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Viti Bond

Categoria — Tipi di obbligazioni
By Nikita Bundzen Head of North America Fixed Income Department
Updated October 24, 2024

What is a Viti Bond?

A Viti Bond represents a distinctive opportunity within the capital market, serving as an alternative option for various investment avenues like term deposits, shares, or trust fund units. It is specifically designed to cater to the preferences of retail or small investors seeking a secure and competitive financial instrument. Issued by the Government of Fiji, the Viti Bond is under the vigilant oversight of the Reserve Bank of Fiji, appointed as the registrar.

Accessible to a diverse range of investors, including individuals, companies, pensioners, and even foreigners, Viti Bonds play a vital role in broadening participation in the economic growth of Fiji. Investors can benefit from tax exemptions on the interest earned, adding to the appeal of these debt securities. The competitive interest rates offered by Viti Bonds make them an attractive choice in comparison to similar investments.

Furthermore, the flexibility of Viti Bonds is exemplified by their transferability, which is not subject to Government Stamp duty. This feature allows bondholders the freedom to trade all or part of their holdings without incurring additional costs. Such accessibility and versatility make Viti Bonds a valuable component of any investor's portfolio, providing a secure avenue for individuals and entities alike to engage in the financial markets while contributing to the economic development of Fiji.

Example of Viti Bond is Fiji Islands, Bonds 4% 24jun2032, FJD.

How to invest in Viti Bonds?

To invest in Viti Bonds, potential investors can initiate the process by completing the Viti Bond Tender Form, an essential document for participation. Once filled, this form should be submitted to the Reserve Bank of Fiji, which serves as the appointed registrar for Viti Bonds.

Comprehensive details regarding Viti Bonds, along with the necessary guidelines for making an investment, can be found in the Viti Bond Prospectus. Interested parties can obtain a copy of the prospectus from the Reserve Bank of Fiji's office or through their official website. This accessible and straightforward process ensures that the general public, businesses, and investors can confidently navigate the investment procedure, making informed decisions about the outstanding investment opportunity that Viti Bonds present.

Advantages and disadvantages

Advantages

  1. Government Backing. Viti Bonds are issued by the Government of Fiji, assuring investors that their funds are backed by a reliable and stable entity.

  2. Risk Mitigation. There is minimal risk associated with Viti Bonds, as the government ensures the timely payment of interest and the recovery of total invested funds.

  3. Tax Exemption. Interest earned on Viti Bonds is exempt from income tax, enhancing the overall returns for investors.

  4. Competitive Interest Rates. Viti Bonds provide competitive interest rates, positioning them favorably against other similar investment opportunities in the market.

  5. Transferability. The flexibility of Viti Bonds is evident in their transferability. Bondholders can easily transfer their holdings without incurring Government Stamp duty, offering a cost-effective option for liquidity when needed.

Disadvantages

  1. Market Risks. Like any investment, Viti Bonds are subject to market fluctuations and economic conditions, which can impact the overall value of the investment.

  2. Limited Liquidity. Although transferable, selling Viti Bonds might not provide instant liquidity, especially in comparison to more liquid assets.

  3. Currency Risk. Currency fluctuations can affect the value of Viti Bonds, especially for foreign investors, introducing an element of risk related to currency exchange rates.

Who is eligible to invest in Viti Bonds?

Viti Bonds are accessible to the general public, extending eligibility to a diverse range of investors, including businesses, pensioners, and individuals from around the world. For overseas investors, coordination with the Reserve Bank of Fiji is essential, covering aspects such as transferring funds to Fiji, submitting a completed Fiji Government Viti Bond Tender Form, and establishing a local bank account with any operational commercial bank in Fiji. The earned interest from Viti Bond investments will be directly deposited into this specified bank account. Additionally, arrangements will be made for the secure issuance and delivery of the Viti Bond certificate, ensuring confidence and security in the investing process.

How to withdraw Viti Bond investment?

Bondholders have the option to divest from their Viti Bond investment by selling or transferring the bonds to another party before the maturity date. Such transfers should occur in multiples of the minimum amount, set at $1,000.

The Reserve Bank of Fiji offers the opportunity for bondholders to sell their Viti Bonds at the par value at any time, providing a convenient and accessible exit strategy. Transfer forms, essential for this process, can be obtained directly from the registrar.

It's important to note that the registrar is not obligated to process transfers within the 14 days leading up to any interest payment date. Additionally, these bond transfers are exempt from Government Stamp duty.

However, bond transfers are subject to capital gains tax, and the resulting gains should be reported in income returns submitted to the Chief Executive Officer of the Fiji Revenue and Customs Authority (FRCA). This ensures compliance with regulations and facilitates a seamless withdrawal process for Viti Bond investors.

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