CAPITAL MARKETS ANNUAL REPORT 2O1O - Reserve … Markets Annual Report 2010.pdf · CAPITAL MARKETS...

| RESERVE BANK OF FIJI | CAPITAL MARKETS UNIT | ANNUAL REPORT 2010 |

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CAPITAL MARKETS ANNUAL REPORT 2O1O


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OUR VISIONLeading Fiji to Economic Success

OUR MISSION• Enhanceourroleinthedevelopmentoftheeconomy

• ProvideproactiveandsoundadvicetoGovernment

• Developaninternationallyreputablefinancialsystem

• Conductmonetarypolicytofostereconomicgrowth

• Disseminatetimelyandqualityinformation

• Recruit,developandretainaprofessionalteam

OUR VALUES• Professionalismintheexecutionofourduties

• Respectforourcolleagues

• Integrityinourdealings

• Dynamisminaddressingourcustomers’needs

• Excellenceineverything

Table of Contents

Governor’s Foreword 4

Economic Overview 7

International Economic Developments

Economic Developments in Fiji

The Capital Markets in Fiji 10

Capital Markets Structure

Supervision, Regulation and Enforcement

Off-site Supervision

On-site Inspections

Capital Market Licenses

Capital Market Products & Issuers

Investor Protection

Industry Consultations/Meetings

Policy Developments

Other Supervisory Activities

Developing the Capital Markets 17

Developing Market Infrastructures

Developing Licensed Intermediaries

Investor Awareness

Capacity Building and Training of Staff

Market Performance 20

The Stock Market

Stock Trading

The Unit Trust Market

Bond Market

Capital Markets Calendar of Events 2010 25

Annexures 26

OUR MAJOR OBJECTIVES

• Facilitate the supply of good marketable securi-ties;

• Facilitate the development of appropriate in-stitutional infrastructure and human capital re-quired of active capital markets;

• Undertake appropriate educational and pub-lic awareness campaigns to broaden the public ownership of securities;

• License market participants as specified within the Capital Markets Decree and Regulations;

• Protect investors by ensuring the maintenance of fair and honest markets through adequate supervision of market participants and enforce-ment of regulations where appropriate;

• Promote good governance practice and en-hanced disclosure requirements;

• Collect statistics to monitor and analyse the prevailing conditions in the capital markets, within the context of the whole financial sys-tem; and

• Formulate policy and advise Government on capital markets development and regulation

OUR KEY STAKEHOLDERS

• The Public - who rely on us to foster capital markets that contribute to the economic well being of Fiji

• Investors - both retail and institutional who seek to invest their savings in fair, efficient and transparent capital markets

• Issuers - public and private companies that rely on the capital markets to fund growth

• Licensed Intermediaries - who advise investors and companies, and facilitate trades

• Other Regulators - with whom we develop and implement initiatives

• The Government - to whom we are accountable

| RESERVE BANK OF FIJI | CAPITAL MARKETS | ANNUAL REPORT 2010 |

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pliance with the Code in their 2009-2010 annual reports. These reports are continually monitored by the South Pa-cific Stock Exchange (SPSE) and the Reserve Bank.

During the year, we also issued four new policies for the capital markets industry and one for market comments. These were:

• Role of External Auditors in the Supervision of Licensed Persons;

• Continuing Professional Education (CPE) Policy - re-quires our intermediaries to undertake a 10 points CPE programme during their license period;

• Minimum requirements for capital raising through the is-sue of debt securities;

• Minimum requirements for capital raising through the is-sue of equity securities; and

• Minimum requirements for fit and proper persons – market comments.

The development of our supervision manual has been a slow process given the change of focus in our supervision from a compliance-based to a risk-based supervision frame-work. Re-training of staff on how to undertake our supervi-sion is an ongoing process. We expect that this process will flow into 2011 when the manual is fully developed and changes in our off-site and on-site frameworks are imple-mented.

In 2010, we conducted spot checks on seven listed com-pany share registries and findings reports were drafted and submitted. Ongoing monitoring continues into a number of findings from the spot checks.

There were no regulatory actions taken against any inter-mediary in 2010.

We continue to work on improvements in the standards and effectiveness of regulation and services.

Governor’s Foreword

It gives me much pleasure to present the Reserve Bank of Fiji Capital Markets Annual Report for 2010. This report provides a summary of major developments, activities and initiatives in our capital markets industry for the period 1 January – 31 December 2010.

2010 was the first full year for the capital markets supervi-sory and regulatory responsibilities to be within the Reserve Bank of Fiji (Reserve Bank) after transferring from the Capital Markets Development Authority (CMDA) in August 2009. That we have been able to achieve so much in the past 15 months is, to a large extent, due to the strong support given to us by our industry partners and stakeholders and the resolve of our staff. I thank all our stakeholders, partners and staff of the Reserve Bank for collectively ensuring the smooth transition of the CMDA to the Reserve Bank.

Regulation and SupervisionSignificant efforts were made in 2010 to strengthen the regulatory and supervision framework for the capital mar-kets. This included the revision of various rules and regula-tions, drafting and implementation of new policies, drafting of a supervision manual as well as initiatives to develop new laws and regulations to align with overall developments in international capital markets. At the same time, the Reserve Bank continued its effort to enhance good corporate gov-ernance by all market participants through the promotion of the Corporate Governance Code. I am pleased to report that all our listed companies began reporting on their com-


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Market DevelopmentsWhile our primary role is to regulate the capital markets in-dustry, we recognise that we have an equally important role to play in allowing a healthy industry to develop. We also have a role to play in supporting Fiji’s continued develop-ment as a reputable financial centre in the South Pacific and internationally.

One of our long term development plans is to enhance our role in facilitating the introduction of new marketable prod-ucts and the extension of our markets to involve new players and intermediaries in the market place. We are mindful that as markets become more global and as financial intermedi-aries operate across borders, the Reserve Bank will need to play its part in shaping and keeping up with international regulatory practices.

In 2010, Cabinet approved the review of the Capital Mar-kets Decree (2009). Major amendments have been pro-posed and market comments on these amendments were received during the latter part of the year. The proposed amendments address the loopholes in our current law while at the same time strengthening the Reserve Bank’s powers and aligning the offences and penalties within the law to de-velopments in our markets. We anticipate receiving Cabinet approval of the amendments in 2011.

In addition to the above, I am also pleased to report two positive developments in our stock exchange:

• On 11 May 2010, the first hybrid security was listed on the SPSE Interest Rate Securities Board. The Bank of the South Pacific Convertible Notes (BCN) became the first hybrid debt instrument to list on the stock exchange. The notes floated at $5.25 and pays a 7 percent interest annually;

• On 1 July 2010, the open out-cry trading floor of our stock exchange call market was replaced with the launch of the Electronic Trading Platform (ETP). This was made possible through a joint venture between the SPSE the Australian NSX and the NASDAQ OMX. Updated re-ports from the SPSE note that brokers have found that trading on the ETP has contributed to a number of ef-ficiencies. Brokers can now access the market platform from 10.00am-4.00pm daily and perform transactions via the NETS Trader Workstation installed on their re-spective personal computers. The longer trading hours on the ETP also give brokers and investors a longer trad-ing window each day.

Our unit trusts also began recovering in 2010. Towards the end of the year, sales had begun to increase and redemp-tion levels decreased to more manageable levels compared to levels in the same period of 2009. The number of unit holders increased by 1.6 percent from 16,162 in 2009 to 16,415 in 2010. This has mainly been due to the ongoing awareness and personal community visits by unit trust rep-resentatives throughout the year.

Better PartnershipsPartnership with our stakeholders and industry participants is a key element of our work and something on which we place a great deal of importance. We refer to our stake-holders and view our licensed intermediaries as our partners and strive to work closely with them in developing initiatives to grow our capital markets. We share many of the same concerns as our partners and believe that we are able to improve the quality of what we do and advance important goals for the capital markets by engaging more closely with them. Dialogue and improved relations with our partners has enabled us to resolve several important development issues.

The Reserve Bank also provided ongoing support to our in-termediaries in 2010. We facilitated all the broker briefings by listed companies in our conference room, boosting at-tendance by more than 200 percent from previous briefings held at the stock exchange. Intermediaries were also invited to participate at the Reserve Bank microfinance expositions held in Suva, Ba and Labasa and responses from the public at these events have been encouraging. We also partnered with the SPSE to facilitate and host two listing seminars tar-geted at various companies in Suva and Nadi and as a fol-low-up, the SPSE plans to pay personal visits to companies that have shown a keen interest in listing.

