catf Annual Report and Audited Financial Statements · Annual Report and Audited Financial Statements for the year ended 30 June 2014 6 . Management Report of the Management Company

catfcentral americantimber fund

Annual Report and Audited Financial Statements For the year ended 30 June 2014

Central American Timber Fund

FCP - SIF

A FCP-SIF registered in the Grand Duchy of Luxembourg under number RCS B 163338

Annual Report and Audited Financial Statements

For the year ended 30 June 2014

No subscription can be received on the basis of the financial statements alone. Subscriptions

are only valid if made on the basis of the current prospectus accompanied by the latest annual

report.

Central American Timber Fund FCP – SIF Annual Report and Audited Financial Statements for the year ended 30 June 2014

Table of Contents

Organization of CATF 3-4

Management Report of BAUM Management 5-8

Independent Auditor’s report 9-10

Statement of Net Assets 11

Statement of Operations and Changes in Net Assets 12

Statistical Information 13

Statement of Investments 14

Notes to the Financial Statements 15-25


3

Organization of CATF

Registered address European Bank & Business Centre

Building B, 6 Route de Trèves

L-2633 Senningerberg

Grand Duchy of Luxembourg

Management Company BAUM Management S.à r.l.

European Bank & Business Centre

Building B, 6 Route de Trèves

L-2633 Senningerberg


Auditor Ernst & Young Luxembourg S.A.

7, rue Gabriel Lippmann

Parc d’Activité Syrdall

L-5365 Munsbach


Administrative Agent Atlantic Funds Services S.A.

20, Eugene Ruppert

L-2453 Luxembourg


Client Communication Agent ÖKO Life B.V.

Witte Kruislaan 6

1217 AP Hilversum

Netherlands

Depositary

From date of incorporation to 1 August 2013

Caceis Bank Luxembourg S.A.

5, Allée Scheffer

L-2550 Luxembourg



4

Organization of CATF (continued)

From1 August 2013 to date

Hauck&Aufhauser Privatbankiers KGaA,

Niederlassung Luxembourg

1c, rue Gabriel Lippmann

L-5365 Munsbach


Investment Advisor Latin American Timber Corporation S.A.

150 oeste de Contraloría General de la República

Edificio Edicol, 3er nivel

Sabana Sur, San José

Costa Rica

Legal Advisors Speechly Birchham Pfeiffer

2, rue Jean Monnet

L-2180 Luxembourg


BLP Abagados S.A.

BLP Building, 4th Floor

Via Lindora Business Center

Radial Santa Ana – Belen, Km 3

Santa Ana, San José

Costa Rica

Third Party Depositary Banco Nacional de Costa Rica S.A.

Avenidas 1 y 3, Calle 4

San José

Costa Rica

Verification Agent Costa Rica Institute of Technology

Fundación Tecnológico de Costa Rica

Cartago, Contiguo a la Escuela de Química

Costa Rica


5

Management Report of the Management Company

as of 30 June 2014

Introduction

The Board of Managers of BAUM Management S.à r.l (“BAUM”), acting as the management

company of Central American Timber Fund FCP-SIF (“CATF”) presents their management

report together with the financial statements of CATF for the year ended 30 June 2014.

Fund Information/ Background

The purpose of CATF is to create a diversified portfolio of mainly Teakwood trees

(Tectonagrandis Linn f.) (“Teak”), in Costa Rica and to provide the unitholders of CATF

(“Unitholders”) with the economical proceeds of the Teakwood trees cultivated in Costa Rica

on some well-defined plantations. These plantations are run and managed by three service

companies (Brinkman & Asociados Reforestadores de Centro America S.A. (“Barca”)),

Expomaderas S.A. (“Expomaderas”) and Latin American Timber Company S.A.(“LATC”)),

initially selected in accordance with the Mission Statement of CATF and the Forest Investment

Policy regarding Tree Farming Plantations. At the end of 2013 BAUM decided to minimize the

cooperation with Expomaderas and to engage LATC for the maintenance of the plantations in

the Northern region and for the establishment of new plantations.

Currently, CATF is in the process of an early termination of both the Expomaderas and Barca

trust. The assets related to the trusts shall be distributed between CATF and Barca respectively

Expomaderas. The assets distributed to CATF shall be held in the favor of CATF by means of

special purpose vehicles, such as CATF CR Ltda. It is envisaged that for certain plantations

distributed to Expomaderas respectively Barca, lease or usufruct agreements shall be entered

into to provide CATF new opportunities for sprouting and/or planting of Teak. This will have no

impact on the valuation of teak assets as of 30 June 2014.

The main objective of CATF is to provide Unitholders with attractive and sustainable long term

total returns, in the form of long-term capital appreciation, through investing in a portfolio of

diversified Teakwood Assets, while safe guarding nature and environment and creating benefits

to the local population at the same time. These objectives can be met with the cultivation of

high quality Teakwood trees in tropical plantations under sustainable plantation management.

