Shaped by truth... Committed to fairness... Driven to serve...

Transcription

1 ANNUAL REPORT

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4 Shaped by truth... Committed to fairness... Driven to serve...

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6 1 Mission Statement TABLE OF CONTENTS 2 Notice of Annual General Meeting 4 Financial Highlights 7 Chairman & President s Overview 8 Directors Report 11 Corporate Governance 16 Board of Directors 22 Executive Team 26 Management Discussion & Analysis 45 Human Resource Development 51 Corporate Social Responsibility 68 Shareholding of Directors & Connected Persons 69 Shareholding of Senior Management & Connected Persons Largest Ordinary Stockholders 70 Directors & Senior Management 71 Operating Divisions & Subsidiaries 72 Advisors 75 Audited Accounts

7 MISSION STATEMENT With God s guidance we shall efficiently manage our Company to fulfill its obligations to our customers, shareholders, employees, contractors and the community at large, with an attitude of service and a commitment to truth, fairness and the building of goodwill. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 01

8 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the 58th Annual General Meeting of Jamaica Broilers Group Limited will be held at the Jamaica Conference Centre, Ocean Boulevard, Kingston Mall, Kingston on Saturday, October 29, at 10:00am to transact the following Business: 1. To receive the Audited Accounts for the year ended April 30,, together with the reports of the Directors and Auditors thereon. The Company is asked to consider, and if thought fit, pass the following resolution: Resolution No.1 That the Audited Accounts for the year ended April 30,, together with the reports of the Directors and Auditors thereon, be and are hereby adopted. 2. To elect Directors. The Directors retiring by rotation in accordance with Regulation 89 of the Company s Articles of Incorporation are Mr. Gregory Shirley, Dr. Claudette Cooke, Dr. Trevor Dewdney and Mr. Edward Barber, who, being eligible for re-election, offer themselves for reelection. The Company is asked to consider and, if thought fit, pass the following resolutions: Resolution No. 2 That the Directors, retiring by rotation, be re-elected by a Single Resolution. Resolution No. 3 That Mr. Gregory Shirley, Dr. Claudette Cooke, Dr. Trevor Dewdney and Mr. Edward Barber who are the Directors retiring by rotation in accordance with Regulation 89 of the Articles of Incorporation be and are hereby re-elected as Directors of the Company. The Director retiring in accordance with Regulation 95 of the Articles of Incorporation is Mr. Stephen Levy who, being eligible for re-election, offers himself for re-relection. The Company is asked to consider, and if thought fit, pass the following resolution: Resolution No. 4 That Mr. Stephen Levy, who is retiring in accordance Regulation 95 of the Articles of Incorporation, be and is hereby re-elected as a Director of the Company. 02 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

9 3. To ratify interim dividends. The Company is asked to consider, and if thought fit, pass the following resolution: Resolution No. 5 That the interim dividend of 10 cents paid on November 13, and of 16 cents paid on April 13,, be and are hereby ratified and declared final for the financial year ended April 30,. 4. To Approve the Remuneration of the Directors. The Company is asked to consider, and if thought fit, pass the following resolution: Resolution No. 6 That the amount shown in the Audited Accounts of the Company for the year ended April 30, as fees of the Directors for their services as Directors, be and is hereby approved. 5. To Appoint Auditors and to authorize the Directors to fix the remuneration of the Auditors. The Company is asked to consider, and if thought fit, pass the following resolution: Resolution No. 7 That the remuneration of the Auditors, PricewaterhouseCoopers, who have signified their willingness to continue in office, be such as may be agreed between the Directors of the Company and the Auditors. Dated the 29th day of August, By Order of the Board PETER A. DePASS Company Secretary Registered Office Content, McCook s Pen, St. Catherine NOTE: A member entitled to attend and vote at the meeting may appoint a proxy, who need also be a member, to attend and so on a poll, vote on his/her behalf. A suitable form of proxy is enclosed. Forms of Proxy must be lodged at the registered office of the Company at Content, McCook s Pen, Saint Catherine or with the Registrar of the Company, PwC Corporate Services 13th Floor, Scotiabank Centre, Cnr. Duke & Port Royal Streets, Kingston not less than 48 hours before the time of the meeting. The Form of Proxy should bear stamp duty of $ The stamp duty may be paid by adhesive stamps which are to be cancelled by the person signing the Proxy. A Corporate shareholder may (instead of appointing a proxy) appoint a representative in accordance with Regulation 74 of the Company s Articles of Incorporation. A copy of Regulation 74 is set out on the enclosed detachable proxy form. 3 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 03

10 FINANCIAL HIGHLIGHTS Net Sales J$B Net Profit Attributable to Stockholders J$M JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

11 Pre-tax Profits J$M Investment in Property, Plant & Equipment J$M Pre-tax Profits as % of Net Sales JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 05

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13 CHAIRMAN & PRESIDENT S OVERVIEW FINANCIAL HIGHLIGHTS The global economic landscape was inundated with challenges over the course of the year. However, the Lord was faithful in providing opportunities that propelled the growth and development of Jamaica and the Jamaica Broilers Group (JBG). We saw turnover increase by 11% moving from $34.57 billion to $38.52 billion, with gross profits also increasing moving up by 25% from $8.02 billion to $10.02 billion. Profits before taxation also increased by 53% from $1.56 billion to $2.39 billion, while after tax profit showed a 72% increase up from $1.00 billion to $1.72 billion. Net profit attributable to stockholders grew 67% from the $1.04 billion realized in 2014/ to $1.74 billion in /. Our balance sheet continues to strengthen as we were able to syndicate all our loan facilities in Jamaica with the National Commercial Bank (NCB) in the lead. This greatly reduced our financing costs and allowed us to formalize relationships which bolstered confidence and provided clarity for our stakeholders. This strategy has amounted to monumental improvement in the management of our finances. ECONOMIC CLIMATE Globally, we saw economies struggling with low commodity prices, insufficient demand and increasing debt and capital flow issues. As Jamaica continued to focus on meeting its International Monetary Fund (IMF) obligations in addressing our share of these hardships, greater emphasis was placed on macro-economic indicators towards encouraging long-term growth. increased. By the end of the second quarter, we had commissioned a second hatchery in Cumberland, St. Catherine in an effort to further increase our capacity to produce. At the start of the fourth quarter, the impending general elections created some amount of uncertainty, as political parties presented their manifestos outlining opposing strategies to policy, taxation and economic reform. Despite the looming ambiguity, we continued our aggressive pursuit of capacity expansion and have since begun discussions with the newly elected government, towards continued support of local production. OUR PEOPLE We have so much to be thankful for, not the least of which is the wealth the Lord has given us in the people He has placed in and around the Group. Our staff pulled together in the most amazing way this fiscal year. They adapted to the many challenges; they were decisive and executed well. They are the true winners and deserve to be credited for their outstanding performance this year. Our Board of Directors was also exceptional in its leadership of the Company, being steady, focused and supportive when it mattered most. We also thank the Lord for you, our shareholders, customers and other stakeholders, for your continued loyalty to the Jamaica Broilers Group both locally and overseas and look forward to your continued partnership with us. Having observed the effects of this pro-growth agenda, we anticipated an increase in local demand for poultry meat towards the third quarter. We ramped up production by 17% and were compelled to maximise our efforts by as much as 20% as the market demand Robert Levy Chairman Christopher Levy President and CEO JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 07

14 DIRECTORS REPORT 08 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

15 The Directors presented their annual report with Financial Statements for the year ended April 30,. RESULTS OF OPERATIONS TURNOVER The Group s turnover for the year amounted to $38,521,304,000 as compared with $34,570,050,000 for the previous year. PROFIT, DIVIDENDS AND APPROPRIATIONS Net Profit attributable to Stockholders 1,744,195 Re-measurements of pension assets / obligations 215,425 Transfers to Capital Reserves (132,115) Profits brought forward from previous years 8,816,721 To give an amount of 10,644,226 Interim Dividends 311,812 Thereby leaving profits to be carried forward as Retained Earnings of $10,332,414 The Directors are recommending that the two interim dividends of 10 cents paid on November 13, and 16 cents paid on April 13,, be ratified and declared final for the financial year ended April 30, by the shareholders in the general meeting, as the Directors do not propose to declare any further dividend(s) from the audited profits realised during the financial year ended April 30,. The Directors retiring in accordance with Regulation 89 of the Articles of Incorporation are Mr. Gregory Shirley, Dr. Claudette Cooke, Dr. Trevor Dewdney and Mr. Edward Barber, all of whom are eligible for re-election. Mr. Barrington Pryce resigned as a Director during the course of the year. Mr. Stephen Levy who was appointed as a Director to fill the vacancy created by the resignation of Mr. Pryce, retires in accordance with Regulation 95 of the Articles of Incorporation and is eligible for re-election. AUDITORS PricewaterhouseCoopers (PwC) will continue in office as Auditors in accordance with the provisions of Section 154(2) of the Companies Act. Dated this 29th day of August, PETER A. DePASS Company Secretary Registered Office Content, McCook s Pen, St. Catherine JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 09