Investor AwarenessIn 2010, the Reserve Bank began a series of newspaper articles in the Fiji Sun on investor awareness issues. We thank the Fiji Sun for partnering with us on this initiative. We also began a quarterly electronic newsletter called the E-Guardian, where we provided updated news and reports of our capital markets and other development issues being undertaken by the Reserve Bank. These publications have reached a very wide audience both in Fiji and abroad and we look forward to increasing their effectiveness in 2011.


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Our awareness programme for 2011-2012 was also drafted and finalised towards the end of the year and staff began planning various activities outlined in the programme. The plan for the awareness programme is to focuses on school students and young professionals who have just entered the workforce. Other activities planned for 2011 include, the production of various publications, a capital markets aware-ness month and a capital markets workshop.

Staff Training and DevelopmentIn seeking to improve the quality of our capital markets, we are mindful of the need to also continuously improve our own capacity. The capital markets environment internation-ally has become more complex and the demands on our staff in terms of skills, resource management, professional-ism and leadership have grown in tandem. To upgrade the capabilities of our staff, the Reserve Bank began some in-house training programmes to encourage staff to research and make presentations, testing our specially developed supervision programme for our market supervisors and en-couraging initiative in improving work processes.

In addition to technical skills, we continue to work towards benchmarking our professional conduct to the highest standards. We also continued to raise our benchmarks on operational efficiency. For instance, we are working to-wards reducing our turnaround time for responses to en-quiries and queries from our intermediaries to one to three days by officially corresponding electronically, cutting back the delays associated with postal correspondences. In ad-dition, we continuously work with our intermediaries and issuers in meeting the same deadlines so that the result is a win-win situation for everyone. In some circumstances, this has meant that our staff have had to meet on a regular basis with companies and their advisers until the company has sat-isfactorily met the Reserve Bank’s requirements.

From a long term perspective, our people remain our key asset, and the future of the Reserve Bank depends a great deal on how we develop our new staff. At the same time, we ensure that experienced staff continue to grow through participation in domestic and international training seminars and workshops and postgraduate studies. In 2010, the Re-serve Bank sponsored two analysts and the manager from the Capital Markets Unit to specialised regional seminars for securities regulators on market supervision and market in-vestigation and enforcement.

The Reserve Bank also approved the CPE policy for capital markets staff. The policy encourages staff to take personal ownership of their professional development. Staff must gain 10 points within one calendar year by undertaking activities such as reading a book and making a presentation, under-taking research and producing a research paper, attending courses and facilitating seminars, to name a few. The CPE will become a key results area for our capital markets staff.

Looking AheadThere is no doubt that the way the market is regulated plays a key role in instilling confidence amongst the investing pub-lic. For Fiji, we will continue to invest significant effort in strengthening the regulatory and supervisory framework.

We have a responsibility to regulate fairly and be as transpar-ent as possible, given our role as a regulatory, licensing and enforcement agency. We will always seek to find the right balance in our regulatory approach so as to not inhibit mar-ket development. We will also continue to move down the path of risk-based supervision, picking the important prob-lems and addressing them in a timely manner.

The Capital Markets 2011 work plan lists some very inter-esting development and investor awareness activities and outputs. The Reserve Bank has made sufficient financial al-locations for these activities and will continuously monitor and evaluate the effectiveness of our programmes at national level. The Reserve Bank has finite resources and therefore we plan to use those resources to serve the investing public in the best possible way.

I would like to record my deep appreciation to the previ-ous Governor, Mr Sada Reddy, for cementing the Reserve Bank’s commitment to the development of the capital mar-kets. I also thank our management team for their counsel and contributions and last but not the least, I extend my gratitude to the capital markets staff for their hard work and dedication throughout 2010.

Barry Whiteside Governor


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International Economic DevelopmentsThe International Monetary Fund (IMF) expects global growth to rebound to 5.1 percent in 2010, after a decline of 0.7 percent in 2009. The outturn was underpinned by pol-icy actions in the developed and developing world, including unconventional monetary policy measures, accommodative fiscal stimulus, and measures undertaken to support the fi-nancial system. Despite the better performance in 2010, the outlook for 2011 is still embroiled with a number of downside risks, including the resurgence in oil and food pric-es, the political tensions in the Middle East and North African region, overheating in developing economies, and sovereign debt sustainability in the Euro area. Consequently, growth is projected to slow to 4.0 percent in 2011.

The United States economy grew by 3.0 percent in 2010, supported by the series of quantitative easing programs by the Federal Reserve to stimulate private demand. Despite these initiatives, the unemployment rate remained at around

10 percent in the US. In Japan, the export-led recovery which began in the second quarter of 2009 gained further momentum in 2010, with growth registered at 4.0 percent. The Euro zone expanded by 1.8 percent despite the sov-ereign debt crisis in some Euro countries. The Australian economy showed strong recovery in 2010 at 2.7 percent, supported by rising demand from China. However, recov-ery in New Zealand was somewhat frail, weakened further by the 2010 earthquake.

Economic Overview

Source: IMF World Economic Outlook - September 2011

WORLD GDP GROWTH RATES6

5

4

3

2

1

0

-1

Percent

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

2.9

3.6

4.94.6

5.2 5.3

2.8

5.1

4.0

-0.7


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2006 levels, and rose only by 3.6 percent in 2010, reflect-ing sluggish construction activity in 2010. Results from the RBF Business Expectations Survey (BES) also revealed that investment intentions, while positive, remained generally weak.

However, employment conditions improved slightly, par-ticularly during the latter part of 2010. The Job Advertise-ments Survey, a partial indicator of employment, rose by 6 percent, led by tourism related sectors.

Inflation spiked in the early months of 2010, peaking at 10.5 percent in April, underpinned by the one-off impact of the devaluation in April 2009 as well as shortages (particularly for market items) resulting from the two cyclones during the year.

The resurgence in oil prices, coupled with the impact of the increase in the electricity tariff rate towards the end of the year, placed further pressure on prices during the last quarter, after some temporary relief in June as a result of an initial reduction in the tariff rate to lifeline consumers. The year-end inflation was 5.0 percent in 2010, compared to 6.8 percent in 2009.

The growth in broad money supply also weakened in 2010, with growth sliding from 7.4 percent in 2009 to 3.9 per-cent, on account of the slowdown in credit during the year. Domestic credit declined by 1.7 percent in 2010, led by the rapid decline in the net claims on Government. This more than offset the growth in private sector credit which grew by 3.2 percent in the review period. Growth in private sec-tor credit was in turn driven by the increase in commercial banks’ loans and advances (3.4 percent) as a result of higher lending to the mining & quarrying; real estate; wholesale, retail, hotel & restaurants; and the private individuals sectors.

Interest rates generally trended downwards in 2010, under-pinned by the excess liquidity in the banking system. The commercial banks’ weighted average lending rate fell to 7.42 percent in December 2010, compared to 7.52 per-cent at the end of 2009. In the same period, the commer-cial banks’ time deposit rate fell to 4.73 percent from 5.83 percent, while the savings deposit rate increased by 10 basis points to 1.02 percent.

In 2010, exports rose by 25.8 percent compared to a 16.4 percent decline in 2009. Similarly, imports rose by 22.6 per-

Consumer demand appears to have improved modestly,

consistent with the improvement in tourism and other re-

lated industries. Net Value Added Tax (VAT) collections, a

partial indicator of household consumption, rose by 23.1

percent in 2010 to $495.7 million and imports of consump-

tion goods increased by 14.2 percent on an annual basis.

This improvement in consumption activity was supported by

a 3.5 percent annual increase in Pay As You Earn collections

(partial indicator for income) and a marginal 0.5 percent

increase in remittances compared to 2009. However, the

annual decline in new consumption lending in 2010 by 12.5

percent suggest restrained consumer behaviour.

Subdued investment activity continued in 2010, as imports

of investment goods recorded an annual increase of 9.6

percent following the 11.2 percent annual contraction in

2009. The total value of work put in place remained below

Economic Developments in FijiAccording to the Fiji Bureau of Statistics (FBOS), the do-mestic economy contracted by 0.2 percent in 2010, led by declines in the public administration & defence; agriculture; health & social work and the education sectors. The trans-port, storage & communication; wholesale & retail trade; other community & business services and the fishing sectors also contributed to the overall contraction, but moderately.

In contrast, the manufacturing; hotels & restaurants; for-estry; construction; electricity & water; mining & quarry-ing; financial intermediation; and the real estate & business sectors registered positive performances – but these were more-than-offset by contractions recorded in the previous-ly-mentioned sectors. Consequently, economic growth in 2010 was -0.2 percent.

