2009 annual report

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“Your equal opportunity fund for creating & growing wealth”

ANNUAL REPORT

U n i t

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Corporate Vision “Your Equal-Opportunity Fund for Creating and Growing Wealth” Corporate Mission Our Customers We will create customers’ value by: • providing consistent returns; • managing a well diversified investment portfolio

within acceptable risk parameters; • developing unique products; • using modern technology to provide timely and

accessible services; and • exceeding expectations through excellent service.

Our People We will build a motivated, committed and empowered team by: • creating equal opportunities; • providing a safe and enthusiastic working

environment; • communicating effectively; • training and encouraging self-development; and • rewarding outstanding performance.

Our Stakeholders We will build a stakeholders’ value by: • complying with relevant regulatory and other

requirements; • delivering best possible returns; and • Fulfilling mandated social responsibilities.

Corporate Values • • • • • •

Professionalism; Integrity; Equality; Loyalty; Trust; and Transparency.

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CONTENTS

“Your equal opportunity fund for creating & growing wealth”

Chairman’s Report

2-3

Trustee’s Report

5-6

Dividend cut-off and payment timetable Interim Dividend Cut-off date:

31 March 2009

Payment:

15 June 2009

General Manager’s Report

Financial Statements

8-10

11-28

Final Dividend Cut-off date:

30 September 2009

Payment:

15 December 2009

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Chairman’s Report

General Overview 2009 was undoubtedly a challenging year for Unit Trust of Fiji (“UTOF” and/or “The Trust”) and the experiences drawn for this period will now pave the way for major changes in the next financial year.

My message to my fellow board directors, management and staff for this financial year is best reflected in this adage “it is no longer business as usual” this has been the driving force for UTOF. Since the new Board was appointed, we had to rehabilitate/ restructure the non-performing investments that include UTOF’s $12 million and $1 million exposure with Muainarewa Resorts Limited (Momi Bay Stage 2 Project) and the Royal Davui Island Resort, respectively. There were other non-performing investments that are currently going through the recovery process.

As to the Muainarewa Resorts Limited, we have initiated all legal procedures to recover our investment. All necessary process to necessitate these changes has been completed and will be made public in the next financial year.

We continue to be vigilant with our investments and appropriate measures are in place to safeguard the interest of our unit holders and stakeholders. Such measures

have led to the formulation of new policies, 3 years Corporate Plan for the planning period 2010 to 2012 and launching of UTOF’s new logo.

This exercise was necessary to add value to the overall growth of the Trust. In addition, it will be an “on-going” exercise for the Board, Management and the Trustees to continuously improve the financial performance of the Trust.

Growth UTOF was back on the growth track towards the end of the 2009 financial year and this was indicative of perseverance and the unswerving support from the unit holders.

Although in the early months of 2009 the Trust recorded a $15 million decline in the total funds under management, there was a dramatic turnaround towards the end of this financial period.

This was best reflected in the increased dividend payout to unit holders by 152% from an interim dividend of 0.03 cents per unit to a final dividend of 3.50 cents per unit.

Overall for this planning period, the Trust declared and/or paid out 3.53 cents per unit to the unit holders, recording a dividend yield of 2.50%.

Based on our market analysis and reform that is currently

being implemented by the board and management, we envisage positive growth in the next financial year especially with the unit trust market now heading towards a rather settled period.

Corporate Governance During this financial period, the Unit Trust of Fiji (Management) Limited (“UTOFML”) Board has been able to review and establish series of policies that will govern the affairs of the Trust in the many years to come. These policies are of international standards and will take into account related government reform programmes, wholly aimed at assisting the Board and the Trustees in future deliberations.

During this planning period under review, the following polices were formulated: •

Accounting & Control Policy

Internal

•

Operational Policy

•

Investment Policy Statement

•

Risk Management Policy & Framework

•

Procurement Policy

•

Human Resource Policy

The other important policy currently being formulated is the Corporate Governance Policy and historically this will be a first for UTOF since inception. Its implementation will safeguard

Mr. Aisake Taito

Chairman Unit Trust of Fiji (Management) Limited

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.........increased dividend payout to unit holders of 152% from an interim dividend of 0.03 cents per unit to a final dividend of 3.50 cents per unit the interest of unit holders and shareholders from contemporary crimes such as corruption and fraud in the work force.

In terms of the Trust Deed, it is relatively archaic and as such, we have engaged our legal counsel to review and amend the Trust Deed and we are adamant that this review will be completed by the third quarter of 2010.

Risk Management The UTOFML Board remain firm with its fiduciary duties when it comes to risk management which is deeply embedded in our daily affairs. We recognise its principles and relevancy in ensuring continuity of our operations.

We have systematically analysed our systems and processes to further enhance our due diligence process, and importantly to allow the Trust to invest prudently.

Key Investments and Projects There have been many discussions and market misinformation about UTOF’s loan to Muainarewa Resorts Limited. The Board would like to clarify that the $12 million loan to Muainarewa Resorts Limited is secured against the first registered mortgage over 322 acres of freehold land, adjacent to stage 1 of the Momi Bay integrated resort development.

UTOF has commenced its preparatory work to proceed with the mortgage sale of stage 2 property in order to recover the investment. This was a direct result of the suspension of development and the non payment of principal and interest since September 2008.