As at 30 June 2014, CATF owns 4,024.5 hectares with Teak as an investment.

During the year ended 30 June 2014 the following major activities regarding the plantations

took place:

- Sale of 195.55 hectares of Teak Assets of plant year 2002 and 2007.

- Harvesting of 342.5 hectares of Teak Assets and the start of sprouting on these

hectares. The Sprouting method will generate more cash inflow moments for CATF due

to earlier harvesting moments which makes it possible to acquire and establish new

plantations, to cater for redemptions, to cover the running operational costs of CATF

and further increase the value of CATF.

- Establishment of 437 new hectares of Teak using a mix of seedlings and clones in the

South West region of Costa Rica.


6

Management Report of the Management Company (continued)

Review of results and operations

As at 30 June 2014 CATF has 19,148,503.18 units in issue and the Net Asset Value of CATF

amounts to United States Dollars (“USD”) 181,930,669, representing USD 9.50 per unit. The

fair value of the investment portfolio held by CATF amounts to USD 186,747,791 as of 30 June

2014 and the net change in the fair value of the investment portfolio from 30 June 2013

amounts to a gain of USD 9,038,552, which currently represents an increase of 5% in the fair

value of the investment portfolio from last year.

Valuation of the portfolio

The valuation of the Teak has been performed by LATC and verified and validated by Instituto

Tecnológico de Costa Rica (“ITCR”). ITCR is fully independent of CATF and related companies,

such as BAUM, Barca, Expomaderas and LATC, and acts only as an external validator and

verification agent.

Annually tree dimensions (height and diameter at breast height; DBH) are being measured. A

model is used to estimate (i) the current standing volume, (ii) the tree sizes and (iii) the

growth. This model is not only based on previous models (Wolff von Wülfing, 1932), but has

also integrated the measured field data, which are collected over the years of the plantations

owned by CATF. This results in a model that is more specifically adapted to the CATF stands.

Starting in 2014, line inventories of the plantations complement the collection of stand

characteristics collected in PSP (Permanent Sample Plots). By using both methods, the in

depth knowledge of CATF stands improved substantially, resulting in a classification of growth

categories. For the purpose of yield projections, plantations in the same growth category are

being grouped together. The classification helps BAUM to maximize the valuation and yield of

the plantations by implementing optimized maintenance, thinning and harvesting.

In performing the valuation of the Teakwood Assets, there are various assumptions used. The

main assumptions applied as of 30 June 2014 relate to the determination of Wood sale price

(Revenue), Growth class of the plantations and the Discount rate applied to calculate the

present value of the plantations. Any upward/downward movement in these assumptions used

in the valuation of the Teakwood Assets may have a significant effect on the valuation. We

therefore present below the sensitivity analyses to the Teakwood Assets valuation as of

30 June 2014 as follows:

Plantations planted between 2001-2013 and newly, 2014, established plantations valuation

(based on 20% DCF value): Sensitivity Analysis at a flat discount rate of 5.92%. The sum of

the values in Bold (=USD 179,311,505) represent the total teak asset value considering the

5,92% flat discounting, 9% wood price increase.

Wood Price (6%) Wood Price (9%) Wood Price (12%)

Old plantations USD 122,166,482 USD 164,464,002 USD 222,303,489

Newly established plantations:

Growth Class - Actual USD 8,500,972 USD 14,847,503 USD 25,940,965

Growth Class - Actual +1 USD 10,155,470 USD 17,523,189 USD 30,370,460

Growth Class - Actual -1 USD 7,035,609 USD 12,396,531 USD 21,792,573


7








Newly established plantations




Risks faced by CATF and how these risks are mitigated

Risk is inherent to every investment. Teak related risks include environmental restrictions,

possible damage from biological causes and natural catastrophic events and cyclical market

conditions. BAUM actively manages these risks through the utilization of proven forest

management and portfolio strategies.

Risk management begins with a thorough site selection procedure. The land considered for

purchase or lease is assessed by on-site inspections to ensure the suitability of the land for

fast growing timber stands. Due consideration is given to possible legal and property

restrictions and environmental and social impact. In a properly managed plantation, the risk

from natural causes such as fire, insects and disease is relatively low. Selective thinning, the

use of fire breaks and planting of genetically improved seedlings as well as a biodiversity and

multi species approach help to minimize certain risks.

Diversifying geographically and excluding certain areas also reduce the risk of losses from

catastrophic events. Through advanced forestry management practices such as these, BAUM

limits damage from natural causes.

BAUM is serviced by an investment advisor. The investment advisor utilizes jointly with BAUM

a risk management system that will not only help to measure the seriousness and the

likelihood of adverse events and conditions but will also support to identify adequate risk

mitigation strategies and possible actions if a specific risk materializes.