Source: Fiji Bureau of Statistics and Macroeconomic Committee

2002 2003 2004 2005 2006 2007 2008 (r) 2009(r) 2010(p)

6

4

2

0

-2

Percent FIJI’S GDP GROWTH RATES

3.2

0.8

5.4

-1.3

1.91.0

-0.2-0.9 -1.3


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cent from a 20.6 percent decline in 2009. Consequently,

the trade deficit worsened to $1,895 million from $1,577

million in 2009.

However, foreign reserves improved further in 2010, on

account of the substantial adjustment in the current account.

At the end of the year, foreign reserves stood at $1,303 mil-

lion, sufficient to cover 4.1 months of import of goods and

non-factor services.

Source: Reserve Bank of Fiji

2010

10

8

6

4

2

0

Percent

COMMERCIAL BANKS’ LENDING AND DEPOSIT RATES

2007 2008 2009

J FMAMJ

Loans Savings Deposit Time Deposit

J FMAMJ J FMAMJJ FMAMJSOND SOND SONDSONDJA JAJAJAJ JJ


0

200

400

600

800

1,000

1,200

1,400

F$M FOREIGN RESERvES

2002 2003 2004 2005 2006 2007 2008 2009 20102001

846

741 729786

549 515

805

559

1,096

1,303


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Capital Markets StructureIn 2010, the capital markets made up 13 percent of Fiji’s financial system. The remaining 87 percent segment is shared mainly between the Fiji National Provident Fund (FNPF) and the four commercial banks.

Whilst Fiji’s capital markets is still in its development stages, there is currently in place a growing debt market, equity market and managed funds industry. In 2010, the debt mar-ket comprised 77.2 percent of the overall capital markets, the equity securities market made up 20.1 percent and the managed funds industry made up the remaining 2.7 percent.

Fiji’s debt market is dominated by bonds issued by the Fiji Government and the Fiji Development Bank. As at 31 De-cember 2010, total outstanding bonds accounted for 77.2 percent of total funds in the capital markets. The Reserve

The Capital Markets in Fiji

* ExcludesReserveBankofFiji** Includes 16 listed companies (excluding BCN) on SPSE, Fijian Holdings Unit

Trust,FijianHoldingsPropertyTrust,UnitTrustofFiji andall licensedbrokers/dealers.

*** IncludesFijiDevelopmentBankandHousingAuthoritybutexcludesFijiNationalProvidentFund,AssetManagementBankandUnitTrustofFiji.

Sources: Reserve Bank of Fiji / South Pacific Stock Exchange

CREDIT INSTITUTIONS3%

COMPOSITION OF FINANCIAL SYSTEMS*

COMMERCIAL BANKS38%

NBFI’S***6%

FNPF33%

CAPITAL MARTKETS**13%

ANIESINSURANCE COMP8%


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Bank provides registry services for the government and stat-utory bodies in both the primary and secondary markets. The SPSE also provides a secondary market for debt instru-ments but very little activity has taken place over the past years. There were no corporate bonds listed on the stock exchange in 2010.

On 11 May 2010, the first hybrid debt security issued by the Bank of the South Pacific (BSP) was listed on the SPSE Interest Rate Securities Board. The BSP Convertible Notes (BCN) were issued and listed at $5.25. An interest of 7 per-cent is paid annually to note holders for the five year term of the BCN.

The equity securities market comprises the stock market and an over-the-counter (OTC) trading desk provided by Kontiki Stock Broking Limited (KSB) called the Kontiki Price Matching Service (KPMS). There were 16 companies on the official list of the SPSE with a total market capitalisation of $778.24 million. There are four public companies on the KPMS with a market capitalisation of $59.90 million. The SPSE is licensed and supervised by the Reserve Bank and the KPMS is approved by the Reserve Bank as an approved broker/dealer activity of KSB.

The managed funds industry is made up of two unit trust funds and one property trust fund managed by two man-agement companies. As at 31 December 2010, total funds under management of all three funds totalled $112.3 mil-lion, a decrease of 2.8 percent from 2009 levels of $115.5 million. Total unit holders however increased by 1.6 percent to 16,415 from 16,162 in 2009.

Supervision, Regulation and EnforcementSections 5 and 6 of the Capital Markets Decree (2009) (Decree), gives the Reserve Bank the mandate to regulate, supervise and develop Fiji’s capital markets, to ensure that securities are issued and traded in an orderly, fair and ef-ficient manner and that fit and proper persons are licensed.

Other functions include:

• Advising Government of capital markets development initiatives and reforms to the law when necessary;

• Granting of licenses and imposing conditions of such li-censes;


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• Powers to enquire, give directions, require information, conduct inspections and publish findings of any licensed or approved person;

• Regulating takeovers and mergers, activities of any ex-change and trading on both the primary and secondary markets of capital markets instruments;

• Hear appeals against stock exchange supervisory actions;

• Powers to suspend or cancel any listing or trading of any securities for the protection of investors;

• Safeguarding the interest of persons dealing with securi-ties;

• Promoting and encouraging proper conduct amongst registered members of an exchange, suppressing illegal and dishonourable and improper practices; and

• Granting compensation to investors who suffer pecuni-ary loss from failure of a licensed intermediary.

The basis of strong regulation and enforcement is an effec-tive and comprehensive legal framework that allows for the effective supervision and enforcement by the regulator. In 2010, the Reserve Bank received Cabinet approval to re-view and make amendments to the Decree. Towards the latter part of the year, the proposed amendments were circulated to market participants and intermediaries for comments. A number of changes were incorporated as a result of the market comments received and the final draft was sent to the Office of the Solicitor General for drafting approval.

In 2010, the Reserve Bank provided assistance to the Fiji Independent Commission against Corruption (FICAC) in its investigation against a licensed intermediary. The outcome of this investigation is still pending. There were no other enforcement actions taken by the Reserve Bank during the year.

There were a total of five complaints received in 2010. Three of the five complaints referred to the drop in market share trading price of Amalgamated Telecom Holdings Lim-ited (ATH) and Flour Mills of Fiji Limited (FMF). The remain-ing two complaints referred to late dividend payments and disclosures at annual general meeting by listed companies. All complaints were satisfactorily resolved.

A total of 17 enquiries were received from shareholders/in-vestors on issues ranging from licensing requirements, pro-

hibited activities, licensed intermediaries, scams and general Capital Markets issues.

The Reserve Bank met with six companies interested in cap-ital markets alternatives to capital raising. At least two com-panies are expected to enter and use the capital markets for capital raising purposes in 2011 and one, BSP, has issued their convertible notes.

Off-site SupervisionOff-site supervision of the capital markets involves the as-sessment of all periodic returns from intermediaries. The following returns are submitted to the Reserve Bank on a regular basis:

(i) Monthly progress reports from the SPSE on various development matters.

The Reserve Bank conducted three meetings with the SPSE to discuss various development issues highlighted in the reports.

(ii) Financial Limits Returns from Broker/Dealers.

The financial limits reports are submitted by brokers on a monthly basis. In 2010, there was full compliance of the limit rules although the Reserve Bank did conduct four follow up enquiries on reports and issued two no-tice letters for limits which were continuously moving towards the minimum requirement rule.

(iii) Quarterly returns from Unit Trust Managers.

In 2010, the unit trusts submitted all the quarterly re-turns although a number of clarifications had to be made on various calculations and numbers. There were no major issues arising out from the returns although plans are in place to enhance the reports and the information required in the returns. Work on these enhancements will begin in 2011.

In addition, all listed companies are required to submit half-yearly reports and annual audited accounts to the SPSE and results and summaries of these are submitted to the Reserve Bank.

During the year, the Reserve Bank also developed eight process maps outlining the important steps supervision staff must follow in assessing the returns. Process maps on the broker’s financial limits and the unit trust returns were de-veloped, presented and tested during the year. The follow-


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ing is a list of all the process maps developed for the capital markets:

• Assessment of Unit Trust Returns and Reports;

• Preparation and Assessment of Financial Limits from Brokers;

• Preparation of E-Guardian newsletter;

• Preparation of articles for Fiji Sun;

• Verification of Statistics;

• Preparation of stoical and compliance reports;

• Preparation of RBF Quarterly Review Capital Markets report; and

• Preparation of Unit Trust Quarterly Condition Reports.