Based on our recent valuation, the Trust was not required to make any provisioning for impairment as the market value of the 322 acres of freehold land was in excess of the loan amount.

Way Forward Looking ahead, 2010 will see major changes in the overall operation of the company and through our collective efforts, we are confident that these changes will come into full effect in the next financial year.

Some of these changes will include the establishment of a new website and the improvement of our services to the unit holders.

The UTOFML Board has redefined its key outcomes that will carry forward its work in the 20102012 financial years. We have also identified indicators to monitor the achievement of these outcomes.

proposed corporate plan for the planning periods with the interest of unit holders and shareholders being the overriding concern.

The Board of Directors under the guidance of our shareholders, the Ministry of Public Enterprises, Tourism and Communications and the Ministry of Finance are working towards providing the best possible returns to our loyal unit holders.

Finally, I would like to acknowledge the support of our shareholders, regulators, trustees, management and most importantly our unit holders for their continuing support and commitment as we endeavour to develop the Trust to become predominantly the preferred investment company in Fiji.

Vinaka Vakalevu!

Mr. Aisake Taito Chairman Unit Trust of Fiji (Management) Limited

We will continue to review and align our results with the

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“Thinking about your future! Start investing now with Unit Trust of Fiji.”

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Trustee’s Report

Trustees’ Report to Unit Holders for the period from 1st October 2008 to 30th September 2009 The Directors of Unit Trust of Fiji (Trustee Company) Limited (“UTOFTCL”) have the pleasure of presenting the 2009 Annual Report and audited financial statement for the period from 1st October 2008 to 30th September 2009.

It has been less than a year since our appointment and we have been working closely with the Board and Management of Unit Trust of Fiji (Management) Limited to introduce and implement new policies, actively monitor the investments and develop UTOF’s 3 Year Corporate Plan.

Market Overview Generally, the Trust noted a decrease in the Total Funds under Management to $73.6 million when compared to the $88.5 million for the same period last year.

This is also reflected in a reduction in the active number of units in issue from over 66 million to 55 million. However, we noted a steady increase in the total

number of active unit holders to just over 12,000.

Unclaimed Dividend and Redemptions

The confidence demonstrated by the unit holders is attributed towards the improved 2009 final dividend of 3.50 cents per unit.

This was a dramatic recovery from the 0.03 cents paid out as interim dividend thus making the total dividend payment of 3.53 cents per unit for the year 2009.

Currently we have more than $70,000 uncollected dividend by the unit holders for various reasons. A notice to this effect will be circulated to our unit holders, as the Trust Deed dated 31st March 1978 Clause 20 provides:-

We are optimistic that such trend will continue with active portfolio management and guidance from the Board and Management of UTOFML.

Investment and related Polices

other

The Directors of the UTOFTCL noted effort made by UTOFML Board to review and implement new policies relating to investment, risks, accounting, record keeping and operation.

This in turn impacts on both Management and Trustees in the day-to-day operation of the Trust and its future directions.

This will be an on-going process to safeguard the best interest of the unit holders.

“…Any distribution payment which shall remain unclaimed after a period of 12 years from the date of payment of the same shall then be transferred to and become part of the deposited property and henceforth neither the payee nor any successor in title or assign of his shall have any right thereto or therein except as part of the deposited property”

Mr. Iowane Naiveli Director Unit Trust of Fiji (Trustee Company) Limited

Way Forward The Trustees have taken a new approach to improve quality of service to unit holders. We will be working closely with the Board and Management of UTOFML in providing more unit holder orientated services.

Mr. Anil Tikaram Director Unit Trust of Fiji (Trustee Company) Limited

Internal processes will be improved and streamlined for the convenience and delivery of services to unit holders.

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We have been and continue to be diligent with regards to the interest of our unit holders, in that their interest is paramount in our decision making.

Acknowledgment We as your Trustees would like to acknowledge and commend the Ministry of Public Enterprises, Tourism and Communications, the Ministry of Finance and the Reserve Bank of Fiji for their continuing support and guidance in these challenging times.

We would also like to express our gratitude to Board of Directors and Management of UTOFML for their support and hard work during the year.

To our loyal unit holders, we would like to sincerely commend your continuing trust. We note with gratitude your growing support and such growth is indeed rewarding as it shows your confidence in our work.

Thank you!

Mr Iowane Naiveli Director Unit Trust of Fiji (Trustee Company) Limited

Mr Anil Tikaram Director Unit Trust of Fiji (Trustee Company) Limited

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General Manager’s Report

it’s financial performance and to maintain consistent returns to it’s unit holders and shareholders.

Mr Vilash Chand Acting General Manager & Company Secretary

Year 2009 in Review 2009 has proven to be a challenging year for Unit Trust of Fiji in light of the global financial crisis and the devaluation of the Fiji dollar.

During the year under review, the Trust recorded a reduction in the total deposited property by $15 million attributed to factors such as low returns from invested income and the social impact of the financial crisis and the devaluation. The Trust noted a moderate recovery towards the end of the financial year which is reflected in the 2009 final dividend payout to the unit holders.

In response to such conditions, the Trust with the guidance of the shareholders and regulators has set in motion strategies to improve

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The management team would like to commend the Board of Directors of the Management Company and new directors of the Trustee Company Messrs Anil Tikaram and Iowane Naiveli for their support and guidance during the year.

in the invested income during the early period of 2009, however, there was a turnaround towards the end of the financial year.

