FLOUR MILLS OF FIJI LIMITED

Transcription

1 ANNUAL REPORT 2009

2 I N D E X Page No. Directors' and Advisors A Notice of annual general meeting B Chairman s report C and D Directors' report 1 to 3 Statement by directors 4 Independent audit report 5 and 6 Income statements 7 Balance sheets 8 Consolidated statement of changes in equity 9 Statement of changes in equity 10 Consolidated cash flow statement 11 Notes to and forming part of the financial statements 12 to 36 South Pacific Stock Exchange listing requirements 37 and 38

3 A DIRECTORS AND ADVISORS DIRECTORS Mr. Hari Punja OF, OBE, JP - Chairman Mr. Gary Callaghan Mr. Radike Qereqeretabua Mr. Ajai Punja CHIEF EXECUTIVE Mr. Ram Bajekal GROUP CFO & COMPANY SECRETARY Mr. Kumar Shankar B.Com, L.L.B, A.C.A, A.C.S, A.M.I.M.A AUDITORS PricewaterhouseCoopers, Chartered Accountants, Suva. SOLICITORS M/s AK Lawyers M/s Diven Prasad Lawyers M/s Munro Leys M/s Sherani & Co. BANKERS Australia and New Zealand Banking Group Limited REGISTERED OFFICE Lot 2, Leonidas street, Walu Bay, Suva. Telephone : Fax : kumars@fmf.com.fj

4 B NOTICE OF ANNUAL GENERAL MEETING Notice is hereby given that the Thirty Seventh Annual General Meeting of the members of Flour Mills Of Fiji Limited will be held at 3.00 p.m. on Friday, the 20 th November 2009, in the Training room at Atlantic & Pacific Packaging Company Limited, Leonidas Street, Walu Bay, Suva to transact the following business : Ordinary business 1. Confirmation of the minutes of the previous Annual General Meeting held on 31 st October Matters arising from the minutes. 3. To receive and adopt the Audited Balance Sheets and Profit and Loss Statements and the reports of the Directors and Auditors for the year ended 30 th June To elect, in accordance with Article 86 of the Articles of Association of the company, Mr. Gary Callaghan as a director of the company. He retires by rotation and being eligible, offers himself for reelection. 5. To elect, Mr. Ajai Punja as a director of the company in place of Mr. Sanjay Punja. Mr. Sanjay Punja retires by rotation and has not offered himself for re-election. 6. To appoint Auditors from the conclusion of this meeting until the conclusion of the next Annual General Meeting at a fee to be negotiated by the Directors.The retiring Auditors M/s. PricewaterhouseCoopers, Chartered Accountants, being eligible, offer themselves for appointment. 7. Any other business brought up in conformity with the Articles of Association of the company. By order of the Board of Directors, Kumar Shankar Group CFO & Company Secretary Dated : 7 th October 2009 Suva, Fiji.

5 C CHAIRMAN S REPORT Dear Shareholders, After a recovery in our financial results in 2008 we have again incurred a significant loss in for the 2009 year. We have incurred a Group loss before tax of $6,435,160 as against a profit before tax of $6,526,720 in The principal cause of this loss is the unfair treatment we continue to receive from the Prices and Income Board and the arbitrary decisions of Government in regard to duties and import policies. The year s results have also been affected by having to write off the value of our Rice Milling assets and our discontinued water business. In the first half of the year we were constantly battling to have the price of our flour and rice adjusted in accordance with rising world prices. The constant delays in approving price adjustments by PIB resulted in mounting losses. This situation was then exacerbated following the devaluation of the Fiji dollar by the Reserve Bank. Overnight the cost of our raw materials increased by more than 20% and we were not able to pass on this increased cost for a considerable period, during which the group was incurring a loss of more than $ 1 million per month. Also during the year the Government decided to arbitrarily reduce import duty on white rice from 15% to zero. There was no prior consultation and as a consequence we were in the unfortunate position of having to honor forward contracts for brown rice at a considerable loss We have now repositioned the Rice company to deal with this new import policy ; however in the process we have had to cease milling brown rice which has resulted in loss of jobs and a write off of machinery values. If it was the Government s intention to lower the consumer price of rice then they have failed. The lower price of rice which the consumers of Fiji are enjoying now is the result of low international prices and not because of the change in duty structure of Rice. On the other hand, these actions have resulted into Government losing a considerable amount of revenue and making it almost impossible for local rice farmers and millers to survive. These arbitrary decisions of Government both present and past have been a constant frustration for us and other manufacturers. When the Australian Government decided to change their duty and tariff structures on Footwear, they gave local manufacturers a 10 year period to adjust to the changes. Our plea to the Government is that policy and duty changes which affect local manufacturers should only be made after consultation and with a reasonable period of adjustment. Also that any changes must be non discriminatory. Exports The group has seen a very healthy growth in Exports of biscuits and other products. This year our group exports were $ 50 million and it is expected to grow to $ 60 million in the forthcoming year. It is important for the Government to appreciate that the benefits of our exports and the Import substitution reaches far and wide. For e.g. we buy local honey, Taro and Cassava from farmers for our different products.

