FOCUSING ON RESULTS ANNUAL REPORT 31 DECEMBER 2015

Transcription

1 FOCUSING ON RESULTS 2015 ANNUAL REPORT 31 DECEMBER 2015

2 Key indicators New Zealand dollars in thousands Earnings before interest, tax, depreciation and amortisation (EBITDA) $ 3,826 $2,203 $ 1,666 Depreciation and amortisation $ 1,189 $ 913 $ 830 Profit before finance costs (EBIT) $2,637 $1,290 $ 836 Finance costs $ 408 $ 145 $ 44 Income tax expense $ 705 $ 132 $( 80) Net profit attributable to shareholders (NPAT) $ 1,524 $ 1,013 $ 872 Total assets $ 31,371 $ 19,914 $ 16,830 Total shareholder funds $ 17,554 $ 11,981 $ 13,276 Total shares on issue (thousands) 4,748 3,453 4,311 Financial ratios Shareholder equity ratio 56% 60% 79% Dividends paid (in thousands) $ 484 $ 501 $ 1,378 Dividend per share $ 0.14 $ $ 0.32 EBITDA per share $ 0.81 $ 0.64 $ 0.39 NPAT per share $ 0.32 $ 0.29 $ 0.20 Net assets per share $ 3.70 $ 3.47 $ 3.08 Contents Chairman s Report 1 Financial Indicators 2 Chief Executive s Report 3 Statement of Financial Performance and Other Comprehensive Income 6 Statement of Changes in Equity 7 Statement of Financial Position 8 Statement of Cash Flows 9 Notes to the Financial Statements 10 Audit Report 35 Statutory Information 36 s 38 Management 39 Shareholders 40 y 41

3 OPAC ANNUAL REPORT Chairman s Report On behalf of the board, I am pleased to present the annual report for the company for the year ended 31 December, This has been a significant period for us all at OPAC with a number of key changes in the management team, a highly-successful capital raising, the introduction of new strategic shareholders, significant site expansion, the recovery in Gold kiwifruit volumes, and the successful sales and marketing programme for significantly increased volumes of both Green and Gold. During 2015, we announced the departure of long-serving Managing Craig Thompson and the appointment of Ian Coventry as incoming CEO. Thanks to both Craig and Ian, this has proven to be a seamless transition for all concerned and I am confident that we have in Ian a strong and talented leader who is capable of successfully taking OPAC into our next phase of business growth and activity. We thank Craig for his past leadership through challenging times and we wish him all the best in his new role at Zespri Global Supply, an area in which he has vast experience. Ian has made other key appointments to the management team to ensure that we have the depth of skills and experience required to support the current and future growth phases. Thanks also to shareholders for their support of the recent capital raising to support our extensive site expansion programme. This has enabled the company to approach this with a strong balance sheet from which to leverage favourable capital funding terms. The significant expansion completed over the past 18 months and culminating in harvest 2016 represents a major milestone for our business. The introduction of Te Tumu Paeroa and Quayside Holdings as cornerstone shareholders through this capital raising process has presented the company with investors of the highest possible quality and strategic value to the business. We welcome Tiaki Hunia (Deputy Maori Trustee) representing Te Tumu Paeroa and Scott Hamilton (CEO of Quayside Holdings Limited) representing Quayside. Both are talented businessmen who will bring further value and depth to the OPAC board. The success of Gold 3 both on orchard and in the market place provides OPAC with a singular strength to plan for future business growth in an environment of quiet confidence. As one of the only New Zealand kiwifruit post harvest operations where Gold supply exceeds that of Green, and with potential for significant expansion within our geographic catchment, we remain strategically placed to grow our business and markedly increase profitability. Whilst we have learnt, through experience, not to count our trays until they are picked, packed and sold! We look forward to the challenge that this potential growth presents! Finally warm thanks to our grower suppliers, our staff and key stakeholders who all contribute to our business successes and we look forward to engaging with you at the coming ASM. AE (Tony) de Farias Chairman

4 2 OPAC ANNUAL REPORT 2015 Financial indicators Revenue Net Assets EBITDA $39.0m $40m $18m $7m $33.7m $27.1m $31.5m $1.7m $37.1m $10.3m $12.6m $13.3m $12.0m $17.6m $4.2m $6.4m $2.2m $3.8m Returns NPAT EPS NPAT Return on Net Assets Dividends Paid in Year $4m $3.3m $ % $0.35 $0.2m $ % $0.9m $1.0m $1.5m $0.20 $0.29 $0.77 $ % 26.3% 8.5% 8.7% $0.32 $0.20 $0.20 $0.145 $

5 OPAC ANNUAL REPORT Chief Executive s Report Business performance Total group revenue of $37.06m was up 17.5% on 2014 ($31.53m) as our Factory Road facility operated at capacity to handle record Hayward yields and increasing GA SunGold volumes. The volume lift and good capacity utilisation contributed to a further improvement in OPAC s operating margin, producing a gross operating profit of $3.48m being a 44.3% increase on 2014 ($2.41m). At $2.64m, earnings before interest and tax (EBIT) more than doubled on 2014 s $1.29m, including a $1.42m contribution from our associate and joint venture orchard investments (2014: $0.51m). Net profit attributable to shareholders was up 50.4% to $1.52m (2014: $1.01m). Approval by shareholders of OPAC s equity raise in support of the five year growth programme saw the injection of $4.82m in new capital from December s share issue. The new equity capital, along with an increase in total borrowing to $8.00m, up from $3.72m in the prior period, will be used along with operating cashflows to fund the company s capacity build at Factory Road. This capacity expansion plan which commenced in 2014 and continued in 2015 includes expanding the packing capacity with a new 7 lane Compac Invision grader, building 1,170,000 trays of new coolstores and investing in land for future post harvest site expansion. The equity raise proceeds and 2015 capital expenditure contributed to a $11.46m lift in the value of total assets to $31.37m. Total net assets were up $5.57m to $17.55m with 1.30m new shares issued in December at $3.75 per share increasing the total number of shares from 3.45m to 4.75m. At balance date, the net asset backing per share was $3.70 being a 6.6% increase on 2014 ($3.47). The company paid dividends of $0.14 per share in 2015 that returned $0.48m to shareholders (2014: $0.50m) season Harvest 2015 provided 5.6m trays to our Factory Road operation, driven by unprecedented Hayward yields, and a 57% lift in total gold kiwifruit volumes as more SunGold orchards achieved full production. Our supplying Hayward growers achieved a remarkable 11,142 trays per hectare on average to deliver a record 3.1m trays. This was mirrored across the industry where Hayward supply outstripped forecasts. Higher industry volumes up 19% on the prior season contributed to a longer shipping programme, and while the industry s initial coolstore performance was good, later movements were impacted by softer fruit and elevated losses, both in New Zealand and in the markets. A key measure for our supplying growers is coolstore storage performance, with our target to deliver losses below 1.00% across all varieties. While we did not achieve our target for Hayward, our average loss of 2.63% was considerably better than the industry average of 4.10% and helped OPAC deliver a forecast Hayward OGR of $5.24 per tray compared to the industry average of $4.94 per tray. OPAC s SunGold growers achieved another significant jump in production to 2.1m trays, up 116% on Along with production from Hort16A and GL Charm orchards, OPAC handled 2.3m trays of gold kiwifruit, just short of the former peak of 2.4m trays of Hort16A packed in 2012.

6 4 OPAC ANNUAL REPORT 2015 In 2015 OPAC delivered SunGold fruit loss of 0.59% compared to the industry average of 1.05% and matched the industry s OGR performance of $8.17 per tray. Over the last couple of seasons SunGold has proven to be a high-cropping variety that is comparatively easy to grow, handle and store. With 2015 the last season for GL Charm, and the rapid removal of Hort16A, SunGold has emerged as a highly-valuable product line for growers, post harvest operators and consumers and has re-established the confidence of our growers. Growing with our industry 2015 has been a transition year for OPAC and our growers. Since Psa started impacting our Italian venture in 2009, we have weathered the economic storm wrought by the demise of Hort16A; we wrote off our Italian orchard investment, consolidated operations at Factory Road, rolled out improved manufacturing processes and have ridden out the downturn in post harvest volumes and the related value impacts on our post harvest facilities and orchard investments. Our actions over this period to preserve shareholder value, while supporting our growers during the Psa crisis, place OPAC in a strong position to grow with a resurging industry. We are now in an exciting growth phase driven by increasing production from our existing grower clients, and new development opportunities to support additional growth. In 2015, we reviewed our orchard investment portfolio and decided large capital investments in established single-orchard operations may be better applied via strategic investments across a number of orchard developments. Accordingly OPAC sold our holding in I-Hort Limited and agreed with our fellow shareholders to sell the orchard assets of Thornton Orchard Limited. By helping establish new orchards, OPAC secures new business for our orchard operations, along with new future volumes for our post harvest operations. Capital raising new strategic alliances Kiwifruit supply from our current grower clients placed our Factory Road site at capacity in 2015, with maturing SunGold orchards forecast to deliver a million more gold kiwifruit trays in 2016, and further increases through to To meet these growth projections, OPAC developed a five year capital investment programme from late 2014 to 2019 totalling over $20m. Funding for the capacity build will be sourced from operating cash flow, investment and asset realisation, debt, and new equity introduced by the capital-raising programme launched in August Targeting to raise $2m to $4m, the capital-raising programme sought interest from existing shareholders, current growers without a shareholding, and new strategic investors. The capital raise was oversubscribed, bringing in $4.82m in new equity capital, with a number of existing grower shareholders and previously un-shared growers investing. Significantly, the capital raise added two new strategic partners to our share register; Te Tumu Paeroa The Maori Trustee a provider of trustee services to Maori land owners across NZ and in the Eastern Bay of Plenty Quayside Holdings Limited the investment arm of the Bay of Plenty Regional Council. These investments in OPAC endorse our business model; both organisations were seeking to invest in high-quality commercial operations that also provide the opportunity through growth to create jobs, career pathways, and wealth within rural communities. They also support our strategies to further our ties with owners of high-producing orchards, and prime undeveloped land for future kiwifruit expansion.

