TAUMATA PLANTATIONS LIMITED
General Information
Directors
Michael N Allen
Stephen J Baldwin
Anthony J Cascio
John L Herbohn
Angeleen D Jenkins
Brenton J Keefer
Roger L Lloyd (Alternate)
William K J McCallum
A Justin Ourso IV
William E Peressini
Thomas G Sarno
Wilfred Steiner
Courtland L Washburn
Julian J Widdup
Registered Office
C/- Russell McVeagh
Level30
Vero Centre
48 Shortland Street
Auckland
New Zealand
Head Office
Appointed
28 June 2016
31 July 2011
7 March 2017
1 January2016
28 November 2016
1 May2015
14 August 2012
7 March 2017
8July2016
1 April 2011
31 March 2014
1 July2014
1 March 2007
14 August 2012
Cl- Hancock Forest Management (NZ) Limited
Unit 5
1 ?O H;:imilton StrnP.t
PO Box 13404
Tauranga 3141
New Zealand
Solicitors
Russell McVeagh
Level 30
Vero Centre
48 Shortland Street
Auckland
New Zealand
Auditors
Ernst & Young
2 Takutai Square
Britomart
Auckland
New Zealand
Resigned
21 October 2016
7 March 2017
21 October 2016
TAUMATA PLANTATIONS LIMITED
Annual Report
For the Year Ended 30 June 2017
Principal Activities
The Company was incorporated on 7 September 2006. The principal activities during the period from
incorporation to 30 June 2017 were those relating to investment in commercial forestry.
There have been no material changes in the nature of the business of the company or any of its subsidiaries
during the year ended 30 June 2017.
Indemnification and insurance of Directors and Officers
As permitted by the constitution and the Companies Act 1993, Taumata Plantations Limited ("Company") has
resolved to indemnify Anthony J. Cascio, Angeleen D. Jenkins, William K. J. McCallum and Alvin J. Ourso IV
against:
a) all costs incurred by them in any proceeding that relates to liability for any act or omission by them as a
director of the Company ( or any subsidiary of the Company) and in which judgement is given in their favour, or
in which they are acquitted, or which is discontinued; and
b) liability to any person other than the Company or a related company for any act or omission by them as a
director of the Company ( or any subsidiary of the Company) and all costs incurred by them in defending or
settling any claim or proceeding relating to any such liability.
The indemnity is subject to a number of exceptions, including criminal liability, liability in respect of a breach of
duty specified in section 131 of the Companies Act 1993, or any liability in respect of which an indemnity is
prohibited by legislation.
As a consequence, the following entries were made in the company's interest register for the year ended 30 June 2017:
1. Anthony J. Cascio has entered into a deed relating to indemnity, access and insurance with the Company.
2. Angeleen D. Jenkins has entered into a deed relating to indemnity, access and insurance with the Company.
3. William K. J. McCallum has entered into a deed relating to indemnity, access and insurance with the Company.
4. Alvin J. Ourso IV has entered into a deed relating to indemnity, access and insurance with the Company.
No other entries were made in the Company's interest register for the year ended 30 June 2017.
Directors' fees
The following directors (or companies nominated by them) have received the following fees during the period.
Michael N Allen
Stephen J Baldwin (Unisuper Management Ply Limited)
John L Herbohn
Angeleen D Jenkins (Unisuper Management Pty Limited)
Ian S Ferguson
Sandra K LaBaugh (Teachers Insurance and Annuity Association of America)
A. Justin Ourso IV (Teachers Insurance and Annuity Association of America)
Julian J Widdup (Palisade Investment Partners Limited)
Total Directors Remuneration
2017
NZ$
55,410
57,500
57,500
37,120
52,500
15,353
275,383
2016
NZ$
50,000
25,000
25,000
50,000
50,000
200,000
The board of directors of Taumata Plantations Limited exercise the power conferred by section 161 of the
Companies Act to authorise any remuneration payment or other benefit of the kind referred to in that section.
For and on behalf of the Board:
Director: Brenton J Keefer
18 September 2017
Director: Wilfred Steiner
18 September 2017
TAUMATA PLANTATIONS LIMITED
Annual Report
For the Year Ended 30 June 2017
Contents
Income Statement
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Auditors' Report
Page
2
3
4
5
6 - 25
26 - 27
TAUMATA PLANTATIONS LIMITED
Income Statement
For the Year Ended 30 June 2017
Continuing operations
Revenue
Timber revenue
Cost of sales
Gross profit
Other income
Biological asset revaluation gain
Realised gain (loss) on sale of intangible asset
Other expenses
Land occupation expenses
Forestry expenses
Administration expenses
Other expenses
Total other expenses
Consolidated Group
Notes 2017 2016
NZO $000's NZO $000's
5 (a) 475,253 403,034
5 (c) ! '.2 '.1(-Ulu=i)
218,348 177,953
5 (b) 322 264
11 (a) 122,008 22,328
12 (a) 1,934
5 (d) (:.20,3'/C)
Profit from continuing operations before depreciation, amortisation,
impairment, net finance costs and income tax 301,022 168,307
Depreciation and amortisation
Land impairment reversal
Impairment of goodwill
Profit from continuing operations before net finance costs
and income tax
Finance costs
Interest income
Net profit (loss) from continuing operations before income
tax
Income tax (expense) benefit
Net profit (loss) after income tax attributable to owners of the
parent
The accompanying notes form part of these financial statements,
13
5 (e)
6 (a)
66,222
44,594
345,616
358
!Wl,I4'1)
239,472
166,133
133,983
388
260
Page 1 E.Y
TAUMATA PLANTATIONS LIMITED
Statement of Comprehensive Income
For the Year Ended 30 June 2017
Net profit (loss) for the year
Other comprehensive income
Notes
Other comprehensive income (loss) to be reclassified to profit and loss in
subsequent periods:
Net movement on cash flow hedges before income tax 19 (b)
Income tax thereon 6 (b)
Net other comprehensive income (loss) to be reclassified to profit and loss in
subsequent periods, net of tax:
Other comprehensive income not to be reclassified to profit and loss in
subsequent periods:
Intangible asset fair value adjustment
Income tax thereon
12 (a)
6 (b)
Net other comprehensive income not to be reclassified to profit and loss in
subsequent periods, net of tax
Other comprehensive income
Total comprehensive income attributable to the owners of
the parent
The accompanying notes form part of these financial statements.
