Letter to the Minister

Appointed to the Board in Decem-ber 1999 and became Chairmanfrom December 2000. Mr. Reddy isan Economist having attained aMasters in Economics with distinc-tion and presently the DeputyGovernor of the Reserve Bank ofFiji. He joined the Reserve Bank ofFiji in 1975 and has held othersenior management positionsduring the period of his employ-ment. Mr. Reddy is also the DeputyChairman of the Capital MarketsDevelopment Authority.

Mr. Sada ReddyChairman

Appointed to the Board in January2004. Mr. Tuiloma is the ChiefExecutive Officer for the Ministryof Local Government, Housing,Squatter Settlement & Environmentfrom 2004. He had served with thePublic Works Department for 24years. Before taking up his newposition, he was the Director ofBuildings & Government Architect.Mr. Tuiloma holds a Bachelor andMasters Degree in ArchitecturalStudies. He also holds a GraduateCertificate in Management.Mr . Tuiloma is also a Board memberfor Public Rental Board andNational Fire Authority.

Mr. Cama TuilomaDirector

Appointed to the Board in Decem-ber 2002. Rev. Lomaloma has aMasters Degree in Social Planningfrom London School of Economics.She is currently serving as theGeneral Secretary of the AnglicanChurch in Fiji, Tonga, Samoa andArchdeaconry in New Zealand.Rev. Lomaloma has held varioussenior positions in Governmentincluding being Director forWomen in the Ministry of Women& Social Welfare for nine years.

Rev. Sereima LomalomaDirector

Appointed to the Board in February2005. Mrs. Gonelevu holds a PostGraduate Diploma in Management& Public Administration and hascompleted 2 units in Masters inBusiness Administration, Bachelorof Arts in Management andLinguistics and Vocational TeachersCertificate. She is currently involvedin social/community work andholds the position of InterimSecretary of Fijian Women’sOrganisation.

Mrs. Elenoa GonelevuDirector

Appointed to the Board in Novem-ber 1996. Mr. Rokovunisei holds aMasters of Business Administration,Post Graduate Diploma in AppliedFinance and Investment, Bachelorof Science in Mathematics & Physicsand Bachelor of Arts in Accountingand Economics. He is presently theGeneral Manager/Chief Executiveof the Fiji National Provident Fund.Mr. Rokovunisei has continued toserve on various Boards includingthat of Unit Trust of Fiji (Mana-gement) Ltd, Yasana Holdings, FijiTV, Home Finance Ltd, CreditCorporation Fiji Ltd, Telecom FijiLtd and Amalgamated TelecomHoldings Ltd.

Mr. Olota RokovuniseiDirector

Appointed to the Board in Dece-mber 2002. Mr Deo is a CharteredAccountant and a retired partner ofthe accounting firm KPMG wherehe served as partner-in-charge of theLautoka office for some 20 years.He is a past president of the FijiInstitute of Accountants. Mr. Deois currently a Business Consultantand a Board Member of CapitalMarkets Development Authorityand holds other company direc-torship. He is also Chairman ofSathya Sai Service Organisation ofFiji, a spiritual and serviceorganisation.

Mr. Vishnu DeoDirector

Board of Directors02

Board of Directors Term Expired on 31st December 2006

Board CompositionThere are six Directors on the Board,all of whom are appointed by theMinister for Women, Social Welfareand Housing. The Chief ExecutiveOfficer is an ex-officio member of theBoard but does not have the power tovote nor regarded as a Board Directorfor the purpose of formimg a quorum.

Board FunctionsThe relationship between the Boardand the Management is a partnershipthat is crutial to the Authority’s longterm success. Each has functions whichshould be clearly defined and under-stood. The Chief Executive Officer isresponsible to the Board for the day today management of the Authority.The Board gives directions and exercisesjudgment in setting the Authority’sobjectives and overseeing their imple-mentation.

Some of the major responsibilities ofthe Board Directors include:

Board ofDirectors

No. ofmeetings

held

No. ofmeetingsattended

Mr. Sada Reddy 11 11

Mr. Olota Rokovunisei 11 1

Mrs. Elenoa Gonelevu 11 9

Rev. Sereima Lomaloma 11 9

Mr. Vishnu Deo 11 7

Mr. Cama Tuiloma/Ms. Emele Duituraga 11 9

• The corporate governance ofthe Authority, including establishment of Sub-Committees;

• Oversight of business and affairs of the Authority by:

• Establishing with Management thestrategies and financial objectives;

• Monitoring the performance of theManagement

• Communicating with shareholders, results of, and developments in the operations of the Authority;

• Appointments of the Chief Executive Officer; and

• Approval of the Authority’s majorHuman Resources policies and overseeing the development strategies for senior and high performance executives.

Board MeetingThe number of Board Directors’ meet-ings and number of meetings attendedby each of the Board Directors of theHousing Authority during the financialyear were:

Board Sub-CommitteesTo assist the Board to plan and supportits activities and administration, threeSub-Committees were formed, namelyProperty, Finance, Audit & Risk Mana-gement and Human Resources Sub-Committees. The minutes of themeetings held by these Sub-Comm-ittees were tabled at Board meetingsand all resolutions of these Commi-ttees required the approval of theBoard.

Property Sub-CommitteeThe Property Sub-Committe waschaired by Mr. Cama Tuiloma with Rev.Sereima Lomaloma, Mrs Elenoa Gone-levu and Mr. Vishnu Deo as members.

The Committee’s primary role wasto review Management’s recommen-dations on all land developmenttenders and all acquisition of land bythe development tenders and onall acquisition of land by the Autho-rity. The Committee also evaluatedand pre-qualified civil contractors/consultants eligible to carry out theAuthority’s projects and assistedManagement where necessary indealing with contractors/consultants,municipal authorities and otherstakeholders.

Finance, Audit and RiskManagement Sub-CommitteeThe Finance, Audit & Risk ManagemntSub-Committee was chaired byMr. Vishnu Deo with Mrs. ElenoaGonelevu, Mr. Olota Rokovunisei andRev. Sereima Lomaloma as members.

The fundamental tasks of this Comm-ittee were to monitor the performanceof the Chief Executive Officer, GeneralManagers, recommend remunationpolicies and address strategic humanresource matters. In addition, the Com-mittee endorses Management’s recom-mendations in regard to performancemanagement system and assists Mana-gement in maintaining good industrialrelations with the Union.

Attendance to Sub-CommitteeMeetingsThe number of Board Sub-Committeemeetings held during the year were 8and attendance to these meetings byhe Board Directors averaged 70%.

The Committee’s main function wasto assist the Board in fulfilling itsresponsibilities relating to the fiduciarymanagement of the accounting policiesand reporting practices of theAuthority.

The Committee is charged with theresponsibility to oversee and appraisethe quality of the audits conducted byboth internal and external auditors.The Committee also maintained openlines of communications among theBoard, the internal auditors andexternal auditors to exchange views andinformation.

Human ResourcesSub-CommitteThe Human Resources Sub-Commi-ttee was chaired by Mr. Sada Reddywith Mr. Cama Tuiloma, Mr. VishnuDeo and Rev. Sereima Lomaloma asmembers.

03Corporate Governance

Financial Highlights04

10.00%

0.00%

-10.00%

-20.00%

-30.00%

-40.00%

-50.00%

-60.00%

-70.00%

%

Return on Equity (1998-2006)

-8.23% -9.90%-13.47%

1.40% 1.97%5.00% 5.68%

4.31%

1998 1999 2000 2001 2002 2003 2004 2005 2006

Lots Production (1998 - 2006)

2500200015001000

5000

Lot N

umbe

rs

1998 1999 2000 2001 2002 2003 2004 2005 2006

Lots completed Lots In-Progress Scheme/Design Plan

Profitability Trend (1998-2006)

4,000

2,000

0

(2,000)

(4,000)

(000

) 160

518771

2,0672,487

2,281

(432)

(3,400)

Non Performing Portfolio (1998-2006)

$M

40.035.030.025.020.015.010.05.00.0

25.0%20.0%15.0%10.0%5.0%0.0%

(%)

1998 1999 2000 2001 2002 2003 2004 2005 2006

22.2 28.7 29.9 30.5 34.3 32.7 24.1 21.3 20.9

15.7%

20.0% 20.8% 20.7% 21.1% 21.1%

24.1%16.5% 14.6%

Weighted Average Cost of Capital (1999-2006)

%

10.00%8.00%6.00%4.00%2.00%0.00%

8.70% 7.70% 7.15%6.47% 6.38% 5.41%

5.01%6.29%

1999 2000 2001 2002 2003 2004 2005 2006

Years

1999 2000 2001 2002 2003 2004 2005 2006

10.10% 10.50% 9.35%

6.38%

7.16% 7.11%6.35%

7.59%

%

12.00%10.00%8.00%6.00%4.00%2.00%0.00%

Effective Lending Rate (1999-2006) Total Operating Expense toTotal Operating Income (1994-2006)

81%93%

87%

65% 66% 60%66%

53%

71%60%

55% 57% 56%

100%80%60%40%20%0%

1999 2000 2001 2002 2003 2004 2005 200619981997199619951994

Years

-63.62

1998 1999 2000 2001 2002 2003 2004 2005 2006

538

1998 1999 2000 2001 2002 2003 2004 2005 2006

130125120115110105

$M

118.9

114.7 113.6117.0

128.7

122.3 122.5 124.2 122.9

Performing Portfolio (1998-2006)

Non Performing Portfolio Non Performing Portfolio(%)

Organisational Structure 05

Minister for WomenSocial Welfare &

Housing

Boardof Directors

Minister for Public Services,Public Enterprises & Public

Sector Reforms

Chief Executive OfficerAlipate Naorosui

The Chief Executive’s Division has the primaryresponsibility of setting strategic directions,

implementing policies as approved by theBoard, corporate governance, monitoringand measuring of results against targets

and risk management.

The Lending Division is responsiblefor all lending functions which

include the assessment, approval,management, control and recoveryof all loans, the Division is also taskedwith improving the overall quality of

the Authority’s loan portfoliothrough the implementation of moreeffective and efficient policies and

procedures which continue to bringthe Authority’s lending functionson par with commercial banking

practices.

The Customer Relations Divisionsmajor respo-nsibilities are to create

new business and enhance theAuthority’s corporate image.

Its activities include the processingof applications, land and house sales,

marketing research, productdevelopment, valuation, work

assessment and boundarydefinitions.

The Finance and AdministrationDivision has the primary responsi-bility of ensuring prudent financialmanagement including reporting;

maintaining data integrity anddisseminating timely and quality

information; developing and drivingappropriate human resources stra-tegies and culture change programsand providing efficient and directive

administration support services.