7 OPAC ANNUAL REPORT Capacity build meeting demand for our services OPAC made substantial investments through 2014 and 2015 to prepare the Factory Road site to handle harvest This included building a total of 1,170,000 trays of new coolstore, a new curing room, conversion of an existing building to a packhouse to handle a new grader, and buying the surrounding grazing and orchard land to secure room for expansion. By harvest 2016 the Factory Road site will be operating a new seven-lane grader with automated sorting, carton fillers and strapping technology, with further coolstore builds planned for harvests 2017 and These investments in growth will improve post harvest productivity and deliver efficiency gains to our business. Staff development and new management team In 2015 Craig Thompson stood down as managing director to pursue other interests in the kiwifruit industry. On behalf of the OPAC team, I thank Craig for his contribution which has helped OPAC prepare itself for an exciting growth phase. To ensure we are sufficiently resourced to manage growth in operations, in 2015 along with my appointment as chief executive, Simon Dondi was promoted to manage OPAC s orchard operations, and Nick Lawrence was recruited as chief financial officer. Our business has a strong focus on supporting our people, ensuring we have the right skills to deliver a high quality service, which maximises value to our growers. From providing pathways to full employment, to helping in career development and tertiary training, OPAC plays an important role in the economic development of our region. Moreover, our support services are in strong demand, driven by excellent performance and the demands made on kiwifruit growers by an increasingly-complex compliance regime. The 2016 season We are entering a simpler orcharding and post harvest landscape driven by a robust SunGold expansion programme that is producing a superior product liked by growers, handlers and consumers. At the same time we have had the decommercialisation of GL Charm, reassessment of HE Sweet Green and imminent removal of the last of Hort16A. The announced release of new SunGold licences will spur new investment in our catchment by our growers and by landowners looking to enter the industry. Our high quality orcharding and post harvest performance and strategic alliances will allow OPAC to participate actively in this growth. We have a healthy balance sheet, new investors that aligned with our aim to actively promote economic development in our region and a responsible expansion programme that will lift capacity, deliver strong post harvest performance for our growers, and improve operating margins. OPAC is well positioned to grow with the uplift in volumes while improving shareholder earnings, with a financial position, cash flow and dividend policy that will reward shareholder support. On behalf of management, I thank growers and shareholders for supporting us and our dedicated workforce for delivering excellent operational performance. Ian Coventry Chief Executive

8 6 OPAC ANNUAL REPORT 2015 Statement of Financial Performance and Other Comprehensive Income for the year ended 31 December 2015 New Zealand dollars in thousands Notes Revenue 4 37,058 31,526 34,890 28,911 Direct operating costs 5 33,575 29,112 31,405 26,497 Gross operating profit 3,483 2,414 3,485 2,414 Other income Share of profits of equity accounted investments 9b 1, Gain on sale of equity accounted investments 9c Total other income 1, General and administrative costs Losses associated with property, plant and equipment Depreciation expense 5, 7 1, , Amortisation expense Total other expenses 2,351 1,693 2,259 1,690 Profit before finance costs (EBIT) 2,637 1,290 1, Finance costs Profit before income tax 2,229 1, Income tax expense 6a Net profit attributable to shareholders 1,524 1, Other comprehensive income Revaluation of property, plant and equipment, net of tax - 1,086-1,086 Total of items that will not be reclassified to profit or loss - 1,086-1,086 Revaluation of available for sale financial assets, net of tax Revaluation of available for sale financial assets in associates, net of tax (16) Total of items that may be reclassified subsequently to profit or loss Total other comprehensive income net of tax 10 1, ,236 Total comprehensive income for the period attributable to shareholders 1,534 2, ,759 The notes to the financial statements form part of and are to be read in conjunction with these financial statements

9 OPAC ANNUAL REPORT Statement of Changes in Equity for the year ended 31 December 2015 Available for Property, plant Associates sale assets & equipment Share Capital revaluation revaluation revaluation Retained New Zealand dollars in thousands Notes capital reserve reserve reserve reserve earnings Total Equity at 1 January ,953 1, ,852 1,434 13,276 Net profit for the year ,013 1,013 Other comprehensive income for the year ,086-1,420 Transfer from retained earnings - (78) Total comprehensive income/(loss) - (78) ,086 1,091 2,433 Transactions with owners Shares repurchased 15 (3,227) (3,227) Dividends paid (501) (501) Transactions with owners (3,227) (501) (3,728) Equity at 31 December , ,938 2,024 11,981 Net profit for the year ,524 1,524 Other comprehensive income/(loss) for the year - - (16) Transfer from retained earnings (422) (127) - Total comprehensive income/(loss) (438) 26-1,397 1,534 Transactions with owners Partly paid shares issued Fully paid shares issued 15 4, ,770 Capital issuance costs (292) (292) Dividends paid (484) (484) Transactions with owners 4, (776) 4,039 Equity at 31 December ,541 1, ,938 2,645 17,554 Equity at 1 January , ,852 (876) 9,909 Net profit for the year Other comprehensive income for the year ,086-1,236 Total comprehensive income , ,759 Transactions with owners Shares repurchased 15 (3,227) (3,227) Dividends paid (501) (501) Transactions with owners (3,227) (501) (3,728) Equity at 31 December , ,938 (854) 7,940 Net profit for the year Other comprehensive income for the year Total comprehensive income Transactions with owners Partly paid shares issued Fully paid shares issued 15 4, ,770 Capital issuance costs (292) (292) Dividends paid (484) (484) Transactions with owners 4, (776) 4,039 Equity at 31 December , ,938 (1,392) 12,237 The notes to the financial statements form part of and are to be read in conjunction with these financial statements

10 8 OPAC ANNUAL REPORT 2015 Statement of Financial Position as at 31 December 2015 New Zealand dollars in thousands Notes Equity Share capital 15 9,541 4,726 9,541 4,726 Reserves 5,368 5,231 4,088 4,068 Retained earnings 2,645 2,024 (1,392) (854) Total equity 17,554 11,981 12,237 7,940 Assets Non-current assets Property, plant and equipment 7 19,190 11,399 19,190 11,399 Intangible assets Equity accounted investments 9a 2,872 3, Available for sale financial assets Loans and cash advances Total non-current assets 23,015 15,747 19,930 12,128 Current assets Cash and cash equivalents 3, , Trade and other receivables 12 3,662 2,410 3,490 2,379 Inventories Biological assets - Kiwifruit crop on vine Income tax receivable 6c Total current assets 8,356 4,167 7,758 4,004 Total assets 31,371 19,914 27,688 16,132 Liabilities Non-current liabilities Borrowings 17 7,676-7,676 - Deferred tax liabilities 6e 1,943 1,543 1,943 1,543 Total non-current liabilities 9,619 1,543 9,619 1,543 Current liabilities Borrowings , ,721 Trade and other payables 18 3,790 2,669 5,424 2,928 Income tax liabilities 6c Total current liabilities 4,198 6,390 5,832 6,649 Total liabilities 13,817 7,933 15,451 8,192 Net assets 17,554 11,981 12,237 7,940 On behalf of the board A E de Farias T D Chrisp Chairman 30 March 2016 The notes to the financial statements form part of and are to be read in conjunction with these financial statements

11 OPAC ANNUAL REPORT Statement of Cash Flows for the year ended 31 December 2015 New Zealand dollars in thousands Notes Operating Activities Cash was provided from: Receipts from customers 35,813 31,895 33,914 29,252 Interest income received Dividends received Cash was distributed to: Payments to suppliers and employees (33,658) (29,005) (31,929) (26,390) Interest paid (409) (145) (399) (145) Income taxes paid (7) (239) (6) (56) Net cash flows from operating activities 22 1,838 2,585 1,655 2,718 Investing activities Cash was provided from: Proceeds from sale of equity accounted investee Sale of property, plant and equipment Repayment of loans to associates and subsidiaries , Capital distributions received from associates 1, Cash was applied to: Purchase of available for sale investments - (17) (18) (17) Purchase of property, plant and equipment (8,835) (2,613) (8,835) (2,613) Purchase of intangible assets (2) (62) (2) (62) Net cash flows from investing activities (6,958) (1,962) (7,067) (2,173) Financing activities Cash was provided from: Issues of shares 15 4,815-4,815 - Proceeds of short term bank borrowings - 3,241-3,241 Proceeds of long term bank borrowings 8,000-8,000 - Cash was applied to: Share buyback transaction 15 - (3,227) - (3,227) Transaction cost recognised directly in equity (292) - (292) - Dividends paid (484) (501) (484) (501) Repayment of short term bank borrowings (3,580) - (3,580) - Repayment of term debt (140) (240) (140) (240) Net cash flows from financing activities 8,319 (727) 8,319 (727) Net increase/(decrease) in cash and cash equivalents 3,199 (104) 2,907 (182) Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 3, , The notes to the financial statements form part of and are to be read in conjunction with these financial statements

12 10 OPAC ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 31 December 2015 NOTE 1. STATEMENT OF ACCOUNTING POLICIES Reporting entity and statutory base Opotiki Packing and Cool Storage Limited ( the company ), its subsidiaries, and its equity accounted investees (together the group ) provide and manage service activities to the horticultural industry. The company is a limited liability company incorporated and domiciled in New Zealand, registered under the New Zealand Companies Act 1993, and an issuer in relation to the Financial Reporting Act The address of its registered office is Opotiki Packing and Cool Storage Limited, 93 Waioeka Road, Opotiki. The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the Companies Act The company continues to comply with the Financial Reporting Act 1993 and the Securities Act 1978 despite the coming into force of both the Financial Reporting Act 2013 ( FRA 2013 ) and the Financial Markets Conduct Act 2013 ( FMC Act ) on 1 April This is in accordance with the transitional provisions in both the FRA 2013 and the FMC Act. Once the company no longer utilises the transitional provisions of both the FRA 2013 and the FMC Act, the company will comply with both the FRA 2013 and the FMC Act. The financial statements were authorised for issue by the Board of directors on 30 March The directors do not have the authority to amend the financial statements after issue. Summary of significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. A. Basis of preparation The consolidated financial statements of the group have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP) and comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards, as appropriate for profit-oriented entities. The consolidated financial statements also comply with International Financial Reporting Standards (IFRS). The group financial statements are presented in New Zealand dollars, which is the group s functional and presentation currency. Exchange differences are recognised in the statement of financial performance as part of the gain or loss on sale. Going concern assumption s continue to adopt the going concern assumption in preparing the financial statements for the year ended 31 December In doing so they have, amongst other things, considered; Forecast information relating to operational profitability and cash flow requirements. The security of bank funding and compliance with bank covenants. The offshore growth in Zespri sales and increasing supply from existing growers of the Gold kiwifruit variety. The company s ability to deliver above industry returns to growers of Hayward kiwifruit, retaining a loyal customer base. B. Historical cost convention The group financial statements have been prepared under the historical cost convention as modified by those assets carried at fair value, being financial instruments measured at fair value through the profit or loss, available for sale financial instruments, biological assets, and land, buildings and coolstore plant and equipment. Financial instruments through profit or loss are measured at fair value. C. Accounting estimates and judgments The preparation of the financial statements in conformity with NZ IFRS requires the use of critical accounting estimates. It also requires directors to exercise their judgment in the process of applying the group s accounting policies. The areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are significant to the financial statements are disclosed in note 2. The s have assessed judgments and estimates at balance date based on information available up to the date of approving the financial statements. D. Basis of consolidation The consolidated financial statements incorporate the assets and liabilities of the group as at 31 December 2015 and the results of the group for the year then ended. Accounting policies of subsidiaries, associates and jointly controlled entities have been changed where necessary to ensure consistency with the policies adopted by the company. i. Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the company. They are no longer consolidated from the date that control ceases.

