Annual Report 2013 Annual Report 2013.pdf · the growing of Teak trees (Tectona grandis) ......

FUTURE FORESTS (FIJI) LTD | ANNUAL REPORT 2013

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Annual Report 2013


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Directors

Mr Digby Bossley (Chairperson)Mr Jim DunnMr Peter McPhersonMr Richard Watling

General Manager

Mr Masum Buksh

Company Secretary

Mr Masum Buksh

Advisors to the Board

Mr Paul EversMr Roderic EversMr Jeffrey Yoon Liew

Auditors

PricewaterhouseCoopersLevel 8, Civic Tower, 272 Victoria Parade Suva Fiji

Solicitors

Cromptons SolicitorsSuite 10, QBE ArcadeVictoria Parade Suva Fiji

Bankers

Australia and New Zealand Banking Group Limited

Principal Registered Office and Company Office

Kadavu CottagesKadavu House414 Victoria Parade, Suva, FijiGPO Box 15850T (679) 3310022 F (679) 3310039www.fff.com.fj

Share Registrar And Share Transfer Agents

Central Share Registry LimitedLevel 2 Provident Plaza 1FNPF Boulevard33 Ellery Street, Suva .T (679) 330 4130 F (679) 3310039Company Registration 16953

Notice of Annual General Meeting 3

Chairman’s Report 4

Corporate Governance 8

Directors’ Report 12

Statement by Directors 14

Independent Audit Report 15

Statement of Comprehensive Income 17

Balance Sheet 18

Statement of Changes in Equity 19

Cash Flow Statement 20

Notes to and forming part of the financial statements 21

Disclaimer on Unaudited Supplementary Information 40

South Pacific Stock Exchange Listing Requirements 41

Minutes of the previous AGM 43

Proxy form 46

Contents


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our visionTo be a dynamic, internationally recognised and environmentally responsible plantation company in

Fiji that consistently produces high quality Teak to maximise returns to shareholders.

our missionTo vigorously pursue our vision by continuing to plant only the best Teak genetics using high input

silviculture best practices to ensure optimum timber quality, and to acquire internationally recognized and audited certification as a sustainable and ecologically responsible plantation company, and to lead the growth of the Teak plantation industry in Fiji into a major economic sector, generating employment, down-stream enterprises and building the asset base of indigenous land owners through equitable and

long-term commercial relationships.

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Notice is hereby given that the Annual General Meeting of the members of FUTURE FORESTS (FIJI) LIMITED will be held at 2.00 p.m. on 12th December 2013, in the Board Room at Tanoa Plaza, Gordon Street, Suva, Fiji to transact the following business:

Ordinary business

1. Confirmation of the minutes of the previous Annual General Meeting held on 5th December 2012.

2. 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 30th June 2013.

4. To elect, in accordance with the Articles of Association of the company, directors of the company.

5. 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.

6. Any other business brought up in conformity with the Articles of Association of the company.

By order of the Board of Directors,

Masum Buksh

Company Secretary

Dated : 11th November 2013

Suva, Fiji

PROXIES1. A member who is unable to attend the meeting

is entitled to appoint a proxy to attend the meeting and vote on his behalf. The proxy need not be a member of the company.

2. A proxy form is enclosed with this Annual Report. To be effective the form must reach the registered office of the company, no less than 48 hours before the time for holding the meeting.

Notice of Annual General Meeting


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Letter from the Chairman

Dear Shareholders,

It is my pleasure to present to you the company’s Annual Report for the year ended 30th June 2013. The year has been very challenging indeed.

Below is a highlight of events during the year:

Appointments and Resignations1. Mr. Digby Bossley was appointed a Director on 5th

December 2012 and appointed as the Chairman effective 1st March 2013 taking over from Dr. Dick Watling.

2. James Rankin Dunn (Jim Dunn) appointed as a Director effective from 5th December 2012.

3. Mr. Kaliopate Tavola resigned as a Director on 1st August 2012, and

4. Mr. Paul McDonnell resigned as a Director from 5th December 2012

5. Mr. John Finn resigned as Chief Financial Officer effective from 17th September 2012.

6. Mr. Stephen Clark resigned as General Manager effective from 31st March 2013

7. Mr. Masum Buksh was appointed Company Secretary on 14th January 2013 and as General Manager with effect from 1st May 2013

8. Mr. Koli Kaitani was appointed Operations Manager based in Savulu effective from 1st May 2013

Highlights9. Cyclone Evan affected the Fiji Group on December

2012. While there was no serious loss of teak plantations, leaf defoliation was caused from the strong winds which had an impact on growth rates. However it was encouraging to note the strength of the young teak plantations during the cyclone

10. Seventeen point eight (17.8) hectares of new Teak plantations were established bringing the total

planted estate to 221.48 hectares.

11. Additional loan finance of $650,000 was secured from the Fiji Development Bank for the purchase of two portable sawmills and log loading equipment in addition to infrastructure and working capital requirements. The sawmilling equipment was ordered during the financial year.

12. Planned rights issue during the financial year was deferred.

13. The Company operates in a constrained cash flow position until the full implementation of sawmill operations and further equity investment.

14. Approximately $47,046 were raised from the sale of seedlings and contract forestry, mainly in establishing new Teak Plantations on private woodlots.

15. The valuation of the 221 hectares of plantations was $4,150,000 at June 30, 2013 compared to $5,032,549 at 30th June 2012. Further discussion is presented below under Important Matters.

Important Events 1. Resignation of Dr. Richard (Dick) Watling as a Director

on 31st August 2013 due to work commitments

2. Arrival of the two portable sawmills and initial training of FFF staff in operations which milled 8 cubic meters of old growth Teak. This sawn timber Teak will be sold.

3. Arrival of the Log Loading Equipment on 2nd November 2013

4. Final approvals for the sawmill operation have been obtained and necessary infrastructure is soon to be installed at the mill site near the FFF offices at Savulu. An EIA was also undertaken and approved by the Department of Environment for the sawmilling operations.

5. Current market investigations (local and overseas) show strong demand for Teak, Mango, Vaivai (Monkey Pod), other indigenous Fiji timber and pine. Several buyers are willing to place orders once


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the sawmill is fully operational (planned for 1st week in December 2013).

6. A further 18 hectares of Teak Plantations were established

7. Several private contracts were undertaken to establish teak plantations. A potentially large order for Teak Seedlings from an EU funded project is being pursued.

8. During September and October 2013 the first ever full inventory of all the FFF Teak Plantations was undertaken.

Important Matters.Estimated Value of Teak Plantations.

OverviewThe Company owns approximately 221 hectares of teak plantation and its principal business activity comprises the growing of Teak trees (Tectona grandis) for timber production and exports. The trees are managed under an international prescribed pruning and thinning regime. The majority of the plantations are in the pre commercial ages with the oldest plantations planted in 2006.

Prior year’s valuations of the Company’s Teak plantations were based on the growth and yield projections and assumptions that were recommended by an independent Teak forest expert, Dr Luis Ugalde in November 2010.

The valuation has been determined at fair value less costs to sell at the harvesting stage. The estimates and assumptions used in the valuation that have a significant risk of causing a material adjustment to the valuation within the next financial year are as follows:

Discount Rate The Company applied a discount rate of 15% (2012: 15%) to reflect the immature nature of most of the plantation and the fact that harvesting may take place in the distant future.

Growth RateAn average tree volume growth rate of 9.4 cubic metres per hectare per year over a 22 year growth cycle has been assumed. This merchantable volume growth rate has appropriate adjustments for losses through thinning and some natural mortality. This assumption

of the growth potential has not changed from prior years and was based on the Dr. Luis Ugalde November 2010 report.

The first ever complete plantation inventory of all planting years from the initial plantings in 2006 through to recent plantings in the first half of 2013 was undertaken by the Company during September and October 2013. The results of this forest inventory, in general, showed reduced growth rates being achieved compared to the 9.4m3/ha/year expectation. Prior valuations had used the stocked areas and the expected 9.4m3/ha/yr. growth rates to estimate future merchantable yields.

The results of the 2013 inventory showed reduced stocking and reduced growth in most of the plantations. While the plantations are still young and growth rates may increase after thinning it is prudent to make necessary reductions at this time based on the results of the forest inventory. Reasons for the reduced growth are caused by a variety of factors. These factors relate to mortality of young plantations after initial plantings due to weather (drought) and weed competition. Some plantations have been established on lower than desired sites. Early sources of seed may have been of varying quality which could be affecting growth rates. Quality of planting can also be a factor. The effects of Cyclone Evan in 2012 appear to have caused some mortality but this was minimal. Defoliation of young trees due to wind from the cyclone Evan, while not causing mortality can contribute to reduced growth, but to what extent is not known. Going forward more management focus needs to be placed on the establishment and early weeding of plantations. Regular annual checks on growth rates will be made by the company.