Board Secretary

Jagdish Prasad

Consultant Project ManagerHousing Development

Manab Ghose

General ManagerFinance & administration

Mamatuki Itautoka

General ManagerLending

Baij Maharaj

General ManagerCustomer Relations

Michael Lee

Housing Development Division isresponsible for the acquisition of

land, its subdivision and productionof houses.

Management Team06

Michael LeeGeneral Manager CustomerRelations

Manab GhoseConsultant Project ManagerHousing Development

Baij MaharajGeneral Manager Lending

Alipate NaiorosuiChief Executive Officer

Leonard KwansingManager Customer Relations-West

Mikaele TupuaLand Development Engineer

Muazzan RazakManager Credit Management

Visha VithalManager Credit Approvals

Gurmukh KripalaniManager Finance

Management Team 07

Mamatuki ItautokaGeneral Manager Finance& Administration

Jagdish PrasadManager Corporate Governance/Board Secretary

Ajay SinghManager Credit Recovery

Inoke BokiniManager Human Resource & Training

Sairusi KomainavokaManager Administration& Property Management

Rajeshwar PrasadManager MIS

Isikeli NavudaManager Land Development

Eapi NabouManager Customer Relations-Central

Isikeli VesikulaManager Legal Service

Aminio TamaniManager Customer Relations - North

IntroductionI am delighted to report that the Hou-sing Authority has had yet anothersuccessful financial year in 2006,despite increased competition andhigh borrowing costs in the market.

Financial ResultsThe Authority achieved a surplus of$2.28m in comparison to a surplusof $2.49m last year – a decrease of11.6%. In addition to recording asurplus, the Authority maintainedits ‘Crystal Loan Package’ at a fixedinterest rate of 3.99% per annum for18 months and thereafter, a variablerate of 7.99% per annum. This wasachieved despite borrowing costsincreasing significantly during theyear.

Lot ProductionA high level of urban migrationmeant the Authority continued toexperience a huge demand for hou-sing lots in the Suva-Nausori corridor.The Authority’s Waila 3B Subdivi-sion at Davuilevu, Nausori with 466lots, was finally completed, withapproved subdivision plans. The lotsin this Subdivision were mostly allo-cated to squatters, in consultationwith the Ministry of Housing, whichprovided a grant of $1.1m thatreduced the development cost of lotsby about 50%. The Authority success-fully resettled 41 families that livedat Bainiose Settlement, Queen Eliza-beth Drive, Suva, and 46 families thatlived at Vunivaivai Settlement,Laqere, and at Nasinu to its Waila 3BSubdivision.

At the Authority’s 74.4 hectare (184acre) Tacirua East Stage 2 Sub-division, engineering plan approvalwas awaited and thereafter, earth-works would commence in 2007.The Authority intends to pre-sell thelots in this subdivision to reduce itsborrowing and thereby make the lotscheaper to our customers. ThisSubdivision will be developed,providing about 261 upmarket lots,with the balance of 789 lots being formiddle to low-income earners.

Chairperson’s Report

The Authority acquired 25.8 hectares(64 acres) of State land at Wainibuku,Nausori, and preliminary siteinvestigation works are in progress.This Subdivision will produce 230residential lots, a commercial centreand a school site. Earthworks on thisproject would commence in 2008.

In continuing its land developmentpartnership with the Native LandTrust Board, the Authority hasacquired 46 hectares (114 acres) ofland at Natadola near Sigatoka. TheAuthority would carry out mixeddevelopment, producing about 600lots to cater for hotel workers atNatadola, Momi Bay and othernearby resorts. The Authority alsoplans to build houses and apartmentsto cater for high and middle-incomegroups.

In the Western Division, 448 lotshave been developed at Field 40 andNatabua subdivisions in Lautoka. In2006, a total of 153 lots have beensold to our customers and that figureincludes 24 lots to the ‘Navutu’squatter families, in consultationwith the Ministry of Housing, at Field40 Subdivision.

Low-Income FocusThe Authority continued to subsidisethe interest rate of 2% on housingloans for all low-income-earningcustomers through its annualGovernment Grant. Additionally,customers under the Authority’sVillage Housing Scheme, whoseannual household income did notexceed $6,500 were also subsidised.Land development subsidies werealso provided to low-income earnersto make lots more affordable forthem.

The Authority remained committedto helping more low-income earnersand to meeting the Government’ssocial housing objectives. In 2006,the Authority has assisted 2,072customers of which 997 (48%) werelow-income earners.

Furthermore, under the Authority’sHome Ownership Plan (HOP),financial assistance was providedthrough a Government Grant to 11existing customers who were unableto repay their mortgage debt. Withthis plan, many of our customerswere able to retain their homes,despite facing financial hardship and18 families have been assisted sincethe inception of HOP in 2005.

Home LoansDespite the highly competitive homeloan market and high borrowingcosts, the Authority was able tomaintain its lending interest rate of3.99% per annum for 18 months andthereafter, a variable rate of 7.99%per annum. This was the lowestinterest rate package in the housingloan market.

In 2006, the Authority approvedloans totalling $23.1m to 2072customers and its loan portfolio stoodat $143.8m as at the end of this year.

Even though the Authority hasmaintained its current lending rates,it is extremely difficult to maintainthis rate under the prevailing con-ditions. A review of lending interestrates and products would beundertaken in early 2007.

Corporate GovernanceThe Board strictly adhered to goodcorporate governance practices,which form a fundamental part ofthe Authority’s values and its success.The Housing Authority already hasin place a Board Charter that spellsout the roles and responsibilities ofthe Board of Directors, including thedisclosure of conflicts of interest byany Director who has a materialpersonal interest in a matter beingconsidered by the Board.

This year, financial statements wereagain audited by KPMG, CharteredAccountants on behalf of theAuditor-General of Fiji. The Autho-rity’s internal auditor was G. Lal &Co, which provided quarterly reports

08

Litia MawiChairperson

that ensured operations conformedwith established policies andprocedures.

In the last quarter of 2006, KPMGwas commissioned to carry out a riskmanagement study. This studydeveloped the risk profile of theAuthority to assist the Board ofDirectors in the strategic planningprocess.

The Housing Authority continuedto provide corporate performancereports to the Government throughthe Ministries of Housing and PublicEnterprises & Public Sector Reform.

Looking ForwardThe Authority operates in a com-petitive home loan market and isfaced with a number of constraintsand challenges such as high borrow-ing rates and a scarcity of funds inthe market. Its medium term goal isto obtain a license from the ReserveBank of Fiji to accept savings deposits.This would require the HousingAuthority to become more efficientin order to operate without reliance

on the Government for support andloan guarantees in the future. Therecommendations of the DueDiligence Study carried out in 2005by KPMG have been incorporatedinto the Authority’s Corporate Planto assist in achieving this goal. In themeantime, Government Guaranteewould be required for the Authority’sborrowings in order to carry out itsvarious capital projects.

There is a need to review the HousingAct as it conflicts with the PublicEnterprises Act, which requires theHousing Authority to operate in abusiness environment, to makesurplus and provide returns of 10%on shareholders’ funds. This wouldbe difficult to achieve consideringthe Authority’s social obligations andhigh social costs.

In 2007, the Housing Authorityplans to implement its new ITsystem, which will make informationreadily available to staff and helpthem ser ve customers moreefficiently. The system will also assistmanagement to monitor the Auth-

ority’s performance more effectively.

The major challenge for theAuthority is to provide housing lotsthat most low-income earners andsquatters can afford. To continue tomeet this objective, the Authorityhas strengthened its HousingDevelopment Division by appointinga Consultant Project Manager on athree-year contract. The Authoritywould carry out some of its landdevelopment projects through jointventures, with other financialinstitutions acting as equity partners.However, it still faces delays inconnection to water/sewer infra-structure and in subdivisional appro-vals and a shortage of consultants andcivil contractors in the market.Further, illegal subdivisions carriedout by landowners have impeded thesale of lots in our newly developedsubdivisions, particularly in theWestern Division.

Conclusion2006 has been a challenging year forthe Housing Authority and therehave been significant changes in the

home loan market. The fact that theAuthority has been able to achieveanother good performance and againdeliver a good financial result is atribute to its efficient and productiveworkforce. Management acknow-ledges the vital role they play in thesuccess of our operation and theyshould be congratulated for theirefforts.

On behalf of the Board, I also wishto express my sincere gratitude to theGovernment for its continuedsupport during the year.

I must also thank the Board Membersfor their contributions and commit-ment throughout the year. I wouldalso like to thank the Fiji Bank andFinance Sector Union leadership fortheir support in resolving staff issuesduring the year.

Finally, I wish to thank all of ourcustomers for their continuedconfidence in and support of theAuthority.

07

Chief Executive Officer’s Report

Operating ResultsLast year was a very competitive yearfor the Authority with increasedcompetition in the market, borrowingcost increased significantly in the laterhalf of the year and many of ourprojects were delayed for variousreasons. However, I am pleased toreport that the Authority againrecorded another good profit for thefourth straight year. A $2.28moperating profit was recorded for2006 compared to $2.49m lastyear, which is a remarkable achie-vement given the difficult operatingenvironment and many socialobjectives the Authority strives toachieve.

The main factors behind our goodresults were largely due to the effec-tive implementation of most ofour key strategies outlined in ourCorporate & Work Plans andincluding a better control of ourexpenses. We also met most of ourtargets for income through collectionof budgeted fees and charges andprovisioning of doubtful debts wasincreased in anticipation of changein policy in 2007 in accordance withRBF guidelines.

However, sales was low due to delaysin the completion of 466 lots at ourWaila 3B Subdivision in Davuilevuand poor sales recorded in our Field40 and Natabua subdivisions inLautoka.

Financial Performance HighlightsA record surplus of $2.28m wasachieved for the year against stretchedbudget of $2.6m. The 2006 surplusrepresents an decrease of 11.6% overthe last year’s surplus of $2.49m.

Return of Equity achieved was 4.3%against target of 5.3%.

Total operating income increased by22% from $11.92m in 2005 to$15.21m in 2006.

Interest income increased by 7% from$10.9m in 2005 to $11.8m in 2006.

Total Performing Loans portfoliodecreased by $1.3m to $122.9m in2006 compared to $124.2m in 2005. The decrease was due to slow landsales in our completed subdivisionsof Balawa and Field 40, Lautoka. Alsothere was a delay in the sale of Waila3B subdivision due to squatterrelocation issues.

Total Non-Performing portfolioreduced from $21.3 in 2005 to$20.9m in 2006, this represents adecrease of 1.9%. This was possiblewith new initiatives and strategiesplaced by the Authority with thefocus of improving the existing loanportfolio in 2006 and bad debtswrite-offs during the year.

Borrowing portfolio increased by 15%from $104.5m in 2005 to $120.3min 2006.