The chart below presents a snapshot of where the Trust’s total funds under management of over $73 million were invested, as at 30th September 2009.

Cash at Bank - 0.5% Interest Bearing Deposit - 1.5% Loans & Receivables - 16% Bonds - 32% Equities - 50%

We have been able to establish a Joint Working Committee between the Management and Trustees to specifically identify and resolve issues of interest to the Trust and its unit holders. This forum allows the Trustee Directors and Management to review the current practises and re-strategise the way forward. As such we will be reviewing our systems and processes to improve our services for the benefit of our unit holders and shareholders.

Portfolio Overview Unit Trust of Fiji recorded a decline in the investment portfolio by $15 million for the year ended 30th September 2009. This was attributed to the impact of the global financial crisis and the devaluation of the Fiji dollar, which led to higher withdrawals by the unit holders during the year. The Trust noted a reduction

Investment Portfolio - Total Value of Deposited Property Asset Classes

Market Value - FJD

Equities

36,967,135

Bonds

23,211,838

Loans & Receivables

12,000,000

Interest Bearing Deposits Cash at Bank TOTAL

1,050,000 360,954 73,589,927

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Total Funds under Management The data below shows the total value of funds managed by the Trust over the last 5 years.

Total Funds Under Management Year

Value of Funds - FJD

FJD100,000,000

2005

88,633,531

FJD80,000,000

2006

94,433,693

FJD60,000,000

2007

90,943,660

FJD40,000,000

2008

88,529,429

FJD20,000,000

2009

73,589,927

Investments & Projects The Trust is currently rehabilitating and/or restructuring it’s nonperforming investments such as Muainarewa Resorts Limited – Momi Bay Stage 2 and Royal Davui Island Resort to recover its investment and diversify the funds in other asset classes. Appropriate measures have been undertaken to recover these investments and this process will be carried forward to the next financial year.

We have also disposed a number of low or non-performing investments and redirected funds to other securities and investments to improve returns to the unit holders.

Investment Strategy The Trust has embarked on strengthening its investment decisions and portfolio management. A new investment policy statement is currently being drafted with the guidelines formulated by the Board of Directors, Trustees, Shareholders and the Regulator that will advocate prudent investment practises and active portfolio management.

Some of these guidelines include limiting the total cost of an investment in any one company or security to 20% of UTOF’s total funds under UTOF Dividend Distribution per Unit – Class A Units Year

Dividend

Tax-free Dividend

2005 2006 2007 2008 2009

management. In addition, UTOF will be actively monitoring its investment portfolio based on provisions stipulated under the investment policy statement and risk management policy.

Funds Performance For the financial year ended 30th September 2009, the Trust declared a final dividend of 3.50 cents per unit compared to an interim dividend payout of 0.03 cents per unit for the same period. A total sum of $1,921,368 was paid out to unit holders on 15th December 2009.

This represents an increase of 152%, a positive growth indeed when compared to last year’s final dividend of 1.39 cents per unit. The total sum declared and/or paid out to the unit holders for the year under review was $4,425,763.

The tables below show the total amount of dividend distributed to the unit holders and the total returns, respectively, over the last 5 years. The negative capital growth for the year 2009 was mainly due to reduction in the value of investment portfolio as a result of decline in investment market values and higher withdrawals by the unit holders during the financial year.

Total Returns (%) Year

Dividend Yield

Capital Growth

Total Return

$4,221,561

2005

4.67

9.01

13.68

6.35c

$5,453,603

2006

4.70

1.61

6.31

3.55c

5.90c

$3,951,218

2007

4.30

0.40

4.70

2.35c

1.39c

3.74c

$2,499,767

2008

2.75

-0.30

2.45

0.03c

3.50c

3.53c

$4,425,763

2009

2.50

-2.68

-0.18

Interim

Final

Total

Distributed

2005

2.30c

3.50c

5.80c

2006

2.35c

4.00c

2007

2.35c

2008 2009

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Unit holders

for their confidence and support in appointing me as General Manager Designate & Company Secretary.

The data below shows the growth in the number of unit holders by just over 12,000 whereas a declining trend in the number of units in issue for the year 2009.

The Management Company also recruited two additional staff for the Sales & Marketing and Investment section. There are plans to recruit further staff in the field of Finance and Investment.

The growth in unit holders is a welcoming trend and we envisage a steady growth in the next financial year since the Trust has loyal, committed and long term unit holders and most importantly, the Trust has improved its dividend payout to the unit holders.

UTOFML continues to invest considerably in staff training and capacity building to enhance skills and knowledge in respective segments of the business.

Number of Unitholders and Units in Issue

The Year Ahead

Year

Unit Holders

Unit in Issue

2005

9,224

65,274,202

2006

10,821

68,723,107

2007

11,681

67,418,220

2008

12,186

66,494,097

2009

12,391

55,392,358

Growth in Number of Unit Holders

Growth in Number of Units in Issue

14000

80,000,000

12000

70,000,000

10000

60,000,000

8000

50,000,000

6000

40,000,000

4000

30,000,000

2000

20,000,000 2005 2006 2007 2008 2009

The Trust will be implementing a new 3 year Corporate Plan for the planning period 2010-2012. Incorporated in this plan are strategies that we expect to actively manage the investment portfolio, improve our rate of returns and develop appropriate systems & internal processes to streamline the business operation.

