REA Finance B.V.
REA Finance B.V.: Annual accounts for 2016
REA Finance B.V. (RE20)
REA Finance B.V. Amsterdam Annual Accounts for the year ended December 31, 2016
Amstelveenseweg 760 1081 JK Amsterdam the Netherlands Report of the management Management herewith presents to the shareholder the audited accounts of REA Finance B.V. (hereinafter ‘the Company’) for the year 2016. General Overview of activities The Company has loans receivable from REAH totalling £43.111 million, a Tranche A loan of £11.259 million bearing interest at 9.6783 per cent and repayable on 20 December 2017, and a Tranche B loan of £31.852 million bearing interest at 8.9283 per cent and repayable on 20 August 2020. There is also a loan from REAH to the Company of £2.460 million bearing interest at 8.5 per cent and repayable on 20 December 2017. Results Going concern The repacking of the PT Bank DBS Indonesia (‘DBS’) facility resulted in a much improved profile of term loan repayments. As at 31 December 2016, bank debt due within one year reduced to $28.6 million from $50.9 million at 31 December 2015. Moreover, of such $28.6 million, $25.5 million represented drawings under the group’s revolving working capital facilities. The directors have no reason to believe that these facilities will not be rolled over at the end of July 2017 when the facilities fall due for renewal. The directors are confident that the group will have the cash resources to meet these commitments and the capital expenditure needed to maintain existing immature plantings and for other routine capital requirements. However, depending upon the level of CPO prices and operational performance during the remainder of 2017, some further funding may be required to enable the group to continue its expansion programme at the level that it would like. Accordingly, the group actively engaged in discussions to obtain new longer term debt financing to replace, or replace in part the maturing notes. The directors are optimistic of a successful outcome to these discussions. As respects funding risk, the group has material indebtedness in the form of bank loans and listed notes. Some $3.1 million of bank term indebtedness falls due for repayment during 2017, and a further $25.5 million of revolving working capital lines fall due for renewal during the same period. In addition, £8.3 million of sterling notes fall due in December 2017. A further £31.9 million sterling notes will become repayable in August 2020. In view of the material proportion of the group’s indebtedness failing due in the period 31 December 2020, as described above, the directors have chosen this period for their assessment of the long-term viability of the group. In April 2017, PT Dharma Satya Nusantara Tbk, the non-controlling shareholder in PT REA Kaltim Plantations (‘REA Kaltim’) provided further loans of $16.6 million to REA Kaltim’s plantation subsidiaries. The group continues in discussions to refinance with longer term debt indebtedness falling due in 2017 and 2018. Furthermore, the directors have no reason to believe that the revolving working capital facilities falling due in 2017 and 2019 will not be rolled over when these facilities fall due for renewal. Limited further capital expenditure will be required on the group’s mills until construction is commenced on the fourth mill. This is scheduled for 2017 but could be postponed if cash constraints so require. In 2020 consideration will be given to proposals to the holders of the sterling notes to refinance these with securities of longer duration. The group holds in treasury $9.9 million of dollar notes 2022 which it acquired in the placing in December 2016; the group plans to sell these over time as market condition permit. Should funding be required pending completion of any of the initiatives above, the group will seek to place for cash a limited number of ordinary and/or preference shares, authority for which will be sought as and when appropriate. The directors fully expect that the foregoing measures will refinance or permit the group to repay, the group indebtedness falling due for repayment during the period of assessment. As the benefits of recent improvements in operational efficiencies start to flow through, with CPO prices likely to remain at current levels, the group’s plantation operations can be expected to generate increasing cash flows going forward. Based on the foregoing and after making enquiries, the directors therefore have a reasonable expectation the company and the group have adequate resources to continue in operational existence for the period 31 December 2020 and to remain