Non Financial PerformanceHighlightsTotal of 2,072 customers and familieswere provided new housing and otherrelated financial assistance comparedto 2,232 families in 2005. Thisrepresents a decrease of 7.17%. Moreinformation is provided in CustomerRelations Divisional Repor t.

997 low income families with incomeon or below $16,500 were assisted.This represents 48% (target is 50%)out of the total of 2,072

27 Village Housing Schemes wereapproved $0.76m to build newhomes compared to 56 schemes for$2.4m in 2005.

In addition, 11 families were assistedunder the Home Ownership Planscheme for them to retain their familyhomes in the sum of $0.15m fromthe said government grant comparedto 7 families in the sum of $0.11min 2005.

Housing Assistance Programmefor Low Income Earners andSquattersThe Authority’s mandate is toprovide affordable and quality

housing accommodation to itscustomers, particularly low to middleincome workers. While we haveexpanded our housing loans to alsoinclude higher income earners, westill try to meet our original mandateby ensuring that not less than 50% ofour housing assistance must go to lowincome earners. This commitment isalso outlined in the Memorandumof Understanding signed with theGovernment in 2003. This was notachieved in 2006, however moreassistance would be given next yearonce 800 new lots in Waila 3B andField 40 Subdivisions are sold andallocated to the low income earners.

Squatter Resettlement at Waila3B Subdivision, DavuilevuAll 466 lots at Waila 3B have beenearmarked for low income andsquatter settlement. About 35families moved from VunivaivaiSettlement and 30 families fromBainiose were allocated lots at Waila.A joint operation to start movingsquatter from Pony Club to Waila3B began in October, 2006. By yearend, 28 families have been relocated.This was the result of a successfuljoint operation by Housing Auth-ority, University of the South Pacific(USP) and Ministry of Housing &Squatter Resettlement Unit and thetenants which able to move Bainiosetenants who have been living therefor more than 40 years. These lotshave been partly financed by USP thelandlord of Bainiose Settlement andGovernment subsidies who contri-buted $5000 each to these families.On top of this USP is offering 4

3,500

2,500

1,500

5,000

4,000

3,000

2,000

1,000

500

0

4,500

2001 2002 2003 2004 2005 2006

25

20

15

10

5

0

4,315 3,826 1,445 1,071 1,123 997

19.53

21.22

14.43

12.2 10.29

7.42

Total Number

Housing Assistance to Low Income Earners

$mNo.

Total Value

09

scholarships a year for the next 25years for these families and theirdescendants.

Most have rebuilt their houses, whilesome have applied for new construc-tion and 8 plans have been approvedready to be built.

Information Technology SystemThe implementation of our new ITsystem commenced towards the endof 2005 following the signing of acontract with Larson & ToubroInfoTech Limited; an Indian-basedcompany which will supply newaccounting and lending software.

This project is a very importantinvestment and a key strategy for theAuthority to compete and be efficientin the future. The new system willhelp ensure that the Authoritydelivers effective and efficient serviceto its customers and track delinquentcustomers. With this new system, wewill also be able to grade our loans inaccordance with Reserve Bank of Fiji’sguidelines and pursue our medium-

term goal to acquire a Savings DepositLicense from the Reserve Bank.

Housing DevelopmentBecause of the continuous delays andproblems faced with our engineeringconsultants over the past ten years,the Housing Authority Board took amajor decision in November 2005 tore-establish the Land DevelopmentDivision. The Division had originallybeen closed down in 1996 becauseit was felt that out-sourcing wouldbe more efficient. This has not provento be the case in the last 10 years.

The re-established Division will becalled Housing Development andwill operate with about tenprofessional staff members and beheaded by a Project Manager. TheDivision’s primary objective will beto acquire, design and develop landand also construct houses on allfuture developments.

The Division is expected to enter intojoint ventures with the private sectorand lenders for funding and to

undertake housing developmentsprojects throughout our country. TheDivision is expected to be fullyoperational by the second quarter of2007.

Finance ReviewA Review was also commissioned andcompleted during 2005 with theobjective to ensure that the FinanceDivision operates efficiently andeffectively to support our corebusinesses. The Review revealeddeficiencies in some key areas ofoperation, including staffing. Theimplementation of the findings wascompleted during the year.

Human Resources, IndustrialRelation and TrainingThe Authority views its humanresources as its biggest asset and ourstrategies and plans are outlined inthe Employment and IndustrialRelations Plan approved by the Board,line Ministry and Ministry of PublicEnterprises. Throughout the year,considerable training was conductedto improve performance, create

10

A $2.28m operating profit was recorded for 2006compared to $2.49m last year, which is a

remarkable achievement given the difficult operatingenvironment and many social objectives the

Authority strives to achieve.

attitudinal change and to furtherdevelop our professional staff. Thisstaff development included overseastraining for management staff as well.There were no unresolved industrialdisputes in 2006. Managementcontinued to work closely with thestaff and the union to resolve anymatters of concern and to holddiscussions on a regular basis.

Performance ManagementSystemOur new performance managementsystem was implemented for thesecond time in 2006. Methodologyfor this new system was endorsed in2004 by the Union as well as theBoard and Management. Forperformance appraisals, the newsystem takes into consideration thecorporate performance, individualstaff performance and their behavior.The performance managementsystem would be reviewed next year.

Land ConstructionThe development of land for theAuthority’s many projects wasdisappointing throughout 2006. Allof our projects completed, includingField 40 and Waila 3B. Both of theseprojects were delayed despite effortstaken by management. Waila 3B wasphysically completed in 2005 but thelot plans were approved early in 2006.First priority was given to squattersfacing eviction and PRB tenants atRaiwai and Raiwaqa however manydid not take up the offer by year end.Other projects in the design andscheme planning stages handled byo u r c o n s u l t a n t s we r e a l s osignificantly delayed. These delaysincluded the Scheme Plans for WailaHousing City (4,000 lots), Savusavu(53 lots), Tavua (210 lots), Ba (83lots) and Tacirua East (1,000 lots).There were many reasons for thedelays despite considerable efforts

taken by Management to meetdelivery deadlines.

The Authority also formulated its six-year Land Development Program in2005, which will now be reviewedannually.

Land AcquisitionThe Authority can only develop moreSub divisions in the future to meetdemand if it can acquire suitable landnow. In 2006, we finalized plans to obtaindevelopment leases from LandsDepartment for land in Wainibuku(60 acres), Vatuwaqa (10 acres), andCaubati (25 acres) and managed toacquire a 10 years development leasefor 114 acres of land close to NatadolaHotel Development site. Acquisitionfor 40 acre site near Matavolivoli,Nadi were also under discussion byyear end. On this property, we planto develop thousands of housing lotsto house the thousands of hotelworkers and others that are expectedto work at the various hoteldevelopments in this area.

This is a new initiative to support thetourism industry. Other sites thatare being considered for similardevelopment are along the CoralCoast and Sigatoka.

Corporate Planning andMonitoring of PerformanceThe Authority’s (2006-2008)Corporate and Work Plan wereimplemented during the year andreports tabled to the Board monthly.Management also meets monthly forhalf day to review progress andstrategies to ensure we are on trackand resolve issues and roadblocks.

Public Relations and MarketingDuring 2006, Management workedhard to maintain the Authority’sgood public image and improveCorporate Profile. We were happy tonote that there were no adversereports in the media. To help achievethis image, the Authority issued pressreleases and newspaper supplementsfrom time to time and was happywith responses to the Authority’s

Year Development Area(Ha)

Location No. ofLots

Total No.of Lots

2005 Waila - Stage 3b 15 Nausori 466Balawa Stage 2 Lautoka 30 496

2006 Namosau - Stage 2 5.13 Ba 83Koronisalusalu - Stage 1 13.13 Tavua 210Naqere - Stage 2 2.4 Savusavu 53Tacirua East - Phase 1 6.75 Suva 150Tavakuvu Infill 5 Lautoka 10 506

2007 Tacirua East - Phase 2 25 Suva 500Waqadra - Stage 2 19.4 Nadi 330Tavakubu Balance - Stage 1 11 Lautoka 100 930

2008 Tacirua East 2 - Phase 3 20 Suva 400Nepani Flats 16.19 Nasinu 340Waila City - Phase 1 30 Nausori 600Vatuwaqa - Viria Road 5.28 50Matawaluwalu Residential 10.2 Sigatoka 95 1485

2009 Tacirua East 2 - Phase 4 15 Suva 150Wainibuku - Stage 1 26.3 Nausori 225Waila City - Phase 2 47.5 Nausori 650 1025

2010 Tavakubu Balance - Stage 1 10 Lautoka 100Waila City - Phase 3 55 Nausori 1000Caubati - Stage 3 8 Nasinu 100 1200

Total Lot Output. 5642

11

A record surplus of $2.28m wasachieved for the year against stretched

budget of $2.6m. The 2006 surplusrepresents an decrease of 11.6% over

the last year’s surplus of $2.49m.

activities and its services. TheAuthority’s newsletter which calledthe ‘VALE’ is published quarterlyevery year and dwells on the projects,issues and other related activities ofthe Authority.

AuditIn accordance with the FinancialManagement Act (17 of 2004) andwith effect from 1st January 2005,the Authority’s financial accountswere audited by the Auditor General. Internal Audits were carried out byG. Lal & Co on a quarterly basis.Issues raised by the Internal andExternal Auditors were acted uponby the management and overseen bythe Board’s Sub-Committee respon-sible for Finance, Audit & RiskManagement.

Risk ManagementKPMG carried out a risk manage-ment study throughout theorganization to identify, evaluate,treat, communicate and monitor riskaffecting its business and in so doing,formulate a policy for the Authority.Draft report was received later in theyear and to be discussed andimplemented in 2007.

Insurance ServicesThe Authority continued to provideits customers mortgage protectionand property insurance covers undera group policy. This arrangementenabled a total of our 10,069 mort-gage customers to enjoy a verycompetitive insurance premium forboth the covers. Insurance cover wasreviewed annually through ourbrokers, Marsh Ltd and premiumsremain unchanged since 2004.

During the year, New India Assu-rance Co. Ltd responded to 8 fireclaims and 4 other property related

damage claims. These claims amou-nted to $340,125. The mortgageprotection insurance cover was placedwith FijiCare Insurance Ltd and theclaims arising due to loss by deathand/or total permanent disability hada loss ratio of 90% for the year. Apartfrom the above claims, 13 motorvehicle claims amounting to $33,000for its customers, staff and theAuthority were also attended to.

The Year AheadLooking ahead, the Authority wouldneed to work hard and must resolveall its key strategic issues if it is tomeet its social housing obligation.These are the huge challenges giventhe current economic situation andhigh interest rate in the market.

We have been able to maintain lowinterest rate for 2006 and we havecontinually strived to reduce ouroperating cost and weighted averagecost of fund but this is not sustainablein the medium and long term.

In this regard, I must thank mymanagement team and staff for theircontribution in yet another good yearand also to the Union, customers andstakeholders for their support.