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17 CORPORATE GOVERNANCE Corporate Governance The Company is committed to maintaining high standards of corporate governance and recognizes that this is a key contributor to the long-term success of the entire operation (the Group). The delivery of exemplary governance consistent with international best practices is central to the Company s strategic objectives. The members of the Board understand their duty of care to the Company and its stakeholders and exercise their fiduciary responsibilities with transparency and integrity. The Company believes that the Board has the right mix of skills, experience, independence and knowledge to enable it to discharge these responsibilities successfully. The Group s Corporate Governance Manual is guided by the governance standards set out in the Private Sector Organisation (PSOJ) Code of Corporate Governance 2nd Edition, published in The Board considers that its governance practices are generally consistent and compliant with all applicable legislation, regulations, standards and codes and aligns its corporate governance practices in keeping with the Group s Corporate Governance Manual and the core values of the Group. The Corporate Governance Committee reviewed its Manual during the course of the financial year and a few changes were made. Our Commitment The Group is proud of the way it conducts business and is committed to continuing to uphold the highest levels of corporate transparency, social responsibility and compliance in all of its transactions and interactions.. BOARD OVERSIGHT Board Members and attendance at meetings: Mr. Omar Azan 8/11 Dr. Claudette Cooke 10/11 Dr. Trevor Dewdney 11/11 Mr. Aubyn Hill 11/11 Mr. Robert Levy 10/11 Mr. Christopher Levy 11/11 Mr. Ian Parsard 11/11 Mr. Barrington Pryce 7/7 Mr. Gregory Shirley 11/11 The Hon. R. D. Williams 10/11 Mr. Edward Barber 11/11 Mr. Stephen Levy 2/2 Board Meetings The Board is scheduled to meet once monthly. However, special meetings are convened if urgent matters arise between the scheduled meetings. The Board met in regular and special sessions 11 times during the year to consider matters relevant to the operation and performance of the Group. Without exception, whenever needed during the year, the directors have demonstrated their ability and willingness to provide any additional time required. Mr. Barrington Pryce resigned as a Director of the Company on the December 31,, and Mr. Stephen Levy was appointed as Director on the March 2,. During the year the Board fulfilled several of its key functions, including: Reviewing and approving the Company s - operational plans and budgets Approving capital expenditure Reviewing and approving credit facilities Monitoring executive management performance in the implementation and achievement of strategic and business objectives and financial performance JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 11

18 CORPORATE GOVERANCE continued The Board is responsible for providing leadership through oversight and guidance whilst setting the strategic direction and delivering value to its shareholders and other stakeholders. The Board is also responsible for ensuring that, as a collective body, it has the appropriate skills, knowledge and experience to perform its role effectively. The Board is not involved in the Group s dayto-day operations, but has delegated to management the power to make decisions on operational matters within an agreed framework. The Company has put in place directors and officers liability insurance in respect of legal actions against its directors. This insurance cover does not extend to fraudulent or dishonest behaviour. Composition of the Board As at April 30,, the Board comprised eight non-executive directors (including the Chairman) and four executive directors (the President & Chief Executive Officer, a Senior Vice President, the Vice President-Human Resources and Public Relations and the President of Wincorp International and other US-based companies). The names and summary biographies of the directors, including details of other material directorships are set out in the directors profile section of the Annual Report. Executive and non-executive directors are required to seek the approval of the Board before accepting additional directorships and must confirm that no conflict of interest arises from the appointment. They must also provide assurance that any additional appointment will not affect their ability to perform their duties. While all the directors are equally accountable for the proper stewardship of the Company s affairs, the non-executive directors understand that they have a specific responsibility to ensure that business strategies and policies are fully ventilated and critically assessed and considered in Board meetings. Nomination of Directors The Board is satisfied that the directors have the appropriate competencies to meet the challenges faced by the Group. Each year at the Annual General Meeting, the Board recommends and the shareholders elect directors in accordance with Article 89 of the Company s Articles of Incorporation. The Corporate Governance Committee is responsible for the nomination and selection of new directors. Internal Controls The Board, through its Committees, has reviewed the effectiveness of the Group s risk management practices and systems of internal control for the year ended April 30,. This review involved consideration of the internal audit and risk management functions including operational risk, regulatory risk and compliance. The Chairman of the Audit Committee reports to the Board on all significant issues considered by the Committee. Internal Audit Function The Group s Internal Audit function is an independent function which reports directly to the Board through the Audit Committee. Currently, KPMG carries out part of the internal audit functions of the Group. The scope of the Audit Committee encompasses the following activities: Reviewing and ensuring the annual internal audit plan is designed to assist in attaining the required objectives; Reviewing financial reporting and disclosure controls and advising management in their representations and assertions regarding these controls; Reviewing means of safeguarding the Group s assets; Coordinating with the external auditors and reviewing the Group s relationship with these auditors including independence and management s response to any major external audit recommendations; Participating in the planning and performance of audits of mergers, acquisitions and divestitures; Reviewing guidelines for ethical business conduct and the process for ensuring compliance; and Periodically reviewing and making recommendations concerning procedures for receipt, retention and treatment of complaints about accounting and auditing matters. 12 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

19 CORPORATE GOVERANCE continued External Audit Function The Audit Committee annually reviews the appointment of the Group s external auditors. Currently, the auditors are PricewaterhouseCoopers (PwC). The Board, upon the recommendation of the Audit Committee, is satisfied with the effectiveness of the external auditors and has agreed to recommend to the shareholders the re-appointment of PwC for a further period of one year. The fees paid to the external auditors in the financial year are included in the audited financial statements. Conflicts of Interest In keeping with international best practices, the Company s Corporate Governance Manual makes provision for the manner in which members of the Board should handle conflicts of interest. A director has a duty to avoid, as far as possible, activities that could create conflicts of interest or the appearance of conflicts of interest and must disclose to the Board any matter that may result, or has already resulted, in a conflict of interest. Where a conflict of interest arises, directors have a responsibility to declare their interest and remove themselves from the relevant Board or Committee meetings without deliberating or voting on the proposal or transaction. Information and Reports Prior to and at each regular meeting of the Board, the Directors receive detailed financial and operational reports to allow them to effectively review and assess the performance of the Group s business. Board papers are usually issued six days prior to meetings and Committee papers are usually issued five days prior. In an effort to reduce the costs and the environmental impact of printing and distributing Board papers, and to improve the efficiency of the process, the Company enables each director to receive Board papers by way of a secure tablet. At each Board meeting, the President and Chief Executive Officer (Managing Director) presents report on all aspects of the Group s business and a report on the Group s financial performance is also received. From time to time, members of the senior management team provide the Board with detailed presentations on the Group s major activities. Remuneration Directors remuneration continues to be set at levels that would attract and retain persons with the required skill and experience. For the executive directors, a significant portion of the compensation package is variable and dependent on the Group s performance during the year. During the year, the Board s compensation committee, comprising three nonexecutive directors, met to review executive compensation. An Executive Director was invited to attend. The Committee, together with input from the Board, will focus on ensuring that the Company s compensation policies are competitive and remain aligned to best practice. For non-executive directors, the level of remuneration generally reflects the experience and level of responsibilities undertaken. The approved remuneration provides for the payment of a retainer for non-executive directors and a fee for each Board and Committee meeting attended. The total fees paid fell within the amounts approved by shareholders at the Annual General Meeting held on November 14,. Board Evaluation The Board did not undertake an independent evaluation of its performance during the financial year but intends to do so during the course of the financial year. Board Committees The Board appoints members to committees of the Board with the objective of ensuring an optimal mix of skill, experience and competence. The Board has delegated specific duties to three Board Committees, each of which operates within specific Terms of Reference as outlined in the Company s Corporate Governance Manual that defines the respective roles and responsibilities. The Committees assist the Board in its oversight role. Subsequent to each Committee meeting, the minutes are included in the Board papers for the review of all Board members. Round robin resolutions approved by the Committees are also included in the Board papers. Members attendance at Board Committee meetings during the past year is set out below. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 13