Consolidated Group
2017 2016
NZD $000's NZD $000's
166,133
7,934
5,713
43,908
256 3(())
(1 39,516
3,929 32,895
170,062 4,601
Page 2 EV
TAUMATA PLANTATIONS LIMITED
Statement of Financial Position
As at 30 June 2017
Consolidated Group
Notes 2017 2016
NZD $000's NZD $000's
ASSETS
Current assets
Cash and cash equivalents 7 17,942 14,134
Trade and other receivables 8 35,051 35,622
Inventories 9 10,865 7,045
Total current assets 63,858 56,801
Non-current assets
Property, plant and equipment 10 362 387
Land 10 246,018 179,796
Biological asset 11 1,629,283 1,495,195
Intangible asset 12 53,973 70,293
Goodwill 13 7,321 23,202
Total non-current assets 1,936,957 1,768,873
TOT AL ASSETS 2,000,815 1,825,674
LIABILITIES
Current liabilities
Trade and other payables 15 30,044 26,366
Accrued interest on notes payable 604,384
Interest-bearing loans and borrowings 16 10,946 1,048
Derivative financial instruments 14 445 2,587
Total current liabilities 41,435 634,385
Non-current liabilities
Deferred tax liability 6 (d) 341,908 266,603
Interest-bearing loans and borrowings 16 329,427 326,509
Notes payable 17 (a) 1,185,849 657,078
Other financial liabilities 17 (b) 16,667 19,681
Derivative financial instruments 14 16,087 22,038
Total non-current liabilities 1,889,938 1,291,909
TOTAL LIABILITIES 1,931,373 1,926,294
NET ASSETS (LIABILITIES) 69,442 (100,620)
EQUITY
Contributed equity 18 370,401 370,401
Other reserves 19 (b) 37,354 33,425
Accumulated deficit 19 (a) (33d.3··1J) (E)04)4l�1.3)
TOTAL EQUITY 69,442 (100 620)
For and behalf of the Board, who authorised the issue of these financial statements on 18 September 2017.
Director: Brenton J Keefer
18 September 2017
The accompanying notes form part of these financial statements.
Director: Wilfred Steiner
18 September 2017
Page 3 E.Y
TAUMATA PLANTATIONS LIMITED
Statement of Changes in Equity
For the Year Ended 30 June 2017
At 1 July 2016
Total comprehensive income:
Profit for the year
Other comprehensive income
Total comprehensive income:
Equity transactions:
Total equity transactions
At 30 June 2017
At 1 July 2015
Total comprehensive income:
(Loss) for the year
Other comprehensive income
Total comprehensive income
Equity transactions:
Note Ordinary
Shares
Redeemable Preference
Shares
Other Reserves
Retained Earnings
Total
NZO $000's NZO $000's NZO $000's NZO $000's NZO $000's
323,000
323,000
207,058
Consolidated Group
47,401 33,425
3,929
3,929
47,401 37,354
47,401 530
32,895
32,895
166,133
166,133
(3'.',8.31
166,133
3,929
170,062
69,442
32,895
4,601
Ordinary shares issued during the year 17 (a) ___ 1 _15--', _9 _42 __________________ 1_1 _5 _,9_4_2
Total equity transactions 115,942 115,942
At 30 June 2016 323,000 47,401 33,425
The accompanying notes form pa,1 of these financial statements.
Page 4 EV
TAUMATA PLANTATIONS LIMITED
Statement of Cash Flows
For the Year Ended 30 June 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers
Net cash flows from operating activities
Cash flows from investing activities
Interest income received
Proceeds from sale of NZ emission units
Proceeds from sale of biological asset, land
Surrender of forestry right
Capital expenditure on biological asset, property, plant and
equipment
Net cash flows (used in) investing activities
Cash flows from financing activities
Working capital advance
Interest paid on investor notes
Bank debt interest and fees
Approved issuer levy
Net cash flows (used in) financing activities
Net increase in cash and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
Notes
7
Consolidated Group
2017 2016
NZD $000's
517,068
179,865
358
13,947
(3. H16)
10,000
4,145
14,134
17,942
NZD $000's
436,065
142,908
388
7,261
460
6,684
7,550
14,134
Page 5 EY
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
1. CORPORATE INFORMATION
The financial statements of Taumata Plantations Limited and its subsidiaries ( collectively, the Group) for the year ended
30 June 2017 were authorised for issue in accordance with a resolution of the directors on 18 September 2017.
2.1 STATEMENT OF COMPLIANCE
The consolidated financial statements of the Group comply with New Zealand Equivalents to International Financial
Reporting Standards (NZ IFRS) with reduced disclosure requirements (RDR).
2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
The financial statements have been prepared in accordance with generally accepted accounting practice in New Zealand (NZ GAAP). For the purposes of complying with NZ GAAP the entity is a for-profit entity.
The Group is a Tier 2 for-profit entity and has elected to report in accordance with Tier 2 For-profit Accounting
Standards. The Group is eligible to report in accordance with Tier 2 For-profit Accounting Standards on the basis that it
does not have public accountability and is not a large for-profit public sector entity.
The consolidated financial statements have been prepared on a historical cost basis, except for biological asset,
intangible asset, derivative financial instruments and 2006 convertible preference shares which have been measured at
fair value.The consolidated financial statements are presented in New Zealand dollars and all values are rounded to the
nearest thousand dollars ($000), except when otherwise indicated.
The financial statements provide comparative information in respect of the previous period.
(b) Basis of consolidation
The consolidated financial statements comprise the financial statements of Taumata Plantations Limited and its
subsidiaries (the Group) as at 30 June 2017. Control is achieved when the Group is exposed, or has rights, to variable
returns from the involvement with the investee and has the ability to affect those returns through its power over the investee.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control
over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses
of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the
date the Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the
parent of the Group. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on consolidation.
(c) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as theaggregate of the consideration transferred measured at acquisition date fair value and the amount of any non
controlling interests in the Group.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the
amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired
and liabilities assumed.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date,
allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irrespective of
whether other assets or liabilities of the Group are assigned to those units. Each unit or group of units to which the
goodwill is so allocated represents the lowest level within the Group at which the goodwill is monitored for internal
management purposes.
Impairment is determined by assessing the recoverable amount of the cash-generating unit (or group of cashgenerating units), to which the goodwill relates. When the recoverable amount of the cash-generating unit (or group of
cash generating units) is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash-generating unit ( or group of cash-generating units) it is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on
the relative values of the operation disposed of and the portion of the cash-generating unit retained.
Impairment losses recognised for goodwill are not subsequently reversed.
Page 6
EY
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Foreign currency translation
Both the functional and presentation currency of Taumata Plantations Limited is New Zealand dollars($).
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of
exchange ruling at the balance sheet date.
(e) Property, plant and equipment
Following initial recognition at cost, land is carried at cost less any subsequent accumulated impairment losses.
Plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.
Depreciation is calculated on a diminishing value basis dependent upon the estimated useful life of the specific asset.
Depreciation rates are as follows:
Land Not depreciated
Buildings
Plant and equipment
Furniture & fittings
Computers
Derecognition and disposal
9.5%
22%
22%
50%
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Gains and losses on disposals which are included in the income statement are
determined by comparing proceeds with the carrying amount.
(f) Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement andrequires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or
assets and the arrangement conveys a right to use the asset.
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. The Group has not entered into any finance lease arrangements.
(g) Impairment of non-current assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. If anyindication of impairment exists, an estimate of the asset's recoverable amount is calculated. An impairment loss is recognised when the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows
that are largely independent of the cash inflows from other assets or groups of assets ( cash-generating units).
In assessing value in use, the estimated cash inflows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
(h) Inventories
Log inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling
price in the ordinary course of business, less the estimated costs necessary to make the sale.
(i) Trade and other receivables
Trade receivables, which generally have 30 day terms, are recognised and carried at original invoice amount less anallowance for impairment.
