounting Standards adopted by the International Accounting Standards Board (“IASB”).
The preparation of financial statements in accordance with IFRS requires management to exercise its judgement 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 2.2.
(a) Standards issued but not yet effective The following new standards, interpretations 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 IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement.
IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements.

It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39.

IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.
The Group is in the process of evaluating the potential effect of this standard.

IFRS 15 Revenue from Contracts with Customers IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised.

It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.

IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.
The Group is in the process of evaluating the potential effect of this standard.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 57 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 2 Summary of significant accounting policies (continued) 2.2 Changes in accounting policies and disclosures (continued) 2.2.
(a) Standards issued but not yet effective (continued) IFRS 16 Leases IFRS 16 removes the classification of leases as either operating leases or finance leases - for the lessee - effectively treating all leases as finance leases.

Short term leases (less than 12 months) and leases of low-value assets (such as personal computers) are exempt from the lease accounting requirements.

There are also changes in accounting over the life of the lease.
In particular, companies will now recognise a front-loaded pattern of expense for most leases, even when they pay constant annual returns.

Lessor accounting remains similar to current practice - i.e.

lessors continue to classify leases as finance and operating leases.

IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019, with early adoption permitted.

The Group is in the process of evaluating the potential effect of this standard.
There are no other standards that are not yet effective and that are expected to have a material impact on the Group or Fund in the current or future reporting periods and on foreseeable future transactions.

The above amendments and interpretations have not been early adopted.

2.2.

(b) Restatement - change in accounting policy for investment in susbsidiaries The Fund has changed its accounting treatment for investment in subsidiaries in 2018.
The Fund previously recognised investment in subsidiaries at cost less impairment in its financial statements.

During 2018, the Fund voluntarily changed the method of accounting for investment in subsidiaries to measure it at fair value through profit or loss.

Management believes that the change more effectively demonstrates the financial position of investment in subsidiaries and is aligned to the growth strategy that the Fund has adopted.

The Fund has applied the accounting policy retrospectively.
The effect of this adjustment is disclosed in Note 16.

2.3 Basis of consolidation Subsidiaries Subsidiaries are entities controlled by the Group.

The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

The Group accounts for business combination using the acquisition method when control is transferred to the Group.

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 at fair value through profit and loss in the financial statements of the Fund.

Refer to note 2.2(b) for details on the change in accounting policy in respect of investment in subsidiaries.
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 recognised directly in the profit or loss.

Changes in the holding company’s ownership interest in a subsidiary company that does not result in the holding company losing control of the subsidiary are equity transactions (i.e.
transactions with owners in their capacity as owners) and accordingly reflected directly in the equity of the group.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Fund and the Group.
The financial statements for the subsidiary Amalgamated Telecom Holdings Limited (“ATH”) have been consolidated based on 31 March 2018 results and the financial statements for the subsidiary acquired in 2018, Farleigh Limited have been consolidated based on the financial position as at the date of acquisition as permitted by IAS 27.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 58 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 2 Summary of significant accounting policies (continued) 2.3 Basis of consolidation (continued) Subsidiaries (continued) Transactions eliminated on consolidation Inter-group transactions, balances and any unrealised income and expenses are eliminated.
Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee.

Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
Acquisition of Vodafone Fiji Limited (VFL) and Amalgamated Telecom Holdings Limited (ATH) The acquisition of VFL and additional interest in ATH in the prior years has been accounted for as a transaction between shareholders.

As a transaction between shareholders, the acquisition does not reflect the fair value of assets and liabilities acquired or any recording of additional goodwill at the time of the acquisition.
The acquisition balance sheet reflects the values for assets and liabilities acquired from the respective entity’s accounting records.

The difference between the fair value of the consideration given and the carrying value of the assets and liabilities acquired is recognised as Other Equity Reserve in the consolidated financial statements.

(refer to note 37).
(refer to note 37).

Loss on control When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity.

Any resulting gain or loss is recognised in profit or loss.

Any interest retained in the former subsidiary is measured at fair value when control is lost.
Interests in equity-accounted investees Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies.

A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Interests in associates and the joint venture are accounted for using the equity method.
They are initially recognised at cost, which includes transactions costs.

Subsequent to initial recognition, the financial statements include the Group’s share of the profit or loss and OCI of equity-accounted investees, until the date on which significant influence or joint control ceases.
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 financial position.

Non-controlling interests (“NCI”) NCI are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

2.4 Foreign currency translation (a) Functional and presentation currency 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) Foreign currency transactions Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined.

Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.

Foreign currency differences are generally recognised in profit or loss.
Foreign currency differences arising from the translation of available-for-sale equity investments are recognized in OCI (except on impairment, in which case foreign currency differences that have been recognised in OCI are reclassified to profit or loss).
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 59 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 2 Summary of significant accounting policies (continued) 2.5 Property, plant and equipment Freehold land is measured at cost.

Hotel resort properties are measured at historical cost less depreciation and impairment and all other property is measured at cost except investment properties which are measured at valuation.
All plant and equipment is measured at historical cost less depreciation 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 profit or loss during the financial period in which they are incurred.

Freehold land is not depreciated.

The upfront cost of leasehold land is amortised on a straight line basis over the term of the lease.
Depreciation of 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 Buildings Exchange plant and telecommunication infrastructure Subscriber equipment Trunk network plant Plant and machinery Vehicles Furniture, fittings and equipment Computer equipment and software Term of lease 40 – 80 years 10 – 17 years 10 – 20 years 10 - 17 years 4 – 17 years 4 – 7 years 3 – 8 years 3 – 5 years 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 great-er 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.

Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised in the profit or loss.
2.6 Investment properties 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 profit or loss.
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 profit or loss during the financial period in which they are incurred.
Property that is being constructed for future use as investment property is accounted for as investment property until construction or development is complete, at which time it is remeasured to fair value.

Any gain or loss arising on re-measurement is recognised in the profit or loss.

When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified accordingly.
Any gain arising on this remeasurement is recognised in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in OCI and presented in the revaluation reserve.

Any loss is recognised in profit or loss.

2.7 Property held for development Property held for development is measured 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.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 60 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 2 Summary of significant accounting policies (continued) 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.

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.

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognised in profit or loss.
They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amount of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed.

For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(b) Computer software Acquired computer software licences 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).

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).
(c) IRU network capacity The IRU network capacity is recorded at cost less accumulated amortisation and impairment losses.

The IRU network capacity is amortised using the annual amortisation rate 6% – 8%.

The estimated economic useful lives of the IRU network capacity are reviewed, and adjusted if appropriate, at each balance date.

(d) Spectrum licences Spectrum licences are capitalised on the basis of the costs incurred to acquire the licences.
The licences are capable of being used as at the date of purchase, but cannot be used until the associated network assets necessary are available for use.

Amortisation of the licences commence when the associated network assets are deployed and economic benefits are derived.

The licences are amortised over the shorter period of the remaining licence rights and their estimated economic useful lives.
2.9 Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its estimated recoverable amount.
The estimated recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 61 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 2 Summary of significant accounting policies (continued) 2.10 Financial assets Financial instruments comprise investments in equity, government and other fixed interest securities, term deposits, trade and other receivables, cash and cash equivalents, loans and advances, and trade and other payables.
The Group classifies their financial assets in the following categories: at fair value through profit or loss, held to maturity, loans and receivables and available for sale.

The classification depends on the purpose for which the financial assets were acquired.

Management determines the classification of its financial assets at initial recognition.
Financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs.

Subsequent to initial recognition non-derivative financial instruments are measured as described below.

A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset.

Purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell the asset.
(a) Financial assets at fair value through profit or loss This category has financial assets that are designated at fair value through profit or loss at inception.

This largely consists of equity investments which are managed and evaluated on a fair value basis in accordance with the Group’s investment strategy and reported by key management personnel on that basis.

Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred.
Subsequent to initial recognition, financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in the profit or loss.

(b) Held to maturity financial assets Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity, other than those that meet the definition of loans and receivables.
These are initially recognised at fair value including direct and incremental transaction costs and measured subsequently at amortised cost, using the effective interest method.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate.

The amortisation is included in interest income in the profit or loss.

The losses arising from impairment of such investments are recognised in the profit or loss.
If the Group were to sell or reclassify more than an insignificant amount of held-to-maturity investments before maturity (other than in certain specific circumstances), the entire category would be tainted and would have to be reclassified as available-for-sale.

Furthermore, the Group would be prohibited from classifying any financial asset as held-to-maturity during the following two years.

Term deposits, government securities and other fixed interest securities are included under this category.
(c) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Loans and advances, cash and cash equivalents and trade receivables are included under this category.
(d) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories.

Certain private equity investments are included under this category.

Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign exchange gains and losses on available-for-sale monetary items, are recognised directly in other comprehensive income.
When an investment is derecognised, the cumulative gain or loss in equity is transferred to the profit or loss.

The fair values of quoted equity investments are generally based on current bid prices.

If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques.
These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same and discounted cash flow analysis making maximum use of market inputs and relying as little as possible on entity-specific inputs.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 62 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 2 Summary of significant accounting policies (continued) 2.10 Financial assets (continued) Reclassification of financial assets The Group is permitted to reclassify, in certain circumstances, non–derivative financial assets out of the held-for-trading category and into the available-for-sale, loans and receivables, or held-to-maturity categories.
It is also permitted to reclassify, in certain circumstances, financial instruments out of the available-for-sale category and into the loans and receivables category.

Reclassifications are recorded at fair value at the date of reclassification, which becomes the new amortised cost.
For a financial asset reclassified out of the available-for-sale category, any previous gain or loss on that asset that has been recognised in other comprehensive income is amortised to profit or loss over the remaining life of the investment using the effective interest rate.

Any difference between the new amortized cost and the expected cash flows is also amortised over the remaining life of the asset using the effective interest rate.
If the asset is subsequently determined to be impaired, then the amount recorded in other comprehensive income is recycled to the profit or loss.

The Group may reclassify a non–derivative trading asset out of the held-for-trading category and into the loans and receivables category if it meets the definition of loans and receivables and the Group has the intention and ability to hold the financial asset for the foreseeable future or until maturity.
If a financial asset is reclassified, and if the Group subsequently increases its estimates of future cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase is recognised as an adjustment to the effective interest rate from the date of the change in estimate.

Reclassification is at the election of management, and is determined on an instrument by instrument basis.
The Group does not reclassify any financial instrument into the fair value through profit or loss category after initial recognition.
Derecognition of financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when: • • • The contractual rights to receive cash flows from the asset have expired; The Group transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred; and The Group neither transfers nor retains substantially all the risks and rewards of ownership and does not retain control over the transferred asset.
Any interest in such derecognised financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Offsetting financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.
This is not generally the case with master netting agreements, therefore, the related assets and liabilities are presented gross in the statement of financial position.

2.11 Impairment of financial assets carried at amortised cost The Group assesses at each financial year end whether there is objective evidence that a financial asset or group of financial assets is impaired.
A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Delinquency in contractual receipts of principal or interest, cash flow difficulties experienced by the borrower, breach of loan covenants or conditions, initiation of bankruptcy proceedings, deterioration of the borrower’s competitive position, and deterioration in the value of collateral are all factors which the Group considers in determining whether there is objective evidence of impairment.
The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant.
If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it then includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment.

Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the profit or loss.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 63 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 2 Summary of significant accounting policies (continued) 2.11 Impairment of financial assets carried at amortised cost (continued) When a loan is uncollectible, it is written off against the related provision for loan impairment.
Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account.
The amount of the reversal is recognised in the profit or loss.

In respect of HFC (the bank), the following additional impairment policies apply: (i) Renegotiated loans Where possible, the bank seeks to restructure loans rather than to take possession of collateral.

This may involve extending the payment arrangements and the agreement of new loan conditions.
Once the terms have been renegotiated, any impairment is measured using the original effective interest rate as calculated before the modification of terms and the loan is no longer considered past due.

Management continually reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur.

The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original effective interest rate.
(ii) Collateral valuation The bank seeks to use collateral, where possible, to mitigate its risks on financial assets.

The collateral comes in various forms such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and credit enhancements such as netting agreements.
The fair value of collateral is generally assessed, at a minimum, at inception, however, some collateral, for example, cash or securities relating to margining requirements, is valued on a regular basis.

To the extent possible, the bank uses active market data for valuing financial assets, held as collateral.

Other financial assets which do not have a readily determinable market value are valued using models.
Non-financial collateral, such as real estate, is valued based on data provided by third parties such as mortgage brokers, housing price indices, audited financial statements, and other independent sources.

(iii) Collateral repossessed The bank’s policy is to sell repossessed assets.

Assets that are determined better to be sold are immediately transferred to assets held for sale at their fair value at the repossession date in line with the bank’s policy.
2.12 Inventories 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.

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 unsaleable are written off in the year in which they are identified.

2.13 Trade receivables Trade receivables are carried at amortised cost less provision for impairment on the basis set out in note 2.11.

Trade receivables are categorised as loans and receivables under financial assets.

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 Group’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.

2.15 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 recognised in the profit or loss over the term of the lease.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 64 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 2 Summary of significant accounting policies (continued) 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 employees’ 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 expect 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.
(c) Termination benefits The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a formal plan without the possibility of withdrawal; or providing termination benefits as a result for an offer made for redundancy.

Benefits falling due more than 12 months after the balance date are disclosed at their present value.
(d) 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 evaluation.

2.17 Creditors and Borrowings Creditors Creditors are recognised initially at fair value and subsequently measured at amortised cost.
Borrowings Borrowings are recognised initially at fair value less any directly attributable transaction costs.

Borrowings are subsequently measured at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit or loss over the period of the borrowings using the effective interest method.
In respect of HFC, the following additional policies apply: Debt issued and other borrowed funds Financial instruments issued by the bank that are not designated at fair value through profit or loss, are classified as liabilities under debt issued and other borrowed funds, where the substance of the contractual arrangement results in the bank having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares.
After initial measurement, debt issued and other borrowings are subsequently measured at amortised cost using the effective interest rate.

Amortised cost is calculated by taking into account any discount or premium on the issue and costs that are an integral part of the effective interest rate.

A compound financial instrument which contains both a liability and an equity component is separated at the issue date.
A portion of the net proceeds of the instrument is allocated to the debt component on the date of issue based on its fair value (which is generally determined based on the quoted market prices for similar debt instruments).

The equity component is assigned the residual amount after deducting from the fair value of the instrument as a whole the amount separately determined for the debt component.
The value of any derivative features (such as a call option) embedded in the compound financial instrument other than the equity component is included in the debt component.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 65 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 2 Summary of significant accounting policies (continued) 2.17 Creditors and Borrowings (continued) Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability.

The difference between the carrying value of the original financial liability and the consideration paid is recognised in profit or loss.
2.18 Borrowing costs Borrowing costs that are directly attributable to the acquisition or construction of 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.

2.19 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 Fund’s financial statements.

In the consolidated financial statements: Income tax expense comprises current and deferred tax.

It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years.

The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any.

It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if certain criteria are met.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for: • • temporary differences on the initial recognition of the assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and • taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which thy can be used.

Future taxable profits are determined based on a business plans for individual subsidiaries in the Group and the reversal of temporary differences.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable profits improves.

Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption.

Deferred tax assets and liabilities are offset only if certain criteria are met.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 66 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 2 Summary of significant accounting policies (continued) 2.20 Provisions Provisions are recognised when the Group 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 plus 10% for solvency as set out in the Act, and has been calculated as each Fund’s net assets as stated on the statement of financial position less the investment reserve account as at reporting date.

The liability for accrued benefits in RIF is the actuarial value of future annuity payments plus amounts required to meet solvency by the regulator.
The liability for accrued benefits in SDBF is a reserve for claims incurred but not yet reported plus amounts required in meeting the solvency by the regulator.

2.22 Contributions Contributions from employers and members are recorded when control of the asset is ascertained which is upon receipt of the contribution schedule forms from the employers and the registration of the forms by the Fund.
The Fund does not accrue for contributions for which no contribution schedule forms are received or received but not registered as it is not able to reliably estimate the contributions balance.

Under the FNPF Act, the amount of contributions for an employee for a month is the amount equal to 18% of the total wages payable to the employee by the employer for the month.

The contribution shall be paid as an 8% deduction from the total wages of the employee and a 10% contribution by the employer.
The legislation allows for additional contributions to be made.

The contributions shown in the statements of changes in member benefits represents total contributions received/receivable from employers and members.