6 D CHAIRMAN S REPORT - Continued Outlook During the last few months we have sought to stabilize the operations of the company and we have rationalized some of our products and activities. We are already seeing improvements flow through from these decisions and I am happy to report that the company and its subsidiaries has recorded a reasonable profit in each of the first three months of the new financial year and we expect this to continue for the rest of the year. We have made numerous requests to the Government not to change the Import duty structure on an adhoc basis. Hari Punja OF, OBE, JP Chairman 7th October 2009 Suva, Fiji Islands

7 1 FINANCIAL STATEMENTS DIRECTORS' REPORT In accordance with a resolution of the board of directors, the directors herewith submit the Group Financial Statements, Statement of Changes in Equity and Group Cash Flow Statement for the year ended 30 June 2009 and report as follows: 1 Directors The following were directors of the company at any time during the financial year and up to the date of this report: - Hari Punja OF, OBE, JP Chairman - Sanjay Punja - Lionel D S Yee CF - Gary Callaghan - Radike Ulaiasi Qereqeretabua - Ajai Punja - appointed as an alternate director effective 25 June Principal Activities The principal activities of the group comprise the milling of wheat, rice and whole dunfield peas, manufacturing of packaging materials including corrugated cartons and assorted boxes and packets, manufacturing of biscuits and snacks food products, sale of crushed and feed wheat and related products and investment. 3 Trading Results The loss after income tax of the group attributable to the members of the holding company for the year ended 30 June 2009 was $7,155,432 (2008: Profit - $3,873,757) and for the holding company was $7,259,153 (2008: Profit - $4,450,932). 4 Provisions There were no material movements in provisions, other than provisions for leave, doubtful debts and taxes. 5 Dividends The directors did not declare any dividends during the year. 6 Bad and Doubtful Debts The directors took reasonable steps before the financial statements were made out, to ascertain that all known bad debts were written off and adequate provision was made for doubtful debts. At the date of this report, the directors are not aware of any circumstances which would render the amount written off for bad debts, or the amount of the provision for doubtful debts, inadequate to any substantial extent.

8 2 FINANCIAL STATEMENTS DIRECTORS' REPORT - Continued 7 Current Assets The directors took reasonable steps before the income statement and balance sheet were made out to ascertain that the current assets of the company and the group were shown in the accounting records of the company and the group at a value equal to or below the value that would be expected to be realised in the ordinary course of the business. At the date of this report, the directors are not aware of any circumstances which would render the values attributable to the current assets in the company and the group s financial statements misleading. 8 Reserves The directors recommend that no amounts be transferred to reserves in respect of the year ended 30 June Events Subsequent to Balance Date No charge on the assets of the company or the group has arisen since the end of the financial year to the date of this report to secure the liabilities of any other person. No contingent liability has arisen since the end of the financial year to the date of this report. No contingent or other liability has become enforceable or is likely to become enforceable within a period of twelve months after the date of this report which, in the opinion of the directors, will or may affect the ability of the company and the group to meet its obligations as and when they fall due. 10 Basis of Accounting The directors believe the basis of the preparation of the financial statements is appropriate and the company will be able to continue in operation for at least twelve months from the date of this report. Accordingly the directors believe the classification and carrying amounts of assets and liabilities as stated in these financial statements to be appropriate 11 Related Party Transactions In the opinion of the directors all related party transactions have been adequately recorded in the books of the company. 12 Other Circumstances At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements which would render any amounts stated in the financial statements misleading.