Collectibility of trade receivables is reviewed on an ongoing basis. Individual debts that are known to be uncollectible are written off when identified. An impairment provision is recognised when there is objective evidence that the Group will not be able to collect the receivable. Financial difficulties of the debtor, default payments or debts more than 60 days overdue are considered objective evidence of impairment subject to management review and consideration of all available information.
Page 7 EV
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(j) Cash
Cash and cash equivalents in the statement of financial position comprise cash at bank and short term deposits that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
Interest income on the New Zealand dollar cash account, is calculated at the New Zealand Official Cash Rate (OCR),
calculated on a daily basis and paid to the account on the last business day of each month. The interest rate as at 30
June 2017 is 1.65% (2016: 2.25%).
(k) Intangible asset - carbon emission reduction units
Carbon emission reduction units ("units") are recognised when the Group controls the units, provided that it is probable
that economic benefits will flow to the Group and the fair value of the units can be measured reliably. Control of the
units arises when the Group has an entitlement to the units.
Carbon emission reduction units are initially measured at fair value on entitlement as an intangible asset unless the
Board of Directors have determined they are held for sale, in which case they would be recorded at the lower of cost or
net realisable value as inventory.
Following initial recognition, the intangible asset has been measured at fair value since the Board of Directors consider
there is an active market for the sale of units. Where it is considered there is no active market for the sale of the units,
the intangible asset is recorded at cost less accumulated impairment losses, if any. Units determined as held for sale at
recognition and recorded as inventory are subsequently measured at cost (less amortisation and impairment, if any}, or
net realisable value.
The intangible asset is tested for impairment annually. The liability arising from the deforestation of eligible land is
measured using the market value approach. A liability exists on pre-1990 forests if the land use changes from forestry.
On land holdings of post-1989 forests the Group has deregistered from the emissions trading scheme and has met all
obligations.
(I) Derivative financial instruments, hedging and risk management
The Group's principal financial instruments, other than derivatives, comprise a syndicated bank loan, a working capital
facility, convertible notes and preference shares with a contractual redemption date. The main purpose of these
financial instruments is to raise finance for the Group's operations.
The Group has various other financial assets and liabilities such as cash and cash equivalents, trade receivables and
trade payables, which arise directly from its operations.
The Group uses derivative financial instruments, principally interest rate swaps, for the purpose of managing interest
rate risk on the Group's syndicated bank loan. The Group has no intention to trade derivative financial instruments.
The Group has issued promissory notes payable, the terms of which contain an option for the Group to repay or redeem
the notes at any time before expiration. The terms of the notes also contain an option for the Group to convert the
promissory notes payable into newly issued preference shares of the Group at any time before expiration at the rate of one New Zealand dollar of principal and accrued and unpaid interest for each New Zealand dollar of redemption
amount of preferred shares.
The main risks arising from the Group's financial instruments are interest rate risk, credit risk, fair value risk and liquidity
risk. The Board reviews and agrees policies for managing each of these risks as summarised below.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis for
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in this note.
Interest rate risk
The Group's exposure to market interest rates relates primarily to the Group's syndicated bank loan with a floating
interest rate.
The Group's policy is to manage its finance costs using a mix of fixed and variable rate debt. To manage this risk in a
cost-efficient manner, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified
intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon
notional principal amount. These swaps are designated to hedge underlying debt obligations. At 30 June 2017, after
taking into account the effect of interest rate swaps, approximately 81% (2016: 81%) of the Group's borrowings in
relation to the syndicated bank loan are at a fixed rate of interest.
Page 8 EV
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(I) Derivative financial instruments, hedging and risk management (continued)
Fair value interest rate risk
The Group enters into interest rate swaps which are measured in the statement of financial position at fair value. Fair value of the interest rate swap depends on fluctuations in market interest rates. As the Group's intention is to hold the interest rate swaps until expiry as a cash flow hedge, fluctuations in fair value are not expected to impact the Group's commercial operations or its capacity to attract adequate operating finance.
The fair value of the Group's preferred shares redemption liability is also subject to fluctuations in market interest rates. The fluctuations in fair value will impact the income statement and equity but is not expected to impact the Group's cash flow, commercial operations or the ability of the Group to secure adequate finance.
Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, and trade and other receivables. The Group's exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments.
The Group seeks to trade only with recognised, creditworthy third parties. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant.
Interest rate swaps have been transacted separately with three financial institutions thus reducing the concentration of credit risk with respect to any one counterparty. Cash and cash equivalents are held with Westpac Banking Corporation.
Liquidity risk
Liquidity risk arises from meeting obligations associated with financial liabilities.
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of a syndicated bank loan, a syndicated bank working capital facility, convertible notes and preference shares with a contractual redemption date.
Interest rate swap and hedging
The Group uses interest rate swaps to hedge its risks associated with interest rate fluctuations on the bank loan. Interest rate swaps are initially recognised at fair value (usually $nil) when entered into and are subsequently remeasured to fair value at each reporting date. Interest rate swaps are carried as assets when their fair value is positive and as liabilities when their fair value is negative.
For the purpose of hedge accounting, the interest rate swap is classified as a cash flow hedge as it hedges the Group's exposure to variability in cash flows attributable to the payment of interest on the bank loan.
At inception of an interest rate swap, the Group formally designates the swap as a hedging instrument and documents the hedge relationship and risk management objectives for undertaking the hedge. The documentation includes identification of the hedging instrument and the hedged item, the nature of the risk being hedged and how the Group will assess the hedging instrument's effectiveness in offsetting exposure to variability in cash flows attributable to variable interest rates on the bank loan. The cash flow hedge is expected to be highly effective in offsetting cash flow variability and it is assessed on an ongoing basis to determine that it actually has been highly effective throughout the financial reporting periods for which it was designated.
A cash flow hedge that meets the strict criteria of hedge accounting is accounted for as follows:
Cash flow hedges are hedges of the Group's exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect the income statement. The effective portion of the gain or loss on the hedging instruments is recognised in other comprehensive income, net of income tax, while the ineffective portion is recognised in the income statement.
Amounts taken to equity are subsequently transferred to the income statement when the hedge transaction affects the income statement, such as when interest expense on the bank loan is recognised in the income statement.
If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, amounts previously recognised in equity are transferred to the income statement.
If the hedged instrument ceases to qualify for hedge accounting and the forecast transaction is still expected to occur, then all amounts previously taken directly to equity are transferred to the income statement. In addition, all future gains and losses on the hedging instrument will be taken to the income statement when the forecast transaction occurs.
Page 9 EV
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(m) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable
transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the
effective interest method. Amortised cost is calculated by including issue costs and any discount or premium on initial
issue; and estimating cash flows over the term of the loan, including interest payments and other costs to maintain the
loan, to determine the effective interest rate on the loan. The Group considers that the carrying amount of interest
bearing loans and borrowings is a reasonable approximation of the fair value, however the carrying amount does not
represent the amount repayable on early termination.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
(n) Notes payable
Notes payable are initially recognised at the fair value of the consideration received less directly attributable transaction
costs.
After initial recognition, notes payable are subsequently measured at amortised cost using the effective interest method.
Amortised cost is calculated by including issue costs and any discount or premium on issue; and estimating cash flows
over the term of the notes, including interest payments, to determine the effective interest rate on the notes payable.