Our key objective remains to provide investors with maximum consistent earnings with a relatively low level of risk. We are adamant that the year ahead will usher in new changes for the Trust.

Looking ahead, I am confident that UTOF along with guidance of the Board of Directors, Trustees, Ministry of Public Enterprises, Tourism & Communications and Reserve Bank of Fiji will continue to explore avenues to grow the Trust and maximise the returns to the unit holders and the shareholders.

Conclusion I would like to take this opportunity to thank all our existing unit holders for their confidence and support throughout the financial year. Also, I would like to compliment the staff members for their hard work and commitment to the company.

10,000,000 2005 2006 2007 2008 2009

Thank you !

Human Resources & Staff Development During this year, my predecessor Dr Peter Mario completed his employment term with Unit Trust of Fiji (Management) Limited after 9 consecutive years of unwavering dedication and commitment.

I would also like to commend the Board of Directors and Shareholders

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Vilash Chand Acting General Manager & Company Secretary

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Financial Statements

Contents

Page

Trustee’s and Manager’s Report and Approval of Financial Statements

12

Independent Audit Report

13

Income and Distribution Statement

14

Balance Sheet

15

Statement of Changes in Equity

16

Cash Flow Statement

17

Notes to and forming Part of the Financial Statements

18-28

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Trustee’s and Manager’s Report

30 SEPTEMBER 2009

Date of Formation

The trust was established on 25th April 1978.

Principal activity The principal activity of the Trust during the financial year was to provide an investment vehicle that allowed investors to pool their funds and have them invested by the Fund Manager across a range of investments in accordance with the investment guidelines contained in the prospectus.

Approval of financial statements The financial statements for the year ended 30 September 2009 together with the accompanying notes set out on pages 14 to 28 are approved as being in accordance with the books and records of the Unit Trust of Fiji. The balance sheet, income and distribution statement, statement of changes in equity and statement of cash flows of the Unit Trust of Fiji fairly represent the state of affairs as at 30 September 2009, and results, changes in equity and cash flows for the year ended on that date.

Signed in accordance with resolution of the Trustee and Manager.

Unit Trust of Fiji (Trustee Company) Limited Trustee of the Unit Trust of Fiji

Dated at Suva this 23rd day of December 2009.

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Unit Trust of Fiji (Management) Limited Manager of the Unit Trust of Fiji

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Income and Distribution Statement

YEAR ENDED 30 SEPTEMBER 2009

Notes

2009 $

2008 $

1,804,787 1,843,159 1,448,393 1,892,851 6,989,190

1,394,955 2,846,996 (77,527) 176,153 4,340,577

-

(1,403,259)

Income Available for Distribution

6,989,190

2,937,318

Net Equalisation

(314,492)

(47,773)

6,674,698

2,889,545

Manager’s Remuneration

1,310,935

1,359,199

Net Income Available for Distribution

5,363,763

1,530,346

Declared for distribution – 30 September 2008

(938,000)

31,421

4,425,763

1,561,767

197,629 1,921,368 2,118,997

1,582,393 917,374 2,499,767

2,306,766

(938,000)

4,425,763

1,561,767

Nil

Nil

Interest Income Dividend Income Exchange /Gains (Losses) Gains on Disposal of Investments

Less: Impairment Losses

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Less:

Less: Interim Distribution Paid Proposed Final Distribution

Declared for Distribution

Balance – 30 September 2009

The Income and Distribution Statement is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 18 to 28.

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Balance Sheet

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2009 $

2008 $

53,699,991 20,271 15,762,070

67,018,650 20,271 22,669,096

69,482,332

89,708,017

483,513 23,495 884,395 61,228,973 12,000,000

4,911,782 1,365,597 1,495,753 74,216,862 12,500,000

74,620,376

94,489,994

835,417 74,493 2,306,766 1,921,368

3,799,990 64,613 917,374

5,138,044

4,781,977

69,482,332

89,708,017

EQUITY

Unit holders’ equity 54,896,282 Class A units fully paid (2008: 65,998,021) 496,076 Class B units fully paid (2008: 496,076) Income reserve Fair value reserve

2 2

Represented by: ASSETS Cash at bank Other receivables Accrued income Available-for-sale financial assets Loans and receivables

LIABILITIES Payables Unclaimed distribution Declared for distribution Proposed final distribution

3 4 5 6 7

9

10

Net Assets Signed in accordance with a resolution of the Trustee and the Manager.

Trustee

Manager

The Balance Sheet is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 18 to 28.