The above inventory check has resulted in a reduction in the value of the company’s Teak plantations as discussed below.

Timber Prices Prices are pegged against the average market prices from a number of countries (based on review report from International Tropical Timber Organisation (ITTO) and Tropical Timber Market Report), adjusted for costs associated with transporting to the market. Prices are assumed to increase by 4% (2012: 4%) every year being the expected annual inflation rate.

Forestry Costs These are costs related to various inputs in the forest management activities, including land preparation,


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Conclusion The Company continues to build on its excellent reputation and general positive view by the public sustainable of teak plantation development. Interest in Teak is increasing and the Company has produced a number of small teak wood products for display. There appears to be good opportunities for the sawmill operation to cut and sell valuable hardwood timber along with pine for general construction. There are also a number opportunities for seedling sales, contract forestry work and forestry consulting work for the Company that can be pursued.

However, further capital injections will have to be forthcoming in the near future including the sale of shares, to fund the FFF’s activities and secure its immediate future, until the Company generates sufficient income to achieve financial stability.

I can assure you the Board of Directors will continue to work to safeguard your investment and may call upon you to support your Company in the near future.

In closing, the Board, Management and Staff remain optimistic and enthusiastic about the potential for FFF and the Teak industry in Fiji. The Teak timber cut and made into sample wood products to date has been impressive, the outlook for Teak timber is strong at continued high prices internationally and the nature of the business is sustainable forestry providing development and employment in rural Fiji. Local interest for private woodlot development of Teak plantations in Fiji is also growing.

I am grateful and am appreciative to the Board, Management and Staff for their tremendous efforts and sacrifices throughout the year.

Digby Bossley Chairman

nursing seedlings, planting, weeding, thinning, fertilising, protecting from animals, insects and fire, harvesting, etc.

Revised Plantation ValueBased on certain key assumptions and best estimates, which are outlined above, especially with regard to reduced tree growth estimates from the forest inventory, the Directors valued the Company’s 221 (2012: 204) hectares of teak plantation as at 30th June 2013 at a fair value of $4,150,000 (2012: $5,032,549). More details are presented in the audited financial statements.

Financial IssuesThe Company continues to operate in an extremely constrained cash flow position, having very little revenue inflows until the full implementation of sawmilling operations. The start of the sawmill has been set back by 6 months due to delays in obtaining necessary approvals.

To date unsecured loans have been provided by founding shareholders, management and a director.

The General Manager and Directors are effectively not being paid to help offset costs. Operations staff have voluntarily agreed to part salary deferments.

The nature of the business of the early years of teak plantation development requires capital expenditure without cash inflows from operations. Apart from equity investment other sources of cash flow are from the sawmilling operations, forestry contracts to plant and manage third party estates, sale of seedlings and consulting services. The Board is pursing all these options aggressively. In addition the Board is seeking private placement investment. The ability of the Company to continue to trade will be dependent on these factors and in particular the profitability of the sawmilling operations planned to be in full operation by the end of 2013. No new planting is occurring until the Company has improved its financial position.

No Capital Rights Raising Issue has occurred, and the Board needs to review how viable such an activity will be at this stage until sawmilling operations are fully established and improved cash flow from the sawmill operation and other revenue generating possibilities are evident.


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Future Forests (Fiji) Limited (FFF or the Company) acknowledges the requirements to report on the Company’s Corporate Governance Code.

In June 2008, the Capital Markets Development Authority (now the Capital Markets Unit of Reserve Bank of Fiji) published the Corporate Governance Code for the Capital Market (The Code). The Code articulates 10 core principles together with the best practice recommendations. This code is the basis for the Company’s governance standards.

On a continuous basis FFF has reviewed its existing policies and has codified / modified policies in line with its goal to improve the standard of corporate governance.

Role of the BoardThe role of the Board is to assume accountability for the success of the company by taking responsibility for its direction and management in order to meet its objective of enhancing shareholder value.

The BoardDirectors are elected by shareholders at the Annual General Meeting (AGM). Any director so appointed shall hold office only until the next following AGM of the Company, and shall be eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation at that meeting. Casual vacancies during the year are filled up by the Board till the conclusion of the next AGM.

As at the Balance date, the Directors in Office were Messrs Digby Bossley (Chairman), Jim Dunn, Peter McPherson and Richard Watling.

Directors are paid a Board fee for their service rendered during the year. Currently they are entitled to receive an annual fee of $6,000. Directors are expected to prepare for and attend Board meetings and work at least an addition of 5 hours per month for the Company.

Directors are also covered under a Directors and Officers’ Liability Insurance Policy.

Meetings of the BoardThe regular business of the Board during its meetings covers business investments and strategic matters, governance and compliance, the General Manager’s report and financial report.

The Board met 8 times during the financial year under review.

Committees of the Board

The Board has formally constituted three Committees:

• Audit and Finance Committee

• Risk Management Committee

• Capital Raising

As at the Balance date, the Audit and Finance Committee comprised Messrs Peter McPherson and Jim Dunn. The Audit and Finance Committee is responsible for monitoring the external audit of the Company’s affairs, reviewing the half-year and annual financial statements, and monitoring the Company’s compliance with applicable laws and stock exchange requirements.

The Executive Management under the directions of this Committee is also responsible for monitoring the Risk Management to ensure that key business and operational risks are identified and appropriate controls and procedures are put in place to manage those risks.

This Committee held 3 meetings during the financial year under review. The Executive Management usually takes its major decisions in consultation with the members of this Committee, where necessary.

Corporate Governance

Director Number of meetings entitled to attend

Number of meetings Attended

Apologies Received

Digby Bossley 5 5 NA

Jim Dunn 5 5 NA

Peter McPherson 8 7 1

Dick Watling 8 3 5

Paul McDonnell 3 3 NA

Kaliopate Tavola 1 0 1


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As at the Balance date, the Capital Raising Committee comprised of Advisors to the Board and the Board of Directors.

This Committee is responsible for strategies associated with the capital raising of the company and met 3 times during the year under review.

Principle Company’s response

Establish clearresponsibilitiesfor Board Over-sight

The FFF Memorandum & Articles of Associa-tion set out the powers of the directors in terms of managing the Company effectively and efficiently. The Company continuously reviews its policy guidelines to strengthen the oversight role.

Constitute aneffective Board

Directors are selected for their experience and competencies and are inducted and evaluated on their basis of their suitability for the Board. The Board has adequate independent directors

Appointment of aGeneral Manager (GM)

The company has appointed a suitably qualified and competent General Man-ager with over 30 years of domestic and international experience. He is profes-sionally qualified with a degree in Masters of Business Administration (MBA) and a Graduate Diploma in Management from the University of Sunshine Coast (Australia). He also holds Diploma in Practical Bookkeeping and Accounts from The British Careers Train-ing College (Britain).

Board and Com-panySecretary

The company has appointed a suitably qual-ified and competent Company Secretary. He is professionally qualified with degree in Masters of Business Administration (MBA), Australia. The Company Secretary maintains a close link with the Board and the Advisors to the Board.

Timely and Bal-anceddisclosure

Board meetings are held at least once in two months of the year. The Board appraises Company’s performance and major deci-sions are deliberated and passed at Board level. Progress on carrying out strategies is reviewed at these meetings. The GM is also in constant contact with the Directors for any issues arising within the company. The Company periodically releases the required information to the public by way of market announcements, as required under the rules of the SPSE.

Promote ethical andresponsible deci-sion making

FFF promotes and believes that all direc-tors and employees uphold high ethical standards, honesty, fairness and equity in all aspects of their employment and associa-tion with the Company.

Register of Inter-ests

The Company calls for declaration of inter-est (agenda item) at every Board meeting and interests of directors (if any) are noted in the minutes of the Board meetings.

Respect the rights ofShareholders

An Annual General Meeting is held every year in accordance with the Articles of As-sociation of the company. The Annual report is also published each year and circulated to the shareholders of the Company.

Accountability andAudit

FFF is audited externally each year and receives an independent audit report which forms part of the Annual Report. The Audit and Finance Committee is responsible for overseeing the financial reporting and disclosure process, performance and inde-pendence of the external auditors, monitor-ing internal control processes, reviewing adequacy of the internal audit function and discussing risk management policies and practices with management.

Recognize and Manage Risk

The Executive Management of the Company ensures that key business and operational risks are identified and appropriate controls and procedures are put in place to manage those risks.

