June 2011

Communications and Allied Industries Pension Fund

ACTUARYSREPORT

T
TOALLTHEACTIVEMEMBERS OFTHEFUND

Welcome to the June issue of the Active members bulletin, thequarterlynewslettertohelp you become better informed aboutwhatis happeningatthe Communications and Allied Industries Pension Fund. This issuesspecialfeatureisonthe AuditedFinancialAccountsfor theFund fortheperiodending 31 December 2010, which shows how the Fund per formed during the year. We also focus on the Actuarial re portandupdateonmortgages.

Inside this issue:

Membership to Fund Role of the Fund Fund Management Role of Trustees The Health Corner
1

he Fund was actuarially val ued as at 31 December 2010 in terms of subsection (1) of section 17 of the Pensions and Provi dent Funds Act (Chapter 24.09). The Valuation was based on 3 969 active members from the contributing com panies of Net One, POSB, Tel One, Zimposts and CAI Pension Fund, 5 612pensionersandotherbeneficiaries and2402deferredpensioners. The Actuarial valuation was carried outtomeetthefollowingobjectives: Determine the liability of the US dollar pensions that areto be paid topensionersfromtheFund. Determinethepastserviceliability in respect of the current active membersbasedontheircurrentUS dollar salaries and service accrued prior to the dollarization of the economyaswellaspostdollariza tion. ToinvestigatetheFundsfinancial position in respect of benefits and service accrued priortothe valua tiondate,and To assess and recommend an ap propriate employer contribution ratetobepaiduntilthe nextactu arialvaluation. The Valuation exercise revealed that the Funds liabilities as at 31 Decem

ber 2010 were US$131 384 million compared with an asset value of US$81047million.Thisresultedina shortfall ofUS$50 337 million trans lating into a funding level of 62%. However, Trustees realizing the low pensions being paid toour pensioners agreed to increase all pension pay ments with effect from 1 January 2011.Thisbenefitimprovementforall pensions increased the deficit to US$79 029 million translating into a fundinglevelof 50.6%.TheFundwas however certified to be in a sound fi nancial position by the Actuary in termsofsection37(4)ofthePensions and Provident Funds regulations of 1991. The Actuary further recom mended that the Employers continue tocontributetotheFundattherateof 22, 5% of the members pensionable emoluments to cover the deficit over the next 27 years all things being equal. Of interest is that the Actuary believes that current asset values (properties and equities) have been severely affected by the economic situation, and is likely going to rise fasterthanliabilitiestherebyoffsetting thecurrentdeficitearlierthanthepro jected 27 years. Another Actuarial valuation may be necessary as at 31 December2011toreviewthe funding level and the level of pension pay ments.

Page 2

THEZAPF ANNUALCONGRESS

his year Zimbabwe Association of Pension Funds (ZAPF) con gressandAnnualGen eral Meeting was held inVictoriaFallsfrom5 7 May 2011. The Communications and Allied Industries Pen sion Fund attended the Congress and was rep resented by Trustees and members of Man agement. There were interesting presentations as fol lows: LowpensionValues whoistoblame? BeyondtheConver sions, wither to PensionFunds. Regaining Industry confidence through Communication. What if the Z$ dol larreturns? Mr. Douglas Hoto of Quantum Consultants and Actuaries pre sented on the Topic: Beyond Conversions, Wither to Pension

Funds.Inhispresenta Awelcomeinitiative,anupdatedstrategicplanforthe tion, he narrated the Fund was adopted early this year to run for the next post conversion prob threeyears.Thestrategicplanwasdevelopedbyman lemsaslowconfidence agementinconjunctionwiththeTrusteesguidedbya given what had hap Consultant.Aseriesofperformancetargetswereset (ratesofreturn,percentageofsurplusgrowth,ratioof pened in the past, low investmentincometototalincome,numberofvisitsto liquidity,highexpecta employers, board&committee meetings,paymentof tion from the popula pensionand lump sum, notificationofsurvivor bene tion and the general fits). lowlevelsofpensions. Aspartofthestrategy,Communicationwithmem However, despite all berswillbeenhancedthroughemployerliaisonmeet ings,thehelpdesk,website,emailsandcorrespon these problems Pen dence. sion funds still re mained very relevant MORTGAGES in Zimbabwe today as they were the only It is now a requirement that all members wishing to source of income and accessthemortgageloanfacilityshouldfirstcomplete thepreliminarymortgageloanapplicationform.This savings for most low form can be obtained from all Human Resources De income earners. They partments of employer companies, the Pensions Offi were also involved in cerordownloadedfromourwebsite, mobilizinginvestments http://www.caipension.co.zw and must be stamped funds for the nation. and signed by respective managers when fully com The presentation tried pleted. The mortgage loan can be accessed for the to answer questions purchaseofanexistinghouse,astand,tobuildahouse orrenovate(improve)anexistinghousedependingon such as whether pen eachmembersentitlement. sion funds were going to have any value in 2010YEARENDACCOUNTS future even when the economy returned to ThefinancialstatementsforthePensionFundforthe year ended 31 December 2010 show the continued the use of local cur growth of the Fund. During the year under review, rency and how the the Fund grew to $64,215 million driven by rental valueofcurrentcontri incomeaswellasactivememberscontributions. butions and assets could be maximized Contributions income for the year amounted to giventhecurrentenvi $10,467 million, which was 66% of total income (previous yearwas90%oftotal income).There was ronment.
anincreaseintheratioofcontributionincometototal revenuefromthepredollarisationperiodasthe