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Statement Of Changes In Equity

30 SEPTEMBER 2009

Reserves Income $ Balance at 30 September 2007 Creations during the year Equalisation on creations Repurchase of units Equalisation on repurchases Expenditure on prospectus Transfer of fair value re-measurements upon disposal of investments Fair value re-measurements

Declared for distribution 2007 Income for the year Interim distribution paid Proposed final distribution

Balance at 30 September 2008 Creations during the year Equalisation on creations Repurchase of units Equalisation on repurchases Transfer of fair value re-measurements upon disposal of investments Fair value re-measurements

Income for the year Interim distribution paid Proposed final distribution Declared for distribution Balance at 30 September 2009

Fair Value $

Unit holders Equity $

Total

20,271 -

21,115,063 -

69,028,476 6,340,852 (117,768) (7,443,502) 165,541 (16,949)

90,163,810 6,340,852 (117,768) (7,443,502) 165,541 (16,949)

-

(162,131) 1,716,164

-

(162,131) 1,716,164

20,271

22,669,096

67,956,650

90,646,017

-

-

31,421 1,530,346 (1,582,393) (917,374) (938,000)

31,421 1,530,346 (1,582,393) (917,374) (938,000)

20,271 -

22,669,096 -

67,018,650 4,973,501 (80,261) (19,544,652) 394,753

89,708,017 4,973,501 (80,261) (19,544,652) 394,753

-

(712,456) (6,194,570)

-

(712,456) (6,194,570)

20,271

15,762,070

52,761,991

68,544,332

-

-

20,271

15,762,070

5,363,763 (197,629) (1,921,368) (2,306,766) 938,000 53,699,991

5,363,763 (197,629) (1,921,368) (2,306,766) 938,000 69,482,332

$

The Statement of Changes in Equity is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 18 to 28.

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Statement of Cash Flows

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Note

2009

2008

$

$

6,670,981

2,897,249

Cash flows from operating activities

Cash receipts in course of operations

Cash payments in course of operations

Proceeds from sale of financial assets

Purchase of financial assets

Net cash from operating activities

(1,785,694)

(682,859)

8,836,152

1,779,522

(2,200,000)

(434,340)

11,521,439

3,559,572

(19,701,849)

(7,017,031)

6,415,350

7,495,182

(2,663,209)

(2,758,255)

(15,949,708)

(2,280,104)

(4,428,269)

1,249,468

4,911,782

3,632,314

483,513

4,911,782

Cash flows from financing activities

Repurchase of units

Proceeds from issue of units

Distribution paid to unit holders

Net cash used in financing activities Net (decrease) / increase in cash Cash at the beginning of the year Cash at the end of the year

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The Statement of Cash Flows is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 18 to 28.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

YEAR ENDED 30 SEPTEMBER 2009

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unit Trust of Fiji (“the Trust”) is a unit trust incorporated and domiciled in Fiji. The address of its registered office and principal place of business are disclosed in note 13 to the financial statements.

Principal Activity The trust is an investment vehicle that allows investors monies to be pooled with other unit holders’ monies that in return are re issued with units and become unit holders in the unit trust. The pooled funds in the trust are then invested by the manager in accordance with the investment guidelines contained in the prospectus.

The significant accounting policies which have been adopted in the preparation of these financial statements are set out below.

The financial statements were authorised for issue by the Trustees and Managers on 23rd December 2009.

(a)

Statement of compliance

The financial statements have been drawn up in accordance with the Unit Trust Act 1978, the Trust Deed, Trust Act 1966, the Capital Markets Development Authority Act 1996 and International Financial Reporting Standards (“IFRS”)

(b)

Basis of preparation

The financial statements have been presented in Fiji dollars, rounded to the nearest dollar. They have been prepared under the historical cost convention, except where stated.

The accounting policies have been consistently applied during the year.

(c)

Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and assumptions. It requires the Trustees and Managers to exercise their judgments in the process of applying the Trust’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements including the following notes:

Note 1(d) – Financial assets

(d)

Financial assets

Note 1(e) – Revenue recognition

Financial assets are classified into the following categories: loans and receivables and available-for-sale financial assets. The classification is dependent on the purpose for which the financial assets are acquired. The Manager determines the classification of financial asset at the time of the purchase and re-evaluates such designation at every report date.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued

(d)

Financial Assets (Cont’d)

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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. They are included in non-current assets unless the Trust intends to dispose of the investment within 12 months of the balance sheet date.

Purchases and sales of investments are recognised on trade-date – the date on which the Trust commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets Unrealised gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised in the fair value reserve. When available-for-sale financial assets are sold or impaired, the accumulated fair value adjustments are included in the income and distribution statement as gains or losses.

The fair values of quoted investments are based on current market prices. Other unlisted equities are valued by independent valuers approved by the Fund Manager and Trustee as per the Trust Deed. The valuation takes into account the following methodologies: 1.

2.

3.

Discounted Cash Flow (DCF) Price to Earnings EV/ EBITDA (Earnings before income tax, depreciation and amortisation)

The Trust assesses at balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired.

If such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from fair value reserve and recognised in the income and distribution statement. Impairment losses recognised in the income and distribution statement on equity instruments are not reversed through the income and distribution statement when the impairment condition reverses.

(ii) Loans and receivables

Loans and advances are recognised at recoverable amount, after assessing required provisions for impairment. Impairment of a loan is recognised when there is reasonable doubt that not all the principal and interest can be collected in accordance with the terms of the loan agreement.

Impairment is assessed by specific identification in relation to individual loans and estimation of expected losses in relation to loan portfolios where specific identification is impracticable. Bad debts are written off when identified. If a provision for impairment has been recognised in relation to a loan, write-offs for bad debts are made against the provision. If no provision for impairment has previously been recognised, write-offs for bad debts are recognised as expenses in the income and distribution statement.

21

u t o f

a n n u a l

20 09 1.