20 CORPORATE GOVERANCE continued AUDIT COMMITTEE Members and attendance at meetings: Mr. Aubyn Hill Chairman 3/4 Mr. Omar Azan 3/4 Dr. Trevor Dewdney 3/4 Mr. Gregory Shirley 4/4 The Board has determined that each member of the Audit Committee is independent and that the membership meets the requirements of the Jamaica Stock Exchange (JSE) and the recommendations of the PSOJ s Code on Corporate Governance. During the year, the President and Chief Executive Officer (Managing Director), the Vice President Accounting and Information Systems, the Internal Auditor and the external auditors normally attended and reported at Audit Committee meetings. The Chairman of the Board of Directors and other senior managers are invited from time to time to present reports and discuss issues of importance. The Audit Committee met four times during the year and focused on the effectiveness of internal controls, compliance, assurance and internal audit functions. Responsibilities discharged during the year, included the following: Financial statements Board Meetings Reviewing significant accounting and reporting issues, considering any changes to accounting standards, and understanding their impact on the financial statements; Ensuring that the Group s quarterly and annual financial statements and quarterly releases represent accurate, clear and balanced assessments of the Group s financial position and prospects. Internal control Monitoring and reviewing the effectiveness of the risk management and internal control systems, including information technology security and control; Review of risk management and internal controls over financial and operational reporting, and obtaining reports on significant findings and recommendations together with management s responses. Internal audit Monitoring and reviewing the effectiveness of the Group s internal audit function. Fraud prevention Receiving and considering reports on significant frauds, forgeries and other irregularities in respect of investigations undertaken. External audit Reviewing the external auditors audit scope and approach; Monitoring and reviewing the objectivity, effectiveness and independence of the external auditors; including approving their scope of work, reports and fee proposals for audit services; Compliance Reviewing the effectiveness of the systems for monitoring compliance with laws and regulations, and the results of management s investigations and follow up; Reviewing auditor observations. 14 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

21 CORPORATE GOVERANCE continued COMPENSATION COMMITTEE Members and attendance at meetings: Board Meetings Mr. Gregory Shirley Chairman 1/1 Dr. Trevor Dewdney 1/1 Mr. Aubyn Hill 1/1 CORPORATE GOVERNANCE COMMITTEE Members and attendance at meetings: Mr. Gregory Shirley Chairman 1/1 Mr. Aubyn Hill 1/1 Board Meetings The Committee met once during the year and considered the following matter: Appointment of New Director Stephen Levy The Company s Corporate Governance Guidelines are available on the Company s website at JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 15

22 BOARD OF DIRECTORS Mr. Robert Levy, C.D. Hon. LL.D., M.A. Chairman Robert Levy joined the Jamaica Broilers Group in 1959, one year after its inception. Throughout his over 45 years working in various capacities within the Company, he was appointed as joint CEO in 1994, President and CEO in 2001 and to his current position as Chairman of the Board of Directors since His longstanding, passionate commitment to the agricultural industry in Jamaica, has made him a distinguished expert in livestock and crop production. He has served as Chairman of the Sugar Company of Jamaica and was recently inducted into the Caribbean Poultry Association Hall of Fame. Also of note, was his induction into the Private Sector of Jamaica (PSOJ) Hall of Fame in for his involvement in commerce and his sustained innovative contributions to the development of the private sector for over 25 years. Mr. Christopher Levy MBA Executive Director As President and CEO of one of the most advanced and diversified poultry operations in any developing nation today, Christopher Levy is a respected and astute Jamaican corporate leader. With over 25 years of senior management experience garnered through working at varying levels of the Jamaica Broilers Group operations, including managing several divisions, he is versed in every aspect of the poultry industry. Under his leadership, the Group has grown organically and exponentially, both locally and overseas, ensuring the long term viability of the organization. He is to be lauded for maintaining a passion for nation-building through his support of initiatives geared towards education, sports, community development and social empowerment.

23 The Hon. R. Danvers Williams, O.J., C.D. Hon. LL.D., J.P., C.L.U. Director Emeritus With over 62 years in the life insurance industry, Danny Williams has amassed an incomparable wealth of knowledge and experience to create a most enviable and distinguished career. The impetus towards the development of the insurance industry and his country stems from as far back as 1953, and over the years, he has become well-known as an entrepreneur, a philanthropist and a dedicated professional with an appetite for challenges. He was the founder and President of Life of Jamaica (now Sagicor Life) and currently serves as Chairman of their Board. He is the immediate Past Chairman of the Jamaica Broilers Group. Dr. Claudette Cooke Ed.D., CMT, CPC, CCRC Executive Director Claudette Cooke joined the Jamaica Broilers Group in 1994 as the Group Public Relations Executive after serving as Senior Vice President for Creative Services at Dunlop Corbin Compton Associates. A year later, she was appointed to her current role as Vice President for Human Resource Development and Public Relations. Her methods have resulted in a surge in the Group s organizational effectiveness, with improvements in both work environs and output quality, and has seen the organization attracting and retaining top-quality employees. She has played a vital role in preserving the Group s identity as a Christ-centered, employee-friendly and philanthropic organisation in Jamaica, contributing to her being listed in the International Who s Who of Professionals. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 17

24 BOARD OF DIRECTORS Continued... Mr. Ian Parsard MBA (Hons.), A.C.C.A. Executive Director Ian Parsard joined the Jamaica Broilers Group in 1989 as a Senior Systems Analyst and was promoted to Project Leader in He progressed through a number of Senior Management positions including being appointed Vice President, where he has held responsibility for Accounting, Finance, Energy, Operations and Corporate Planning at varying intervals over his near 30 years with the Company. In 2012, he was appointed as the Group s Senior Vice President and currently has responsibility for the portfolios of Finance and Corporate Planning. Dr. Trevor Dewdney D.V.M. Director Trevor Dewdney is a well-respected Veterinary Consultant who has been affiliated with the Jamaica Broilers Group since 1971, and was appointed as a Director in A devoted farming practitioner, he has used his nearly 50 years of experience to serve in various capacities across the Agricultural Industry, including Vice President of the Jamaica Agricultural Society and Director of the National Development Bank where he served for almost 10 years. His passion for sustainable growth and development of the industry has earned him national recognition, as he was awarded the National Honour of the Order of Distinction for Excellence in Agriculture. 18 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

25 Mr. Aubyn Hill MBA Director Aubyn Hill has over 35 years of working experience in the private sector, specifically in banking and finance and has conducted business in more than 85 countries. During his 21 years as a banker, his performance has resulted in several quantifiable successes, including leadership of the management team responsible for the turnaround of the National Commercial Bank in only 19 months. While stationed in the Middle East, he also led the restructuring of two major banks Burgan Bank in Kuwait and the National Bank of Oman, where he served as CEO. Since then, Aubyn Hill founded Corporate Strategies Limited, a management consultancy firm, where he currently serves as the CEO. Mr. Omar Azan Director Omar Azan has been one of Jamaica s leading manufacturers and exporters of furniture for over 20 years. As an avid believer in service above self, he has become a strong voice for the manufacturing industry, charting a course that has resulted in the achievement of noteworthy milestones such as the removal of the 2% Customs User Fee on raw materials and capital equipment, provision of free factory space for startups and expanding entities and the awarding of contracts to local printers during his tenure as President of the Jamaica Manufacturers Association. With over 24 years successfully influencing business growth and market captaincy, he brings the fiscal acumen needed to ensure effective management of operating budgets and the ability to analyze market dynamics, customer demands and competitor activities in order to position a company s product offerings and take advantage of niche markets and emerging opportunities. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 19

26 BOARD OF DIRECTORS Continued... Mr. Gregory B. Shirley MBA Director With a career spanning over 30 years, Gregory Shirley has garnered extensive experience in a range of fields including corporate and strategic planning and process improvement. He started his professional career as the Manager of Human Resource Planning and Development for a major overseas utility company and later joined KPMG where he served for over 30 years. At KPMG, he developed experience in diverse business advisory assignments within banking and finance, government, utilities, manufacturing and service sectors. He has been one of the main architects in change management and the development and implementation of performance and reward management programmes within the public and private sectors. His tenure at KPMG, along with his international experience, has made him a desired consultant in areas such as compensation, benefits administration and performance measurement. Mr. Edward Barber B.Acy, CPA Director Edward Barber carries nearly 30 years of local and international experience in real estate, finance, development and acquisitions. His areas of specialization include strategic planning, capital procurement, investment and the development and implementation of real estate solutions. In 1997, he launched the company CRE Services, a private real estate consulting firm that specializes in capital placement and asset management. Though he is an astute businessman, he is also an active philanthropist, as he serves as a Director of the Global Orphan Project, a global orphan care and orphan prevention ministry that partners with local churches and organizations to provide family-based care to orphaned and abandoned children in their communities. 20 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