Interest expense is calculated by applying the effective interest rate to the amortised balance and is taken to the income
statement. Gains and losses on derecognition of notes payable are taken to the income statement in the period the
notes are derecognised.
(o) Trade and other payables
Trade and other payables are carried at invoice amount. They represent liabilities for goods and services provided to
the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make
future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually
paid within 30 days of recognition. Due to the short term nature of trade payables, their carrying amount is considered
a close approximation of their fair value.
(p) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense
relating to a provision is presented in the income statement net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects,
when appropriate, the risks specific to the liability. The increase in the provision resulting from the passage of time is
recognised as a finance cost.
(q) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue
can be reliably measured, regardless of when the payment is being made. The following specific recognition criteria
must also be met before revenue is recognised:
Timber revenue
Timber revenue is recognised when the Group has ensured delivery of the product according to the terms and
conditions of the contract, the customer has assumed the risks and rewards of ownership and collection of the related
receivables is reasonably assured. Generally this occurs for sales in domestic markets after the shipment of the goods
to customers. In the case of goods sold to export customers this is dependent on the nature of the contract, but no
earlier than the goods are loaded on the vessel.
Interest revenue
Interest revenue on bank and short term cash deposits is recognised using the effective interest rate method.
Page 10 EY
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(q) Revenue recognition (continued)
Other income
Other Income is recognised when the Group has ensured delivery of the product, such as by product wastes, where the
customer has assumed the risks and rewards of ownership. Management fees are recognised according to the terms
and conditions of the contract.
(r) Income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the balance sheet date in New Zealand.
Deferred tax is provided using the liability method on temporary differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
- when the deferred income tax liability arises from the initial recognition of goodwill; or
- when the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is
not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss; or
- when the taxable temporary difference is associated with investments in subsidiaries, and the timing of the reversal of
the temporary differences can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, the carry forward of unused tax
credits and unused tax losses, to the extent that it is probable that future taxable profit will be available against which
the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised,
except:
- when the deferred income tax asset relating to the deductible temporary differences arises from the initial recognition
of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss; or
- when the deductible temporary differences are associated with investment in subsidiaries, deferred tax assets are
only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and
future taxable profits will be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the deferred
income tax asset to be utilised.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the
same taxation authority.
Income tax relating to items recognised in equity are recognised in equity and not in the income statement.
(s) Other taxes
Revenues, expenses, assets and liabilities are recognised net of the amount of GST except:
- when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which
case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable;
and
- receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of the receivables or payables in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising
from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as
part of operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation
authority.
Page 11
EY
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(t) Biological assets
Biological assets are predominantly standing trees which are managed by the company on a sustainable-yield basis.
These are shown in the statement of financial position at fair value. The costs to establish and maintain the forest
assets are included in the income statement together with the change in fair value for each accounting period.
The determination of fair value, as assessed annually by an independent forest valuer, is based on the before tax value
of net revenue from projected woodflows by product and destination. Projected woodflows, which are derived from the
forest estate model, correspond to the expected volumes of merchantable timber that could be harvested from existing stands given current management strategy and projected customer demand.
The forests can be summarised into three main regions based on geographic locations being Northland, Central North
Island and Eastern Bay of Plenty.
Capitalised harvest roads are stated at cost less accumulated depreciation and any impairment in value. Harvest roads
are built to facilitate timber harvesting planned to commence within 12 months following the completion of the road, and
in use for greater than a 12 month period. Roads are included as part of the biological asset.
Depreciation on harvest roads is calculated on a diminishing value basis using the rates over the estimated useful life of
the specific asset. Depreciation rates are as follows:
Harvest Roads (Sealed)
Harvest Roads (Partially or Unsealed)
(u) Derecognition of financial instruments
Acquired prior Acquired post
2013 2013
6%
24%
5%
20%
The derecognition of a financial instrument takes place when the Group no longer controls the contractual rights that
comprise the financial instrument, which is normally the case when the instrument is sold, or all the cash flows
attributable to the instrument are passed through to an independent third party.
(v) Redeemable preference shares
On initial recognition, the component of the preference shares that exhibits characteristics of a liability is recognised as
a liability on the statement of financial position, net of transaction costs.
After initial recognition, the liability component of the preference shares issued in 2006 is subsequently measured at fair
value through the income statement using a discount rate based on a long term bond plus an appropriate credit margin.
The Group's risk management policy requires it to manage various alternative sources of long term capital requirements
in order to minimise the cost of capital to the Group and maximise shareholders' returns. The designation of the 2006
preference shares redemption liability at fair value through the income statement is consistent with this policy as
changes in fair value provide additional information on the cost of capital inherent in the preference shares liability
relative to alternative sources of long term capital.
After initial recognition, the liability component of the preference shares issued in 2009 is subsequently measured at
amortised cost using the effective interest method. As the number of preference shares issued in 2009 is only a small
portion of various long term capital sources and they were issued for nil consideration, the Group considers that in
terms of its risk management policy it was not necessary to subsequently measure this preference share issue at fair
value through the income statement.
The increase in the liability due to the passage of time is recognised as a finance cost using the effective interest rate
method. Changes in fair value attributable to changes in the discount rate are recognised as a finance cost. The
carrying amount of the liability component does not represent the amount that would be contractually repayable if the
shares were redeemed early.
The remainder of the proceeds net of tax is allocated to the residual right to receive future dividends and is recognised
and included in shareholders' equity, net of transaction costs. The carrying amount of the equity component is not
remeasured in subsequent years.
Dividend distribution on the preference shares would be recognised as an equity distribution.
Transaction costs are apportioned between the liability and equity components of the redeemable preference shares
based on the allocation of proceeds between the liability and equity components on initial recognition.
Page 12 E.Y
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(w) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the
proceeds.
(x) Dividend distribution
Dividend distribution to the company's shareholders would be recognised as a liability in the Group's financial
statements in the year in which the dividends are declared.
2.3 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
New and amended standards and interpretations
Certain standards and interpretations apply for the first time in 2017. However, they do not impact the annual
consolidated financial statements of the Group.
The accounting policies adopted are consistent with those of the previous year.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
In the process of applying the Group's accounting policies, the manager makes estimates and assumptions concerning
the future. Estimates and assumptions are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
The estimates and assumptions are reviewed for reasonableness on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision effects only that period, or in the
period of revision and future periods if the revision affects both current and future periods.
The estimates and assumptions that have a reasonable risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
Fair value of the biological asset
The fair value of the biological asset is determined by an independent appraiser which requires the appraiser to make
judgments and assumptions in relation to the discount rate, future log prices and costs, foreign exchange rates and
other key inputs.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences, primarily accumulated income tax losses, as
management considers it is probable that the Group will generate sufficient future taxable profits to utilise the temporary
differences.
Fair value of preference shares
The fair value of the preference shares (issued in 2006) is calculated by discounting the contractual redemption liability
using a market discount rate for a long term treasury bond plus an appropriate credit margin based on market
determined credit margins for similar corporate debt issues.
Estimation of useful lives of depreciable plant and equipment
The estimation of useful lives of depreciable plant and equipment is based on historical experience and also other
factors such as manufacturers· warranties. The condition of assets is assessed each year and considered against the
remaining useful life. Adjustments are made to the estimate of remaining useful life where appropriate.