9 3 FINANCIAL STATEMENTS DIRECTORS' REPORT Continued 13 Unusual Transactions The results of the company and the group s operations during the year have not in the opinion of the directors been substantially affected by any item, transaction or event of a material and unusual nature other than those disclosed in the financial statements. 14 Directors Interest Interest of directors and any additions thereto during the year in the ordinary shares of the company are as follows: Beneficially Non-Beneficially Additions Holding Additions Holding Hari Punja ,166,175 Sanjay Punja as above Lionel D S Yee - 10, ,870 Gary Callaghan - 1,500, , Group Contribution Contributions to group loss after income tax are as follows: Contribution $ Flour Mills of Fiji Limited ( 7,427,153) Subsidiary Companies 467,808 ($ 6,959,345) ========== Signed in accordance with a resolution of the directors this 7 th day of October For and on behalf of the Board,. Director.. Director

10 4 FINANCIAL STATEMENTS STATEMENT BY DIRECTORS In the opinion of the directors: (a) (b) (c) (d) the accompanying income statements are drawn up so as to give a true and fair view of the results of the company and of the group for the year ended 30 June 2009, the accompanying balance sheets are drawn up so as to give a true and fair view of the state of the company s and the group s affairs at 30 June 2009, the accompanying statement of changes in equity and consolidated statement of changes in equity for the year ended 30 June 2009 are drawn up so as to give a true and fair view of the movement in shareholder s funds. the accompanying consolidated cash flow statement is drawn up so as to give a true and fair view of the cash flows of the group for the year ended 30 June 2009, and Signed in accordance with a resolution of the directors this 7 th day of October For and on behalf of the Board,.. Director.. Director

11 5 INDEPENDENT AUDITOR S REPORT To the members of Flour Mills of Fiji Limited PricewaterhouseCoopers Level 8, Civic Tower 262 Victoria Parade GPO Box 200 Suva, Fiji Islands Telephone Facsimile Scope We have audited the accompanying financial statements of Flour Mills of Fiji Limited and the group which comprise the balance sheet as of 30 June 2009 and the income statement, statement of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes as set out on pages 7 to 36. Directors' and Management s Responsibility for the Financial Statements Directors and Management are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and with the requirements of the Fiji Companies Act, This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility This report is made solely to the group s shareholders, as a body, in accordance with Section 165(1) of the Fiji Companies Act Our audit work has been undertaken so that we might state to the group s shareholders those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company s shareholders as a body, for our audit work, for this report, or for the opinions we have formed. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by directors and management, as well as evaluating the overall presentation of the financial statements. The financial statements of the Samoa subsidiary were not audited. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

12 6 Opinion In our opinion (a) (b) proper books of account have been kept by the company and the group, so far as it appears from our examination of those books, and the accompanying financial statements which have been prepared in accordance with International Financial Reporting Standards: (i) are in agreement with the books of account; (ii) to the best of our information and according to the explanations given to us: a) give a true and fair view of the state of affairs of the group as at 30 June 2009 and of its financial performance, changes in equity, and its cash flows for the year ended on that date; b) give the information required by the Fiji Companies Act, 1983 in the manner so required. We have obtained all the information and explanations which to the best of our knowledge and belief, were necessary for the purposes of our audit. 16 October 2009 Suva, Fiji PricewaterhouseCoopers Chartered Accountants