Finally, I wish to express my gratitudeto the Board Chairperson, Membersof the Board and the Ministries ofHousing, Finance and Public Enter-prises for their continued supportand direction during the year.

Alipate NaiorosuiChief Executive Officer

Mortgage Protection Insurance Claim Record

116 80 80 73 70 79

$1.58

$1.25

$1.22

$1.45

$1.20

$1.48

140

120

100

80

60

40

20

0

1.80

1.60

1.40

1.20

60

40

20

0

$ ValueNo. of Claims

$mNo.

Material Damage (Fire) Insurance Policy Claim

Total Claims[$]No

0

2

4

6

8

10

12

14

0

$100

$150

$200

$250

$300

$350

$400

2004 2005 2006

1265

$340.13

$243.04

$141.95

YearNo.

12

Customer Relations Division

IntroductionThe primary focus of the CustomerRelations Division for 2006 was tocontinue to improve our servicedelivery by providing efficient andeffective services to our customers.The Division’s charter was to ensurethe provision of housing productsthat would be affordable to lowincome-earners and to use marketingtools to increase the Authority’smarket share.

Residential Home LoanThe Authority maintained theCrystal Package throughout 2006,even though all other lendinginstitutions have increased theirlending rates. Table 1.0 shows thereduction in interest rates offered bythe Authority over the past sevenyears.

Fees and ChargesThe Housing Authority continues tooffer the lowest loan fees and chargesin the market and was able to attractconsiderable business in home loanpackages. The total fees and chargescollected by the Division in 2006amounted to $283,248. Thisexceeded our projection by 20%.

Land Sales and SquatterResettlementLots at the Waila 3B and BalawaSubdivisions were sold mostly tosquatters. Lots were also allocatedfor resettling squatters at the Field40 subdivision in Lautoka. Twelvesquatter settlements were earmarkedfor relocation at the Waila 3B sub-division and this includes Bainiose,Vunivaivai, Korova, Tamavuaiwai,Muanivatu, Matata, Nasinu Quarry,Laqere, River Road, Pritam Singh,Koka Place and Nanuku. Onehundred residential lots are alsoreserved for relocating Public RentalBoard Tenants who currently occupythe four-storey flats at Raiwaqa amdRaiwai.

Two squatter settlements, namelyBaniose (41 families) and Matata (9families) have all relocated to Waila3B and to other family members andthe land they had occupied has nowreverted to the original owners. Therelocation of the whole of the Vunivaicommunity had started and shouldbe finalised in 2007.

Loans ApprovedThe total loans approved for 2006amounted to $23,108,796. This is areduction of 23% and 7% in loanvalue and number compared with2005. This is mainly due to theincrease in real estate values and theslow sales of the Waila 3B and Field40 residential lots.

Low Income focusIn total, 997 low-income clients wereassisted in 2006 with fundsamounting to $7,423,022. This isequivalent to 48% in number and32% in value of the total Loan andSales approved during the year.Assistance to low-income earners arestill a priority in our service as theallocation of lots in our newly deve-loped subdivision has been directedprimarily to low-income clients.

Village Housing LoanThe rural housing assistance forvillage scheme continued this yearand 83 housing schemes were assistedthroughout the country. Thisproduct is aimed at upgrading thestandard of living in our villages. Itincludes the construction ofresidential homes, community hallsand churches in the villages andinvestment residential homes in

urban centres. The total outstandingdebt is $10,734,302. This year 27schemes were assisted with a totalloan of $758,864.00.

Educational ProgrammesOur focus was mainly to educatefamilies residing in squattersettlements and Public Rental Boardclients living in four-storey flats totake up our offer to purchase andconstruct their homes on our fullyserviced residential lots at Waila 3Bin Suva, Field 40, Balawa andNatabua in Lautoka. This will givethese clients secure land tenure(ownership) and upgrade their livingstandards.

New ProductThe Crystal Loan Package, which waslodged in September 2005 with thelowest loan interest rate in the marketof 3.99% fixed for 18 months and7.99% variable thereafter, wasmaintained throughout the year. Thisis despite the fact that all otherlending institutions have increasedtheir lending interest rates.

Michael LeeGeneral Manager CustomerRelations/Land Development

14

The Crystal Loan Package, which waslodged in September 2005 with the

lowest loan interest rate in the market of3.99% fixed for 18 months and 7.99%

variable thereafter, was maintainedthroughout the year.

* Fixed for 1 Year only * Fixed for 2 Years*** Fixed for 1.5 Years **** Low income earners also enjoy the fixed rate.

2000 9.5%* 11.5% 6.0% (5 years)2001 5.99%** 8.35% 5.99% (5 years)2002 5.99%** 8.35% 5.99% (5 years)2003 4.45%** 7.99% 4.45% (2 years)

5.99% (3 years)2004 4.45%** 7.99% 4.45% (2years)

5.99% (3 years)2005 (from September) 3.99%*** 7.99% 3.99% (1.5 years)

5.99% (3.5 years)2006 3.99% 7.99% 3.99% (1.5 years)

5.9% (3.5 years)

YearFixed Rate Variable Rate Fixed Rate for Low Income

****

Table 1.0

Waila 3B 203 258

Field 40 153 219

Balawa 3 26

Subdivision Lots Sold Balance

Cash Loans 712 18,058,275 979 24,898,880 564 13,758,809

Village Loans 27 758,864 56 2,393,101 27 1,138,248

Personal, Quick

Repair & Car Loans 1086 2,360,153 1,162 2,453,781 1,267 2,656,325

Home &

Land Sales 247 1,931,504 35 494,000 130 4,982,350

Total 2072 23,108,796 2,232 30,239,762 1,988 22,535,732

2005 2004

Products No Value($) No Value($) No Value($)

2006

15

Housing Development Division

The development of land for theAuthority’s many projects wasencouraging during 2006, comparedwith 2005. The developmentscompleted included Field 40 (412lots) and Waila 3B (466 lots). TheNamosau Ba subdivision (84 lots) iscurrently in progress and expected tobe completed by March 2007.

The three major projects still in theplanning and design stages includeTacirua East Stage 2 – ( Suva RuralLocal Authority – (74 hec-tares),Nepani stage 2 (16.1 hectares),and Wainibuku (24.2 hectares)subdivisions. Consultancy services,engineering design and approval forTacirua East was awarded to Erasitoconsultants while Nepani andWainibuku were awarded to SinclairKnight Mertz. From these threedevelopments the expected lot yieldis 1500 lots.

For the Tavua development (210lots), the award of construction workhad to be suspended owing to theclosure of the Emperor Gold Mines,since the development was earmar-ked for mine workers. If the new mineowners resume operations, theAuthority may then reconsider itsposition to finish the subdivision.

The Naqere subdivision in Savusavu(53 plots) construction tender hadto be retendered since the pricequoted by contractors was far aboveour estimate where the lot priceswould be well above the eligibilitylevels of the target market.. Reten-dering and the start of constructionwork is expected by April 2007.

Waila Housing City comprising 750acres is expected to yield 4,000 –5,000 lots depending on the lot mixthat will be adopted. This deve-lopment was significantly delayedduring the scheme planning stages.The main reason for the delays wasthe inability of our consultant to

perform and deliver despite consi-derable efforts taken by management.

Land AcquisitionTo carry out residential developmentsthe Housing Authority will need tohave a steady supply of land by wayof land acquisition. To date theAuthority has acquired 114 acres atNatadola which is earmarked for thedevelopment of more than 1,000housing lots mainly for hotel workersand others who are expected to beemployed in this area.

This is a new initiative to support thetourism industry. Other sites beingconsidered for similar developmentare located along the Coral Coast andat Sigatoka. The Authority is alsoliaising closely with the developers ofYaqara Studio City to develop asubdivision for the construction ofhouses for the anticipated influx ofpeople who are expected to work atthe Studio City in the future.

In 2007, we hope to finalise plansand obtain development leases fromthe Native Land Trust Board for landin Matavolivoli and Votualevucomprising approximately 24hectares. The Authority is also liaisingwith the Department of Lands toacquire some State land in Vatuwaqa(4 hectares) and Caubati (10hectares).

With the economic slowdown thatbegan at the end of 2006, we have tomove cautiously on acquisition ofland to ensure that sites acquired areviable in terms of sale after deve-lopment. Otherwise the focus is toconcentrate on the development ofour existing undeveloped land stock.

Housing DevelopmentThe Consultant Project ManagerHousing Development joined the

Housing Authority in November2006. The main focus of this is toreinforce the position of theAuthority in terms of producing notonly land but also land and house asa package. The high building cost ofhouse construction is a major concernand part of the brief of the new roleis to find new designs and materialsthat are of good quality affordableparticularly to the low to middleincome segment of the market.

The medium term intention is tostrengthen the department includingits land development and houseconstruction functions through theengagement of positions, such asarchitects, design & contract engi-neers, projects engineers Surve-yors and clerk of works in the land& housing development team.

The Housing Authority will stren-gthen its in-house team, since housingdevelopment is one of its key focusnow. Owing to the rapid increase inurbanisation, the demand for hous-ing has increased greatly, but there isless supply in the market. The highdemand low supply situation hasresulted in the high property pricesrealized in major urban centers likeSuva, Nausori, Lami and Nadi. Theauthority is determined to deliver itsquota of more than 2000 affordable,quality land lots/ housing units peryear, once the necessary in-houseinfrastructure is ready.

Manab GhoseConsultant Project ManagerHousing Development

16

The developments completed included Field 40 (412

lots) and Waila 3B (466 lots). The Namosau Ba

subdivision (84 lots) is currently in progress and

expected to be completed by March 2007.

17

Lending Division

The primary role of the LendingDivision is to attain lending portfoliogrowth through the underwriting ofquality loans. The Authority had20,780 customers as at 31 December2006 of which 10,069 were loanaccounts valued at $142.2m. Thebalance of 10,711 with the value of$1.6m was attributed to ground rentaccounts.

Mortgage PortfolioThe total mortgage portfolioat theend of the year was $143.8m,compared to $145.5m in 2005. Thebar graph below illustrates the trendfor total mortgage portfolio over thepast five years:

Performing Loan PortfolioThe PerformingLending portfolio stood at $122.9mcompared with $124.2m in 2005.A slight decrease is attributed to slowland sales in Field 40, Balawa andNatabua coupled with delayed salesin Waila 3B and related squatterresettlements. The Approvals Depart-ment is responsible for approvingquality loans strongly based on theprobability of default, securitycoverage and repayment capacity. TheApprovals team ensures that, for allloans, there is a “second way out”.Continuous improvement programs,coupled with ongoing training,coaching and guidance, helpedidentify problem areas androadblock s . To reduce tur naround times for loan approvals andimprove customer satisfaction in2006, the Division initiated processchanges, restructured work areas andimplemented other workablesolutions to achieve efficiency.