Responses to the Guidelines on Corporate Govern-ance issued by Reserve Bank of Fiji:

Shareholders

Shareholders Name No of Shares % Holdings

PAUL EVERS AFT EVERS FAMILY TRUST 6,822,950 32.18

JEFFREY MHOON LIEW 4,312,100 20.34

TAREI WEEKS & RODERIC EVERS 4,274,900 20.16

JOHN KENNON SHEA ATF 2009 SHEA FAMILY TRUST

538,773 2.54

VAN HEEMSTRA HOLDING BV 485,036 2.29

GRAHAM THOMAS SHEA 359,030 1.69

ARNOLDUS GIJSBERTUS LEENDERS & ANNA BAUKJE DE JONG

280,904 1.32

YVONNE SHANAHAN 253,397 1.20

STRONGHOLD INVESTMENT INC 241,900 1.14

CAMERON NOBLE 216,000 1.02

ALEXANDER JAMES THOMAS HANDS 209,206 0.99

GREG THOMPSON ATF THOMPSON SUPER-ANNUATION FUND PTY LTD

188,530 0.89

PIETER CASPER SMIT 188,394 0.89

JOHANNES HEKELAAR 171,377 0.81

TILLMAN ANDREW BRUETT & JAMES BRIAN NASTUS

164,067 0.77

PIERO PIVA 161,747 0.76

SCOTT SMERECZNIAK & BERNADINE (CAROL) FLORE-SMERECZNIAK

148,000 0.70

JOHN MALCOLM FINN 134,150 0.63

HENDRICUS NICOLAAS OVERMARS 132,933 0.63

PETER MULLER & EVELYNE DE GRAAF 129,281 0.61

Top 20 Shareholders.


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FINANCIAL STATEMENTS FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 I N D E X Page No. 1 and 2 Directors‟ Report 3 Statement by Directors 4 and 5 Independent Audit Report 6 Statement of Comprehensive Income 7 Balance Sheet 8 Statement of Changes in Equity

9 Cash Flow Statement

10 to 28 Notes to and forming part of the financial statements

29 Disclaimer on Unaudited Supplementary Information 30 to 31 Unaudited Supplementary Information:

South Pacific Stock Exchange Listing Requirements

Audited Financial Accounts 2013


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FINANCIAL STATEMENTS FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT In accordance with a resolution of the Board of Directors, the Directors herewith submit the balance sheet of the company as at 30 June 2013, and the related statements of comprehensive income, cash flow and changes in equity for the year ended on that date 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: Mr Peter McPherson Mr Digby Bossley – from 5 December 2012 Mr Jim Dunn – from 5 December 2012 Mr Kaliopate Tavola – up to 1 August 2012 Mr Paul McDonnell – up to 5 December 2012 Mr Richard Watling – up to 31 August 2013

2. PRINCIPAL ACTIVITIES AND OPERATIONS

Future Forests (Fiji) Ltd is Fiji‟s first commercial hardwood forest plantation company specializing in the growing of teak trees (Tectona grandis) for timber production and exports. The sale of teak seedlings is the other core activity of the company.

3. TRADING RESULTS

The net loss for the company for the year ended 30 June 2013 was $1,656,509 (2012: net profit of $951,270). Included in the net loss for 2013 is a decline in fair value of plantations of $882,549 (2012: increase in fair value of $1,923,890)

4. DIVIDENDS

The Directors recommend that no amounts be paid as dividend in respect of the year ended 30 June 2013.

5. RESERVES

The Directors recommend that no amounts be transferred to reserves for the year ended 30 June 2013.

6. CURRENT ASSETS

The Directors took reasonable steps before the company‟s financial statements were made out to ascertain that the current assets of the company were shown in the accounting records at a value equal to or below the value that would be expected to be realised in the ordinary course of 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 accounts misleading.


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FINANCIAL STATEMENTS FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT – continued 7. BASIS OF ACCOUNTING

The financial statements of the company have been drawn up in accordance with the International Financial Reporting Standards and the requirements of law. The financial statements have been prepared on a going concern basis which contemplates continuity of business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

8. OTHER CIRCUMSTANCES

At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or accounts which render any amounts stated in the accounts misleading.

9. UNUSUAL TRANSACTIONS

The results of the company‟s operations during the financial 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.

10. EVENTS SUBSEQUENT TO BALANCE DATE

No charge on the assets of the company 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 end of the financial year which, in the opinion of the Directors, will or may affect the ability of the company to meet its obligations when they fall due.

11. DIRECTORS’ BENEFITS

No director of the company has, since the end of the previous financial year, received or become entitled to receive a benefit (other than a benefit included in the total amount of emoluments received or due and receivable by Directors shown in the company‟s financial statements) by reason of a contract made with the company or a related corporation with the director or with a firm of which the director is a member, or in a company in which the director has a substantial financial interest.

For and on behalf of the Board

30 September 2013 Director Date 30 September 2013 Director Date


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FINANCIAL STATEMENTS FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 STATEMENT BY DIRECTORS

In the opinion of the Directors:

(a) the accompanying statement of comprehensive income is drawn up so as to give a true and fair view of the results of the company for the year ended 30 June 2013;

(b) the accompanying balance sheet is drawn up so as to give a true and fair view of the state of the company‟s affairs at 30 June 2013;

(c) the accompanying statement of changes in equity is drawn up so as to give a true and fair

view of the movement in shareholders‟ funds for the year ended 30 June 2013; (d) the accompanying cash flow statement is drawn up so as to give a true and fair view of

the cash flows of the company for the year ended 30 June 2013; (e) at the date of this statement, there are reasonable grounds to believe that the company

will be able to pay its debts as and when they fall due; and (f) all related party transactions have been adequately recorded in the books of the company

and reflected in the attached financial statements.

For and on behalf of the Board of Directors by authority of a resolution of the Directors.

30 September 2013 Director Date 30 September 2013 Director Date


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Independent Auditor’s Report To the Shareholders of Future Forests (Fiji) Limited Report on the Financial Statements We have audited the accompanying financial statements of Future Forests (Fiji) Limited (the „Company‟). The financial statements comprise the balance sheet of the Company as at 30 June 2013 and the statements of comprehensive income, changes in equity and cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes as set out on pages 6 to 28. 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, 1983, and for such internal control as the directors and management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

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 about 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 of financial statements that give a true and fair view 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. PricewaterhouseCoopers, Level 8 Civic Tower, 272 Victoria Parade, Suva, Fiji. GPO Box 200, Suva, Fiji. T: (679)3313955 / 3315199, F: (679) 3300981 / 3300947

PricewaterhouseCoopers is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.


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Independent Auditor’s Report - continued

Opinion

In our opinion the financial statements give a true and fair view of the financial position of the Company as at 30 June 2013, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 12 in the financial statements which relates to the basis used for the valuation of the plantations. The company has valued its plantations based on certain key assumptions and best estimates which may vary over time. The actual outcome of these assumptions and estimates may be different to the fair value estimated in the financial statements at year end. Report on Other Legal and Regulatory Requirements In our opinion: a) proper books of account have been kept by the Company, so far as it appears from our

examination of those books, and b) the accompanying financial statements are in agreement with the books of account and to the best

of our information and according to the explanations given to us 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. Restriction on Distribution or Use This report is made solely to the Company‟s shareholders, as a body, in accordance with Section 165(1) of the Fiji Companies Act 1983. Our audit work has been undertaken so that we might state to the Company‟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. 30 September 2013 Suva, Fiji PricewaterhouseCoopers Chartered Accountants


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STATEMENT OF COMPREHENSIVE INCOME FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013

30 June 30 June Notes 2013 2012 $ $ Revenue 112,415 38,350 (Loss)/gain arising from changes in fair value less costs to sell of plantations 12 ( 882,549) 1,923,890 Other income 7 73,882 92,669 Planting, administration and other costs ( 809,094) ( 993,595) Finance costs ( 151,163) ( 110,044) (Loss)/profit before tax 6 ( 1,656,509) 951,270 Income tax expense 8 - - (Loss)/profit for the year ( 1,656,509) 951,270 Other comprehensive income - - Total comprehensive (loss)/income for the year ($ 1,656,509) $ 951,270 ========= ========= Basic earnings per share 19(a) ($ 0.08) $ 0.04 ========== ========= Diluted earnings per share 19(b) ($ 0.07) $ 0.05 ========== ========= The above statement of comprehensive income should be read in conjunction with the accompanying notes.