13 7 INCOME STATEMENTS Group Company Notes $ $ $ $ Revenue ,399, ,080,421 60,297,771 62,214,340 Other operating income 6,799,904 4,767,280 7,184,196 10,946,886 Changes in inventories of finished goods and work in progress 2,635, , , ,892 Raw materials and consumables used ( 130,424,802) ( 114,146,818) ( 59,398,124) ( 51,857,862) Staff costs ( 6,604,569) ( 5,071,607) ( 3,163,290) ( 2,182,904) Depreciation/amortisation ( 5,521,386) ( 5,681,740) ( 2,095,939) ( 2,251,274) Impairment loss ( 755,990) Other operating expenses ( 20,436,171) ( 21,571,280) ( 9,060,758) ( 10,643,875) (Loss) / profit from operations ( 2,908,618) 10,364,958 ( 5,978,323) 6,739,203 Finance costs ( 3,526,542) ( 3,838,238) ( 1,528,902) ( 1,649,285) (Loss) / profit before tax 16 ( 6,435,160) 6,526,720 ( 7,507,225) 5,089,918 Income tax (expense)/credit 11 ( 524,185) ( 2,016,726) 248,072 ( 638,986) (Loss) / profit) after tax ($ 6,959,345) $ 4,509,994 ($ 7,259,153) $ 4,450,932 ============ ========== ========== ========== Attributable to: Equity holders of the company ( 7,155,432) 3,873,757 Non-controlling interest 196, ,237 ($ 6,959,345) $ 4,509,994 =========== ========== Earnings per share 19 ($ 0.048) $ =========== ========== The above income statements should be read in conjunction with the accompanying notes.

14 BALANCE SHEETS AND SUBSIDIARIES 30 JUNE 2009 Group Company Notes $ $ $ $ CURRENT ASSETS Cash and cash equivalents ,985 1,727, ,022 1,527,960 Inventories 5 24,175,096 31,023,223 9,069,215 12,246,508 Trade receivables 6 19,317,711 19,561,331 4,451,659 5,910,996 Other receivables 7 2,486,259 5,232, ,750 1,043,414 Amounts owing by related companies 23(c) 4, ,592 61,702 46,487,101 57,544,964 14,854,238 20,790,580 NON-CURRENT ASSETS Related company loan 23(e) ,000,000 Term deposits 3,855,790 4,427,170 2,657,247 3,498,973 Property, plant and equipment 13 42,138,691 35,738,074 12,449,139 13,664,204 Investments ,979,250 10,979,250 Investment property 14 17,220,106 17,429, Intangible assets , , , ,000 Deferred tax asset 12(b) 5,173,535 5,269,369 2,925,749 2,838,030 68,925,796 63,436,838 30,549,059 32,515,457 TOTAL ASSETS 115,412, ,981,802 45,403,297 53,306,037 Less: CURRENT LIABILITIES Bank overdraft 8 22,779,207 23,973,967 1,472,897 1,977,792 Trade payables 7,183,382 5,615, , ,660 Other payables and accruals 6,143,869 3,835,084 3,883,765 1,697,029 Borrowings 9 8,482,058 7,755,996 4,085,948 3,944,200 Amounts owing to related companies 23(d) 412, , ,735 41,358 Related company loan 23(e) - - 2,335,000 3,000,000 Current tax liability 11 ( 366,756) 1,200,281 ( 125,331) ( 125,331) 44,634,327 42,692,406 13,297,045 11,323,708 NON-CURRENT LIABILITIES Borrowings 9 39,406,227 40,056,509 16,833,986 19,290,557 Deferred tax liability 12(a) 3,160,100 2,949, , ,277 42,566,327 43,005,808 17,232,910 19,849,834 TOTAL LIABILITIES 87,200,654 85,698,214 30,529,955 31,173,542 NET ASSETS $ 28,212,243 $ 35,283,588 $ 14,873,342 $ 22,132,495 ========== =========== ========== ========== SHAREHOLDERS' EQUITY Issued capital 4 6,000,000 6,000,000 6,000,000 6,000,000 Reserves 19,434,009 26,589,441 8,873,342 16,132,495 25,434,009 32,589,441 14,873,342 22,132,495 Non-controlling Interest 2,778,234 2,694, Capital commitments 20 Contingencies and commitments 21 $ 28,212,243 $ 35,283,588 $ 14,873,342 $ 22,132,495 ========== =========== ========== ========== The above balance sheets should be read in conjunction with the accompanying notes. These financial statements are approved in accordance with the resolution of the Board of Directors. For and on behalf of the Board 8.. Director Director