Assessment of active market for intangible asset
Intangible asset of carbon emission units are valued at fair value when there is an active market for these units. This assessment is based on the frequency and volumes of sales and consistency of quoted prices for sale of the units.
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value measurement is based on the presumption that
the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability
- The principal or the most advantageous market must be accessible to by the Group.
Page 13 EV
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (continued)
Fair value measurement (continued)
The following table provides the fair value measurement hierarchy of the Group's assets and liabilities.
Quantitative disclosures of fair value measurement hierarchy for assets as at 30 June 2017:
Assets measured at fair value
Intangible asset (note 12)
Revalued biological asset
Biological asset (note 11)
Date of
valuation
30 June 2017
30 June 2017
Quantitative disclosures of fair value measurement hierarchy for liabilities as at 30 June 2017:
Liabilities measured at fair value
Interest rate swaps (note 14)
Liabilities for which fair values are disclosed
Interest bearing loans and borrowings
2006 convertible preference shares (note 17 (b))
Date of
valuation
30 June 2017
30 June 2017
Quantitative disclosures of fair value measurement hierarchy for assets as at 30 June 2016:
Assets measured at fair value
Intangible asset (note 12)
Revalued biological asset
Biological asset (note 11)
Quantitative disclosures of fair value measurement hierarchy for liabilities as at 30 June 2016:
Liabilities measured at fair value
Interest rate swaps (note 14)
Liabilities for which fair values are disclosed
Interest bearing loans and borrowings
2006 convertible preference shares (note 17(b))
Total
NZD $000's
53,973
1,629,283
Total
NZD $000's
16,532
15,845
Total
NZD $000's
70,293
1,495,195
Total
NZD $000's
24,625
18,946
Page 14 EY
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
4. GROUP INFORMATION
Information about subsidiaries
All subsidiary companies of Taumata Plantations Limited are incorporated in New Zealand and have forestry as their
principal activity.
The consolidated financial statements of the Group include the following 100% owned subsidiary companies of
Taumata Plantations Limited:
AHi Group Limited
Ataidar Forests Limited
Houpoto Te Pua Forest (No.2) Limited
Houpoto Whituare Forest (No.2) Limited
Matangareka Forest (No.2) Limited
Nukutere Forest (No.2) Limited
NZ Forest Products Kinleith Forests Limited
NZ Forest Products Limited
Orete Forest (No.2) Limited
Otanemutu Forest (No.2) Limited
Potikirua Forest (No.2) Limited
Torere 64 Forest (No.2) Limited
Torere 65 Forest (No.2) Limited
TPL 1 Limited
TPL 2 Limited
TPL 3 Limited
TPL 4 Limited
TPL 5 Limited
Tunapahore 4B Forest (No.2) Limited
Tunapahore B2A Forest (No.2) Limited
Page 15 EV
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
5. REVENUES AND EXPENSES
(a) Timber revenue
Domestic sales
Export sales
Stumpage sales
(b) Other income
Hunting license income
Other income
(c) Cost of sales
Distribution
Export freight
Harvest roading
Harvesting
Inventory movement
Log yard costs
Port costs
(d) Other expenses
Loss on foreign currency transactions
Loss on sale of forestry rights and easements
Marketing and property management fees
(e) Finance costs
Approved issuer levy expense
Interest on bank loan
Interest on notes payable
Interest on preference shares
Loss (gain) on change in fair value of preference shares
(f) Lease payments
Minimum lease payments - operating lease
6. INCOME TAX
(a) Income tax expense
Deferred income tax expense (benefit) reported in the income statement
(b) Amounts charged or credited to other comprehensive income
Deferred income tax related to items in other comprehensive income
Intangible asset fair value adjustment
Net movement on revaluation of cash flow hedges
Income tax expense reported in equity
Consolidated Group
2017 2016
NZD $000's NZD $000's
200,238
273,694
1,321
475,253
232
90
322
62,912
42,785
19,906
108,843
3,133
23,084
256,905
1,956
18,420
20,376
1,678
21,451
86,388
1,476
{4J�)··1)
106,502
4,697
73,339
2,221
1,965
203,460
197,540
2,034
403,034
170
94
264
53,801
31,766
16,832
100,763
601
2,252
19,066
225,081
648
673
16,355
17,676
2,745
18,211
137,357
1,299
3,313
162,925
4,746
(2(iC)
4,392
1,817
Page16 E.Y
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
6. INCOME TAX (continued)
(c) Numerical reconciliation between aggregate tax expense (benefit) recognised in the income statement and
tax expense (benefit) calculated per the statutory income tax rate
A reconciliation between tax expense expense (benefit) and the product of accounting profit (loss) before income tax multiplied by the Group's applicable income tax rate is as follows:
Accounting profit (loss) before tax
Adjustments for income tax purposes: Impairment of goodwill not deductible Non assessable capital gain on land / land impairment reversal Non assessable movements of pre-1990 NZU's Interest expense not deductible Legal fees not deductible
Income tax expense (benefit) before temporary differences 28%
Adjustments in respect of current income tax of previous years Aggregate income tax (benefit) expense as reported in income statement
Attributable to:
Continuing operations
(d) Recognised deferred tax assets and liabilities
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities
Fair value of the biological asset Fair value of inventory Fair value of intangible asset (NZU's)
Effective tax on preference share Gross deferred tax liabilities
Set-off of deferred tax assets Net deferred tax liabilities
Deferred tax assets Tax losses carried forward Book value property, plant and equipment Derivatives Prepayments and accruals Gross deferred tax assets
Set-off of deferred tax liabilities Net deferred tax assets
(e) Tax Losses
Consolidated Group
2017 2016
NZD $000's NZD $000's
239,472
15,881
331 22,604
130 213,257
59,712
13,627 73,339
73,339
(454,?Cli)
112,793 (341 908)
108,043 106
4,504 140
112,793
('1'1
28,989
189
175 ()CCi)
(4i6,398)
149,795 (266,603)
142,966 103
6,726
149,795
795)
The tax benefit attributable to estimated income tax losses at 30 June 2017 is $108.0 million stated at a tax rate of 28% (2016: $143.0 million). A tax benefit has been recognised on the basis the losses are available to be carried forward and utilised against future assessable income. The ability to carry forward losses for income tax purposes is dependent on New Zealand tax law.
Page 17 EV
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
7. CASH AND CASH EQUIVALENTS
Cash at bank - NZ dollar
Cash at bank - US dollar
8. TRADE AND OTHER RECEIVABLES
Trade receivables
Sundry debtors
Prepaid expenses
Total trade and other receivables
9. INVENTORIES
Log inventory
Other inventory
10. PROPERTY, PLANT AND EQUIPMENT
Reconciliation of carrying amounts at the beginning and end of the period
Consolidated Group
2017 2016
NZO $000's NZD $000's
9,640 3,352
8,302 10,782
17,942 14,134
32,551 33,033
940 1,026
1,560 1,563
35,051 35,622
10,507 6,750
358 295
10,865 7,045
Consolidated Group
Year Ended 30 June 2017
Cost net of accumulated depreciation and impairment at 1
July2016
Additions
Disposals
Impairment reversal
Depreciation charge for the year
At 30 June 2017 net of accumulated depreciation and
impairment
At 30 June 2017
Cost
Accumulated depreciation
Accumulated impairment
Net carrying amount
Year Ended 30 June 2016
Cost net of accumulated depreciation and impairment at 1
July 2015
Additions
Disposals
Depreciation charge for the year
At 30 June 2016 net of accumulated depreciation and
impairment
At 30 June 2016
Cost
Accumulated depreciation
Accumulated impairment
Net carrying amount
Land Buildings
NZD $000 NZD $000
179,796 96
66,222
u�i)
246,018 87
249,916 250
(3J�Df3) 246,018 87
179,923 106
'1 1 i
179,796 96
249,916 250
("/0,·1:,::CJ)
179,796 96
Plant and Total
equipment
NZD $000 NZD $000
291 180,183
50 50
66,222
(l33) (l::!)
