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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Phaunos Timber | LSE:PTF | London | Ordinary Share | GG00BFX4LT97 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.51 | 0.47 | 0.55 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Jul 2019 to Jul 2024
TIDMPTF
RNS Number : 3229A
Phaunos Timber Fund Limited
10 September 2018
10 September 2018
PHAUNOS TIMBER FUND LIMITED (the "Company")
CORRECTION OF UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2018
This announcement replaces the Half-year Report announcement issued by the Company at 6.31 p.m. on Friday, 7 September 2018 under RNS number 1941A.
The Chairman's Statement contained a typographical error in the paragraph 'Asset Sales Process'. The relevant sentence incorrectly referred to an estimate of the realisable value range per share as at 30 April of US$45-$0.57, whereas the range as at that date should have been stated to be US$0.45-US$0.57.
The full announcement including the amended text appears below.
PHAUNOS TIMBER FUND LIMITED
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2018
Phaunos Timber Fund Limited (the "Company"), the specialist authorised closed-ended timberland and timber-related investment fund, today announces its unaudited interim results for the period ended 30 June 2018.
The Company's unaudited interim condensed consolidated financial statements for the period ended 30 June 2018 has been reproduced in full below and is available from the Company's website (www.phaunostimber.com) under 'Financial Reports' in the Investor Information section of the website. A copy has also been submitted to the National Storage Mechanism and it will shortly be available for inspection at www.morningstar.co.uk/uk/nsm.
For further information, please contact:
Phaunos Timber Fund Limited
Richard Boléat (Chairman) +44 (0)1534 625522 JTC Fund Solutions (Guernsey) Limited (Secretary) +44 (0)1481 702400
Winterflood Investment Trusts (Corporate Broker)
Joe Winkley
Neil Langford +44 (0)20 3100 0000
Notes to Editors
Established in 2006, Phaunos Timber Fund Limited invests in a concentrated, but diversified portfolio of timberland and timber-related investments. It was announced on 19 June 2017 that the Company's continuation resolution had not been passed. The Board is now conducting an orderly realisation of the assets of the Company.
The Company is a Guernsey-domiciled authorised closed-ended investment scheme, authorised by the Guernsey Financial Services Commission under section 8 of The Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended) and the Authorised Closed-ended Investment Schemes Rules 2008 made thereunder. The Company's ordinary shares are traded on the Main Market of the London Stock Exchange.
Phaunos Timber
Fund Limited
Unaudited Interim Condensed Consolidated Financial Statements
For the period ended 30 June 2018
Phaunos Timber Fund Limited (the "Company" or "Phaunos") holds a portfolio of timber assets located principally in New Zealand, Brazil and Uruguay. Following the loss of the Continuation Vote at the 2017 Annual General Meeting on 19 June 2017, the Company's investment policy was amended to permit an orderly realisation of its assets. The Company is now self-managed by its board of directors, supported by a team of executives and service providers within the financial, forestry management and asset sale functions.
Chairman's Statement............................................................................................................. 2
Investment Strategy, Objective and Policy.............................................................................. 4
Directors' Report..................................................................................................................... 5
Statement of Directors' Responsibilities................................................................................. 8
Interim Condensed Consolidated Statement of Comprehensive Income............................... 9
Interim Condensed Consolidated Statement of Financial Position....................................... 10
Interim Condensed Consolidated Statement of Changes in Equity...................................... 11
Interim Condensed Consolidated Statement of Cash Flows................................................ 12
Notes to the Interim Condensed Consolidated Financial Statements.................................. 14
Investor Information............................................................................................................... 31
Directors and Service Providers........................................................................................... 32
Chairman's Statement
Dear Shareholder,
Since I last wrote to you in a financial statements context on 30 April 2018, it has been an eventful period for the Company.
Asset Sales Process
The Company has continued to execute its shareholder mandated asset sales process (the "Asset Realisation Process") and has received a range of high quality non-binding offers from institutional parties keen to acquire our assets. Those offers and the formal evaluation of the progress made at our New Zealand interests that I alluded to in my 30 April 2018 statement, enabled us to lift our estimate of the realisable value range per share from US$0.45-US$0.57 at 30 April to US$0.54-US$0.60 presently (the "Updated Asset Realisation Range"). All of the background to the current Updated Asset Realisation Range is set out in our response circular published on 14 August 2018. The Asset Realisation Process has now moved into a new phase where those bidders are preparing to commence, and in some cases have already commenced, onsite due diligence, with a view to binding offers during Q4 of 2018. We look forward to moving that process forward with the support of Pöyry Capital, our sales process advisors.
Offers for the Company
Concurrently, the Company has received both a firm all-cash offer at US$0.49 per Phaunos share from Stafford Capital Partners ("Stafford"), and just yesterday an indication that Catchmark Timber Trust Inc, a US timber REIT, is considering making an offer in shares at US$0.57 per Phaunos share. Both of these approaches are unsolicited. Nevertheless, we are pleased that both of these parties have taken an interest in our assets and will be continuing a dialogue with them as the UK Takeover Code timetable, which was triggered by the firm offer from Stafford, moves along. Shareholders will be well aware that the board's view of the Stafford offer is that it significantly undervalues the Company, consistent with our Updated Asset Realisation Range assessment. The board has announced it intends to engage with Catchmark and will evaluate its proposal in due course.
Litigation - New Zealand
We announced on 28 August 2018 that a subsidiary of Rayonier Inc, the majority owner of our New Zealand interests, had issued proceedings in the Auckland High Court alleging a breach by Phaunos of confidentiality, notice and consultation obligations in the shareholders agreement between the parties in relation to their respective interests in the Matariki Forestry Group. To repeat the message delivered in our announcement of 28 August, the board does not regard Rayonier's claims as having merit. Accordingly, it will endeavour to have a Court deal with these claims urgently, including by taking a pre-emptive step such as a strike out application if necessary and will continue to progress the Asset Realisation Process.
Chairman's Statement (continued)
Next Steps
Your board's overriding objective is to achieve a balance between delivering maximum value and making timely returns of capital to Shareholders, consistent with the mandate given to it by shareholders in 2017, and we are focussed on that. Our mind is not closed to any outcome which delivers that, but for now, we continue to believe that completion of Asset Realisation Process represents the best means of achieving that objective, for the reasons that we have articulated publicly. The board is fortunate to have the support of an excellent team of advisors whose industriousness, diligence and experience have enabled clarity of debate and comfort in the guidance that we have delivered to you. I have personally enjoyed many direct interactions with shareholders keen to understand the impact of recent developments on the value of the Company and look forward to continuing those dialogues as matters move forward. We will report further to you on all of the matters set out above consistent with the Company's legal and regulatory obligations.
Yours sincerely,
Richard Boléat
Chairman of Phaunos Timber Fund Limited
Investment Strategy, Objective and Policy
Further to the loss of the Continuation Vote at the 2017 AGM, shareholders subsequently approved a revised investment objective and policy of the Company at an Extraordinary General Meeting held on 17 August 2017. The revised policy states as follows:
Investment Objective
The Company will be managed with the intention of realising all remaining assets in the Portfolio, in a prudent manner consistent with the principles of good investment management with a view to returning capital to the Shareholders in an orderly manner.
Investment Policy
The managed wind-down will be effected with a view to the Company realising all of its investments in a manner that achieves a balance between maximising the value from the Company's investments and making timely returns of capital to Shareholders. The Company may sell its investments either to co-investors in the relevant asset or to third parties, but in all cases with the objective of achieving the best available price in a reasonable time scale.
The Company will cease to make any new investments or to undertake capital expenditure except where necessary in the reasonable opinion of the Board in order to protect or enhance the value of any existing investments or to facilitate orderly disposals.