Prior to a loan being processed, newand existing loan applications arescreened by Data Bureau Limited.The Authority was also able tomaintain high customer satisfactionlevels by approving most loans withina 24-hour period. Loans approvedin 2006 totalled $23.1m comparedwith $30.24m in 2005. The declinewas due to the aforementioned slowland sales coupled with relatedsquatter resettlements and to thesuspension of investment loans.

Non-Performing LoansNon-performing loans reduced to$20.9m in 2006, from $21.3m in2005. That represents a reduction to14.5% from the previous 14.6%,although the target was 10%.

Matavolivoli Rehabilitation ProjectThe Matavolivoli Subdivision in Nadiaccounts for $5.8m of these loans.Every house in Matavolivoli wasinspected, costings were done and anagreement was reached to repair thehouses and restructure the individualdebts in 2006. So far, 49 houses havebeen upgraded and loans have beenrestructured.The poor debt servicingof loans was mainly due to job lossesand matrimonial problems for thehomeowners. In keeping with its aimof averting tenant evictions, theAuthority continued to takeinnovative actions to meet its socialobjectives. Various Home RetentionSchemes were also implemented. Thebar graph below reflects a reducingtrend:

Home Ownership PlanThe Home Ownership Plan wasintroduced in 2005 to assist those

debtors who were unable to meettheir financial commitments. Thedebtors were unable to repay theirmortgage because of old age,retirement, loss of income, or sicknessand there were those who hadrepaid their debts three or more timesover their original borrowing. In2006, 11 debtors were assisted witha total por tfolio of $0.15m.

Poverty Alleviation SchemeThe Authority continued to assistlow-income earners whose totalhousehold income did not exceed$6,500 per annum through itsinterest subsidy scheme. Bothindividual homeowners and those inthe Village Housing Scheme enjoyedan interest rate of 5.99% per annumon their mortgage loans instead ofthe variable interest rate of 7.99%. Atotal portfolio of $2.3m benefited298 families under this scheme in2006. An additional 46 villagehousing scheme customers benefitedfrom this subsidy for a total portfolioof $3.3m.

Bad Debts Write-offsA total of $1.4m of doubtful andinsolvent debts were written off fromthe Authority’s books during 2006.

ArrearsMortgage arrears stood at $5.3m at31 December 2006 or 3.68% of theAuthority’s total loan portfolioalthough the target was $4.3m or3.0%. The bar graph below denotesthe trends:

Utilisation of Government GrantThe Authority was able to fulfill someof its social objectives by assisting low-income earners from the 2006Government Grant allocation of

165

160

155

150

145

140

135

1302002 2003 2004 2005 2006

Total Mortgage Portfolio

163.2

155.0

146.7 145.5143.8

Loans Approved

6000

5000

4000

3000

2000

1000

02002 2003 2004 2005 2006

Number Approved Amount Approved

5229

1819 19882232 2072

2330231929

0

10

20

30

40

Non Performing Loans

2002 2003 2004 2005 2006

34.332.7

24.121.3 20.9

18

($m)

($m

)

$1.0m. Details of this assistanceprovided are outlined in the tablebelow:

Interest subsidy could not be utilizedfully due to slow sales in Field 40,Balawa, Natabua and Waila 3B. TheseSubdivisions were earmarked for lowincome earners. Likewise, delays wereexperienced with the HomeOwnership Plan.

Legal ServicesA complete legal solution is providedto the Authority’s customers. TheLegal Department’s daily operationsinclude conveyances and settlementsat the Registrar of Titles Office, FijiNational Provident Fund transfers

and documentation and consent todealings and litigations.

The Legal Department was also ableto generate additional incomethrough the preparation of probates,wills, power of attorney, tenancyagreements and contract documents.Producing legal documents in-housegave the Authority a competitive edgeand enabled legal fees to be kept to aminimum.

FNPF TransfersIn 2006, there were 975 customersassisted through the transfer of theirFiji National Provident Fund monies.Although the target was $6.0m, theAuthority actually received $7.5m.

LitigationLitigation was brought against 81 ofthe Authority’ customers. Theamount that would be recovered wasfirst weighed against the adminis-trative costs to the Authority beforeproceeding.

Stakeholders MeetingsMonthly stakeholder meetings wereheld between the Authority and theRegistrar of Titles, the Native LandTrust Board and the Fiji NationalProvident Fund. These meetingswere aimed at improving theefficiency of loan approvals, thepreparation of legal documents andthe transfer of funds.

Amount Percentage

0

1

2

3

4

5

6

7

Arrears

6.5

4.01 3.95

6.1

4.8

3.27

4.9

3.363.68

5.3

2002 2003 2004 2005 2006

1 Interest Subsidy– debtors earningbelow $6,500 pa 298 48,783 187,033

2 Interest Subsidy- Village Housing 46Scheme SCHEMES 126,153 8,847

3 Home Ownership– under HomeOwnership Plan(HOP) 11 134,221 598,855

Utilized For NoAssisted

AmountUtilised

AmountUnutilised

Baij MaharajGeneral Manager Lending

19

The Authority continued to assist low-income earners whose total household

income did not exceed $6,500 per annumthrough its interest subsidy scheme.

Finance & Administration Division

The primary role of Finance &Administration Division is to ensureprudent financial management andefficient administrative services areprovided to support the businessactivities and operations of theAuthority. This include to the prepa-ration of budgets and forecasting,proper cash flow management, pro-vide timely and accurate manage-ment and financial reports and tomanage corporate informationtechnology and human resources.

Revenue:Revenue continued to increase overthe same period last year. Theincreases were mainly due to theinterest on short-term investmentsamounting to 214% and increase insale of lots and houses by 216%. Mostof the customers who enjoyed theinitial two-year fixed rate of 4.45%had moved to the variable rate of7.99%.

Expenditure:Administration expenses were wellcontained in 2006, despite anincrease in the total operatingexpenses of 1.5% over 2005. Thismarginal rise in expenditure wasprimarily due to the increase in rentfor the new premises and higher fuelprices.

Payroll and other relatedexpensesPayroll increased by 6.2% afterallowing for salary adjustments andmerit payments at the end of the year.Project officers were engaged on ashort-term basis for specialised acti-vities related to the new IT project.This strategy will be continued inearly 2007 to ensure that clean datais migrated into the new IT systems.

Administration ExpensesAs part of the Authority’s StrategicPlan, there has been an emphasis onsavings in the area of administrationexpenses. In 2006, a saving of$64,000 (or 2%) has been achievedover the 2005 fiscal year.

Finance ManagementIn order to strengthen the functionsand effectiveness of the department,a new Finance Manager was appoi-nted and started in December. Mr.Gurmukh Kripalani, a charteredaccountant from India, brings to thedepartment a wealth of experiencein finance and treasury management.

In recognition of a weakness in somestaff skills, 2007 has been earmarkedfor professional development,restructure and multi-skilling of thefinance staff.

Borrowing Portfolio:The long term borrowing portfoliofor the Authority stood at $118.8million and also there was a shortterm bank overdraft of $1.5m so thetot al borrowing por tfolio is$120.317m as at 31st December2006.

Weighted Average Cost of Capital.Unlike other years, the cost of fundsin 2006 continued on an upwardtrend and reached record heights inDecember, which combined with acontinued shortage of funds. Thisresulted in the Authority utilisingthe balance of its 2005/2006 Gover-nment guarantee to reserve funds tomeet commitments in 2007. Thesefunds were also put into short-terminvestments.

As a flow-on effect, the Authoritywas unable to maintain the WeightedAverage Cost of Capital (WACC)below 6.0% and at the end ofDecember, the WACC was around6.29%.

As part of the strategic goals of theAuthority, the costs of funds are tobe continually scrutinised in order tosustain the low and competitivelending rate of 7.99%.

Information Technology:The IT Department has been engagedin providing support for theintroduction of the new IT system.Many meetings and detaileddocumentation of requirements havebeen pursued with vigour by theDepartment.

Secondly, in line with the IT strategicgoals of the Authority, the ITDepartment continues to maintainthe existing AS400 ComputerisedSystem to ensure efficient services tocustomers, internally as well asexternally.

Thirdly, the Authority’s website,www.housingfiji.com, launched inmid 2004, was continually updatedby the Department.

The IT strategic goals for 2007included the formulation of aDisaster Recovery Plan and also thecompletion of the New IT System.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2000 2001 2002 2003 2004 2005 2006 IndustryAve

Efficiency Ratio: Total OperatingExpenses: Total Operating Income

0

20

40

60

80

100

120

140

160

$m

1999 2000 2001 2002 2003 2004 2005 2006

Borrowing Portfolio

20

0

2,000

4,000

6,000

8,000

10,000

12,000

2002 2003 2004 2005 2006

($000)

Revenue

Estates and Physical ResourcesRefurbishment of the Valelevu Officehas been deferred to 2007 becauseof cost constraints dictated by thecurrent economic hardships. Thisexercise is expected to begin in Julyand would bring the Authority’simage in line with the new buildingsof the Nasinu Township.

As part of the cost cutting measures,office services awarded in 2004continued to be constantly reviewedon performance under the terms ofthe three-year contracts. Thecontracts will be renewed in 2007..The Authority continues to be themanaging agent of the Strata Units(Edenville, Cakau Estate, Rogi Place,Vesida), numbering 208 units in fourestates. A major repair and main-tenance for all, totalling $400,000has been earmarked for 2007, afterwhich the formation of a corporatebody to manage these estates wouldbe finalised.

Human Resource Development2006 proved an exciting year as manyof the decisions taken in 2005 wereacted upon during the year. After-shocks of the 2003 Job EvaluationExercise continued into 2006, theonset of the new PerformanceManagement System began to takeroot in the year and there were somedifferences of opinion, whichcontinue to be worked on.

The Housing Authority believes insystematic training of staff as a keyfactor in achieving goals. TheAuthority works to adapt itscorporate culture in order to respondrapidly to the housing needs of thecommunity and the market.

TrainingThe Authority is a Method “A”employer based on the TrainingCriteria adopted by the Training andProductivity Authority of Fiji(TPAF). Training programs adopteda competency based approach. To be

fully competent, one must have theknowledge, be able to apply it andhave the required behaviouralattitude. The courses are designed toaddress the competency gapsidentified.

In 2006, a total of 54 in-housecourses totalling 3,337 training hours(14,496 hours in 2005) wereconducted and 471 persons (652persons fewer than 2005) attended.The total bill for training decreasedto $109,000 in 2006 compared with$241,000 in 2005. In 2006, selectedand specialised training was pursued,which saw the reduction in thefigures above.

In the professional development ofstaff, 13 officers pursued graduateprogrammes ranging from Diplomasto Masters degrees in the tertiaryinstitutions such as CentralQueensland University, Fiji Instituteof Technology and University of theSouth Pacific.