PENSIONADMINISTRATIONSTRATEGY

Page 3

investments market was de pressed, rendering active trading on the capital and money mar ketslimited. Investmentsincome,inclusiveof capital gains realized amounted to $5,413 million, driven by rental income which constituted 65% of the investments income (2009 rentals were 97% of in vestments income) and capital gains income which constituted 28% of the investments income (2009 capital gains were 1% of theinvestmentsincome).Rentals for the year amounted to $3,52 million (2009 rentals were $2,86 million). With the economy on the recovery path, rentals were reviewedinlinewiththechanges

on the market. The investments incometookanewshapein2010 divertingfromtheprevioustrend where most income came from either interest or capital gains. This was due to the fact that in terestratesonthemarketwereof thehighriskandhighreturntype andtheFundtookacautiousap proachinordertopreservecapi tal by investing more on the stock market than on the money market. Most companies were recapitalizingduringtheyearand did not declare dividends, hence the low dividend income re ceived, constituting 1% of total investmentsincome. Grossadministrationexpenses fortheyearamountedto$3,3 million.Halfoftheadministra

tionexpenseswasduetoinvest mentsdiminutionasshareprices wentdownfromthe2009prices whichwerethedeemedcostval ues.Theothersignificantadmini strationcostlineitemwasthe provisionfordoubtfuldebtsdue tochallengesfacedbytenantsto payuptheirrentalsintime.The Fundmadeasurplusincomeof $6,151millioninyear2010,up 8%fromthe2009surplusincome of$5,696million.Costcontrol, activeinvestmentsmanagement strategiesandthechargingof competitiverentalswerethemain driversforthegoodperformance achievedinyear2010.TheFund willendeavourtocontinuously exploreopportunitieswhichen hancevaluetotheFundandim provebenefitstomembers.

INVESTMENTS The Funds investments port foliocomprisesofmoneymar ket investments, mortgages, properties and listed and unlistedequities. Equities constituted 19% of totalassetsatcostasat31De cember 2010 while invest mentsinpropertiesconstituted 79% of total assets of the Fund. Properties included shares in the property owning company,JoinaCity.TheFund recently completed the con struction of TM Cowdry Park andacquiredanewpropertyin theMt.PleasantBusinessPark at a cost of $1,256 million. recovers. The Fund is a coinvestor in theJoinaCity,whoseshopping mall was completed late last year. The office tower was completed at the beginning of 2011. The Funds buildings are not fully occupied as the chal lenges faced by the country hasaffectedattractionofqual ity tenants and their ability to payrentalsandoperatingcosts on time. This has negatively affectedrentalsbeingcharged. However, in the long term we expect that the rental yields will firm up as the economy The Fund administers a mort gages scheme which consti tutes5%oftheFundstotalas sets. Contributing members of the Fundareentitledtobenefit from the mortgages loan schemeat6%interestrate. Finally, the Fund invests in money markets which consti tuted2% of itstotalassets.In terest rates on money market investments were low and some of the instruments were very risky, hence limited in vestmentonthemoneymarket.

COMMUNICATINGWITHTHEFUND

Inadditiontothepostaladdress,thefollowingemailaddressescanbeusedforenquiries: Pensionpayments Pensionassessments Investments Properties Mortgages Executive ChiefExecutiveOfficer HeadFinance HeadPensions,Properties&IT payments@caipensions.co.zw lydia@caipensions.co.zw investments@caipensions.co.zw chanaka@caipensions.co.zw investments@caipensions.co.zw chikava@caipensions.co.zw musadzi@caipensions.co.zw chanaka@caipensions.co.zw

Youcanalsovisitourwebsiteat http://www.caipensions.co.zw. Thewebpagescontaininformationonthe PensionFundschemebenefits,forms,andotherinformationregardingyourpension.

Enjoyyourdayand GodBless