2.23 Revenue recognition (a) Sale of telecommunication and related services Revenue is recognised based on billing cycles through the month.

Unbilled revenue from the billing cycle date to the end of each month is recognised as revenue in the month the service is provided.
Revenue from prepaid products and fixed monthly charges billed in advance is deferred and recognised as revenue either once the related service has been provided or when the product date has expired, whichever occurs earlier.

Revenue from international public and dedicated telecommunications services is recognised upon the use of service by the customer.

Revenue from the provision of data and internet services is recognised upon the use of service by the customer.
Revenue from installation, connection and associated costs are recognised upon completion of the installation or connection.

Revenue from publication of telephone directories is recognised upon dispatch of the directories for distribution.

Advance billings and monies collected in advance are deferred.

Costs including overhead expense incurred in relation to securing advertisements and in the publication of the directories are also deferred until the associated revenues are recognised.
Revenue from contracts in relation to on-line directory services is recognised over the term of the contract.

(b) Sale of equipment Sale of equipment is recognised when the 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.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 67 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 2 Summary of significant accounting policies (continued) 2.23 Revenue recognition (continued) (c) Airtime and gaming revenue Revenue from airtime and gaming services is recognised when earned.

Revenue is deferred in respect of that portion of fixed monthly charges, which have been billed in advance.
Allowance is made for the amount of prepaid airtime revenue as at balance date in respect of which service has not been provided.

(d) Interest income Interest income is earned from investments such as government securities, other fixed securities, loans and advances and term deposits.

Interest income is recognised using the effective interest rate method.
In respect of HFC, the following policy applies: Interest and similar income and expense For all financial instruments measured at amortised cost, interest bearing financial assets classified as available-for-sale and financial instruments designated at fair value through profit or loss, interest income or expense is recorded using the effective interest rate.
Effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability.
The calculation takes into account all contractual terms of the financial instrument and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses.

The carrying amount of the financial asset or financial liability is adjusted if the bank revises its estimates of payments or receipts.
The adjusted carrying amount is calculated based on the original effective interest rate and the change in carrying amount is recorded as interest and similar income for financial assets and interest and similar expense for financial liabilities.
However, for a reclassified financial asset for which the bank subsequently increases its estimates of future cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase is recognised as an adjustment to the effective interest rate from the date of the change in estimate.
Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

(e) Property rentals Property rental income from operating leases 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.

(f) Dividend income Dividend income from investments is recognised when the right to receive payment is established.

(g) 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 when related services have been provided.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 68 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 2 Summary of significant accounting policies (continued) 2.23 Revenue recognition (continued) (g) Fees (continued) In respect of HFC, the following policy applies: Fee and commission income The bank earns fee and commission income from a diverse range of services it provides to its customers.
Fees earned for the provision of services over a period of time are accrued over that period.

These fees include commission income and asset management, custody and other management and advisory fees.

Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred (together with any incremental costs) and recognised as an adjustment to the effective interest rate on the loan.
When it is unlikely that a loan will be drawn down, the loan commitment fees are recognised over the commitment period on a straight-line basis.

(h) Revenue from hotel and golf activities Revenue from rooms, food and beverage, and golf activities is recognised when the service is provided.

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.
(i) Movement in fair value of investments Changes in the fair value of investments (including investment property) are recognised as income/(loss) and are determined as the difference between the fair value at year end or consideration received (if sold during the year) and the fair value as at prior year end or cost (if the investment was acquired during the period).
2.24 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.
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 assist 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.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 69 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 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.

FNPF caters for the retirement funding of its members and invests to cater for this.

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.
(a) Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.

Market risk comprises three types of risk: currency risk, interest risk and other price risk.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
(i) Foreign exchange risk 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, PGK as well as the Euro.

Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities.
The individual Group entities’ Treasury departments manage 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.
In particular, Momi Bay Resort Limited manages its foreign exchange risk against the functional currency by hedging the foreign exchange risk exposure arising from future commercial transactions and recognised assets and liabilities using forward exchange contracts (FECs).

Hedge accounting has not been applied.

There were no forward exchange contracts outstanding as at reporting date.
The Group’s total exposure to fluctuations in foreign currency exchange rates at the balance sheet date was as follows (amounts denominated in FJD’000): Assets AUD USD NZD PGK Liabilities AUD USD Euro 2018 $000 2017 $000 207,302 186,811 235 70,569 206,084 291,439 21,138 5,465 - 89,396 12,540 - 9,722 6,733 The Board maintains foreign investment exposures reflective of the Fiji dollar weighted basket of currencies as a natural hedge against relative movements in foreign exchange rates.
Sensitivity Analysis Following analysis of historical data over the past 5 years and expected currency rate movements during the 2019 financial year together with consultation with the investment consultant, the Fund’s Investment Department considered a 10% movement in the Fiji Dollar as reasonably possible for the 2019/18 reporting period.

This analysis assumes that all other variables, in particular interest rates, remain constant.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 70 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 3.
Financial risk management (continued) 3.1 Financial risk factors (continued) (a) Market risk (continued) Sensitivity Analysis (continued) A 10% strengthening/weakening of the FJD against the AUD, USD, Euro, PGK and NZD at 30 June would have increased/(decreased) the profit or loss and equity by the amounts shown below: Consolidated Assets 30 June 2018 USD AUD NZD PGK 30 June 2017 USD AUD NZD PGK Liabilities 30 June 2018 USD Euro 30 June 2017 USD Euro (ii) Price risk Carrying Amount $000’s (FJD) 186,111 207,302 235 70,569 291,439 204,131 21,138 5,465 Impact on equity +10% $000’s (FJD) -10% $000’s (FJD) (18,611) (20,730) (24) (7,057) (29,144) (20,413) (2,114) (546) 18,611 20,730 24 7,057 29,144 20,413 2,114 545 89,396 12,540 (8,940) (1,254) 8,940 1,254 9,722 6,733 (884) (612) 884 612 The Group is significantly exposed to equity securities price risk because of investments held by the Group and classified in the Statement of financial position 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 Reserve Bank of Fiji (“RBF”) over offshore investments.
The Group’s investments in equities are largely those which are publicly traded 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 profit.

The net profit would increase/ (decrease) as a result of gains/ (losses) on equity securities classified at fair value through profit or loss.
Assuming that the equity investments increased / (decreased) in value by 5% it would have had an equal but opposite effect.
Index South Pacific Stock Exchange Australian Securities Exchange Group Fund Impact on profit Impact on profit 2018 $000 5,504 5,964 11,468 2017 $000 3,992 5,589 9,581 2018 $000 5,343 5,964 11,307 2017 $000 3,830 5,589 9,419 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 71 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 3.
Financial risk management (continued) 3.1 Financial risk factors (continued) (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 limited cash flow interest rate risk.

Since these assets are measured at amortised cost, fair value interest rate risk is also very limited.

Risks arising from variable rate instruments are considered not to be material.

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 its commencement.

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.
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 of 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 on credit terms.

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 financial position.

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 the 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.

The following applies to HFC: Impairment assessment For accounting purposes, the bank uses an incurred loss model for the recognition of losses on impaired financial assets.

This means that losses can only be recognised when objective evidence of a specific loss event has been observed.
Triggering events include the following: • A breach of contract such as a default of payment; • Where the bank grants the customer a concession due to the customer experiencing financial difficulty; • • Other observable data that suggests that there is a decrease in the estimated future cash flows from the loans.
It becomes probable that the customer will enter bankruptcy or other financial reorganisation; The bank addresses impairment assessment in two areas: individually assessed allowances and collectively assessed allowances.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 72 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 3.
Financial risk management (continued) 3.1 Financial risk factors (continued) (b) Credit risk (i) Individually assessed allowances The bank determines the allowances appropriate for each significant loan or advance on an individual basis, taking into account any overdue payments of interests, credit rating downgrades, or infringement of the original terms of the contract.
Items considered when determining allowance amounts include the sustainability of the counterparty’s business plan, its ability to improve performance if it is in financial difficulty, projected receipts and the expected payout should bankruptcy ensue, the availability of other financial support, the realisable value of collateral and the timing of the expected cash flows.

Impairment allowances are evaluated at each reporting date, unless unforeseen circumstances require more immediate attention.
(ii) Collectively assessed allowances Allowances are assessed collectively for losses on loans that are not individually significant and for significant loans and advances that have been assessed individually and found not to be impaired.

Allowances are evaluated separately at each reporting date with each portfolio.
The collective assessment is made for groups of assets with similar risk characteristics, in order to determine whether provision should be made due to incurred loss events for which there is objective evidence, but the effects of which are not yet evident in the individual loans assessments.
The collective assessment takes account of data from the loan portfolio (such as historical losses on the portfolio, levels of arrears, credit utilisation, loan to collateral ratios and expected receipts and recoveries once impaired).The approximate delay between the time a loss is likely to have been incurred and the time it will be identified as requiring an individually assessed impairment allowance is also taken into consideration.

Local management is responsible for deciding the length of this period.
The impairment allowance is then reviewed by credit management to ensure alignment with the bank’s overall policy.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 73 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 3.
Financial risk management (continued) 3.1 Financial risk factors (continued) (b) Credit risk (continued) Credit quality by class of financial assets The table below shows the credit quality by class of asset for all financial assets exposed to credit risk.

The amounts presented are gross of impairment allowances.
Consolidated 2018 Term deposits Government securities Other fixed interest securities Equities Loans and advances Cash and cash equivalents Trade receivables 2017 Term deposits Government securities Other fixed interest securities Equities Loans and advances Cash and cash equivalents Trade receivables The Fund 2018 Term deposits Government securities Other fixed interest securities Equities Loans and advances Cash and cash equivalents 2017 Term deposits Government securities Other fixed interest securities Equities Loans and advances Cash and cash equivalents Neither past due nor impaired $ Past due but not impaired $ Individually impaired $ - - - - 58,752 - 9,352 68,104 - - - - 60,072 - 9,120 69,192 - - - - 22,253 - 22,253 - - - - 20,424 - 20,424 - - - - 14,185 - 16,049 30,234 - - - - 13,864 - 19,089 32,953 - - - - 295,565 - 295,565 - - - - 304,351 - 304,351 Total $ FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 74 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 3.
Financial risk management (continued) 3.1 Financial risk factors (continued) (b) Credit risk (continued) Credit risk concentration in loans and advances disclosed in note 14 are as follows: Agriculture Construction Financial institutions Government and statutory bodies Telecommunications Manufacturing Mining Private others (includes staff loans) Professional and business services Real estate development Education Transport and storage Wholesale and retail Other (Hotels & Restaurants) Total Consolidated Fund 2018 $000 49,390 72,222 30,000 57,624 - 56,804 11,845 185,095 29,542 141,807 5,098 202,083 114,926 - 956,436 % 3 7 3 9 - 6 1 19 3 15 1 21 12 - 100 2017 $000 24,469 70,629 - 62,344 - 28,046 11,689 165,162 30,900 109,249 2,864 210,613 103,220 - 819,185 2018 $000 29,835 - 33,388 57,624 - - - 178 1,861 18,612 5,098 111,566 - 544,055 802,217 % 3 9 - 8 - 3 1 20 4 13 - 26 13 - 100 2017 $000 5,488 - 7,770 62,344 2,388 - - 191 1,763 17,498 2,864 124,244 431,976 656,526 % 1 - 4 10 - - - - 2 1 14 - 68 100 % 1 - 1 10 - - - - - 3 - 19 - 66 100 The carrying amount of financial assets represents the maximum credit exposure.
The maximum exposure to credit risk at the reporting date is: Term deposits Government securities Other fixed interest securities Equities Loans and advances Cash and cash equivalents Trade receivables (c) Liquidity risk Notes 11 12 13 15 14 19 20 Consolidated 2018 $000 466,505 2,650,278 248,009 434,979 948,240 786,580 58,264 5,592,855 2017 $000 633,678 2,325,875 275,729 287,483 811,756 824,863 56,220 5,215,604 The Fund 2018 $000 577,400 2,582,641 248,009 431,645 686,253 481,825 - 5,007,773 2017 $000 678,603 2,275,534 275,729 284,205 508,449 550,396 - 4,572,916 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 fulfill commitments to lend.

The Group is restricted by the exchange controls of RBF in terms of offshore investments (RBF has imposed limits 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.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 75 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 3.
Financial risk management (continued) 3.1 Financial risk factors (continued) (c) Liquidity risk (continued) 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 departments manage 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 following applies to HFC: Liquidity risk is defined as the risk that the bank will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

Liquidity risk arises because of the possibility that the bank might be unable to meet its payment obligations when they fall due under both normal and stress circumstances.

Normal business conditions are over a 30 day period with stress conditions over an 8 day period.
To limit this risk, management has arranged for diversified funding sources in addition to its core deposit base and adopted a policy of managing assets with liquidity in mind and monitoring future cash flows and liquidity on a daily basis.

The bank has developed internal control processes and contingency plans for managing liquidity risk.

This incorporates an assessment of expected cash flows and the various institution specific sources which could be used to secure additional funding if required.
The bank maintains a portfolio of marketable and diverse assets that are assumed to be easily liquidated in the event of an unforeseen interruption of cash flow.

The bank also has committed lines of credit that it can access to meet liquidity needs.

In addition, the bank maintains a statutory reserve deposit with the Reserve Bank of Fiji equal to 10% of customer deposits.
In accordance with the bank’s policy, the liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to the bank.

The most important of these is to maintain limits on the ratio of net liquid assets to customer liabilities, to reflect market conditions.
Net liquid assets consist of cash, short-term bank deposits and liquid debt securities available for immediate sale, less deposit for banks and other issued securities and borrowings due to mature within the next month.

The ratios during the year were, as follows: 1.

Loan to Total Funding Ratio 2.

Liquid Assets to Total Assets Ratio 3.


Liquid Assets to Total Funding Ratio 2018 2017 Satisfactory position Marginal position 86.0% 16.7% 19.5% 84.9% 17.7% 20.5% 70.0% 30.0% 30.0% 80.0% 20.0% 25.0% The satisfactory and marginal positions are management’s internal benchmarks that is the ideal position they have set for the Bank.

These are not positions set by the local regulator.

The bank stresses the importance of current accounts and savings accounts as sources of funds to finance lending to customers.
They are monitored using the advances to deposit ratio, which compares loans and advances to customers as a percentage of core customer current and savings accounts, together with term funding with a remaining term to maturity in excess of one year.

Credit loss reserve records possible losses inherent in the loan portfolio which are not associated with any individual facility or amount.
These are maintained in respect of all credit facilities outstanding which are not subject to the specific and collective provisioning requirements.

The credit loss reserve is required by the Reserve Bank of Fiji’s banking supervision policy statement No.3, Section 5.6.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 76 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 3.
Financial risk management (continued) 3.2 Capital risk mangement 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 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.
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.
The following applies to HFC: The primary objectives of the bank’s capital management policy are to ensure that the bank complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholder value.

The bank manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities.
In order to maintain or adjust the capital structure, the bank may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities.

No changes have been made to the objectives, policies and processes from the previous years.

4.
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.

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

The following applies to HFC: The bank reviews its individually significant loans and advances at each balance date to assess whether an impairment loss should be recorded in the profit or loss.
In particular, management’s judgement is required in the estimation of the amount and timing of future cash flows when determining the impairment loss.

These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.
Loans and advances that have been assessed individually (and found not to be impaired) are assessed together with all individually insignificant loans and advances in groups of assets with similar risk characteristics.

This is to determine whether provision should be made due to incurred loss events for which there is objective evidence, but the effects of which are not yet evident.
The collective assessment takes account of data from the loan portfolio (such as levels of arrears, credit utilisation, loan-to-collateral ratios, etc.).

(b) Impairment of property, plant and equipment, other non-financial assets and goodwill The Group assesses whether there are indicators of impairment of all property, plant and equipment and other non-financial assets at each reporting date.

Where there are indicators of impairment an impairment test is performed.
If the carrying amounts exceeds recoverable amount an impairment provision is recognised.

Goodwill is tested annually for impairment.

Refer to Note 22 for impairment of Goodwill on consolidation.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 77 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 4.
Critical accounting estimates and judgments (continued) (c) Actuarial present value of accrued benefits The Fund determines the actuarial present value of the accrued benefits in 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).

The demographic assumptions are applied to project benefit payments up to the date of the cessation of the last annuity.
Asset cashflows are also projected and the rate of future (re)investment return on the projected net cashflows of the RIF (projected asset cashflows less projected benefit payments less projected expenses) is assumed to be 5.2% per annum.