The investment advisor or the local agents will notify BAUM each time a risk is identified and

will assist BAUM in finding suitable solutions.

Overall BAUM is confident that the current set-up and the adoption of the new plans will be to

the benefit of the Unitholder, will result in a more improved cash-flow and liquidity plan that

will cater for early redemptions over the next years and at the same time supports the long

term goal of CATF as well as secures the value for the remaining Unitholders.

Redemptions subsequent to year end

On 8 October 2013 the Board of Managers had to decide to suspend all subscriptions and

redemptions up and till the next valuation date. Hence, no redemption requests were granted.

Central American Timber Fund FCP – SIFAnnual Report and Audited Financial Statements for the year ended 30 June 2014

8


The Board of Managers is pleased to announce that all redemption requests by Unitholdersoffered to the administrator of CATF up to and including 15 May 2014 could be honored.

Subsequent to the year end, the Board of Managers decided to pay out all redemptions totalingnet USD 2,770,199 in October 2014 based on unaudited NAV of USD 10.11 per Unit.

During the financial year CATF has established new plantations. Following the initial 30 June2014 NAV calculation (unaudited), the Board of Managers agreed that the establishedplantations should be revaluated at only 20% of the discounted future total income and not100% at once as done in the initial NAV calculation. As a result, the initial 30 June 2014 NAVcalculation (unaudited) has been reduced. The impact of the reduced NAV has consequenceson the redemptions actually paid in October 2014 based on the initial 30 June 2014 NAVcalculation (unaudited), resulting in an overpayment of USD 177,569. The Board of Managerswill apply the necessary requirements of Circular CSSF 02/77 in order to ensure that the NAVadjustment and the impact on the redemptions are properly accounted for.

Bas Dijkman Frans BlommesteinManager Manager

p.koorn

Stamp

p.koorn

Stamp

Ernst & YoungSociete anonyme

Ey’ 7, rue Gabriel LippmannParc dActivité Syrdall 2[-5365 Munsbach BR 780

[-2017 Luxembourg

Building a better Tel: +352 42 124 1R.C.S. Luxembourg B 47771

working world www.ey.com/Iuxembourg TVA LU 16063074

Independent auditor’s report

To the Management Company ofCentral American Timber Fund FCP-SIF6 rue de TrèvesL-2633 Senningerberg

We have audited the accompanying financial statements of Central American Timber Fund FCP-SIF (the“Fund”), which comprise the statement of net assets and the statement of investments as at 30 June 2014,the statement of operations and changes in net assets for the year then ended and a summary of significantaccounting policies and other explanatory information.

Management Company’s responsibility for the financial statements

The Management Company of the Fund is responsible for the preparation and fair presentation of thesefinancial statements in accordance with Luxembourg legal and regulatory requirements relating to thepreparation and presentation of the financial statements and for such internal control as the ManagementCompany of the Fund determines is necessary to enable the preparation and presentation of financialstatements that are free from material misstatement, whether due to fraud or error.

Responsibility of the “réviseur d’entreprises agréé”

Our responsibility is to express an opinion on these financial statements based on our audit. We conductedour audit in accordance with International Standards on Auditing as adopted for Luxembourg by the“Commission de Surveillance du Secteur Financier”. Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the judgement of the “réviseur d’entreprisesagréé”, including the assessment of the risks of material misstatement of the financial statements, whetherdue to fraud or error. In making those risk assessments, the “réviseur d’entreprises agréé” considers internalcontrol relevant to the entity’s preparation and fair presentation of the financial statements in order to designaudit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinionon the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by the ManagementCompany of the Fund, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion.

-9-

A member firm of Ernst & Young Global Limited

EYBuilding a betterworking world

Opinion

In our opinion, the financial statements give a true and fair view of the financial position ofCentral American Timber Fund FCP-SIF as of 30 June 2014, and of the results of its operations andchanges in its net assets for the year then ended in accordance with Luxembourg legal and regulatoryrequirements relating to the preparation and presentation of the financial statements.

Emphasis of matter

Without qualifying our opinion, we draw attention to notes 3 and 2(d) to the financial statements related tothe valuation method applicable to investments. These notes disclose that the carrying value of theteakwood portfolio has been determined by the management based on financial models internallydeveloped, in the absence of readily ascertainable market values and has been reviewed by an independentexpert in the forestry industry. Note 3 in particular shows the degree of sensitivity of the investments carrying

value to the main assumptions used in the model such as prices at which the teakwood could be sold, thediscount factor and the plantations growth expectations. Considering the judgmental aspects of theassumptions and estimates as well as the variability of the market assumptions over the years used in themodels, the carrying value retained for the investment portfolio may differ significantly from the value thatwould be actually realized if a ready market existed for the investment portfolio.