13 OPAC ANNUAL REPORT The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the group s share of identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the statement of financial performance. Inter-entity transactions, balances and unrealised gains on transactions between entities are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the assets transferred. ii. Interests in equity accounted investees The group s interests in equity accounted investees comprise interests in associates and joint ventures. Associates are those entities in which the group has significant influence, but not control or joint control, over the financial and operating policies. Joint ventures are arrangements in which the group has joint control, whereby the group has rights to the net assets of the arrangements, rather than rights to their assets and obligations for their liabilities. Interests in associates and joint ventures are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the group s share of the profit or loss and other comprehensive income in equity accounted investees, until the date on which significant influence or joint control ceases. E. Property, plant and equipment Land, buildings and cool store plant and equipment are shown at fair value, based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of financial performance during the financial period in which they are incurred. Increases in the carrying amounts arising on revaluation of land, buildings and cool store plant and equipment are credited to reserves in shareholders equity. To the extent that the increase reverses a decrease previously recognised in the statement of financial performance, the increase is first recognised in the statement of financial performance. Decreases that reverse previous increases of the same asset are first charged against revaluation reserves directly in equity to the extent of the remaining reserve attributable to the asset; all other decreases are charged to the statement of financial performance. Land is not depreciated. Depreciation on other assets is calculated using the straight line (SL) or diminishing value (DV) method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows: Buildings years (SL) or 4% % DV Plant & Machinery 40 years (SL) or 7.5% % DV Coolstore Plant & Equipment 40 years (SL) or 7.5% % DV Motor Vehicles 4-7 years (SL) or 18% to 60% DV Office Equipment, Fixtures and Fittings 3-10 years (SL) or 11.4% - 60% DV Partially completed Projects (nil) The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of financial performance. When revalued assets are sold, it is company policy to transfer the amounts included in other reserves in respect of those assets to retained earnings. F. Intangible assets - Computer software Acquired computer software licenses, which have a finite life, are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised using the diminishing value method at 48%. G. Impairment of non financial assets Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

14 12 OPAC ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 31 December 2015 H. Financial instruments A financial instrument is recognised if the group becomes party to the contractual provisions of the instrument. Financial assets are derecognised if the group s contractual rights to the cash flows from the financial assets expire or if the group transfers the financial asset to another party without retaining substantially all risks and rewards of the asset. Ordinary purchases and sales of financial assets are accounted for at trade date, the date that the group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the group s obligations as specified in the contract expire or are discharged or cancelled. Non-derivative financial instruments comprise investments in available for sale financial assets, loans and cash advances, trade and other receivables, cash and cash equivalents, borrowings, and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through the profit or loss, any directly attributable transaction costs. Subsequent to initial recognition, available for sale financial assets are measured at fair value after recognition. Unrealised gains and losses arising from changes in the fair value of such assets are recognised in the available for sale assets revaluation reserve. When they are sold, the accumulated fair value adjustments are included in the statement of financial performance as gains or losses from investment securities. Where the investments are not valued on a quoted market (the bid price), the group establishes fair value by using valuation techniques, including discounted cash flow models and recent sales prices of the same or similar instruments. These assets are included in non-current assets unless management intends to dispose of those investments within 12 months of balance date. Subsequent to initial recognition, other non-derivative financial instruments classified as loans and receivables or other liabilities are measured at amortised cost using the effective interest method, less any impairment losses. They comprise loans and cash advances, trade and other receivables, cash and cash equivalents, borrowings, and trade and other payables. Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the group s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Bank overdrafts, multi option credit line facilities and term loans are included within current liabilities as borrowings, to the extent that their repayment is either required or demandable within the next 12 months. The group assesses whether there is objective evidence that a financial asset or group of financial assets are impaired at least annually. In the case of available for sale assets, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists, the cumulative loss, measured as the difference between the acquisition cost and the current fair value less any impairment loss on that financial asset previously recognised in profit and loss, is removed from equity and recognised in the statement of financial performance. Impairment losses recognised in the statement of financial performance on equity instruments are not reversed through the statement of financial performance and other comprehensive income. In the case of trade and other receivables, a provision for doubtful debts is considered based on the collectability of outstanding receivables, which is reviewed on an ongoing basis. Where a receivable is known to be uncollectible, it is written off to the statement of financial performance. It is assumed at all times that the carrying values less estimated credit adjustments of trade and other receivables, and trade and other payables, are assumed to approximate their fair values. The group is not party to any derivative financial instruments. I. Leases Leases of property, plant and equipment where the group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the leases inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in payables. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The interest element of the finance cost is charged to the statement of financial performance over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the asset s useful life and the lease term. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of financial performance on a straight line basis over the period of the lease, except for short term orchard leases where lease costs are recognised at the same time as other crop related income and expenses. Where a lease is onerous, the cost of the onerous portion is recognised immediately. J. Biological assets i. Biological assets Kiwifruit vines (equity accounted investees) All kiwifruit orchards are held in associates and jointly controlled entities. Where the associate or jointly controlled entity owns the land, the fair value is determined by an independent valuer. Where the orchard land is leased with a finite term, fair value for fully developed orchard areas is determined on the basis of a discounted cash flow model. The fair value of orchard areas under development is determined at cost due to insufficient biological transformation having occurred at balance date. Cost is tested for impairment at balance date. In assessing the cost of developing kiwifruit orchard areas, consideration is given to the level of uncertainty that exists as to the ability of the new vines, or grafts, to survive through to full production. The gain or loss in the fair value of the kiwifruit vines is recorded in the statement of financial performance of the equity accounted investee.

15 OPAC ANNUAL REPORT ii. Biological assets Kiwifruit crop on vine (short term leases) At annual balance date kiwifruit grown by the company under short term leases is measured at its fair value. The fair value is deemed to be cost as insufficient biological transformation has occurred. The gain or loss in the previously assessed fair value of the kiwifruit is recorded in the statement of financial performance. K. Inventories Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials and direct labour. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. L. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown as a reduction in retained earnings, net of tax, from the proceeds and are therefore not included in the issuance value of shares within share capital. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of acquisition as part of the purchase consideration. M. Employee benefits Liabilities for wages and salaries, including non monetary benefits, and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. N. Borrowings Borrowings are recognised initially at fair value, net of costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of financial performance over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after balance date. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalised during the period of time that is necessary to complete and prepare the asset for intended use. Other borrowing costs are expensed in the period in which they are incurred and are reported in the statement of financial performance under finance costs. O. Income tax The income tax expense comprises both current and deferred tax. Income tax expense is recognised in the statement of financial performance except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to the tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities in a transaction that is not a business combination and that affects neither accounting or taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the foreseeable future. Deferred tax recognised in the financial statements does not represent the tax that would be payable on the disposal of buildings. The actual tax payable on disposal of the buildings would be limited to the reversal of tax depreciation claimed on that asset in prior period tax returns. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. P. Goods and Services Tax (GST) The statement of financial performance and other comprehensive income has been prepared so that all components are stated exclusive of GST. All items in the statement of financial position are stated net of GST, with the exception of receivables and payables, which include GST invoiced.

16 14 OPAC ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 31 December 2015 Q. Revenue recognition Revenue comprises the fair value received for the sale of goods and services, net of GST, rebates and discounts and after eliminating sales within the group. Revenue is recognised as follows: i. Sales of services The group provides post harvest, orchard services and fruit marketing services to the horticultural industry. Orchard services This includes orchard management, and associated services provided to growers who supply fruit to the group. Fees for these services are invoiced and recognised as incurred on a monthly basis. The group also enters into orchard leases via financial arrangements with landowners to produce kiwifruit crops. The costs of growing these crops are incurred over an 11 month period prior to harvest during March to June each year. The revenue from these crops is received over the 12 month period following harvest and is applied against growing costs incurred and payments to landowners. Post harvest services This includes fruit packing, coolstorage and other associated activities. These services are predominantly provided during the period from April to October with the majority of revenues collected by the end of November each year. Revenue is recognised as the service is provided. ii. Interest income Interest income is recognised on a time proportion basis using the effective interest method. iii. Dividend income Dividend income is recognised when the right to receive payment is established. R. Revaluation reserves The revaluation reserves relate to property, plant and equipment, investments held in tradable shares and revaluations of investments in associates. Where impairments or decreases in the fair value of assets or investments, exceed the carrying value of the revaluation reserve, the loss or decrease is recognised in the statement of financial performance and other comprehensive income. S. Dividends payable Provision is made for the amount of any dividend declared on or before the end of the year but not distributed at balance date. T. Comparative balances The presentation of certain comparative balances has been amended to ensure consistency with the current year disclosures. U. Application of new and revised New Zealand International Financial Reporting Standards Standards, amendments and interpretations to existing standards that are now in effect The following new standard and amendments are mandatory for the first time in the current year and adopted by the group: i. NZ IAS 32 Financial instruments presentation (effective for annual periods beginning or after 1 January 2015). This amendment clarifies some of the requirements for offsetting financial assets and financial liabilities on the statement of financial position. The amendment did not have a significant effect on the group financial statements. ii. NZ IAS 36 Impairment of assets (effective for annual periods beginning or after 1 January 2015). This amendment has made a small change to the disclosures required when a recoverable amount is determined based on fair value less costs of disposal. Standards, amendments and interpretations to existing standards that are not yet effective The group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective: i. NZ IAS 41 (Amendment) Agriculture (effective for annual periods beginning or after 1 January 2017). Early adoption is allowed. Biological assets except for bearer plants are accounted for under IAS 41 while bearer plants are accounted for under IAS 16 Property, Plant and Equipment. The amendments also clarify that produce growing on bearer plants is to be accounted for under IAS 41. The group has yet to fully assess the impact of this amendment however it is anticipated that the changes will not be significant. ii. NZ IAS 16 Property, plant and equipment & NZ IAS 38 Intangible assets (effective for annual periods beginning on or after 1 July 2015). Both standards are amended to clarify how the gross carrying amount and the accumulated depreciation are treated where an entity uses the revaluation model. The group has yet to fully assess the impact of this amendment however it is anticipated that the changes will not be significant. iii. NZ IAS 24 Related party disclosures (effective for annual periods beginning on or after 1 July 2015). The standard is amended to include, as a related party, an entity that provides key management personnel services to the reporting entity or to the parent of the reporting entity ( the management entity ). The group has yet to fully assess the impact of this amendment however it is anticipated that the changes will not be significant.