27 Mr. Stephen Levy BSc, MBA Executive Director Stephen Levy s relationship with the Group commenced in 2003 with his appointment as Operations Manager for Content Agricultural Products. He has since occupied several management positions including Assistant Vice President of Energy Operations for the Group. Since May 2013, he has served as President of Wincorp International Inc., a wholly owned subsidiary of the Jamaica Broilers Group located in Medley, Florida. There, he has spearheaded the reorganization, development and profitable growth of the Company s United States-based operations. His leadership and management skills have helped the Group to develop strong relationships with key US-based stakeholders including customers, suppliers, government and non-government organizations. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 21

28 EXECUTIVE TEAM Christopher E. Levy MBA President & Chief Executive Officer Ian S. Parsard MBA (Hons.), A.C.C.A. Senior Vice President, Finance & Corporate Planning Claudette D. Cooke Ed.D., CMT, CPC, CCRC Vice President, Human Resource Development & Public Relations 22 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

29 Donald A. Patterson MBA, FCA Vice President, Accounting & Information Systems Judy Baugh MSc Asst. Vice President, Procurement Conley N. Salmon Vice President, Marketing Feeds & Agricultural Supplies JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 23

30 EXECUTIVE TEAM Continued... Continued John Carberry MSc, MBA, PMP Asst. Vice President, Energy Stephen D. Levy MBA President, Wincorp International Inc. (USA) 24 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

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32 MANAGEMENT DISCUSSION & ANALYSIS BUSINESS Our - financial year has been among our greatest successes to date. Local and overseas operations performed extremely well as we focused on strengthening our core elements. Poultry is our core business, so we are committed to further infrastructural development and reinforcement and implementation of best practices in live production, feed and processing. We were strategic in securing new acquisitions that would both support existing operations and facilitate new business as we expanded our capacity to meet growing demand for our products both locally and internationally. Locally, we have experienced tremendous growth in both our Best Dressed Chicken and Hi-Pro Divisions as we continued to see Jamaica s agricultural industry strengthening throughout the operational year. Demand for poultry meat among Jamaican consumers escalated significantly and both divisions responded positively, with The Best Dressed Chicken acquiring a new hatchery in Jamaica to facilitate increased production and Hi-Pro focusing on providing feed, supplies and veterinary expertise to our local farmers. 26 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

33 The Group s US operations also performed very well. We completed the acquisition of a hatchery in Iowa reinforcing our business model in the US. Our customer base continues to expand in many regions and our team members in the US have really blended well together to form a very powerful and smart organization that moves in harmony. Our Haiti business has turned the corner! We are experiencing consistent profits and are projecting approximately 40% growth in production over the next fiscal year. I invite you to take a closer look as we explore the Operational Highlights of the Group s major operations for /.

34 MANAGEMENT DISCUSSION & ANALYSIS continued OPERATIONAL HIGHLIGHTS JAMAICA OPERATIONS The major activities within the Jamaica Operations of the Group this financial year took place in the Best Dressed Chicken and Hi-Pro Divisions. THE BEST DRESSED CHICKEN DIVISION The Best Dressed Chicken Division returned another year of solid financial results as indexed against key performance indicators established for our business. Our financials indicated good all-round performances with record profitability being reported within the Division this fiscal year when compared with prior years. The poultry business line in particular, performed admirably with demand outpacing supplies. Concomitantly, revenue generated from the sales of poultry meat made the most significant contribution to the Company s profitability, fuelled by the unprecedented spike in demand for chicken meat experienced within the industry and most importantly for The Best Dressed Chicken JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

35 MANAGEMENT DISCUSSION & ANALYSIS continued The team along the vertical integrated chain rallied well to this exponential, but welcomed demand for chicken meat and the Division was able to rise to the challenge. As a part of that response, the Company engaged in direct and indirect infrastructural expansion. A new hatchery was commissioned into service during the fiscal year to increase the number of chicks available to meet the growing needs of consumers for poultry meat. This also led to significant investments by our contract farmers, by way of construction of tunnel houses, to expand the placement capacity necessary to increase output of broiler meat relative to market demand. We also experienced increased sales for all other protein meats and complementary products carried by the Division. It was felt that this general upswing in demand for all our products was driven, in part, by the positive changes reported in business and consumer confidence indices, which ultimately drove demand for fast moving consumer goods. The further processed line was extended during the year under review. A suite of valueadded products was rolled out under the Reggae Jammin brand in line with our value proposition to provide food with superior flavour, taste and convenience at an affordable cost. The extended line included, inter alia, chicken bologna; breaded chicken products; a range of miniature cocktail burgers and an American-style breakfast sausage. There have been encouraging responses to the addition of these products to our new suite within the retail trade and the food services sector. The Hamilton Smokehouse brand continued to enjoy success as a niche market product while concurrently gaining appeal within social circles as the go to food for celebratory occasions. This we believe is due to a certain extent to the great taste of the products, ease of preparation, the convenient packaging and the depth in the line of products on offer JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 29

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37 MANAGEMENT DISCUSSION & ANALYSIS continued During the year under review, we partnered with retail outlets across the island to stage the Meat Room Competition. This initiative was double tiered, serving not only as a competition, but also as a training exercise. Our retail partners and the meat room teams embraced the event with great zeal. Through this initiative, the teams were able to reinforce their technical skills, best practices and enhance food safety measures. The merits of teamwork were also reinforced and we were pleased with the high levels of camaraderie and professionalism displayed by the participants throughout. The competition was held on a regional basis, after which the parish winners and ultimate winners were identified and announced at separate Awards Luncheons. The Ultimate Winner for the northern region was Progressive Supermarket, Junction, St. Ann and in the southern region, Loshusan Supermarket, Barbican, St. Andrew. The Division also hosted a customer appreciation event under the theme The Great Safari Adventure, encompassing a fun day for the entire family at Chukka Cove - Runaway Bay, St. Ann. We welcomed the opportunity to show appreciation to our customers for their ongoing support over the years. The event was well received and the sentiments espoused served as testimonies to the quality and meaningful relationships that we have been able to build with our customers spanning over five decades.

38 MANAGEMENT DISCUSSION & ANALYSIS continued 32 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

39 MANAGEMENT DISCUSSION & ANALYSIS continued JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 33

40 34 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

41 MANAGEMENT DISCUSSION & ANALYSIS continued THE BEST DRESSED CHICKEN: REGIONAL ADVANCES We continued with our focus on not only building our brand in our domestic market, but also in regional territories in which The Best Dressed Chicken and Reggae Jammin products are traded. As an offshoot to our brand building initiative in the export markets, we joined forces with the Jamaica Observer to take the Table Talk Food Awards to the Cayman Islands. With our passion to build significant relations in the Cayman Islands, there was no better way to underscore our interest and support of the food industry than by presenting the Table Talk Food Awards. The staging of this inaugural event resonated well with artisans of the culinary arts, as it presented a credible platform for us to publicly recognize their talents, efforts and accomplishments within the Cayman Food industry in front of their peers, the media and food enthusiasts. At the inaugural staging of the Cayman Food Awards, The Best Dressed Chicken recognized the achievements and business acumen of Foster s Food Fair IGA by presenting the management of that establishment with the Lifetime Achievement Award. For over 35 years, Foster s has built a formidable business of retail chain stores on the island. It strategically widened its footprint across the island with mergers and acquisitions being a part of the tools of the trade used in its expansion drive. Based on the exemplary values and commitment to customer satisfaction, the Best Dressed Chicken forged a synergistic partnership with Foster s to distribute our chicken in the Cayman Islands. This year marks our 24th year of doing business with Foster s, who took a chance on a relatively unknown brand in its market within nine years of its own establishment. Today, Foster s remains a key part of our distribution network in the Cayman Islands and is indeed a worthy recipient of the prestigious Lifetime Achievement Award. Even as we build our brand in the Cayman Islands, we have been concurrently working to deepen our roots in the Turks & Caicos Islands and plans are afoot to cement our foray into this territory. The Best Dressed Chicken ended this fiscal year with it being one of the best performing years in the history of the Division. As we turn our attention to the new financial year, we remain forever grateful for the loyalty and patronage of our customers, the dedication of our staff and the direction of our Senior Management and Board of Directors. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 35