Any cash received by the Company as part of the realisation process prior to its distribution to Shareholders will be held by the Company as cash on deposit and/or as cash equivalents.
The Company will not undertake new borrowing other than for short-term working capital purposes.
Directors' Report
Update on the Asset Realisation Process
Matariki
The Board is pleased to confirm that selected bidders for the Company's interest in the Matariki asset have now been sent process letters for phase 2 of the process and provided with access to a comprehensive virtual data room including information on the forest assets and operations, legal documentation, financial statements and other related financial information.
Pöyry will be coordinating the due diligence process as well as site visits, with binding offers due on or around early November 2018.
As announced on 28 August 2018, the Board intends to defend itself vigorously against the claims brought by Rayonier, which it continues to believe are without merit.
An update on timing of the Matariki disposal will be provided in due course. In the meantime, the potential purchasers of Matariki remain actively engaged with Phaunos and its advisers.
Latin American Assets
Selected bidders for the Latin American Assets (excluding the Company's interest in Aurora Forestal) have now been provided with access to a virtual data room containing comprehensive information on the assets.
This next stage of the sale process will include site visits, inventory checks and meetings with local forest management and operators.
Following the receipt of binding bids, the Board expects completion for the sale of the Latin American Assets (18% of the Portfolio Value), assuming a process of 60-120 days, between Q4 2018 and Q1 2019.
Aurora Forestal ("AF")
The Board reminds Shareholders that following delivery of the Voluntary Exit notice, the Company entered into discussions with AF's majority shareholder to negotiate a possible disposal of its equity interest in AF.
Whilst the Board cannot comment on the outcome of its discussions with AF's majority shareholder at this stage, it notes that negotiations are progressing well and various options are being explored to effect an exit.
GreenWood Tree Farm ("GTFF")
As mentioned in the Response Circular, the disposal of the Company's interest in GTFF (4% of the Portfolio Value) is subject to a separate liquidation procedure.
Similarly to Phaunos, GTFF is currently in the process of realising its portfolio. Expressions of interest and / or non-binding bids have been received for all assets in the portfolio.
Directors' Report (continued)
NTP Timber Plus ("NTP")
The Company's interest in NTP was realised on 27 June 2018, above its reported NAV as at 31 December 2017.
Phaunos Ongoing Costs
The board would like to take the opportunity to provide further background related to estimated Phaunos's running costs going forward.
In general, timber sales in the wholly-owned South America businesses are expected to cover their operational costs until sale. Investment operating costs, mostly incurred at the parent level in Guernsey, are expected to run at $2.1m to $2.4m on an annualised basis going forward and are expected to tail off as the Asset Realisation Process runs to conclusion. The expected expense burden referenced above includes all directors fees, staff costs, listing fees, administrator fees, audit fees, insurance, travel and all other regular expected expenditure.
These ongoing costs, alongside expected returns from Matariki, were taken into account when determining the expected Asset Realisation Range published in the response circular published on 14 August 2018.
Principal Risks and Uncertainties
The Directors have carried out a robust assessment of the principal risks facing the Company, with a focus principally on the risks associated with the realisation of the asset portfolio.
In addition, the Directors review quarterly cash flow forecasts and NAV estimates to assess the liquidity and solvency of the Group. These reviews also include quarterly updates on current and potential litigation and tax uncertainties.
The purpose of the following principal risks table is primarily to summarise those matters that may materially influence the asset disposal process and the values which may be achieved through that process.
Hot Features
Premium
Risk Mitigation
Valuation uncertainty
Valuations determined by the The Board receives annual independent
board represent their current valuations for all material
best estimate of the likely timber assets to guide valuation
range of gross realisation proceeds assumptions.
from asset disposals. Given
that the timber assets held The board also seeks counsel
by the Group are illiquid, that from its professional advisors
there are few comparable historic and monitors the market in timber
transactions and that the universe assets worldwide in order to
of possible buyers of those inform its ongoing estimation
assets is limited to a small process.
group of market participants
and differentiated asset to
asset, the Board's estimates
of gross realisation proceeds
are inherently uncertain. Valuation
subjectivity is amplified in
the current wind-down scenario.
----------------------------------------
Foreign exchange risk
The Company's functional currency Export orientated timberland
is US$. Investments are primarily investments provide an internal
held in New Zealand Dollar (NZ$) hedge, insofar as depreciation
and Brazilian Real (BRL). in currency supports increased
export volumes.
Fluctuation in foreign exchange Currency hedging may be utilised
rates between these currencies where the board determines that
impacts the NAV of the Company. it is in the interest of the
Company to do so, recognising
that more volatile currency
pairs, such as USD/BRL, tend
to attract significant hedging
costs and also require cash
collateralisation.
The Company has not conducted
any currency hedging activities
during the year under review
and does not presently anticipate
doing so.
----------------------------------------
Directors' Report (continued)
Principal Risks and Uncertainties (continued)
Risk Mitigation
Political, Tax and Regulatory
Risk The board reviews the appropriateness
Changes in the political, regulatory of the Company's legal structure,
and tax status of each subsidiary including the nature of the
or changes in legislation in holding and intermediary companies
investment or home markets could to minimise potential tax on
impact on the ability of the the Group.
Company to realise its assets
at their full value on a timely The board, assisted by its legal
basis. representatives, takes a proactive
In particular, the disposal approach to understanding changes
of the Company's New Zealand in the political, regulatory
assets are impacted by the need and taxation environments within
for a potential buyer of those the jurisdictions it operates
assets to comply with the requirements in to ensure potential risks
of the New Zealand Overseas are understood and minimised.
Investment Office ("OIO") as
discussed elsewhere in this Sale can be structured with
report. onerous guarantees on the buyer,
There is risk of post-sale tax in order to avoid the potential
assessments in Brazil, whereby tax.
buyers and sellers can be held
jointly liable for certain taxes,
even post-sale.
----------------------------------------
Market risk
There exists a risk of a significant The Board has set an ambitious
market disruption or geo-political timetable and is determined
event between the time of this to remain on schedule to minimise
report and the eventual sale the risk of a major geopolitical
of assets. event affecting the sales process.
----------------------------------------
Sale execution risk
The sale of a diverse portfolio The Board has contracted a wide
across multiple jurisdictions array of parties, with various,
and geographies presents a complex complementary skillsets.
sales transaction with many Legal and tax advice is sought
variables. in all operating jurisdictions.
----------------------------------------
Timber infestations
In the lead-up to sale, an infestation All contractors previously operating
would prove burdensome. on the various properties have
been retained and Chief Forestry
Officers employed to oversee
forestry operations.
----------------------------------------
Warranties on sale
The jurisdictions in which some The Company is marketing the
of the properties are located investments as widely as possible
have slow-moving administrative and working to resolve any issues
and legal regimes, creating that may preclude a clean exit.
the possibility of guarantees,
warranties and escrow accounts.
----------------------------------------
Rayonier litigation
The outcome of litigation is Phaunos believes Rayonier's
inherently unpredictable, notwithstanding claim to be without merit and
the strength of one's legal New Zealand legal counsel has
position. A risk exists that been instructed to vigorously
Rayonier could be successful defend the Company's rights.
in their claim against the Company.
----------------------------------------
Timing
Further to the Rayonier legal Phaunos is exploring avenues
dispute referenced above, and to progress the legal dispute
the Stafford take-over, the with Rayonier promptly and is
risk is the envisaged time-table progressing the Asset Realisation
gets extended beyond what was Process concurrently.
originally envisaged.
----------------------------------------
Statement of Directors' Responsibilities
The Directors are responsible for preparing this Unaudited Interim Condensed Consolidated Financial Statements in accordance with applicable law and regulations.
