mrVMoores Rowland Vanuatu Vanuatu Agricultural Research & Technical Centre (V.A.R.T.C.) Financial Statements For the year ended 31 December 2015 Vanuatu Agricultural Research & Technical Centre For the year ended 31 December 2015 Page Audit Report 3-4 Statement of Comprehensive Income 5 Statement of Changes in Funds 5 Statement of Financial Position 6 Statement of Cash Flows 7 Notes to the Financial Statements 8-15 Disclaimer 16 Detailed Statement of Comprehensive Income 17 Moores Rowland Chartered Accountants 2 mrVMoores Rowland Vanuatu 2nd Floor, TransPacific Haus, P.O. Box 257, Port Vila, Vanuatu Telephone: (678) 22291 Fax: (678) 23836 Email: mooresrowland@vanuatu.com.vu Website: www.mooresrowland.com Independent Auditors' Report To The Members of Vanuatu Agricultural Research and Technical Centre We have audited the accompanying financial statements of Vanuatu Agricultural Research and Technical Centre (VARTC) which comprise the statement of financial position as at 31 December 2015, the statement of comprehensive income, statement of changes in funds and the statement of cash flow for the year then ended and a summary of significant accounting policies and other explanatory notes. Board Members Responsibility for the Financial Statements The Centre's management and board members are responsible for the preparation and the true and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the VARTC Act [CAP 286] and the Vanuatu Companies Act No. 25 of 2012. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Centre's preparation and fair presentation of the financial statements 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 Centre's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. Basis for Qualified Opinion We were unable to attend the stock take as at 31 December 2015 and were consequently unable to carry out auditing procedures necessary to obtain adequate assurance regarding the quantities and condition on inventory and biological assets, amounting to Vt917,367 and Vtl9,819,888 respectively. Any adjustments to these figures would have a consequential effect on the results and retained surplus for the year. Chartered Accountants Resident Partners: 3 Certified Practising Accountants Andrew Munro, Laurence Harrison mr/Moores Rowland Vanuatu 2nd Floor, TransPacific Haus, P.O. Box 257, Port Vila, Vanuatu Telephone: (678) 22291 Fax: (678) 23836 Email: mooresrowland@vanuatu,com.vu Website: www.mooresrowland.com Independent Auditors' Report (continued) To The Members of Vanuatu Agricultural Research and Technical Centre Qualified Audit Opinion in our opinion, except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph, the financial statements give a true and fair view of the Centre's financial position as at 31 December 2015, and of its financial performance and cash flows for the year then ended, in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the VARTC Act [Cap 286) and the Vanuatu Companies Act No. 25 of 2012. Continuation as a Going Concern If the Centre does not continue to receive support from the Vanuatu Government, then there is significant uncertainty whether it will be able to continue as a going concern and therefore, whether it will realize its assets and liabilities in the normal course of business and at the amounts stated in the financial statements. MOORES ROWLAND Chartered Accountants Qualified pursuant to Section 130 of the Companies Act No. 25 of 2012 of the Republic of Vanuatu Dated this day of 6. 4 Chartered Accountants Resident Partners: Certified Practising Accountants Andrew Munro, Laurence Harrison Vanuatu Agricultural Research & Technical Centre Statement of Comprehensive Income For the year ended 31 December 2015 (Expressed in Vatu) Note 2015 2014 Sales 3 16,708,853 18,755,195 Cost of goods sold (1,666,307) (1,003,006) Gross profit 18,375,160 19,758,201 Administrative expenses 4 (72,793,796) (95,546,822) Other gains 5 48,382,563 75,404,135 Operating deficit (6,036,073) (384,486) Deferred grants released to income 16 7,250,278 5,042,733 Surplusl(deficit) for the year 1,214,205 4,658,247 Statement of Changes in Funds For the year ended 31 December 2015 (Expressed in Vatu) 2015 2014 Retained surplus at beginning of year 20,850,850 16,192,603 Surplus/(deficit) for the year 1,214,205 4,658,247 Retained surplus at end of year 22,065,055 20,850,850 The Statement of Comprehensive Income and the Statement of Changes in Funds should be read in conjunction with the Notes to the Financial Statements. Moores Rowland Chartered Accountants 5 Vanuatu Agricultural Research & Technical Centre Statement of Financial Position As at 31 December 2015 (Expressed in Vatu) Note 2015 2014 ASSETS Current assets Cash and cash equivalents 6 38,351,213 39,144,158 Trade receivables 