21

The primary role of Finance & AdministrationDivision is to ensure prudent financial

management and efficient administrativeservices are provided to support the business

activities and operations of the Authority.

In 2007, Human Resource Depart-ment will be concentrating ontargeted training as well as improvingproductivity through more effectivesystems and processes. The Authorityhas registered its interest in partici-pating in the Fiji Business ExcellenceAwards

Staff NumbersStaff numbers reduced during theyear and stood at 130 permanentemployees at the end of 2006compared with 134 in 2005. Therewere a number of Project Officersemployed during the year to completecertain assignments for the IT Project.As part of its social obligations, theAuthority continued to employpotential graduates as trainees to helpthem complete their practical hours.

This policy will be maintained in2007.

Industrial RelationsWhilst regular monthly staffmeetings continued during the year,the promotion of harmoniousemployee relations was taken to newheights with the introduction ofmanagement and staff quarterly get-togethers. This new forum served asa focus for major targets and projectsand importantly, to recognise staffcontributions to the organisation’sperformance. The union continuedto be involved in the operations ofthe Authority through regularmeetings. As a testimony to thesegood relations, a number of issues,

ranging from staff appeals to normalday-to-day concerns, were amicablyresolved.

No log of claims was received for theyear, owing to an existing agreementcovering 2005 – 2007. In keepingwith the existing agreement, staffsalary adjustments were aligned tothe movement of the Banking andFinance Sector.

Harmonious work relationships willcontinue to be encouraged in 2007.

Sports & Social Activities:The Authority believes in ensuringthere is also fun in the workplace andthat it plays an important role inimproving productivity. It alsorecognises its role as a responsibleemployer in ensuring the workers arehealthy.

Sports and social activities were verymuch part of the life of the Authorityin 2006 and a Family Fun Day washosted in July. Management andstaff were divided into four teamseach (taken after names of localbirds), headed by the GeneralManagers and the CEO. The Kikauteam took six of the seven trophiescontested during the Family Fun Day.

Other activities included inter-business house competitions and theAuthority participated in the follow-

ing sports: basketball, volleyball,bowling and soccer. Internal get-fitprogrammes such as aerobics, walk-ing, soccer, touch rugby and volleyballwere also organised. The Authorityalso celebrated significant religiouscalendars by inviting outside speakers.

It also took part in the followingreligious and National events:Easter / Diwali / Prophet Moha-mmed’s Birthday / Mother’s Day /Women’s Prayer Day / Ratu SukunaDay / Fiji Day / Annual MethodistConference Choir competition andChristmas.

In 2007, these activities are expectedto be fully patronised and plans forassistance by way of community workat our housing estates would beundertaken.

Mamatuki ItautokaGeneral ManagerFinance & Administration

21

The primary role of Finance & AdministrationDivision is to ensure prudent financial

management and efficient administrativeservices are provided to support the business

activities and operations of the Authority.

25 Director’s Report

26 Auditor’s Report

27 Income Statement

28 Balance Sheet

29 Statement of Change in Equity

30 Statement of Cash Flows

31 Notes to the Financial Statements

Financial Contents

Directors’ ReportYear ended 31 December 2006

The directors present their report together with the financial statements of Housing Authority of Fiji (“the Authority”)for the year ended 31 December 2006 and the auditors' report thereon.

DirectorsThe directors of the Authority during the year were:

State of AffairsIn the opinion of the directors, the accompanying balance sheet and statement of changes in equity give a true and fairview of the state of affairs of the Authority as at 31 December 2006 and the accompanying income statement andstatement of cash flow gives a true and fair view of the results of the Board and its cash flow for the year then ended.

Principal activitiesThe principal activities of the Authority during the course of the financial year were to provide affordable housingthrough the development of land and houses for sale and the financing of these properties. There was no significantchange in the nature of the activities of the Authority during the year.

Operating resultsThe operating results for the Authority for the year ended 31 December 2006 was:

2006 2005$’000 $’000

Net profit before income tax 2,281 2,487Income tax expense - -

Net profit for the year 2,281 2,487

DividendsThe directors recommend that no dividends be declared or paid during the year.

ReservesThe directors recommend that no amounts be transferred to or from reserves.

Events subsequent to balance dateThere has not arisen in the interval between the end of the financial year and the date of this report any item, transactionor event of a material and unusual nature likely, in the opinion of the directors of the Authority, to affect significantlythe operations of the Authority, the results of those operations, or the state of affairs of the Authority, in future financialyears.

Dated at Suva this 15th day of November 2007.

Signed in accordance with a resolution of the directors:

Interim Chairperson Member

Director Appointed Served Until

Mr. Sada Reddy (Chairman) 01 December 2000 31 December 2006

Mr. Olota Rokovunisei Pre-1999 31 December 2006

Mr. Cama Tuiloma 01 January 2004 22 May 2006

Ms Emele Duituturaga 23 May 2006 31 December 2006

Mr. Vishnu Deo 01 December 2002 31 December 2006

Rev. Sereima Lomaloma 01 December 2002 31 December 2006

Mrs. Elenoa Gonelevu 01 February 2005 31 December 2006

24

Independent Audit ReportYear ended 31 December 2006

25

Income StatementYear ended 31 December 2006

The income statement is to be read in conjunction with the notes to the financial statements set out on pages 30 to 42.

IncomeInterest income 2 11,767 10,921Interest expense 4 (5,606) (5,667)

Net interest income 6,161 5,254

Other operating income 3 9,053 6,668

Total operating income 15,214 11,922

Staff costs 5 (4,231) (3,949)Bad and doubtful debts (2,665) (1,464)Other operating expenses 6 (6,037) (4,022)

Net profit before income tax 2,281 2,487

Income tax expense 1(k) - -

Net profit for the year 2,281 2,487

Note 2006 2005$000 $000

26

Balance SheetAs at 31 December 2006

AssetsCash 1,282 3,095Investments 7 25,063 1,000Loans 8 129,161 131,662Stock 9 12,714 13,299Land held for future development 10 7,367 1,490Property, plant and equipment 11 7,102 5,272Other 12 763 511Total Assets 183,452 156,329

LiabilitiesBorrowings 13 120,317 104,533Employee entitlements 540 430Provisions 14 1,210 1,062Other 15 8,481 6,515

Total Liabilities 130,548 112,540

Net Assets 52,904 43,789

Capital and ReservesCapital 41,772 41,772Government grant 15,958 15,958Reserves 11,046 4,212Accumulated losses (15,872) (18,153)

Total Capital and Reserves 52,904 43,789

Commitments and contingent liabilities 17,18

Note 2006 2005$000 $000

The balance sheet is to be read in conjunction with the notes to the financial statements set out on pages 30 to 42.

Signed in accordance with a resolution of the Board:

Interim Chairperson Member

27

Statement of Changes in EquityYear ended 31 December 2006

The statement of changes in equity is to be read in conjunction with the notes to the financial statements set out onpages 30 to 42.

CapitalBalance at start of year 41,772 41,772Movements during the year - -Balance at end of year 41,772 41,772

Government grantBalance at start of year 15,958 15,958Movements during the year - -Balance at end of year 15,958 15,958

ReservesAsset revaluation reserveBalance at start of year 3,566 3,566Movements during the year 6,834 -Balance at end of year 10,400 3,566

Asset realisation reserveBalance at start of year 646 646Movements during the year - -Balance at end of year 646 646

Total reserves 11,046 4,212

Accumulated lossesBalance at start of year (18,153) (20,640)Net profit for the year 2,281 2,487Balance at end of year (15,872) (18,153)

Total Capital and Reserves 52,904 43,789

2006 2005$000 $000

28

Statement of Cash FlowsFor the year ended 31 December 2006

Operating activitiesInterest received 11,049 10,732Fees, charges and other income received 9,053 6,668Interest and other costs of finance paid (5,076) (5,663)Net customer loans issued (678) (1,663)Payments to suppliers for land and houses (2,385) (3,160)Operating expenses (5,510) (5,029)

Cash flows from operating activities 6,453 1,885

Investing activitiesProceeds from sale of plant and equipment - 133Payments for plant and equipment (1,315) (580)

Cash flows from investing activities (1,315) (447)

Financing activitiesNet increase/(decrease) in borrowings 14,284 (5,590)Government grant received 1,328 889

Cash flows from financing activities 15,612 (4,701)

Net increase/(decrease) in cash held 20,750 (3,263)

Cash at the beginning of the financial year 4,095 7,358

Cash at the end of the financial year 19 24,845 4,095

Note 2006 2005$000 $000

The statement of cash flows is to be read in conjunction with the notes to the financial statements set out on pages30 to 42.

29

1 Statement of significant accounting policies

Housing Authority is a fully owned Government of Fiji entity domiciled in Fiji. The financial statements were authorisedfor issue by the directors on 15th day of November 2007.

The significant policies which have been adopted in the preparation of these financial statements are:

a. Basis of preparationThe financial statements of the Authority have been drawn up in accordance with the provisions of the accountingstandards and disclosure requirements of the Fiji Institute of Accountants. The financial statements are presentedin Fiji dollars, rounded to the nearest thousand. They have been prepared on the basis of historical costs and donot take into account changing money values or, except where stated, current valuations of non-current assets.The accounting policies have been consistently applied.

b. Income recognition

Interest incomeInterest income is brought to account on an accruals basis.

When a loan is categorised as non-performing, interest on the loan ceases to be brought to account unless receivedor unless the loan becomes performing.

Fee and chargesFee income is brought to account on an accrual basis.

Income from sale of land and housesRevenue relating to the sale of land and houses is brought to account at the time of the sale.

Rental incomeRental income is recognised in the income statement over the term of the lease and is brought to account on an accrual basis.

Gain or loss on sale of fixed assetsGain or loss on sale of fixed assets is treated as operating income or expense.

c. Expense recognition

Interest expenseInterest expense is brought to account on an accruals basis.

Bad and doubtful debtsThe annual charge against profits for bad and doubtful debts reflects new specific provisions, reversals of specificprovisions no longer required and movements in the general provision.

d. CashCash comprises cash at hand and cash at bank.

e. LoansLoans represent mortgage loans, village scheme loans, quick repair loans, home loans and personal loans.

Quick repair loans, home loans and personal loans can only be obtained if the borrower has an existing mortgageloan. These loans are added to the existing mortgage loan balance.

Loans are carried at recoverable amount represented by the gross value of the outstanding balance adjusted for provisions for bad and doubtful debts and unearned income.

For mortgage loans, collateral consisting of the mortgaged properties, are obtained.

Notes to the Financial StatementsFor the year ended 31 December 2006

30

Non-performing loansLoans are classified as non-performing if arrears relating to these loans are greater than three months. Non-performing loans are treated as non-accrual assets as reasonable doubt exists as to the collectability of principal and interest.