275 246,380
1,499 251,665
( 1
(3,US1E;)
275 246,380
320 180,349
42 42
{'i'
(11) (8"1)
291 180,183
1,480 251,646 t·\ \ \
(?0,L2U)
291 180,183
Page 18 E.Y
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
11. BIOLOGICAL ASSET - AT VALUATION
(a) Reconciliation of carrying amounts at the beginning and end of the period
Opening biological asset as at 1 July
Reforestation
Change in value attributable to roads
Deferred Engineering
Closing biological asset prior to change in value
Change in Value Attributed to Value of Biological Asset
Growth and fair value adjustment to the forest assets
Roading on sold / surrendered land written off
Depletion - timber harvested
Net increment recognised in the Income Statement
Closing biological assets as at 30 June
(b) Valuation Assumptions
Consolidated Group
2017 2016
NZD $000's NZD $000's
1,495,195 1,459,678
7,214 7,952 I' \ I 2,253
5,022 2,984
1,507,275 1,472,867
269,363 119,511
(f l{(),400) (�)6,200)
122,008 22,328
1,629,283 1,495,195
An independent market valuation of the forest assets of $1,629.3 million including roads was undertaken by forestconsultants lndufor Asia Pacific Limited as at 30 June 2017 (2016: $1,495.2 million).
lndufor Asia Pacific Limited (lndufor) have considered both a transaction approach using implied discount rates, and income approach using a weighted average cost of capital discount rate to determine an appropriate discount rate, in deriving the fair value of the forest estate. The discount rate applied to current rotation cash flows in the determination
of fair value was 7.25% (2016: 7.5%).
Land based costs have been developed from land tenure groups and consist of the following types of land tenure:
- Lease agreements
- Forestry right
- Share of volume I stumpage arrangements as per forestry rights and lease agreements
- A land use charge for freehold forest areas.
12. INTANGIBLE ASSET
Consolidated Group
2017 2016
NZD $000's NZD $000's
(a) Reconciliation of the value of carbon emission units held at the beginning and end of the year:
Opening balance as at 1 July 70,293 31,711
Fair value adjustment 12 43,908
Realised (loss) gain on sold units 1) 1,934
NZ emission units sold
Closing balance as at 30 June
(b) Reconciliation of NZ emission units held at the beginning and end of the year:
Opening balance as at 1 July
NZ emission units sold
Closing balance as at 30 June
(7.:2CO;
53,973 70,293
Consolidated Group
2017 2016
Units Units
3,940,136
UJ00,000)
3,140,136
4,735,136
(79().000)
3,940,136
Page 19 E.Y
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
12. INTANGIBLE ASSET (continued)
(c) Description of intangible asset
Following the introduction of the Climate Change Response (Moderated Emissions Trading) Amendment Act 2009, theGroup, as a land owner of pre-1990 and post-1989 forests, was entitled to receive New Zealand Emission Units
(NZU's).
As at 30 June 2017, the Group is holding 1,406,783 NZU's (2016: 1,406,783) on land holding post-1989 forests for net carbon sequestered between the 2008 and 2013 calendar years. These units have been recognised as an intangible
asset at fair value of $24.2m (2016: $25.1 m).
As at 30 June 2017, the Group is holding 1,731,175 NZU's (2016: 2,531,175) on land holding pre-1990 forests. These
units have been recognised as an intangible asset at fair value of $29.8m (2016: $45.2m).
As at 30 June 2017, the Group are holding 2,178 unencumbered ERU's from AAU (2016: 2,178) after meeting the
surrender obligations on de-registration from the optional emission trading scheme for post-1989 forests. These units
have no fair value at 30 June 2017 (2016: $nil).
Based on external third party market data the fair value is $17 .20 per NZU at 30 June 2017 (2016:$17.85).
13. GOODWILL
Movements in goodwill during the year were as follows:
Opening balance as at 1 July
Impairment loss (from depletion of asset acquired)
Closing balance as at 30 June
Consolidated Group
2017 2016
NZO $000's NZO $000's
23,202 52,191
7,321 23,202
After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairment losses. Goodwill is not amortised but is subject to impairment testing on an annual basis or whenever there is an indication of impairment.
As described in 2.2(c), goodwill arises on acquisition of subsidiaries due to the recognition of a deferred tax liability on
the difference between fair value of the asset acquired (predominantly the biological asset) and the tax cost base of
those assets.
Any items which impact this acquisition related deferred tax liability will have a corresponding impact on goodwill. An impairment loss is recognised due to the changes to the acquisition related deferred tax liability caused by the
depletion, through harvesting or sale, during the year of the biological assets acquired.
14. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
Current liabilities
Interest rate swap contracts at fair value - cash flow hedges
Non-current liabilities
Interest rate swap contracts at fair value - cash flow hedges
Instruments Used by the Group - Interest rate swaps (cash flow hedges)
Consolidated Group
2017 2016
NZO $000's NZO $000's
445 2,587
16,087 22,038
16,532 24,625
Interest rate swaps are used by the Group in the normal course of business in order to hedge cash flow risk
attributable to fluctuations in interest rates.
At 30 June 2017, the syndicated bank loan of the Group currently bears a weighted variable interest rate of 3.38% (2016: 3.74%) (including credit margin) per annum. In order to hedge variable interest rates the Group has entered into interest rate swap contracts under which it has a right to receive interest at the variable 90 day New Zealand bank
bill rate and to pay interest at agreed fixed rates.
The swap agreements in place as at 30 June 2017 are effective 30 November 2016 to 28 November 2018 ($133
million), and 30 November 2016 to 30 November 2018 ($133 million). Interest rate swap contracts have also been
entered into which are effective from November 2018 to May 2022 ($266m) and from May 2022 to May 2024 ($160m). At 30 June 2017 the swaps in place hedge approximately 81 % of the variable rate bank debt.
The swap fixed rates do not include a credit margin which is chargeable under the terms of the syndicated bank loan.
At 30 June 2017, the New Zealand 90 day bank bill rate was 1.98% (2016: 2.34%).