7 120,000 4,578 Other receivables 8 362,573 64,624 Inventory 9 917,367 915,212 Total current assets 39,751,153 40,128,572 Non-current assets Property, plant and equipment 10 20,462,703 20,075,809 Biological assets 11 19,819,888 18,155,736 Total non-current assets 40,282,591 38,231,545 Total Assets 80,033,744 78,360,117 LIABILITIES AND FUNDS Current liabilities Trade payables 12 2,334,702 683,595 Other payables 13 26,055,560 22,407,750 Employee benefits 529,025 460,056 Unearned/unused grants 14 8,026,702 13,010,061 Total current liabilities 36,945,989 36,561,462 Non-current liabilities Severance provision 15 560,000 872,000 Deferred grants 16 20,462,700 20,075,805 Total non-current liabilities 21,022,700 20,947,805 Total liabilities 57,968,689 57,509,267 Funds Share capital 17 - - Retained surplus 22,065,055 20,850,850 Total funds 22,065,055 20,850,850 Total Liabilities and Funds 80,033,744 78,360,117 The Statement of Financial Position should be read in conjunction with the Notes to the Finacial Statements. Director irector 62 Moores Rowland hartered Accountants 6 Vanuatu Agricultural Research & Technical Centre Statement of Cash Flow For the year ended 31 December 2015 (Expressed in Vatu) Note 2015 2014 Operating activities Cash was provided from: Receipts from customers 16,593,431 19,062,978 Receipts from grants 50,462,280 89,245,431 Interest received 574,097 522,907 67,629,808 108,831,316 Cash was applied to: Payments to suppliers and employees (60,785,580) (87,442,295) (60,785,580) (87,442,295) Net cash from operating activities 18 6,844,228 21,389,021 Investing activities Purchase of property, plant & equip. (7,637,173) (15,137,182) Net cash used in investing activities (7,637,173) (15,137,182) Net (decrease)/increase in cash & cash equivalents (792,945) 6,251,839 Cash and cash equivalents at beginning of year 39,144,158 32,892,319 Cash and cash equivalents at end of year 6 38,351,213 39,144,158 The Statement of Cash Flow should be read in conjunction with the Notes to the Financial Statements. Moores Rowland Chartered Accountants 7 Vanuatu Agricultural Research & Technical Centre Notes to the Financial Statements For the year ended 31 December 2015 (Expressed in Vatu) 1. General information Vanuatu Agricultural Research and Technical Centre [VARTC] is a statutory body which was established under the VARTC Act. This Act was passed in April 2003 and its provisions commencement as from 1 January 2003. Principal The principal activities of the Centre during the year was for research into agricultural production methods. 2. Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Statement of compliance The financial statements of the Centre are prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and the requirements of the VARTC Act [CAP 286] and the Companies Act No. 25 of 2012 of the Republic of Vanuatu. 2.2 Basis of preparation The financial statements have been prepared on an accrual basis and a historical cost basis and do not take into account changing money values or, except where stated, current valuations of non- current assets. 2.3 Property, plant and equipment i) Property, plant and equipment Items of property, plant and equipment are recorded at cost less accummulated depreciation. ii) Depreciation Depreciation is calculated on a straight line basis to recognise the consumption of economic benefits of an asset over its useful life. The estimated useful lives of property, plants and equipments are as follows: Buildings 4-50 years Plant and equipment 4-10 years Vehicles 3-4 years Office furniture and equipment 3-10 years Patents and Trademarks 1 year 2.4 Inventories Stock on hand and in transit is valued at the lower of cost and net realisable value. Cost is based on the first-in first-out method and includes expenditure incurred in acquiring the stock and bringing it to its existing condition and location. Adequate provision is made for slow moving and obsolete stock. The methods of valuation are consistent with those applied in the previous year. Moores Rowland Chartered Accountants 8 Vanuatu Agricultural Research & Technical Centre Notes to the Financial Statements For the year ended 31 December 2015 (Expressed in Vatu) 2.5 Biological assets i) Livestock Livestock are measured at their fair value less estimated point-of-sale costs. The fair value of livestock is determined based on market price of livestock of similar age, breed and genetic merit. ii) Seedlings & root crops The seedlings and root crops are measured at fair value less estimated point-of-sale costs. The fair value of seedlings and root crops is determined based on the market prices in the local area. i) Coconut, cocoa & coffee Fully grown coconut, cocoa and coffee trees are generating income for the Centre however, the values of these fully grown trees are not recorded in the statement of financial position. 