On-site InspectionsThe Reserve Bank’s supervision programme of licensed in-termediaries includes both off-site and on-site supervision. On-site inspections form an integral part of the Reserve Bank’s regulatory framework.

The Reserve Bank generally conducts two types of on-site examinations of licensed intermediaries, namely routine and special examinations. Although other examinations such as spot checks, investigations and thematic/target examinations may also be undertaken as and when necessary.

In 2010, the Reserve Bank conducted:

• One preliminary on-site training inspection of the Fijian Holdings Unit Trust (FHUT);

• One preliminary on-site training inspection of the SPSE; and

• Eight spot checks of listed company share registries.

Reports of the registry spot checks were submitted but on-site inspections of both the FHUT and the SPSE are planned for 2011.

Capital Market Licenses Under the Decree 2009, no person shall carry on a business as a broker, dealer, investment adviser, unit trust, mutual fund or a representative unless the person is a holder of a valid license issued under the Decree. In 2010, the licensed capital markets participants in Fiji comprised one securities exchange, two unit trusts, one property trust, three brokers/dealers, 10 investment advisers and 43 representatives.

Licensed applications are assessed against a set of require-ments which are guided by international best practices and benchmarks. An applicant is granted a license only after they have satisfactorily met all the requirements of the Decree. The licenses are valid for a period of one year and are sub-ject to renewal based on meeting ongoing renewal legal and policy requirements of the Reserve Bank.

Five different categories of licenses are issued and these in-clude the stock exchange, brokers, dealers, investor advisers and unit trusts. At present, the KSB OTC facility and the clearing and settlement services, registry services and central depository services performed by the SPSE have all been approved.

To improve the efficiency and effectiveness of all licensing requirements, a licensing manual is currently being devel-oped and tested.

To assist intermediaries with training in technical areas the Reserve Bank facilitated three user pays technical workshops in 2010:

NAME OF LICENSEE TYPES OF LICENSE

BROKERS & DEALERS

FHL Securities Limited (FHLS) Broker & Dealer - Principal

Fiji Stock Brokers Limited (FSB) Broker & Dealer - Principal

Kontiki Stock Broking Limited (KSB) Broker & Dealer - Principal

INVESTMENT ADVISERS

FHL Securities Limited (FHLS) Investment Adviser -Principal

Fiji Stock Brokers Limited (FSB) Investment Adviser -Principal

Kontiki Capital Limited (KCL) Investment Adviser -Principal

KPMG Advisory (Fiji) Limited Investment Adviser -Principal

PricewaterhouseCoopers Corporate Finance Limited (PWCCFL)

Investment Adviser -Principal

Westpac Banking Corporation (WBC)


UNIT TRUSTS

Fijian Holdings Property Trust (FHPT)

Unit Trust - Principal

Fijian Holdings Unit Trust (FHUT) Unit Trust - Principal

Unit Trust of Fiji (UTOF) Unit Trust - Principal

SECURITIES EXCHANGE

South Pacific Stock Exchange Securities Exchange



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i. Financial Analysis (Basic – Intermediate level)

ii. Valuation of Equity and Debt Securities (Intermediate – Advance level)

iii. Fundamentals of Fund Management (Basic – Intermedi-ate level)

Facilitation of the workshops is awarded on a tender basis. At least 40 participants attended each workshop.

Capital Market Products & IssuersThe Reserve Bank regulates all products, securities and issu-ers in the capital markets. Section 24 of the Decree requires that a public company must submit a proposal for any:

(i) New issues or offers for sale of securities to the public whether by public offer or private placements;

(ii) Rights issues of securities;

(iii) Bonus issues of securities;

(iv) Schemes of arrangements, reconstructions, takeovers, share option schemes; and

(v) Listing and quotation of securities on a stock exchange

In assessing any proposal, the Decree requires that the Re-serve Bank considers:

• The viability of the Issuer;

• The quality and capability of the management of the Issuer;

• The suitability for listing where applicable; and

• The interest of the public.

In 2010, the Reserve Bank met with six companies on vari-ous capital raising issues:

• Two provincial companies on restructuring for capital raising purposes;

• One company on issuing corporate bonds;

• One teak plantation company on issuing equity and debt securities;

• One company on issuing depository receipts; and

• BSP on issuing convertible notes.

Investor ProtectionAs part of the investor awareness programme, monthly publication of investment awareness articles written by

Reserve Bank have been published by the Fiji Sun newspa-per company. A total of eight articles were submitted and published in 2010:

• Why you need to invest?

• Microfinance and You

• Understanding the capital markets

• Why raising money smart children is a must?

• Having a financial plan

• Borrowing money

• Watch out for scams

• Watch your money this festive season

Industry Consultations/MeetingsOngoing consultations with licensed and unlicensed com-panies in the capital markets industry were conducted. The meetings ranged from interests to publicly raise capital and list on the SPSE.

The Reserve Bank also conducted two industry meetings; one with the unit trust managers and representatives and the second with the SPSE and brokers. The Reserve Bank plans to hold these industry meetings on a more regular ba-sis in 2011.

In 2010, the Reserve Bank also established the Capital Mar-kets Advisory and Development Taskforce. The Taskforce comprises six highly experienced and prominent industry professionals chaired by the Governor of the Reserve Bank. The main purpose of the Taskforce is to develop the Capital Markets Master Plan for 2010-2020 and oversee the imple-mentation of the Master Plan in the initial 1-3 years of com-mencement. The Taskforce met only once in 2010. The members of the Taskforce are:

• Governor (Chairperson)

• Mr. Daryl Tarte

• Mr. Pradeep Patel

• Mr. Mesake Nawari

• Ms. Lisa Apted

• Mr. Norman Wilson; and

• Mr. Nitish Niranjan

Policy DevelopmentsThe development and issuance of policy statements is im-


15

v. Capital Markets Supervision Policy No. 5: “Minimum Requirements for Capital Raising through issue of Equity Securities”

A copies of these policies are available on the website: www.rbf.gov.fj.

This Policy was issued pursuant to Section 24 of the Decree, to promote accurate, timely and quality disclosure of infor-mation by companies in their proposal to issue equity secu-rities. The Policy replaced CMDA Policy Statements 12/00, 13/00, 18/01, 21/02 and 22/02 and came into effect on 1 January 2011.

In 2010, work begun on the development of the following policies:

(i) Capital Markets Supervision Policy on Fit and Proper Re-quirements for Licensed Intermediaries and Issuers

This policy will require all market participants, including li-censed, listed companies and issuers, to ensure that all board directors and executive and senior management of-ficials are assessed against the fit and proper requirements outlined in the Policy.

(ii) Capital Markets Supervision Policy on Prospectus Guide-line for Managed Investment Schemes

The development of this policy specifies the minimum infor-mation required by the Reserve Bank in a fund’s prospectus. It is general in nature and should not be viewed as the only criteria for disclosure in a fund’s prospectus. The objective of this guideline is to ensure that fund managers and trustees disclose and provide all material and quality information nec-essary to assist investors in making an informed investment decision.

(iii) Capital Markets Supervision Policy on Asset Investment Management for Managed Investment Schemes

This policy describes the essential elements for a sound as-set investment management system across the full range of investment activities. The asset management practices of managed investment schemes are likely to differ according to the size and structure of the managed investment scheme and the type of products it undertakes. The policy outlines the minimum requirements for managing the investment of a managed investment schemes must follow. The policy is expected to be completed in 2011 and come in to force on 1 January 2012.

portant in the supervision and regulation of the capital mar-kets industry.

In 2010, five capital markets supervision policies were issued by the Reserve Bank:

i. Capital Markets Supervision Policy No. 1: “Role of Exter-nal Auditors in the Supervision of Licensed Persons”

This Policy outlines the minimum requirements and clarifies the role to be played by external auditors in the supervision of licensed persons. This policy came into effective on 31 March 2011.

ii. Capital Markets Supervision Policy No. 2: “Continuing Professional Education”

The CPE policy aims to enhance the professional compe-tence of all licensed representatives. Over the longer term, it is expected that the programme should create a culture of continuous education and improvement among licensed persons in the capital markets as part and parcel of their skills and knowledge upgrading so as to better serve their clients. The ongoing development of licensed persons is essential to the growth and development of the capital markets. In-vestors need to be assured that licensed persons have the technical knowledge, professional skills and ethical standards required to perform their functions effectively and fairly. The Reserve Bank CPE policy requires all licensed intermediar-ies to obtain 10 CPE points in each license year in order to qualify for renewal of their licenses for the following year. This policy came into effective on 1 January 2011.

iii. Capital Markets Supervision Policy No. 3: “Minimum Guidelines on Complaints Management”

This Policy was issued under Section 5(r) of the Decree as part of the Reserve Bank’s standards governing the activities of the capital markets participants which include interme-diaries, approved issuers, listed companies and any other person(s) approved by the RBF to undertake capital markets activities. This Policy came into effect on 1 December 2010.

iv. Capital Markets Supervision Policy No. 4: “Minimum Requirements for Capital Raising through issue of Debt Securities”

This Policy was issued pursuant to Section 24 of the Decree to promote accurate, timely and quality disclosure of infor-mation by companies in their proposal to issue debt securi-ties. The Policy came into effect on 1 January 2011.