42 36 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

43 MANAGEMENT DISCUSSION & ANALYSIS continued BEST DRESSED FEED MILL We saw significant increases in feed production as improved operational efficiencies allowed the team to deliver added value to our customers. The year was also marked by the completion of Phase 2 of our grain storage project, bringing the added onsite capacity to over 24,000 metric tons. This investment continues to facilitate improved grain handling and storage conditions, enhancing the quality of raw material inputs to the final product. The Mill s Quality Management System was recertified to the ISO 9001 standard in and forms an excellent platform for the continued improvement in product quality and operational efficiency. Building on these achievements, we look forward to the operating year with great optimism. HI-PRO DIVISION The - operational year was a fantastic one for the Hi-Pro Division and we thank God for His blessings. Our team worked with determination and skill often going the extra mile to surpass targets set. Cost reduction and industry recovery were used to our advantage. Despite two consecutive years of drought which affected the poultry, livestock and crop sectors, we implemented strategies to further strengthen relationships with our customers and partner with them towards executing effective solutions. Overall, feed sales were buoyed by positive growth in the poultry and livestock sector. The Division experienced robust sales in the poultry sector, attributable to greater restrictions being imposed on imports of poultry meat and by-products. These policies benefited our small farmers and encouraged record growth in the industry at close to 25% over the previous year. The Layer market continued to rebound nicely from the glut in With over 600,000 birds laying, layer farmers were just able to meet the increased demand for table eggs. The Jamaica Egg Services remains committed to maintaining the balance between supply and demand as this has resulted in fair prices for local layer farmers. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 37

44 MANAGEMENT DISCUSSION & ANALYSIS continued We saw further stabilization in the pig sector with farmers achieving a 20% increase in pork production year over year which directly contributed to an increase in our sales of pig feed over the previous year. During the year, the Division cemented critical partnerships with existing suppliers, while establishing agreements with a number of new firms devoted to the production and distribution of veterinary pharmaceuticals and agro-chemicals with eco-friendly properties. These products were launched at the Denbigh Agricultural Show to an audience of farmers, Hi-Pro dealers, and patrons. The recently rebranded Hi-Pro Farm Supplies Store renewed its commitment to providing top quality customer service by re-training all staff members. These training exercises were conducted by representatives from one of our international partners. Store sales were good, and with the launch of our new top of the line products, Hi-Pro Farm Supplies continued to see healthy growth, particularly in veterinary pharmaceuticals, crop care products and services primarily through provision of full support to crop farmers and industry stakeholders. The reality of the local agricultural sector indicates that it is not enough to sell products to our farmers. They also need to be taught best practices in their respective sectors, through proper application of programs, products and administration of their resources. 38 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

45 MANAGEMENT DISCUSSION & ANALYSIS continued Hi-Pro placed emphasis on the education of farmers and industry stakeholders and achieved this task through the publication of a range of technical brochures and manuals, use of social media and hosting a number of sector-specific seminars throughout the year. We also launched Subsistence to Success in association with the Family Life Equipping Network, where subsistence farmers learnt life skills based around biblical principles of stewardship, self-esteem, giving, record-keeping and other topics. Thus far, over 800 people have taken the course to good effect. Hi-Pro continues to support small farmers who contribute tremendously to the growth and development of our industry and this played out in the Grow with Hi-Pro campaign. The campaign resonated with our consumers and the wider public, resulting in a second award from the prestigious American Advertising Federation. Grow with Hi-Pro was complemented by Hi-Pro Rewards and The Christmas Countdown island-wide promotions that gained a great deal of traction based on the healthy sales numbers achieved. At the first ever Hi-Pro Dealer Awards, top dealers were recognized for their performance in feed and product sales. The Awards were a resounding success, with dealers committed to attaining and retaining awards of their own for the next financial year. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 39

46 MANAGEMENT DISCUSSION & ANALYSIS continued U.S. OPERATIONS The Group s primary United States-based operations comprise of Wincorp International Incorporated in Florida and International Poultry Breeders in Georgia and Arkansas. Our U.S. team reached a significant milestone, with Wincorp International Inc. operating for an entire year as the largest fertile egg marketing company in the United States of America. During this year, our Executives focused mainly on improvements to the system s infrastructure, upgrading facilities, as well as staff development through team training and empowerment exercises. In an effort to prevent complacency in our success, two long term goals for product diversification were fulfilled this year. We were able to secure an exclusive distributorship for the Novogen breed of layer hens and also acquired a Hatchery business in Iowa to distribute this Novogen product. This acquisition has not only strengthened our operations, but has also allowed us to extend our reach within the poultry markets of the U.S.A. and Canada. The U.S. Team is poised and looks forward to strong growth and positive shareholder return of value. Stephen Levy President, Wincorp International Inc. 40 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

47 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 41

48 MANAGEMENT DISCUSSION & ANALYSIS continued OTHER CARIBBEAN OPERATIONS The year - saw us making a small profit in Haiti Broilers S.A. for the last 2 months of the financial year. The Haitian currency depreciated significantly and this affected our profitability for the year even though we made significant strides in our operations. Sales for the year increased to 619M in HTG from 503M in HTG. A major contributor to this growth in revenue was HB Ouefs (table eggs) which accounted for 48% of sales and continues to be our engine of growth. We continue to market our feeds and chicks under the Hi-Pro brand and our processed chicken under the Le Chic Poulet brand. Our buy-back program continues to work well, providing employment opportunities for small farmers who now supply us with 100% of the birds for processed chicken. The strategy for the new financial year envisages us growing our egg production by another 35-40%. Most of these eggs will be sold through the distribution points being established in strategic locations aimed at insulating our operations against the illegal eggs coming from the Dominican Republic at low prices. This, along with other strategies being pursued, should push us into sustained profitability for the year. Dave Fairman President, Haiti Operations 42 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

49 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 43

50 RISK ANALYSIS & DEPT MANAGEMENT AVIAN INFLUENZA The Company has significant poultry operations in Jamaica, the U.S.A. and Haiti. As a consequence, significant management attention is focused on the health and wellbeing of our birds, together with measures to minimise the risk of contracting diseases such as Avian Influenza (AI). There have been less incidence of outbreaks during the year under review when compared to the previous year, but notwithstanding this our vigilance remains high. We continue to maintain our robust systems given the potential impact AI can have on our global operations. This focus remains as follows: 1. Education includes our people (farmers and employees) as well as Government authorities and customers. 2. Communication update our bio-security protocols system wide; as well as have representatives on Advisory Boards and First Response Teams. 3. Preparation implement insurance coverage, trade and logistics back-up plans and quarantine plans. Through God s protection, we have not lost birds or eggs, either directly or indirectly, as a result of AI. We continue to be vigilant and focused in our efforts to maintain an AI free operation. DEBT MANAGEMENT The Company took advantage of favourable market conditions to restructure its debt and properly align it to our strategic objectives. Almost all of the debt is denominated in Jamaican currency, thereby mitigating foreign exchange risk. The debt is also at a fixed rate of interest, thereby mitigating interest rate risk. The debt facilities are predominantly long term, bringing further stability to the Balance Sheet. The Company has capacity to increase the level of debt if so desired, and all loan covenants are being comfortably satisfied. 44 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

51 HUMAN RESOURCE MANAGEMENT PEOPLE At the heart of our operations are thinkers, innovators and leaders who work hard to maintain the highest standards across the Group. The Lord has blessed us with a tremendous asset in our dedicated staff and this year, significant focus was placed on Human Resource Development, more specifically, in the training and overall welfare of our people. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 45

52 MANAGEMENT DISCUSSION & ANALYSIS continued THE FAMILY THAT PRAYS TOGETHER On the first Monday of May, we gathered on the lawns of the Group s Head Office to give thanks to the Lord as we marked the start of the - operating year. This has been a custom of ours for many years and has grown from a handful standing in the parking lot, to in excess of five hundred employees, contractors, board members and other associates coming together to lift a united voice of praise in celebration of God s grace towards us. Our teams in the US were able to stream the service live online for the first time and this has blessed the Group enormously as our teams across the waters begin to feel more like part of the family here in Jamaica. 46 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

53 MANAGEMENT DISCUSSION & ANALYSIS continued STRENGTHENING THE CORE: RECRUITMENT & TRAINING Training is critical to the development of our organisation. We continue to recruit some of the most qualified professionals in the industry and in order to maintain high standards, we must ensure that they have access to new information regarding best practices, equipment and technology in their respective fields. Our Training Department continues to facilitate this process and to date, we have retained and contributed to the further development of some of the most highly qualified specialists in the Caribbean. The Training Department also assessed their overall approach to training and ultimately redefined their Key Performance Indicators (KPIs) to ensure that the training needs of the Group are being satisfied and that the performance of the Department is both quantifiable and qualifiable. Results are assessed in the first and third quarters of the fiscal year and the latter result saw the Department performing above the required standard. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 47