2.6 Foreign currencies All amounts are expressed in Vatu. Assets and liabilities denominated in foreign currencies have been translated at the approximate rates of exchange ruling at the balance sheet date except that where forward exchange cover has been obtained the forward exchange rate has been used. Transactions in foreign currencies are translated at the exchange rates prevailing on transaction dates. Foreign exchange translation gains or losses arising on current account balances and unhedged foreign currency borrowings are reflected in the results for the year. 2.7 Provision for employee benefits Provision has been made in the financial statements by charges against income for benefits accruing to employees in respect of annual leave and severance pay. The liability for annual leave is shown as a non-current liability in the statement of financial position . The severance allowance is calculated at the rate of one months salary for each year of service. Effective January 2013, labourers are hired on a one year contract while other employees on a three years contract basis. 2.8 Income tax The body was incorporated under the VARTC Act 2003 in the Republic of Vanuatu. Under the laws of the Republic of Vanuatu, no income tax or capital gains tax is levied on companies, trusts or individuals. 2.9 Value added tax (VAT) Where applicable, the statement of comprehensive income has been prepared so that all components are stated exclusive of VAT. All items in the statement of financial position are stated net of VAT, with the exception of receivables and payables which include VAT invoiced. 2.10 Provisions A provision is recognised in the statement of financial position when the Centre has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. Moores Rowland Chartered Accountants 9 Vanuatu Agricultural Research & Technical Centre Notes to the Financial Statements For the year ended 31 December 2015 (Expressed in Vatu) 2.11 Accounts receivable Accounts receivable are recorded at their estimated realisable value after providing for doubtful and uncollectable debts. 2.12 Statement of cash flow The following are definitions of the terms used in the statement of cash flow: (a) Cash comprises cash on hand, current bank balances and short term deposits that can be converted to cash within two working days, net of bank overdraft. (b) Operating activities includes all transactions and other events that are not investing or financing activities. (c) Investing activities are those relating to the acquisition, holding and disposal of fixed assets and investments. Investments can include securities not falling within the definition of cash. (d) Financing activities are those activities that result in changes to the size and composition of the company's capital structure. This includes both equity and debt not falling within the definition of cash. 2.13 Grant revenue Grants relating to costs are deferred as unearned income (unused grants) in current liabilities and then recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate. Grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred grants and are credited to the income statement on a straight line basis over the expected lives of the related assets. 2.14 Comparative information Where necessary, comparative information has been re-classified to achieve consistency in disclosure with current financial year amounts and other disclosures. 2.15 Changes in accounting policies There have been no changes in accounting policy. Moores Rowland Chartered Accountants 10 Vanuatu Agricultural Research & Technical Centre Notes to the Financial Statements For the year ended 31 December 2015 (Expressed in Vatu) 2015 2014 3. Sales Sales have been broken down into the following segments. Sales - Copra & coconut products 10,304,471 13,138,169 Sales - Cocoa products 472,001 265,359 Sales - Coffee 409,443 751,633 Sales - Pepper & fruits 19,650 94,987 Sales - Root crops 241,055 122,748 Sale of livestock (meat, duck, chicken) 2,602,056 2,781,308 Income - Memorandum 1,309,191 1,068,015 Other sales & recoveries 1,350,986 532,976 16,708,853 18,755,195 4. Administrative expenses Included in administrative expenses are: Auditor- audit fees 450,000 450,000 Auditor- other services 38,642 48,840 Depreciation 7,250,278 5,042,733 5. Other gains Grant income: SPC - Nabua (PAPGREN) 176,476 1,685,409 NARI ACP-EU S&T Program 6,039,188 466,442 FFEM Project 2,294,414 1,769,752 Fond Pacifique 8,400 45,757 World Bank - EU Project 3,481,653 28,631,515 World Bank - GEF Project 2,767,494 5,645,753 Vanuatu Government 32,653,441 36,636,599 VCMB Fund 387,400 - 47,808,466 74,881,227 Interest received 