The Directors confirm that to the best of their knowledge:
-- The Unaudited Interim Condensed Consolidated Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and
-- The Unaudited Interim Condensed Consolidated Financial Statements include a fair review of the information required by:
- DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the Unaudited Interim Condensed Consolidated Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
- DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position and performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
Signed on behalf of the Board by:
Richard Boléat Jonathan Bridel Chairman Director
7 September 2018
Interim Condensed Consolidated Statement of Comprehensive Income
for the period ended 30 June 2018
30 June 2018 30 June 2017
Unaudited Unaudited
Notes US$'000 US$'000
Revenue from timber operations 4 1,023 576
Cost of sales 5 (497) (282)
------------- -----------------
Gross profit 526 294
Other operating income 101 31
Timber operating expenses 6 (1,101) (1,328)
------------- -----------------
Timber operating loss (474) (1,003)
Investment income 7 241 6,451
Investment operating expenses 8 (2,535) (3,115)
Operating (loss)/profit (2,768) 2,333
Net gain/(loss) on financial assets
at fair value through profit or
loss 12,401 (933)
Revaluation and impairment of biological
assets and land 25 -
Net realised loss on disposal of
assets - (4)
Profit before tax 9,658 1,396
Income tax expense 9 (584) (2,113)
Profit/(loss) for the period 9,074 (717)
============= =================
Other comprehensive income loss
Other comprehensive loss to be
reclassified to profit or loss
in subsequent years (net of tax):
Exchange differences on translation
of foreign operations (5,781) (514)
Other comprehensive loss not to
be reclassified to profit or loss
in subsequent years (net of tax):
Reversal of revaluation of land (1,310) (1,194)
Other comprehensive loss, net of tax (7,091) (1,708)
============= =================
Total comprehensive income/(loss),
net of tax 1,983 (2,425)
============= =================
Basic and diluted earnings/(loss) Cents Cents
per Ordinary Share for the period 10 1.80 (0.13)
The notes on pages 14 to 30 form an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.
Interim Condensed Consolidated Statement of Financial Position
as at 30 June 2018
30 June 2018 31 Dec 2017
Unaudited Audited
Notes US$'000 US$'000
Assets
Current Assets
Financial assets at fair value
through profit or loss 11 193,355 185,323
Biological assets 11 13,896 15,254
Land 11 26,830 30,713
Cash and cash equivalents 13 22,322 47,448
Trade and other receivables 14 5,084 7,261
Other assets 33 67
Inventories - 8
261,520 286,074
TOTAL ASSETS 261,520 286,074
============= ==============
Equity and Liabilities
Equity
Issued capital 17 407,468 443,866
Treasury shares 17 - (11,398)
Retained earnings (200,270) (209,344)
Other components of equity 50,107 57,198
TOTAL EQUITY 257,305 280,322
------------- --------------
Current Liabilities
Trade and other payables 15 1,082 1,823
Provisions 16 3,133 3,929
--------------
4,215 5,752
------------- --------------
TOTAL LIABILITIES 4,215 5,752
------------- --------------
TOTAL EQUITY AND LIABILITIES 261,520 286,074
============= ==============
Ordinary Shares in Issue 17 498,360,117 545,529,832
US cents US cents
Net Asset Value Per Ordinary
Share 52 51
The Unaudited Interim Condensed Consolidated Financial Statements on pages 9 to 13 were approved by the Board of Directors on 7 September 2018 and signed on its behalf by:
Richard Boléat Jonathan Bridel Director Director
The notes on pages 14 to 30 form an integral part of these Unaudited Interim Condensed Consolidated Financial Statements
Interim Condensed Consolidated Statement of Changes in Equity
for the period ended 30 June 2018
Attributed to equity holders of the parent
------------------------------------------------------------------------------------
Foreign
currency Land Warrant
Issued Treasury Retained translation revaluation Other Instrument Total
Note capital Shares earnings reserve reserve reserves reserve Equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1
January 2017 443,866 (10,707) (196,362) (54,440) 5,859 110,418 2,683 301,317
Loss for the
period - - (717) - - - - (717)
Other
comprehensive
income - - - (514) - - - (514)
--------- --------- ---------- ------------ ------------ --------- ----------- ---------
Total
comprehensive
income/(loss) - - (717) (514) - - - (1,231)
Buy back of
Ordinary
Shares 17 - (691) - - - - - (691)
Movement in
Land Reserve - - - - (1,194) - - (1,194)
Buyback of
warrants - - - - - - (2,683) (2,683)
Dividends paid 18 - - (8,728) - - - - (8,728)
As at 30 June
2017 443,866 (11,398) (205,807) (54,954) 4,665 110,418 - 286,790
========= ========= ========== ============ ============ ========= =========== =========
Loss for the
period - - (3,537) - - - - (3,537)
Other
comprehensive
income - - - 424 (3,355) - - (2,931)
--------- --------- ---------- ------------ ------------ --------- ----------- ---------
Total
comprehensive
income/(loss) - - (3,537) 424 (3,355) - - (6,468)
As at 30
December 2017 443,866 (11,398) (209,344) (54,530) 1,310 110,418 - 280,322
========= ========= ========== ============ ============ ========= =========== =========
Profit for the
period - - 9,074 - - - - 9,074
Other
comprehensive
income/(loss) - - - (5,781) (1,310) - - (7,091)
--------- --------- ---------- ------------ ------------ --------- ----------- ---------
Total
comprehensive
income/(loss) - - 9,074 (5,781) (1,310) - - 1,983
Cancellation
of treasury
shares 17 (11,398) 11,398 - - - - - -
Share
Redemption 17 (25,000) - - - - - - (25,000)
As at 30 June
2018 407,468 - (200,270) (60,311) - 110,418 - 257,305
========= ========= ========== ============ ============ ========= =========== =========
The notes on pages 14 to 30 form an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.
Interim Condensed Consolidated Statement of Cash Flows
for the period ended 30 June 2018
30 June 2018 30 June 2017
Note Unaudited Unaudited
US$'000 US$'000
Operating activities
Net profit before tax 9,658 1,396
Adjustments to reconcile net profit
before tax to net cash flows Pg. 13 (14,795) (3,577)
(5,137) (2,181)
Working capital adjustments
Decrease in trade and other receivables 2,177 3,368
Decrease in trade and other payables (690) (139)
Decrease in inventories 8 6
1,495 3,235
Income tax paid 9 (635) (2,113)
------------- -------------------
Net cash outflow from operating
activities (4,277) (1,059)
------------- -------------------
Investing activities
Net cash inflow from investing
activities Pg. 13 4,151 7,416
------------- -------------------
Financing activities
Payment of dividend 18 - (2,683)
Payment for buy back of shares - (691)
Payment for redemption of ordinary (25,000) -
shares
------------- -------------------
Net cash outflow from financing
activities (25,000) (3,374)
------------- -------------------
Net (decrease)/increase in cash
and cash equivalents (25,126) 2,983
Cash and cash equivalents at beginning
of period 47,448 45,582
Effect of foreign exchange rate
changes on cash and cash equivalents - (1,476)
Cash and cash equivalents at end
of period 13 22,322 47,089
------------- -----------------
The notes on pages 14 to 30 form an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.
Explanatory Notes to the Consolidated Statement of Cash Flows
for the period ended 30 June 2018
The following details all non-cash items for operating activities
and net cash inflows for investing activities as summarised in
the Consolidated Statement of Cash Flows:
-----------------------------------------------------------------------------------
Note 30 June 2018 30 June 2017
Unaudited Unaudited
US$'000 US$'000
Adjustments to reconcile profit
before tax
to net cash flows
Depletion 497 265
Dividends and distributions received 7 - (6,031)
Interest income 7 (241) (420)
Effect of foreign exchange rate
changes on associates
and financial assets at fair value
through profit or loss (5,781) (6,446)
Effect if foreign exchange rate
changes on other non-cash financial
assets and liabilities - 1,635
Net gain on financial assets designated
at fair value through profit or
loss (excluding foreign exchange) (12,401) 5,893
Loss on revaluation of biological
assets 1,320 1,127
Loss on revaluation of land 2,573 359
Movements in provisions (796) -
Movements in other assets 34 41
Pg.