54 MANAGEMENT DISCUSSION & ANALYSIS continued EMPLOYEE HEALTH & WELLNESS The Chikungunya virus had a tremendous impact on Jamaica s economic landscape with many workers across the island succumbing to the virus. This is just one example of how crucial it is for us to have adequate welfare benefits available to our staff in order to maximize their health and overall wellbeing. Our continued partnership with Sagicor allowed our employees to have access to affordable medical care throughout the year, while our Company nurses focused on maintaining good health through regular check-ups and awareness campaigns. One major success was the Cancer Awareness Pageant held at The Best Dressed Chicken Processing Plant in Spring Village. This event saw our contractors partnering with us to extend awareness to their teams of workers alongside our staff. Pageant entrants became ambassadors for the fight against cancer and educated their coworkers on methods of early detection and prevention. We have also re-started exercise programmes at our Group Head Office in McCook s Pen and at Hi-Pro in White Marl. Our employees have responded very well to these programmes where they have been encouraged to partner with one another toward physical fitness, healthier eating habits and a positive work/life balance. Our canteen staff have noted increased requests for vegetables and ground provisions over refined starches and some staff members involved in the programme report healthy weight loss and renewed energy.. 48 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

55 MANAGEMENT DISCUSSION & ANALYSIS continued SPORTS We continue to support both the Business House Football and Business House Cricket Boards. Our Best Dressed Chicken team put up a good fight in the Five-A-Side Football competition coming second to Bank of Nova Scotia in the Open Rally. In the League competition, we tied with The Food for the Poor team for 7th place however, they advanced to the quarter final based on a better goal average. The battles in the cricket competitions were fierce. In the 50 overs competition, we lost the semi-final to JAMALCO and the National Housing Trust (NHT) managed to defeat us in the final match of the T-20 competition. While we were saddened at not being able to field a team for the netball competition, we remain proud of our football and cricket teams and continue to plan for victory in the coming seasons. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 49

56 MANAGEMENT DISCUSSION & ANALYSIS continued THE WAY FORWARD The - operational year has been a tremendous success for the Company. After receiving such remarkable results, it is imperative that we assess the next steps we need to take in order to ensure continuity on this journey. Giving thought to this, we took the necessary course of action during the first quarter of the operating year, to finalize the sale of our shareholding in ERI Services (St. Lucia) along with its wholly owned subsidiary JB Terminal (Port Esquivel) Limited. This will serve to further our focus on the core operations of the Group and the areas for growth. We expect this fiscal year to be punctuated by economic uncertainties such as the rate of the devaluation of the Jamaican Dollar against its United States counterpart, changes in the structure of the European Union, taxation policies and likely fluctuation in business and consumer confidence levels. However, we will continue to monitor macroeconomic indicators and take warranted defensive and offensive actions to keep us moving forward. We do expect the Jamaican economy to improve and conversely, we look forward to continued growth in our Jamaica Operations. We will continue our True to the Core campaign, which has served to reinforce both the heart and the business behind the Jamaica Broilers Group. We will focus on maintaining and refining what is already a strong business model around our core product and continue to strengthen our staff through training and team building exercises, as these objectives remain high on our priority list. We anticipate a very dynamic year ahead and we continue to look to the Lord for guidance in our decision making process towards the development of our Company, with the interest of all our stakeholders at heart. Christopher Levy President and CEO 50 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

57 CORPORATE SOCIAL RESPONSIBILITY SUSTAINABILITY We have a strong culture of giving back to the communities within which we operate and this year, we continued to partner with our neighbours towards building sustainable communities and promoting values and attitudes that encourage fairness and the building of goodwill. Protecting our environment has also been a major factor in this endeavour. We remained focused on energy efficiency and explored solutions toward refining how we handle waste. We engage in hundreds of social projects across the Group each year and this year was no different. Below are highlights from a few of the communities, charities and initiatives we supported over the / operating year. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 51

58 CORPORATE SOCIAL RESPONSIBILITY continued INTERNAL INITIATIVES JAMAICA BROILERS GROUP FAIR PLAY AWARDS FOR EXCELLENCE The media fraternity came fancily dressed for the staging of the Fair Play Awards held at the Terra Nova Hotel. The most anticipated event of its kind, the Fair Play Awards continues to encourage integrity in investigative journalism, quality reporting and the production of riveting pieces for print, television and radio. The judges received 30 entries this year 4 radio, 7 television and 19 print, and commented on the strength and competitiveness of the pieces. The Fair Play Award of Excellence Trophy and the cash prize of $500, was awarded to the RJR Communications Group, represented by Nadine McLeod, Kirk Wright, Shakir Brown, Talawa Levy, Anthony James and Carlton McCarthy, for an expose entitled Business on Back Road. 52 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

59 CORPORATE SOCIAL RESPONSIBILITY continued LE CHIC POULET FUN IN THE SON - HAITI Despite political unrest, peace abounded as thousands gathered in Port-au-Prince, Haiti for the third staging of the free Le Chic Poulet Fun in the Son Gospel Festival in November. Haiti Broilers partnered with the Luis Palau Association and hundreds of churches to bring the life changing message of salvation through Christ to Haitians of all ages. Patrons were treated to lively children s stage presentations, amazing bike stunts and awesome gospel music by the best local artistes as well as Jamaica s own Carlene Davis. Evangelist Andrew Palau shared the message of forgiveness through Jesus and saw over 2,000 persons responding. In the week before the Festival, the Palau mission teams reached out at prisons, churches, eye clinics and schools. Two special events were held for the first time. Tears flowed freely as Wendy Palau shared her testimony during a gala dinner for hundreds of women from all walks of life. A luncheon for Haitian leaders gave Andrew Palau the opportunity to share Christ with Members of Parliament, Senators, influential businessmen, and the heads of officially recognized religions including the Voodoo and Muslim faiths, with many commitments being made for Christ. Haiti Broilers continues to be a beacon bringing lasting hope to lives in Haiti. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 53

60 THE JBG ANNUAL TEACHERS DAY LUNCHEON The staging of the Jamaica Broilers Group Annual Teacher s Day Luncheon was held on May 6 at the Caymanas Country Club. With an attendance of over 160 teachers from 21 schools in St Catherine, this event is one of the island s largest gatherings of teachers on Teacher s Day. In keeping with the Company s emphasis on empowering members of the communities in which we operate, JBG organizes this event each year in recognition of the hard work and personal sacrifices teachers display each day in the classrooms. This year our teachers were challenged to go The Extra Mile, in keeping with the theme of the luncheon. They were encouraged to be exemplary both inside and outside the classrooms and to be prepared to impact not only the intellectual development of their students, but their social, emotional and ethical growth as well. The teachers enjoyed a surprise performance by Kevin Downswell who shared that through the efforts of a very patient teacher, he was able to complete high school and later graduate university with honours, attaining a degree in biochemistry. 54 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

61 CORPORATE SOCIAL RESPONSIBILITY continued JBG SHARE THE LOVE INITIATIVE The Share the Love Campaign was created last year out of a desire to boost staff morale and unite the various divisions across the Group. This year, the initiative evolved into an opportunity to not only allow the Staff to enjoy themselves, but also show the heart of the Company, as a passionate supporter of nation-building. Through this vision, the Group launched a Week of Love where staff brought in gifts of non-perishable food items and toiletries to donate to select charities. The Best Dressed Chicken division also donated thousands of pounds of product to several children s homes, church kitchens and charitable non-profit organizations across Jamaica. Keeping the element of fun involved, employees at various locations participated in a Sweet Treat, Candy Count, Brain Teaser Challenge and prizes were awarded to the winners who were able to successfully estimate the number of candies in a glass jar. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 55

62 CORPORATE SOCIAL RESPONSIBILITY continued HI-PRO GIVES BACK TO MAVIS BANK - LABOUR DAY In May, a fire along the Blue Mountain range burnt over 500 acres of land devoted primarily to coffee cultivation, causing severe damage to property and thousands of plants. Hi-Pro used Labour Day as an opportunity to assist affected coffee farmers, partnering with Mavis Bank Coffee Factory and Jamaica Agricultural Society for the distribution of hundreds of coffee seedlings, fertilizer, broiler chicks and feed. The Hi-Pro team journeyed to the remote community of Flamstead and were warmly received by the residents who were animated and upbeat, despite the magnitude of their recent loss - a true testament to the resilience of Jamaican farmers. Hi-Pro technical representatives conducted workshops on best practices in broiler management and crop care, while representatives from the Mavis Bank Coffee Factory discussed methods for fire prevention. Following the workshops, the farmers were presented with our contributions in the hope that the coffee seedlings, fertilizers, chicks and feed could somehow mitigate their loss. 56 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