574,097 522,907 48,382,563 75,404,134 6. Cash and cash equivalents Cash 5,417 1,552 Bank balances 14,712,680 16,083,587 Term deposits 23,633,116 23,059,019 38,351,213 39,144,158 Moores Rowland Chartered Accountants 11 Vanuatu Agricultural Research & Technical Centre Notes to the Financial Statements For the year ended 31 December 2015 (Expressed in Vatu) 2015 2014 7. Trade receivables Trade receivables 315,850 200,428 Less: Provision for doubtful debts (195,850) (195,850) 120,000 4,578 8. Other receivables VAT refundable 223,763 8,374 VAT provision 56,250 56,250 Sundry receivable 82,560 - 362,573 64,624 2015 2014 9. Inventory Fertilizers/chemicals - 23,541 Planting materials 917,367 891,671 917,367 915,212 10. Property, plant and equipment 2015 Cost Acc Depn NBV Buildings 80,308,165 76,917,088 3,391,077 Plant and equipment 41,328,721 39,570,518 1,758,203 Vehicles 32,148,541 25,310,318 6,838,223 Office furniture and equipment 18,155,724 16,997,954 1,157,770 Patents and Trademarks 331,530 331,530 - Buildings improvements 10,746,673 3,429,243 7,317,430 183,019,354 162,556,651 20,462,703 2014 Buildings 79,697,988 75,010,709 4,687,279 Plant and equipment 41,038,596 38,516,449 2,522,147 Vehicles 40,735,527 38,293,748 2,441,779 Office furniture and equipment 17,563,297 16,605,458 957,839 Patents and Trademarks 331,530 331,530 - Buildings improvements 10,746,673 1,279,908 9,466,765 190,113,611 170,037,802 20,075,809 Moores Rowland Chartered Accountants 12 Vanuatu Agricultural Research & Technical Centre Notes to the Financial Statements For the year ended 31 December 2015 (Expressed in Vatu) 10. Property, plant and equipment (continued) 2015 2014 Reconciliation of property, plant & equipment Net book value brought forward 20,075,809 9,981,360 Additions 7,637,172 15,137,182 Depreciation (7,250,278) (5,042,733) Net book value carried forward 20,462,703 20,075,809 The land known as IRCC is held in the name of the Vanuatu Government and the land known as IRHO is held in the name of the custom owners. The Vanuatu Government is still in negotiation with the land owners to acquire the Land, therefore no land appears in the books of VARTC. The land and fully grown coconut, cocoa and coffee trees will be accounted for in the Centres books once the title is given by the Government. 11. Biological assets Livestock 17,751,158 16,702,186 Seedlings 1,649,500 785,120 Root crops 419,230 668,430 19,819,888 18,155,736 12. Trade payables Trade payables 2,334,702 683,597 13. Other payables Accrued expenses 25,706,250 22,106,250 Other payables 349,310 301,500 26,055,560 22,407,750 14. Unearned I Unused grants FFEM Project 2,406,181 2,240,177 Fond Pacifique 323,748 332,148 NARI ACP-EU S/T Program 1,204,658 7,598,734 SPC - Nabua (PAPGREN) 1,090,385 1,510,149 World Bank EU 1,324,636 806,289 World Bank GEF 64,494 522,564 VCBM fund 1,612,600 - 8,026,702 13,010,061 Grants are taken up as unearned income when first received and then systematically taken up as income when matched with project expenditure in the period in which the project expenditure is incurred. Moores Rowland Chartered Accountants 13 Vanuatu Agricultural Research & Technical Centre Notes to the Financial Statements For the year ended 31 December 2015 (Expressed in Vatu) 2015 2014 15. Severance provision Provision for severance pay 560,000 872,000 The calculation of severance pay is outlined in note 2.7 16. Deferred grants Statutory or Contractual Investment Grants Grants Total Grants received 98,804,738 105,052,340 203,857,078 Accumulated Amortisation (98,080,078) (85,701,195) (183,781,273) Balance at 31 December 2014 724,660 19,351,145 20,075,805 Additions/adjustments during 2015 - 7,637,173 7,637,173 Amortised during 2015 (264,190) (6,986,088) (7,250,278) Balance at 31 December 2015 460,470 20,002,230 20,462,700 Grants that have been received to provide plant and equipment for the Centre are credited to Deferred Grants. The Grant is then released as income each year in line with the annual depreciation charge for these assets. 17. Share capital The Vanuatu Agricultural Research and Technical Centre was established under the VARTC Act passed in April 2003. The Act commenced on the 1 January 2003 and established the Centre as a statutory body, with no share capital. 