The methodology requires the proportion of projected asset cashflows, which together with assumed reinvestment returns, is just sufficient to meet the projected annuity payments and expenses as they fall due.
The implied discount rate after the allowance for expenses is 5.84% pa (2017: 5.75%).

For the valuation as at 30 June 2018, the determination was carried out by Mr. Peter Martin, Fellow of the Institute of Actuaries of Australia, in accordance with the International Standard of Actuarial Practice #2 issued by the International Association of Actuaries.
Determination of the SDBF reserve for claims incurred but not reported was also carried out by Mr. Martin, applying the chain ladder method to reported run-off data.

5.

Fair value estimation Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date.
The fair value of a liability reflects its non-performance risk.

The Group measures the fair value of an instrument using the quoted price in an active market for that instrument.

A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs.

The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a ask price.
The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price i.e.

the fair value of the consideration given or received.
If the Group determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transactions price.
Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but not later than when the valuation is wholly supported by observable market data or the transaction is closed out.
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: • Level 1 fair value measurement are those instruments valued based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2 fair value measurements are those instruments valued based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e.

derived from prices).

• Level 3 fair value measurements are those instruments valued based on inputs for the asset or liability that are not based on observable market data (unobservable inputs).
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 78 s t n e m e t a t s l a i c n a n fi ) d e u n i t n o c ( n o i t a m i t s e e u l a v r i a F .

5 e u l a v r i a f e d u l c n i t o n s e o d t I .
, : , , 7 9 4 0 5 9 2 , - - 2 4 1 2 4 1 , , 7 9 4 0 5 9 2 , - - , 8 7 2 0 5 6 2 , , 8 7 2 0 5 6 2 , 0 0 3 8 3 1 , 0 0 3 8 3 1 , , 8 7 5 8 8 7 2 , , 8 7 5 8 8 7 2 , - - - , 9 7 9 4 3 4 5 1 9 2 2 6 2 , , 5 3 7 8 0 4 , 9 7 9 4 3 4 - , $ 0 0 0 $ 3 l e v e L 0 0 0 $ 2 l e v e L 0 0 0 $ 1 l e v e L l a t o T 0 0 0 $ 0 0 0 $ y t i r u t a m o t d l e H 0 0 0 $ e u l a v r i a f t a d e t a n g i s e D 3 8 4 7 8 2 , 5 1 6 5 3 1 2 , , 2 1 1 6 6 2 3 8 4 7 8 2 , - 3 8 4 7 8 2 , , 3 4 3 6 5 1 , 5 5 4 0 5 4 2 , - - , 3 4 3 6 5 1 , 5 5 4 0 5 4 2 , - - 0 0 3 9 3 1 , 0 0 3 9 3 1 , , 5 7 1 9 2 3 2 , , 5 7 1 9 2 3 2 , , 0 0 0 1 9 4 1 , , 0 7 3 9 5 0 1 , 9 2 2 6 2 , 1 0 4 5 0 4 , , 0 0 0 1 9 4 1 , , 5 7 4 8 6 4 2 , - , 5 7 4 8 6 4 2 , 2 4 1 2 4 1 , , 8 3 4 8 7 8 2 , - - 2 4 1 2 4 1 , , 8 3 4 8 7 8 2 , - - 0 0 3 8 3 1 , 0 0 3 8 3 1 , , 1 4 6 2 8 5 2 , , 1 4 6 2 8 5 2 , , 1 4 9 0 2 7 2 , , 1 4 9 0 2 7 2 , , 5 8 8 3 1 1 1 , , 3 4 3 6 5 1 , 7 8 2 5 1 4 2 , - - , 3 4 3 6 5 1 , 7 8 2 5 1 4 2 , - - 5 9 6 9 2 8 , 6 5 3 1 2 , 4 3 8 2 6 2 , , 5 8 8 3 1 1 1 , , 4 3 5 5 7 2 2 , - , 4 3 5 5 7 2 2 , 0 0 3 9 3 1 , 0 0 3 9 3 1 , , 4 3 8 4 1 4 2 , , 4 3 8 4 1 4 2 , - - - - - - , 0 0 0 1 9 4 1 , , 5 8 8 3 1 1 1 , - - - e
) ( ) ( FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 5.
Fair value estimation (continued) The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of the fair value hierarchy.
79 Balance at 1 July Restatement adjustment Gains (loss) included in profit or loss Acquisition Balance at 30 June Consolidated The Fund 2018 2017 2018 2017 2016 $000 15 - - - 15 $000 $000 15 829,695 - - - - 66,790 162,885 (Restated)1 (Restated)1 $000 682,762 146,933 - - $000 15 682,747 - - 15 1,059,370 829,695 682,762 Valuation technique and significant unobservable inputs The following table shows the valuation technique used in measuring Level 2 and level 3 fair values, as well as the significant unobservable inputs used.
Type Valuation technique Equity securities Government bonds Market comparison: The fair values of equity securities are based on broker quotes and for units held in Trusts based on the value of the Trust’s net assets.

Income technique: The valuation model is based on the future maintainable earnings and capitalisation rates.

comparison: Market The fair value of the long term investment securities is based on market prices published by the Reserve Bank of Fiji.
Significant unob-servable inputs Inter-relationship between significant unobservable inputs and fair value measurement Not applicable Not applicable • Capitalisation rates (5.5%- 6.0%) • Capitalisation rate Hotels (8.5% - 13%) • Adjusted market multiple (5.5%-6.0%) • Forecasted earnings changed.
Generally, The estimated fair value would increase/ (decrease) if any of the inputs significant unobservable a were change in the annual growth rate is accompanied by directionally similar future maintainable earnings.
change in Not applicable Not applicable Sensitivity analysis For the fair values of equities – investment in subsidiaries, a reasonable possible change of 5% at the reporting date to one of the significant unobservable inputs, holding other inputs constant would have the following effects: Capitalization rates Adjusted market multiple Cost of Equity rates 1 Refer note 16 Increase Decrease $000 4,141 42,208 (4,910) $000 14,426 (42,208) 5,619 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 80 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 6.
Interest income Fixed interest securities - Government - Other Loans and advances Term deposits Other interest income 7.

(a) Net change in fair values of investments Unrealised gains on investments Realised gains on investments (b).

Net foreign exchange gain/(loss) Unrealised exchange gains/(losses) Realised exchange gains/(losses) 8.
Other income Other income includes the following specific items: Gain on sale of fixed assets and investment property Insurance claims Fees and commissions Surcharge income Consolidated The Fund 2018 $000 182,730 17,435 9,903 21,318 20,559 251,945 49,091 1,956 51,047 6,839 1,652 8,491 5,000 - 7,519 599 2017 $000 169,632 17,808 9,292 19,729 15,425 231,886 11,445 4,808 16,253 1,536 1,117 2,653 1,169 6,435 4,969 160 2018 $000 182,730 17,435 26,445 21,718 20,405 268,733 115,881 1,956 117,837 5,807 (114) 5,693 54 - 787 599 2017 $000 169,632 17,808 24,941 18,296 15,667 246,344 129,792 4,808 134,600 (132) (699) (831) 668 - 702 160 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 Consolidated The Fund Notes 23 18 21 9.
General administration expenses Auditors’ remuneration: - Audit – KPMG - Other firms - Other services - KPMG - Other firms Directors fees Electricity Hotel operating expenses Insurance Impairment expenses: - Net impairment of property, plant and equipment - Reversal of property held for development/resale - Impairment/(reversal) of loans and advances, trade and other receivables Licence fees Loss on sale of fixed assets and investment property Marketing and promotion Operating leases Provision/(Reversal)/for stock obsolescence Personnel expenses: - Salaries and wages - Other staff benefits and expenses Repairs and maintenance Reform expenses Other operating and general expenses 2018 $000 175 263 49 217 511 10,263 39,774 8,937 50,012 (2,601) 6,038 18,598 76 19,232 7,045 518 87,540 18,123 7,439 - 78,173 350,382 2017 $000 139 239 102 146 377 12,416 26,690 7,781 696 (408) 5,239 15,896 70 16,681 4,089 (142) 72,272 15,867 5,226 418 63,138 246,932 2018 $000 88 - 49 - 41 468 - 54 - - 1,639 - - - - - 15,156 1,724 176 - 7,030 26,425 81 2017 $000 75 - 102 - 59 524 - 53 - - (851) - - - - - 16,066 1,910 175 418 5,674 24,205 10.
Income tax (a) Income tax expense Prima facie income tax expense calculated at 20% (2017:20%) on profit add/(deduct): Fund income not subject to tax Impact of difference in tax rate Expenses not deductible Export income allowances Investment allowances Amortisation of Government Grant Temporary differences recognized Transitional dividend tax at 1% Under provision in prior year 97,679 73,036 107,732 84,480 (64,787) (4,751) - (117) (489) 20 (15) - 17 27,557 (43,223) (4,295) 898 (84) (452) (9) (15) 118 38 26,012 (107,732) - - - - - - - - - (84,480) - - - - - - - - - FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 82 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 10.
Income tax (continued) (a) Income tax expense (continued) Income tax expense is made up of: Current tax expense Deferred tax (income)/expense Transitional dividend tax at 1% Under provision in prior years Consolidated The Fund 2018 $000 26,685 855 - 17 27,557 2017 $000 23,037 2,819 118 38 26,012 2018 $000 2017 $000 - - - - - - - - - - Tax expense excludes the Group’s share of the tax expense of equity accounted investees of $2,078,000 (2017: $2,850,000), which has been included in share of profit of equity-accounted investees, net of tax.
(b) Current tax liability/(asset) Movements during the year were as follows: Balance at the beginning of the year Current income tax expense Income taxes paid Withholding taxes paid Transitional dividend tax at 1% Over provision in prior years Acquisition of Farleigh Limited Balance at the end of the year (c) Deferred tax liabilities Deferred tax liabilities comprises the following at 10% (2017:10%) for ATH and 20% (2017:20%) for other subsidiaries: Deferred expenses Property, plant and equipment Unrealised exchange gain Unrealised fair value gain on consolidation (d) Deferred tax assets Deferred tax assets comprises the following at 10% (2017:10%) for ATH and 10% (2017:20%) for other subsidiaries: Provision for inventory obsolescence Deferred revenue Employee entitlements Provisions for impairment and doubtful debts Tax losses Depreciation Other 3,961 26,685 (26,379) 39 - 17 (208) (4,115) 13 20,272 17 33,958 54,260 433 190 1,752 4,084 - 7,236 61 13,756 1,542 23,037 (21,765) - 1,109 38 - 3,961 14 20,454 10 - 20,478 612 252 1,121 4,458 50 - (65) 6,428 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - All movements in temporary differences relating to deferred tax assets and liabilities are recorded through the profit or loss except for the deferred tax asset and liability of Farleigh Limited.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 83 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 10.

Income tax (continued) (e) Short Life Investment Package (“SLIP”) Pursuant to a letter from the Minister of Finance dated 16 September 2010 approving full SLIP to 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 of the resort.

Pursuant to section 17(81) of the Income Tax Act the income of Momi Bay Resort Limited, the subsidiary is exempt from income tax for a period of 13 years effective from 2 October 2013.
Given that the two subsidiaries above are exempt from income tax for a period of 20 and 13 years respectively, no deferred tax assets in relation to accumulated tax losses have been brought to account relating to those entities.

Under the existing income tax laws tax losses may only be carried forward for 4 years in succession in accordance with the amendments to the Income Tax Act.
The Directors of the subsidiaries 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.

Consolidated The Fund 11.

Term deposits Local banks and financial institutions– local currency Local and other banks – foreign currency Maturity represented as: Less than or equal to 3 months 3 to 12 months 1 to 5 years Greater than 5 years 12.
Government securities Fiji Government Registered Stock Treasury Bills Maturity represented as: Less than or equal to 3 months 3 to 12 months 1 to 5 years Greater than 5 years 2018 $000 466,505 - 466,505 72,975 393,530 - - 466,505 2,632,516 17,762 2,650,278 46,642 140,435 634,562 1,828,639 2017 $000 415,975 217,703 633,678 259,780 368,898 5,000 - 633,678 2,322,575 3,300 2,325,875 15,930 68,770 682,222 1,558,953 2018 $000 577,400 - 577,400 195,900 381,500 - - 577,400 2,578,219 4,422 2,582,641 46,542 113,045 606,170 1,816,884 2017 $000 460,900 217,703 678,603 300,809 372,794 5,000 - 678,603 2,275,534 - 2,275,534 15,930 64,170 645,061 1,550,373 2,650,278 2,325,875 2,582,641 2,275,534 The above investments are accounted for as held-to-maturity and measured in accordance with note 2.10 to the financial statements.
ATH has pledged government bonds amounting to $16,980,000 (2017:$16,980,000) as security for the loan obtained from the ANZ Banking Group Limited.

13.
13.

Other fixed interest securities Promissory notes Fiji Bonds Foreign Bonds Maturity represented as: Less than 3 months 3 to 12 months 1 to 5 years Greater than 5 years Promissory notes and Fiji bonds are guaranteed by the Government of Fiji.
The above investments are accounted for as held-to- maturity and measured at amortised cost as they are considered likely to be held to maturity in line with the fixed investment objectives of the Fund and the fixed price nature of the investments.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 84 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 14.
Loans and advances Loans and advances (quasi-government) Loans to subsidiaries (Note 35(b)) Customer term loans Staff loans Provision for impairment Maturity represented as: Less than or equal to 3 months 3 to 12 months 1 to 5 years Greater than 5 years Consolidated The Fund 2018 $000 87,459 - 861,703 7,274 956,436 (8,196) 948,240 22,911 57,737 282,153 593,635 956,436 2017 $000 67,831 - 745,637 5,717 819,185 (7,429) 811,756 29,746 55,168 246,254 488,017 819,185 2018 $000 87,459 547,541 167,039 178 802,217 (115,964) 686,253 8,690 29,563 141,961 622,003 802,217 2017 $000 67,831 442,134 146,370 191 656,526 (148,077) 508,449 14,290 23,971 111,030 507,235 656,526 The maximum exposure to credit risk at the reporting date before collateral held or other credit enhancements is the carrying amount of each class of asset above.
Collateral held against each of the above categories of loans and advances are as follows: - Quasi government loans- Government Guarantee or a Debenture over all the assets.

During the year, Fiji Sugar Corporation was approved a loan of $50,000,000 of which $25,000,000 remained undrawn as at financial year end; - - Loans to subsidiaries – Usually a first charge over the mortgage is obtained, however other forms of security such as debentures, guarantees, liens etc are also accepted.
For Natadola Bay Resort Limited, the loan is largely unsecured.

Refer below for further comments.

During the year, the Fund took over debts from subsidiaries of Farleigh Limited of $82,200,000 and Barton Limited of $36,900,000 as part of the Starwood Properties acquisition; Customer term loans – The head security is a registered first mortgage over property and improvements.

University of the South Pacific’s second loan had a drawdown of $2,460,000 during the year.
Lotus Garments Limited loan which was approved in 2017, drawn $1,500,000 during the year.

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 amount outstanding and the security value.

Natadola Bay Resort Limited (NBRL) The carrying value of the loan provided to NBRL by FNPF is $293,624,000 (2017: $295,546,000).

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 $114,024,000 (2017: $139,078,000).

Momi Bay Resort Limited (MBRL) The carrying value of the loan provided to MBRL for the Momi Resort development is $121,807,000 (2017: $118,975,000).