17 OPAC ANNUAL REPORT iv. NZ IFRS 9 Financial instruments (effective for annual periods beginning on or after 1 January 2019). NZ IFRS 9 is to replace IAS 39 and will simplify the mixed measurement model as well as establish three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income and fair value through financial performance. Basis of classification depends on the entity s business model and contractual cash flow characteristics of the asset. IAS 39 guidance on impairment and hedge accounting will continue to apply. The group has yet to fully assess the impact of this amendment. v. NZ IFRS 15 Revenue from contracts with customers (effective for annual periods beginning on or after 1 January 2018). NZ IFRS 15 addresses recognition of revenue from contracts with customers. It replaces the current revenue recognition guidance in NZ IAS 18 Revenue and NZ IAS 11 Construction contracts and is applicable to all entities with revenue. It sets out a 5 step model for revenue recognition 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. The group has yet to assess NZ IFRS 15 s full impact however it is anticipated that the changes will not be significant. The group will apply this standard from 1 January NOTE 2. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of the assets and liabilities and profit within the next financial year are discussed below: i. Valuation of biological assets Kiwifruit vines for associates and jointly controlled entities Kiwifruit vines are measured at fair value as explained in note 1 (J) Biological assets where discounted cashflows are assessed using unobservable inputs such as orchard costs and orchard gate returns (OGRs). Refer note 9. ii. Valuation of kiwifruit Crop on vine for short term leases Kiwifruit from short term leased orchards are measured at fair value. Due to the profit share arrangements with landowners, the company only receives a small percentage of the profit from growing the crop. For this reason the company considers the costs to grow the crop to equate to the fair value of its investment. Refer note 14. iii. Land and buildings Land and buildings are measured at fair value as determined by an independent valuer. The independent valuer uses valuation techniques which are inherently subjective and involve estimation. Refer note 7. Changes to the above valuation assumptions could have a significant impact on the statement of financial performance and other comprehensive income and equity portion of the company and group. NOTE 3. FINANCIAL RISK MANAGEMENT The group s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The chief executive officer is required to identify and report the major risks affecting the business and develop strategies to mitigate these risks. The board reviews and approves overall risk management strategies covering specific areas such as market risk, use of derivative and nonderivative financial instruments and investments of excess liquidity. A. Market risk i. Foreign currency risk The group and the company have no material direct currency risk. The group is exposed to foreign currency risk indirectly through its fruit income received on leased orchards. The foreign currency risk associated with the offshore sales is managed by Zespri Limited (Zespri) and is not covered by the company. ii. Price risk The group is exposed to equity securities price risk. This arises from investments held by the group and classified on the statement of financial position as available for sale financial assets. The majority of the group s equity instruments are in industry related entities, only some of which are publicly traded. The following table summarises the impact of increases and decreases in the fair value of equity securities available for sale on the group s post tax profit for the year and on equity. The analysis is based on the assumption that the equity values had increased or decreased by 10% with all other variables held constant and all the group s equity instruments moved in correlation with each other.

18 16 OPAC ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 31 December 2015 Impact on post tax profit Impact on equity +10% -10% +10% -10% New Zealand dollars in thousands available for sale financial assets 7 5 (7) (5) (94) (89) available for sale financial assets 7 5 (7) (5) (72) (68)) iii. Cash flow and fair value interest rate risk The group s interest rate risk arises from both long and short term borrowing. Borrowing issued at variable rates expose the group to cash flow interest rate risk. Borrowing issued at fixed rates expose the group to fair value interest rate risk. The board continuously reviews the group s interest rate risk on term borrowing to ensure the most favourable interest rates are received. An analysis of interest rate and price sensitivity of the group s financial assets and liabilities and their impact on profit and loss or equity is shown below. As loans and cash advances do not attract interest and are not subject to pricing risk, they have accordingly been excluded from this analysis. Interest rate risk Price risk -1% +1% -10% +10% Short term Long term Short term Long term Short term Long term Short term Long term New Zealand dollars in thousands liabilities liabilities liabilities liabilities liabilities liabilities liabilities liabilities 31 December 2015 Profit / equity 3 77 (3) (77) (154) (379) 31 December 2014 Profit / equity 37 - (37) - (133) (267) 31 December 2015 Profit / equity 3 77 (3) (77) (139) (318) 31 December 2014 Profit / equity 37 - (37) - (133) (250) The following table outlines the expected undiscounted cash flows relating to the group s outstanding term debt as at balance date: Between Between Between Between Between and company Total months months months years years 31 December 2015 Contractual undiscounted cash flows based on current market interest rates ($000) Average variable rate (%) 4.47% 4.46% 4.46% 4.46% 4.47% 4.51% 31 December 2014 Contractual undiscounted cash flows based on current market interest rates ($000) Average variable rate % 6.30% 6.30% 6.30% - - -

19 OPAC ANNUAL REPORT B. Credit risk Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. As part of the group s financial risk policy, exposure is monitored on a regular basis. For banks and financial institutions, only registered banks or their subsidiaries are accepted. For customers, including outstanding receivables, the group deals predominantly with growers for which it receives payment directly from OPAC Growers Limited. Credit risk is therefore not considered significant. The group does not generally require any collateral or security to support financial instruments due to the quality of the financial institutions dealt with. Refer to trade and other receivables note 12 for further information on the credit risk of loans and receivables. C. Liquidity risk Management and the board regularly monitor the group s liquidity reserves on the basis of expected cashflows, recognising the seasonal nature of the group s operations. At balance date, the group had $12,000,000 (2014: $4,640,000) of available lines of credit of which $8,000,000 (2014: $3,721,000) were drawn. The following tables analyse the group s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date. Less than Between Between Over New Zealand dollars in thousands Total year years years years 31 December 2015 Trade and other payables 3,790 3, Interest bearing loans and borrowings 8, ,380 Interest bearing loans and borrowings 11,790 4, , December 2014 Trade and other payables 2,669 2, Bank borrowings 3,581 3, Interest bearing loans and borrowings Interest bearing loans and borrowings 6,390 6, December 2015 Trade and other payables 5,424 5, Interest bearing loans and borrowings 8, ,380 Interest bearing loans and borrowings 13,424 5, , December 2014 Trade and other payables 2,928 2, Bank borrowings 3,581 3, Interest bearing loans and borrowings Interest bearing loans and borrowings 6,649 6,

20 18 OPAC ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 31 December 2015 D. Capital risk The group s objectives when managing capital are to safeguard the group s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital, in order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The group monitors capital on the basis of its shareholder equity ratio. This ratio is calculated as total shareholder funds divided by total assets. The shareholder equity ratio at 31 December is: New Zealand dollars in thousands Total shareholder funds 11,981 13,276 Total assets 19,914 16,830 Shareholder equity ratio 60.16% 78.88% The group is subject to and monitors financial covenants imposed by its lenders. As at balance date, the group was subject to the following specific lending covenants: times interest earned, quasi equity ratio. At no stage during the year did the company breach any of its lending covenants. E. Fair value estimation Assets and liabilities carried at fair value, referenced in Note 2, are categorised within one of the following levels of the fair value hierarchy. Of those assets and liabilities, all are categorised in level 3, with the exception of listed equity securities which are included within available for sale financial assets. These totalled $326,000 this year (2014: $287,000) at both the group and parent level. Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3: Inputs for the asset or liability that is not based on observable market data (that is, unobservable inputs). The following table shows a reconciliation from the beginning balances to the ending balances for level 3 fair value measurements: Land, buildings & coolstore Unlisted plant and Biological equity New Zealand dollars in thousands equipment assets securities Total Balance at 1 January , ,385 Acquisitions / purchases ,591 Sales / disposals (16) (619) - (635) Depreciation (393) - - (393) Change in value recognised in other comprehensive income 1,512 - (54) 1,458 Balance at 31 December , ,406 Acquisitions / Purchases 5, ,408 Sales / Disposals - (857) - (857) Depreciation (615) - - (615) Change in value recognised in other comprehensive income Balance at 31 December , ,348

21 OPAC ANNUAL REPORT Land, buildings & coolstore Unlisted plant and Biological equity New Zealand dollars in thousands equipment assets securities Total Balance at 1 January , ,127 Acquisitions / purchases ,591 Sales / disposals (16) (619) - (635) Depreciation (393) - - (393) Change in value recognised in other comprehensive income 1,512 - (3) 1,509 Balance at 31 December , ,199 Acquisitions / purchases 5, ,408 Sales / disposals - (857) - (857) Depreciation (615) - - (615) Balance at 31 December , ,135 The valuation techniques used in the determination of fair values within level 3 of the hierarchy, as well as the key unobservable inputs used in the valuation models are included within these financial statements within accounting policies or relevant notes. F. Financial risk management strategies related to agricultural activity The group undertakes agricultural activities through its associate and jointly controlled orchards and short term leased orchard operations. These operations are exposed to business risks including climatic and market returns. The board and management have adopted the following strategies to manage risk: i. Climatic risk The group grows kiwifruit on orchards located throughout the Bay of Plenty region. This geographical spread provides risk diversification from localised climatic events. In addition, the group encourages the adoption of proactive crop protection on orchards operated by it and growers, who supply the group s post harvest division. ii. Market and price risks The group has no direct market risk from its sale of class 1 kiwifruit harvested from its leased orchards, as all marketing activities are undertaken by Zespri Limited under statutory regulations. The group however, is exposed to price risk for fruit returns from Zespri which impact on the group s orchard profitability. The group monitors fruit returns from Zespri and uses techniques to analyse current and projected orchard income. This information is used when setting orchard lease terms. iii. Disease and pests The group grows kiwifruit on orchards located throughout the Bay of Plenty region. Along with all horticultural undertakings kiwifruit crops are susceptible to disease and pest incursions. To minimise the risk of crop loss the group monitors its orchards and undertakes a recognised spray programme to protect its crops to the fullest extent possible. As at 31 December 2015 the bacteria Pseudomonas syringae pv. actinidiae (Psa) was confirmed in orchards throughout the group s catchment.