18. Reconciliation of operating deficit to net cash from operations Operating deficit for the year (6,036,073) (384,486) Adjustments Inc/(dec) provision severance pay (243,031) (760,902) Depreciation 7,250,278 5,042,733 Grant reserves mvmnt 7,637,173 15,137,182 Unused grants mvmnt (4,983,359) (772,977) 9,661,061 18,646,036 Add/(less): movements in working capital items: Receivables (115,422) 307,783 Other receivables (297,949) 450,713 Inventory & biological assets mvmnt (1,666,307) (1,003,006) Payables 5,298,918 3,371,981 3,219,240 3,127,471 Cash generated from operating activities 6,844,228 21,389,021 Moores Rowland Chartered Accountants 14 Vanuatu Agricultural Research & Technical Centre Notes to the Financial Statements For the year ended 31 December 2015 (Expressed in Vatu) 19. Financial Instruments All financial instruments to which the Centre is a party are recognised in the financial statements. Credit risk Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Centre does not require collateral in respect of financial assets. At balance date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position. Debtors considered uncollectable have been written off and doubtful debts have been provided for. Interest rate risk The Centre's exposure to interest rates and the effective interest rates of financial assets and liabilities at balance date are as follows: Term Deposit 2.50% All other financial assets or liabilities are non-interest bearing. Fair values The aggregate net fair values of financial assets and liabilities at the balance date approximate the carrying values. 20. Capital Commitments The Centre has not entered into any contracts to purchase plant and equipment for 2015 (2014: Nil) 21. Contingent liabilities The Directors are not aware of any contingent liabilities as at the date of signing the Directors Report. 22. Subsequent events No events have occurred since the balance date which would require any adjustment to or disclosure in the financial statements. Moores Rowland Chartered Accountants 15 mrVMoores Rowland Vanuatu 2nd Floor, TransPacific Haus, PO. Box 257, Port Vila, Vanuatu Telephone: (678) 22291 Fax: (678) 23836 Email: mooresrowland@vanuatu.com.vu Website: www.mooresrowland.com VANUATU AGRICULTURAL RESEARCH AND TECHNICAL CENTRE (VARTC) Disclaimer The additional financial data presented on pages 17 is in accordance with the books and records of Vanuatu Agricultural Research and Technical Centre, which have been subjected to the auditing procedures applied in our statutory audit of the Centre for the year ended 31 December 2015 It will be appreciated that our statutory audit did not cover all details of the additional financial data. Accordingly, we do not express an opinion on such financial data and no warranty of accuracy or reliability is given. The additional financial data has been prepared at the request of and exclusively for the use and benefit of the Centre only, and neither the firm nor any employee of the firm accept any responsibility whatsoever to any other party. MOORES ROWLAND Chartered Accountants Qualified pursuant to Section 130 of the Companies Act No. 25 of 2012 of the Republic of Vanuatu Dated thi day of (\, 2016. 16 Chartered Accountants Resident Partners: Certified Practising Accountants Andrew Munro, Laurence Harrison Vanuatu Agricultural Research & Technical Centre Detailed Statement of Comprehensive Income For the year ended 31 December 2015 (Expressed in Vatu) 2015 2014 Revenue Sales - Copra & coconut products 10,304,471 13,138,169 Sales - Cocoa products 472,001 265,359 Sales - Coffee 409,443 751,633 Sales - Pepper & fruits 19,650 94,987 Sales - Root crops 241,055 122,748 Sale of livestock (meat, duck, chicken) 2,602,056 2,781,308 Income - Memorandum 1,309,191 1,068,015 Other sales & recoveries 1,350,986 532,976 16,708,853 18,755,195 Cost of sales: Stock valuation adjustments and purchases (1,666,307) (1,003,006) Gross profit from trading 18,375,160 19,758,201 Other income Interest income 574,097 522,907 Grant income 47,808,466 74,881,228 Total other income 48,382,563 75,404,135 Total Income 66,757,723 95,162,336 Expenses Accounting fees 38,642 48,840 Advertising 80,000 44,000 Audit fees 450,000 450,000 Depreciation expense 7,250,278 5,042,733 Agricultural supplies 551,036 447,842 Insurance 714,482 862,763 Maintenance & repair-buildings & equipments 1,130,198 2,991,103 Maintenance & repair-vehicle 89,973 422,820 Postage & shipping 146,007 120,142 Wages & salaries 35,162,538 43,270,492 Pay-out severance 1,272,305 1,091,786 Severance inc/(dec) in provision (312,000) (736,000) VNPF 1,844,404 2,409,271 Telephone 456,104 616,206 Electricity 4,688,796 4,835,271 Gas, fuel & oil 3,721,557 4,998,979 Livestock Medication 976,412 267,200 Equipment & supplies 4,215,176 11,778,919 Office & admin supplies 509,981 505,372 Agents renumeration & fees 3,497,951 3,030,815 Travel & mission expenses 2,344,989 4,812,607 Bank charges 52,872 175,121 Road tax 125,916 406,229 Land lease 3,600,000 3,940,544 Sundry expenses 186,179 3,713,767 Total expenses 72,793,796 95,548,822 Operating deficit (6,036,073) (384,486) Deferred grants released to income 7,250,278 5,042,733 Net surplusl(deficit) for the year 1,214,205 4,658,247 Moores Rowland Chartered Accountants 17