15 9 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Group Attributable to the members of the Holding Company Notes Share Capital Foreign Unappropriated Total Non-controlling Total Capital Profit Currency Profits Interest Shareholders Reserve Translation Equity Reserve $ $ $ $ $ $ Balance at 30 June ,000,000 41,500 1,844 25,672,340 31,715,684 2,392,910 34,108,594 Profit for the year ,873,757 3,873, ,237 4,509,994 Dividends ( 3,000,000) ( 3,000,000) ( 335,000) ( 3,335,000) Balance at 30 June ,000,000 41,500 1,844 26,546,097 32,589,441 2,694,147 35,283,588 Loss for the year ( 7,155,432) ( 7,155,432) 196,087 ( 6,959,345) Dividends ( 112,000) ( 112,000) Balance at 30 June 2009 $ 6,000,000 $ 41,500 $ 1,844 $19,390,665 $ 25,434,009 $ 2,778,234 $ 28,212,243 =========== ======== ========== ========== =========== =========== ========== The above statement of changes in equity should be read in conjunction with the accompanying notes.

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17 11 CONSOLIDATED CASH FLOW STATEMENT Note $ $ Cash flows from operating activities Receipts from customers 162,522, ,203,343 Payments to suppliers and employees ( 145,621,929) ( 151,395,968) Cash generated from operations 16,900,425 8,807,375 Income tax paid ( 2,338,103) ( 1,468,050) Interest paid ( 3,069,982) ( 3,765,774) Net cash provided by operating activities 11,492,340 3,573,551 Cash flows from investing activities Acquisition of investment properties ( 107,042) ( 243,726) Acquisition of property, plant and equipment ( 12,367,535) ( 3,548,707) Proceeds from sale of property, plant and equipment 6, ,008 Payment for trademark ( 22,507) ( 26,079) Investment in term deposits 676,693 1,011,151 Interest received 289,873 ( 157,722) Net cash used in investing activities ( 11,524,074) ( 2,452,075) Cash flows from financing activities Proceeds from borrowings 3,535,117 22,693,380 Repayment of borrowings ( 5,459,338) ( 4,116,824) Loan to related companies (net) 2,038,813 ( 5,283,894) Dividends paid ( 112,000) ( 3,335,000) Net cash provided by financing activities 2,592 9,957,662 Net (decrease)/ increase in cash and cash equivalents ( 29,142) 11,079,138 Cash and cash equivalents at the beginning of the year ( 22,246,080) ( 33,325,218) Cash and cash equivalents at the end of the year 17(a) ($ 22,275,222) ($ 22,246,080) ============ =========== The above consolidated cash flow statement should be read in conjunction with the accompanying notes.

18 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted by Flour Mills of Fiji Limited and its subsidiaries are stated to assist in a general understanding of these financial statements. These policies have been consistently applied by the company and its subsidiaries except where otherwise indicated. 12 (a) Basis of accounting The financial statements of the group have been drawn up in accordance with the provisions of the Companies Act 1983 and International Financial Reporting Standards ( IFRS ). The financial statements have been prepared under the basis of historical costs, as modified by the revaluation of available-forsale financial assets, financial assets and liabilities at fair value through profit or loss. Standards, amendments and interpretations issued but not yet effective The following standards, amendments and interpretations to existing standards have been published and are mandatory for accounting periods beginning on or after 1 January 2009 or later periods, but the company has not early adopted them. Adoption of these standards and interpretations will not have any significant impact on the group s financial statements. IAS 1 Revised - Presentation of financial statements (effective 1 January 2009) IAS 23 Revised - Borrowing costs (effective 1 January 2009) IAS 27 Amendment - Consolidated and separate financial statements (effective 1 July 2009) IAS 32 and IAS 1 Amendment, Puttable financial instruments and obligations arising on liquidation (effective 1 January 2009) IAS 39, Financial instruments - Recognition and measurement Amendments for eligible hedged items (effective 1 July 2009) IFRS 1 and IAS 27 Amendment - Cost of an investment on first-time adoption (effective 1 January 2009) IFRS 2 Amendment - Vesting conditions and cancellations (effective 1 January 2009) IFRS 3 Amendment - Business combinations and consequential amendments (effective 1 July 2009) IFRS 8 - Operating segments (effective 1 January 2009) IFRIC 15 - Agreements for the construction of real estate (effective 1 January 2009) (b) Principles of consolidation (i) Subsidiaries Subsidiaries are all entities over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the group s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