The company is now paying interest only on the monthly loan with monthly principal and interest repayments to commence in November 2018.
The loan is secured by: - First registered Debenture over the assets of the company - - - First registered mortgage over Development lease LD Ref 60/782-3, and portion of freehold land described as DP 10698 Assignment of Income Assignment of Bank Accounts BSP A/c & HFC A/c FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 14.
Loans and advances (continued) Movements in the provision for impairment – Consolidated are as follows: Collectively Assessed Provisions Balance as at 1 July 2016 New and increased provisioning Provisions released as no longer required Balance as at 30 June 2017 New and increase provisioning Provisions released as no longer required Balance as at 30 June 2018 Individually Assessed Provisions Balance as at 1 July 2016 New and increased provisioning Provisions released as no longer required Balance as at 30 June 2017 New and increased provisioning Provisions released as no longer required Balance as at 30 June 2018 Total provision for impairment at 1 July 2016 Total provision for impairment at 30 June 2017 Total provision for impairment at 30 June 2018 85 Loans & advances $000 Customer term loans Staff loans Total $000 $000 $000 - - - - - - - - - - - - - - - - - 90 - (90) - - - - 4,985 4,045 (1,780) 7,250 2,372 (1,603) 8,019 5,075 7,250 8,019 275 28 (124) 179 - (2) 177 - - - - - - - 275 179 177 365 28 (214) 179 - (2) 177 4,985 4,045 (1,780) 7,250 2,372 (1,603) 8,019 5,350 7,429 8,196 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 86 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 14.
Loans and advances (continued) Movements in the provision for impairment – The Fund are as follows: Loans and ad-vances $000 Loans to subsidiaries $000 Customer term loans $000 Staff loans $000 Collectively Assessed Provisions Balance as at 1 July 2016 New and increased provisioning Provisions no longer required Balance as at 30 June 2017 New and increased provisioning Provisions no longer required Balance as at 30 June 2018 Individually Assessed Provisions Balance as at 1 July 2016 Assignment from Natadola Land Holdings Limited Provisions no longer required Balance as at 30 June 2017 Assignment of NLHL provision balance to NBRL Provisions no longer required Balance as at 30 June 2018 Total provision for impairment at 1 July 2016 Total provision for impairment at 30 June 2017 Total provision for impairment at 30 June 2018 - - - - - - - - - - - - - - - - - Collectively assessed provisions Individually assessed provisions 15.
Equities Local listed equities Local unlisted equities Local unit trusts Overseas equities - - - - - - - 139,078 6,891 - 145,969 (6,891) (25,055) 114,023 - - - - - - - 3,544 165 (1,780) 1,929 (165) - 1,764 139,078 3,544 145,969 1,929 275 28 (124) 179 - (2) 177 - - - - - - - 275 179 Total $000 275 28 (124) 179 - (2) 177 142,622 7,056 (1,780) 147,898 (7,056) (25,055) 115,787 142,897 148,077 114,023 1,764 177 115,964 Consolidated The Fund 2018 $000 177 8,019 8,196 2017 $000 179 7,250 7,429 2018 $000 177 2017 $000 179 115,787 147,898 115,964 148,077 114,441 15 26,229 294,294 434,979 83,152 98 21,356 182,877 287,483 111,107 15 26,229 294,294 431,645 79,957 15 21,356 182,877 284,205 Equity investments are valued in accordance with Note 2.10 to the financial statements, that is, fair value through profit or loss.
Local equities amounting to $3,225,000 (2017: $3,225,000) are held by FNPF Nominees Limited on behalf of members and therefore are not available to the Group.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 87 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 16.
Investments in subsidiaries, associates and joint ventures (a) Investment in subsidiaries – fair value Investments in subsidiaries Investment in subsidiaries consists of the following: Consolidated 2018 $000 2017 $000 2018 $000 - - 1,059,355 The Fund 2017 $000 Restated 829,680 2016 $000 Restated 682,747 Name Principal activities Amalgamated Telecom Holdings Limited Home Finance Company Limited FNPF Holdings (PNG) Limited Yatule Beach Resort Limited FNPF Hotel Resorts Limited Vodafone Fiji Limited FNPF Nominees Limited Natadola Bay Resort Limited Momi Bay Resort Limited Dareton Limited Farleigh Limited Telecommunications Financial services Investments Resort operations Resort operations Telecommunications Nominee Services Resort operations Resort operations Land development Resort operations Balance Date 2018 Fair value 2017 Fair value Restated 2016 Fair value Restated 31 March 30 June 30 June 30 June 30 June 31 March 30 June 30 June 30 June 30 June 31 Dec $000 530,878 77,250 53 - 51,400 210,042 - - 29,159 2,765 157,808 1,059,355 $000 410,349 55,770 53 - 45,859 204,398 - - 110,601 2,650 - 829,680 $000 332,741 46,451 53 - 44,701 174,241 - - 82,000 2,560 - 682,747 Refer to note 35(c) for details on ownership interest for the above subsidiaries.
Dividend income from the above entities for the year ended 30 June 2018 amounted to $44,533,000 (2017: $42,997,000).

Restatement of investment in subsidiaries The Fund’s 2017 and 2016 comparatives for investment in subsidiaries have been restated as explained in note 2.2.

The effect of the change in accounting policy is summarised below: Momi Bay Resort Limited’s balances for 2017 and 2016 are stated at costs as the hotel commenced operations in April 2017.
Fund – Statement of Financial Position As at 30 June Investment in subsidiaries Total Assets Net assets available to pay benefits Total net assets Investment reserve Total equity Fund – Income Statement Net change in fair value of investments Total revenue Profit before and after tax Total comprehensive income Net profit available for allocation Net profit taken to reserves As previously reported 2017 $000 719,694 5,733,737 5,711,830 836,442 275,977 836,442 2016 $000 635,668 5,134,698 5,119,983 757,438 263,800 757,438 Impact of restatement Adjustments 2017 $000 62,907 62,907 2016 $000 47,079 47,079 62,907 62,907 62,907 62,907 47,079 47,079 47,079 47,079 Restated 2017 $000 829,680 5,843,723 5,821,816 946,428 385,963 946,428 2016 $000 682,747 5,181,777 5,167,062 804,517 310,879 804,517 As previously reported 2017 71,693 398,872 359,495 359,495 359,495 359,495 Adjustments 2017 62,907 62,907 62,907 62,907 62,907 62,907 Restated 2017 134,600 461,779 422,402 422,402 422,402 422,402 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 88 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 16(b) Investment in associates and joint venture Investment in associates - at cost allowance for impairment Interest in joint venture Consolidated The Fund 2018 $000 2017 $000 115,251 (9,395) 1,143 106,999 103,975 (9,395) 1,221 95,801 2018 $000 85,252 (9,395) - 75,857 2017 $000 85,252 (9,395) - 75,857 Movements in the allowance for impairment are as follows: Balance at the beginning of the year Balance at the end of the year 9,395 9,395 9,395 9,395 9,395 9,395 9,395 9,395 Investments 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.

The Group is directly involved in the investments through director appointments thus allowing for greater influence over these investees.

Share of profit of associates of $11,375,000 (2017: share of profit of $14,480,000) has been recorded in the Group’s income statement, relating to the investment in Grand Pacific Hotel Limited and Fiji Ports Corporation Limited.
Investment in associates consists of the following: Consolidated Name Interest Grand Pacific Hotel Limited Tropic Health Incorporated (Fiji) Limited Active (Fiji) Co. Limited Halabe Investments Limited Fiji Ports Corporation Limited Bluesky SamoaTel Investments Limited Bligh Water Shipping Limited The Fund Name Grand Pacific Hotel Limited Tropic Health Incorporated (Fiji) Limited Active (Fiji) Co. Limited Halabe Investments Limited Fiji Ports Corporation Limited Bligh Water Shipping Limited 25% 46% 23% 25% 39% 25% 26% Interest 25% 46% 23% 25% 39% 26% 2018 Cost $000 11,675 2018 Impairment $000 4,652 1,090 750 884 83,608 14,341 2,903 115,251 2018 Cost $000 14,109 1,090 750 884 65,516 2,903 85,252 1,090 750 - - - 2,903 9,395 2018 Impairment $000 4,652 1,090 750 - - 2,903 9,395 2018 Carrying value $000 7,023 - - 884 83,608 14,341 - 105,856 2018 Carrying value $000 9,457 - - 884 65,516 - 75,857 2017 Cost $000 11,462 2017 Impairment $000 4,652 1,090 750 884 73,007 13,879 2,903 103,975 1,090 750 - - - 2,903 9,395 2017 Cost $000 14,109 2017 Impairment $000 4,652 1,090 750 884 65,516 2,903 85,252 1,090 750 - - 2,903 9,395 2017 Carrying value $000 6,810 - - 884 73,007 13,879 - 94,580 2017 Carrying value $000 9,457 - - 884 65,516 - 75,857 A number of associates have been fully or substantially written down as they are making losses and have negative net assets positions.
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.

The Directors have therefore not shown the aggregate amounts of assets, liabilities and profit or loss pertaining to these associates as they believe it would not be meaningful disclosure.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 89 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 16.
Investments in subsidiaries, associates and joint ventures (continued) 16(b) Investment in associates and joint venture (continued) For the reasons noted above, other than Grand Pacific Hotel Limited and Fiji Ports Corporation Limited, the Group has not equity accounted its investments in associates and the Board believes that the impact of not equity accounting these associates is not material to the current year Group results.
HFC has a 50% interest, equivalent to $1,143,000 (2017: $1,221,000) after share of profits/(losses)) in the Banking Concession business at Nadi International Airport.

The other party to the venture is Westpac Banking Corporation.

The bank’s interest is in the net assets of the unincorporated joint venture.

The term of the airport concession business is 7 years.

17.
Investment properties Balance as at 1 July Transfer from/(to) property, plant and equipment and intangibles Transfer to subsidiary – MBRL Change in fair value Acquisitions Work in progress Disposals Balance as at 30 June Consolidated The Fund 2018 $000 205,002 4,017 - 82,249 5,479 10,556 (911) 306,392 2017 $000 212,146 - (28,600) - 15,525 5,937 (6) 205,002 2018 $000 231,199 (2,707) - 82,871 5,479 10,556 (911) 326,487 2017 $000 238,343 - (28,600) - 15,525 5,937 (6) 231,199 Investment properties for the Fund includes Momi Bay foreclosed assets comprising of land at fair value of $122,365,000 (2017:50,800,000 at cost) and ATH Park land at fair value of $15,000,000 (2017:$5,665,000 at cost).
Management believes that the above mentioned land have been held for a currently undeterminable future use and as result have classified it as investment property in line with the International Accounting Standard (IAS) 40.

Fair values gains of $71,546,000 and $9,335,000 have been included in the income statement respectively.
Fair value hierarchy The fair value of investment property was determined by external independent property valuers having appropriate recognised professional qualifications and experience in the location and category of the property being valued.

The independent valuers provide the fair value of the Group’s investment property every 3 years.

In the intervening years the Directors review the carrying value of the investment properties.
The fair value measurement for all of the investment properties has been categorised as a Level 3 fair value based on the inputs to the valuation technique used.

Valuation technique and significant unobservable inputs The following table shows the valuation technique used in measuring the fair value of investment property, as well as the significant unobservable inputs used.
Valuation technique Income capitalization approach: Discounted cash flows and Direct Capitalisation: The valuation model considers the present value of net operating income (NOI) to be generated from the property, taking into account the expected rental growth rate, void periods, occupancy rate, lease incentive costs such as rent-free periods and other costs not paid by tenants.

The net income is converted into a value indicator using a direct and or yield capitalization model.
The capitalisation rate has been developed using three techniques: extracted from comparable sale, debt coverage method and a band of investment method.
Significant unobservable inputs • Expected market rental growth 2.5% • Annualised vacancy and credit loss allowance, 2% - 6% • Market based Inter-relationship between key unobservable inputs and fair value measurement The estimated fair value would increase (decrease) if: • expected market rental growth were higher (lower); • void periods were shorter (longer); management fee 3.5% • the occupancy rate were higher • Operating expense (lower); increases, 2.5% • rent-free periods were shorter • Capitalisation rates – 7% (longer); or - 10% • the capitalisation rates were lower (higher).
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 90 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 18.
Property held for development Opening carrying value Transfer to land for resale Reversal of impairment Consolidated The Fund 2018 $000 7,144 - 2,601 9,745 2017 $000 13,506 (6,770) 408 7,144 2018 $000 2017 $000 - - - - - - - - During the year, an independent valuation of the land held for development was carried out by Colliers International resulting in a reversal of impairment of $2,602,000.

19.
Cash and cash equivalents Cash at bank Cash on hand and with agents Cash at bank – restricted* Statutory reserve deposit with RBF** Exchange settlement account Short term deposits Consolidated The Fund 2018 $000 2017 $000 2018 $000 2017 $000 564,513 34,340 5 90,280 67,526 29,916 786,580 604,311 24,653 2,355 70,280 117,084 6,180 824,863 470,013 11,807 5 - - - 481,825 532,935 15,106 2,355 - - - 550,396 * Restricted cash account includes grant money received by the Fund from the United Nations Capital Development Fund to fund research into development of strategies and business plans for extending pension benefits to the informal sector.
** Statutory Reserve Deposits with the Reserve Bank of Fiji represent mandatory reserve deposits and are not available for use in HFC’s day to day operations.

20.
Trade receivables Trade receivables Unearned income Impairment provision Movements on the allowance for impairment are as follows: Balance at the beginning of the year New and increased provisioning Bad debts written off Provisions released Consolidated 2018 $000 2017 $000 The Fund 2018 $000 2017 $000 76,528 (1,573) (16,691) 58,264 76,998 (1,620) (19,158) 56,220 19,158 3,309 (5,721) (55) 16,691 17,431 2,098 (323) (48) 19,158 - - - - - - - - - - - - - - - - - - The maximum exposure to credit risk at the reporting date is the carrying value of receivables mentioned above.
The Group generally obtains security deposits for all new land line and internet connections.

Apart from these, 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 $6,037,000 (2017: $5,924,000).

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 21.
Inventories Consumables and finished goods Allowances for obsolescence Land held for sale Bus consoles Goods in transit 91 Consolidated The Fund 2018 $000 30,554 (3,047) 27,507 9,487 558 57 37,609 2017 $000 24,473 (2,529) 21,944 9,557 - 391 31,892 2018 $000 2017 $000 - - - - - - - - - - - - - - *Land held for resale comprises of NBRL’s completed stage 1 development comprising of 44 residential lots developed that are available for sale in the ordinary course of business.
Management anticipates to sell residential lots amounting to $719,581 (2017: $1,770,894) in the next 12 months while the remaining $8,965,127 (2017: $7,786,035) is expected to be sold in more than 12 months.

22.
Intangible assets Consolidated The Fund Software costs Goodwill on consolidation Indefeasible rights of use capacity Spectrum licences Intangibles - other Represented by: Software costs Cost Balance at the beginning of the year Additions during the year Transfer from property, plant and equipment and investment property Disposals Balance at the end of the year Amortisation and impairment Balance at the beginning of the year Amortisation charge for the year Disposals Adjustment Balance at the end of the year Carrying amount At the beginning of the year At the end of the year 2018 $000 14,839 141,857 13,828 5,479 87,359 263,362 2017 $000 17,053 124,972 14,476 5,776 - 162,277 57,803 499 571 - 58,873 40,750 3,277 - 7 44,034 55,613 2,250 709 (769) 57,803 38,739 2,776 (765) - 40,750 2018 $000 9,171 - - - - 9,171 17,125 120 92 - 17,337 6773 1,393 - - 8,166 2017 $000 10,352 - - - - 10,352 16,102 1,023 - - 17,125 5,479 1,294 - - 6,773 17,053 14,839 16,874 17,053 10,352 9,171 10,623 10,352 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 92 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 22.
Intangible assets (continued) Goodwill on consolidation Cost Balance at the beginning of the year Additions on business acquisition Balance at the end of the year Accumulated impairment allowance Balance at the beginning of the year Balance at the end of the year Carrying Value At the beginning of the year At the end of the year Consolidated The Fund 2018 $000 2017 $000 2018 $000 2017 $000 214,228 16,885 231,113 208,517 5,711 214,228 89,256 89,256 89,256 89,256 124,972 141,857 119,261 124,972 - - - - - - - - - - - - - - The carrying value of goodwill is comprised of $141,857,000 (net of $89,256,000 of impairment) in relation to the Fund’s investment in Amalgamated Telecom Holdings Limited, $5,223,000 in relation to FNPF Hotel Resorts Limited (“FHRL”), $3,401,000 in relation to Vodafone Fiji Limited’s investment in Datec (Fiji) Limited and its Subsidiary Company, $5,711,000 in relation to Telecom Vanuatu Limited (TVL) and $16,885,000 in relation to Farleigh Limited.
On 27 March 2017, ATH acquired 100% share holding in TVL for a purchase consideration of $44,108,000.

Goodwill of $5,711,000 was recognised as the excess of the consideration transferred over the fair value of net assets of $38,397,000.

On 24 May 2018, FNPF acquired 100% share holding in Farleigh Limited for a consideration of $157,808,000.

Goodwill of $16,885,000 was recognised as the excess of the consideration transferred over the fair value of net assets of $140,923,000.
Goodwill in respect of ATH and FHRL has been tested for impairment by management based on fair value less cost of disposal.

Fair value for ATH has been determined based on the quoted price of shares traded on the South Pacific Stock Exchange at 30 June 2018 of $2.85 (2017: $1.50) less estimated cost to sell.

A decrease in ATH’s share price by 91 cents would result in im-pairment.