viable during that period. Having considered these statements by the director of REAH the directors of the Company has a reasonable expectation that REAH will be able to repay its indebtedness. Risks and uncertainties * the guarantee given by REAH and R.E.A. Services Limited (‘REAS’), a subsidiary company of REAH incorporated in the United Kingdom, in favour of the Note Holders; and The LRA reflects the intention of the parties thereto that the Company, in relation to its financing activities, should (i) meet the minimum risk requirements of article 8c, paragraph 2, of the Dutch Corporate Income Tax Act and (ii) not be exposed to risk in excess of the Minimum Risk Amount (‘MRA’). For these purposes the MRA is 1 per cent of the aggregate amounts outstanding under the loan agreement between the Company and REAH. In relation to point (i) above, the Company’s capital and reserves as at 31 December 2016 complied with the minimum risk requirements of article 8c, paragraph 2, of the Dutch Corporate Income Tax Act. In addition, pursuant to the LRA, REAH and REAS limited their rights of recourse against the Company in respect of any calls upon their guarantee of the 2017 sterling notes and the 2020 sterling notes. Risks and uncertainties with respect to the group’s operations are low. All of the group’s operations are located in Indonesia and the group is therefore significantly dependent on economic and political conditions in Indonesia. In the recent past Indonesia has been stable and the Indonesian economy has continued to grow. In addition the group has never been adversely affected by political unrest. The introduction of exchange controls or other restrictions on foreign owned operations in Indonesia could lead to restrictions on the transfer of profits from Indonesia to the UK with potential negative implications for the servicing of the obligations in relation to the sterling notes but the group is not aware that there are any plans for this under current political conditions. Mandatory reduction of foreign ownership of Indonesian plantation operations could lead to forced divestment of interests in Indonesia. However, while the group accepts there is a significant possibility that foreign owners may be required over time to partially divest ownership of Indonesian oil palm operations, it has no reason to believe that such divestment would be at anything other than market value.
Report of the management (continued) Risk management objectives The Company does not enter into or trade other financial instruments for any purpose. The Company’s overheads are denominated mostly in euros and sterling. The fixed margin referred to above, which is derived in sterling, is formulated to cover all the overheads and to leave a residual margin as compensation for assuming the limited risk under the LRA. The Company does not seek to hedge the minimal foreign currency risk implicit in these arrangements. The principal credit risk is described in detail under ‘Risks and uncertainties’ above. Deposits of surplus cash resources are only made with banks with high credit ratings. Employees Research and development Audit Committee The AC is formed by members of the Company’s supervisory board (‘SB’) or by non-executive management board members. Because the Company falls within the definition of a PIE it is in principle obliged to establish an AC. Although the ED provides certain exemptions for establishing an AC for securitisation vehicles (‘SVs’), under the IR the Company is not considered to be a SV and therefore can not make use of the exemption to install an AC. In the light of extensive research and discussions between, amongst others, the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten) and several legal advisors and audit firms, there are certain matters to be considered with respect to the requirement to establish an AC: * The activities of the Company and those of a SV are very similar; The general view in the Netherlands is that it could not have been the legislators’ intention for financing vehicles, such as the Company, not to fall within the description of a SV and thus not be exempted. In view of the above reasons, management currently does not consider it to be in the Company’s best interest, nor has it taken steps, to implement an AC. Report of the management (continued) Future outlook Management representation statement Amsterdam, April 28, 2017 Corfas B.V. Financial Statements Balance sheet as at 31 December 2016
Profit and loss account for the year ended 31 December 2016
The accompanying notes are an integral part of this profit and loss account.