19 13 NOTES TO AND FORMING PART OF 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued (b) Principles of consolidation continued (i) Subsidiaries continued Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. (ii) Transactions and non-controlling interests The group applies a policy of treating transactions with minority interests as transactions with parties external to the group. Disposals to non-controlling interests result in gains and losses for the group that are recorded in the income statement. Purchases from non-controlling interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary. (c) (d) Intangible assets Trademarks have a finite useful life and are carried at cost less accumulated amortisation. Acquired trademarks are shown at historical cost. Amortisation is charged on a straight line basis over their estimated useful lives. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period. Property, plant and equipment Property, Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows: Premium on leasehold land - term of lease Buildings - 2.5% Plant and machinery - 4% - 10% Motor vehicles - 25% Furniture, fittings and office machines - 10% Computers % The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within income statement.

20 14 NOTES TO AND FORMING PART OF 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued (e) (f) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost (WAC) method. The cost of finished goods and work in progress comprises design costs, raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Provisions Provisions are recognised when: the group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. (g) Income tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the Fiji Islands, where the company s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of temporary difference will not reverse in the foreseeable future. (h) Foreign currency translation i) Functional and presentation currency Items included in the financial statements of each of the group s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in Fijian Dollars, which is the company s functional and presentation currency. ii) Transactions and balances Foreign currency transactions are translated into the Fijian currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

21 15 NOTES TO AND FORMING PART 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued (i) Financial assets and liabilities Investments in equity securities have been classified as available-for-sale financial assets. The classification is dependent on the purpose for which the investments are acquired. Management determines the classification of investments at the time of the purchase and re-evaluates such designation on a regular basis. Purchases and sales of investments are recognised on the trade date, which is the date the group commits to purchase or sell the asset. Cost of purchase includes transaction costs. Available-for-sale financial assets Available-for-sale financial assets are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Equity investments not held for trading are classified under this category. Available-for-sale financial assets are subsequently carried at cost less amortisation. Provision for impairment of investments is made where in the opinion of the directors there has been a permanent diminution on the value of the investments. Amounts expended to acquire a share, upon coming into existence of the copyright to an audio visual production, is stated at a value expected to be recovered from the exploitation of the copyright in accordance with that production s Investment Agreement. (j) (k) Investment properties Investment properties, principally comprising leasehold land and buildings, are held for long-term rental yields. Investment properties are stated at historical cost less any accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation rates are as noted in note 1 (d). Revenue recognition Revenue comprises the fair value of the received or recoverable for the sale of goods and services in the ordinary course of the group s activities. Revenue is shown net of sales discount and value added tax. The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the group and when specific criteria have been met for each of the group s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. (i) Sale of Goods Revenue comprises the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the group s activities. Revenue is shown net of value-added tax, returns, rebates and discounts. Sales of offal by-products are included as other income. (ii) Audio Visual Copyrights Proceeds from exploitation of copyrights in audio visual productions are brought to account when received in accordance with the copyrights related Investment Agreement. (iii) Dividend Income Dividend income is recognised when the right to receive payment is established. (iv) Interest Income Interest income is recognised on a time-proportion basis using the effective interest or compound interest method which matches income earned to the funds employed on a constant basis.

22 16 NOTES TO AND FORMING PART OF 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued. (l) (m) (n) (o) (p) (q) (r) (s) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within other operating expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited to other operating income in the income statement. Trade and other payables Trade payables and other accounts payable are recognised at fair value. Segment information A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. Cash and cash equivalents Cash and cash equivalents comprise of cash on hand and at bank, and bank overdrafts. Employee entitlements Liability for annual leave is recognised and measured as the amount unpaid at the reporting date at current pay rates in respect of employee services up to that date. Liabilities for other employee entitlements, which are not expected to be paid or settled within twelve months of reporting date, are accrued in respect of all employees at the present value of future amounts expected to be paid. Dividend distribution Dividend distribution to the company s shareholders is recognised as a liability in the company s financial statements in the period in which the dividends are proposed or declared by the company s directors. Dividends are subject to the provisions of the Fiji Income Tax Act and Income Tax (Dividend) Regulations Earnings per share Basic earnings per share Basic earnings per share (EPS) is determined by dividing profit after income tax attributable to shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share Diluted EPS is the same as the basic EPS as there are no ordinary shares which are considered dilutive. Comparative figures Where necessary, amounts relating to prior years have been reclassified to facilitate comparison and achieve consistency in disclosure with current year amounts.