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BALANCE SHEET FUTURE FORESTS (FIJI) LIMITED 30 JUNE 2013

30 June 30 June

Notes 2013 2012 $ $ CURRENT ASSETS Cash on hand and at bank 9 15,574 18,268 Held-to-maturity investments 10 113,002 613,002 Trade and other receivables 11 341,200 125,971 469,776 757,241 NON-CURRENT ASSETS Held-to-maturity investments 10 266,184 379,186 Plantations 12 4,150,000 5,032,549 Property, plant & equipment 13 653,682 766,631 5,069,866 6,178,366 TOTAL ASSETS 5,539,642 6,935,607 CURRENT LIABILITIES

Borrowings 14 75,630 12,434 Deferred income 16 62,790 62,790 Payables 17 189,375 123,840 327,795 199,064 NON-CURRENT LIABILITIES Borrowings 14 496,731 327,312 Convertible notes 15 1,289,904 1,264,719 Deferred income 16 1,824 64,615 1,788,459 1,656,646 TOTAL LIABILITIES 2,116,254 1,855,710 NET ASSETS $ 3,423,388 $ 5,079,897 ========== ========== SHAREHOLDERS’ EQUITY Share capital 18(a) 212,008 212,008 Share premium reserve 18(b) 3,062,517 3,062,517 Convertible notes - equity component 15 139,055 139,055 Accumulated profits 9,808 1,666,317 TOTAL SHAREHOLDERS’ EQUITY $ 3,423,388 $ 5,079,897 ========== ========= The above balance sheet 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 Director Director


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STATEMENT OF CHANGES IN EQUITY FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013

Share capital Share premium Convertible notes - Accumulated Total

reserve equity component profits/(losses) $ $ $ $ $

Balance at 31 December 2011 204,263 2,557,073 - 715,047 3,476,383 Comprehensive income Profit for the year - - - 951,270 951,270 Other comprehensive income - - - - - Total comprehensive income - - - 951,270 951,270 Shares issued 7,745 532,773 - - 540,518 Capitalised listing expenses - ( 27,329) - - ( 27,329) Convertible notes issued - - 139,055 - 139,055

Balance at 30 June 2012 212,008 3,062,517 139,055 1,666,317 5,079,897

Comprehensive income Loss for the year - - - ( 1,656,509) ( 1,656,509) Other comprehensive income - - - - - Total comprehensive income - - - ( 1,656,509) ( 1,656,509)

Balance at 30 June 2013 $ 212,008 $ 3,062,517 $ 139,055 $ 9,808 $ 3,423,388

=========== ========== =========== =========== ========== The above statement of changes in equity should be read in conjunction with the accompanying notes.


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9 CASH FLOW STATEMENT FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013

30 June 30 June

Note 2013 2012 $ $ Cash flows from operating activities Proceeds from customers 103,754 56,862 Payments to suppliers and employees ( 921,508) ( 1,163,723) Interest received 7,249 1,982 Interest paid ( 151,163) ( 110,044) Net cash used in operating activities ( 961,668) ( 1,214,923) Cash flows from investing activities Held-to-maturity investments placed - ( 1,448,689) Proceeds from held-to-maturity investments 613,002 456,501 Proceeds from sale of property, plant and equipment 400 23,478 Acquisition of property, plant and equipment ( 2,043) ( 124,393) Net cash from/ (used in) investing activities 611,359 ( 1,093,103) Cash flows from financing activities Proceeds from issuance of shares - 540,518 Proceeds from issuance of convertible notes - 1,472,198 Listing expenses paid - ( 109,982) Advance from related parties 115,000 - Net proceeds from (repayment of) borrowing 232,615 ( 12,207) Net cash from financing activities 347,615 1,890,527 Net (decrease)/increase in cash on hand and at bank (2,694) ( 417,499) Cash on hand and at bank at the beginning of the financial year 18,268 435,767 Cash on hand and at bank at the end of the financial year 9 $ 15,574 $ 18,268 ========= =========

The above cash flow statement should be read in conjunction with the accompanying notes.


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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013

1. GENERAL INFORMATION

Future Forests (Fiji) Limited (“the company”) specialises in the growing of teak trees (Tectona grandis) for timber production and export. The sale of teak seedlings is the other core activity of the company.

The company is a public company incorporated and domiciled in Fiji. The address of the registered office is at 414 Victoria Parade, Suva.

The financial statements were authorised for issue by the Board of Directors on 30 September 2013.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied by the company except where otherwise indicated.

2.1 Basis of preparation

The financial statements have been prepared in accordance with requirements of the Fiji Companies Act, 1983 and International Financial Reporting Standards (IFRS). They have been prepared under the historical cost convention except where specifically stated to be at fair value.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the company‟s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 5.

(a) New and amended standards adopted by the company There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 July 2012 that would be expected to have a material impact on the company.

(b) Standards, amendments and interpretations issued but not yet effective A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 July 2012, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Company, except for the following:

Topic Key requirements

IFRS 13, „Fair value measurement‟ (effective 1 January 2013)

IFRS 13, „Fair value measurement‟, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs.


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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – Cont’d FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued 2.1 Basis of preparation - continued

(b) Standards, amendments and interpretations issued but not yet effective - continued

(c) Going concern The financial statements have been prepared on a going concern basis which contemplates continuity of business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The company has negative cash flows from operating activities for the year ended 30 June 2013 of $961,668 (2012: $1,214,923). The company has also made an operating loss of $1,656,509 for 2013 (2012: operating profit of $951,270). The business is in the early years of teak plantation development which requires capital expenditure without cash inflows. In order to sustain the operations, the company is pursuing other sources of cash flow such as from sawmilling operations (to generate short to medium term cash flows, the company has undertaken a sawmilling project in Ra), forestry contracts to plant and manage third party estates, sale of seedlings and consulting services. Shareholders and directors have also provided loans to the company for purposes of short term financing. The Board is pursing all these options aggressively, including private placement investment. Taking into account all the above factors, the Directors consider the application of the going concern principle to be appropriate in the preparation of the financial statements of the company.

Topic Key requirements

IFRS 9 „Financial instruments‟− classification and measurement (effective 1 January 2015)

IFRS 9, „Financial instruments‟, addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity‟s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity‟s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The Company is yet to assess IFRS 9‟s full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after 1 January 2015. The Company will also consider the impact of the remaining phases of IFRS 9 when completed by the International Accounting Standards Board.

Amendment to IAS 32, „Financial instruments: Presentation‟, on offsetting financial assets and financial liabilities (effective 1 January 2013)

This amendment updates the application guidance in IAS 32, „Financial instruments: Presentation‟, to clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet.

Amendments to IAS 36, „Impairment of assets‟(effective 1 January 2014)

These amendments address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.


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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – Cont’d FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued 2.2 Property, plant and equipment

Property, plant and equipment, with the exception of freehold land, are depreciated at rates calculated to write off each asset over its estimated useful life. The rates and methods of depreciation used are: Rate Method Motor Vehicles 20%/12% Straight line Computer Software 40% Straight line Equipment 24%/12% Straight line Building 2.5% Straight line Freehold land is not depreciated. Profits and losses on disposal (if any) of property, plant and equipment are taken into account in determining the results for the year.

2.3 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if 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 only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.


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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – Cont’d FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued 2.4 Trade and other creditors

These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year and which are unpaid.

2.5 Plantations

Plantations are stated at fair value less estimated costs to sell at the harvesting stage. Fair value less costs to sell is determined using the present value of expected future cash flows using the market price of the estimated recoverable wood volumes expected from the plantations based on a 22 year rotation less costs to sell at the point of harvest and net of forestry, harvesting, roading and transport costs. The valuation is based on certain key assumptions and best estimates. These assumptions and estimates have been determined by the directors using the most recent information and market data available and may not reflect the actual value. The gain or loss on initial recognition and subsequent changes in fair value less costs to sell of the plantations is recognised in profit or loss in the period in which it arise.

2.6 Revenue recognition Revenue consists of sale of teak tree seedlings. It is recognised at invoice price once goods have been delivered to the customer.

2.7 Deferred income

Grants relating to assets are included as deferred income and are credited to the statement of comprehensive income on a straight-line basis over the expected useful lives of the related assets.

2.8 Financial assets

The company classifies its financial assets into held to maturity and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. (a) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities where the management has the positive intention and ability to hold to maturity. (b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The company‟s loans and receivables comprise „Trade and other receivables‟ in the balance sheet.


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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – Cont’d FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

2.9 Impairment of non financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset‟s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset‟s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets that have been impaired are reviewed for possible reversal of the impairment at each reporting date.

2.10 Compound financial instruments – convertible notes

Compound financial instruments issued by the company comprise convertible notes that are convertible to shares at the end of 5 years or earlier at the option of the holder, and the number of shares to be issued does not vary with changes in their fair value. The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. Upon conversion, the liability component will be transferred to equity at the prevailing carrying amount of the convertible note. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition except on conversion or expiry.

2.11 Employee entitlements

Liabilities for wages and salaries and annual leave are recognised and are measured as the amount unpaid at the reporting date at the current pay rates in respect of employees‟ services up to that date.