(e)

r e p o r t

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

YEAR ENDED 30 SEPTEMBER 2009

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Revenue recognition

Income is generally brought to account on an accrual basis. However effective from September 2008 interest income including penalty interest charged on loans to Muainarewa Resorts Limited (Muainarewa) was recognised on a cash receipt basis.

Income from offshore investments is recorded on an accrual basis net of any withholding tax deducted at source.

Dividend income from listed or quoted securities is recognised when a market announcement is made. Dividend from unlisted and private equities is recognised when it is formally notified that dividend is declared and the right to receive dividends is established.

(f)

Manager’s remuneration

Under the terms of the Trust Deed, the Manager is entitled to receive manager’s remuneration being 1.5% of the value of the deposited property.

(g)

Distributions upon divestment

Clause 19 of the Trust Deed permits the Managers in their absolute discretion to determine annually such amounts being the surplus from disposal of investments that year as being available for distribution. Any balance of the surplus from disposal of investments is then transferred to unitholders equity.

(h)

Income tax

The Trust is not subject to income tax provided the distributable income is declared for distribution to unit holders.

(i)

Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents comprises of cash at bank.

(j)

Other receivables and accrued income

Other receivables include cash receivable from sale of units and bank charges receivable from the “Management company”. Interest receivable and dividend declared but unpaid on shares owned are included under accrued income.

(k)

Payables

Payables are recognised for amounts to be paid in the future for goods and services recorded, whether or not billed to the Trust. Payables are stated at cost as they are expected to be settled within next twelve months.

22

u t o f

20 09

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

(l)

Foreign exchange translation

(i)

a n n u a l

r e p o r t

YEAR ENDED 30 SEPTEMBER 2009

Functional and presentation currency

The financial statements are presented in Fiji dollars, which is the functional and presentation currency of the Trust.

(ii)

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency assets are translated into the functional currency using the exchange rate prevailing at the balance sheet date.

Foreign exchange gains and losses arising from translation of non monetary items, such as equities classified as held for sale financial assets, are included in the Fair Value Reserve. In the opinion of managers and trustees, this accounting policy is more appropriate and suitable for Unit Trust of Fiji.

2.

RESERVES

Reserves consist of changes in the fair value of investments classified as available-for-sale, and an amount being an income reserve. The latter represents interest earned on funds advanced by the Government of Fiji prior to the establishment of the Trust. Government approval has been received for an amount of $8,069 transferred to the distribution statement in 1979 to be reimbursed and the total to be utilised as deemed necessary by the Board of the Managers.

3.

CASH AT BANK

Cash at bank comprise of the following bank accounts:

Income account Distribution account Capital account

4.

OTHER RECEIVABLES Receivable from management company

5.

ACCRUED INCOME Accrued interest income Accrued dividend income

2009 $

2008 $

116,577 78,455 288,481

1,126,026 1,034,549 2,751,207

483,513

4,911,782

23,495

1,365,597

494,535

655,759

389,860

839,994

884,395

1,495,753

23

u t o f

a n n u a l

20 09 6

r e p o r t

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

YEAR ENDED 30 SEPTEMBER 2009

AVAILABLE - FOR - SALE FINANCIAL ASSETS

Available-for-sale investments are valued in accordance with note 1(d) of the financial statements.

Available-for-sale investments included in the financial statements comprise:

a) Term deposits Local Offshore

b) Listed equities Shares quoted on stock exchanges: South Pacific Stock Exchange Stock exchanges overseas c)

Shares

d) Managed funds Local Offshore

e)

Unlisted equities

Bonds Local

Total Available –for –sale financial assets

7

LOANS AND RECEIVABLES

Loans to Muainarewa Resorts Limited (a) Syndicated Loan to Suva Private Hospital (b)

2009 $

2008 $

1,050,000 1,050,000

937,399 815,895 1,753,294

26,399,188 26,399,188

27,175,233 2,160,637 29,335,870

10,567,947

15,216,513

-

505,533 212,263

-

717,696

23,211,838

27,193,489

61,228,973

74,216,862

12,000,000 -

12,000,000 500,000

12,000,000

12,500,000

(a) The loan to Muainarewa Resorts Limited is secured by first registered mortgages over freehold lands adjacent to and forming part of the Momi Bay integrated resort development. The developers have suspended development. The principal and interest were due for settlement on 30 September 2008, and are now past due. No interest on this loan has been brought to account.

An independent valuation was obtained by the Trust during the year, which valued the securities at $13.3m. The Trust has made no provision for impairment as the Trustees and Managers believe that the security value is adequate to cover the loan balance of $12m. (b) The Syndicated Loan with Suva Private Hospital (SPH) was fully paid during the year ended 30 September 2009.

24

u t o f

20 09 8

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

r e p o r t

YEAR ENDED 30 SEPTEMBER 2009

INVESTMENT FEASIBILITY

2009 $

a n n u a l

Funds advanced to Fiji Wai Limited Less: Provision for impairment

2008 $

-

1,403,259

-

(1,403,259)

-

-

The Trust had expended funds amounting to $1,403,259 in evaluating and developing proposed investment opportunities in the mineral water industry for Fiji Wai Limited.

Neither the Trust nor Fiji Wai Limited has the ability to bring the funds expended in this project to fruition. Under the current economic conditions, the likelihood of locating a Joint Venture partner in the foreseeable future is uncertain and accordingly, the amount was fully provided for during the year ended 30 September 2008.