The fair value measurement was categorised as a Level 1 fair value based on quoted prices.
The carrying amount of the CGU in 2018 was determined to be lower than its recoverable amount of $ 873,900,000 (2017: $368,000,000).

Fair value for FHRL has been determined based on an independent valuation by Colliers International dated 30 June 2018 which has resulted in a recoverable amount of $52,000,000 (2017: $45,000,000) in which the carrying amount of the CGU is higher than the recoverable amount.
Based on the impairment assessment made by management, no provision for impairment has been made on Goodwill in respect of Datec (Fiji) Limited and its subsidiary company, Telecom Vanuatu Limited and Farleigh Limited as management reasonably believes that no indicators of impairment exist.
Indefeasible rights of use capacity Cost Balance at the beginning of the year Adjustments Additions Balance at the end of the year Amortisation Balance at the beginning of the year Amortisation charge for the year Balance at the end of the year Carrying value At the beginning of the year At the end of the year Consolidated The Fund 2018 $000 2017 $000 2018 $000 2017 $000 79,157 - 1,305 80,462 64,681 1,953 66,634 14,476 13,828 78,969 (240) 428 79,157 62,901 1,780 64,681 16,068 14,476 - - - - - - - - - - - - - - - - - - FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 93 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 22.
Intangible assets (continued) Indefeasible Rights of Use (“IRU”) capacity relates to the lease of IRU network capacities by subsidiaries, Telecom Fiji Limited and Fiji International Telecommunications Limited.

The IRU network capacity purchase and lease consideration is capitalised to intangible assets, and amortised over its estimated economic useful life.

The useful lives of the IRU network capacity are reviewed, and adjusted if appropriate, at each balance date.
Spectrum licences Cost Balance at the beginning of the year Addition Adjustment Balance at the end of the year Amortisation Balance at the beginning of the year Amortisation charge for the year Balance at the end of the year Carrying value At the beginning of the year At the end of the year Consolidated The Fund 2018 $000 2017 $000 2018 $000 2017 $000 6,370 - - 6,370 594 297 891 6,392 - (22) 6,370 297 297 594 5,776 5,479 6,095 5,776 - - - - - - - - - - - - - - - - - - Spectrum licences include licenses acquired by the subsidiaries, Telecom Fiji Limited and Vodafone Fiji Limited on 2 September 2013 from Department of Communications.
Spectrum licences also includes the licence acquired by Amalgamated Telecom Holdings (Kiribati) Limited on 27 May 2016 from Communications Commission of Kiribati.

The licences of Telecom Fiji Limited and Vodafone Fiji Limited have an initial 5 year term starting from 2 September 2013, then extending to a further 10 years conditional on compliance with implementation requirements.

The purchase consideration has been capitalised to intangible assets.
The licence of Amalgamated Telecom Holdings (Kiribati) Limited has an initial 15 year term starting from 27 May 2015, then extending to a further 5 years conditional on compliance with implementation requirements.

The purchase consideration has been capitalised to intangible assets.

All conditional requirements had been fulfilled.

Intangibles - other Intangible – other includes assets acquired from Farleigh Limited.
Under IFRS 3 Business Combinations, where the acquiree is the lessee in an operating lease agreement, a separate intangible asset is recognised by the acquiree in respect of the operating leases acquired in a business combination.

Leasehold Land This represents leasehold land operating leases of Barton Limited, Dubbo Limited and Denarau Golf & Racquet Club.

The fair value of the leasehold land as at 23 May 2018 was assessed as $87 million.
The valuation of the leasehold land was determined using the income approach and the market approach.

Operating Lease - ANZ This represents various operating leases with ANZ Bank including 65 golf carts, 6 passenger carts, 2 in room dinning carts, golf maintenance equipment and 2 motor vehicles with leases of average life between three to five years with no renewal option included in the contract.
The lease contract has been measured at its fair value on 23 May 2018 which represents the amount outstanding of $358,796 at balance date in respect of the commitment with ANZ Bank.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 94 l a t o T 0 0 0 $ n e n i L 0 0 0 $ 0 0 0 $ 0 0 0 $ & 0 0 0 $ - & t 0 0 0 $ 0 0 0 $ 0 0 0 $ 0 0 0 $ 0 0 0 $ 0 0 0 $ s g n i d l i u b t s o c t a d n a L 0 0 0 $ d n a L 0 0 0 $ fi – t n e m p i u q e d n a t n a l p , y t r e p o r P .
3 2 , 5 8 9 3 1 5 1 , 2 7 5 1 , 0 3 4 6 1 , 4 5 8 6 , 2 0 0 2 , , 3 5 6 0 6 7 2 8 3 5 3 4 , 0 0 7 1 8 , 9 1 1 3 5 , 0 2 8 r a e y e h t i f o g n n n g e b e h t i ) 0 2 5 3 ( , 4 6 6 4 9 , 0 0 0 8 9 1 , ) 4 0 2 0 1 ( , 2 2 8 3 0 2 , - - - - 1 9 3 4 2 - - 8 9 3 5 4 , ) 0 7 4 1 ( , 5 4 9 0 6 , ) 2 8 6 2 ( , 2 7 1 8 , 4 9 6 2 , 1 5 3 1 , - - ) 1 2 3 0 2 ( , 8 6 5 ) 3 3 3 ( 2 7 8 2 2 , - 9 0 8 2 , - - 7 3 ) 5 9 1 ( 6 3 6 1 7 , - - 8 3 6 6 , ) 9 6 1 ( 4 5 4 , 5 8 9 4 9 7 1 , 6 0 9 1 , 7 3 0 0 4 , 8 4 0 1 7 , 5 8 3 5 2 , 4 6 3 8 7 , 4 6 6 6 4 1 , 2 1 0 0 5 , , 6 7 6 6 9 1 - - - - 0 5 6 0 5 6 2 2 6 2 5 6 , 0 9 7 9 6 , ) 1 4 2 2 ( , ) 3 6 6 1 ( , - - 0 3 6 4 1 6 8 0 5 8 1 7 , 4 4 2 1 , - - - - - 3 3 1 7 , 9 1 3 1 , 2 5 4 8 , ) 6 1 ( 5 2 4 5 , 9 1 4 1 3 , ) 5 9 1 1 ( , 3 3 6 5 3 , - 9 0 3 9 0 3 3 7 7 2 , 0 9 4 6 1 , ) 3 ( ) 0 5 2 ( 0 1 0 9 1 , 9 1 6 0 8 5 2 8 7 4 1 2 6 , 9 4 4 3 , ) 9 ( ) 1 8 1 ( 6 0 4 5 6 , - - - 9 4 6 3 8 ) 3 4 6 ( 6 9 0 7 , - - - - 0 2 9 4 , 1 6 4 ) 3 7 2 ( 8 0 1 5 , ) 2 9 1 ( ) 5 1 1 ( ) 3 ( - - - - - - 2 2 6 4 9 8 , 1 0 9 1 , 1 1 6 4 3 , - - - 1 4 1 - 4 2 7 1 , - 6 6 - 7 1 2 3 , 8 2 8 9 8 1 , - - - 4 1 1 6 8 4 6 , ) 3 7 2 9 ( , - - - - - - , 0 4 0 4 0 8 , 2 3 1 7 3 4 , 8 0 8 4 7 2 , 6 4 4 0 5 , - 8 9 7 1 1 , 8 9 7 1 1 , , 3 4 9 6 1 1 ) 5 5 3 1 1 ( , 8 8 5 5 0 1 , 3 3 2 9 9 4 8 5 , 2 3 7 8 5 , 6 7 1 1 1 4 9 , 7 8 5 9 , - - - - - - - 3 8 7 5 4 , , 0 4 7 3 8 4 - ) 7 3 ( 4 8 0 9 , 1 0 8 8 2 , - - 9 2 9 2 2 , 9 0 6 1 , 3 2 5 9 2 5 , 8 4 8 7 3 , 8 3 5 4 2 , 2 9 5 6 4 5 1 , ) 0 4 9 1 ( , - 8 9 1 - - - - - - - - ) l a s r e v e R ( / r a e y e h t r o f t n e m r i a p m I r a e y e h t f
, 1 0 8 9 7 8 , 2 4 9 2 6 6 0 8 7 5 1 , 7 8 3 9 3 , 3 9 3 2 2 , 3 6 9 6 2 , 2 8 3 6 , 6 6 0 6 , 0 7 4 9 , 3 3 1 2 1 , 4 3 9 1 , 8 8 9 1 , 5 2 5 1 , 8 6 1 3 , 5 1 1 5 6 2 , , 9 1 7 2 6 2 8 3 6 9 8 2 , 6 9 6 3 9 2 , 8 3 5 8 5 , 8 3 5 1 9 1 , 2 6 1 2 4 , 1 6 6 0 4 , FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 95 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 23.
Property, plant and equipment – Consolidated (continued) (a) Momi Bay Resort Limited (MBRL) In 2018, an independent valuation of the Momi Bay Resort Limited’s property, plant and equipment was carried out by Mr. Chris Bennett (MPINZ), of CIVAS Limited t/a Colliers International resulting in an impairment loss of $66,248,078.

(b) Natadola Bay Resort Limited (NBRL) In 2009, an impairment loss was recognised based on an independent valuation conducted.
In 2018, an independent valuation of the Intercontinental Fiji Golf Resort and Spa and Golf course was carried out by Colliers International resulting in a reversal of impairment (previously recognised against the property) of $15,089,951.

(c) ATH Based on the impairment assessment performed by Telecom Fiji Limited and Fiji International Telecommunications Limited an impairment amounting to $258,000 has been booked against capital spares during the year ended 31 March 2018.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 96 l a t o T 0 0 0 $ s s e r g o r P F I R 0 0 0 $ 0 0 0 $ F P N F 0 0 0 $ n i k r o W s g n i t t i f & e r u t i n r u F 0 0 0 $ r o t o M s e l c i h e v F I R 0 0 0 $ ) 2 4 ( 1 9 7 2 , ) 8 3 ( 7 5 6 2 , 0 4 2 3 2 , - - 6 1 2 ) 2 4 ( 4 0 6 1 , - - - - - 5 2 - - - - - - - - - - 4 4 8 9 4 2 , 8 3 1 2 , 2 4 1 8 0 6 8 2 , 8 7 7 1 , 4 4 3 2 5 2 , 8 3 1 2 , 2 4 1 ) 8 3 ( 9 0 7 1 , 8 7 3 2 1 , 9 4 0 4 1 , - - - - 2 6 8 0 1 , 9 5 5 4 1 , 6 1 2 8 7 7 1 , - - 4 4 4 4 - - - 4 5 2 0 5 8 1 , 4 0 1 2 , 8 4 6 9 1 4 8 9 3 7 7 0 1 , - 5 7 4 1 , 3 6 6 1 6 0 1 , 1 8 1 1 - fi – t n e m p i u q e d n a t n a l p , y t r e p o r P .
3 2 F P N F 0 0 0 $ - 6 1 8 7 , ) 8 3 ( 7 6 1 4 2 1 1 , 9 6 0 9 , 1 7 8 ) 8 3 ( 7 2 8 5 , 0 6 6 6 , 9 8 9 1 , 9 0 4 2 , 0 0 0 $ n o i t a u l a v d n a L 0 0 0 $ d n a L 0 0 0 $ 8 1 9 9 , - - 8 3 0 9 4 2 , 6 4 4 2 1 , - 4 7 1 2 1 4 3 , 6 8 5 3 , 6 0 5 6 , 0 6 8 8 , - - - - 7 9 1 - 7 8 8 8 9 0 1 - - - - 1 7 3 - - - - FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 24.
Other receivables Contributions receivable Provision for impairment Other deposits and receivables Provision for impairment Accrued revenue 97 Consolidated 2018 $000 2017 $000 8,496 (3,440) 5,056 136,124 (1,174) 134,950 6,226 (1,792) 4,434 117,959 (1,180) 116,779 1,441 141,447 1,821 123,034 The Fund 2018 $000 8,496 (3,440) 5,056 24,962 (64) 24,898 - 29,954 2017 $000 6,226 (1,792) 4,434 24,442 (71) 24,371 - 28,805 The maximum exposure to credit risk at the reporting date is the carrying value of each class of the asset above.
There is no collateral held as security against any of the above receivable balances.

In 2017, ATH paid Amper SA of Spain and Elandia International Inc. of USA a refundable deposits of USD 30,000,000 (FJD 61,218,243), for the acquisition of BlueSky Group, while the final payment and settlement is awaiting certain consents from the Federal Communication Commission of USA and approvals and waivers from the Committee of Foreign Investments in the United States (CFIUS).
As at 30 June 2018, ATH did not have control of Bluesky Group and therefore the payments have been recognised as ‘Refundable Deposits’ in the financial statements.

Upon completion of the transaction, the deposit amount is expected to be transferred to investment in subsidiaries.
Maturity of gross receivables represented as: 1 to 12 months 1 to 5 years Movements in the provisions for impairment are as follows: Balance as at 1 July 2016 New and increased provisioning Provisions reversed Balance as at 30 June 2017 New and increased provisioning Provisions reversed Balance as at 30 June 2018 Consolidated The Fund 2018 $000 2017 $000 68,757 77,304 146,061 59,301 66,705 126,006 2018 $000 20,558 12,900 33,458 2017 $000 17,768 12,900 30,668 Consolidated The Fund Contributions receivable Other Contributions receivable $000 938 854 - 1,792 1,648 - 3,440 $000 1,139 41 - 1,180 - (6) 1,174 $000 938 854 - 1,792 1,648 - 3,440 Other $000 25 46 - 71 - (7) 64 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 98 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 25.
Investment income receivable Interest receivable Dividend receivable Rent receivable Provision for impairment Receivable from related parties Movements in the provisions for impairment are as follows: Balance as at 1 July 2016 New and increased provisioning Transfer to customer loans Provisions reversed Balance as at 30 June 2017 New and increased provisioning Provisions reversed Balance as at 30 June 2018 26.
Creditors and borrowings Sundry creditors and accruals Bank overdraft Borrowings Customer deposits – unsecured Maturity represented as: At call Less than or equal to 3 months 3 to 12 months 1 to 5 years Greater than 5 years Note Consolidated The Fund 2018 $000 65,638 11,246 1,217 (142) 1,075 2017 $000 55,837 7,167 1,058 (96) 962 2018 $000 65,332 11,246 1,217 (142) 1,075 2017 $000 55,503 7,167 1,058 (96) 962 35(b) - 77,959 347 64,313 31,356 109,009 20,420 84,052 Consolidated Fund Receivable from related parties Rent receivable Receivable from related parties Rent receivable $000 165 - (165) - - - - - $000 67 36 - (7) 96 46 - 142 $000 - - - - - - - Consolidated The Fund 2018 $000 116,836 4,492 166,636 658,803 946,767 509,674 75,003 232,206 96,538 46,569 959,990 2017 $000 113,192 1,713 187,348 618,017 920,270 377,785 76,907 380,167 96,213 100 931,172 2018 $000 13,994 - - - 13,994 - 13,994 - - - 13,994 $000 67 36 - (7) 96 46 - 142 2017 $000 16,497 - - - 16,497 - 16,497 - - - 16,497 The above maturity analysis includes future interest payable.
Customer deposits are fixed term and at call deposits with Home Finance Company Limited.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 99 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 26.
Creditors and borrowings (continued) Borrowings Amalgamated Telecom Holdings Limited, (“ATH”) Group has the following borrowings: (a) Term loan – Bank of South Pacific Limited The loan from Bank of South Pacific Limited was unsecured and subject to competitive interest rate per annum with monthly repayments of $52,000.

During the year, the term loan with Bank of South Pacific Limited has been fully paid.
(b) Term loan – Westpac Banking Corporation The loan facilities from Westpac Banking Corporation are unsecured and subject to competitive interest rate per annum with monthly repayments of $150,800.

(c) Term loan – ANZ Banking Group Limited In prior year, the holding company obtained a loan from ANZ Banking Group Limited (ANZ) to finance the acquisition of Telecom Vanuatu Limited and to fund the transaction to acquire Amper SA interest in certain subsidiaries of Bluesky Group.
The loan facility from ANZ Banking Group Limited are secured and subject to competitive interest rates.

The term loan is secured by the following: First registered mortgage debentures over all assets and undertakings including uncalled capital and unpaid premiums.

Scrip lien over Government bonds of $16,980,000.

i) ii) iii) Authority to appropriate and set off term deposit.
iv) Deed of Assignment reassigning of the holding company’s 2nd registered charge over certain assets and undertakings of AST Telecom LLC.