Other matter

Supplementary information included in the annual report has been reviewed in the context of our mandate

but has not been subject to specific audit procedures carried out in accordance with the standards described

above. Consequently, we express no opinion on such information. However, we have no observation tomake concerning such information in the context of the financial statements taken as a whole.

Ernst & YoungSociété Anonyme

Cabinet de revision agréé

Olifier Jordant

Luxembourg, 11 June 2015

-10-

A member firm of Ernst & Young Global Limited


11

Statement of Net Assets

as at 30 June 2014

(expressed in USD)

ASSETS Note 30 June 2014

30 June 2013

Investment portfolio at fair value 3 186,747,791

177,709,239

Formation expenses 4 126,626

189,940

Prepaid expenses 5 1,882,830

-

Receivables

168,708

100

Cash and cash equivalents

1,475,532

-

Total Assets

190,401,487

177,999,179

LIABILITIES

Accrued expenses 6 178,471

3,503,727

Other loans 7 5,033,552

1,423

Amounts due to other creditors

158,795

158,795

Advances received on account 3 3,100,000

-

Total Liabilities

8,470,818

3,663,945

Total Net Assets

181,930,669

174,335,234

The accompanying notes form an integral part of these financial statements.


12

Statement of Operations and Changes in Net Assets

for the year ended 30 June 2014

(expressed in USD)

Note From 1 July 2013 to

30 June 2014

From 1 July 2012

to 30 June 2013

INCOME

Other Income 13,940 -

TOTAL INCOME 13,940 -

EXPENSES

Amortization of formation expenses 4 (63,313) (63,313)

Amortisation of costs of newly

established plantations 5 (943,283) -

Management fees 8 (2,602,611) (2,478,247)

Administration fees (85,937) (146,066)

Audit fees (108,547) (201,846)

Depositary fees (79,395) (54,942)

Legal fees 9 (465,725) (179,175)

Subscription tax 10 (27,493) (8,554)

Marketing costs 11 (256,275) (31,311)

Maintenance costs 12 (452,930) -

Consultancy fee (12,717) -

Financing costs 7 (360,762) -

Other expenses (346,070) (230,075)

TOTAL EXPENSES (5,805,058) (3,393,529)

Net Loss from operations (5,791,118) (3,393,529)

Realized results on investments 3 4,348,001 2,550,000

Net change in unrealized results on

investments

3 9,038,552 7,295,788

TOTAL RESULT ON INVESTMENTS 13,386,553 9,845,788

NET ASSETS AT THE BEGINNING OF

THE YEAR/PERIOD

174,335,234 167,882,975

Net Increase in assets as a result of

operations

7,595,435 6,452,259

Net proceeds from shares issued - -

NET ASSETS AT THE END OF THE

YEAR

181,930,669

174,335,234



13

Statistical Information

as at 30 June 2014

30 June 2014 30 June 2013 30 June 2012

Net assets

USD 181,930,669 USD 174,335,234 USD 167,882,975

Number of units

outstanding at beginning of year

19,148,503.18 19,148,503.18 -

-issued

- - 19,148,503.18

-redeemed

- - -

outstanding at end of year

19,148,503.18 19,148,503.18 19,148,503.18

Net asset value per unit

as at the end of the year

USD 9.50 USD 9.10 USD 8.77


14

Statement of Investments

As at 30 June 2014

Currency Description Cost

Fair Value % of Total

Assets

USD Land 4,187,400

4,187,400 2.20%

USD Teakwood Assets Portfolio 185,351,912

182,560,391 95.88%

USD Total 189,539,312 186,747,791 98.08%

As at 30 June 2013

Currency

Description

Cost

Fair Value

% of Total

Assets

USD Land 6,133,120

6,133,120 3.45%


171,576,119 96.39%

USD Total 191,485,032 177,709,239 99.84%

As at 30 June 2012

Currency Description Cost

Fair Value

% of Total

Assets

USD Land 6,133,120

6,133,120 3.59%


164,280,331 96.25%

USD Total 191,485,032 170,413,451 99.85%



15

NOTES TO THE FINANCIAL STATEMENTS as at 30 June 2014

1. General information

Central American Timber Fund-SIF is organized as a common fund (fonds commun de

placement) in the form of an open ended specialized investment fund (fonds d’investissement

spécialisé) organized under the Law of 13 February 2007 regarding specialized investment

funds, as amended,(“SIF-Law”) and managed by BAUM Management (société à responsabilité

limitée), a company governed by the laws of Luxembourg.

CATF has a fixed life of 19 years and will end on 30 December 2030. By mutual agreement

between BAUM and the Depositary, BAUM, at its own discretion, is entitled to decide one or

several extensions of 5 years each, if so required for the best interest of the Unitholders.