Page 20 EV
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
14. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING (continued)
The following table details the notional principal amounts, average contracted fixed interest rates and terms of open interest rate swaps as at 30 June:
Notional Principal Amount
Less than 1 year
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
More than 5 years
Average Contracted Fixed Interest Rate
Less than 1 year
1 -2 years
2 - 3 years
3 - 4 years
4 - 5 years
More than 5 years
Consolidated Group
2017 2016
NZD $000's NZD $000's
266,000 266,550
266,000 266,550
160,000 266,000
160,000 266,000
160,000 160,000
160,000
3.99% 5.14%
3.99% 3.99%
5.03% 3.99%
5.03% 5.03%
5.03% 5.03%
NA 5.03%
The interest rate swaps require settlement of net interest receivable or payable on a quarterly basis. The settlement
dates coincide with the dates on which interest is intended to be paid on the underlying debt. All the swaps have been formally designated as a cash flow hedge, they are matched directly against the syndicated bank loan and interest expense and as such are considered highly effective cash flow hedges. The swaps are measured at fair value which is determined by discounting the future cash flows using the market interest rate yield curves and credit risk inherent in the contracts. All fair value gains and losses on the swaps are taken directly to other comprehensive income and reclassified into the income statement when the interest expense is recognised.
During the period to 30 June 2017, payments transferred from equity to interest expense were $6,059,497 (2016: $5,963,084). In addition, during the period to 30 June 2017, amounts directly credited to equity were $1,874,768
(2016: $15,159,088 debited).
15. TRADE AND OTHER PAYABLES
Trade payables
Approved issuer levy accrued
Other payables
Add related party payables:
Other related parties (note 20)
Carrying amount of trade and other payables
Consolidated Group
2017 2016
NZD $000's NZD $000's
26,064 23,055
135 228
1,951 1,116
28,150 24,399
1,894 1,966
30,044 26,365
Page 21 EV
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
16. INTEREST-BEARING LOANS AND BORROWINGS
Accrued interest owing
Current portion of bank loan
Non current portion of bank loan
Amortised bank loan
Consolidated Group
2017 2016
NZD $000's NZO $000's
946 1,048
10,000
329,427 326,509
340,373 327,557
The carrying cost of the interest-bearing loans and borrowings is the amortised cost using the effective interest method
and does not represent the drawings on the facility at balance date as per note 2.2 (m).
The bank loans are secured by a fixed and floating charge over all assets of the Group. At 30 June 2017 the loans are
held pursuant to a three year revolving cash advance facility of $174,990,000 due to expire on 31 May 2020 and a five
year revolving cash advance facility of $180,000,000 due to expire on 31 May 2022.
Interest is payable on a quarterly basis. The interest rate is based on the 90 day New Zealand bank bill rate at the start of each interest period plus an applicable margin. At 30 June 2017 the average interest rate in effect was 3.38% (2016: 3.74%).
At 30 June 2017 the combined revolving cash advance facilities have a maximum commitment of $354,990,000
(2016:$355,000,000). At 30 June 2017 the Group had drawings on the facility of $330,000,000 (2016: $330,000,000).
At 30 June 2017 the undrawn credit line was $24,990,000 (2016: $25,000,000).
The Group has a working capital facility of $20,000,000 of which $10,000,000 was drawn at 30 June 2017 (2016
undrawn).
17. CONVERTIBLE PROMISSORY NOTES AND OTHER FINANCIAL LIABILITIES
(a) Notes Payable
Non - Current
Convertible promissory notes
Convertible promissory notes terms and conditions
Maturity
24 Oct 2026
Consolidated Group
2017 2016
NZO $000's NZO $000's
1,185,849 657,078
At 30 June 2017 there were 1,185,848,924 (2016: 659,589,037) convertible promissory notes on issue, each with a face value of $1.00.
A noteholder may seek the approval of the board to convert any number of the converting noteholder's remaining notes
specified by the converting shareholder.
The notes are convertible into newly issued shares of the Group at any time, at the discretion of the Board in specific circumstances (acting reasonably but having regard to the interests of the Noteholders and all of the Shareholders of
the Group), at the rate of one share per $1.00 of principal and accrued and unpaid interest. On 30 June 2017, 526,259,887 new notes were issued in payment of accrued and unpaid accrued interest at a rate of one note per $1
unpaid interest. At 30 June 2016 a conversion was completed of 115,941,868 promissory notes to ordinary shares
with the agreement of all Noteholders and Shareholders. The notes are prepayable or redeemable at any time before
expiration at the option of the Group.
From 1 July 2016 interest on the notes is calculated at 6.72% per annum (to 30 June 2016 10% per annum) based on the ten year fixed market rate in November 2016. Interest is payable quarterly on the last day of March, June,
September and December and the rate is reset every ten years.
Interest payments are funded from the quarterly net operating cash flows of the Group. Where an interest payment is not made due to insufficient net operating cash flows for that quarter, interest will accrue on the unpaid interest until
operating cash flows are sufficient to fund the payment.
The notes are an unsecured liability of the Group.
(b) Other financial liabilities
(i) Preference shares issued 1 December 2006
(ii) Preference shares issued 15 May 2009
Consolidated Group
2017 2016
NZO $000's NZO $000's
15,845
822
16,667
18,946
735
19,681
Page 22 EV
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
17. CONVERTIBLE PROMISSORY NOTES AND OTHER FINANCIAL LIABILITIES (continued)
(i) 70,200,003 $1 Preference shares issued 1 December 2006 with a contractual redemption date of 31 December2034
Fair value of preference shares redemption liability at 1 July
Fair value movement
Interest charges for the year
Fair value of 2006 preference shares redemption liability at 30 June
Consolidated Group
2017 2016
NZD $000's NZO $000's
18,946
1,389
15,845
14,412
3,313
1,221
18,946
The fair value of the preference shares (issued 1 December 2006) contractual redemption liability has been estimated using valuation techniques based on assumptions outlined in note 2.2 (v) and which are supported by
market sourced valuation inputs.
(ii) 5,832,442 $1 Preference shares issued 15 May 2009 with a contractual redemption date of 31 December 2034
Preference shares redemption liability at 1 July at amortised cost 1 July
Interest charges for the period
2009 preference shares redemption liability at 30 June
18. CONTRIBUTED EQUITY
Ordinary shares
Preference shares
Fair value preference shares at issue
Tax liability recognised on preference share equity at issue
(a) Ordinary Shares
( a )
( b )
Issued shares fully paid - 328,832,705 shares (2016: 328,832,705 shares)
Ordinary shares have equal voting rights and share
equally in dividends and surplus on winding up.
Movement in ordinary shares on issue
Beginning of the year
Movements this year - Share conversion of promissory notes
Ordinary share capital at end of year
17
Consolidated Group
2017
NZO $000's
735
87
822
323,000
70,200
370,401
323,000
323,000
323,000
2016
NZO $000's
657
78
735
323,000
70,200
('le.4:\3'}
370,401
323,000
207,058
115,942
323,000
Each ordinary share has identical terms, except that pursuant to the provisions of the Group's constitution, each
holder of 6.93% of the outstanding ordinary shares will have the right to appoint one director, and one additional
director for each additional 6.93% of the Group's outstanding shares held by such shareholder.
Holders of ordinary shares have one vote per share on all matters on which shareholders are entitled to vote and
otherwise will be entitled to receive dividends, when and if declared by the Group's board of directors.