Total 12 (14,795) (3,577)
Net cash inflow from investing activities
Return of capital and disposal of
assets:
Dividends and distributions received 7 - 6,031
Interest income 7 241 420
Return of capital from other financial
assets 3,389 1,547
Proceeds from disposal of plant
and equipment - (20)
Proceeds from realisation of other
financial assets 980 -
4,610 7,978
Purchase of assets and silviculture
costs:
Silviculture and other biological
asset costs (459) (561)
Purchase of other assets - (1)
--------------- -------------
(459) (562)
Pg.
Total 12 4,151 7,416
--------------- -------------
Notes to the Interim Condensed Consolidated Financial Statements
for the period ended 30 June 2018
1. CORPORATE INFORMATION
The Unaudited Interim Condensed Consolidated Financial Statements ("the Interim Financial Statements") of Phaunos Timber Fund Limited (the "Company" or "Phaunos") and its subsidiaries (collectively, the "Group") for the period ended 30 June 2018 were authorised for issue in accordance with a resolution of the Directors on 7 September 2018.
Phaunos Timber Fund Limited is a limited company incorporated and domiciled in Guernsey and whose shares are publicly traded on the London Stock Exchange. The registered office is located at Ground Floor, Dorey Court, Admiral Park, St Peter Port, Guernsey GY1 2HT.
Phaunos is an authorised closed-ended, investment scheme.
On 10 July 2017 Stafford Capital Partners Limited submitted its resignation as Manager, with effect from the Company's EGM held on 17 August 2017, triggering a six month notice period. Pöyry Capital was appointed as sales agents in November 2017 and the Group became self-managed on 17 February 2018.
2. ACCOUNTING POLICIES 2.1 Basis of preparation
The Interim Financial Statements for the six months ended 30 June 2018 have been prepared in accordance with IAS 34 Interim Financial Reporting.
The Interim Financial Statements do not include all the information and disclosures required in the annual consolidated financial statements, and should be read in conjunction with the Group's annual consolidated financial statements as at 31 December 2017.
The Interim Financial Statements have been prepared under a 'break-up' basis and amended to reflect the fact that the going concern assumption is not appropriate. This involves writing assets down to their net asset value based on conditions existing at the end of the reporting period and providing for contractual commitments which may have become onerous as a consequence of the decision to wind-down the entity.
Under the 'break-up' basis, all assets are measured at net asset value, provisions are made for estimated liquidation costs and all assets have been classified as current.
The Directors deem it appropriate to adopt a break-up basis in preparing the Interim Financial Statements given the timing for completion of the disposal of its assets and full liquidation of the fund structure as indicated in its Response Circular and in Phaunos's announcement published on 6 September 2018. Please refer to page 4 of this document for detail regarding the Group's revised Investment Objective and Investment Policy.
The Interim Financial Statements are presented in US Dollars and all values are rounded to the nearest thousand US Dollars (US$'000), except where otherwise indicated.
The Interim Financial Statements have not been audited or reviewed by the Company's auditors.
2. ACCOUNTING POLICIES (CONTINUED) 2.2 New standards, interpretations and amendments adopted
The accounting policies adopted in the preparation of Interim Financial Statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2017, except for the adoption of new standards effective as of 1 January 2018. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
The Group applies, for the first time, IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments that require restatement of previous financial statements. As required by IAS 34, the nature and effect of these changes are disclosed below.
Several other amendments and interpretations apply for the first time in 2018, but do not have an impact on the Interim Financial Statements of the Company.
IFRS 9, Financial Instruments
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.
The Group has applied IFRS 9 retrospectively, with the initial application date of 1 January 2018 and adjusting the comparative information for the period beginning 1 January 2017. However there are no financial impact on the application of IFRS 9 therefore, the comparative information for 2018 has not changed.
Classification and measurement
IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income and fair value through profit or loss. IFRS 9 classification is generally based on the business model in which a financial asset is managed and its contractual cash flows.
By adopting IFRS 9, there is no material impact on the classification and measurement of financial assets of the Group because the Group continues to classify its investment in financial assets at fair value through profit or loss under IFRS 9 and continues to classify its trade receivables and payables at amortised cost under IFRS 9.
Impairment
The adoption of IFRS 9 has fundamentally changed the Group's accounting for impairment losses for financial assets by replacing IAS 39's incurred loss approach with a forward-looking expected credit loss (ECL) approach.
ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive. The shortfall is then discounted at an approximation to the asset's original effective interest rate.
The only assets subject to the ECL model are trade and other receivables and the Group has applied the standard's simplified approach and has calculated ECLs based on lifetime expected credit losses. The adoption of the ECL model has not given rise to a material change in impairment.
Hedge accounting
The Group does not use hedge accounting.
2. ACCOUNTING POLICIES (CONTINUED)
IFRS 15 Revenue from Contracts with Customers
The new IFRS 15 standard requires entities to recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This core principle is achieved through a five step methodology that is required to be applied to all contracts with customers. In addition, guidance on interest and dividend income has been moved from IAS 18 to IFRS 9 without significant changes to the requirements.
The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.
The application of IFRS 15 did not have a material impact on the revenue from timber sales reported, but the revenue recognition policy has been revised to reflect the changes in IFRS 15.
When measuring and recognising revenue, the entity will apply the following five-step model in relation to harvesting contracts:
-- Identify the contract(s) with a customer; -- Identify the performance obligations in the contract; -- Determine the transaction price; -- Allocate the transaction price to the performance obligations in the contract; and -- Recognise revenue when (or as) the entity satisfies a performance obligation.
Sale of standing timber
The Group has concluded that revenue from sale of standing timber should be recognised at the point in time when control of the asset is transferred to the customer, generally when all risk and rewards relating to the standing timber have been transferred to the buyer. Therefore, the adoption of IFRS 15 did not have an impact on the timing of revenue recognition.
Standing timber sale contracts do not generally comprise work in progress and all performance conditions must be met before the contract takes effect.
Transition disclosures
The application of IFRS 9 and 15 did not change the measurement and presentation of the current financial instruments and revenue from timber sales therefore there was no impact on the Interim Financial Statements.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The estimates and judgements made by the Board of Directors are consistent with those made in the Annual Consolidated Financial Statements for the year ended 31 December 2017.
4. REVENUE FROM TIMBER OPERATIONS
30 June 2018 30 June 2017
Unaudited Unaudited
US$'000 US$'000
Income - standing timber
sales 1,023 576
------------- -------------
1,023 576
============= =============
5. COST OF SALES
30 June 2018 30 June 2017
Unaudited Unaudited
US$'000 US$'000
Depletion 497 282
------------- -------------
497 282
============= =============
6. TIMBER OPERATING EXPENSES
30 June 2018 30 June 2017
Unaudited Unaudited
US$'000 US$'000
Direct timber costs
Property management fees 348 356
Property, repairs and maintenance 62 80
410 436
------------- -------------
Indirect timber costs
Liquidation and deregistration
costs 168 130
Professional fees 142 116
Other timber costs 131 188
Accounting fees 109 119
Other taxes 100 35
Foreign exchange losses 22 163
Legal fees 19 98
Fees paid to auditors - 43
691 892
------------- -------------
Total timber operating expenses 1,101 1,328
============= =============
7. INVESTMENT INCOME
30 June 2018 30 June 2017
Unaudited Unaudited
US$'000 US$'000
Distribution income * - 6,031
Interest income 241 420
241 6,451
============= =============
* US$ 3.4 million was received by way of shareholder loan repayment in respect of Q1 2018. Q2 2018 Dividend is disclosed in note 21.