CATF is registered with the Registre de Commerce et des Sociétés de Luxembourg, number B

163338.

CATF’s financial year begins on 1 July and ends on 30 June each year with the exception of the

first financial period which began on 19 September 2011 (date of incorporation) and ended on

30 June 2012.

The main objective of CATF is to provide Unitholders with attractive and sustainable long term

total returns, in the form of long-term capital appreciation, through investing in a portfolio of

diversified Teakwood Assets, while safeguarding nature and environment and creating benefits

to the local population at the same time. These objectives can be met with the cultivation of

high quality Teakwood trees in tropical plantations under sustainable plantation management.

2. Summary of significant accounting policies

(a) Basis of preparation

The financial statements have been prepared in accordance with the Luxembourg legal and

regulatory requirements (“Luxembourg GAAP”), notably with Title II of the law of

19 December 2002 relating to the register of commerce and companies, bookkeeping,

annual company accounts and modification of certain other legal dispositions (“Accounting

Law”), as well as in compliance with valuation principles as per article 28(4) and the

reporting principles of articles 52 and 53 and the relating reporting schedule in the Annex

of the SIF-Law.

(b) Foreign currency translation

CATF maintains its books and prepares its financial statements in USD. Assets and liabilities

expressed in currencies other than USD are translated at exchange rates prevailing at the

balance sheet date.

Income and expenses in currencies other than USD are converted into USD at the

exchange rate prevailing at the transaction date.

Profit and losses arising on foreign exchange operations are recorded in the Statement of

Operations and Changes in Net Assets.


16

NOTES TO THE FINANCIAL STATEMENTS as at 30 June 2014 (continued)

2. Summary of significant accounting policies (continued)

(b) Foreign currency translation (continued)

The principal exchange rates applied at 30 June 2014 are as follows:

EUR 1.0 = USD 1.3658

The source of the exchange rate is the website of the European Central Bank (www.ecb.int)

(c) Investments

Non-publicly traded investments for which reliable market quotations are not available are

valued by BAUM prudently and in good faith taking into account the International Private

Equity and Venture Capital Guidelines published by the European Private Equity and

Venture Capital Association (“EVCA”), the British Venture Capital Association (“BVCA”) and

the French Venture Capital Association (“AFIC”) in March 2005 and revised in October 2006

and September 2009 or any subsequent update of such guidelines and endorsed since then

by 34 national Venture Capital associations as well as by the International Limited Partners

Association.

All direct and indirect investments in Teakwood Assets will be valued at least once during

each full fiscal year by one or several independent appraisers appointed by BAUM and

benefiting from specific experience in the valuation of investments in Teakwood Assets in

accordance with independent valuation methodology.

Each valuation shall be conducted with prudence and in good faith and shall be based on a

Mark to Market valuation approach taking into account all cash flows, current or foreseen,

impacting the valuation of the Teakwood Assets.

(d) Estimates, assumptions and judgements

In the process of applying the accounting policies of CATF, in particular relating to the

valuation of the investments, BAUM has made some estimates, assumptions and

judgements.

The key assumptions concerning the future and other key sources of estimation uncertainty

at the reporting date, that have a significant risk of causing a material adjustment to the

carrying amounts of assets and liabilities within the next financial year, are discussed

below. CATF based its assumptions and estimates on parameters available when the

financial statements were prepared. However, existing circumstances and assumptions

about future developments may change due to market changes or circumstances arising

beyond the control of CATF. Such changes are reflected in the assumptions when they

occur.

Fair value of investments

CATF carries its investments at fair value, with changes in fair value being recognized in

the profit and loss account. The fair value is determined using valuation technique including

taking into account all cash flows, current or foreseen, impacting valuation of Teakwood

Assets. The inputs to the model are taken from observable markets where possible, but

where this is not feasible, a degree of judgement is required in establishing fair values.


17


2. Summary of significant accounting policies (continued)

(d) Estimates, assumptions and judgements (continued)

Fair value of investments (continued)

Newly established plantations are valued on a similar basis as the matured plantations.

However, taking into account the high risk of the newly established plantations, the related

future cash flows are not currently fully included in the valuation but rather gradually over

the first five (5) years of these plantations. Only 20% of the discounted cash flows is

included in the valuation in the first year of the new established plantations, then an

increase by 20% per year is applied for the next four years until 100% of the discounted

cash flows are included by year five.

The judgements include consideration of inputs such as price, appropriate discount rate,

market risk and volatility. Changes in assumptions about these factors would affect the

reported value of investments. The key assumptions used to determine the fair value of the

investments and sensitivity analyses are provided in Note 3 below.

(e) Formation expenses

Formation expenses of CATF are written off on a straight line basis over a period of five (5)

years.

(f) Liabilities

Liabilities are measured at their repayable amounts.