22 20 OPAC ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 31 December 2015 New Zealand dollars in thousands Notes NOTE 4. REVENUE AND OTHER INCOME Revenue Orchard services and sales 13,192 13,077 13,194 13,077 Post harvest sales 23,126 17,786 20,956 15,171 Other sales Total revenue 37,058 31,526 34,890 28,911 Other income Interest income Dividend income Gain on sale of property, plant and equipment Foreign currency gain Total other income

23 OPAC ANNUAL REPORT New Zealand dollars in thousands Notes NOTE 5. EXPENSES BY NATURE Direct operating costs Operating materials and services 18,213 17,064 16,043 14,449 Employee benefits expense 14,498 10,890 14,498 10,890 Rent and lease expenses 864 1, ,158 Total direct operating costs 33,575 29,112 31,405 26,497 Other expenses General and administrative costs General administrative expenses Audit Fee - KPMG Audit Fee - Ingham Mora Fees paid for other services provided by KPMG s fees Total general and administrative costs Losses associated with property, plant and equipment Loss on disposal of property, plant and equipment Total losses associated with property, plant and equipment Depreciation expense Land and buildings Plant and machinery Coolstore plant and equipment Motor vehicles Office furniture, fixtures and fittings Total depreciation expense 7 1, , Amortisation expense Software amortisation Total amortisation expense Total other expenses 2,351 1,693 2,259 1,690 Fees paid for other services provided by KPMG in the current year were for taxation compliance services.

24 22 OPAC ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 31 December 2015 New Zealand dollars in thousands Notes NOTE 6. TAXATION A. Income tax Income tax recognised in the statement of financial performance Income tax expense Current tax expense Current year Adjustments prior year Total current tax expense/(credit) Deferred tax expense Origination and reversal of temporary differences 6e Total deferred tax expense Total income tax expense B. Numerical reconciliation of income tax expense to prima facie tax payable/(receivable): Profit before tax 2,229 1, Tax at New Zealand tax rate of 28% (2014: 28%) Tax effect of amounts which are not deductible / (taxable) in calculating taxable income (8) (50) (33) (50) Effect of share of (loss) of equity accounted investments (336) (123) - - Imputation credits received Dividends from associates Imputation credits (49) (29) (28) (20) Change in recognised deductible temporary differences 469 (1) 469 (1) Under provided in prior years - income tax Assessable (loss) brought forward (65) - (66) - Total income tax expense C. Current tax liability/(asset) The following table shows the group s current tax liability/asset: Opening balance of current tax liabilities/(assets) (221) (90) (223) (257) Adjustments for prior periods Current year tax Income tax transfers Less tax paid (9) (239) (6) (55) Current tax liability/(asset) 84 (221) 84 (223) D. Imputation credit account At 31 December 2015, imputation credits available for use in New Zealand by the group totalled $2,613,000 (2014: $2,742,000) and for the company totalled $1,790,000 (2014: $1,944,000).

25 OPAC ANNUAL REPORT E. Deferred tax assets and liabilities Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows: Balance as 31 December Recognised Net balance Recognised in other Deferred Deferred as at in profit comprehensive tax tax New Zealand dollars in thousands 1 January or loss income Net asset liability 2015 and Property, plant and equipment 1, ,804-1,804 Biological assets Employee benefits and accrued expenses (78) 3 - (75) (75) - 1, ,943 (75) 2, and Property, plant and equipment 1,025 (41) 423 1,407-1,407 Prepaid income (40) Biological assets Employee benefits and accrued expenses (36) (42) - (78) (78) - 1, ,543 (78) 1,621

26 24 OPAC ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 31 December 2015 Office Coolstore equipment, Partially Land and Plant and plant and Motor fixtures and completed New Zealand dollars in thousands buildings machinery equipment vehicles fittings projects Total NOTE 7. PROPERTY, PLANT AND EQUIPMENT GROUP AND COMPANY As at 1 January 2014 Cost or valuation 4,682 6,828 1, ,878 Accumulated depreciation and impairment (14) (5,202) (22) (353) (102) - (5,693) Net book amount 4,668 1,626 1, ,185 Year ended 31 December 2014 Opening net book amount 4,668 1,626 1, ,185 Additions ,589 2,705 Revaluation before tax 1, ,512 Disposals (16) (16) Depreciation expense (186) (453) (207) (43) (6) - (895) Partially completed projects completed during year (92) (92) Closing net book amount 6,151 1,588 1, ,596 11,399 As at 1 January 2015 Cost or valuation 6,223 7,243 1, ,596 17,710 Accumulated depreciation and impairment (72) (5,655) (80) (396) (108) - (6,311) Net book amount 6,151 1,588 1, ,596 11,399 Year ended 31 December 2015 Opening net book amount 6,151 1,588 1, ,596 11,399 Additions ,374 9,374 - Disposals - (109) - (2) - (313) (424) Depreciation expense (300) (502) (315) (35) (7) - (1,159) Partially completed projects completed during year 4,268 1,186 1,283-3 (6,740) - Closing net book amount 10,119 2,163 2, ,917 19,190 As at 1 January 2015 Cost or valuation 10,491 8,429 3, ,917 26,771 Accumulated depreciation and impairment (372) (6,266) (395) (433) (115) - (7,581) Net book amount 10,119 2,163 2, ,917 19,190 Partially completed projects As at 31 December 2015, the group had commenced capital works on the construction of four new coolstores and replacing the existing grader with a new seven lane grader. Construction costs up to the statement of financial position date totalled $3,917,538 (2014: $1,595,990). Refer to Note 20 capital commitments for capital works planned for the 2015/16 financial year. Security At 31 December 2015, assets with a carrying amount of $19,190,146 (2014: $11,399,199) are subject to a registered debenture to secure bank loans (see note 17).

27 OPAC ANNUAL REPORT Fair values of land, buildings and coolstore plant and equipment Land, buildings and coolstore plant and equipment were last valued on the 2nd September 2014 at $8,100,000. No further valuations have been carried out as management and the board of directors believe there has been no material movement in the fair valuation since that date, including the fair value of those assets purchased since that date. The valuation techniques used in the determination of fair values for land, buildings and cool store plant and equipment, as well as the key unobservable inputs used in the valuation models are shown below. Valuation approach The fair value of land, buildings and coolstore plant and equipment, is determined on a rolling 3 year cycle using valuations prepared by an independent valuer Telfer Young. Telfer Young considered three approaches in determining the market value of land, buildings and coolstore plant and equipment at 93 Waioeka Road Opotiki: Replacement cost approach (considers current level of building costs in Bay of Plenty region, physical depreciation and obsolescence due to age and condition.) Sales approach (considers sales of comparable types of properties including factors such as location, size, and technology.) Investment approach (assumes a hypothetical lease with current market rentals that are capitalised at an appropriate rate of return and considers type of development, location, terms of lease and financial capability.) Key unobservable inputs Comparative market rents and the discount rate applied to such. Comparative market sales. Current level of building costs. Physical depreciation allowance. Inter-relationship between key unobservable inputs and fair value measurement. The estimated fair value increases the higher the market rental. The estimated fair value increases the lower the discount rate. The estimated fair value increases the higher the building cost. The estimated fair value increases the lower the depreciation allowance. If carrying amount of land and buildings were stated on the historical cost basis, the amounts for the company and group would be as follows: New Zealand dollars in thousands Cost 11,606 7,338 11,606 7,338 Accumulated depreciation 3,243 3,020 3,243 3,020 Carrying amount 8,363 4,318 8,363 4,318 NOTE 8. SUBSIDIARIES Opotiki Packing and Cool Storage Limited is the ultimate parent company of the group. The consolidated financial statements incorporate the assets, liabilities, and results of the following subsidiaries listed below in accordance with the accounting policy described in note 1(D) Name Country of operation Nature of business Interest held by parent Balance date OPAC Properties Limited New Zealand Investment in associates and joint ventures 100% 31 December OPAC Growers Supply Limited New Zealand Kiwifruit supply and logistics 100% 31 December The results of subsidiaries are incorporated in the consolidated financial statements of the group based on the most recently available financial statements. The results of the group for the year ended 31 December 2015 include the results for all subsidiaries since the date of their last report to the 31 December 2015 using restated statements where balance dates differ. NOTE 9. EQUITY ACCOUNTED INVESTMENTS Opotiki Packing and Cool Storage Limited uses the equity accounting method for associates, associates of subsidiaries and the group s joint ventures. Where equity accounted investments hold assets in orchards these assets are measured at fair value. Fair value is measured on a discounted cash flow model for fully developed orchard areas, or at cost for orchard areas under development. The valuation techniques used in the determination of fair values for orchard assets as well as the key unobservable inputs used in the valuation models are shown below.

28 26 OPAC ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 31 December 2015 Valuation approach The fair value of fully developed kiwifruit orchards (vines) is determined using the net present value of future cashflows. The fair value of the vines under development is deemed at cost due to insufficient biological transformation having occurred at balance date. Cost is tested for impairment at balance date. In assessing the fair value of crop at cost, consideration is given to the level of uncertainty that exists as to the ability of the grafts to survive through to full production and the recoverability of the crop s fair value. Key unobservable inputs Discount rate applied to cashflow. Cost of grafting. Estimated OGR per tray and yields per hectare. Orchards costs per hectare. Inter-relationship between key unobservable inputs and fair value measurement. The estimated fair value increases the lower the discount rate. The estimated fair value reduces if cost is impaired at balance date. The estimated fair value increases the higher the OGR return per tray and the higher the yield per hectare. The estimated fair value increases the lower the cost per hectare. New Zealand dollars in thousands A. Financial position of equity accounted investments The amounts recognised in the statement of financial position are as follows: Associates 2,408 2, Joint ventures Equity accounted investments 2,872 3, B. Share of profits of equity accounted investments The amounts recognised in the statement of financial performance are as follows: Associates 1, Joint ventures (3) Share of profits of equity accounted investments 1, C. Investment in associates Set out below are the associates of the group as at 31 December 2015, which, in the opinion of the directors, are material to the group. Fraser Road Orchards Limited, I-Hort Limited and Thornton Orchards Limited had share capital consisting solely of ordinary shares, which were held directly by the group; the country of incorporation or registration was also their principal place of business. Te Kaha Gold Investments Partnership is structured as a partnership. Nature of investment in associates 2015 and 2014 Name of entity Country of incorporation Percentage of ownership interest Nature of relationship Measurement method Fraser Road Orchards Limited New Zealand 0% % I-Hort Limited New Zealand 0% % Thornton Orchards Limited New Zealand 42.8% % Fraser Road Orchards main activity is the growing of kiwifruit, supplying OPAC. I-Hort s main activity is the growing of kiwifruit, supplying OPAC. Thornton s main activity is the growing of kiwifruit, supplying OPAC. Equity Equity Equity Te Kaha Gold Investment Partnership New Zealand 33.3% TKGIP s main activity is the growing of kiwifruit, supplying OPAC. Equity