8. INVESTMENT OPERATING EXPENSES
30 June 2018 30 June 2017
Unaudited Unaudited
US$'000 US$'000
Asset realisation expenses 578 -
Professional fees 428 57
Portfolio management fees 410 1,911
Fees paid to auditors for audit
services 288 179
Directors' remuneration - Company 266 101
Take-over related costs 211 -
Administration fees 84 390
Legal fees 75 55
Directors', Officers' and other
insurance 40 8
Directors' remuneration - Subsidiaries 34 15
Commission expenses 28 -
Travel expenses 27 37
Appraisal fees 22 22
Accounting fees 22 15
Corporate advisory fees 10 41
Directors' expenses 6 10
Other expenses 6 84
Liquidation and deregistration
costs - 190
2,535 3,115
============= =============
9. INCOME TAX EXPENSE
30 June 2018 30 June 2017
Unaudited Unaudited
US$'000 US$'000
US corporate income taxes 401 1,883
South America corporate income taxes 183 223
Other income taxes - 7
------------- -------------
584 2,113
============= =============
Under the 'break-up' basis of accounting, all potential repatriation taxes have been raised, along with taxes from continuing operations.
The Group has been granted exemption from Guernsey Income Tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989, and is charged an annual fee of GBP1,200 (2017: GBP1,200). As a result, the taxation charge for the period relates solely to the Company's subsidiaries. The principal reason for the tax charge is profitability of some of the Group's subsidiaries.
10. EARNINGS/(LOSS) PER SHARE
The basic and diluted loss per Ordinary Share is based on the net profit for the period attributable to Ordinary Shareholders of US$ 9 million (30 June 2017: US$ 0.7 million loss) and 500,705,572 (30 June 2017: 546,074,252) Ordinary Shares, being the basic weighted average number of Ordinary Shares in issue during the period.
11 ASSETS AND LIABILITIES MEASURED AT FAIR VALUE
11.1 Valuation methodology process
The same valuation methodology and process was deployed in June 2018 and December 2017. Please refer to the 2017 Annual Report for further detail of the valuation and methodology process.
11.2 Fair Value Hierarchy
Financial assets designated at fair value through profit or loss (including investments in associates), biological assets and land recorded at fair value are analysed by using a fair value hierarchy that reflects the significance of inputs. The fair value hierarchy has the following levels:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for assets or liabilities that are not based on observable market data (that is, unobservable inputs).
As at 30 June 2018 the net carrying value of the assets is based on the 30 June 2018 NAV adjusted for liquidity and minority discounts, sales commission expense, estimated sales tax and other costs to sell the assets.
The Group held the following assets at net asset value, which are all categorised as Level 3 in accordance with the fair value hierarchy in IFRS 13:
30 June 2018 31 Dec 2017
Unaudited Audited
US$'000 US$'000
Associates 185,681 176,083
Other financial assets 7,674 9,240
194,355 185,323
Non-financial assets
Biological assets 13,896 15,254
Land 26,830 30,713
------------- ------------
40,726 45,967
234,081 231,290
------------- ------------
11 ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (CONTINUED)
For assets that are recognised in the Interim Financial Statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. There were no transfers between Levels during the period.
Other financial assets and liabilities
For all other financial assets and liabilities, including trade and other receivables; cash and cash equivalents; and trade and other payables, the carrying value is an approximation of fair value due to its short-term nature.
11.3 Reconciliation of recurring fair value measurements categorised within Level 3 of the fair value hierarchy
The below tables reflect the movements in assets designated as Level 3 during the course of the year.
The following is a reconciliation of the beginning and ending balances for recurring fair value measurements of assets and liabilities that utilise significant unobservable inputs (Level 3) at the reporting date and the prior year-end.
Other financial Biological
As at 30 June 2018 Associates assets assets Land Total
US$'000 US$'000 US$'000 US$'000 US$'000
----------- ---------------- ----------- -------- ---------
Opening fair value 176,083 9,240 15,254 30,713 231,290
----------- ---------------- ----------- -------- ---------
Total gains or losses
for the period:
----------- ---------------- ----------- -------- ---------
Unrealised gain/(loss)
included in profit
or loss:
Revaluation and impairments 20,195 (586) 170 (136) 19,643
Foreign exchange translation (7,208) - (1,490) (2,437) (11,135)
----------- ---------------- ----------- -------- ---------
12,987 (586) (1,320) (2,573) 8,508
----------- ---------------- ----------- -------- ---------
Unrealised gain included
in other comprehensive
income:
Revaluation - - - (1,310) (1,310)
----------- ---------------- ----------- -------- ---------
- - - (1,310) (1,310)
----------- ---------------- ----------- -------- ---------
Purchases, issues,
sales and other movements:
Purchases and other
costs - - 459 - 459
Disposals - (980) - - (980)
Depletion - - (497) - (497)
Return of capital (3,389) - - - (3,389)
(3,389) (980) (38) - (4,407)
Closing fair value 185,681 7,674 13,896 26,830 234,081
----------- ---------------- ----------- -------- ---------
11 ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (CONTINUED)
11.3 Reconciliation of recurring fair value measurements categorised within Level 3 of the fair value hierarchy (continued)
As at 31 December 2017 Associates Other financial assets Biological assets Land Total
US$'000 US$'000 US$'000 US$'000 US$'000
----------- ----------------------- ------------------ -------- ---------
Opening fair value 165,922 14,658 29,298 40,738 250,616
----------- ----------------------- ------------------ -------- ---------
Total gains or losses for the year:
----------- ----------------------- ------------------ -------- ---------
Unrealised gain/(loss) included in
profit or loss:
Revaluation and impairments 16,345 (5,418) (8,600) (2,927) (600)
Foreign exchange translation 3,463 - (162) (174) 3,127
19,808 (5,418) (8,762) (3,101) 2,527
Unrealised gain included in other
comprehensive income:
Revaluation - - - (4,549) (4,549)
Foreign exchange translation - - - (90) (90)
----------- ----------------------- ------------------ -------- ---------
- - - (4,639) (4,639)
----------- ----------------------- ------------------ -------- ---------
Purchases, issues, sales and other
movements:
Purchases and other costs - - 492 - 492
Depletion - - (5,028) - (5,028)
Disposals - - (454) (2,183) (2,637)
Return of capital (9,647) - - - (9,647)
Other - - (292) (102) (394)
(9,647) - (5,282) (2,285) (17,214)
Closing fair value 176,083 9,240 15,254 30,713 231,290
----------- ----------------------- ------------------ -------- ---------
All investments, apart from Matariki and Pradera Roja, are held at 31 December 2017 valautions, adjusted for foreign exchange movements.
Matariki and Pradera Roja has been revalued based on more recent valuations.
11.4 Transfers during the period
There have been no transfers between levels during the period ended 30 June 2018 and the year ended 31 December 2017. Any transfers between the levels will be accounted for on the last day of each financial period. Due to the nature of the investment, it is always expected to be classified under Level 3.
11.5 Significant unobservable inputs and sensitivity analysis
IFRS 13 requires that quantitative information be provided about significant unobservable inputs used in the fair value measurement for each class of Level 3 asset and liabilities. The following data as at 30 June 2018 and 31 December 2017 summarises the valuation methods and information about fair value measurements and related significant unobservable inputs (Level 3) where, if changed, could significantly increase or decrease the valuation of an asset (e.g. NAV per share, timber and land prices, discount rates).