Borrowing for acquisition of Telecom Vanuatu Limited Effective from 27 March 2018, the loan obtained for the purpose of acquisition of Telecom Vanuatu Limited was renegotiated and is now payable on repayments based on notional term of 14 years with remaining debt to be cleared in full.
Accordingly, the loan amounting to $44,090,000 which comprised of USD9,500,000 (FJD19,490,000) and FJD24,600,000 has been classified between current and non-current liabilities as at 31 March 2018.

Also, during the year, the holding company converted USD 3,098,000 into FJD out of the USD portion of the loan.

Subsequent to balance date, the converted USD 3,098,000 loan (FJD 6,600,000) was fully paid by ATH.
Borrowing for acquisition of Amper SA interest in certain subsidiaries of Bluesky Group The loan amounting to FJD74,800,00 as at year end comprised of USD30,000,000 and FJD13,400,000 obtained for the purpose of funding the transaction to acquire Amper SA’s interest in certain subsidiaries of Bluesky Group.

The payments are on interest only basis as bridging finance, therefore, it is classified as current liabilities as at 31 March 2018.
Also, during the year, ATH converted USD6.8m into FJD out of the USD portion of the loan.

Subsequent to balance date, in the month of April and May 2018, the holding company further converted its USD portion of the loan amounting to USD10,000,000 into FJD.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 100 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 26 Creditors and borrowings (continued) Borrowings (continued) (d) Bank Loan, Bank Overdraft and Finance Lease – ANZ Bank (Kiribati) Limited Finance lease is for a short term (period of 12 months), subject to market interest rate and repayable by monthly instalments of AUD300,289 (inclusive of interest).
During the year, finance lease has been fully paid.

The term loan and bank overdraft from ANZ Bank (Kiribati) Limited is subject to market interest rate and term loans are repayable by monthly instalments of AUD126,097 (inclusive of interest).

The term loan and bank overdraft are secured by the following: i) ii) Limited Guarantee given by Amalgamated Telecom Holdings Limited to the amount of AUD$9,577,000 plus interest and costs.
First registered mortgage debentures given by Amalgamated Telecom Holdings (Kiribati) Limited being a fixed and floating charge over all present and future assets, undertakings (including goodwill) and unpaid or uncalled capital of that security provider.
iii) Deed of Subordination with ATH (Postponer), Amalgamated Telecom Holdings (Kiribati) Limited and ANZ Banking Group Limited (Bank), covenanting that the loan from Postponer to the subsidiary company will not reduce without prior written consent of the Bank and the Bank has priority to extend the facilities provided.

(e) Bank Loan – ANZ Bank (Vanuatu) Limited The term loan from ANZ Bank (Vanuatu) Limited is subject to market interest rate with monthly repayments of VUV12,348,545.
The term loan is secured by registered equitable mortgage debenture over the subsidiary company’s assets.

(f) Bank overdraft and Finance Lease – Westpac Banking Corporation i) Vodafone Fiji Limited, has a bank overdraft facility of $20,000,000 with Westpac Banking Corporation which is unsecured, and is subject to maintaining certain financial covenants.
(g) Bank overdraft and Finance Lease – Westpac Banking Corporation (continued) ii) Datec (Fiji) Limited, has bank overdraft and finance lease facilities with Westpac Banking Corporation which is secured by: a) Registered first fixed and floating charge by Datec (Fiji) Limited over all its assets.

b) Undertakings including its uncalled and called but unpaid capital.

c) Letter of Support from Vodafone Fiji Limited.


(h) Bank overdraft – Bred (Vanuatu) Limited Telecom Vanuatu Limited, has a bank overdraft facility of VUV270,000,000 with Bred (Vanuatu) Limited which is unsecured, and is subject to maintaining certain financial covenants.

(i) Other Bank Facilities – ANZ Banking Group Limited Telecom Fiji Limited, has an indemnity guarantee and visa business credit card facilities with ANZ Banking Group Limited.
These facilities are secured by letter of charge over term deposit funds.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 101 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 26 Creditors and borrowings (continued) Borrowings (continued) Home Finance Bank Following the commencement of the commercial banking operation, it is a regulatory requirement for the bank to hold certain amount of funds with Reserve Bank of Fiji to act as a statutory reserve deposit.
This resulted in a further injection of $21,000,000 by the shareholders being placed as a debenture at a rate of 3.50% and repayment term is 5 years.

The EXIM loan is a back to back loan from the Reserve Bank of Fiji (“RBF”) at an interest rate of 1% and a term of 5 years.

The bank may obtain this loan from the RBF and on-lend to businesses that meet the criteria at a maximum margin of 4%.

27.
Other liabilities Consolidated The Fund Advance for relocation of telecommunications cable Deposits Government Grant Provision for amortisation Deferred revenue Dividends payable Finance lease liabilities Other payables 2018 $000 2,271 3,821 6,459 (6,379) 20,375 20,436 252 52,107 99,342 2017 $000 4,014 4,256 6,459 (6,334) 20,953 26,435 273 15,566 71,622 2018 $000 - 1720 - - 751 - - 1,051 3,522 2017 $000 - 1,701 - - 500 - - 948 3,149 Telecom Fiji Limited received $6,273,091 (VEP) during the financial year (2017:$6,273,091) for relocation of underground and overhead telecommunication cables for the Nadi and Suva road upgrading project.
As at balance date, the relocation of underground and overhead telecommunication cables work is currently in progress and TFL has incurred costs of $4,001,655 (2017: $2,259,138) which have been offset against the advance received.

In accordance with the agreement with Optus Networks Pty Limited for the purchase of IRU newtwork capacity, the repayment term covers monthly repayments of over 2 to 5 years.
In the opinion of the management of TFL, the fair value of the liability equals to the carrying amount and accordingly the payable has not been discounted to its present value.

The non-current portion of the other liabilities amounts to $80,000 which relates to deferred government grants.

The remaining liabilities have a contractual maturity of less than 12 months.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 102 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 28.
Employee entitlements Annual leave Long service leave and gratuity Redundancy Retirement benefit Bonus As at 1 July Additional provisions recognised Paid during the year Provisions no longer required Carrying amount as at 30 June Current Non-current Total Consolidated The Fund 2018 $000 4,102 1,557 - 2,002 5,274 12,935 16,521 4,447 (8,033) - 12,935 10,411 2,524 12,935 2017 $000 2,062 361 1,293 8,315 4,490 16,521 7,215 15,873 (6,606) 39 16,521 13,926 2,595 16,521 2018 $000 1,534 380 - - - 1,914 2,261 2,144 (2,491) - 1,914 1,534 380 1,914 2017 $000 731 237 1,293 - - 2,261 1,014 2,577 (1,330) - 2,261 2,024 237 2,261 (a) Annual 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.
(b) Long service leave, retirement benefit and gratuity – 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.

29.
Net assets available to pay benefits Consolidated The Fund Note 31(a) 29 (a) 29 (b) 29 (c) 29 (d) 37 2018 $000 6,208,160 5,225,622 (60,603) 1,210,337 5,470 (670) (171,996) 6,208,160 (40,097) (20,506) (60,603) 2017 $000 5,504,219 4,640,216 (40,097) 1,071,614 5,470 (988) (171,996) 5,504,219 (16,638) (23,459) (40,097) 2018 $000 6,612,735 5,225,622 - 1,387,113 - - - 6,612,735 - - - 2017 (Restated)1 $000 5,821,816 4,640,216 - 1,181,600 - - - 5,821,816 - - - Net assets available to pay benefits Represented by: Liability for accrued benefits Accumulated losses Reserves Credit loss reserve Foreign currency translation reserve Other equity reserve (a) Accumulated losses Balance at the beginning of the year Add transfers from income statement Balance at the end of the year 1Refer note 16 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 29.
Net assets available to pay benefits (continued) (b) Reserves Balance at the end of the year Reserves comprise the following: Special death benefit fund reserve Retirement income fund reserve FNPF reserve 103 Consolidated The Fund 2018 $000 2017 $000 2018 $000 2017 (Restated)1 $000 1,210,337 1,071,614 1,387,113 1,181,600 37,511 310,462 862,364 32,620 298,995 739,999 37,511 310,462 1,039,140 32,620 298,995 849,985 1,210,337 1,071,614 1,387,113 1,181,600 Special death benefit fund, Retirement income fund and FNPF reserves include investment and solvency reserves.
The movements in the reserves are as follows: Special death benefit fund reserve Balance at the beginning of the year Add/(less) transfers from/(to) member benefits: Transfer from Transfer to Transfer from income statement - current year investment returns Balance at the end of the year 32,620 28,686 32,620 28,686 32 11,430 (8,760) 2,221 37,511 10,993 (8,919) 1,860 32,620 11,430 (8,760) 2,221 37,511 10,993 (8,919) 1,860 32,620 The amounts transferred to the Special Death Benefit Fund Reserve of $11,430,000(2017: $10,993,000) represent deductions of $35 (2017: $35) or less from the accounts of each entitled member.
The amounts transferred from the Special Death Benefit Fund Reserve of $8,760,000 (2017: $8,919,000) represent disbursements to the nominees of those members who died during the year of $8,500 (2017: $8,500) per member.

These disbursements are in addition to the accumulated amounts owing to the deceased member.
Retirement income fund reserve Balance at the beginning of the year Add/(less) transfers from/(to) member benefits: Transfer from Transfer to Transfer from income statement - current year investment returns Balance at the end of the year Consolidated The Fund Notes 2018 $000 2017 $000 2018 $000 2017 $000 298,995 287,428 298,995 287,428 10,423 (23,782) 24,826 310,462 11,760 (24,314) 24,121 298,995 10,423 (23,782) 24,826 310,462 11,760 (24,314) 24,121 298,995 32 The amount transferred to the Retirement Income Fund Reserve of $10,423,000 (2017: $11,760,000) represents pension income during the year.
The amounts transferred from the Retirement Income Fund Reserve of $23,782,000 (2017: $24,314,000) represent pension annuities to pensioners whilst amounts transferred to the Retirement Income Fund Reserve during the year of $24,826,000 (2017: $24,121,000) represents investment returns after allowing for operating expenses of $373,000 (2017: $270,000).
1Refer note 16 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 104 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 29.
Net assets available to pay benefits (continued) (b) Reserves (continued) FNPF reserve Balance at the beginning of the year Add transfers from income statement Less transfers to liability due to members Balance at the end of the year (c) Credit loss reserve Balance at the beginning of the year Movements during the year Balance at the end of the year (d) Foreign currency translation reserve Balance at the beginning of the year Currency translation differences arising during the year Less non-controlling interests Balance at the end of the year Consolidated The Fund Notes 32 2018 $000 739,999 147,842 (25,477) 862,364 2017 $000 676,534 63,465 - 739,999 2017 2018 $000 (Restated)1 $000 849,985 214,632 (25,477) 1,039,140 723,613 126,372 - 849,985 5,470 - 5,470 (988) 437 (119) (670) 5,150 320 5,470 (1,392) 552 (148) (988) - - - - - - - - - - - - - - (e) Contributions to the Fund for benefits (immediate, contingent or deferred) The Fund receives contributions from members for investment, which are invested and become available upon retirement, or if earlier; death, permanent migration or incapacity.
The premium for the Special Death Benefit (SDB) is deducted and paid to Special Death Benefit Fund (“SDBF”), with benefit payable upon death of the member while still a member of the Fund.

Members purchase annuities by transferring part or all of their FNPF balance upon retirement or incapacity (or if a sole nominee, a member’s FNPF balance on his or her death) into Retirement Income Fund (“RIF”).
The allocation of contributions is set out below: 2018 Member contributions, net SDB premiums Purchase of annuities Total 2017 Member contributions, net SDB premiums Purchase of annuities Total 1Refer note 16 SDBF $000 - 11,430 11,430 - 11,430 SDBF $000 - 10,993 10,993 - 10,993 RIF $000 - - - 10,423 10,423 RIF $000 - - - 11,760 11,760 FNPF $000 All funds $000 588,425 - 588,425 - 588,425 FNPF $000 535,244 - 535,244 - 535,244 588,425 11,430 599,855 10,423 610,278 All funds $000 535,244 10,993 546,237 11,760 557,997 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 105 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 29.
Net assets available to pay benefits (continued) (f) Payments to beneficiaries 2018 2017 SDBF $000 8,760 8,919 RIF $000 23,782 24,314 FNPF $000 315,056 280,652 All funds $000 347,598 313,885 Total benefits paid, excluding pension annuity relating to RIF, amounted to $323,816,000 (2017:$ 289,571,000).

The breakdown of payments is as follows.
Benefit type 1 55 years and over 2 Death 3 Disability 4 Migration 6 Non-Citizens migrating Small accounts 7-8 Partial 9 Housing transfers Fees deducted from members accounts Total 2018 $000 143,981 22,490 4,827 25,526 7,785 2,210 63,771 44,234 232 315,056 2017 $000 137,306 21,962 4,555 28,223 7,956 302 47,500 32,848 - 280,652 Total benefits exclude $10,423,000 (2017: $11,760,000) being the amount transferred from FNPF to RIF in respect of FNPF members purchasing annuities.
The breakdown of payments from RIF is: 1 - Sole life annuity 2 - Joint life annuity 3 - Term annuity 4 - Top up pension (in respect of pre March 2012 pensioners) 5 - Commutation 2018 $000 11,497 5,941 1,261 4,822 261 23,782 2017 $000 11,456 5,717 1,775 5,022 344 24,314 Commutation refers to the lump sum paid in respect of the unexpired portion of the guarantee period for which a deceased annuitant would otherwise have received payment.

The commuted sum is payable to the pensioner’s nominee on death.

30.
30.

Transfers between funds under the Act Amounts may be transferred between funds only in accordance with the Act.

Provisions include: • • • • Transfers from FNPF to RIF for purchase of annuities Deductions from FNPF for premiums due to SDBF Transfers from RIF and SDBF and SF to FNPF to meet expenses incurred in managing RIF and SDBF respectively Repaying amounts paid in error or recovering overpayments The Board may transfer a surplus in RIF or SDBF to FNPF in accordance with the regulations.
These regulations require that any such transfer be recommended by the Fund Actuary and approved by the Reserve Bank of Fiji.

The Act also provides that the Board must allocate to RIF and SDBF sufficent assets of FNPF as will ensure that an actuary is able to issue a funding and solvency certificate in each case.

Funding and solvency certificates for each of RIF and SDBF are currently in force and no transfer from FNPF is envisaged in the foreseeable future.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 106 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 31.
Net assets at balance date and liability for accrued benefits (a) FNPF Balance at the beginning of the year Add transfers from General Reserve Net movement during the year Balance at the end of the year (i) Allocation of Benefits Allocated to Members’ Accounts Unallocated to Members’ Accounts Solvency requirement of 10% of member accounts Other FNPF reserve Notes 31(a)ii 29(b) 2018 $000 4,640,216 25,477 559,929 5,225,622 5,214,545 11,077 5,225,622 522,562 516,578 1,039,140 2017 Restated $000 4,127,335 - 512,881 4,640,216 4,632,468 7,748 4,640,216 464,022 385,963 849,985 Net assets at end of year 6,264,762 5,490,201 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.
(ii) Benefits accrued during the year Contributions received Benefits paid Interest credited on members’ accounts Net amounts transferred from: Special Death Benefit Reserve Transfer to Retirement Income Fund Notes 29(f) 29(b) 29(b) 2018 $000 599,855 (323,816) 296,983 (2,670) (10,423) 559,929 2017 $000 546,237 (289,571) 270,049 (2,074) (11,760) 512,881 The Board declared an annual interest rate for 2018 of 6.35% to be credited to members’ accounts as at the reporting date (2017: 6.35%).
(iii) Movement in liability: Liability at beginning of year Net contributions Benefits paid (including annuity purchase) Interest allocated to members Transfer from General Reserve Liability at end of year Notes 29(e) 29(f) 2018 $000 4,640,216 588,425 (325,479) 296,983 25,477 5,225,622 2017 $000 4,127,335 535,244 (292,412) 270,049 - 4,640,216 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 107 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 31.
Net assets at balance date and liability for accrued benefits (continued) (b) RIF Liability for future annuity payments Solvency reserve Net assets Movement in liability Liability at start of year New purchases Expected reduction for year Model and asumption changes and variation in experience Liability at end of year 2018 $000 230,903 79,559 310,462 231,185 10,423 (10,135) (570) 230,903 2017 $000 231,185 67,810 298,995 230,698 11,760 (12,064) 791 231,185 The actuarial present value of RIF annuitant liabilities determined on a basis consistent with Government Bonds being recorded at face value has been calculated as $230,903,000 (2017: $231,185,000).
The valuation was carried out by Mr Peter Colin Martin, Fellow of the Institute of Actuaries of Australia, in compliance with International Standard of Actuarial Practice No.