29 OPAC ANNUAL REPORT The deregistering of Fraser Road Orchards during 2015 resulted in a loss of $92,224 recognised in the statement of financial performance from the transfer of shares in Thornton Orchards Limited. During the year the directors resolved to sell OPAC Properties share in I-Hort Limited to existing I-Hort Limited shareholders with a gain on sale of $152,323. The transaction was concluded on the 2nd October The company has representation on the board of Thornton Orchards Limited. Thornton Orchards Limited has independent management structures and is responsible for making operational decisions. The directors of Thornton Orchards Limited entered into a sale and purchase agreement for the sale of the orchard operation and associate assets on the 12th October Settlement occurred on the 18th December The orchard assets of Te Kaha Gold Investments Partnership have a finite life and are therefore carried at their fair value. Summarised financial information for associates Set out below are the summarised financial information for associate entities which are accounted for using the equity method. The below table represents the group s share of financial information. Profit New Zealand dollars in thousands Assets Liabilities Equity Revenue / (loss) 2015 Fraser Road Orchards Limited (25) Thornton Orchards Limited Te Kaha Gold Investment Partnership 1, , Share in associates 2, ,408 1,206 1, Fraser Road Orchards Limited (73) I-Hort Limited Thornton Orchards Limited 1, , Te Kaha Gold Investment Partnership Share in associates 3, ,810 1, New Zealand dollars in thousands Reconciliation of movement in the carrying values of associate s financial information Reconciliation of summarised financial information presented to the carrying amounts of its interest in the associate entities: Carrying amount at 1 January 2,810 2,285 Share of profit / (loss) 1, Dividends and capital distributions received (1,476) (77) Movements in other comprehensive income (23) 239 Gain on sale of Investment Proceeds on sale of equity accounted investee (325) - Carrying amount at 31 December 2,408 2,810

30 28 OPAC ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 31 December 2015 D. Investment in joint ventures Set out below are the joint ventures of the group as at 31 December 2015, which, in the opinion of the directors, are material to the group. Name of entity Apanui Road Orchards Joint Venture Country of incorporation Percentage of ownership interest Nature of relationship New Zealand 50% Apanui s main activity is the growing of kiwifruit, supplying OPAC. Measurement method Equity The orchards of Apanui Road Orchard JV have a finite life and are therefore carried at their fair value. The valuations are recorded in the jointly controlled entity. The Opotiki Packing and Cool Storage Limited financial statements record the group s share of the net income and net assets of jointly controlled entity. Summarised financial information for joint ventures Set out below are the summarised financial information for joint ventures which are accounted for using the equity method. The table below represents the groups share of financial information. Profit New Zealand dollars in thousands Assets Liabilities Equity Revenue / (loss) 2015 Apanui Road Orchards JV (3) Share in joint ventures (3) 2014 Apanui Road Orchards JV Share in joint ventures New Zealand dollars in thousands Reconciliation of movement in the carrying values of jointly controlled entities financial information Reconciliation of summarised financial information presented to the carrying amounts of its interest in the jointly controlled entities: Carrying amount at 1 January Share of profit / (loss) (3) 149 Capital distributions - realised - (35) Carrying amount at 31 December

31 OPAC ANNUAL REPORT New Zealand dollars in thousands NOTE 10. AVAILABLE FOR SALE FINANCIAL ASSETS As required under NZ IAS 39, equity investments not otherwise held for trading are classified as available for sale. As at 1 January Additions Revaluation recognised in equity As at 31 December Available for sale financial assets include the following: Listed securities Zespri Limited Unlisted equity securities Ballance Agri Nutrients Limited Farmlands Trading Society OTK Orchards Limited Ravensdown Fertiliser Co-operative Limited UPNZ Limited G3 Kiwi Supply Ltd The Nutritious Kiwifruit Limited Total available for sale financial assets The valuation techniques used in the determination of fair values for unlisted equity securities as well as the key unobservable inputs used in the valuation models are shown below. Valuation approach Fair value is based on the most recent information made available from the respective entities management. Fair value is assessed at each balance date. Where there is no indication that fair values has deviated materially from original cost, cost is deemed to equal fair value Key unobservable inputs Information provided by respective entities management Discount rate applied to cash flow. Inter-relationship between key unobservable inputs and fair value measurement. The estimated fair value increases the higher the share price information or financial position and performance. The estimated fair value increases the lower the discount rate. New Zealand dollars in thousands NOTE 11. LOANS AND CASH ADVANCES Loans to associates

32 30 OPAC ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 31 December 2015 New Zealand dollars in thousands NOTE 12. TRADE AND OTHER RECEIVABLE Trade and other receivables 1,538 1,328 1,385 1,328 Net trade receivables 1,538 1,328 1,385 1,328 Loans to subsidiaries Prepayments and accrued income 2,124 1,082 1,941 1,016 Total trade and other receivables 3,662 2,410 3,490 2,379 Within trade receivables $66,168 (2014: $210,779) are past due, of which $Nil (2014: $9,042) are more than 90 days. Trade receivables are considered to be recoverable. The fair value of receivables equals their carrying value. New Zealand dollars in thousands NOTE 13. INVENTORIES Packaging at cost Orchard consumables at cost Total inventories expensed in the year were $5,537,880 (2014: $4,001,156). NOTE 14. BIOLOGICAL ASSETS KIWIFRUIT CROP ON VINE The company, as part of its operations, leases kiwifruit orchards for terms not exceeding three years. Harvesting of orchards takes place from approximately April to June each year. The orchards are situated in the Bay of Plenty and East Cape, New Zealand. New Zealand dollars in thousands Carrying amount at beginning of year Harvested and sold (857) (619) (857) (619) Costs incurred in growing crop As at 31 December 2015 the company had leases on a total of 51 hectares (2014: 51) of kiwifruit orchards. During the year ending 31 December 2015, the company harvested 430,166 trays of kiwifruit (2014: 345,067) from its leased orchards. The valuation techniques used in the determination of Biological assets Kiwifruit crop on vine fair values as well as the key unobservable inputs used in the valuation approach are shown below. Valuation approach The fair value of the crop is deemed at cost due to insufficient biological transformation having occurred at balance date. Cost is tested for impairment at balance date. In assessing the fair value of crop at cost, consideration is given to the level of uncertainty that exists as to the ability of the crop to survive through to full production and the recoverability of the crop s fair value. Key unobservable inputs Orchard costs incurred. Inter-relationship between key unobservable inputs and fair value measurement. The estimated fair value reduces if cost is impaired at balance date.

33 OPAC ANNUAL REPORT Number Ordinary of shares shares New Zealand dollars in thousands (thousands) (amount) Total NOTE 15. SHARE CAPITAL As at 1 January ,311 7,953 7,953 Share buyback transaction (858) (3,227) (3,227) As at 31 December ,453 4,726 4,726 Issue of fully paid shares 1,272 4,770 4,770 Issue of partly paid shares ,295 4,815 4,815 As at 31 December ,748 9,541 9,541 All shares are authorised and issued with no par value. The directors approved a share issue in 2015 at which time an additional 1,295,000 shares were issued on the 22 December Of the 1,295,000 shares on issue, 1,272,000 were fully paid and 23,000 were partially paid. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of fully paid shares held. The share issue was taken up by existing growers, suppliers, the Chief Executive Officer as well as Quayside Holdings Limited (Quayside) and The Maori Trustee (Te Tumu Paeroa) both taking 10.1% of the total shares on issue with each party nominating a director for appointment to the company s Board of s. Quayside is the investment arm of the Bay of Plenty Regional Council established in Quayside has a diversified investment portfolio which includes property, shares and Kiwifruit orchards (via its Rangiuru Business Park site). Te Tumu Paeroa, the office of The Maori trustee, manages significant Maori land holdings throughout New Zealand and in the Eastern Bay of Plenty. It works with owners to ensure their whenua (land) is protected, and to build the benefits for the owners now and in the future Amount Per share Amount Per share New Zealand dollars (thousands) (cents) (thousands) (cents) NOTE 16. DIVIDENDS PAID 19 September December June December Total dividend paid The dividends are imputed to the extent allowable in the tax year. At the end of December 2015, no further dividends have been declared by the company.

34 32 OPAC ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 31 December 2015 NOTE 17. LOANS AND BORROWINGS This note provides information about the contractual terms of the group s interest-bearing loans and borrowings. For more information about the group s exposure to interest rate and foreign currency risk, see note 3. New Zealand dollars in thousands Non current loans and borrowings Term loans 7,676-7,676 - Total non current loans and borrowings 7,676-7,676 - Current loans and borrowings Term loans Multi option credit line - 3,581-3,581 Total current loans and borrowings 324 3, ,721 Total loans and borrowings 8,000 3,721 8,000 3,721 The bank overdraft and term debt are secured under the same debentures and mortgages over all company assets (see note 7). The group has total facilities of $12,000,000 made up of the facilities in the table below. Term loans Multi option credit line Overdraft facility $8,000,000 with maturity dates of 30 January 2018 ($3,500,000) and 18 December 2019 ($4,500,000) respectively. Repayments will start in August 2016 at a rate of $64,796 per month. $3,500,000 Multi option credit line on call. $500,000 Bank overdraft. New Zealand dollars in thousands NOTE 18. TRADE AND OTHER PAYABLES Trade creditors 721 1, ,312 Employee entitlements Sundry creditors and accruals 2, , Loans from subsidiaries - - 2, Total trade and other payables 3,790 2,669 5,424 2,928 NOTE 19. OPERATING LEASES The group leases a number of kiwifruit orchards structured as operating leases. The leases typically run for a 1 to 3 year period. The group also leases vehicles, equipment and office space under non-cancellable operating leases as follows: New Zealand dollars in thousands Payable within one year Payable between one and two years Payable between two and five years