63 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 57

64 CORPORATE SOCIAL RESPONSIBILITY continued HI-PRO TAKES FARMING FAMILIES FROM SUBSISTENCE TO SUCCESS The Hi-Pro Division was honored to sponsor a project geared toward improving the lives of farming families both spiritually and economically. After an extensive review of course material, the Division partnered with Joseph and Alice Mulaa from the Family Life Equipping Network to deliver a series of 6-week courses. The workshops, entitled From Subsistence to Success, address bible-based values and life-coping skills including family life enrichment, conflict resolution, business management, and record keeping. With over 350 graduates since September, the program has proven to be very successful with participants forming Accountability Groups that function as support systems for them in their respective communities. The sense of achievement and self-worth that course participants express, is only second to their renewed hope for a better quality of life. 58 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

65 CORPORATE SOCIAL RESPONSIBILITY continued WINCORP HOSTS AVIAN INFLUENZA AWARENESS PROGRAMME With the recent Avian Influenza (AI) issues in the Midwest (USA) and the impending migration season, we brought all our farmers across the division together for an open conversation concerning the potential threats. Dr. Louise Dufour-Zavala, Executive Director of the Georgia Poultry Lab Network led a presentation to all our farmers across our Georgia Divisions while Dr. Brandon Doss, DVM, led the presentation to our farmers in Arkansas. The aim of the programme was to educate farmers on how to prevent contamination among farms at various locations. Each location hosted a dinner and presentations at different dates to facilitate farmers in their area. We are confident that our farmers are up to date on the Avian Virus and our investments remain protected. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 59

66 CORPORATE SOCIAL RESPONSIBILITY continued PARTNERING TOWARD GREATNESS JAMAICA COLLEGE ROBOTICS PROGRAMME At the Jamaica Broilers Group, education is very close to our heart and we are always eager to assist with the growth of the nation s youth. We were excited to partner with the Jamaica College Robotics Team, affectionately called the Blue Bots, on their journey to create a robot for entry into the series of the National, Regional and Super Regional Robotics Competitions. As leaders in agri-business and poultry production, we have always been supportive of nation-building initiatives, new developments in science and creating innovative ways to work with technology. The 7-member all-male team impressed us with their creativity, zeal and passion for innovation and shared about the importance of maintaining high academic standards while enjoying their love for robotics. 60 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

67 CORPORATE SOCIAL RESPONSIBILITY continued RELAY FOR LIFE Relay for Life is an annual corporate fundraising initiative organized by the Jamaica Cancer Society. The Jamaica Broilers Group, alongside the Best Dressed Chicken, continue to remain avid sponsors and supporters of this cause which not only unites our staff and their families, providing a safe and wholesome environment for food, fun and camaraderie, but also allows us to stand with those who lost loved ones and celebrate with those who have survived the fight against cancer. Our team of 86 persons, the largest JBG representation to date, was dressed in lime green, to sensitize persons about lymphoma, a cancer that affects the body s immune system. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 61

68 CORPORATE SOCIAL RESPONSIBILITY continued EVERYONE S A WINNER / THE BEST DRESSED CHICKEN ROAD RACE SERIES Every year, children who receive treatment under the auspices of the Diabetes Association of Jamaica (DAJ) are in need of life saving medicines such as insulin. The Everyone s a Winner / The Best Dressed Chicken Road Race Series which promotes healthy lifestyle and wellness generally, is one of the vehicles that we use to generate funds to support the work of the DAJ. The Best Dressed Chicken has been a donor to the DAJ for over three years in support of its recently launched programme The Life of a Child. Under this initiative, insulin, syringes, blood glucose monitors and testing supplies are offered to children and youth from birth to 25 years of age at no cost. Over the years, The Best Dressed Chicken has donated kitchen equipment to assist with the preparation of meals as well as to provide increased storage facilities for the various types of insulin. Our most recent contribution to the work of DAJ was in the form of a donation cheque in the amount of $250,000 from the proceeds of the previously held The Everyone s A Winner/The Best Dressed Chicken Road Race Series. The Best Dressed Chicken shares in the Association s mandate to reduce the number of children affected by diabetes and to provide care to an extent that no child should die from diabetes. Proceeds from the Road Races were also donated to the Neurology Department of the University of the West Indies in the sum of $250,000.

69 CORPORATE SOCIAL RESPONSIBILITY continued FEED OUR FUTURE CHARITY (CAYMAN) The Best Dressed Chicken continued to support the work of the Feed Our Future Charity - a not for profit company based in the Cayman Islands. The goal of the Feed Our Future Charity is to fund nutritionally balanced school meals for children in need. This edict resonated with us and we have been supporting this Charity for over three years. We supported its largest annual fundraising event - Island Roast. The success of the event in recent years has translated to over 5,000 school meals for children on this programme. The work of the Feed our Future Charity was also recognized at the inaugural staging of the Table Talk Food Awards in the Cayman Islands to standing ovation. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 63

70 CORPORATE SOCIAL RESPONSIBILITY continued VOICES FOR CHILDREN OF BROWARD COUNTY Voices for Children is an organization that assists foster children in Broward County, Florida. Wincorp International sponsored Voices for Children on two occasions in. Our first sponsorship provided abused and neglected children with hygiene care for an entire year and the second provided two Dream Big days for 2 of the children they serve. This organisation is close to our hearts as we feel all children need a nurturing home environment to foster healthy growth and development. 64 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

71 CORPORATE SOCIAL RESPONSIBILITY continued GEORGIA SPECIAL OLYMPICS The Georgia Special Olympics aids individuals with disabilities in overcoming barriers through sports. During the Annual International Production & Processing Expo in Atlanta, Georgia, Stephen Levy, Syd Mogg & Christopher Levy, together presented a check for US$2, with Miss America to the Georgia Special Olympics Award Medalist. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 65

72 CORPORATE SOCIAL RESPONSIBILITY continued ENVIRONMENTAL STEWARDSHIP Compliance with all applicable requirements remain the hallmark and endeavour of the Jamaica Broilers Group. To this end, engagement of internal and external stakeholders has been ongoing. Diligence in maintaining Environmental Management Systems (EMS) continues to yield results both in terms of increased positive behaviours among our stakeholders as well as concrete actions to prevent non-conformances. With the recent increase in production to meet the strong local demand for poultry meat, we have had to make adjustments toward improving our waste treatment capabilities. As a result, the Company continues to make significant investments toward the rehabilitation and upgrade of our EMS and in particular, the waste water treatment system at the Best Dressed Chicken Processing Plant. This was another rewarding year for the Group as our environmental management programmes have resulted in an overall reduction in water usage across our production facilities. 66 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

73 MANAGEMENT DISCUSSION & ANALYSIS continued CORPORATE SOCIAL RESPONSIBILITY continued Additionally, energy consumption has seen appreciable reduction across the Group since the implementation of a major initiative to gather consumption data and create digital dashboards to ensure visibility of results and ultimately drive the achievement of targets set. Continual improvement in systems and operating practices has resulted in the positive effect of reducing the Group s environmental footprint and the level of environmental consciousness across the Group has been tremendous. Top management commitment has been consistent and buy-in by our staff and contractors guarantees that the Group will reap the benefits of higher efficiencies as well as continue to demonstrate to its stakeholders, its commitment to excellence in environmental stewardship for the long haul. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 67

74 SHAREHOLDING OF DIRECTORS & CONNECTED PERSONS For purposes of compliance with Rule 407 of the Jamaica Stock Exchange Rules, details of stockholdings of Directors and Senior Management and their connected persons as at 2 MAY are set out hereunder: DIRECTORS SHAREHOLDING CONNECTED PERSONS SHAREHOLDING Robert E. Levy Chairman 616,000 Robert E. Levy / Judy Levy Portland Corporation Ltd. The Robert Levy Family Foundation Phillip E. Levy The Phillip Levy Family Foundation 6,907,893 8,805, ,412, ,000 34,964,975 Christopher Levy President & Chief Executive Officer Executive Director 2,731,316 Christopher Levy / Sarah Levy 14,112,790 R. Danny Williams Director Emeritus Nil R. Danny Williams / Shirley Williams Ravers Limited Nil 9,873,332 Claudette Cooke Vice President, Human Resource Development & Public Relations Executive Director Nil Claudette Cooke / Richard Cooke Richard Cooke Richard Cooke / Claudette Cooke Richard Cooke / Claudette Cooke / Ryan Cooke 9,044,107 9,318 7, Ian Parsard Senior Vice President, Finance & Operations Nil Ian Parsard / Karen Parsard Karen Parsard / Peter-John Parsard 4,202,489 5,250 Trevor Dewdney Director 53,333 Trevor Dewdney Jr. Trevor Dewdney / Gloria Dewdney Don-Pierre Dewdney 9,318 9,318 19,078 Aubyn Hill Director 6,103,934 Malcolm McDonald Director Nil Omar Azan Director Nil Gregory B. Shirley Director 1,004,720 Gregory B. Shirley / Susan Shirley 4,895,990 Barrington Pryce Director Nil Barrington Pryce / Nadine Pryce Vivienne Pryce /Nikkiesha Pryce 74,548 21,432 Edward Barber Director Nil 68 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