Provisions for bad and doubtful debts

Specific provisionsWhere a loan has been identified as doubtful and the estimated repayment realisable from the borrower, includingcollateral, is expected to fall short of the principal and interest outstanding, a specific provision is raised. Interestrevenue is not brought to account where the mortgage is considered non-performing.

General provisionsA general provision of 1% on accounts not specifically provided is maintained for losses that can be reasonably beexpected to arise from the existing loan portfolio but which are not yet identifiable. In determining the level of the general provision, management refers to the overall state of the economy and other factors with the potential to impact on the recoverability of loans.

(f) Stock

Land and housesStock, comprising land and houses is carried at the lower of cost and net realisable value. At year-end, the carryingvalue of unsold lots and developed properties are assessed and a provision for write-down is created where carryingvalues are determined to be less than net realisable value.

Developed and sub-divided lots include the cost of the land and capitalised expenses directly associated with bringing the stock to its existing condition and location.

Work-in-progressWork-in-progress is valued at the lower of cost and net realisable value. Cost includes capitalised indirect administrativecosts which are incurred as a result of land development and house construction and development interest costs on the funds used to finance the development up to the time of completion.

(g) Property, plant and equipment

AcquisitionItems of property, plant and equipment are initially recorded at cost and depreciated as outlined below.

Disposal of revalued assetsThe gain or loss on disposal of revalued assets is calculated as the difference between the carrying amounts of theasset at the time of disposal and is included in the results in the year of disposal. Any related revaluation incrementin the asset revaluation reserve at the time of disposal is transferred to the asset realisation reserve.

Depreciation and amortisationItems of property, plant and equipment, including buildings and leasehold property but excluding freehold land,are depreciated / amortised using the straight-line method over their estimated useful lives.

The annual depreciation rates used for each class of asset are as follows:

Buildings 1.5 – 3.5 %Plant and equipment 20 – 33.3 %Motor vehicles 20 %Computer equipment and software 20 %Furniture and fittings 10 %

Notes to the Financial StatementsFor the year ended 31 December 2006

31

(h) InvestmentsInvestments include term deposits with the intent of being held to maturity. These securities are recorded at costand interest income is brought to account on an accrual basis.

(i) BorrowingsLoans are brought to account at the gross value of their outstanding balance. Bonds that have been issued by the Authority are recorded at face value with an interest accrual raised at year-end. Borrowing costs are expensed in the period they are incurred.

(j) Provision for employee entitlementsThe provision for employee entitlement relates to amounts expected to be paid to employees for annual leave, sickleave and long service leave. Current employee remuneration rates are used to calculate these provisions.

(k) Income taxThe Authority is exempt from income tax under Section 26 of the Housing Act, Cap. 267.

(l) Government grantThe Government provides an annual grant to the Authority to assist qualifying customers in meeting their repayments and to subsidise the cost of developed lots. This grant is in the form of a one off rebate to customer’sloan balance or an annual interest subsidy. Any grants that are not utilised at year end are shown as a liability untilsuch time as they are applied. The Government grant takes the following forms:

Poverty alleviation schemeFunds received from Government are applied to the loan balance of qualifying customers usually at the inceptionof the loan. The grant to customers is a one off rebate. There are certain criteria set for customers to comply withto be eligible for financial assistance under the scheme. Financial assistance provided to a customer is up to a maximum amount of $5,000.

Interest subsidyInterest subsidy is provided to customers who earn below $6,500 per annum and to village scheme customers onan accrual basis. The difference between the prevailing interest rate and subsidised rate provided to customers are brought to account in the income statement.

Deferred payment planFunds received from Government are applied to the loan balance of qualifying customers once the loan has beenrestructured to provide existing non-performing loans with an initial reduction in repayments commensurate with their ability to meet the repayments. There are certain criteria for customers to comply with to be eligible for financial assistance under the plan. Financial assistance provided to a customer is up to a maximum amount of $5,000.

Land development subsidyGovernment subsidises the cost of developed lots to make it more affordable for qualifying customers. The subsidyis applied against the prevailing selling price. There are certain criteria set for customers to comply with in orderto be eligible for assistance under this scheme.

(m) Creditors and accrualsLiabilities are recognised for amounts to be paid in the future for goods and services rendered. Creditors and accruals are stated at cost.

(n) ImpairmentThe carrying amounts of the Authority’s assets are renewed at each balance date, to determine whether there is an indication of impairment. If such indication exists, the assets recoverable amounts are estimated at each balancedate. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating amount exceeds its recoverable amount. All impairment losses are recognised in the income statement.

Notes to the Financial StatementsFor the year ended 31 December 2006

32

(o) ProvisionA provision is recognised in the balance sheet when the Authority has a legal or contractual obligation as a result of a past event and it is probable that an outflow of economic benefit will be reflected to settle the obligation.

(p) Operating leasesPayments made under operating leases are recognised in the income statement in equal installments over the accounting periods covered by the lease terms.

(q) ComparativesWhere necessary, amounts relating to prior years have been re-classified to facilitate comparison and achieve consistency in disclosure with current financial year amounts.

2006 2005$000 $000

2. Interest income

Investment securities 856 272Loans and advances 10,911 10,649

11,767 10,921

3. Other operating income

Fees and charges 5,067 4,977Other income 461 501Rent 130 116Sale of land and houses 3,395 1,074

9,053 6,668

4. Interest expense

Long-term loans 724 1,278Bonds 4,881 4,389Bank overdraft 1 -

5,606 5,667

5. Staff costs

Wages and salaries 3,662 3,413FNPF contributions 278 255Employee entitlements 185 240Other 106 41

4,231 3,949

The number of permanent employees at the end of the financial year was 128 (2005: 133).

Notes to the Financial StatementsFor the year ended 31 December 2006

33

2006 2005$000 $000

2006 2005$000 $000

6. Other operating expenses

Auditors’ remuneration – audit fee 19 19– other services 32 61

Cost of sales – land and houses 2,872 793Depreciation 424 398Loss on sale of fixed assets - 109Repairs and maintenance 90 121Stock write-downs 50 50VAT expense 100 103Other 2,450 2,368

6,037 4,022

7. Investments

CurrentTerm deposits 25,063 1,000

The interest rate on term deposits investment varies from 9.56 % - 14% per annum.

8. Loans

Mortgage loans 130,472 132,035Village scheme loans 8,727 8,912

139,199 140,947Add: Accounts with credit balances 1,426 1,099

140,625 142,046Less: Provision for bad and doubtful debts (11,464) (10,384)

129,161 131,662

Provision for bad and doubtful debts is represented by:

Specific provision

Balance at beginning of the year 9,464 9,035Add: Current year charge 2,233 2,185

11,697 11,220Less: Amounts written off as bad debts during the year (1,604) (1,756)Balance at end of the year 10,093 9,464

Notes to the Financial StatementsFor the year ended 31 December 2006

34

2006 2005$000 $000

2006 2005$000 $000

8. Loans (continued)

General provision

Balance at beginning of the year 920 1,641Add: Current year charge 432 (721)

Other adjustments 19 -1,371 920

Less: Amounts written off as bad debts during the year - -Balance at end of the year 1,371 920

Total provision for bad and doubtful debts 11,464 10,384

Included in the above are receivables expected to mature as follows:

At call and in arrears 5,740 5,453Not later than 3 months 5,818 5,939Later than 3 months but not later than 12 months 16,100 16,378Later than 1 year but not later than 5 years 58,724 60,087Later than 5 years 57,970 58,262

144,352 146,119Less: suspended interest (3,727) (4,073)

140,625 142,046

Mortgage loans include staff housing loans and advances totalling $1,361,938 (2005: $2,084,821). Villagescheme loans are secured by a combination of assignments over native lease rental monies.

9. Stock

Developed lots 7,483 6,069Less: Provision for developed lots write-down (154) (189)

7,329 5,880

Unsold properties 888 843Less: Provision for unsold properties write-down (227) (226)

661 617

Development work-in-progress 4,892 6,970Less: Pre-sold lots (21) (21)

4,871 6,949Less: Provision for development work-in-progress write-down (147) (147)

4,724 6,802

Total stock 12,714 13,299

10. Land held for future development

Freehold land - at cost 0 48

- at valuation** 6,496 5716,496 619

Leasehold land – at cost 871 871

Total land held for future development 7,367 1,490

** The undeveloped land at Waila, Deuba - Korolevu, Waila Withrew, Votualevu, Nabuta and Toko Tavua were revalued as at 31 December 2006 by the Housing Authority’s internal valuer.

Notes to the Financial StatementsFor the year ended 31 December 2006

35

10. Property, plant and equipment

CostBalance at1 January 2006 4,523 1,437 241 581 3,085 68 214 10,149Acquisitions 101 112 - 114 207 - 781 1,315Asset RevaluationReserve 939 - - - - - - 939Disposals - - - - - - - -Balance at31 December 2006 5,563 1,549 241 695 3,292 68 995 12,403

Accumulated depreciationBalance at1 January 2006 631 1,226 40 359 2,564 57 - 4,877Depreciation chargefor the year 82 49 6 106 181 - - 424Disposals - - - - - - -Balance at31 December 2006 713 1,275 46 465 2,745 57 - 5,301

Carrying amountAt 1 January 2006 3,892 211 201 222 521 11 214 5,272

At 31 December 2006 6552 274 195 230 547 11 995 7,102

* The Valelevu and Lautoka office premises and land adjoining the premises and staff houses and Police Posts wererevalued as at 31 December 2006 by the Housing Authority’s internal valuer.

*Properties$’000

Furniture&

Fittings$’000

Staffhouses &

shops$’000

Motorvehicles

$’000

Computerequipment

$’000

Other

$’000

Work inProgress

$’000

Total

$’000

2006 2005$000 $00012. Other

Interest receivable 550 7Staff advances 63 121Stationery stock 18 16Sundry debtors and prepayments 132 367

Total other assets 763 511

Notes to the Financial StatementsFor the year ended 31 December 2006

36

2006 2005$000 $000

2006 Interest$’000 Rates Maturity

2006 2005$000 $000

13. Borrowings

CurrentBank overdraft 1,500 -Bonds 9,700 6,200Loans 2,612 3,801

13,812 10,001

Non-currentBonds 98,900 84,600Loans 7,605 9,932

106,505 94,532

Total borrowings 120,317 104,533

The interest rates and terms of borrowings are as follows:

Bonds 108,600 2.15% to 12.00% 2007 to 2021Loans 10,217 7.0% to 7.875% 2007 to 2014Bank overdraft 1,500

120,317

Included in the above are borrowings expected to mature as follows:

At call 1,500 -Not later than 3 months 518 931Later than 3 months but not later than 12 months 11,794 9,070Later than 1 year but not later than 5 years 71,211 67,764Later than 5 years 35,294 26,768

120,317 104,533

14. Provisions

Repairs and maintenance 670 494Insurance aggregate 540 568

1,210 1,062

15. Other

Interest payable 1,397 867Mortgage accounts with credit balances 1,426 1,099Deferred Government Grant 1(l) 2,723 2,649Deferred Grant – University of the South Pacific 40 -Other creditors and accruals 2,895 1,900

8,481 6,515

Notes to the Financial StatementsFor the year ended 31 December 2006

37

2006 2005$000 $000

2006 2005$000 $000

2006 2005$000 $000

16. Capital and reserves

Reserves

The Asset Revaluation Reserve relates to land and buildings and comprises the cumulative increase in the value of property (revalued as at 31 December 2006 by the Housing Authority’s internal valuer).