2 issued by the International Actuarial Association.
The annual benefits payable from the RIF together with assumed expenses are projected year by year, allowing for expected life annuitant deaths and completion of term annuities and guaranteed payments, until all benefits in respect of annuitants in force at the valuation date have been paid.
The asset cashflows arising from RIF investments (Fiji government bonds and cash) are projected year by year, allowing for reinvestment of those cashflows not required to immediately finance annuity payments at an assumed market rate of interest.
The proportion of RIF asset cashflows which, together with assumed reinvestment interest, is just sufficient to meet all projected annuity payment obligations and expenses as they fall due is then applied to the face value of RIF investments at the valuation date to determine a liability value.
The main assumptions used for the purpose of the calculation are as follows: (i) Mortality for life annuitants in accordance with World Health Organisation 2008 Fiji population life tables, assuming a 1% per annum reduction in both male and female rates continuously from 2012 and set back one year (2017: 1% per annum from 2011); (ii) Fiji government bonds will be redeemed at the earliest opportunity; that is, up to 4 years before maturity.
(iii) An average long run market rate of reinvestment of RIF asset cashflows of 5.2% per annum over the term of the current annuities.

(iv) A continuous liquidity allowance of one year’s worth of annuity payments which does not attract interest.

(v) An allowance for RIF expenses of 5% of annuity payments from time to time (2017: 0.5% per annum of assets allocated to liabilities) The calculated proportion of RIF asset cashflows was 74.4%.
This means that 74.4% of each RIF asset cashflow, together with interest at the assumed reinvestment rate, is calculated to be just sufficient to meet the projected in force annuity payments and expenses as they fall due.

The liability assuming a reinvestment rate of return 50bp lower (4.7% per annum) is calculated as $234,055,000 (75.4% of the face value of RIF investments).
The liability assuming a reinvestment rate of return 50bp higher (5.7% pa) is calculated as $228,031,000 (73.5% of the face value of RIF assets).

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 108 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 31.
Net assets at balance date and liability for accrued benefits (continued) (c) SDBF The IBNR has been calculated by the actuary using the chain ladder method applied to a run-off triangle of SDB claims by financial year of death and year of payment.

The provision for mortality fluctuation is based on 6 months claim with an additional 10% of that amount.

The balance in the fund is held against the possibility of major catastrophic loss of life amongst those eligible for SDB.
Liability for claims incurred but not reported (IBNR) Provision for mortality fluctuation Catastrophe reserve Net assets 32.
Net profit for the year 2018 $000 3,554 4,818 29,139 37,511 2017 $000 3,987 4,905 23,728 32,620 The net profit for the year has been appropriated to accrued benefits, reserves and retained earnings as follows: Profit for the year attributable to members of the Fund Allocated to: Liability for accrued benefits Special death benefit fund reserve FNPF reserve Retirement income fund reserve 2018 $000 538,662 2017 $000 (Restated)1 422,402 (296,983) (2,221) (214,632) (24,826) (241,679) (270,049) (1,860) (126,372) (24,121) (152,353) (538,662) (422,402) 33.
Notes to the statements of cash flows (a) Reconciliation of cash and cash equivalents For the purposes of the statements of cash flows, cash and cash equivalents includes cash on hand and ‘at call’ deposits with other financial institutions.
Cash and cash equivalents 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: Cash and cash equivalents Bank overdraft Cash and cash equivalents at end of financial year Consolidated The Fund Notes 19 26 2018 $000 696,300 (4,492) 691,808 2017 $000 754,583 (1,713) 752,870 2018 $000 481,825 - 481,825 2017 $000 550,396 - 550,396 Statutory Reserve Deposits with the Reserve Bank of Fiji amounting to $90,280,000 (2017: $70,280,000) (Note 19) represents mandatory reserve deposits and are not available for use in the Bank’s day to day operations and therefore are not part of cash and cash equivalents.
(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) (ii) sales and purchases of maturing fixed interest securities; and Investment and maturity of term deposits.

1Refer to note 16 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 34.
Commitments and contingent liabilities (a) Commitments Capital expenditure commitments Undrawn facilities in relation to mortgage loans (b) Contingent liabilities Performance bonds Litigation Guarantees (c) Operating lease commitments Total commitments for non-cancellable future lease rentals are pay- able as follows: Not later than 1 year Later than 1 year but not later than 5 years Greater than 5 years (d) Finance lease commitments Total finance lease commitments contracted are payable as follows: Not later than 1 year Later than 1 year but not later than 5 years Future finance charges (e) Operating lease revenue Non cancellable operating lease rentals are receivable as follows: Not later than 1 year Later than 1 year but not later than 5 years Greater than 5 years Consolidated 2018 $000 134,943 82,819 217,762 2017 $000 61,370 11,906 73,276 - 5,401 1,298 6,699 2,940 456 1,373 4,769 9,387 15,820 55,521 80,728 159 228 (20) 367 13,861 20,519 4,451 38,831 9,882 14,521 54,500 78,903 2,901 370 (47) 3,224 13,212 19,203 2,476 34,891 109 2017 $000 - 3,456 3,456 - 456 - 456 - - - - - - - - The Fund 2018 $000 5,970 36,539 42,509 - 372 - 372 - - - - - - - - 12,199 18,533 4,451 35,183 12,458 18,587 2,476 33,521 (f) Sponsorship agreement with Fiji Rugby Union On 13 November 2017, VFL has entered into a sponsorship agreement with Fiji Rugby Union.
As per the terms of the agreement, Fiji Rugby Union has granted sponsorship rights in respect to certain properties under the control of FRU, including the Kaji Tournament and the Under 20s Team on an exclusive basis to VFL.

VFL has agreed to the acquisition of such sponsorship rights to be solely for VFL which include corporate entities for sponsorship in cash and sponsorship in kind for a period of 5 years.
(g) Sponsorship agreement with Fiji Football Association On 6 December 2013, Vodafone Fiji Limited entered into a sponsorship agreement with Fiji Football Association.

As per the terms of the agreement, Fiji Football Association (the Association) has granted with sponsorship rights in respect to its competitions, the Association and, the district affiliate teams on an exclusive basis to Vodafone Fiji Limited.
Vodafone Fiji Limited has agreed to the acquisition of such sponsorship rights to be solely for them and its Consortium sponsor for sponsorship in cash in kind for a period of 5 years.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 110 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 34.
Commitments and contingent liabilities (continued) (h) Sponsorship agreement with Fiji National Rugby League Limited On 25 January 2018, VFL entered into a sponsorship agreement with Fiji National Rugby League Limited.

As per the terms of the agreement, Fiji National Rugby League (FNRL) has granted sponsorship rights in respect to its events, including the Fiji Bati team, Vodafone Cup Tournament, and Primary and Secondary School rugby events on an exclusive basis to VFL.
VFL has agreed to the acquisition of such sponsorship rights to be solely for VFL for sponsorship in cash and sponsorship in kind for a period of 4 years.
Certain subsidiaries of the ATH group are also committed to paying Universal Service Levies to the Government of Fiji based on the audited annual gross revenue which arises directly from the provision of services under the respective licence in the current year and such annual gross revenue shall be calculated net of settlements with other licences in Fiji.

.

35.
Related parties (a) Board members The Board members of the Fund during the year were: Mr Ajith Kodagoda (Chairman) Mr Tevita Kuruvakadua Ms. Makereta Konrote Ms. Bhavna Narayan (Resigned 18 September 2017) Mr. Sanjay Kaba (b) Transactions with related parties Directors* Directors remuneration - fees and allowances Other services provided to the Fund Consolidated The Fund 2018 $000 50 15 65 2017 $000 69 33 102 2018 $000 2017 $000 41 15 56 59 33 92 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, Mr. Sanjay Kaba and Mr. Sashi Singh (HFC).

Remuneration for Mr. Taito Waqa (ATH Group) is paid directly to the Ministry of Labour.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 111 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 35.
Related parties (continued) (b) Transactions with related parties (continued) Key management personnel In addition to the directors, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly (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: - - - - - - - - - - - - Mr. Jaoji Koroi – Chief Executive Officer (appointed 9/03/2018) – Chief Operating Officer (from 22/01/2016 – 8/03/2018) Mr. Viliame Vodonaivalu – Chief Investment Officer (appointed 14/08/2017) Mr. Pravinesh Singh – Chief Financial Officer Mr. Uday Singh – General Manager Governance & Risk Mr. Ravinesh Krishna – General Manager Human Resources Mr. Alipate Waqairaiwai – General Manager Member Services Mr. Tevita Nagataleka – General Manager Prime Services (resigned 18/10/2017) Ms. Millie Low – General Manager Business Transformation (appointed 03/10/2017) Mr. Sitiveni Nabuka – Acting Chief Information Technology Officer Mr. Ivan Fong – General Manager (ATH) Mr. Rakesh Ram – Chief Executive Officer (HFC - appointed 22/01/2018) Mr Raj Sharma - Acting Chief Executive Officer (HFC - 09/02/2017 – 21/01/2018) The aggregate compensation of the key management personnel for the Fund and Group comprises of short-term benefits and is set out below: Short-term benefits Consolidated 2018 2017 $000 2,295 $000 1,718 The Fund 2018 $000 1,425 2017 $000 1,147 Management personnel who are members of the Fund contribute and receive 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).
Transactions with other related parties The investments and ownership interests in subsidiary companies are disclosed in Note 35(c).
Interest income The amount of interest income received from related parties during the year is as follows: ATH Limited Vodafone Fiji Limited Telecom Fiji Limited Home Finance Company Limited Natadola Bay Resort Limited FNPF Hotel Resorts Limited Yatule Beach Resort Limited Momi Bay Resort Limited Farleigh Limited Barton Limited Consolidated The Fund 2018 $000 2017 $000 2018 $000 2017 $000 - - - - - - - - - - - - - - - - - - - - - - 17 - 2 3,663 7,341 435 127 8,482 428 193 20,688 112 26 12 2,900 7,488 464 141 7,054 - - 18,197 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 112 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 35.
Related parties (continued) (b) Transactions with related parties (continued) Transactions with other related parties (continued) Rental income The amount of rental income received from related parties during the year is as follows: Consolidated The Fund ATH Limited Vodafone Fiji Limited Telecom Fiji Limited Home Finance Company Limited Dividend from subsidiaries The amount of dividend received from subsidiaries during the year is as follows: ATH Limited Home Finance Company Limited Vodafone Fiji Limited Fiji Hotel Resorts Limited Other receivables from related parties include: ATH Limited Home Finance Company Limited Vodafone Fiji Limited Hotel Resorts Limited Other related parties of the group Less : provision for impairment Loans provided by the Fund to subsidiaries as set out in Note 14 are as follows: 2018 $000 - - - - - - - - - - - - - - - - - 2017 $000 - - - - - - - - - - - - - - 347 347 - 347 Natadola Bay Resort Limited Momi Bay Resort Limited FNPF Hotel Resorts Limited Telecom Fiji Limited Amalgamated Telecom Holdings Limited FNPF Nominees Limited Home Finance Company Limited Yatule Beach Resort Limited Farleigh Limited Barton Limited Less : provision for impairment 2018 $000 63 828 814 806 2,511 13,798 6,185 22,050 2,500 44,533 6,133 6,185 16,538 2,500 - 31,356 - 31,356 2017 $000 63 714 693 596 2,066 18,397 3,500 19,600 1,500 42,997 12,265 6,655 - 1,500 - 20,420 - 20,420 2018 $000 293,624 121,807 6,764 - - 98 3,388 2,668 82,217 36,975 547,541 (114,024) 433,517 2017 $000 295,546 118,975 7,485 145 2,243 98 7,770 9,872 - - 442,134 (145,968) 296,166 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 113 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 35.
Related parties (continued) (b) Transactions with related parties (continued) Transactions with other related parties (continued) Natadola Bay Resort Limited (NBRL) Loans that were advanced to the subsidiary, NBRL for the construction of the Intercontinental Hotel and Golf Course at Natadola were restructured in 2011.

The loan agreements for these loans were executed as at 30 June 2014.

There has been no change in the interest rate during the current year.
Interest charged by FNPF in the current financial year is $$7,340,545 (2017: $7,621,046).

The loans were restructured effective from 1 August 2011 as follows: Name Loan 1 Amount ($) $60,000,000 Term of loan 26 years Interest rate 8.00% Loan 2 $40,000,000 26.5 years 8.00% Loan 3 $202,835,111 Indefinite Interest free Interest plus principal repayments Principal plus interest repayment commenced from 1 August 2012.
Interest only for first 18 months and principal plus interest repayment commenced from 1 February 2013.

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 in the normal course of the business shall be applied to the outstanding balance.

FNPF reserves the right to commence charging and capitalising interest against the balance outstanding at any time in the future.
The carrying value of the loan has been reassessed for impairment at balance date.

The loans are secured by the securities outlined below, for which the security has not been executed as at balance date: a) First registered mortgage with improvement thereon over: i. ii.

TLTB reference no.

4/11/11438, part of Sanasana and Navo Island, Tikina Malomalo, Province Nadroga; Agreement for Lease Contract number 50034331, part of Vile, Malomalo, Nadroga; iii.

Crown Lease 16834; iv.


Cown lease 16833 v. Cown lease 7491 vi.

Crown Lease 559677, Lot 24, DP 4724; vii.

Crown Lease 559662, Lot 32, DP 4724; viii.

Approval Notice LD Ref 4/11/710, Lot 27, DP 4724; ix.

Approval Notice LD Ref 4/11/711, Lot 28, DP 4724; x.

Approval Notice LD Ref 4/11/703A, Lot 33, DP 4724; xi.
Approval Notice LD Ref 4/11/732, Lot 30, DP 4724; b) c) Comprehensive insurance cover over the property with improvements thereon and FNPF’s interest noted thereon; An equitable mortgage over the bank accounts of the Mortgagor and assignment of income arising out of the Hotel & Golf Operations and Residential subdivision to be effectived when arrears of obligations are outstanding.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 114 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 35.

Related parties (continued) (b) Transactions with related parties (continued) Transactions with other related parties (continued) Telecom Fiji Limited (TFL) During the year, term loan with Fiji National Provident fund was fully paid off.
The term loan is secured by: (i) 1st registered mortgage debenture over all the assets of TFL except for TFL New Wing building in Suva.

(ii) Comprehensive insurance cover over the property of TFL with improvements thereon with the Funds interest noted.

Vodafone Fiji Limited (VFL) In March 2006, Vodafone Fiji Limited entered into a lease agreement with the Fund for its head office.
The term of the lease was for 10 years beginning from the date of occupation and ending in March 2016, with right of renewal for a further two 10 year terms.

The lease agreement review process for additional term has been completed with the terms and conditions agreed between FNPF and Vodafone.

FNPF Hotel Resorts Limited (FHRL) The Fund disbursed a loan of $8,000,000 to FHRL in 2016.
The loan is for a period of 10 years at 6% interest per annum with quarterly repayments of principal and interest of $289,219.

Momi Bay Resort Limited The loan of $120,000,000 was approved by FNPF Board on 30/7/2015 for a term of 25 years at the rate of 7% p.a fixed for 3 years.

In the loan term there is a moratorium period of 2 years, Interest Only period of 1 year with principal and interest repayment over a term of 22 years.
Monthly interest only repayment on the loan commenced from October 2017, with monthly principal and interest repayment to start from October 2018.

The MBRL Board approved $110m with the additional $10,000,000 to be drawn should the need arise.

The loan is secured by: (i) First registered Mortgage over Development Lease – LD Ref:60/782-3 (ii) First registered Mortgage over a portion of Freehold Land described as DP.
10698 (iii) First registered Debenture over all assets of Momi Bay Resort Limited (iv) Other conditions of the Loan Agreement remains in full force and effect Equitable mortgage over the bank accounts of the borrower and assignment of income arising out of the Hotel operation to be effective when arrears of obligations are outstanding Farleigh Limited FNPF entered into a Share Sale Deed with Marriott International, Inc. and Fiji Cayman Holdings for the acquisition of the 100% shares in Farleigh Limited, the Holding Company for $157,808,000 which was made up of Debt and Equity.
The debt novated under Farleigh Limited to the Fund amounted to $82,220,000.