16

Other Supervisory Activities(a) Advice on the Capital Markets Decree (2009)

The Reserve Bank provides legal interpretation of the Capital Markets Decree 2009 and related legislation to the Board, licensed intermediaries, market participants and other exter-nal stakeholders as and when required.

(b) Legal assistance, drafting and advice

Legal officers within the Capital Markets Unit provided a to-

tal of 15 legal advise to other Groups within the Reserve

Bank. The advice included drafting of amendments and pro-

visions of the RBF Act and Exchange Control Act, drafting of

contracts and tenancy agreements and legal interpretations

of various provisions of Banking, Insurance and amendments

to the Companies Acts.


17

The Reserve Bank is also responsible for the development of the capital markets in Fiji. The development strategy is three pronged. There is a focus on activities and programmes that aims to develop our market infrastructures, our licensed in-termediaries and our investors.

1. Developing Market Infrastructures

• Facilitation

The Reserve Bank plays a facilitation role between external parties and investors, Government and our intermediaries. In 2010:

• the Reserve Bank coordinated and supported three meetings between the Fiji Revenue & Customs Author-ity (FRCA), SPSE and the Reserve Bank on tax treatment

of listed companies;

• met with three groups of investors interested in invest-

ments in Fiji;

• assisted the SPSE by facilitating broker briefings at the

Reserve Bank boosting attendance by 200 percent;

• organised two listing seminars in partnership with the

SPSE in Suva and Nadi. The seminars were well attend-

ed by intermediaries and potential companies;

• undertook research work into the development of an

Alternate Investment Market (AIM) for small to medium

enterprises and the creation of an AIM Board on the

SPSE;

• approved the sale of FijiStock Brokers to an Australia

based stock broking firm;

Developing the Capital Markets


18

• granted approval in principal for the issue and listing of Fiji Depository Notes in Fiji;

• streamlined and articulated all licensing and approval re-quirements to facilitate external and intermediary que-ries;

• began work on a number of guidelines and policy initia-tives to clarify the preparation of prospectuses; and

• drafted the CPE Policy for commencement in 2011.

• Review of laws and policies

In 2010, the Reserve Bank received Cabinet approval to re-view the Capital Markets Decree and this was completed in December. A number of new policies aimed at making investment easier for issuers also became effective during the year.

• Capital Markets Development Taskforce

In 2010, a Capital Markets Advisory and Development Task-force was established to spearhead the development of the capital markets.

• Promoting Good Corporate Governance

During the year, the Reserve Bank closely monitored listed company annual reports for the reporting of their corpo-rate governance within the company. Under the Reserve Bank Corporate Governance Code, companies must report on how they are addressing each of the Principles in the Code within the company. The Code acknowledges that each company may implement the principles outlined in the Code differently depending on their size, business, his-tory etc. In 2010, the Reserve Bank queried the absence of a governance report of two listed companies. As a result the concerned companies prepared separate reports and released these to the market. They were also required to attach the report to all copies of their annual report.

2. Developing Licensed Intermediaries

The development of Fiji’s capital markets requires experi-enced and skilled intermediaries. To address this, the Re-serve Bank mandates that all new licensees pass the secu-rities licensing exams, organises technical workshops and facilitates free seminars for intermediaries and members of the professional public. The activities are aimed at creating

awareness and up-skilling of our intermediaries and profes-sional members of the public who provide services to the market. During the year, the Reserve Bank provided and facilitated the following activities:

• Securities licensing exam –The licensing exam is targeted at new licensees who do not have the necessary qualifi-cation or background in capital markets whilst the tech-nical workshops are provided specifically for those who have been in the industry for a number of years. The exam is divided into two modules – Module 1: Financial and Investment Analysis; and Module 2: Securities Law and Regulation in Fiji. In 2010, 18 people sat and passed Module 1 and 16 people sat and passed Module 2.

• Technical workshops – In 2010 the Reserve Bank organ-ised three technical workshops on the following topics:

- Financial Analysis Course (Basic) – the workshop was attended by 30 participants and course presenter was Mr. Stephen James of the Securities Investment Institute Asia Pacific (SiiA), Australia;

- Financial Analysis & Valuation Course (Advanced) - the workshop was attended by 41 participants and the presenter was Mr. Stephen James of the Secu-rities Investment Institute Asia Pacific (SiiA), Austral-ia;

- Valuing Equity & Debt Securities (Basic - Intermedi-ate) - the workshop was attended by 33 participants and the course presenter was Mr. Bradley Schwarz, Director Debt Capital Markets, ANZ International;

- Fundamentals of Fund Management (Intermediate) - the workshop was attended by 22 participants and the course presenter was Mr. Robert Jewell, Head of Funds Trading, ANZ International.

• CPE Policy

In 2010, the Reserve Bank implemented a CPE policy aimed at enhancing the professional competence of all licensed representatives. Over the long term, the programme is expected to create a culture of continuous education and improvement among licensed persons in the capital market as part and parcel of their skills and knowledge upgrading so as to better serve their clients. The ongoing development of licensed persons is essential to the growth and develop-ment of the capital markets and investors need to be as-sured that licensed persons have the technical knowledge,


19

professional skills and ethical standards required to perform their functions effectively and fairly. Ultimately, the CPE will act as a professional competency model, aimed at bench-marking the development of licensed persons on the level of technical knowledge and professional skills that is expected throughout the cycle of the profession.

• Industry Meetings and Presentations

Throughout the year, the Reserve Bank organised industry meetings and presentations for licensed intermediaries.

3. Investor Awareness In 2010, the Reserve Bank began a series of newspaper arti-cles in the Fiji Sun on investor awareness issues and also be-gan an electronic newsletter called the E-Guardian, where updated news and reports of capital markets issues were disseminated. These publications have reached a wide audi-ence both in Fiji and abroad.

The awareness programme for 2011-2012 was also drafted and finalised towards the end of the year and staff began planning various activities outlined in the programme. The programme specifically focuses on awareness at secondary school and tertiary students and young professionals who have just entered the workforce. In 2011, the Reserve Bank plans to concentrate on investor awareness programmes in vernacular particularly for the indigenous population.

During the year, the Reserve Bank conducted community seminars in Ba and Labasa and disseminated capital markets publications in Suva, Ba and Labasa during the Reserve Bank microfinance expositions.

Capacity Building and Training of StaffThe professional development of staff at the Reserve Bank is a high priority and staff are encouraged to pursue avail-able training opportunities in technical areas. In 2010, staff attended a number of local training workshops and the fol-lowing overseas training:

• 4th SEACEN Intermediate Leadership Course on “Lead-ership in Times of Uncertainty”, 25-30 April, 2010, Kuala Lumpur, Malaysia. This Course was organised by South East Asian Central Banks Research & Training Centre (SEACEN)

• APG/IMF Training Workshop for Mutual Evaluation As-sessors, 23-27 August, 2010, Singapore.

• “Central Banking and Financial Sector Legal Frame-works”, 30 August-10 September, 2010, Singapore. This training was organised by the IMF-Singapore Re-gional Training Institute.

• “Market Supervision”, 13-17 December, 2010, Kuala Lumpur, Malaysia. This Seminar was organised by ADB APEC Financial Regulators Training Institute.


20

The Stock MarketFiji has one securities exchange which is yet to be demutu-

alised. The exchange is owned and operated by the SPSE.

SPSE is a locally incorporated company, has a Board of seven

members, three of whom are representatives of the brok-

ing firms. The brokers are also shareholders of the SPSE.

Other shareholders include the Fiji National Provident Fund,

Fiji Development Bank and Colonial BSP.