The functional currency of the Company is GBP, which is also the presentation currency of the accounts. Basis of presentation a) Foreign currencies Assets and liabilities in foreign currencies are converted into pounds sterling at the exchange rates prevailing on the balance sheet date. Transactions in foreign currencies are translated into pounds sterling at the exchange rates in effect at the time of the transactions. The resulting exchange rate differences are taken to the profit and loss account, with the exception of the share capital which is included in Capital and reserves under Translation reserve. The exchange rates used in the annual accounts are: 31.12.16 31.12.15 b) Loans and receivables Loans and receivables are stated at their face value, less an allowance for any possible uncollectible amounts. c) Other assets and liabilities Other assets and liabilities are shown at face value, unless stated otherwise in the notes. d) Recognition of income Income and expenses, including taxation, are recognized and reported on the accruals basis. e) Corporate income tax Taxation on the result for the period comprises both current taxation payable and deferred taxation. No current taxation is provided if, and to the extent that, profits can be offset against losses brought forward from previous periods. Deferred tax assets on losses are recognized to the extent that it is probable that taxable profits will be available against which the deferred tax assets can be utilized. Current tax liabilities are computed taking into account all available tax credits. Going Concern The repacking of the PT Bank DBS Indonesia (‘DBS’) facility resulted in a much improved profile of term loan repayments. As at 31 December 2016, bank debt due within one year reduced to $28.6 million from $50.9 million at 31 December 2015. Moreover, of such $28.6 million, $25.5 million represented drawings under the group’s revolving working capital facilities. The directors have no reason to believe that these facilities will not be rolled over at the end of July 2017 when the facilities fall due for renewal. The directors are confident that the group will have the cash resources to meet these commitments and the capital expenditure needed to maintain existing immature plantings and for other routine capital requirements. However, depending upon the level of CPO prices and operational performance during the remainder of 2017, some further funding may be required to enable the group to continue its expansion programme at the level that it would like. Accordingly, the group actively engaged in discussions to obtain new longer term debt financing to replace, or replace in part the maturing notes. The directors are optimistic of a successful outcome to these discussions. As respects funding risk, the group has material indebtedness in the form of bank loans and listed notes. Some $3.1 million of bank term indebtedness falls due for repayment during 2017, and a further $25.5 million of revolving working capital lines fall due for renewal during the same period. In addition, £8.3 million of sterling notes fall due in December 2017. A further £31.9 million sterling notes will become repayable in August 2020. In view of the material proportion of the group’s indebtedness failing due in the period 31 December 2020, as described above, the directors have chosen this period for their assessment of the long-term viability of the group. In April 2017, PT Dharma Satya Nusantara Tbk, the non-controlling shareholder in PT REA Kaltim Plantations (‘REA Kaltim’) provided further loans of $16.6 million to REA Kaltim’s plantation subsidiaries. The group continues in discussions to refinance with longer term debt indebtedness falling due in 2017 and 2017. Furthermore, the directors have no reason to believe that the revolving working capital facilities falling due in 2017 and 2017 will not be rolled over when these facilities fall due for renewal. Limited further capital expenditure will be required on the group’s mills until construction is commenced on the fourth mill. This is scheduled for 2017 but could be postponed if cash constraints so require. In 2020 consideration will be given to proposals to the holders of the sterling notes to refinance these with securities of longer duration. The group holds in treasury $9.9 million of dollar notes 2022 which it acquired in the placing in December 2016; the group plans to sell these over time as market condition permit. Should funding be required pending completion of any of the initiatives above, the group will seek to place for cash a limited number of ordinary and/or preference shares, authority for which will be sought as and when appropriate. The directors fully expect that the foregoing measures will refinance or permit the group to repay, the group indebtedness falling due for repayment during the period of assessment. As the benefits of recent improvements in operational efficiencies start to flow through, with CPO prices likely to remain at current levels, the group’s plantation operations can be expected to generate increasing cash flows going forward. Based on the foregoing and after making enquiries, the directors therefore have a reasonable expectation the company and the group have adequate resources to continue in operational existence for the period 31 December 2020 and to remain viable during that period. Having considered this statements by the directors of REAH the directors of the Company have a reasonable expectation that REAH will be able to repay its indebtedness.