The interest rate on the loan is 5.00% p.a fixed for 3 years, with the loan maturing on 24 May 2033.

The loan is payable on quarterly basis amounting to $1,955,932 inclu-sive of interest and principal.

The loan is secured by: (i) First Registered Mortgage over NL 13796 described as Lot 1, Denarau Island being the Westin property.

(ii) First registered Mortgage over State Lease No.
13451 described as Lots 1, 2 and 3 on SO.3705 being the Golf Course & Racquet Club.

(iii) First registered Mortgage over State Lease No.

19370 described as Lot 9 on SO.5005 being Dump Site and ponds.

(iv) First registered Mortgage over State Lease No.

19371 described as Lot 7 on SO.5005 being the residential dwelling.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 115 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 35.

Related parties (continued) (b) Transactions with related parties (continued) Transactions with other related parties (continued) Barton Limited The debt novated under Barton Limited amounted to $36,980,000 as part of the Starwood Properties acquisition.
The interest rate on the loan is fixed at 5.00% for 3 years, with the loan maturing on 24 May 2033.The loan is payable in quarterly repayment of $879,644 inclusive of interest and principal.

The loan is secured by: (i) First Registered Mortgage over NL.14619 described as Lot 2 on SO.4946 being the Sheraton Property.
(ii) First Registered Debenture over all the assets and undertakings of Barton Ltd.(This is a fixed and floating charge over all present and future assets, undertakings (including goodwill) and unpaid /uncalled capital of the company.

Home Finance Company Limited (HFC) As at reporting date, HFC had a Debenture loan balance of $3,400,000.

This loan was disbursed in 2014 for a term of 5 years at 3.50%.

No new loans were disbursed to HFC during the financial year.
Undistributed dividend for FY 2016 and FY 2017 amounting to $5,076,582 was reinvested as capital injection in FY 2018.
(c) Group enterprises – significant subsidiaries Principal place of business Ownership Interest Fiji Amalgamated Telecom Holdings Limited* - Telecom Fiji Limited* - Fiji Directories Limited* - Vodafone Fiji Limited* - Datec (Fiji) Limited* - Datec Australia Pty Limited* - Telecom Services Kiribati Limited* - FINTEL* - Telecom Vanuatu Limited* Vanuatu Home Finance Company Limited* FNPF Holdings (PNG) Limited* FNPF Nominee Company Limited* Farleigh Limited Momi Bay Resorts Limited Natadola Land Holding Limited Yatule Beach Resort Limited Natadola Bay Resort Limited FNPF Hotel Resorts Limited Dareton Limited* Fiji PNG Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Australia Kiribati Fiji 2018 73% 2017 73% 75% 100% 100% 100% 100% - 100% 100% 100% 100% 75% 100% 100% - 100% 100% 100% 100% 100% 100% * Not audited by KPMG 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 an 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.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 116 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 36.

Non-Controlling Interests The following table summarises the information relating to each of the Group’s subsidiaries that has a material non-controlling interest, before any intra-group eliminations.
30 June 2018 ATH $(000) 31 March 2018 HFC $(000) 30 June 2018 Total $(000) Intra-group eliminations $(000) NCI percentage Non-current assets Current assets Non-current liabilities Current liabilities Net assets Carrying amount of NCI Revenue Profit OCI Total comprehensive income Profit allocated to NCI OCI allocated to NCI Cash flow from operating activities Cash flow used in investment activities Cash flow from/(used in) financing activities (dividends to NCI: $19,600,000) Net increase in cash and cash equivalents 30 June 2017 27% 429,248 260,199 (90,502) (250,612) 348,333 94,050 487,330 96,648 437 97,085 31,722 2 130,582 (74,585) (58,446) (2,449) 25% 680,150 275,614 (75,789) (778,714) 101,261 25,315 48,081 11,781 - 11,781 2,945 - 20,979 (25,468) (6,484) (10,973) (15,019) 104,346 (13,946) 20,721 2 ATH $(000) 31 March 2017 HFC $(000) 30 June 2017 Total $(000) Intra-group eliminations $(000) NCI percentage Non-current assets Current assets Non-current liabilities Current liabilities Net assets Carrying amount of NCI Revenue Profit OCI Total comprehensive income Profit allocated to NCI OCI allocated to NCI Cash flow from operating activities Cash flow used in investment activities Cash flow from/(used in) financing activities (dividends to NCI: $24,420,000) Net increase in cash and cash equivalents 27% 464,369 170,944 (65,768) (277,064) 292,481 78,970 414,720 85,266 552 85,818 31,044 5 132,590 (167,391) 25% 573,377 253,877 (59,481) (676,815) 90,958 22,740 48,081 7,698 - 7,698 1,925 - 45,394 (5,903) 53,854 19,053 (4,232) 35,259 (12,587) 89,123 (16,080) 16,889 5 FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 117 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 37.
Acquisition of Non-Controlling Interest in Subsidiary Amalgamated Telecom Holdings Limited (ATH) – acquired 21 December 2015 On 21 December 2015, the Fund purchased an additional 60,671,022 shares in Amalgamated Telecom Holdings Limited from the Government of Fiji for a purchase consideration of $74,019,000.

The additional acquisition has increased the Funds shareholding from 58.27% to 72.64%.
As described in note 2.3, the acquisition of additional interest in ATH is accounted for as a transaction between shareholders and as such the accounting and disclosure requirements of IFRS 3 Business Combinations do not apply to this transaction.

As a transaction between shareholders, the acquisition does not reflect the fair value of assets and liabilities acquired or any recording of additional goodwill at the time of the acquisition of ATH.
The assets and liabilities were acquired at the book values of ATH at 31 December 2015.

The difference between the fair value of the consideration given and the carrying value of the assets and liabilities acquired is recognised as an Other Equity Reserve, after adjusting for the minority interest acquired.
Consideration transferred Cash Identifiable assets acquired and liabilities assumed (100%) Property, plant and equipment Intangible assets Deferred tax asset Trade and other receivables Held to maturity investments Inventories Cash and cash equivalents Borrowings Trade and other payables Current tax liability Deferred tax liability Provisions Less non-controlling interests Total identifiable net assets acquired Other Equity Reserve Net book value of identifiable net assets as at 31 December 2015 14.37% of identifiable net assets as at 31 December 2015 Total consideration transferred Other Equity Reserve $000 74,019 273,271 28,654 3,889 64,309 55,436 18,905 21,110 (40,581) (118,415) (1,759) (21,472) (6,101) 277,246 (47,131) 230,115 $000 230,115 33,068 (74,019) (40,951) FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 118 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 37.
Acquisition of Non-Controlling Interest in Subsidiary (continued) Vodafone Fiji Limited (VFL) On 30 June 2014, FNPF and Vodafone International Holdings (Vodafone International) signed an Agreement for the Sale and Purchase of Shares under which FNPF acquired 2,490,000 shares (49% shareholding) in VFL from Vodafone International for $160,000,000 in cash.

The key conditions precedent were met and settlement of the sale completed on 1 July 2014.
This acquisition brings FNPF’s direct and indirect holding in VFL, a company involved in the provision of cellular mobile telecommunication services, to 79 %.

As described in note 2.3, the acquisition of VFL is accounted for as a common control transaction and as such the accounting and disclosure requirements of IFRS 3 Business Combinations do not apply to this transaction.
As a common control transaction, the acquisition does not reflect the fair value of assets and liabilities acquired or any recording of additional goodwill at the time of the acquisition of VFL.

The assets and liabilities were acquired at the book values of VFL at 30 June 2014.

The difference between the fair value of the consideration given and the carrying value of the assets and liabilities acquired is recognised as an other equity reserve.
The following summarises the major classes of consideration transferred, and the recognised amounts of assets acquired and liabilities assumed at the acquisition date.
Consideration transferred Cash Identifiable assets acquired and liabilities assumed (100%) Property, plant and equipment Intangible assets Deferred tax asset Trade and other receivables Inventories Cash and cash equivalents Borrowings Trade and other payables Deferred tax liability Provisions Total identifiable net assets acquired Other Equity Reserve Net book value of identifiable net assets as at 30 June 2014 (100%) 49% of identifiable net assets as at 30 June 2014 Total consideration transferred Other Equity Reserve $000 160,000 124,050 811 831 32,560 7,607 (9,897) (20,000) (54,812) (6,921) (15,137) 59,092 $000 59,092 28,955 (160,000) (131,045) FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 119 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 38.
Acquisition of subsidiary companies Telecom Vanuatu Limited On 27 March 2017, the holding company, acquired 100% share holding in Telecom Vanuatu Limited, incorporated and domiciled in Vanuatu for a purchase consideration of FJD 44,107,798.
The fair values of the identifiable assets and liabilities of Telecom Vanuatu Limited at the date of acquisition were (for recording of transaction and for the purpose of calculation of goodwill, 31 March 2017 was assumed to be the effective date of transaction): Assets Cash in hand and at bank Property, plant and equipment Inventories Trade and other receivables Total assets Liabilities Trade payable and other liabilities Interest bearing borrowing Provision Total liabilities Net book value of identifiable assets Purchase consideration paid for 100% equity Goodwill on acquisition (Note 16a) Net cash outflow from the acquisition FJD’000 9,773 55,756 2,405 6,278 74,212 2,055 25,445 8,315 35,815 38,397 44,108 5,711 34,335 (i) Upon acquisition of Telecom Vanuatu Limited, management carried out a detailed assessment of carrying value of network and related equipment.
Based on the assessment carried out by the management, an amount of FJD 4,480,000 of impairment was recognised in the books of Telecom Vanuatu Limited as at 31 March 2017.

(ii) The fair value of property, plant and equipment includes an increment of $17,612,684 at a consolidation level as part of allocation of purchase consideration, based on independent valuation of the properties conducted by Vanuatu Property Valuations Limited on 28 March 2017 and 3 April 2017.
Management believes that this valuation is appropriately reflective of the conditions which existed as at 27 March 2017.

(iii) The goodwill is attributable mainly to the management structure of Telecom Vanuatu Limited together with the telecommunication industry in which it operates.

It is one of the major operators of indirect distribution network, fixed line phones and mobile phone network in Vanuatu, a developing market with potential for further organic growth and synergies.
The synergies are expected to be achieved from integrating the company into the group existing telecommunication business.

None of the goodwill recognised is expected to be deductible for tax purpose.

(iv) During the acquisition process, the previous shareholders’ loan was refinanced through the loan obtained from ANZ Vanuatu Limited by Telecom Vanuatu Limited.
FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 120 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 38.

Acquisition of subsidiary companies (continued) Farleigh Limited On 24 May 2018, FNPF acquired 100% share holding in Farleigh Limited (the holding company) from Fiji Caymans Holdings for a consideration of $157,808,000.
FNPF acquired Farleigh Limited as part of its growth and diversification strategy to increase their footprint in the tourism sector in order to enhance the return on its member’s funds.

Farleigh Limited owns the Sheraton Fiji Resort, the Westin Denarau Island Resort and Rylestone Limited- an entity which owns the Denarau Golf and Racquet Club and the Residential Villas.

The shares purchased comprised of 70 preference shares and 3 ordinary shares.
Goodwill of $16,855,000 was recognised as the excess of the consideration transferred over the fair value of net assets of $140,923,000.
The fair values of the identifiable assets and liabilities of Farleigh Limited at the date of acquisition were: Assets Cash on hand and bank Property, plant and equipment Intangible assets Inventories Trade and other receivables Income tax receivable Deferred tax assets Investment in associates Total Assets Liabilities Trade and other liabilities Borrowings from Fiji National Provident Fund Employee benefits Deferred tax liabilities Total liabilities Net book value of identifiable assets as at 24th May 2018 (100%) Purchase consideration paid for 100% equity Goodwill on acquisition (note 22) Net cash outflow from the acquisition $000 11,292 198,000 87,359 409 6,240 208 7,976 41 311,525 15,553 119,247 1,844 33,958 170,602 140,923 157,808 16,885 146,516 The goodwill is mainly attributed to the Marriott brand name, resort locations of Farleigh Limited’s subsidiaries (Sheraton Fiji Resort, the Westin Denarau Island Resort and Rylestone Limited) and customer loyalty.
Its subsidiaries are amongst the major resort operators on Denarau Island, Fiji, with potential for further growth and synergies.

None of the goodwill recognized is expected to be deductible for tax purposes.

Acquisition related cost amounted to $8,310,000 (included in investment expenses in the Fund’s income statement for the year ended 30 June 2018).
Following acquisition of Farleigh Limited and its subsidiaries, Ratu Joseva Vatunitu & Ors has filed a Civil Action against TLTB, Fiji Cayman Limited and FNPF [Suva High Court Civil Action No.

55 of 2018], for unjust enrichment and claims for loss of entitlement under iTaukei lease (Sheraton land) as a result of the Sale and Purchase of the shares under Barton Limited and Dubbo Limited from Fiji Cayman Limited.
A writ of Summons has been served to the Fund and the Fund has responded with a Statement of Defence.

Parties to the proceedings are awaiting a court date to be given by the Court.

At this stage, an amount has not been quantified by the Fund’s legal team in relation to a reasonable probability of outflow of resources embodying economic benefits.
This has not been recognized in the acquisition accounting in accordance with IFRS 3 as it is a possible obligation whose existence will be confirmed only by the occurrence or non-occurrence of one of more uncertain future events not wholly within the control of the entity.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 121 Fiji National Provident Fund and its subsidiaries Notes to and forming part of the financial statements For the year ended 30 June 2018 39.
Events Subsequent to the Balance Date On 22 May, 2018, FNPF Board approved the acquisition of the remaining 75% shares of GPH from National Superannuation Fund and CGA Property Limited from Papua New Guinea (PNG).

The Sale and Purchase Agreement was signed on 6 July 2018, with completion of the acquisition to be done by 31 December 2018.
In 2017, ATH paid Amper SA of Spain and Elandia International Inc. of USA a refundable deposits of USD 30,000,000 (FJD 61,218,243) while the final payment and settlement is awaiting certain consents from the Federal Communication Commission of USA and approvals and waivers from the Committee of Foreign Investments in the United States (CFIUS).
As at the date of signing, 31 August 2018, ATH did not have control of Bluesky Group and therefore the payments have been recognised as ‘Refundable Deposits’ in the financial statements.

Upon completion of the transaction, the deposit amount is expected to be transferred to investment in subsidiaries.
Apart from the matters noted above, there has not arisen in the interval between the end of the financial year and the date of this report, any transactions or event 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.

40.
40.

Auditors The Fund is a compulsory superannuation scheme legislated by the FNPF Act and continuing under the FNPF Act 2011.

Section 13 of the FNPF Act and Section 37 of the FNPF Act 2011 requires every employer and employee to make contributions to the Fund.

Team members of KPMG, the Fund’s external auditors contribute to and receive benefits on the same terms and conditions as those available to other members.
The KPMG audit signing partner is not a member of the Fund and has no interest in the Fund.

FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 122 Notes FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018 123 Labasa Savusavu Ba Lautoka Nadi Sigatoka Nausori Valelevu Suva Suva - Head Office Provident Plaza Two 33 Ellery Street, Suva Private Mail Bag, Suva, Fiji.
Phone: (679) 330 7811 Fax: (679) 330 7611 Nadi Agency Shop 2, Lot 13, Concave Subdivision, Namaka, Nadi Phone: (679) 323 8018, 323 8006 Fax: (679) 672 8982 Nausori Agency Lot 1, Main Street, Nausori Telephone: (679) 323 8030, (679) 323 8031 Lautoka Branch Shop 5, Provident Centre, 6 Naviti Street, Lautoka, Phone: (679) 666 1888 Fax: (679) 666 5232 Ba Agency Ganga Singh Street, Ba CBD Phone: (679) 667 0009 Fax: (679) 667 0009 Labasa Branch Rosawa Street, Labasa Phone: (679) 881 2111 Fax: (679) 881 2741 Savusavu Agency PO Box 89, Savusavu Main Street, Savusavu Phone: (679) 885 3396 Fax: (679) 885 3397 Sigatoka Branch Shop 3-4, Hanif Building, Matamata Subdivision Phone: (679) 666 1888 Valelevu Agency Shop 3, Rajendra Prasad Bros Supermarket Complex, Valelevu, Nasinu Telephone (679) 323 8035, 323 8037 Email: information@fnpf.com.fj Website: www.myfnpf.com.fj FIJI NATIONAL PROVIDENT FUND ANNUAL REPORT 2018