The SPSE began 2010 with 17 companies officially listed on

the Exchange and concluded the year with the same num-

ber of listed companies, following the listing of BSP Convert-

ible notes and the delisting of Fiji Sugar Corporation. There

were five major events that occurred on the stock exchange

in 2010:

Market Performance• On 11 May, the BSP issued and listed the first hybrid

security on the SPSE Interest Rate Securities Board;

• On 1 July, the open outcry system of call market was re-placed with the launch of the Electronic Trading Platform (ETP), a joint venture between Fiji’s SPSE, the Australian NSX and NASDAQ OMX;

• On 1 September, the SPSE launched its revised Listing Rules approved by the Reserve Bank.

• On 5 October, the Fiji Sugar Corporation, a public listed company, was suspended from trading on SPSE indefi-nitely; and

• Government approved a reduced corporate tax to 20 percent for companies listed on the SPSE with a 40 per-cent local shareholding.


21

Stock Trading• Market Capitalisation

The SPSE commenced 2010 with a market capitalisation of $901.5 million. During the year it experienced a low of $772.6 million but concluded the year with a slight improve-ment of $778.2 million. The decline in market capitalisation of 13.7 percent is a direct result of decreases in share prices for 11 of the 17 listed companies. The devaluation of the Fiji dollar in 2009 led to a significant decline in the 2010 financial results of listed companies in the retail, manufacturing and wholesale industries.

• Trading results

The 2010 saw the SPSE experience a significant decline in the level of stock trading relative to the previous year with volume and value traded dropping 62 percent and 93 per-cent respectively. Fijian Holdings Limited’s (FHL) divestment of close to 3 million shares in FGP in 2009 contributed to this significant decline as the sale was recorded off-market through a special crossing transaction.

The trading platform facilitated aggregate on-market trades of 2.3 million shares in 711 transactions resulting in an aggre-gate consideration of $2.7 million. Excluding the 12 special crossing transactions that occurred in 2009, the 2010 mar-ket trading results represented marginal changes through an increase in total volume of shares traded (2009:1.6 million shares) and consideration received (2009: $2.2 million) and a decline in stock trade transactions (2009: 777 transactions)

The SPSE’s buy to sell ratio averaged 1:16 during the year signifying a bear market with a huge dominance of sellers pressuring a downward trend on share prices. Despite the predominant share sale transactions, shares in existing listed companies continued to be tightly held which also damp-ened the level of trading.

BCN was the only entity on the stock market that concluded the year with no trade.

In addition to the on-market trading transactions, a total of 42 off-market private transactions totalling 1.8 million shares of 11 listed companies were approved in 2010. Pleass Bev-erages & Packaging Limited alone had 1.3 million shares traded in private transactions.

Stock trading peaked in the month of May 2010 resulting primarily from a trade in Pacific Green Industries shares of 803,830 shares with an associated consideration of $739,524 and bi-annual dividend reinvestment by FHL.

The volume and value of stock trading that occurred over the past 5 years reflects inconsistent fluctuations in both the value and volume traded. The sharp decline in value and volume traded between the 2008 and 2009 was represent-ed primarily by the effects of the global financial crisis and the devaluation of the Fiji dollar which resulted in dismal financial performance for listed companies.

The market continued to be dominated by Amalgamated Telecom Holdings Limited (ATH), which accounted for 49.4 percent or $384.1 million of the total market capitalisation. This was followed by Fosters Group Pacific (FGP) at $111.9 million and Flour Mills of Fiji Ltd (FMF) at $60.0 million.

MARKET CAPITALISATION$M

2006

1,200

1,150

1,100

1,050

1,000

950

900

850

800

750

700

2007 2008 2009 2010

SPSE MARKET CAPITALISATION BY SECTOR

INDUSTRIAL1.4%

MANUFACTURERS& WHOLESALERS

26.3%

COMMUNICATIONS& MEDIA

54.1%

INSURANCE0.5%

INVESTMENT4.4%

AUTOMOTIVE4.1%

BANKING2.1%

RETAIL7.0%

Source: South Pacific Stock Exchange



22

NB: Above graph includes special crossing figures of previous years.

• Share Price

2010 saw only four of the 17 listed companies experiencing positive growth in capital gains for its investors. FHL’s share price recorded the highest improvement, an increase of 8.3 percent from $2.90 to $3.14. Companies that experienced an increase in share price included Pleass Beverages & Pack-aging Limited (4.4 percent), Communications Fiji Limited (2.3 percent) and VB Holdings Limited (0.3 percent).

The share price for 11 out of 17 listed companies decreased in value relative to the previous year whilst the share price of the remaining 2 companies remained unchanged over the year. The share prices as at 31 December 2010 ranged from a low of $0.25 for Fiji Sugar Corporation to a high of $10.75 for Foster’s Group Pacific.

• Total Returns

The total market return of a listed security is a function of capital growth (price appreciation or depreciation) plus its dividend yield provides an indication of the total return a list-ed security provides to its investors. In 2010, the average to-tal return from the SPSE stood at -5 percent with an average dividend yield of 3.9 percent and an average capital growth of -9.5 percent. The general fall in share prices for 11 of the 17 listed companies had a significant bearing on this decline. Seven of the 17 listed companies recorded positive total re-turn with FHL recording the highest returns for the year at 14.7 percent, Pleass Beverages & Packaging Limited at 8.6 percent and RB Patel Group Limited at 7.2 percent. Despite a negative average return for the year, there were mixed financial results experienced by listed companies.

Despite improved financial performances by a number of listed companies, market share prices in some of these se-curities reacted negatively.

• SPSE Total Return Index (STRI)

STRI is an aggregate market capitalisation index which re-flects the aggregate market value of all its components rela-tive to their aggregate value on the base day. The index is constructed on a base of 1,000 set at 4 January 2000. STRI reflects the total return from the stock market including the price and dividend returns. This Index is not affected by any form of corporate action and uses an index divisor to nor-malise index values.

STRI stood at 1,677.38 which represented a 11.7 percent fall in comparison to the STRI value of 1,899.00 during the same period in 2009. The fall in the STRI in 2010 is attrib-uted to the general fall in share prices and capital growth experienced by the stock market largely due to challenging business environment. The average dividend yield for 2010 showed a slight improvement at 3.9 percent relative to an average dividend yield of 3.4 percent in 2009. In aggregate, the total average market return for 2010 stood at negative 5.0 percent which was a decline of 66.7 percent from nega-tive 3.0 percent in the previous year.

• Over-the-Counter Facility

The KSB KPMS for unlisted public companies currently reg-isters four unlisted public companies. In 2010, shares in two companies recorded trades of 12,472 shares at a value of $40,268. The market capitalisation of the companies on the KPMS facility was $59.9 million. Source: South Pacific Stock Exchange

TOTAL RETURNS

Dividend Yield

Capital Growth

%20.0

10.0

0.0

-10.0

-20.0

-30.0

-40.0

-50.0

-60.0

AP

P

ATH

CFM FG

P

FIL

FMF

FTv

KG

F

PB

P

RB

G

RC

F

TTS

vB

H

FHL

BC

N

PG

I


$M Million Shares

vALUE AND vOLUME OF SHARES TRADED

2006 2007 2008 2009 2010

20

18

16

14

12

10

8

6

4

2

0

25

20

15

10

5

0

30

35

40

45

50

Value Traded Volume Traded

2.32.6

26.0

2.2

6.0

NB: FSC was suspended from 5 October 2010 until further notice so price remained invariable.


23

The Unit Trust MarketThe unit trust market consists of UTOF, Fijian FHUT and the FHPT. Other managed funds available in Fiji include the Australian BT Investor Choice funds offered by Westpac and the Hunter Hall managed funds offered by KSB.

• Funds under Management

Funds under management contracted in 2010 for the unit trust market. This declined by 2.9 percent in 2010 from $115.5 million to $112.2 million. The reduction was under-pinned by large redemptions, general decline in the share prices of listed securities, revaluations of unlisted securities and competitive interest rates on term deposits offered by commercial banks affecting demand by unit holders.

• Unit Holders

The number of unit holders increased marginally by 1.6 percent from 2009. The increase was represented by an increase of 181 and 72 unit holders in FHUT and UTOF respectively. The growth was underpinned by extensive marketing and promotional activities conducted by the unit trust managers throughout Fiji. Of the total unit holders, 69.1 percent were individuals whilst institutions and other groups account for 23.5 percent respectively and 7.4 per-cent respectively.

• Investments

In 2010, total investments for the unit trust industry fell by 0.03 percent to $112.3 million. The reduction in invest-ments was led by listed equities and bonds. Investments in listed securities decreased by 21 percent to $20.1 million and constitute the second largest component of to-

tal investments at 20 percent. Investments in bonds also decreased by 14 percent to $26.0 million and accounted 23 percent of investments. Investments in managed funds, noted a substantial increase of 30 percent to $1.95 million as at year end.