Related party transactions Notes to the specific items of the balance sheet
REAH, the Company’s parent company, is a company incorporated in the United Kingdom whose share capital is listed on the London Stock Exchange. The loans to REAH comprise:
The Tranche A loan to REAH bears interest at 9.6783 per cent and is repayable on 20 December 2017.
All amounts are due within one year.
The sterling loan from REAH incurs interest at 8.5% and is repayable on 20 December 2017. The loan from REAH to the Company was provided during 2011 in order to finance the re-purchase of £2,460,000 nominal of sterling notes. Management has estimated the fair value of this loan on the same basis as the loan from the Company to REAH (see note 1) resulting in a fair value of £2.4m at 31 December 2016 (2015: £2.6m).
The sterling notes are listed on the London Stock Exchange and are irrevocably and jointly guaranteed by REAH and by REAS.
Unless previously redeemed or purchased and cancelled the 2017 sterling notes are repayable on 31 December 2017. The 2020 sterling notes are repayable on 31 August 2020. The fair value of the sterling notes has been estimated by management at £39.8m (2015: £39.2m) based on the latest price at which the sterling notes were traded prior to the balance sheet date. 9. Capital and reserves
Audit fees
The Company has concluded an Advance Pricing Agreement and an Advance Tax Ruling with the Dutch fiscal authorities dated 21 February 2007, as amended by Addenda dated 11 March 2009 and 29 July 2010. The Company’s financing activities are based on a transfer pricing report and are confirmed to be conducted at arm’s length in the Advance Pricing Agreement. The profit on such financing activities comprises interest received on loans to group entities, less interest payable on loans from group and external entities and operating expenses relating to such activities. Dutch corporate income tax is assessable on such profit. The Dutch corporate income tax rate below an amount of EUR 200,000 is 20%. 16. Staff numbers and employment costs 17. Directors 18. Ultimate Holding Company Amsterdam, April 28, 2017 Corfas B.V. Other information Statutory rules relating to the appropriation of results The general meeting has the authority to make distributions. If the Company is required by law to maintain reserves, this authority only applies to the extent that the equity exceeds these reserves. No resolution of the general meeting to distribute shall have effect without the consent of the management board. The management board may withhold such consent only if it knows or reasonably should expect that after the distribution, the Company will be unable to continue the payment of its debts as they fall due. Appropriation of the result for the year Subsequent events Click here to enter text.Independent auditor’s report REPORT ON THE FINANCIAL STATEMENTS 2016 INCLUDED IN THE ANNUAL ACCOUNTS
Our Opinion 1. The balance sheet as at 31 December 2016. 2. The profit and loss account for 2016. 3. The notes comprising a summary of the accounting policies and other explanatory information. Basis for our opinion Materiality Our key audit matters Valuation of receivables Response Based on the work performed, as mentioned above, we observed that the impairment analysis for these receivables is appropriate. We also determined that the disclosure of the fair value in relation to these receivables is appropriate. REPORT ON THE OTHER INFORMATION INCLUDED IN THE ANNUAL ACCOUNTS – Management Board’s Report – Other Information as required by Part 9 of Book 2 of the Dutch Civil Code Based on the following procedures performed, we conclude that the other information: – Is consistent with the financial statements and does not contain material misstatements. – Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code. We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements. Click here to enter text.DESCRIPTION OF RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
Responsibilities of management and the management board for the financial statements Our responsibilities for the audit of the financial statements – Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. – Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. – Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. – Concluding on the appropriateness of management’s use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern. – Evaluating the overall presentation, structure and content of the financial statements, including the disclosures. – Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and/or the risk profile of the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of financial information or specific items. Amsterdam, April 28, 2017 Deloitte Accountants B.V. Signed on the original: A.J. Kernkamp |
Language: | English |
ISIN: | GB00BYY8MM32, GB00B1FWDD12 |
Category Code: | ACS |
TIDM: | RE20 |
OAM Categories: | 1.1. Annual financial and audit reports |
Sequence No.: | 4129 |
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