Asset Fair Fair Valuation Valuation Significant Range (1) Sensitivity Inter-relationship
Value Value Method Source Unobservable Rate between significant
30 Jun 31 Dec Inputs (2) unobservable inputs
18 17 and fair value
US$'000 US$'000 measurement
----------------
Average log price
change(3) of The net asset
+/-5% value, profit
(2017: +/-5%) for the year and
equity value of
Average the Group would
production increase / (decrease)
cost change of if the NAV of
+/-5% the associate
(2017: +/-5%) increased or decreased
due to:
Discount rate +/-9% -- estimated
change log prices being
of +/-1% higher/(lower)
(2017: +/-1%) +/-5% -- the risk-adjusted
discount rates
NAV based Average land being lower/(higher)
on average price +/-7% -- estimated
log prices, change(4) of future overheads
NAV at Underlying discount +/-5% being lower/(higher)
fair value, manager rates, land (2017: +/-5%) +/-1% -- land prices
adjusted based on prices and being higher/(lower)
for minority independent minority Minority discount -- minority discount
Associates 185,681 176,083 discounts appraisals discount of +/-10% +/-1% being higher/(lower)
---------- ---------- ---------------- ------------- ------------------- ------------ --------------------------------
The net asset
value, profit
for the year and
equity value of
the Group would
increase / (decrease)
if the value of
the under-lying
land price increased/(deceased)
Underlying
manager
Other based on
Financial NAV at independent Land price change
assets 7,674 fair value appraisals NAV of +/- 5% <+/-1%
at fair
9,240 value (2017: +/- 5%)
---------- ---------- ---------------- ------------- ------------------- ------------ --------------------------------
The net asset
value, profit
for the year and
equity value of
the Group would
increase / (decrease)
Average log price if:
Combination change(3) of -- estimated log
of the +/-5% prices were higher/(lower)
income Timber (2017: +/-5%) -- the risk-adjusted
and cost Independent prices discount rates
capitalisation appraisal per m Discount rate +/-1% were lower/(higher)
and and change -- estimated
Biological comparative management Discount of +/- 1% future overheads
assets 13,896 15,254 sales approach assessment rates (2017: +/-1%) <+/-1% being lower/(higher)
---------- ---------- ---------------- ------------- ------------------- ------------ --------------------------------
The net asset
value, profit
for the year and
Independent Average land equity value of
Income appraisal price the Group would
and cost and change(3) of increase / (decrease)
capitalisation management Land prices +/-5% if land prices
Land 26,830 30,713 approach assessment per hectare (2017: +/-5%) <+/-1% were higher/(lower)
---------- ---------- ---------------- ------------- ------------------- ------------ --------------------------------
(1) All discount rates shown in the table are real rates as opposed to nominal rates. All timber and land price ranges are those used by the valuer in determining the biological assets and land valuations
(2) This is the expected maximum change, positive or negative, in NAV of any of the Group which could be incurred as a result of a shift in the unobservable input
(3) Log and land prices have been adjusted for growth rates, transport costs and liquidity
12. INVESTMENT IN ASSOCIATES
Matariki Forestry Group
At 30 June 2018, the Company had 23.01% (31 December 2017: 23.01%) ownership and voting rights in Matariki, a forestry company which owns and leases forestry assets in New Zealand, where the company is incorporated.
The following is a summary of distributions received by the Company from Matariki, significant balances obtained from Matariki's Consolidated Financial Statements for the period ended 30 June 2018, and a reconciliation of the fair value of Matariki, which is included in the total value of financial assets designated at fair value through profit or loss:
30 June 2018 30 June 2017
Unaudited Unaudited
US$'000 US$'000
Distributions
Distributions received* 3,389 7,578
============= =============
Summary of Consolidated Income Statement
for the period ended 30 June 2018
Gross timber revenue 204,031 170,687
Profit from continuing operations 98,072 34,339
Other comprehensive income (3,543) 2,651
Total comprehensive income 94,528 36,990
Summary of Consolidated Statement 30 June 2018 31 Dec 2017
of Financial Position at 30 June Unaudited Audited
2018 US$'000 US$'000
ASSETS
Non-current Assets
Biological assets 743,911 677,766
Property, plant and equipment 93,491 97,889
Other non-current assets 46,046 49,406
Total non-current assets 883,448 825,061
------------- --------------
Total current assets 67,292 43,242
------------- --------------
Total Assets 950,740 868,303
------------- --------------
LIABILITIES
Non-current Liabilities
Deferred tax liability 152,818 123,082
Other non-current liabilities 1,218 637
------------- ------------
Total non-current liabilities 154,036 123,719
------------- ------------
Current Liabilities
Shareholder loans - 14,720
Other current liabilities 31,849 20,254
------------- ------------
Total current liabilities 31,849 34,974
Total Liabilities 185,885 158,694
Total Net Assets 764,855 709,609
============= ============
12. INVESTMENT IN ASSOCIATES (CONTINUED)
Fair Value of Associate
23.01% Share of Total Net Assets
(2017: 23.01%) 175,993 163,281
23.01% Share of Shareholder Loans
(2017: 23.01%) - 3,387
----------- ----------
175,993 166,668
Selling costs (1,580) (1,393)
----------- ----------
Net asset value** 174,413 165,275
=========== ==========
*refers to dividends received and return of shareholder loan
** translated at USD/NZD 1.47623 (2017:1.40499)
Aurora Forestal Limited
The Company holds 23.57% (31 December 2017: 23.57%) ownership and voting rights in Aurora Forestal Ltd, a company incorporated in the British Virgin Islands, which has mixed aged pine plantations and a fully integrated sawmill and co-generation plant in Uruguay. The following is a summary of dividends received by the Company from Aurora Forestal and significant balances obtained from Aurora Forestal's Consolidated Financial Statements for the period ended 30 June 2018, and a reconciliation of the fair market value of Aurora Forestal, which is included in the total value of financial assets designated at fair value through profit or loss:
30 June 2018 31 Dec 2017
Unaudited Audited
US$'000 US$'000
Summary of Consolidated Income Statement
for the period ended 30 June 2018
Gross timber revenue 14,719 11,149
Loss from continuing operations (6,560) (3,577)
Other comprehensive loss (962) (937)
Total comprehensive loss (7,522) (4,514)
Summary of Consolidated Statement 30 June 2018 31 Dec 2017
of Financial Position at 30 June Unaudited Audited
2018 US$'000 US$'000
ASSETS
Non-current Assets
Biological assets 46,204 46,204
Property, plant and equipment 72,999 72,852
Other non-current assets 1,707 1,859
Total non-current assets 120,910 120,915
------------- ----------------
Total current assets 9,391 7,995
------------- ----------------
Total Assets 130,301 128,910
------------- ----------------
12. INVESTMENT IN ASSOCIATES (CONTINUED)
Total non-current liabilities 9,387 11,865
Total current liabilities 15,985 16,269
Total Liabilities 25,372 28,134
------------- ----------------
Total Net Assets 104,929 100,776
============= ================
Fair Value of Associate
23.57% Share of Total Net Assets
(2017: 23.57%) 24,732 23,753
Selling costs and minority discount (13,464) (12,945)
------------- ----------------
Net asset value 11,268 10,808
============= ================
The functional currency of Aurora Forestal Limited is US Dollars and no foreign exchange conversions are therefore required.
13. CASH AND CASH EQUIVALENTS
For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents comprise of the following:
30 June 2018 31 Dec 2017
Unaudited Audited
US$'000 US$'000
Cash at bank and in hand 19,904 45,047
Short-term deposits 2,388 2,371
Cash held by third parties 30 30
------------- ------------
22,322 47,448
============= ============
The following table provides a breakdown of the Cash and Cash Equivalents held in each jurisdiction:
30 June 2018 31 Dec 2017
Unaudited Audited
US$'000 US$'000
Guernsey 9,623 32,853
Brazil 9,615 9,916
United States 2,104 2,955
Uruguay 560 683
Norway 370 190
Australia 45 48
China 5 590
Cyprus - 122
Netherlands - 91
22,322 47,448
============= ============
The intention of the Board is to distribute cash to Shareholders in a timely and orderly manner. It is recognised that certain jurisdictions have legal and regulatory protocols that must be adhered to and completed before the cash can be remitted to Guernsey.