9

PAYABLES

2009 $

2008 $

Managers’ remuneration payable

514,665

682,264

Repurchase of units payable

312,867

470,064

7,885

2,647,662

835,417

3,799,990

Other sundry payables

10

DISTRIBUTIONS

Proposed final distribution

The manager has proposed a final distribution of $1,921,368 (2008: $917,374) or 3.5 cents per unit (2008:1.39 cents per unit).

11

CONTINGENT LIABILITIES AND COMMITMENTS

The Trustee and the Manager are not aware of any contingent liabilities or commitments at year end (2008: Nil).

25

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a n n u a l

20 09 12

r e p o r t

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

YEAR ENDED 30 SEPTEMBER 2009

RELATED PARTIES

Manager The Manager of the Trust is Unit Trust of Fiji (Management) Limited.

The directors of the management company are: Aisake Taito

Marika Luveniyali

Shaenaz Voss

Saula Sovanivalu (Retired on 23rd September 2009)

Manager’s fees Under the terms of the Trust Deed, the Manager is entitled to receive manager’s remuneration being 1.5% of the value of the deposited property, manager’s rounding being the lower of 1% of the value of each unit created or 1.25 cents per unit and preliminary charges being 2% of total funds available for transfer to capital. During the year the Manager received $1,310,935 as Manager’s Remuneration (2008: $1,359,199).

Trustee The Trustee of the Trust is Unit Trust of Fiji (Trustee Company) Ltd. The present directors of the Trustee Company are: Iowane Naiveli (appointed on 8 June 2009)

Anil Kumar Tikaram (appointed on 27 May 2009)

The previous directors of the Trustee Company were Gilbert Veisamasama Jr, and Ulamila Fa-Tuituku.

Trustee’s fee The Trustee is currently entitled to receive a fee of 1/8 of 1% of the value of the deposited property capped to $50million, and 1/16 of 1% of the deposited property in excess of $50million. During the year the Trustee was paid $97,420 VIP (2008: $79,352 VIP) for its services by the Managers.

Related party balances

Net amount (owing to) Managers

26

2009 $

2008 $

(604,141)

( 918,531)

u t o f

20 09 13

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

a n n u a l

r e p o r t

YEAR ENDED 30 SEPTEMBER 2009

TRUST DETAILS

Date of Formation Unit Trust of Fiji was established on 25th April 1978.

Registered Office The Trust’s registered office is located at level 2, Provident Plaza 2, Ellery Street, Suva.

14

RISK MANAGEMENT POLICIES

The Trust’s activities expose it to a variety of financial risks: market risk (including interest rate risk, credit risk, performance risk, foreign exchange risk, and price risk), liquidity risk and operational risk. The Trust’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Trust’s financial performance.

The Manager has the overall responsibility for the establishment and oversight of the Trust’s risk management framework. The Trust’s risk management policies are established to identify and analyse the risks faced by the Trust, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Trust’s activities.

Market risk

i)

Interest rate

This is the risk borne by interest bearing assets such as loans and bonds due to the changes in interest rates. Through its investment policy the Trust aims to balance its portfolio through short term deposits and loans, and medium to long term Government and semi-government bonds.

At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was:

Fixed rate instruments Carrying Amount

Term deposits Bonds

2009 $

2008 $

1,050,000

1,753,294

23,211,838

27,193,489

24,261,838

28,946,783

Fair value sensitivity analysis for fixed instruments The Trust does not account for any fixed rate financial assets and liabilities at fair value through profit and loss. Therefore a change in interest rates at the reporting date would not affect income.

27

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a n n u a l

20 09

r e p o r t

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

14

RISK MANAGEMENT POLICIES - continued

ii)

YEAR ENDED 30 SEPTEMBER 2009

Credit risk

This refers to the risk of losing investment funds due to companies, banks and financial institutions the Trust has deposits and provided short term loans defaulting on their repayments of principal or interest or both.

For deposits with banks and financial institutions, only reputable parties with known sound financial standing are accepted.

The Trust minimizes credit risk by conducting thorough due diligence on any investments its makes, ensure that there are guarantees on these investments by principal directors or sister companies, limit the amount that is given as loans and implement certain conditions and obtaining securities to secure funds advanced.

The total exposure of credit risk in the Trust’s portfolio is as follows: 2009 $

2008 $

483,513

4,911,782

23,495

1,365,597

1,050,000

1,753,294

23,211,838

27,193,489

24,768,846

35,224,162

Cash at bank Other receivables Term deposits Bonds

ii)

Credit risk

The Trust monitors credit risk by sector. An analysis of concentrations of credit risk is shown below:

2009 $

2009 %

2008 $

2008 %

Concentration by sector Central banks Financial Institutions Government Others

28

483,513

2%

4,911,782

14%

1,050,000

4%

1,753,294

5%

23,211,838

94%

27,193,489

77%

23,495

0%

1,365,597

4%

24,768,846

100%

35,224,162

100%

u t o f

20 09 14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

a n n u a l

r e p o r t

YEAR ENDED 30 SEPTEMBER 2009

RISK MANAGEMENT POLICIES - continued

iii)

Performance risk

This risk relates to the performance of the investment in which the Trust has invested. The return on a particular investment such as a share, is affected by the performance of the issuer of the investment, and in the case of bonds the movement in interest rates and the ability of the Trust to hold the bond to maturity in the normal course of its operations.