(g) Amortization

Expenses related to the investments are amortized for entire investment cycle. Such

expenses are: preparation of plantations as well as lease.

3. Investments

CATF invests in a diversified portfolio of teakwood assets (“Teakwood Assets”) in plantations

managed through the three (3) service companies: Barca, Expomaderas and LATC, which are

all contracted by CATF. CATF owns the wood proceeds of 4,024.5 hectares and has direct

economic rights to most of the proceeds from the fellings and sale of the teakwood trees, but

in most of the cases not the legal ownership. The Teakwood Assets are expected to continue in

existence until at least 2030.

The valuation of investments as of 30 June 2014 also includes some land amounting to

USD 4,187,400 (30 June 2013: USD 6,133,120) owned by CATF. As at 30 June 2014, the

investment portfolio is detailed as follows:


18


3. Investments (continued)

Teakwood

Assets Land Total

USD USD USD

Gross book value (Cost) - 1 July 2013 185,351,912 6,133,120

191,485,032

Additions for the year - -

-

Disposals during the year - (1,945,720)

(1,945,720)

Gross book value (Cost) - 30 June 2014 185,351,912 4,187,400 189,539,312

Accumulated fair value adjustment - 30

June 2013 (13,775,793) -

(13,775,793)

Allocations for the year:

on brought forward investments (3,235,310) -

(3,235,310)

on investments added during the

year

14,219,582

-

14,219,582

Disposals during the year - -

-

Accumulated value adjustment - 1 June

2014 (2,791,521) - (2,791,521)

Net book value/Fair Value 30 June 2014 182,560,391 4,187,400 186,747,791

Net book value - opening balance 171,576,119 6,133,120 177,709,239

Newly established plantations

The total area of planted teak has in this financial year increased compared to the previous

stand valuation. New teak plantations have been established in the Tamales and Puerto

Jimenez area. A total of 437 hectares have been planted in newly established plantations. In

this respect, CATF has prepaid some fees related to lease agreements and establishment

costs:

- CATF has prepaid USD 811,300 for 11 year lease (50% of the total USD 1,622,600 for

entire period of 22 years). This amount is amortized over the life of the lease and the

amortization for the period from the date of the lease to 30 June 2014 amount to

USD 22,211 and therefore the prepaid balance as at 30 June 2014 amounts to

USD 789,089.

- The establishment costs for the new plantations are expected to be incurred over a

period of five (5) years and are estimated at USD 4,605,364. As of 30 June 2014, CATF

has already prepaid USD 2,012,740 of this amount. The total establishment costs are

amortized over the five (5) year period and the amortization for the year ended

30 June 2014 amounts to USD 921,072 and therefore the prepaid balance as at

30 June 2014 amounts to USD 1,091,667.

The total of the prepaid balances relating to the new established plantations (USD 1,880,757)

are included in the caption ‘Prepaid expenses’ in the Statements of Net Assets. The total

amortization for the period is included in the Statement of Operations and Changes in Net

Assets under the caption ‘Amortization of new plantation establishment costs’.


19



As detailed in Note 2(d) above, only 20% of the discounted cash flows from the newly

established plantations (being USD 14,219,582 of the total discounted cash flows of

USD 71,097,911) has been taken into consideration in the computation of the Net Asset Value

of CATF as of 30 June 2014. An additional 20% of the discounted cash flows will be applied

from next year until 100% of the discounted cash flows is applied by year five (5). This implies

that the newly established plantations will have a fair value in year two (2) of 40% of the

expected fair value of these newly established plantations, year three (3) 60% and so forth.

After five (5) years, these plantations will be valued in line with all other plantations in the

portfolio of CATF.

Land valuation

The valuation of the land is based on an estimated current market value per hectare of similar

land in similar locations in Costa Rica.

Teakwood assets valuation

The Teakwood Assets have been valued at USD 182,560,391 (30 June 2013:

USD 171,576,119) based on a Discount Cash Flow valuation approach; a model internally

developed model by the management, taking into account the expected future cash flows from

the predicted growth based on field data collected over the years. The valuation has been

reviewed by an independent appraiser as per 30 June 2014.

Key assumptions used in performing the valuation of the Teakwood Assets

In performing the valuation of the Teakwood Assets, the key assumptions used by BAUM are

the following:

- Growth in annual revenues (price) of 9% is used;

- Growth class – a classification system where classes were created based on girth buckets

used to valuate the stand. By using the price buckets, the classes are directly linked to an

expected yield which is linked to the wood characteristics desired by the market;

- Discount curve based on a term structure which could be seen as equivalent to a flat

volume rate of 5.92%

Estimation of the commercial volume production

BAUM recognizes the uncertainty associated with the annual revenue growth rate at 9%,

resulting in a stand valuation of the Teakwood Assets of USD 182,560,391. With teak price

increase of 12%, the stand valuation of the Teakwood Assets would be USD 251,685,598,

whereas with teak price increase of 6%, the stand valuation of the Teakwood Assets would be

USD 133,550,235. The best price offered has been used to determine the revenues and cash

flows used for the stand valuation.