2.12 Cash on hand and at bank Cash on hand and at bank are carried in the balance sheet at cost.

2.13 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 is subject to risks and returns that are different from those of segments operating in other economic environments.

The company only sells seedlings at this point in time and operates predominantly in one geographical segment and therefore no segment disclosures have been made in the financial statements.


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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – Cont’d FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued 2.14 Basic earnings per share

Basic earnings per share are determined by dividing the profit for the year of the company by the weighted average number of ordinary shares in issue during the financial year.

Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company has one category of dilutive potential ordinary share being the convertible notes. The convertible note is assumed to have been converted into ordinary shares, and the net profit is adjusted to eliminate the interest expense.

2.15 Share-based payments

The company operates a number of equity-settled, share-based compensation plans, under which the company provided equity instruments as compensation for services received from directors and consultants. The value of the services received in exchange for the grant of the shares is recognised as an expense.

2.16 Reporting currency All figures are reported in Fiji currency.

2.17 Comparative figures

Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current period.

3. FINANCIAL RISK MANAGEMENT

Financial risk factors

The company‟s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow interest rate risk, fair value interest rate risk and commodity price risk), credit risk and liquidity risk. The company‟s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the company‟s financial performance. Risk management is carried out by management, using policies as advised by the Board of Directors. Management identifies and evaluates financial risks, and assists the board in developing policies for overall risk management.

(a) Market risk

(i) Foreign exchange risk The company‟s purchase of goods and services in foreign currencies is limited and hence its exposure to foreign currency risk is minimal.


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3. FINANCIAL RISK MANAGEMENT - continued

Financial risk factors - continued

(a) Market risk - continued

(ii) Cash flow interest rate risk and fair value interest rate risk As the company has no significant interest-bearing assets, the company‟s income and operating cash flows are substantially independent of changes in market interest rates.

The company‟s interest rate risk arises from long-term borrowings, convertible notes and fair value of plantations.

The company has a borrowing which has a fixed interest rate of 6% from February 2013 to January 2017 and is subject to review thereafter. This limits volatility in interest rates applicable to the borrowing and the Company‟s exposure to the same.

Convertible notes pay fixed interest of 7.5% on each note per annum and therefore exposure to changes in interest rate is minimal.

The convertible notes issued last year were measured at fair value on initial recognition using a interest rate of 10.15% as the discount rate. These convertible notes are not subject to fair value re-measurement in the future. As such, the company‟s exposure to fair value interest rate risk is minimal.

The fair value of the plantations is determined at a discount rate of 15%. This rate may vary over time depending on market interest rates and may impact the fair value of the plantation. Refer table below in note 3.1(a)(iii) on the sensitivity of the plantation fair value to changes (+10%, -10%) in the discount rate.

(iii) Commodity price risk Commodity price risk to the company is the risk that an adverse movement in commodity prices will impact the valuation of plantations. The company is exposed to commodity price risk arising from changes in prices of timber.

The timber prices used by the company in the valuation of plantations is based on the prices pegged against the average market prices from a number of countries (based on review from International Tropical Timber Organisation and Tropical Timber Market Report).

The table below shows the impact of changes (+10%, -10%) in the discount rate, inflation rate and timber price to the fair value of the plantations and the profit before tax.

Impact of 10% increase Impact of 10% decrease on fair value of on fair value of plantations and profit plantations and profit before tax before tax

2013 2012 2013 2012 $ $ $ $

Discount rate ( 683,373) ( 822,805) 605,652 1,010,646 Inflation rate 106,696 301,313 ( 297,504) ( 286,526) Timber price 419,010 676,570 ( 619,010) ( 676,645)

(b) Credit risk Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the company‟s cash investments.

Credit risk arises from cash on hand and at bank, deposits with banks and financial institutions. For banks and financial institutions, only reputable parties are acceptable.


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3. FINANCIAL RISK MANAGEMENT - continued

Financial risk factors - continued (c) Liquidity risk Sound liquidity risk management requires maintaining sufficient cash in the business to meet its present obligations. Management constantly monitors the forward cash requirements of the business to ensure liquidity reserves in the form of cash and cash reserves can meet these requirements. A summary of the maturity analysis of the company‟s borrowings and liabilities at 30 th June, 2013 is set out below on an undiscounted basis:

Up to 1 to 2 to Over Total 1 year 2 years 5 years 5 years $ $ $ $ $ As at 2013 Borrowings (Note 14) 75,630 85,521 283,590 127,620 572,361 Convertible notes (Note 15) - - 1,289,904 - 1,289,904 Payables (Note 17) 189,375 - - - 189,375 Total $ 265,005 $ 85,521 $ 1,573,494 $ 127,620 $ 2,051,640 ======== ======== ========== ========= ========= As at 2012 Borrowings (Note 14) 12,434 24,605 92,165 210,542 339,746 Convertible notes (Note 15) - - 1,264,719 - 1,264,719 Payables (Note 17) 123,840 - - - 123,840 Total $ 136,274 $ 24,605 $ 1,356,884 $ 210,542 $ 1,728,305 ======== ======== ========== ========= =========

4. CAPITAL RISK MANAGEMENT

The company‟s objectives when managing capital are 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 and be in compliance with statutory requirements.

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 on hand and at bank. Total capital is calculated as „equity‟ as shown in the balance sheet plus net debt.

The gearing ratio of the company at balance date is as follows:

30 June 30 June 2013 2012 $ $ Total borrowing (Note 14, 15) 1,862,265 1,604,465

Less: Cash on hand and at bank (Note 9) 15,574 18,268

Net debt 1,846,691 1,586,197

Total capital 3,423,388 5,079,897

Gearing ratio 54% 31%


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5. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

The preparation of financial statements require management to make judgements, 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. Revision to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes: Note 12: Plantations

Note 2.8: Financial assets

Note 2.9: Impairment of non financial assets

Note 15: Compound financial instruments – convertible notes

6. PROFIT/(LOSS) BEFORE INCOME TAX

Profit/(loss) before income tax has been determined after:

30 June 30 June 2013 2012

$ $ Charging as expense: Auditors remuneration: Audit fees 10,000 15,000 Other services 7,751 2,000 Depreciation 108,058 104,648 Directors fees 21,500 39,000 Salaries and wages 324,261 479,976 FNPF 22,911 19,842 Loss on sale of property, plant and equipment 6,534 - 7. OTHER INCOME

30 June 30 June 2013 2012

$ $

Grant amortisation 62,791 62,790 Gain on sale of property, plant and equipment - 12,487 Interest income 11,091 17,392 $ 73,882 $ 92,669 =========== ==========


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19 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – Cont’d FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 8. INCOME TAX

8.1 Income Tax Expense

30 June 30 June 2013 2012

$ $

Operating profit/(loss) before income tax ( 1,656,509) 951,270 ========== =========

Prima facie income tax (credit)/expense @ 20% ( 331,302) 190,254

Tax effect of: Loss/(gain) arising from changes in fair value less costs to sell of plantations 176,510 ( 384,778) Deferred income ( 12,558) ( 12,558) Other temporary differences - ( 2,924) Tax losses for which no deferred tax asset was recognised 175,344 173,608 Temporary differences on movement in provisions and differences in tax and accounting depreciation not brought to account ( 7,994) 36,398 Income tax expense attributable to tax loss $ Nil $ Nil

=========== =========

8.2 Deferred tax asset

Potential deferred income tax asset arising from accumulated tax losses amounting to $2,604,451 (2012: $1,936,979) has not been recognised as an asset because it is not probable that future taxable profits will be available against which the deferred tax assets can be utilised. Under the Fiji Income Tax Act, effective from 1 January 2012, tax losses may only be carried forward for a period of 4 years.

9. CASH ON HAND AND AT BANK

For the purpose of the cash flow statement, cash comprise the following:

30 June 30 June 2013 2012

$ $

Cash on hand 1,300 1,300 Cash at bank 14,274 16,968

$ 15,574 $ 18,268 ========== ==========


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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – Cont’d FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 10. HELD-TO-MATURITY INVESTMENTS

30 June 30 June 2013 2012

$ $

Current assets Maturing in: Less than or equal to 3 months - 200,000 3 to 12 months 113,002 413,002 $ 113,002 $ 613,002 ========= ========== Non current assets Maturing in: 1 to 5 years $ 266,184 $ 379,186 ========== =========

Term deposits are held with financial institutions and attract interest rates ranging from 3.25% to 3.5% per annum.