35 OPAC ANNUAL REPORT NOTE 20. CAPITAL COMMITMENTS During the year the group committed to spend $8.7m of capital expenditure for completion in 2016 on the expansion of coolstores, packing facilities and purchase of land. Of this $3,917,538 has been incurred to 31 December 2015 with the remainder expected to be settled in 2016 (see note 7). NOTE 21. CONTINGENCIES There are no contingent liabilities as at 31 December NOTE 22. NET CASHFLOW FROM OPERATING ACTIVITIES The following is a reconciliation between the surplus after income tax shown in the statement of comprehensive income and the net cashflow from operating activities: New Zealand dollars in thousands Net operating profit after taxation 1,524 1, Add non cash items: Share of (profit) of associates (1,267) (512) - - Gain on sale of equity accounted investee (152) Loss on sale of property, plant and equipment Depreciation 1, , Amortisation of intangible assets Movement in deferred taxation Dividend income not in profit and loss Loss on transfer of shares in equity accounted investee Movements in working capital: Movement in trade and other payables Movement in income taxes due 305 (132) Movement in trade and other receivables (1,252) 465 (982) 414 Movement in inventory Movement in biological assets - Kiwifruit crop on vine - (238) - (238) Net cash from operating activities 1,838 2,585 1,655 2,718 NOTE 23. RELATED PARTY TRANSACTIONS entities The group has related party relationships with its subsidiaries, associates and joint ventures (see note 8 and 9). Opotiki Packing and Cool Storage Limited have made loans and advances to certain subsidiaries and associates. Trade and other receivables in note 12 include loans and advances to subsidiaries and associates of $163,667 (2014: $35,383). Trade and other payables in note 18 include loans from subsidiaries of $2,279,304 (2014: $432,703). All intercompany transactions are eliminated in the group accounts. The group received dividends, capital distributions and other income from associates of $159,822 (2014: $110,375). All loans and advances to subsidiary companies and associates are payable on demand. In addition to the above, the company provides secretarial services and the use of offices for administrative purposes to group entities for no consideration (2014: Nil). Grower entity In the normal course of business the group undertakes transactions with OPAC Growers Limited, a related party which administers all monies from the sale of kiwifruit on behalf of growers with whom it holds a contract. In the current period the group received post-harvest payments for services from its grower entity to the value of $19,407,271 (2014: $13,768,468). As at the end of 31 December the group owed $Nil (2014: $207,469) to the grower entity.

36 34 OPAC ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 31 December 2015 Transactions with key management personnel Key management personnel are defined as all directors and senior executives that set the strategic direction and manage the parent company. Key management personnel compensation is set out below. New Zealand dollars in thousands Executive salaries 1, Gain on sale of equity accounted investee The company undertakes transactions with these persons in the normal course of business on normal commercial terms. The Chief Executive Officer was related to the purchase of 25,000 shares issued in the company during the year. Transactions with related parties The group undertakes transactions with all related parties in the normal course of business, and all transactions are on normal commercial terms. The following table shows transactions that were entered into with related parties during the period (excluding transactions outlined above). New Zealand dollars in thousands Sales of services Associates 2,227 2,417 2,227 2,417 Joint ventures and unlisted equity securities 1,114 1,139 1,114 1,139 Key management personnel 3,728 4,823 2,676 2,711 Purchase of services Associates Key management personnel 1, Transactions for sales of services detailed above relate to orchard management services provided by the group to related parties. The group also received payments directly from Zespri Limited related to the supply agreement and respective service level agreements (SLA) for kiwifruit supply and services (excluding transactions with the grower entity mentioned above). The following table shows the outstanding balances at the reporting date in relation to transactions with related parties. New Zealand dollars in thousands Current trade receivables Associates Joint ventures Key management personnel Current trade payables Key management personnel No related party debts have been forgiven or written off during the year. NOTE 24. EVENTS SUBSEQUENT TO BALANCE DATE No events occurred subsequent to balance date requiring adjustment to or disclosure in the financial statements.

37 OPAC ANNUAL REPORT Independent auditor s report To the shareholders of Opotiki Packing and Cool Storage Limited Report on the company and group financial statements We have audited the accompanying financial statements of Opotiki Packing and Cool Storage Limited ( the company ) and the group, comprising the company and its subsidiaries, on pages 6 to 34. The financial statements comprise the statements of financial position as at 31 December 2015, the statements of financial performance and other comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, for both the company and the group. This report is made solely to the shareholders as a body. Our audit work has been undertaken so that we might state to the company s shareholders those matters we are required to state to them in the auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company s shareholders as a body, for our audit work, this report or any of the opinions we have formed. s responsibility for the company and group financial statement The directors are responsible on behalf of the company for the preparation of company and group financial statements in accordance with generally accepted accounting practice in New Zealand and International Financial Reporting Standards that give a true and fair view of the matters to which they relate, and for such internal control as the directors determine is necessary to enable the preparation of company and group financial statements that are free from material misstatement whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these company and group financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the company and group financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the company and group financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company and group s preparation of the financial statements that give a true and fair view of the matters to which they relate in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company and group s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Our firm has also provided other services to the company and group in relation to tax compliance services. Subject to certain restrictions, partners and employees of our firm may also deal with the company and group on normal terms within the ordinary course of trading activities of the business of the company and group. These matters have not impaired our independence as auditor of the company and group. The firm has no other relationship with, or interest in, the company and group. Opinion In our opinion, the financial statements on pages 6 to 34: comply with generally accepted accounting practice in New Zealand; comply with International Financial Reporting Standards; and give a true and fair view of the financial position of the company and the group as at 31 December 2015 and of the financial performance and cash flows of the company and the group for the year then ended. Other matter The financial statements of Opotiki Packing and Cool Storage Limited and the group, for the year ended 31 December 2014, were audited by another auditor who expressed an unmodified opinion on those statements on 31 March Report on Other Legal and Regulatory Requirements In accordance with sections 16 (1) (d) and 16 (1) (e) of the Financial Reporting Act 1993, we report that: we have obtained all the information and explanations that we have required; and in our opinion, proper accounting records have been kept by Opotiki Packing and Cool Storage Limited as far as appears from our examination of those records. 30 March 2016 Tauranga

38 36 OPAC ANNUAL REPORT 2015 Statutory Information for the year ended 31 December 2015 Principal activities The principal activity of the company is to provide and manage service activities to the horticultural industry. The nature of the company s business has not changed in the year under review. Dividends Imputed dividends of 7.0 cents per share were paid on the 19th June 2015 and the 14th December 2015 respectively. s holding office during the year A E de Farias (Chairman) T D Chrisp (Audit committee chairman) I J Craig D J Emslie C M Thompson (Resigned 4 December 2015) D R Birch (Appointed 22 December 2015, Resigned 3 February 2016) s appointed subsequent to balance date T B Hunia (Appointed 3 February 2016) A S Hamilton (Appointed 3 February 2016) Use of company information During the year the board received no notices from directors requesting authority to use company information, which would not otherwise have been available to them. s shareholding s held the following shares at 31 December 2015: Beneficially Non-beneficially Shareholder / held shares held shares I J Craig 204, ,000 D J Emslie - DJ & DJ Emslie Family Trust - 478,000 C M Thompson 183,588 24,000 Share dealings On the 22nd December 2015 D J Emslie acquired an additional 106,802 fully paid shares (non-beneficially held) and CM Thompson acquired an additional 54,000 fully paid shares (beneficially held). No other directors noted above acquired or sold interests, either directly or indirectly, in ordinary shares issued by the company during the year. s remuneration and other benefits Fees Other benefits Total A E de Farias 55,000 2,000 57,000 T D Chrisp 37,000 2,000 39,000 I J Craig 32,000 2,000 34,000 D J Emslie 32,000 2,000 34,000 C M Thompson 10, , ,663 Total 166, , ,663 Other benefits include reimbursements, bonuses and employee benefits. Subsidiaries No directors remuneration was paid during the year by subsidiaries to their directors. Employee remuneration During the year 5 (2014: 5) employees who are not directors received remuneration of $100,000 or more number 2014 number Salary band of employees of employees $100,000 - $110,000-1 $110,000 - $120, $120,000 - $130,000-1 $170,000 - $180, $190,000 - $200,000-2 $200,000 - $210, $220,000 - $230, Remuneration includes employee benefits, vehicles and all bonus payments.

39 OPAC ANNUAL REPORT Entries recorded in the interests register The following additional entries were recorded in the interest s registers of the company and its subsidiaries during the year: s interests in transactions : During the year the directors undertook transactions with the company as set out in Note 23 to the Financial Statements, Related party transactions. At 31 December 2015, the following general disclosures of interests have been made by the directors in terms of section 140(2) of the Companies Act Subsidiaries: Other than directors stating their directorships in the parent company and its subsidiaries, no other interests were noted. Other interests: s have disclosed the following interests held by them: A E de Farias Grasslands Consultants LLC Zespri International Limited Zespri Limited The Fresh Fruit of Nelson Limited Canterbury Grasslands Limited Horizon Energy Distribution Limited OPAC Properties Limited Opotiki Packing and Coolstorage Limited DFR Consultants Limited Maxwell Farms Limited and associated entities Biolumic Limited Chiefs Rugby Club GP Limited Grow Whakatane Advisory Board Rivas Orchards Limited Ngati Awa Holdings Limited Ngati Awa Asset Holdings Limited Lirch Limitted Aquaheat New Zealand Limited Bay of Plenty Rugby Promotions Limited I J Craig Tablelands Hail Machines Limited TKG 9 Limited Orangewood Limited Ian Craig Opotiki Limited OTK Orchards Limited OTK Management Limited OPAC Properties Limited Opotiki Packing and Coolstorage Limited Whakatohea Fisheries AHC Limited OPAC Growers Limited Eastern Seafarms Limited Punchbowl Investments Limited Golf Course Orchards GP Limited Fraser Road Orchard GP Limited Whakatohea Mussels (Opotiki) Limited Whakatohea Aquaculture (Opotiki) Limited Te Kaha Orchards Limited Whakatohea Fisheries Asset Holding Limited Te Kaha Gold Spraying Limited Mussel Men Opotiki Limited T D Chrisp Links PHC Limited Cedenco Foods New Zealand Limited OPAC Properties Limited Opotiki Packing and Coolstorage Limited Ross Holdings Limited Coroglen Investments Limited Convenience Foods Limited Cedenco Aquaculture Limited North Island Mussels Limited Chairman & Shareholder Chairman Independent Chairman Shareholder Chairman & Shareholder Shareholder Chairman & Shareholder & Shareholder & Shareholder & Shareholder & Shareholder & Shareholder & Shareholder & Shareholder Managing D J Emslie Fraser Road Orchards Limited & Shareholder Highcrest Limited & Shareholder D.C.D. Orchards Limited & Shareholder Fortuna Orchard Limited & Shareholder Kaiaua Holdings Limited & Shareholder Arohena Pastoral Limited & Shareholder Opotiki Packing and Coolstorage Limited & Shareholder OPAC Properties Limited Kaiaponi Farms Limited TKG Agent Limited Trixl Enterprises Limited 31 A Bridge Street Limited BKLP GP Limited C M Thompson (Resigned 4 December 2015) Ohiwa Hort Limited Ohiwa Investments Limited Double M Orchards Limited Paradise Kiwi Limited Paradise Management Limited Alandale Farms Limited DCD Orchards Limited Vigneto Limited Opotiki Packing and Coolstorage Limited Seeka Kiwifruit Industries Limited Fraser Road Orchards Limited Thornton Orchard Limited OPAC Properties Limited Kaiaponi Farms Limited I-Hort Limited TKG Agent Limited OPAC Growers Supply Limited G.I.Kss OTK Orchards Limited Kiwifruit Vine Health Incorporated G4 Kiwi Supply Limited Toi-EDA & Shareholder & Shareholder Shareholder Shareholder Trustee D R Birch (Appointed 22 December 2015, resigned 3 February 2015) Crown Irrigation Investment Limited Manuka Research Partnership Limited MTD1 Chair & RDF1 Ngati Awa Holdings Limited Chair IC & Manu Hou Limited Ngati Awa Asset Holding Limited Wellington Free Ambulance Trust Trustee & Deputy Chair Climate Change Iwi Leader Member The Maori Trustee Senior Manager Ngati TuwhareToa / Ngati Apa / Ngati Hauiti Shareholder / Owner or affiliated to s indemnity and insurance The company has insured all its directors and the directors of its subsidiaries against liabilities to other parties (except the company or a related party of the company) that may arise from their positions as directors. The insurance does not cover liabilities arising from criminal actions. Donations During the year various small amounts were donated to various charities by either the company or its subsidiaries.