• Dividend Return

In 2010, UTOF paid out a total of 6.85 cents per unit result-ing in a total consideration of $3.7 million. For FHUT the company paid out a total dividend of $1.69 million. Total dividend distribution increased by 25 percent from 2009 as a result of improved financial performance. Bi-annual divi-dends were paid out at 1.34 cents and 2.38 cents per unit resulting in a total dividend distribution of 3.72 cents per unit.

This was also a favourable year for FHPT with the entity pay-ing out a record dividend distribution since its establishment. This was primarily the result of a positive revaluation on the Ra Marama property, increasing its value by 1.68 percent. Bi-annual dividend distributions for the year were 2 cents and 3 cents per unit leading to a total dividend distribution of 5 cents per unit which represented a 48 percent increase from total distributions in 2009.

Bond MarketSecondary bond trading takes place on the SPSE trading board and the OTC registry at the Reserve Bank. In 2010, there were no trades on the SPSE trading board.

• Bonds Trading

Bonds issued in 2010 totalled $521.0 million, a 0.2 percent decrease from $522.0 million in 2009 mainly due to the decrease in bond issues by all issuers. The value of bonds redeemed stood at $311.5 million with Fiji Government and Fiji Development Bank bonds dominating the redemptions. Total bonds outstanding increased by 7 percent over the year to $3,212.2 million as there were more bonds issued than redeemed during the year. Increase in bonds outstand-ing was noted for Fiji Government.

Fiji Government stocks continued to dominate the bond market making up 85.9 percent of the total bonds. Other issuers included Fiji Development Bank (6.6 percent), Fiji Electricity Authority (3.9 percent), Housing Authority (2.6 percent) and others making up the balance of 1.0 percent.

Sources: Fijian Holdings Unit Trust, Fijian Holdings Property Trust, Unit Trust of Fiji

FUNDS UNDER MANAGEMENT & UNIT HOLDERS $ M

Fund Under Management (Rhs)No. of Unit Holders (Lhs)

2006

16,000180

160

140

120

100

80

60

40

20

0

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

2007 2008 2009 2010


24

• Bond Holders & Value Held

The number of bond holders decreased from 74 in 2009 to

67 in 2010. The decline was due to a decrease in both retail

and institutional investors. The value of bonds held by insti-

tutional investors increased over the year while the value

held by retail investors decreased.

• Total Return

The average total return from the bond market stood at 5.3

percent with an average dividend yield of 7.1 percent and

an average capital growth of -1.9 percent. Except for the

5 year bond which noted increased returns over the year,

the returns in terms of dividend yield and capital growth de-

creased for 3 year, 10 year and 15 year bonds. Total returns

ranged from -6.3 percent for 15 year bonds to 17.5 percent

for 5 year bonds.

Over the year, a decline of 77.9 percent was noted in aver-

age total return for bonds largely due to the decrease in the

value of bonds held.


25

Capital Markets Calendar of Events 2010JANUARYApproval and issue of renewal licensed for Licensed Intermediaries and RepresentativesPresentation to University of the South Pacific on Corporate Governance CodeMARCHFiji Sugar Corporation Limited issued Promissory Notes to raise $21.5 million New licenses were approved and issued to Licensed Intermediaries and RepresentativesAPRILTechnical Workshop : Financial Analysis and Valuation VB Holdings Ltd Rights Issue of 178,113 ordinary sharesNew licenses were approved and issued to Licensed Intermediaries and RepresentativesMAYCapital Markets Industry MeetingListing of BSP Convertible Notes Limited on SPSE Interest Rate Securities Board JUNERegistry Inspection - VB Holdings LimitedJULYCapital Markets Securities Licensing ExamCapital Markets Development Taskforce MeetingLaunch of South Pacific Stock Exchange Electronic Trading BoardRegistry Inspection - Flour Mills of FijiRegistry Inspection - Rice Company of FijiRegistry Inspection - Atlantic Pacific Packaging LimitedRBF Microfinance Exposition in BaBrokers Briefing - Toyota Tshusho AUGUSTRBF Microfinance Exposition in SuvaBrokers Briefing - Vishal Bhatiya HoldingsBrokers Briefing – FijiCare Insurance LimitedBrokers Briefing – Fosters Group PacificBrokers Briefing – Pacific Green Industry LimitedCapital Markets Listing Seminar - SuvaSEPTEMBERTechnical Workshop : Valuing Debt and Equity SecuritiesRegistry Inspection - Fiji Sugar CorporationCapital Markets Listing Seminar - Tanoa International Hotel in NadiOCTOBERCapital Markets Development Taskforce Meeting 2Brokers Briefing – R.B Patel groupBrokers Briefing – Amalgamated Telecom HoldingsBrokers Briefing – Fijian Holdings LimitedBrokers Briefing – Flour Mills of Fiji (FMF)/Atlantic Pacific Packaging Limited (APP)/ Rice Company of FijiBrokers Briefing – Communications Fiji MediaBrokers Briefing – Fiji Sugar Corporation RBF Microfinance Capital Markets Booth at RBF Microfinance Village at Vodafone Hibiscus FestivalTrading Suspension of Fiji Sugar Corporation on SPSE NOVEMBERTechnical Workshop : Fundamentals of Fund Management Capital Markets Securities Licensing ExamOn-site Inspection (Preliminary) - Fiji Holdings Trust Management LimitedDECEMBEROn-site Inspection (Preliminary) - South Pacific Stock Exchange



26

AnnexuresList of Licensed Companies and Individuals in 2010

PricewaterhouseCoopers Corporate Finance Limited (PWCCFL)

Investment Adviser - Principal

Chirk Yam PWCCFL Representative

Jenny Seeto PWCCFL Representative

Nitin Ghandhi PWCCFL Representative

Jerome Kado PWCCFL Representative

John Ridgway Investment Adviser

Pradeep Patel Investment Adviser

Nalin Patel Investment Adviser

Rick Croker (RC) Investment Adviser - Principal

John Malcolm Finn RC Representative

UNIT TRUSTS

Unit Trust of Fiji (UTOF) Unit Trust - Principal

Vilash Chand UTOF Representative

Gyanesh Reuben UTOF Representative

Reema Chand UTOF Representative

Fijian Holdings Property Trust (FHPT)

Unit Trust - Principal

Fijian Holdings Unit Trust (FHUT) Unit Trust - Principal

Rowena Fong FHPT/FHUT Representative

Sowani Tuidrola FHPT/FHUT Representative

Elenoa M Lalabalavu FHPT/FHUT Representative

Priscilla Greig FHPT/FHUT Representative

SECURITIES EXCHANGE

South Pacific Stock Exchange Securities Exchange


NAME OF LICENSEE TYPES OF LICENSEBROKERS & DEALERS

FHL Securities Limited (FHLS) Broker & Dealer - Principal

Sowani Tuidrola FHLS Representative

Rowena Fong FHLS Representative

Aisea Wainiqolo FHLS Representative

Nitesh Chand FHLS Representative

Fiji Stock Brokers Limited (FSB) Broker & Dealer - Principal

Steven Shane Pritchard FSB Representative

Brett Andrew Hall FSB Representative

Giles Cameron Craig FSB Representative

Enzo Pirillo FSB Representative

Dinesh Shankar FSB Representative

Elenoa Qalotaki FSB Representative

Kontiki Stock Broking Limited (KSB) Broker & Dealer - Principal

David Oliver KSB Representative

Jack Lowenstein KSB Representative

Griffon Emose KSB Representative

Raghni Khatri KSB Representative

Elenoa Kaloumaira KSB Representative

Melaia Koro Rokotuinasigana KSB Representative

Siale Nyrie Yee KSB Representative

INVESTMENT ADVISERS

FHL Securities Limited (FHLS) Investment Adviser -Principal

Mohamed Fareed FHLS Representative

Tevita Gonelevu FHLS Representative

Fiji Stock Brokers Limited (FSB) Investment Adviser -Principal

Steven Shane Pritchard FSB Representative

Brett Andrew Hall FSB Representative

Giles Cameron Craig FSB Representative

Enzo Pirillo FSB Representative

Dinesh Shankar FSB Representative

Kontiki Capital Limited (KCL) Investment Adviser -Principal

Griffon Emose KSB Representative

David Oliver KSB Representative

Jack Lowenstein KSB Representative

George Niumataiwalu KSB Representative

Jignesh Pala KSB Representative

KPMG Advisory (Fiji) Limited Investment Adviser -Principal

Bruce Sutton KPMG Representative

Lisa Apted KPMG Representative

Westpac Banking Corporation (WBC)