23 17 NOTES TO AND FORMING PART OF 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued (t) Leases Leases of property, plant and equipment where the company has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rent obligations, net of finance charges, are included in other long term payables. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the asset s useful life and the lease term. Lease in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. (u) Use of estimates and judgments The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the application of 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 in 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(b) Property, plant and equipment Note 1(d) Provisions 2 FINANCIAL RISK MANAGEMENT The group s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The group s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group s financial performance. Risk management is carried out by a risk management committee under policies approved by the board of directors. The committee identifies and evaluates financial risks in close co-operation with the group s operating units. The board provides written policies for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity. (a) Market risk (i) Foreign exchange risk The group is exposed to foreign exchange risk arising from various currency exposures in respect to purchase of inventory, primarily with respect to the Australian and US dollar. Foreign exchange risk arises from future commercial transactions and liabilities. Management has set up a policy to require the group to manage their foreign exchange risk against their functional currency, in this case the Fiji dollar. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency other then the Fiji Dollar. For significant settlements, the group is required to seek quotations from recognised banks and use the most favourable exchange rate for purposes of the settlement.

24 NOTES TO AND FORMING PART OF 2 FINANCIAL RISK MANAGEMENT - Continued At 30 June 2009, if the Fijian dollar had weakened/strengthened by 10% against the AUD with all other variables held constant, post-tax profit for the year would have been $246,562 lower/higher, mainly as a result of foreign exchange gains/losses on translation of AUD denominated trade payables and trade receivables. At 30 June 2009, if the Fijian dollar had weakened/strengthened by 10% against the EURO with all other variables held constant, post-tax profit for the year would have been $104,289 lower/higher, mainly as a result of foreign exchange gains/losses on translation of EURO denominated trade payables. At 30 June 2009, if the Fijian dollar had weakened/strengthened by 10% against the USD with all other variables held constant, post-tax profit for the year would have been $73,970 lower/higher, mainly as a result of foreign exchange gains/losses on translation of USD denominated trade payables. (ii) Price risk The group is exposed to equity securities price risk because of investments held by the group and classified on the consolidated balance sheet as Investments. The group is not exposed to commodity price risk. To manage its price risk arising from investment in equity securities, the group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the group. (iii) Cash flow and fair value interest rate risk As the group has no significant interest-bearing assets, the group s income and operating cash flows are substantially independent of changes in market interest rates. (b) Credit risk Credit risk is managed by management with board oversight. Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables. As part of its risk control procedures, an assessment of the credit quality of a new customer, taking into account its financial position, past experience and other factors is carried out prior to the board approval. Individual credit risk limits are then set based on the assessments done. Individual risk limits are set based on assessments done. The utilisation of credit limits is regularly monitored. Sales to credit retail customers are settled in either cash or bank cheques. (c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash to meet its present obligations. Management monitors rolling forecasts of the group s liquidity reserve comprising of cash and cash equivalents on the basis of expected cash flow. The group s financial liabilities, analysed below, illustrates that all balances are due within 12 months and are equal to their carrying balances as the impact of discounting is not significant. 18 As at 30 June 2009 Up to 1 year 1 to 2 years 2 to 5 years Over 5 Years Total $ 000 $ 000 $ 000 $ 000 $ 000 Borrowings 8,482 7,947 7,947 23,512 47,888 Creditors & accruals 13, ,327 Total 21,809 7,947 7,947 23,512 61,215 As at 30 June 2008 Borrowings 7,756 7,221 7,221 25,615 47,813 Creditors & accruals 9, ,451 Total 17,207 7,221 7,221 25,615 57,264