13. CASH AND CASH EQUIVALENTS (CONTINUED)
Whilst the process is underway to repatriate cash in a timely manner, the administrative nature of the repatriation processes takes time which is not always within the control of the Board. It should further be noted that funds will be retained in the local jurisdictions to cover operational expenses and the anticipated deregistration cost.
14. TRADE AND OTHER RECEIVABLES
30 June 2018 31 Dec 2017
Unaudited Audited
US$'000 US$'000
Amounts falling due within one year:
Trade receivables 3,216 4,728
Amounts due from third parties on
disposal of assets 654 1,470
Dividend receivable from associates 555 555
Tax receivables 541 286
Other receivables 118 222
5,084 7,261
============= ====================
15. TRADE AND OTHER PAYABLES
30 June 2018 31 Dec 2017
Unaudited Audited
US$'000 US$'000
Amounts falling due within one year:
Other payables 466 875
Portfolio management fees payable - 596
Trade payables 385 56
Taxes payable 203 254
Deferred revenue 28 42
1,082 1,823
------------- ------------
16. PROVISIONS
30 June 2018 31 Dec 2017
Unaudited Audited
US$'000 US$'000
Amounts falling due within one year:
Provision for legal litigations 1,845 2,000
Provision for withholding tax on repatriation
of funds 659 1,098
Provision for liquidation and deregistration
costs 629 831
3,133 3,929
------------- ------------
A provision has been raised for litigation expenses, to cover expected settlement costs and legal fees. There is significant uncertainty pertaining to the total provision raised and timing of any payments, due to the uncertain nature of underlying legal items.
16. PROVISIONS (CONTINUED)
Further provisions have been raised for expected liquidation costs, along with expected withholding tax on repatriation of cash balances. Timing of any liquidation costs and taxes payable are likewise uncertain, as these are dependent on the timing of the underlying asset sales.
17. ISSUED CAPITAL AND RESERVES
Authorised shares
At 31 December 2017 and 30 June 2018: US$
Unlimited Ordinary Shares of no par value -
====
Ordinary Shares issued and fully paid
31 Dec 2017 Movement 30 June 2018
US$'000 US$'000 US$'000
Share Capital - Ordinary Shares 571,758 (36,398) 535,360
Less: Issue costs of Ordinary
Shares (17,474) - (17,474)
Less: Transfer to other reserves (110,418) - (110,418)
------------ ------------- -------------
Total Share Capital - Ordinary
Shares 443,866 (36,398) 407,468
============ ============= =============
No. of Ordinary Shares 545,529,832 (47,169,715) 498,360,117
============ ============= =============
31 Dec 2016 Movement 31 Dec 2017
US$'000 US$'000 US$'000
Share Capital - Ordinary Shares 571,758 - 571,758
Less: Issue costs of Ordinary
Shares (17,474) - (17,474)
Less: Transfer to other reserves (110,418) - (110,418)
------------ ------------ ------------
Total Share Capital - Ordinary
Shares 443,866 - 443,866
============ ============ ============
No. of Ordinary Shares 547,024,832 (1,495,000) 545,529,832
============ ============ ============
Treasury Shares
31 Dec 2017 Movement 30 June 2018
US$'000 US$'000 US$'000
Total Treasury Shares 11,398 (11,398) -
============ ============= =============
No. of Treasury Shares 25,685,045 (25,685,045) -
============ ============= =============
The Authorised Share Capital of the Company is an unlimited number of Ordinary Shares of no par value and 1,556,490,000 C Shares of no par value.
On 9 January 2018, 47,169,715 Ordinary Shares were redeemed at a price of US$0.53 per share.
18. DISTRIBUTIONS MADE AND PROPOSED
The Company is committed to returning all sales proceeds from asset sales and distributions received during the year, after allowing for cash reserves to wind-down the Group.
No dividend was paid or declared for the current reporting period.
A dividend of US$0.016 cents per Ordinary Share (total dividend of US$1.6 million) was paid to holders of fully paid Ordinary Shares in 2017.
Future distributions are planned in a timely manner, to follow asset sales during the year.
19. RELATED PARTY DISCLOSURES
The following table provides the total amount of transactions that Phaunos Timber Fund Limited has entered into with related parties and key management personnel during the period ended 30 June 2018 and 2017, as well as balances with related parties as at 30 June 2018 and 31 December 2017. There were no sales or purchase transactions entered into between related parties during the current or prior financial years.
Related Party Year Nature of related Amounts received
party transaction from/(paid Amounts
to) related owed by/(to)
parties related parties
US$'000 US$'000
Transactions with related parties:
Dividend / distribution
Associates 2018 income - 555
------ ------------------------- ----------------- -----------------
2017 6,031 -
------ ------------------------- ----------------- -----------------
2018 Return of capital 3,389 -
------ ------------------------- ----------------- -----------------
2017 1,547 -
------ ------------------------- ----------------- -----------------
Key management personnel of the Group:
Directors within 2018 Directors' remuneration (272) -
the Group and expenses
------ ------------------------- ----------------- -----------------
2017 (111) (47)
--------------------------------- -------------------- ----------------- -----------------
Phaunos Boston Inc. 2018 Compensation (89) -
------ ------------------------- ----------------- -----------------
2017 (77) -
------ ------------------------- ----------------- -----------------
Stafford Capital 2018 Portfolio Management (410) -
Partners fees
------ ------------------------- ----------------- -----------------
2017 (1,911) (79)
--------------------------------- -------------------- ----------------- -----------------
20. CONTINGENCIES
Rayonier Dispute
On 27 August 2018, Phaunos was made aware that Rayonier Canterbury LLC, Phaunos's joint venture partner in Matariki, had launched proceedings in the Auckland High Court, alleging a breach of confidentiality, notice and consultation obligations under the terms of the Matariki Shareholders' Agreement.
Rayonier further served Phaunos with an Acquisition Notice under the terms of the Shareholders' Agreement in response to the alleged breach, asserting that it is entitled to acquire Phaunos' interest in Matariki for the sum of NZD 225m, a discount to the reported fair value.
20. CONTINGENCIES (CONTINUED)
Phaunos believes the claim to be without merit, the Acquisition Notice served to be invalid and it intends to vigorously defend itself against the claim. As Phaunos believes the success of Rayonier's claim to be improbable, no liability has been raised in relation to this legal action.
As the litigation process is very much in its early stage, it is difficult to quantify a potential outcome should the claim succeed. Due to the litigation with Rayonier in respect of Matariki as detailed in the note below, alongside the hostile take-over bid from Stafford, Phaunos has resolved to provide due diligence cost cover to bidders in the Asset Realisation Process. The quantum of cost cover is yet to be determined, but will fall within the limits mandated by the take-over Code. Please refer to the announcement from Phaunos published on 28 August 2018 for further details.
21. RECONCILIATION BETWEEN NAV STATED IN 14 AUGUST 2018 RESPONSE CIRCULAR AND THESE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
An updated unaudited pro forma statement of net assets per Phaunos share on both a going concern and break-up basis was included in Appendix II to our response circular published on 14 August 2018. In that document, the pro forma break-up net asset value of Phaunos was US$0.51 per share, whereas our break-up net asset value as at 30 June 2018 shown in these Interim Consolidated Financial Statements is US$0.52.