(b) Preference Shares
Preference shares fully paid - 76,032,445 shares
Movement in preference shares on issue
Beginning of the year
Preference share capital at end of year
Total share capital at end of year
Consolidated Group
2017 2016
NZO $000's NZD $000's
70,200 70,200
47,401 47,401
47,401 47,401
370,401 370,401
Page 23 EV
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
18. CONTRIBUTED EQUITY (continued)
The preference shares are:
(i) Non voting (except in limited circumstances)
(ii) Have a redemption amount equal to its purchase price per share of $1.00
(iii) Redeemable on 31 December 2034 could be redeemed earlier at the option of the Group,
(iv) Have the right to receive dividends on the same basis as the ordinary shares, and rank senior to ordinary
shares in liquidation.
19. RETAINED EARNINGS AND RESERVES Consolidated Group
2017 2016
(a) Movements in retained earnings were as follows: NZD $000's NZD $000's
Balance at the beginning of the year
Net profit (loss)
Balance at the end of the financial year
(b) Other reserves
Intangible Asset revaluation reserve
Balance at the beginning of the year
Gain recognised on fair value of intangible asset
Income tax related to gain recognised on intangible asset
Balance at the end of the financial year
Cash flow hedge reserve
Balance at the beginning of the year
Amounts transferred to interest expense
Gain (loss) recognised on fair value of interest rate swap
Income tax related to gain (loss) recognised on interest rate swap
Balance at the end of the financial year
Total other reserves balance at the end of the financial year
(c) Nature and Purpose of Reserves
Intangible asset revaluation reserve
(338 '13)
50,720
256
48,937
6,059
1,875
37,354
This reserve records the fair value gain or loss on the intangible asset of emission trading carbon credits held.
Cash flow hedge reserve
r.o, UJ
11,204
43,908
50,720
) 5,963
33,425
This reserve records the gain or loss on a hedging instrument that is determined to be an effective cash flow hedge.
20. TRANSACTIONS WITH RELATED PARTIES
The following transactions have been entered into with related parties:
Hancock Natural Resource Group, Inc. ("HNRG") is the investment management company engaged to act on behalf of
the shareholders. Hancock Timber Resource Group, a business division of HNRG had made payments for the Group during the year. As at 30 June 2017 the Group owed $38,779 to Hancock Timber Resource Group for reimbursement
of these payments (2016: $nil).
The Group was charged $4,247,798 (2016: $4,296,922) in property management fees by Hancock Forest
Management (NZ) Limited, an indirect subsidiary of HNRG, during the year. The Group was also charged $10,365,681 (2016: $9,203,867) in harvesting and marketing fees by Hancock Forest Management (NZ) Limited during the year. As at 30 June 2017 the Group owed $1,813,815 (2016: $1,940,477) to Hancock Forest Management (NZ) Limited.
During the year the Group entered into transactions with a related party with common Directors, Tiaki Plantations Company, where shared costs have been recharged. As at 30 June 2017 the Group owed $41,161 (2016: $25,959) to
Tiaki Plantations Company.
Terms and conditions of transactions with related parties:
Sales and purchases from related parties are made at prices agreed between both parties.
Outstanding balances at year-end are unsecured, interest free and settlement occurs in cash.
Page 24 EV
TAUMATA PLANTATIONS LIMITED
Notes to the Financial Statements
For the Year Ended 30 June 2017
20. TRANSACTIONS WITH RELATED PARTIES (continued)
Directors' fees 2017 2016
NZO $000's NZD $000's
The following directors (or companies nominated by them) have received the following fees during the period.
Michael N Allen 55
Stephen J Baldwin (Unisuper Management Ply Limited)
John L Herbohn
Angeleen D Jenkins (Unisuper Management Pty Limited)
Ian S Ferguson
Sandra K LaBaugh (Teachers Insurance and Annuity Association of America)
A. Justin Ourso IV (Teachers Insurance and Annuity Association of America)
Julian J Widdup (Palisade Investment Partners Limited)
Total Directors Remuneration
21. COMMITMENTS AND CONTINGENCIES
Operating lease commitments
58
58
37
53
15
275
50
25
25
50
50
200
Future minimum land rental payable under non-cancellable operating leases as at 30 June are as follows:
Within one year
After one year but not more than five years
More than five years
Capital commitments
At 30 June 2017 the Group had no significant capital commitments (2016: nil).
Contingent Liabilities
Consolidated Group
2017 2016
NZD $000's
4,332
16,618
47,068
68,018
NZD $000's
4,836
17,660
45,381
67,877
The Group has recognised an intangible asset for the NZ Emission Units (NZU's) allocated for carbon sequestered in
post-1989 forests. A contingent liability exists when surrender obligations from harvesting and deforestation exceed the
number of units held by the Group. There is no contingent liability as the Group has now deregistered from the post-
1989 emissions trading scheme and all surrender obligations have been met.
The Group has also recognised an intangible asset for NZU's on pre-1990 forests. The Board of Directors consider
there is no contingent liability relating to these units as there is no intention to change the land use from forestry.
22. AUDITORS' REMUNERATION
Amounts received or due and receivable by Ernst & Young New Zealand for:
- An audit of the financial statements of the entity
- An agreed upon procedure of the risks associated
with reliance on third party
23. DIVIDEND PAID AND PROPOSED
Consolidated Group
2017 2016
NZD $000's NZD $000's
156
156
149
7
156
There has been no dividends paid or proposed during the year ended 30 June 2017 (2016: nil).
24. EVENTS SUBSEQUENT TO BALANCE DATE
There have been no material events subsequent to balance date.
Page 25 E.Y
A member firm of Ernst & Young Global Limited
Chartered Accountants
Independent auditor’s report to the Shareholders of Taumata Plantations Limited Report on the audit of the financial statements
Opinion
We have audited the financial statements of Taumata Plantations Limited (“the Company”) and its subsidiaries (together “the Group”) on pages 1 to 25, which comprise the consolidated statement of financial position of the Group as at 30 June 2017, and the consolidated statement of comprehensive income, consolidated income statement, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended of the Group, and the notes to the financial statements including a summary of significant accounting policies.
In our opinion, the consolidated financial statements on pages 1 to 25 present fairly, in all material respects, the consolidated financial position of the Group as at 30 June 2017 and its consolidated financial performance and cash flows for the year then ended in accordance with New Zealand equivalents to International Financial Reporting Standards Reduced Disclosure Regime.
This report is made solely to the Company's shareholders, as a body. Our audit has been undertaken so that we might state to the Company's shareholders those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's shareholders as a body, for our audit work, for this report, or for the opinions we have formed.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other than in our capacity as auditor we have no relationship with, or interest in, the Company or any of its subsidiaries. Partners and employees of our firm may deal with the Group on normal terms within the ordinary course of trading activities of the business of the Group.
Information other than the financial statements and auditor’s report
The directors of the Company are responsible for the Annual Report, which includes information other than financial statements and auditor’s report which is expected to be made available to us after the date of this auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
A member firm of Ernst & Young Global
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated.
If, based upon the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Directors’ responsibilities for the financial statements
The directors are responsible, on behalf of the Company, for the preparation and fair presentation of the consolidated financial statements in accordance with New Zealand equivalents to International Financial Reporting Standards Reduced Disclosure Regime, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing on behalf of the entity the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (New Zealand) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements is located at the External Reporting Board website: https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities. This description forms part of our auditor’s report.
Auckland 18 September 2017