11. TRADE AND OTHER RECEIVABLES

30 June 30 June 2013 2012

$ $

Trade receivables 19,956 3,242 Owing from related parties 75,613 75,613 Prepayments 213,274 10,546 Interest receivable 19,252 15,409 Other receivables 13,105 21,161 $ 341,200 $ 125,971

========= ========= The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. Due to their short-term nature, the carrying values of the above assets are representative of their fair value. The company does not hold any collateral as security.

12. PLANTATIONS

The company owns approximately 221 hectares of teak plantation and its principal business activity comprises the growing of teak trees (Tectonis grandis) for timber production and exports. The trees are managed under a single silviculture regime. The trees are managed under an international prescribed pruning and thinning regime. The majority of the plantations are in the pre commercial ages with the oldest plantations planted in 2006

At 30 June 2011 management performed a valuation of the companies plantations based on the growth and yield projections and assumptions that were reviewed by an independent Teak forest expert, Dr Luis Ugalde in a report dated 25 November 2010. Management used the above independent expected growth and yield of Teak Plantations in Fiji report with relevant updated inventory data to ascertain the fair value.

At 30 June 2012 and 30 June 2013 management performed a similar exercise using the valuations performed at 30 June 2011 and reviewed the assumptions used in the valuation of the plantations. Other then the growth rate which is further discussed below, there were no variations identified by management that has significantly impacted the valuation.


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12. PLANTATIONS - continued The valuation has been determined at fair value less costs to sell at the harvesting stage. The estimates and assumptions used in the valuation that have a significant risk of causing a material adjustment to the valuation within the next financial year are as follows:

Discount Rate The company applied a discount rate of 15% (2012: 15%) to reflect the immature nature of most of the plantation and the fact that harvesting may take place in the distant future.

Growth Rate A growth rate (the increase in volume through biological transformation during any given period of time) of Mean Annual Merchantable Increment (MAI) of 9.4 cubic meters of log volume per hectare over a 22 year period (MAI 9.4 m3/Ha/22yrs) had been applied with appropriate adjustments for losses through thinning. A complete plantation inventory of all planting years from the initial plantings in 2006 through to recent plantings in the first half of 2013 was completed by the company. The results of this forest inventory in general showed reduced growth rates being achieved compared to 9.45m3/ha/year expectation. Prior valuations had used the stocked areas and the expected 9.45m3/ha/yr growth rates to achieve future merchantable yields. The results of the 2013 inventory showed reduced stocking and reduced growth in most of the plantations. While the plantations are still young and growth rates may increase after thinning it is prudent to make necessary reductions at this time based on the results of the forest inventory. Reasons for the reduced growth are caused by a variety of factors. These factors relate to mortality of young plantations after initial plantings due to weather (drought) and weed competition. Some plantations have been established on lower than desired sites. Early sources of seed may have been of varying quality which could be affecting growth rates. Quality of planting can also be a factor. The effects of Cyclone Evan in 2012 appear to have caused some mortality but this was minimal. Defoliation of young trees due to wind from the cyclone, while not causing mortality can contribute to reduced growth, but the extent is not known. Going forward more management focus needs to be placed on the establishment and early weeding of plantations. Regular annual checks on growth rates will be made by the company.

The above inventory check has resulted in a reduction in inventory valuation as noted below.

Timber Prices Prices are pegged against the average market prices from a number of countries (based on review report from International Tropical Timber Organisation (ITTO) and Tropical Timber Market Report), adjusted for costs associated with transporting to the market. Prices are assumed to increase by 4% (2012: 4%) every year being the expected annual inflation rate.

Forestry Costs These are costs related to various inputs in the forest management activities, including land preparation, nursing seedlings, planting, thinning, fertilising, protection from animals and insects, harvest and so on. The following costs have been included in the calculations:

• Felling costs; • Silvicultural costs (including fertilising); • Costs incurred to protect from natural hazards, such as cyclones, fire, drought pest and

diseases; and • Replanting costs (if any).

Based on certain key assumptions and best estimates, some of which are outlined above, the directors valued the company‟s 221 (2012: 204) hectares of teak plantation as at 30th June 2013 at a fair value of $4,150,000 (2012: $5,032,549). Refer note 3(a)(iii) on sensitivities done on the key assumptions and the impact on the valuation.


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12. PLANTATIONS – continued

Reconciliation of carrying amount of plantations: 30 June 30 June 2013 2012

Carrying amount at 1 July 5,032,549 3,108,659 (Loss)/gain arising from changes in fair value less costs to sell of plantations ( 882,549) 1,923,890 Carrying amount at 30 June $ 4,150,000 $ 5,032,549 ========== =========

13. PROPERTY, PLANT & EQUIPMENT

Land Building Motor Equipment Total

Vehicles $ $ $ $ $

At 1 January 2012 Cost 372,509 42,152 249,969 301,771 966,401 Accumulated depreciation ( - ) ( 5,004) ( 102,564) ( 100,955) ( 208,523) Net book amount $ 372,509 $ 37,148 $ 147,405 $ 200,816 $ 757,878 Year ended 30 June 2012 Opening net book amount 372,509 37,148 147,405 200,816 757,878 Additions - 7,061 60,870 56,462 124,393 Disposals - - ( 10,992) - ( 10,992) Depreciation ( - ) ( 1,878) ( 50,262) ( 52,508) ( 104,648) Closing net book amount $ 372,509 $ 42,331 $ 147,021 $ 204,770 $ 766,631 At 30 June 2012 Cost 372,509 49,213 266,874 358,233 1,046,829 Accumulated depreciation ( - ) ( 6,882) ( 119,853) ( 153,463) ( 280,198) Net book amount $ 372,509 $ 42,331 $ 147,021 $ 204,770 $ 766,631

Year ended 30 June 2013 Opening net book amount 372,509 42,331 147,021 204,770 766,631 Additions - 349 - 1,694 2,043 Disposals - - ( 6,934) - ( 6,934) Depreciation - ( 2,467) ( 49,819) ( 55,772) ( 108,058) Closing net book amount $ 372,509 $ 40,213 $ 90,268 $ 150,692 $ 653,682 At 30 June 2013 Cost 372,509 49,561 249,096 359,927 1,031,093 Accumulated depreciation - ( 9,348) ( 158,828) ( 209,235) ( 377,411) Net book amount $ 372,509 $ 40,213 $ 90,268 $ 150,692 $ 653,682


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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – Cont’d FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 14. BORROWINGS

30 June 30 June 2013 2012

$ $

Fiji Development Bank (FDB) loan $ 572,361 $ 339,746 ========== =========== Current portion 75,630 12,434 Non-current portion 496,731 327,312 $ 572,361 $ 339,746 ========== ===========

The company has a total loan facility of $988,867 of which $572,594 has been drawn down by the company as of 30 June 2013. The loan is secured by first debenture over company‟s assets including its uncalled capital and mortgage over land owned. Interest rate of 6% per annum is applicable on the loan and it is repayable at the rate of $3,336 per month up until 1 August 2013 and $9,100 thereafter.

15. CONVERTIBLE NOTES

During the 2012 financial year, the company issued convertible notes to the public. These were listed on the South Pacific Stock Exchange on 21st November 2011. The convertible notes are governed by a Trust Deed whereby they convert to equity after five years from date of issue (being 21st November 2011) or earlier at the option of the holder. Each note pays interest at the rate of 7.5% (7.5 cents) per annum (coupon). The coupons are payable twice yearly on 1 July and 1 January for a maximum of five years from the date of issue. Given the above characteristics the notes are considered to be a compound financial instrument. The notes are valued in accordance with note 2.10 of the company‟s accounting policy. For purpose of valuing the liability component of the instrument, the company had used 10.15% as the discount rate.

Initial Recognition at 30 June 2012:

Proceeds of the notes issue 1,472,198 Present value of convertible notes payable at end of five years 907,912 Add: present value of the interest payable annually for five years 416,960 Liability component on initial recognition 1,324,872 Less: capitalised listing expenses ( 74,382) Total liability component $ 1,250,490 ========== Equity component on initial recognition 147,326 Less: capitalised listing expense ( 8,271) Total equity component 139,055 ==========


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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – Cont’d FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 15. CONVERTIBLE NOTES - continued

Subsequent Recognition 30 June 30 June 2013 2012 Liability component

Opening balance 1,264,719 - Additions - 1,250,490 Amortisation of convertible notes 25,185 14,229 Total liability component $1,289,904 $1,264,719 ========= ========= Equity component $ 139,055 $ 139,055 ========= ========= 16. DEFERRED INCOME 30 June 30 June

2013 2012 $ $

ECF Grant 127,405 190,195 Less amortisation ( 62,791) ( 62,790) $ 64,614 $ 127,405 =========== ========== Current portion 62,790 62,790 Non-current portion 1,824 64,615 $ 64,614 $ 127,405 ========== == =========== In 2009, the company received a grant of AU$190,000 or equivalent to FJ$313,952 from AusAID Enterprise Challenge Fund (ECF). According to the Enterprise Challenge Fund Agreement, this grant is to be disbursed to purchase equipment, assets and other related expenditures detailed in the said agreement. The grant will be amortised over a period of 5 years which is in line with the estimated useful life of the respective assets funded by such grants.