The pro forma break-up NAV reported in the response circular of 14 August 2018 was US$0.8 million lower than the break-up NAV reported in these Interim Consolidated Financial Statements. The key differences between the two figures relate to: (a) the movement in the foreign exchange rates of the New Zealand dollar and the Brazilian real against the US dollar between 1 August 2018 and 30 June 2018, (b) net trading income and expenditure for the six months to 30 June 2018 (overall value-neutral), and (c) a decrease in provisions from 31 December 2017 to 30 June 2018 as stated in note 16 to these Interim Consolidated Financial Statements.
For further background on the underlying appraisal reports used in computing the NAV in these Interim Consolidated Financial Statements, please refer to the table below.
Appraisal reports underpinning net assets computation
Asset Appraisal Value Valuation Date Valuation Type
(local currency)
---------------------- ------------------ ----------------- --------------------
Matariki (23.01% NZD 283.8m 31 March 2018 Appraisal report
Stake) (Indufor)
---------------------- ------------------ ----------------- --------------------
Aurora Forestal US$ 28.1m Phaunos 2017 Annual
(23.57% Stake) 31 December 2017 Report
---------------------- ------------------ ----------------- --------------------
Appraisal report
Mata Mineira BRL 64.5m 31 December 2017 (Consufor)
---------------------- ------------------ ----------------- --------------------
Eucateca - Eucalyptus Desktop land-based
(Quedas Claras) BRL 19.1m 31 December 2017 valuation
---------------------- ------------------ ----------------- --------------------
Eucateca - Teak Desktop land-based
(Paraiso) BRL 16.4m 31 December 2017 valuation
---------------------- ------------------ ----------------- --------------------
Appraisal report
Pradera Roja US$ 18.0m 30 June 2018 (Legacy)
---------------------- ------------------ ----------------- --------------------
GreenWood Tree Farm Phaunos 2017 Annual
Fund ("GTFF") US$ 9.2m 31 December 2017 Report
22. RECONCILIATION BETWEEN NAV STATED IN 14 AUGUST 2018 RESPONSE CIRCULAR AND THESE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The table above sets out the appraisal value, being the market value of the biological and land assets, of each of the assets that comprise Phaunos's portfolio. For the avoidance doubt, appraisal values exclude any assets and liabilities other than biological and land assets.
For Aurora Forestal, the appraisal value represents the value of the biological and land assets as well as the fair value of the sawmill and cogeneration plant owned by Aurora Forestal.
23. EVENTS AFTER REPORTING PERIOD
Takeover Offers for Phaunos
On 3 July 2018, Stafford Capital Partners Limited announced a firm cash offer for the entire issued and to be issued share capital of the Company at US$0.49 per Phaunos share (the "Offer").
On 31 July 2018, Stafford Capital Partners Limited issued an offer document pursuant to its Offer on the same terms as its announcement made on 3 July 2018.
On 14 August 2018, the Company published a circular rejecting Stafford's Offer. The Board further recommended that Shareholders take no action in relation to Stafford's Offer. In the Response Circular, the Board published an Updated Asset Realisation Range of US$0.54 - 0.60 per Phaunos share. The updated Asset Realisation Range is primarily based on the outcome of indicative bids received for all assets which are subject to a sale process under the Asset Realisation Process. Further information on the Board's position regarding Stafford's Offer as well as details on the Updated Asset Realisation Range can be found in the Response Circular available on Phaunos's website. Additional details on the Asset Realisation Process can also be found in the announcements made by Phaunos on 21 August 2018, 5 September 2018 and 6 September 2018. Please refer to the Response Circular for further detail related to envisaged costs related to the take-over defense.
On 6 September, CatchMark Timber Trust, Inc. ("CatchMark") announced it had made an approach to the board of Phaunos regarding a possible all-stock offer by CatchMark for the entire issued and to be issued share capital of Phaunos, representing a value of US$0.57 per Phaunos share. The Company subsequently announced that it intended to engage with CatchMark to understand fully its proposal. Shareholders should note that, as at the date of this document, there can be no certainty that any firm offer for the Company will be made nor as to the terms on which any firm offer might be made.
Change of Secretary
On 30 July 2018, JTC Fund Solutions (Guernsey) Limited was appointed to provide company secretarial, compliance and administration services effective 1 August 2018 in replacement for Vistra Fund Services (Guernsey) Limited.
Dividend Income
During the second quarter of 2018, one of the Group's associates, Matiriki Forests Limited, declared a dividend in the amount of US$3.1 million. This dividend was received after the reporting date.
Investor Information
COMPANY INFORMATION
PTF is a Guernsey-domiciled authorised closed-ended investment scheme, authorised by the Guernsey Financial Services Commission under section 8 of The Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended) and the Authorised Closed-ended Investment Schemes Rules 2008 made thereunder. The Company's Ordinary Shares are traded on the Main Market of the London Stock Exchange.
The Ordinary Shares are admitted to the Official List and are traded on the Main Market of the London Stock Exchange. The Ordinary Shares may be dealt in directly through a stockbroker or professional adviser acting on an investor's behalf. The buying and selling of Ordinary Shares may be settled through CREST.
The issued share capital of the Company at 30 June 2018 was 498,360,117 Ordinary Shares (2017: 545,529,832) and no Ordinary Shares (2017: 25,685,045) were held in treasury (Treasury Shares).
The ISIN, SEDOL and the LSE mnemonic of the Ordinary Shares are:
ISIN SEDOL LSE mnemonic GG00BFX4LT97 BFX4LT9 PTF
SHAREHOLDER ENQUIRIES
The Company's CREST compliant registrar is, as at the date of publication of these Unaudited Interim Condensed Consolidated Financial Statements, Link Asset Services (Guernsey) Limited, who maintains the Company's registers of Shareholders. They may be contacted by telephone on +44 (0)1534 847 445.
For information about investing in the Company contact: info@phaunostimber.com
Directors and Service Providers
Registered Office Auditors
Ground Floor Ernst & Young LLP
Dorey Court PO Box 9
Admiral Park Royal Chambers
St Peter Port St Julian's Avenue
Guernsey St Peter Port
GY1 2HT Guernsey
GY1 4AF
------------------------------------------ ---------------------------------
Directors Registrar
Richard Boléat (appointed 31 Link Asset Services (Guernsey)
August 2017) Limited
Jonathan Bridel (appointed 13 September Mont Crevelt House
2017) Bulwer Avenue
Brendan Hawthorne (appointed 25 July St Sampson
2017) Guernsey
GY2 4LH
------------------------------------------ ---------------------------------
Administrator, Company Secretary Solicitors to the Company
From 1 August 2018: (as to English Law)
JTC Fund Solutions (Guernsey) Limited Herbert Smith Freehills LLP
Ground Floor Exchange House
Dorey Court Primrose Street
Admiral Park London
St Peter Port England
Guernsey EC2A 2HS
GY1 2HT
Previously:
Vistra Fund Services Guernsey Limited
11 New Street
St Peter Port
Guernsey
GY1 2PF
------------------------------------------ ---------------------------------
UK Transfer Agent Corporate Broker
Link Asset Services Limited Winterflood Investment Trusts
The Registry The Atrium Building
34 Beckenham Road Cannon Bridge House
Beckenham 25 Dowgate Hill
Kent, England London
BR3 4TU England
EC4R 2GA
------------------------------------------ ---------------------------------
Advocates to the Company Sales Agent
(as to Guernsey Law) Pöyry Capital
Ferbrache and Farrell Portland House
Somers House Bressenden Place
Rue Du Pre London
St Peter Port SW1E 5BH
Guernsey
GY1 1LU
------------------------------------------ ---------------------------------
END OF ANNOUNCEMENT
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September 10, 2018 11:41 ET (15:41 GMT)
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