Deven Magan WBC Representative



27

Total Assets of the Financial System ($M)

Regulated Financial Institutions 2006 2007 2008 2009 2010

Banks 3,547 3,957 4,008 4,452 4,504

Credit Institutions 401 370 348 372 418

Insurance Companies 705 826 804 914 936

FNPF 3,337 3,437 3,696 3,841 3,928

Unit Trusts 120 115

Total 7,990 8,590 8,856 9,699 9,901

Non-regulated financial institutions

Non Bank Financial Institutions 736 738 748 688 681

TOTAL FINANCIAL SYSTEM 8,726 9,328 9,604 10,388 10,582


Total Returns

Company Dividend Yield (%) Capital Growth (%) Market Returns (%)

Atlantic & Pacific Packaging Company Limited 4.55 -12.50 -7.95

Amalgamated Telecom Holdings Limited 5.49 -14.95 -9.46

Communications (Fiji) Limited 4.57 2.34 6.91

Foster’s Group Pacific Limited 2.79 -13.31 -10.52

FijiCare Insurance Limited 0.00 -2.99 -2.99

Flour Mills of Fiji Limited 1.00 -42.03 -41.03

Fiji Sugar Corporation Limited* 0.00 0.00 0.00

Fiji Television Limited 4.00 -7.69 -3.69

Kontiki Growth Fund Limited 0.00 -10.00 -10.00

Pleass Beverages & Packaging Limited 4.21 4.40 8.61

Pacific Green Industries (Fiji) Limited 7.61 -56.19 -48.58

RB Patel Group Limited 7.73 -0.55 7.19

Rice Company of Fiji Limited 3.19 -4.08 -0.89

Toyota Tsusho (South Sea) Limited 4.21 -3.55 0.66

VB Holdings Limited 4.01 0.34 4.35

Fijian Holdings Limited 6.37 8.28 14.65

BSP Convertible Notes Limited 7.00 n/a 7.00

Average 3.93 -9.53 -5.04

*Note: FSC is suspended from Trading - Fifth of October, Two Thousand and Eleven.




28

SPSE Market Capitalisation by Sector ($M)

Company Sectors Market Capitalisation Percentage

Atlantic & Pacific Packaging Company Limited Manufacturing 6,160,000 0.79

Amalagated Telecom Holdings Limited Communications 384,115,430 49.36

Communication (Fiji) Limited Communications 6,226,500 0.80

Fosters Group Pacific Limited Manufacturing 111,887,344 14.38

FijiCare Insurance Limited Insurance 4,209,453 0.54

Flour Mills of Fiji Limited Manufacturing 60,000,000 7.71

Fiji Sugar Corporation Limited Industrial 11,100,000 1.43

Fiji Television Limited Communications 30,900,000 3.97

Kontiki Growth Fund Limited Investments 1,592,260 0.20

Pleass Beverages & Packaging Manufacturing 5,700,000 0.73

Pacific Green Industries (Fiji) Limited Manufacturing 7,009,695 0.90

RB Patel Group Limited Retail 54,300,000 6.98

Rice Company of Fiji Limited Manufacturing 14,100,000 1.81

Toyota Tsusho (South Sea) Co. Limited Automobile 26,661,184 3.43

VB Holdings Limited Automobile 5,325,591 0.68

Fijian Holdings Limited Investments 32,859,001 4.22

BSP Convertible Notes Limited Banking 16,091,077 2.07


Market Capitalisation ($M)

Months 2006 2007 2008 2009 2010

January 1,047.56 1,021.39 794.23 994.83 883.49

February 1,096.13 1,047.56 833.04 991.45 879.88

March 1,132.60 940.98 855.51 979.05 867.78

April 1,140.30 917.30 858.34 974.73 866.85

May 1,164.90 907.69 880.55 934.28 871.06

June 1,182.48 897.33 905.36 962.61 872.10

July 1,162.83 894.63 919.66 954.69 868.35

August 1,128.23 896.28 933.56 934.77 851.60

September 1,175.55 903.72 948.41 921.02 819.91

October 1,146.75 866.85 1,003.80 908.06 792.02

November 1,070.44 839.04 1,006.59 904.30 776.84

December 1,059.59 809.96 1,002.33 901.55 778.24




29

Volume Traded, Value Traded, Market Capitalisation (Million)

Year Volume Value ($) Market Capitalisation ($)

2010 2.30 2.70 778.24

2009 6.10 43.50 901.55

2008 18.40 26.10 1,002.33

2007 2.70 3.60 809.96

2006 2.30 5.70 1,059.59


Funds Under Management and Number of Unit Holders

2006 2007 2008 2009 2010

Number of Unit Holders 14,351 15,224 15,850 16,162 16,415

Funds Under Mangement ($M) 165.30 148.20 137.60 115.50 112.30

Sources: Fijian Holdings Unit Trust, Fijian Holdings Property Trust, Unit Trust of Fiji, Colonial First State Investments

Unit Trust Investment Portfolio as at 31 December ($M)

2009 2010

Quoted Managed Funds 1.50 1.95

Listed Equity 28.20 22.12

Unlisted Equity 23.70 25.8

Bonds 30.40 26.02

Loans 12.00 12.00

Cash 1.00 1.73

Long Term Deposits 0.00 1.50

Short Term Deposits 7.60 10.25

Investment Property 10.70 10.87

Others 1.00 N/A

TOTAL 116.10 112.24

Sources: Fijian Holdings Unit Trust, Fijian Holdings Property Trust, Unit Trust of Fiji, Colonial First State Investments



30

Bond Market Share (%)

2006 2007 2008 2009 2010

Fiji Government 84.10 79.90 83.00 83.40 85.90

Fiji Development Bank 9.30 12.30 9.10 8.10 6.60

Fiji Electricity Authority 2.40 4.10 4.90 4.60 3.90

Housing Authority 4.00 3.60 3.00 2.80 2.60

Fiji Pine Limited 0.20 0.10 0.00 0.00 0.00

Others 0.00 0.00 0.00 1.10 1.00

TOTAL 100.00 100.00 100.00 100.00 100.00


Number of Trades

Company 2006 2007 2008 2009 2010

Atlantic & Pacific Packaging Company Limited (APP) 4 3 11 2 3

Amalgamated Telecom Holdings Limited (ATH) 143 111 132 155 100

Communications (Fiji) Limited (CFM) 18 12 13 19 18

Foster’s Group Pacific Limited (FGP) 105 31 33 59 12

FijiCare Insurance Limited (FIL) 6 12 7 4 3

Flour Mills of Fiji Limited (FMF) 85 23 27 12 10

Fiji Sugar Corporation Limited (FSC)* 4 16 10 2 3

Fiji Television Limited (FTV) 77 50 32 43 10

Kontiki Growth Fund Limited (KGF) 31 5 13 8 6

Pacific Green Industries (Fiji) Limited (PGI) 2 1 5 1 1

RB Patel Group Limited (RBG) 36 77 71 62 44

Rice Company of Fiji (RCF)Limited 10 3 3 4 2

Toyota Tsusho (South Sea) Limited (TTS) 6 9 4 3 4

VB Holdings Limited (VBH) 9 7 4 5 8

Yaqara Group Limited (YGL) 2 2 0 0 0

Fijian Holdings Limited (FHL) 416 251 392 394 466

Pleass Beverages & Packaging Limited (PBP) N/A N/A N/A 16 21

BSP Convertible Notes Limited (BCN) N/A N/A N/A N/A 0

TOTAL 954 613 757 789 711

*Note: FSC is suspended from Trading - 5 October, 2011




3

Postal PrivateMailBag,Suva,Fiji Telephone (679) 331 3611

Facsimile (679) 330 2094 Email [email protected] Website www.rbf.gov.fj

ReserveBankofFiji

Thegreatdouble-hulled,ocean-goingcanoes

(drua)oftheancientFijianswereremarkable

crafts, capable of long voyages. The tagaga

(pronounced “tanganga”) or masthead, was

crucial for holding in place the sails, woven

fromtheleavesofthepandanustree.Itwasthe

tagagawhichenabledthenavigatorstokeep

theirdrua sailing towards theirdestinations.

FortheReserveBankofFiji,alogobasedon

the tagaga masthead, symbolises the Bank’s

roleincontributingtowardsasureandsteady

courseforFiji’seconomy.


4

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