The discount rate is based on Interest Rate Risk, Country Risk and other Business Risks. The

discount curve takes into account the US Dollar Swap Curve (Overnight Indexed Swap) and is

adjusted for the credit risk of the country, Costa Rica, according to the Credit Default Swap

(“CDS”). This discount curve reflects the economic risks associated with the timber industry in

Costa Rica over time. With a discount rate of 6.92%, the valuation of the teakwood assets

would be USD 173,147,623 based on 9% annual wood price increase.


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As mentioned above, the teak assets are valuated based on the growth class characteristics,

also referred to as DBH classes. DBH classes were created based on girth buckets used to

valuate the stand. By using the price buckets, the classes are directly linked to an expected

yield which is linked to the wood characteristics desired by the market.

Below an example of the value impact when the diameter development of the newly

established plantations exceeds our expectations (table below: Growth class – actual +1),

which is calculated by raising the diameter development by 1 girth bucket using the growth

model, and when the diameter development is lower than our expectations (table below:

Growth class – actual -1), which is calculated by lowering the diameter development by 1 girth

bucket using the growth model.





















The stand valuation is based on Hoppus volume which takes into account the commercial

volumes of stems of specific diameters with the unsellable stem parts and stems being not

included in the volume calculations. The model and the volumes used in the valuation model

have been verified and validated by the verification agent: ITCR.


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The plantations are subject to a number of natural risks that can damage or destroy growing

Teakwood trees. These include weather events (tornados, hurricanes, storms, etc.), insects

and diseases as well as fire. BAUM mitigates the risk through geographically diversifying the

locations of the plantations and through on-site inspections, among other forest management

strategies. In particular, newly established plantations may be more exposed to such natural

risks and hence in the valuation of the Teakwood Assets, management include the expected

potential yield of new plantations gradually each year until the life of the plantations reached

five years.

Due to the inherent uncertainty in the fair valuation process (see also Note 2d), it is

reasonably possible that the estimated values may differ significantly from the values that

would have been used had a readily market for the investments existed, and such differences

could be material.

Teakwood Assets revenue

As of 17 February 2014, 432.04 hectares (195.55 hectares of Teak planted) were sold and are

no longer part of the Teakwood Assets and land as of 30 June 2014.

The revenue for the year amount to USD 4,348,001 and is included under the caption

“Realized results on Investments” in the Statements of Operations and Changes in Net Assets.

On August 15, 2014, CATF has also entered into a sale agreement to sell a part of the Teak

Assets, including the related land owned by CATF, which generated USD 3,100,000 cash for

CATF. The land including the related Teak Assets will be legally transferred subsequent to

30 June 2014. The cash received has been included in the Statements of Net Assets under the

caption ‘Advances received on account’.

4. Formation expenses

Included in formation expenses are charges incurred with respect to the incorporation and set

up of CATF’s activities. The formation expenses are written off on a straight line basis over a

period of five (5) years. As at 30 June 2014 the evolution of the formation expenses can be

summarized as follows:

USD

USD

Gross book value – opening balance 316,565

316,565

Additions during the year/period -

-

Gross book value – closing balance 316,565

316,565

Accumulated amortization – opening balance 126,626

63,313

Amortization during current year/period 63,313

63,313

Accumulated amortization – closing balance 189,939

126,626

Net book value 126,626

189,940


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5. Prepaid expenses

As explained in Note 3 above, CATF has prepaid some fees related to lease agreements and

establishment costs for the new plantations. The movement in the prepaid expenses can be

detailed as follows:

2014

2013

USD

USD

Gross book value – opening balance -

-

Additions during the year 2,824,040

-

Gross book value – closing balance 2,824,040

-

Accumulated amortization – opening balance -

-

Amortization during current year (943,283)

-

Accumulated amortization – closing balance (943,283)

-

Net book value 1,880,757

-

6. Accrued expenses

As at 30 June 2014 the accrued expenses are comprised as follows:

30 June 2014

30 June 2013

USD

USD

Management fee (Note 8) 16,981

2,993,818

Depositary fee 40,107

119,654

Audit fee 109,946

152,876

Administration fee 7,079

189,238

Subscription tax 4,358

4,202

Service fee -

30,000

178,471

3,503,727

7. Other loans

On 4 October 2013, CATF entered into a credit facility agreement with Compartment One of

Bond House S.A., a limited liability securitization company incorporated in Luxembourg

(“Lender”) for a facility commitment amount of EUR 3,000,000. On 9 April 2014 the credit

facility was amended and the facility commitment amount was increased to EUR 6,000,000.