40 38 OPAC ANNUAL REPORT 2015 s Tony de Farias Chairman Tony is an experienced director and currently holds a number of directorships within New Zealand, both in the horticultural and dairy sectors. These include the boards of Zespri Limited and The Fresh Fruit of Nelson Limited. He is also a director of Horizon Energy Distribution Limited and an independent director of the Chiefs Rugby Club Limited. Other roles in the dairy sector include the board of Iwi-owned Ngati Awa Farms Limited in the Eastern BoP, Canterbury Grasslands Limited, located in Canterbury and in Missouri USA, and the chair of Maxwell Farms Limited, one of New Zealand s largest familyowned dairy farming enterprises with properties in Reporoa, Tokoroa, Napier-Taupo and northern Hawkes Bay. Tony is also chairman of the Grow Whakatane Advisory Board, and a member of the Ngati Awa Holdings Board. Tony has been a member of the OPAC board since Tim Chrisp Tim has been actively involved in New Zealand agribusiness for the past 30 years, working in all sectors of the industry as a grower, owner of post harvest facilities, in international marketing and finance and at governance level. He is managing director of Cedenco Foods New Zealand Limited, one of New Zealand s largest primary processors of fruits and vegetables and a member of the Imanaka Food which is an active participant in NZ Inc and investor in a growing number of New Zealand and Australian food businesses. In addition to his directorship in OPAC, Tim has other directorships in the New Zealand food industry, the most notable of which is with Ross Holdings Limited, the parent company of Tegel Chicken New Zealand Limited, New Zealand s largest chicken company. In 2012 Tim was seconded to the Zespri Supply Chain review committee to work with other kiwifruit and non-kiwifruit business executives to review and bring about changes to the total Zespri supply chain. Tim has served as an OPAC director for 12 years. Ian Craig A co-founder of OPAC in 1987, Ian was OPAC s general manager from its inception until July Ian has also been a director of OPAC since the company was formed, the first eight years serving as chairman. He is currently chairman of TKG Agent, the TKG Joint Ventures and Orangewood Limited, a Kerikeri kiwifruit post harvest facility. David Emslie A founding director of OPAC, David has extensive industry and orchard experience developed from his roles at OPAC in leadership and field operations. David is a director of several orchard-owning companies, and has been orcharding with his wife, Debbie since purchasing their own holding in Tiaki Hunia Tiaki is the deputy Maori trustee and previously general manager, trusts for Te Tumu Paeroa. Tiaki s career has included roles as a solicitor, asset manager and director of trusts, companies and iwi authorities. From Ngati Awa, Te Aupouri and Ngati Pikiao, Tiaki is passionate about Maori development and has worked across the health, iwi development, fishing, forestry, agribusiness and investment sectors. He is currently the chairman of Maori Investments Limited and Tarawera Lands Limited, chairman of Putauaki Trust and a director of Ngati Awa Holdings Limited. Tiaki is a member of the Institute of s and the New Zealand Law Society. Scott Hamilton Scott is the CEO of Quayside Holdings Limited and has been with the company since Scott brings ten years of funds management experience including senior investment and operations management roles in both New Zealand with ASB Investments and the United Kingdom with Barclays Global Investors. Scott also brings New Zealand banking and commercial sector financial, acquisition and restricting experience to the role. Scott is a director of WNT Ventures, a licensed Callaghan Innovation technology-focused incubator. Scott is also a member of the Institute of s, a Chartered Accountant and mentor with the New Zealand Institute of Chartered Accountants.

41 OPAC ANNUAL REPORT Management Ian Coventry Chief Executive Officer Ian was appointed CEO in August He has been with OPAC for ten years with previous roles as OPAC Commercial Manager and Grower Services Manager. Ian is a qualified accountant and in his previous roles oversaw OPAC s financial, IT and strategic planning processes as well as key areas of grower liaison and administration of the grower pools. Ian has first-hand knowledge of the industry s grower oriented structures, gained from personal experience as an OPAC grower, as well as bringing previous experience from senior financial roles in the pulp and paper, forestry, research, and education sectors. Nick Lawrence Chief Financial Officer Nick joined OPAC during the year after returning home to New Zealand from the United Kingdom where he spent the last eight years as a finance leader in the food manufacturing industry. A chartered accountant with experience in a range of different sized businesses and industries, Nick plays an active role in creating business, team and employee success. Nick is responsible for leading robust financial management and ensuring the long-term financial stability of the company. Sonia McAllister HR Manager Sonia completed university studies in commerce management and human resources, which has provided her with the knowledge she needs to support and enable managers to fulfil the company s HR responsibilities. Sonia s role works closely with the management team to ensure that OPAC has the right people in place and at the right time. Nicki Paget Operations Manager Nicki joined the OPAC team late in 2013 and is now the Operations Manager in charge of OPAC s post harvest quality and production functions. Nicki has a Bachelor of Agriculture from Massey University, and since the year 2000, has worked in the kiwifruit industry in various roles including orchard operations, site management, post-harvest operations, quality management and grower liaison for several Northland and Bay of Plenty companies. Simon Dondi Orchard Operations Manager Simon has been with OPAC for over seven years since coming to New Zealand from Kenya, initially working as a Senior Orchard Manager and recently being appointed to the Orchard Operations Manager role. Simon has a Bachelor of Science in Agriculture degree from University of Nairobi-Kenya. He has a strong background in managing large-scale horticultural operations before joining OPAC, and has now added to that an excellent knowledge of growing kiwifruit. Warren Short Supply Chain Manager Warren s career has involved managing all aspects of the kiwifruit industry, from growing quality fruit in New Zealand, through to marketing kiwifruit in Europe. Over the past decade, Warren has worked in key roles across OPAC, including Grower Services Manager, Logistics Manager, Post- Harvest Operations Manager, and currently as Supply Chain Manager. In this position, Warren s varied industry experience and commitment to OPAC s right first time philosophy enable him and his team to work with the management team to deliver best practice supply chain processes right across OPAC s administration, orcharding and post-harvest operations.

42 40 OPAC ANNUAL REPORT 2015 Shareholders as at 31 December 2015 Number Percentage of Shareholder of shares total shareholding Quayside Holdings Limited 479, % The Maori Trustee 479, % David Emslie, Deborah Emslie, Sharp & Cookson Trustee Services Limited 478, % Sheryl Tebbutt 400, % Robert Tait, Jane Tait and Ian Craig 321, % Ann Davidson 236, % Murray and Marilyn Thompson 220, % Ian Craig 204, % Craig Murray Thompson 183, % Development Enterprises Limited 147, % Sally Spencer 137, % Roger and Colleen Clark 128, % Ian and Denise Robertson 104, % Mary-Anne Barton 96, % Selby and Judy Fisher 96, % Christopher Urry, Sally Urry and Donald Finlayson 96, % Susan Cowie and Sheryl Herbert 91, % Peter Anstis, Marian Anstis and Robert Tait 78, % John Connor 71, % Michelle Ruth Thompson 66, % Ian Palmer 63, % Donald and Katherine Murray 62, % Hamish Spencer 53, % Sharp & Cookson Trustee Services, Anne Larkey and Shona Devoy 48, % WD & BA Orchard-Farming Limited 36, % Brian Young, Kathleen Young, Cookson Forbes BDR Trustees Limited 29, % Hamish Deuchar Spencer, Sally Gibbons Spencer and Brett Anthony Hart 29, % Rex and Ngaire Henderson 26, % Tom and Jennifer Newman 26, % Julian and Nghaire Lowe Family Trust 25, % Ian and Justine Coventry and Hammertons Trustee Services 25, % Richard Anstis, Peter Anstis and Beverley Butchart 24, % Hedley Farms Limited 24, % Jerome and Jean Smithson 24, % Ian Greaves, Nicola Greaves and Craig Thompson 24, % Te Kaha 15B Ahuwhenua Trust 23, % Rushaven Farms 13, % Te Kaha 9b Trust 13, % Andrew Taylor and Robert Tait 11, % Te Kaha 86 Lands Trust 9, % Anthony Donald Palmer, Carol June Palmer, Ian Rex Palmer, Sharp & Cookson Trustee Services 9, % Graeme and Delwyn Redpath 9, % Robert Tait and Jane Tait 9, % Alan and Krystene Connolly 5, % Te Ehutu Lands Trust 5, % 4,747, %

43 OPAC ANNUAL REPORT y s A E de Farias (Chairman) T D Chrisp I J Craig D J Emslie A S Hamilton T B Hunia Contact Details 93 Waioeka Road, Opotiki Telephone: (07) Facsimile: (07) info@opac.co.nz Website: Address for Service and Registered Office 93 Waioeka Road, Opotiki Auditors KPMG, Tauranga