17. Commitments

(a) Operating lease commitments

Future operating lease rentals not provided for in the financial statements and payable as follows:

Not later than one year 138 78Later than one year but not later than two years 108 43Later than two years but not later than five years 324 54

570 175

The Authority has various lease commitments for leasehold land. The leases typically run for a period of between three and ten years. It is not certain whether the land leases will offer an option of renewal after maturity. The annual lease rentals recognised as an expense in the income statement amount to $78,000 (2005: $40,000).

(b) Capital commitments

Approved by the Board 1,194 1,772

The Authority has committed $1,193,948 for upgrading its current software, AS 400, to Microsoft Navisionand Indus Lendsphere package.

18. Contingent liabilities

The details and estimated maximum amounts of contingent liabilities that may become payable by the Authority are set out below. The directors are not aware of any circumstances or information that would leadthem to believe that these contingent liabilities will crystallize and consequently no provisions are includedin the financial statements in respect of these matters:

(a) IndemnityDuring 1989, loans owing to the Fiji National Provident Fund (FNPF) amounting to $18,573,232 was transferred to the Public Rental Board (PRB) by Government Decree (No. 12 of 8 May, 1989). The FNPF continues to recognise the Authority as the borrower of these loans and has not released the Authority fromthese loans or amended the loan documentation to specify the PRB as the rightful borrower. In the meantime,the Ministry of Finance is making repayments of principal and interest to FNPF on behalf of PRB. The totalloan principal and interest accrued at balance date, but not reflected in the financial statements, are as follows:

Principal 7,141 8,240Accrued interest 78 91

7,219 8,331

Notes to the Financial StatementsFor the year ended 31 December 2006

38

2006 2005$000 $000

2006 2005$000 $000

2006 2005$000 $000

18. Contingent liabilities-continued

(b) Guarantees

Fiji Electricity Authority bond 5 5

19. Notes to the statement of cash flows

(a) Reconciliation of cash

For the purposes of the Statement of Cash Flows, cash includes cash on hand, overdraft and ‘at call’ and deposits with other financial institutions. Cash as at the end of the financial year as shown in the Statementof Cash Flows is reconciled to the related items in the balance sheet as follows:

(b) Reconciliation of cash

Cash 1,282 3,095Bank overdraft (1,500) -Deposits redeemable at call 25,063 1,000

24,845 4,095(c) Cash flows presented on a net basis

Cash flows arising from the following activities are presented on a net basis in the Statement of Cash Flows:

i) Customer borrowings and repayments on loans, advances and other receivables; and

ii) Loans, bonds and promissory note borrowings and repayments.

20. Related parties

(a) Identity of related parties

The Board has a controlling related party relationship with its directors. The directors of the Board in officeduring the year were:

Mr. Sada Reddy (Chairman)Mr. Olota RokovuniseiMr. Cama TuilomaMr. Vishnu DeoRev. Sereima LomalomaMrs. Elenoa Gonelevu

(b) Transactions with related parties

Board expenses and allowances 37 35

Government grant 2,723 2,649

Notes to the Financial StatementsFor the year ended 31 December 2006

39

21. Maturities

2006Financial assets

Cash 1,282 - - - - - - 1,282Investments - 2,000 23,063 - - - - 25,063Loans 5,740 5,818 16,100 58,724 57,970 (11,464) (3,727) 129,161Total financial assets 7,022 7,818 39,163 58,724 57,970 (11,464) (3,727) 155,506

Financial liabilities

Mortgage loans with credit balances 1,426 - - - - - - 1,426Borrowings 1,500 518 11,794 71,211 35,294 - - 120,317Accrued interest- - 1,397 - - 1,397Accounts payable and accrued liabilities - 2,895 - - - - - 2,895

Total financial liabilities 1,926 3,413 13,191 71,211 35,294 - - 126,035

2005Financial assets

Cash 3,095 - - - - - - 3,095Investments - - 1,000 - - - - 1,000Loans 5,453 5,939 16,378 60,087 58,262 (10,384) (4,073) 131,662

Total financial assets 8,548 5,939 17,378 60,087 58,262 (10,384) (4,073) 135,757

Financial liabilities

Mortgage loans with credit balances 1,099 - - - - - - 1,099Borrowings - 931 9,070 67,764 26,768 - - 104,533Accrued interest - - - 867 - - - 867Accounts payable and accrued liabilities - 1,900 - - - - - 1,900

Total financial liabilities 1,099 2,831 9,078 68,264 26,949 - - 108,399

At call

$’000

0 to 3 mths

$’000

4 to 12mths

$’000

1 to 5yrs

$’000

over 5 yrs

$’000

Provisionfor doubtful

debts$’000

Suspendedinterest

$’000

Total

$’000

Notes to the Financial StatementsFor the year ended 31 December 2006

40

2006 2005$000 $000

22. Additional financial disclosures

(a) Asset quality

Non-accrual loansNon-accrual loans without specific provisionsfor impairment 7,260 7,202Non-accrual loans with specific provisionsfor impairment 15,627 15,801

22,887 23,003Less: Specific provisions (5,904) (5,079)

16,983 17,924

Restructured loansGross 12 -Less: Specific provisions - -

12 -Total impaired loans 16,995 17,924

Past-due loansGross 13,407 13,159Less: Specific provisions (4,189) (4,385)

9,218 8,774

Total net impaired and past-due loans 26,213 26,698

The policies adopted by the Authority in respect of asset quality are as follows:

(i) Non-performing loansNon-performing loans are those loans where arrears of principal and interest are greater than three monthsand where interest income has been suspended. This policy became effective on 1 April 1999.

(ii) Non-accrual loansNon-accrual loans are those loans where interest income has been suspended and there is doubt over the fullcollectability of principal and interest in accordance with the terms of the loan agreements. Non-performingloans and doubtful loans are considered to be non-accrual loans.

(iii) Past due loansPast-due loans represent those loans which have not operated within their key terms by the borrower for at least three months (typically in respect of repayment of principal and interest) and which are not non-accrualloans.

(iv) Restructured loansRestructured loans are loans which are not non-accrual but where:(a) the original terms of the loan have been changed to grant to the borrower a concession that would not

otherwise be available, due to the borrower’s difficulty in complying with the original terms; and(b) the revised terms of the facility are not comparable with the terms of new facilities with comparable risks.

(v) Real estate assets acquired through the enforcement of securityWhere auction sales and mortgagee sales of the borrowers’ real estate security are unsuccessful, the Authorityassumes ownership and forecloses the real estate in settlement of the outstanding debt. The real estate is valued at market value and brought to account as stock in the Authority’s records.

Notes to the Financial StatementsFor the year ended 31 December 2006

41

2006 2005$000 $000

22. Additional financial disclosures - continued

(b) Credit riskThe maximum exposure to credit risk at balance date in relation to each class of financial asset is the carrying amount of these assets as indicated in the balance sheet.

Maximum exposures to credit risk: Loans – mortgage 131,898 133,134

– village scheme 8,727 8,912Accounts receivable and other debtors 763 511

141,388 142,557

The Authority operates in the home loan mortgage sector with its primary target market being those individualsearning between $3,500 to $50,000 per annum. While the Authority’s market poses a higher credit risk than that of typical financial institutions, the Authority attempts to minimise this risk through appropriatecontrols, obtaining collateral security and diversification by loan value. This diversification is reflected in the average loan balance of approximately $14,097 (2005: $13,640) per borrower (excluding Ground Rentcustomers) at balance date.

(c) Interest rate riskInterest rates charged to borrowers on loans for the first two years are fixed, however the Authority’s exposureto interest rate risk is minimised through its discretion to vary lending rates to borrowers following the first24 months of the loan.

(d) Liquidity riskThe Authority does not fund its loan portfolio through savings or term deposits from the public, but borrowsusing short term and long term debt instruments such as promissory notes and bonds. Long term loans arealso obtained. To minimise liquidity risk, the Authority continually assesses its funding requirements and where necessary borrows to meet these requirements.

23. Staff advances

Staff advances represent motor vehicle loans and advances. The motor vehicle loans are secured by bill of sale over the motor vehicles and incur interest at the rate of 9.5% per annum. Staff advances incur interest at the rate of 9.98% per annum.

24. Principal activities

The principal activities of the Authority during the course of the financial year were the development of land and houses for sale and the financing of these properties. There was no significant change in the natureof the activities of the Authority during the year.

Notes to the Financial StatementsFor the year ended 31 December 2006

42

Annual Report 2006

Annual Report 2006

Caring is our commitment

Our VisionTo be the dynamic leader in housing

Our MissionThe purpose of Housing Authority is

to develop and produce affordable

lots and mortgage financing with

attractive loan packages on a

competitive basis to all customers

with special focus on low income

earners

Corporate ValuesDynamism

Excellence in Customer Service

Innovativeness

Understand, appreciate and involve staff

Ethics and Moral Values

02 Board of Directors

03 Corporate Governance

04 Financial Highlights

05 Organisational Structure

06 Chairman’s Report

Contents07 Chief Executive Officer’s Report

14 Customer Relations Division

16 Housing Development Division

18 Lending Division

20 Finance & Administration Division

24 Financial Statement

Head Office:Housing Authority Building

Saqa Street, Valelelvu, NasinuPO Box 1263, SuvaT: (679) 339 2977F: (679) 334 0092

Garrick Building33 Renwick Road, Suva

T: (679) 330 9570F: (679) 331 5135

Moraji Kalidas Building149 Main Street, Nadi

T: (679) 670 7999F: (679) 670 7499

Housing Authority Building14 Tavewa Avenue, Lautoka

PO Box 262, LautokaT: (679) 666 0299F: (679) 666 5602

NP BuildingNg Patel Road

Nausori (opposite Bus Stand)T: (679) 347 7767F: (679) 347 7791

15 Ganga Singh StreetBa (opposite Asco Motors)

T: (679) 667 8177F: (679) 667 8178

FNPF BuildingRosawa Street, Labasa

T: (679) 881 1977F: (679) 881 3919