25 19 NOTES TO AND FORMING PART OF 3 CAPITAL RISK MANAGEMENT The company s objectives when managing capital is to safeguard the company s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the balance sheet) less cash and cash equivalents. Total capital is calculated as equity as shown in the balance sheet plus net debt. Equity comprises of quassi equity through shareholder advances. The gearing ratios at 30 June 2009 and 2008 were as follows: $ $ Total borrowings (note 9) 47,888,285 47,812,505 Add: cash, cash equivalents and bank overdrafts (note 17) 22,275,222 22,246,080 Net debt 70,163,507 70,058,585 Equity (page 8) 28,259,581 35,283,588 Total capital $ 98,423,088 $105,342,173 =========== ========== Gearing ratio 71% 67% The increase in the gearing ratio during 2009 resulted primarily from the operating results for the year. 4 SHARE CAPITAL Group Holding Company $ $ $ $ Authorised: 250,000,000 shares of $0.04 each $ 10,000,000 $ 10,000,000 $ 10,000,000 $ 10,000,000 ========== ========== ========== ========== Issued: 150,000,000 shares of $0.04 each fully paid $ 6,000,000 $ 6,000,000 $ 6,000,000 $ 6,000,000 ========== ========== ========== ========== 5 INVENTORIES The valuation policy adopted in respect of inventories is set out in note 1(e). Group Holding Company $ $ $ $ Finished products 6,965,276 4,606,137 1,224,329 1,199,094 Raw materials 11,305,811 18,798,257 6,554,292 9,728,604 Packing materials 3,358,048 3,434, , ,955 Consumable stores 1,749,703 1,559, , ,786 Work in progress 519, , , ,069 Provision for stock obsolescence ( 68,742) ( 46,662) ,829,340 28,594,987 9,069,215 12,246,508 Goods in transit 345,756 2,428, $ 24,175,096 $ 31,023,223 $ 9,069,215 $ 12,246,508 ========== ========== ========== ==========

26 20 NOTES TO AND FORMING PART OF 6 TRADE RECEIVABLES Trade receivables 19,983,663 20,311,858 4,606,393 6,147,372 Provision for doubtful debts ( 665,952) ( 750,527) ( 154,734) ( 236,376) $ 19,317,711 $ 19,561,331 $ 4,451,659 $ 5,910,996 ========== ========== ========== ========== Trade receivables that are less than one month past due are not considered impaired. As of 30 June 2009, trade receivables of $ 5,805,358 (2008: $ 6,307,306) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows: Consolidated Holding Company $ $ $ $ Over 1 month 4,016,935 4,485, ,014 1,297,699 Over 2 months 1,788,423 1,821,999 59, ,858 $ 5,805,358 $ 6,307,306 $ 1,008,984 $ 1,543,557 =========== ========== ========= ========== As of 30 June 2009, trade receivables of $594,969 (2008: $668,270) were impaired and provided for. The total amount of the provision was $665,952 as of 30 June 2009 (2008: $750,527). The individually impaired receivables mainly relate to balances that were in dispute and includes managements assessment of the likely loss from the impact of the adverse economic condition on trade receivables. It was assessed that a portion of the receivables is expected to be recovered. The ageing of these receivables is as follows: Consolidated Holding Company $ $ $ $ Over 1 month - 4, Over 2 months 594, , , ,376 $ 594,969 $ 668,270 $ 154,734 $ 236,376 =========== ========== ========= ========= Movements on provision for impairment of trade receivables are as follows: Consolidated Holding Company $ $ $ $ At 1 July 750, , , ,380 Provision for receivables impaired 24, ,051-59,996 Unused amounts reversed ( 108,646) - ( 81,642) - At 30 June $ 665,952 $ 750,527 $ 154,734 $ 236,376 ========== ========== ========= ========== The provision for impaired receivables have been included in other operating expenses in the income statement (page 6). Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The group does not hold any collateral as security. 7 OTHER RECEIVABLES Group Holding Company $ $ $ $ Other receivables 2,748,916 5,397, ,035 1,130,233 Provision for doubtful debts ( 262,657) ( 165,090) ( 167,285) ( 86,819) $ 2,486,259 $ 5,232,523 $ 324,750 $ 1,043,414 ========== ========== ========== ==========