17. PAYABLES 30 June 30 June 2013 2012

Trade payables and accruals 46,181 63,562 Owing to related parties - Salaries 17,133 9,527 - Loans from directors and management 115,000 - Other liabilities 11,061 50,751 $ 189,375 $ 123,840 ============ =========== Loans from directors and management are unsecured, at 0% to 6% interest rate per annum, and repayable on demand.


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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – Cont’d FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 18. EQUITY 30 June 30 June 2013 2012 $ $

(a) Share Capital Authorised

30,000,000 B class shares @ $0.01 each $ 300,000 $ 300,000 ============ =========== Issued 21,200,785 (2012: 21,200,785) B class ordinary shares @ $0.01 each $ 212,008 $ 212,008 ============ =========== (b) Share Premium Reserve

Share premium is the amount by which the consideration received exceeds the nominal value of shares issued.

30 June 30 June 2013 2012 $ $

Share premium $ 3,062,517 $ 3,062,517 ============ =========== In 2012, the company issued 774,473 B class $0.01 ordinary shares at a premium as follows:

Share Share Total Capital Premium $ $ $ 541,530 shares issued for cash 5,415 389,515 394,930 59,400 shares issued to directors in lieu of outstanding directors fees 594 36,531 37,125 140,000 shares issued to directors in lieu of directors remuneration 1,400 86,100 87,500 33,543 shares issued to consultants in lieu of outstanding consultancy fees 336 20,627 20,963 Capitalised listing expenses - ( 27,329) ( 27,329) $ 7,745 $ 505,444 $ 513,189 ========== ========== ========

(c) Share-Based Payments

As summarised above the company has granted shares to the directors and consultants in lieu of services provided. The exercise price of the shares were as approved by the directors. Share based payments made during the financial year ended 30 June 2013 to persons who were directors amounted to $ NIL (2012: $124,625) and to consultants amounted to $ NIL (2012: $20,963).

19. EARNINGS PER SHARE a) Basic 30 June 30 June 2013 2012

(Loss)/profit for the year ($ 1,656,509) $ 951,270

Number of ordinary shares 21,200,785 21,200,785

Basic earnings per share ($ 0.08) $ 0.04 ============ ============


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19. EARNINGS PER SHARE - continued b) Diluted shares 30 June 30 June 2013 2012

(Loss)/profit for the year ( 1,656,509) 951,270 Interest expense on convertible notes (net of tax) 112,847 72,601 (Loss)/profit used to determine diluted earnings per share ( 1,543,662) 1,023,871

Number of ordinary shares in issue 21,200,785 21,200,785 Adjustment for assumed conversion of convertible debt 1,506,698 1,506,698 Number of ordinary shares for diluted earnings per share 22,707,483 22,707,483 Diluted earnings per share ($ 0.07) $ 0.05 ============ ===========

20. OPERATING LEASE COMMITMENTS

i) iTLTB Leases The company leases land in various locations from the iTaukei Land Trust Board on which trees are planted. The lease terms are between 20 and 75 years with annual lease payments between $300 to $2,500 VEP. These costs are charged to the statement of comprehensive income in the period they are incurred.

ii) On 1 August 2012, the company entered into a lease agreement with Arthur Snow to lease premises situated at Lot 12 DP 6303, Savulu in Rakiraki being approximately 1.76768 hectares. The term of the lease agreement is for a period of 20 years . Rent is payable at $300 per month. iii) On 1 August 2012, the company entered into a tenancy agreement with Arthur Snow to rent property consisting 3 dwelling houses situated at Savulu Point, Kings Road, Ra. The term of the lease agreement is for a period of 5 years . Rent is payable at $750 per month. Total commitments for future lease rentals, which have not been provided for in the financial statements are as follows:

30 June 30 June 2013 2012 $ $ Due

- not later than one year 17,857 17,659 - later than one year and not later than five years 59,535 26,843 - later than 5 years 204,142 199,561 $ 281,534 $ 244,063

========== =========== Other than the above, the Company is renting office premise from Kadavu Holdings Limited at $478 (VEP) per month.


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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – Cont’d FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 21. COMMITMENT AND CONTINGENT LIABILITIES

The company had no commitments other than those disclosed in note 20 and no contingent liabilities as at 30 June 2013 (2012: NIL).

22. RELATED PARTY (a) Directors

The following persons held the position of director of Future Forests (Fiji) Limited during the year: Mr Peter McPherson Mr Digby Bossley – from 5 December 2012 Mr Jim Dunn – from 5 December 2012 Mr Kaliopate Tavola – up to 1 August 2012 Mr Paul McDonnell – up to 5 December 2012 Mr Richard Watling – up to 31 August 2013

(b) Directors’ fees and emoluments

During the year directors‟ fees expense amounted to $21,500 (2012: $39,000).

(c) Balances with Directors 30 June 30 June 2013 2012 $ $

Owing from related parties (Note 11) $ 75,613 $ 75,613 =========== =========== Owing to related parties (Note 17) - Salaries 17,133 9,527 - Loans from directors and management 115,000 - $ 132,133 $ 9,527 =========== =========== Loans from directors and management are unsecured, at 0% to 6% interest rate per annum and repayable on demand.

(d) Transaction with director related entity 30 June 30 June 2013 2012 $ $

Five Princes Hotel - Functions and accommodation - 1,567 =========== =========== All transactions with related parties are made on normal commercial terms and conditions.


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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – Cont’d FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 22. RELATED PARTY - continued (e) Key management compensation

Key management includes the General Manager, Chief Financial Officer and the Capital Raising Manager. The compensation paid or payable to key management personnel is shown below:

30 June 30 June 2013 2012 $ $

Emoluments and fees 118,441 297,208 Share-based payments (Note 18(c)) - 20,963 Total $ 118,441 $ 318,171 =========== ===========

23. SUBSEQUENT EVENTS No charge on the assets of the company 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 to meet its obligations as and when they fall due.


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29

FUTURE FORESTS (FIJI) LIMITED DISCLAIMER ON UNAUDITED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED 30 JUNE 2013 The additional unaudited supplementary information presented on pages 30 - 31 is compiled by the Board of Future Forests (Fiji) Limited. Accordingly, we do not express an opinion on such financial information and no warranty of accuracy or reliability is given. We advise that neither the firm nor any member or employee of the firm accepts any responsibility arising in any way whatsoever to any person in respect of such information, including any errors or omissions therein, arising through negligence or otherwise however caused. 30 September 2013 Suva, Fiji PricewaterhouseCoopers

Chartered Accountants PricewaterhouseCoopers, Level 8 Civic Tower, 272 Victoria Parade, Suva, Fiji. GPO Box 200, Suva, Fiji. T: (679)3313955 / 3315199, F: (679) 3300981 / 3300947 PricewaterhouseCoopers is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.


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30

UNAUDITED SUPPLEMENTARY INFORMATION FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 SOUTH PACIFIC STOCK EXCHANGE LISTING REQUIREMENTS

Listing requirements of the South Pacific Stock Exchange (not included elsewhere in this financial statements)

a) Interest of each Director in the share capital of the Company as at 30 June 2013 is NIL (2012: NIL)

b) Distribution of Shareholding

Holding No. of holders Total % holding Up to 500 shares 38 0.06

501 to 5,000 shares 42 0.42 5,001 to 10,000 shares 10 0.38 10,001 to 20,000 shares 10 0.65 20,001 to 30,000 shares 2 0.27 30,001 to 40,000 shares 5 0.78 40,001 to 50,000 shares 3 0.63 50,001 to 100,000 shares 5 1.58

100,001 to 1,000,000 shares 24 22.55 Over 1,000,000 shares 3 72.68

Total 142 100.00

c) Net tangible assets per share

30 June 30 June 2013 2012 Net assets $ 3,423,388 $ 5,079,897 Number of ordinary shares 21,200,785 21,200,785 Net tangible assets per share $ 0.16 $ 0.24 ============ ============


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31

UNAUDITED SUPPLEMENTARY INFORMATION FUTURE FORESTS (FIJI) LIMITED YEAR ENDED 30 JUNE 2013 SOUTH PACIFIC STOCK EXCHANGE LISTING REQUIREMENTS (Cont’d)

d) Disclosure under Section 6.31(xii) Year Ended Year Ended 30 June 30 June 2013 2012

Turnover 112,415 38,350 (Loss)/ Gain arising from changes in Fair value less costs to sell plantations ( 882,549) 1,923,890 Other income 73,882 92,669 ( 696,252) 2,054,909 Depreciation ( 108,058) ( 104,648) Interest expense ( 151,163) ( 110,044) Other expenses ( 701,036) ( 888,947) Income tax expense ( - ) ( - ) ( 960,257) ( 1,103,639) Profit after tax ( 1,656,509) $ 951,270

========== ==========

Assets 5,539,642 6,935,607 Liabilities ( 2,116,254) ( 1,855,710) Shareholders‟ funds 3,423,388 5,079,897

e) Share Register

Central Share Registry South Pacific Stock Exchange Level 2, Plaza One, Provident Plaza 33 Elllery Street GPO Box 11689 Suva, Fiji Ph: 330 4130

f) The following table shows the highest and lowest share price during the course of the year:

Share Price ($) Highest 0.83 Lowest 0.80

As at 30 June 2013, the share price was $0.80 per issued share.