Different investments tend to perform differently under the same operating environment. Therefore, the Trust at all times will try to have different types of investments in its portfolio.

iv)

Foreign exchange risk

The Trust has investments and holds funds offshore and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Australian dollar. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities.

v)

Price risk

Price risk is the risk that the value of an investment will fluctuate as a result of changes in market prices, whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the market.

Different investments (cash, shares, bonds, property) tend to perform differently under the same operating environment.

Liquidity risk This is the risk that the Trust will not be able to facilitate its unit holders’ redemption request. The Trust aims to maintain a buffer fund in liquid assets at all times to meet expected normal redemptions. Under the Trust Deed, the manager, with the concurrence of the Trustee, may suspend the redemption of units for such time as may be necessary to realise sufficient liquid funds to meet any unusual redemption requests.

The table below analyses the Trust’s financial assets into relevant maturity groupings based on the remaining period at the balance date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

No specific At 30 September 2009

Maturity

Term Deposits Listed and unlisted securities

Less than 1 year $’000s

Between 1 and 2 years $’000s

Between 3 and 5 years $’000s

Over 5 years $’000s

1,067,437

Total $’000s 1,067,437

39,748,485

39,748,485

Managed funds

-

-

-

-

-

-

Bonds

-

4,743,693

5,028,770

3,757,694

11,314,260

24,844,417

5,811,130

5,028,770

3,757,694

11,314,260

Loans and receivables

12,000,000 51,748,485

12,000,000 77,660,339

29

u t o f

a n n u a l

20 09 14

r e p o r t

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

YEAR ENDED 30 SEPTEMBER 2009

RISK MANAGEMENT POLICIES - continued

Liquidity Risk

No specific Maturity

Less than 1 year $’000s

Between 1 and 2 years $’000s

Between 3 and 5 years $’000s

Over 5 years $’000s

$’000s

Term Deposits

-

1,758,526

-

-

-

1,758,526

Listed and unlisted securities

-

44,572,383

-

-

-

44,572,383

Managed funds

-

717,796

-

-

-

717,796

At 30 September 2008

Bonds Loans and receivables

Total

-

1,508,110

6,379,990

4,701,040

16,380,428

28,969,568

12,500,000

-

-

-

-

12,500,000

12,500,000

48,556,815

6,379,990

4,701,040

16,380,428

88,518,273

Operational risk

i)

Data risk

This is the risk of losing information including unit holder account details even though there is dual system storage of a hard copy filing system and electronic database. The Manager ensures confidentially and security of all unit holders information. The Trust has developed a database system to adequately store information, conducts daily backups of electronic information and has developed a Disaster Recovery Plan.

ii)

Legal risk

Legal risks refer to the risk of being legally non compliant due to changes in Government and Regulators current policies and regulations. The Manager has an independent compliance officer who reports directly to the General Manager and Board of Directors.

iii) Operational risk

Operational risk is defined as the risk arising from the Trust’s and its related entities business functions and from the practical implementation of the Manager’s strategy for growing the Trust. The Manager has developed a three year strategic plan and annual key performance indicators to ensure performance of the Trust. The Manager also conducts third party due diligence on new investments before recommending any investment to Trustees.

15

EVENTS AFTER BALANCE SHEET DATE

The Trustees and Managers consider that the current political situation will not affect the ability of the Trust to continue as a going concern. The financial statements do not reflect any uncertain implications, if any, arising from this event.

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Trustees and Managers, to affect significantly the operations of the Trust, the results of those operations, the changes in net assets of those operations, or the state of affairs of the Trust in future financial years.

30

Directory Unit Trust of Fiji (Management) Limited Board of Directors Mr. Aisake Taito

Chairman

Mrs. Shaenaz Voss

Director Mr. Saula Sovanivalu Mr. Marika Luveniyali

Director Director – retired on 23rd September 2009

Acting General Manager & Company Secretary Mr. Vilash Chand Registered Office

Level 2, Provident Plaza 1, Ellery Street G P O Box 14451, Suva

Telephone

330 1052, 330 9698, 331 4544

Facsimile

331 5376

E-mail

info@unittrust.com.fj

Customer Service Office

Shop 4, 12 Marine Drive, Reddy Diamond Building P O Box 3578, Lautoka Ph: 666 3663 Fax: 666 1661

Agents

Fiji Development Bank Post Fiji Branches Kontiki Stockbroking Limited Fiji Stock Brokers

Auditor

KPMG Chartered Accountants Suva Central, Renwick Road, Suva

Solicitors

R Patel & Company, Mitchell & Keil, Neel Shivam

Bankers

Australia & New Zealand Bank, Bank of South Pacific

Unit Trust of Fiji (Trustee Company) Limited Board of Directors Mr. Iowane Naiveli

Director and Company Secretary

Mr. Anil Tikaram

Director

Registered Office

Level 2, Provident Plaza 1, Ellery Street G P O Box 14451, Suva

www.unittrustfiji.com.fj

Level Two, Provident Plaza One, Ellery Street, G.P.O Box 14451, Suva, Fiji Islands.

Telephone (679) 330 1052, 330 9698, 331 4544, Facsimile (679) 331 5376 E-mail info@unittrust.com.fj