The credit facility has been granted for the period from the date of the agreement until

30 August 2016.

The rate of interests is the percentage rate per annum equal to the aggregate of the

applicable:

- The basic interest rate of 7.25% for secured loans; and

- The additional margin of 1.50% for unsecured loans.

The credit facility is currently unsecured.


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7. Other loans (continued)

As part of the agreement:

- CATF had to pay to Lender an upfront fee in the amount of 1.25% on the credit facility

commitment.

- CATF must pay the Lender a commitment fee computed at the rate of 0.25% per

annum on the undrawn, uncancelled amount of the credit facility; and

- any interest or fee accruing under agreement accrues from day to day and is

calculated on the basis of the actual number of days elapsed and a year of 360.

As of 30 June 2014 the balance payable on the credit facility is detailed as follows:

30 June 2014 30 June 2013

USD USD

Loan principal 4,817,860 -

Loan Interests Payable 49,586 -

Loan Margin Payable 39,983 -

Commitment Fee Payable 23,688 -

Loan Upfront Fee 102,435 -

5,033,552 -

The total financing costs for CATF relating to the credit facility agreement during the year is

detailed as follows:

2014 2013

USD USD

Accrued Interest on Loan 234,639 -

Commitment Fee 23,688 -

Loan Upfront Fee 102,435 -

360,762 -

8. Management fees

CATF pays a management fee to BAUM that is equivalent to a maximum of 1.4% per annum of

the NAV, calculated and payable quarterly in advance.

The management fees for the year amounted to USD 2,602,611 (2013: USD 2,478,247).

USD 16,981 (Note 6) remains payable to BAUM as at 30 June 2014.

9. Legal costs

The legal costs of USD 465,725 (2013: USD 179,175) are related to legal services provided,

amongst others, for the sales transactions of some of the Teak Assets, the harvesting

agreements with international purchasers of the Teak wood harvested and the establishment

(including lease) agreements for the new plantations.


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10. Taxes

Under Luxembourg Law, CATF is not subject to any taxes on income or capital gains. However,

CATF is subject to the Subscription tax (“Taxed’Abonnement”), which amounts to an annual

rate of 0.01% of the combined net assets of CATF at the end of each calendar quarter,

calculated and paid quarterly.

Interest and dividend income received by CATF may be subject to non-recoverable withholding

tax in the countries of origin.

11. Marketing costs

The marketing costs of USD 256,275 (2013: USD 31,311) include the costs for setting up and

maintaining the interactive website and the related client database. Furthermore, the costs for

international sales events, in order to acquire potential investors and client communication

costs such as newsletters and printing are included.

12. Maintenance costs

The maintenance costs of USD 452,930 in 2014 are related to the maintenance of the Teak

Assets. In 2013 and partly in 2014, these maintenance costs were deducted from the Teak

Assets Portfolio Fair Value and therefore not presented separately.

13. Units issued

CATF has issued, only in registered form, Units representing an interest in CATF. Each

Unitholder shall be beneficially entitled to the assets and liabilities of CATF pro rata to the

number of its Units. All Units have equal rights as to redemption and proceeds upon liquidation

of CATF. As of 30 June 2014, CATF has 19,148,503.18 Units in issue (2013: 19,148,503.18).

14. Related party transactions

A related party is considered to be a party that has the ability to control CATF or exercise

significant influence over CATF in making financial or operational decisions.

CATF has been managed and controlled by its management company: BAUM Management

S.à r.l. and it’s Board of Managers, consisting of Mr Blommestein, Mr Dijkman, Mr Kloezen,

Mr Lammerts van Bueren and Mr Learbuch.

On 30 June 2014, Mr Blommestein, Mr Dijkman, Mr Kloezen and Mr Lammerts van Bueren and

Mr Learbuch held directly and indirectly via an investment vehicle 91,397 Units in CATF.

As detailed in Note 6 above, CATF entered into a credit facility agreement with Compartment

One of Bond House S.A. Even though BAUM and Bond House S.A. have some directors in

common, the Board of Managers believes that the conditions of this agreement are not

influenced by the partly common directorship.


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15. Subsequent events

During the year ended 30 June 2013, the liquidity of CATF was insufficient to pay out any

redemption requests and the Board of Managers decided to suspend and postpone all

redemption requests.

During the year ended 30 June 2014, the liquidity of CATF improved substantially. The Board

of Managers therefore decided to pay out, subsequent to year end, 100% of the outstanding

redemption requests, totaling USD 2,770,184 and 323,964 Units relating to both the

30 June 2014 and 30 June 2013 NAV.

Documents

catf Annual Report and Audited Financial Statements · Annual Report and Audited Financial Statements for the year ended 30 June 2014 6 . Management Report of the Management Company