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Introduction

Welcome and confirmation of quorum.

Chair welcomed all shareholders and noteholders at

14:10pm.

The chair confirmed members present and proxy’s held

by members present. A total of 87.32 % of members

were present in person or as proxy. The quorum to hold

the meeting was confirmed.

Draft Agenda was presented by the Chair. Peter

McPherson moved a motion to accept the draft

agenda, Mr Kaliopate Tavola seconded the motion.

The AGM 2012 Agenda was duly accepted.

Ordinary Business

1. Confirmation of the minutes of the previous Annual

General Meeting held on 21 October 2011

The Chair introduced the minutes from the AGM 2011.

Mr Jeff Liew moved a motion to accept the minutes

and Mr Peter McPherson seconded the motion. The

minutes were duly adopted.

2. Matters arising from the minutes

There were no matters arising from the Minutes.

3. Addresses by the Chairperson and the General

Manager

The Chair, Dr Richard (Dick) Watling, addressed the

meeting (refer to address attached).

The General Manager, Mr Stephen Clark, addressed

the meeting with an overview of operations 2012 and

update outlook 2013 (refer to address attached).

4. To receive and adopt the Audited Balance Sheets

and Profit and Loss Statements and the reports of

the Directors and Auditors for the years ended 30th

June 2011 and 30th June 2012.

The Audited Balance Sheets and Profit and Loss

Statements 30 June 2011 were presented.

Mr Peter McPherson moved a motion to accept the

Audited Balance Sheets and Profit and Loss Statements

30 June 2011, Mr Kaliopate Tavola seconded the

motion.


Statements 30 June 2011 were duly adopted


Statements 30 June 2012 were presented.

Mr Kaliopate Tavola moved a motion to accept the

Audited Balance Sheets and Profit and Loss Statements

30 June 2012, Mr Jeffrey Yoon Liew seconded the

motion.


Statements 30 June 2012 were duly adopted.

5. To present and discuss a proposed Rights Issue to

raise new capital

ANNUAL GENERAL MEETING 20125 December 2012 at 2pm at Tanoa Plaza Hotel in Suva.

Minutes


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The Chair presented the proposed Rights Issue.

The introduction included obtaining a new loan to

commence Sawmilling (refer to attached briefing).

Mr Peter McPherson moved a motion for the Company

to move forward with the rights issue and sawmill

development proposal. This motion was seconded by

Mr Kaliopate Tavola.

The Chair stated that the Company will move ahead

with the Rights Issue, the new loan and the sawmill

development in the 1st Quarter of 2013.

6. To elect, in accordance with the FFF Articles of

Association, Dr Richard (Dick) Watling as a director

of the Company.

The Company recorded its gratitude to Mr Kaliopate

Tavola, who stepped down from the Board of Directors

in 2012 after serving five years on the Board, of which

two years as Chairman of the Board. The members

joined in thanking Mr Tavola.

Dr Watling stepped down from the Board of Directors

and as Chair of the AGM 2012. The members agreed for

Mr Paul McDonnell to Chair the AGM 2012.

Dr Dick Watling was nominated as Director by Mr Peter

McPherson. Dr Watling had accepted the nomination.

Mr Jeffrey Yoon Liew moved a motion to elect Dr

Watling to the Board of Directors. The motion was

seconded by Mr Robin Yarrow.

The members put the election to a vote by show of

hands:

For: All for

Against: None

Abstain: None

Dr Dick Watling was duly appointed to the Board of

Directors for a 3 year term.

Mr Paul McDonnell stepped down from the Board of

Directors, but offered to remain available as solicitor

to the Company through Cromptons Solicitors, who

have been Solicitors for Future Forests (Fiji) Ltd since its

inception.

Mr Jeffrey Yoon Liew moved a motion to elect Dr Dick

Watling to Chair the remainder of the AGM 2012. The

members agreed for Dr Watling to Chair the AGM 2012.

To elect, in accordance with the FFF Articles of

Association Mr Peter McPherson as a director of the

Company.

Mr McPherson was nominated by Mr Roderic Evers. Mr

McPherson had accepted the nomination. Mr Kaliopate

Tavola moved a motion to elect Mr McPherson. Mrs

Tarei Weeks seconded the motion.


hands:

For: All for

Against: None

Abstain: None

Mr Peter McPherson was duly appointed to the Board

of Directors for a 3 year term.


Association Mr Digby Bossley as a director of the

Company

The Chair introduced Mr Digby Bossley’s professional

and relevant experience.

Mr Digby Bossley was nominated by Mr Roderic

Evers. Mr Bossley is in Australia and had accepted the

nomination in writing.


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45

Mr Robin Yarrow moved a motion to appoint Mr Bossley

to the Board of Directors. Mr Kaliopate Tavola seconded

the motion.


hands:

For: All for

Against: None

Abstain: None

Mr Digby Bossley was duly appointed to the Board of



Association Mr Jim Dunn as a director of the Company

The Chair introduced Mr Jim Dunn’s professional and

relevant experience.

Mr Jim Dunn was nominated by Mr Peter McPherson.

Mr Dunn had accepted the nomination in writing.

Mrs Tarei Weeks moved a motion to appoint Mr Dunn to

the Board of Directors. Mr Peter McPherson seconded

the motion.


hands:

For: Majority

Against: None

Abstain: One

Mr Jim Dunn was duly appointed to the Board of


7. To appoint Auditors, to Audit the June 2013

Financial Statements.

The Chair put forward a proposal to re-appoint

PricewaterhouseCoopers as auditors for the 30 June

2013 financial accounts for a fee to be negotiated by

the Board of Directors.

Mr Kaliopate Tavola moved to appoint

PricewaterhouseCoopers as Auditors 30 June 2013 and

was seconded by Noud Leenders

The members put the appointment to a vote by show

of hands.

For: All for

Against: None

Abstain: None

PricewaterhouseCoopers was duly appointed Auditors

for June 2013 Financial Accounts for a fee to be

negotiated by the Board of Directors.

8. Any other business brought up in conformity with the FFF

Articles of Association.

The meeting discussed the potential of carbon

sequestration.

The Chair agreed to circulate the Draft Minutes of the

AGM 2012 within a number of weeks.

Thereafter, the Chair thanked all those present and

closed the AGM 2012 at 16:30 pm

Signed

Chairman


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PROXY FORM

Share Folio No________________________No. of shares held_____________________

The Company SecretaryFuture Forests (Fiji) Limited P O Box 1380Suva Fiji Islands

I/WE_________________________________________________________________________________________________

of ___________________________________________________________________________________________________

Being a member / (s) Future Forests (Fiji) Limited hereby appoint

_____________________________________________________________________________________________________

of___________________________________________________________________________________________________

or failing him _________________________________________________________________________________________

of___________________________________________________________________________________________________

as my/our proxy to vote on my/our behalf at the Annual General Meeting of the company, to be held

at 2.00 p.m. on 12th December 2013 and at any adjournment thereof.

As witness to my/our hands this_________day of _______________2013, at____________________________________

Signed by the said member (s) _________________________________________________________________________

In the presence of (Witnessed by)_______________________________________________________________________

In the case of a body corporate, this form should be under its Seal or be signed by an officer or anattorney duly authorized by it.

Proxies must be received at the Registered Office of the Company no less than 48 hours prior to thetime appointed for holding of the meeting.As per Article 72 of the company, a member may appoint not more than two (2) proxies neither of whom needs to a mem-ber of the company. If a member appoints two proxies, neither proxy shall be entitled to vote on a show of hands. Where a member appoints two proxies, the appointment shall be of no effect unless each proxy is appointed to represent a specified proportion of the members voting rights

For office use only :

Proxy received on _____________ at ______am / pm by _____________________________


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