75 SHAREHOLDING OF SENIOR MANAGEMENT & CONNECTED PERSONS SENIOR MANAGEMENT SHAREHOLDING CONNECTED PERSONS SHAREHOLDING Peter DePass Nil Donald Patterson 677,332 Donald Patterson/ Irenia Patterson Dayne Patterson 4,006, Conley Salmon Nil Conley Salmon / Juliet Salmon Christopher McClure / Angela McClure / Juliet Salmon ,783,101 Nil Stephen Levy Nil Stephen Levy/Michka-Mae Levy 1,346,791 Judy Baugh Nil Dorothy Jaggan / Eric Jaggan 354,066 John Carberry 619, LARGEST ORDINARY STOCKHOLDERS The Holdings of those persons owning the ten (10) largest blocks of stock units as at 02 MAY are set out hereunder: SHAREHOLDER SHAREHOLDING Jamaica Broilers Trust (JBT) 168,330,275 The Robert Levy Family Foundation 100,412, Halcyon Limited 60,314, National Insurance Fund 56,745, SJIML A/C ,257,093 The Arrol Trust 44,411,830 The Philip Levy Family Foundation 34,964,975 Sagicor Pooled Equity Fund 32,986,394 NCB Insurance Co. Ltd. WT109 28,487,667 JCSD Trustee Services Ltd.- Sigma Optima 20,759, PETER A. DePASS Company Secretary April 30, JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 69

76 DIRECTORS & SENIOR MANAGEMENT BOARD OF DIRECTORS Mr. Robert Levy, C.D. Hon. LL.D., M.A. Chairman Mr. Christopher E. Levy MBA Executive Director The Hon. R. Danvers Williams, O.J., C.D. Hon. LL.D., J.P., C.L.U. Director Emeritus Dr. Claudette D. Cooke Ed.D, CMT, CPC, CCRC Executive Director Mr. Ian Parsard MBA (Hons.), A.C.C.A. Executive Director Dr. Trevor Dewdney D.V.M. Director Mr. Aubyn Hill MBA Director Mr. Omar Azan Director Mr. Gregory B. Shirley MBA Director Mr. Edward Barber B.Acy, CPA Director Mr. Stephen D. Levy BSc, MBA Executive Director EXECUTIVE TEAM Mr. Christopher E. Levy MBA President & Chief Executive Officer Mr. Ian S. Parsard MBA (Hons.), A.C.C.A. Senior Vice President Finance & Corporate Planning Dr. Claudette D. Cooke Ed.D, CMT, CPC, CCRC Vice President Human Resource Development & Public Relations Mr. Donald A. Patterson MBA, FCA Vice President Accounting & Information Systems Mr. Conley N. Salmon Vice President Marketing Feeds & Agricultural Supplies Mr. Stephen D. Levy MBA President Wincorp International Inc. (USA) Ms. Judy Baugh MSc Asst. Vice President Procurement Mr. John Carberry MSc, MBA, PMP Asst. Vice President Energy COMPANY SECRETARY Peter A. DePass Attorney-at-Law 70 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

77 OPERATING DIVISIONS & SUBSIDIARIES JAMAICA BROILERS GROUP LIMITED JAMAICA BROILERS GROUP LIMITED Group Head Office Content, McCook s Pen St. Catherine Jamaica, West Indies Tel: Fax: Website: SUBSIDIARIES LOCAL EAL/ERI CO-GENERATION PARTNERS, LP Content, McCook s Pen St. Catherine Tel: Fax: JB TERMINAL (PORT ESQUIVEL) LIMITED Port Esquivel, Old Harbour St. Catherine Tel: Fax: DIVISIONS BEST DRESSED CHICKEN PROCESSING PLANT & BEST DRESSED CHICKEN FURTHER PROCESSING FACILITY Spring Village, St. Catherine Tel: Fax: BEST DRESSED FEED MILL Freetown, P.O. Box 24 Old Harbour P.O., St. Catherine Tel: Fax: BEST DRESSED FOODS Spring Village St. Catherine Tel: Fax: Toll Free: BUY BDF1 HI-PRO FARM SUPPLIES STORE P.O. Box 886 White Marl, St. Catherine Tel: Fax: JAMAICA EGG SERVICES White Marl. St. Catherine Tel: Fax: SUBSIDIARIES OVERSEAS ATLANTIC UNITED INSURANCE CO. LTD. 20 Micoud Street Castries, St. Lucia ERI SERVICES (ST. LUCIA) LIMITED 20 Micoud Street, Castries, St. Lucia HAITI BROILERS S.A. Lafiteau, Port Au Prince Mailing Address: Building #47 Parc Industriel Sonapi, Port Au Prince Haiti INTERNATIONAL POULTRY BREEDERS (ARKANSAS) 660 Niven Road Rison, Arkansas Tel: Fax: INTERNATIONAL POULTRY BREEDERS (GEORGIA) 1235 Perry Batts Road Norman Park, Georgia Tel: Fax: INTERNATIONAL POULTRY BREEDERS (JAMAICA) LIMITED Caentabert, P.O., Box 27 Claremont, St. Ann Tel: Fax: INTERNATIONAL POULTRY BREEDERS (IOWA) 113 North Long Street Brancroft, Iowa WINCORP INTERNATIONAL INC NW 116 Way, Suite 14 Medley, FL Tel: (305) Fax: (305) JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 71

78 ADVISORS AUDITORS PricewaterhouseCoopers Scotiabank Centre Corner Duke & Port Royal Streets P.O. Box 372 Kingston BANKERS EXIM Bank Jamaica First Caribbean International Bank Bank of Nova Scotia Jamaica Limited Inter-American Investment Corporation National Commercial Bank Jamaica Limited Sagicor Investments Jamaica Limited Sagicor Bank Citibank N.A. ATTORNEY-AT-LAW Peter A. DePass Attorney-at-Law Old Hope Road Kingston 6 REGISTRAR & SECRETARIAL AGENTS PwC Corporate Services (Jamaica) Scotiabank Centre Corner Duke & Port Royal Streets Kingston CONSULTANTS KPMG The Victoria Mutual Building 6 Duke Street Kingston 72 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

79

80

81 TABLE OF ACCOUNTS 76 Independent Auditor s Report to The Members STATUTORY FINANCIAL STATEMENTS 78 Group Statement of Comprehensive Income 79 Group Balance Sheet 80 Group Statement of Changes in Stockholders Equity 81 Group Statement of Cash Flows 83 Company Statement of Comprehensive Income 84 Company Balance Sheet 85 Company Statement of Changes in Stockholders Equity 86 Company Statement of Cash Flows 88 Notes to the Financial Statements

82 Independent Auditors Report Independent Auditor s Report To the Members of Jamaica Broilers Group Limited Report on the Consolidated and Company Stand-Alone Financial Statements We have audited the accompanying consolidated financial statements of Jamaica Broilers Group Limited and its subsidiaries, set out on pages 78 to 155, which comprise the Group balance sheet as at, and the Group statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information, and the accompanying financial statements of Jamaica Broilers Group Limited standing alone, which comprise the balance sheet as at, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Consolidated and Company Stand-Alone Financial Statements Management is responsible for the preparation of consolidated and company stand-alone financial statements that give a true and fair view in accordance with International Financial Reporting Standards and with the requirements of the Jamaican Companies Act, and for such internal control as management determines is necessary to enable the preparation of consolidated and company stand-alone 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 consolidated and company stand-alone financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and company stand-alone financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated and company stand-alone financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated and company stand-alone financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of consolidated and company stand-alone financial statements that give a true and fair view 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated and company stand-alone financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 76 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

83 Opinion In our opinion, the consolidated financial statements of Jamaica Broilers Group Limited and its subsidiaries, and the financial statements of Jamaica Broilers Group Limited standing alone give a true and fair view of the financial position of Jamaica Broilers Group Limited and its subsidiaries and the Jamaica Broilers Group Limited standing alone as at, and of their financial performance and cash flows for the year then ended, so far as concerns the members of Jamaica Broilers Group Limited, in accordance with International Financial Reporting Standards and the requirements of the Jamaican Companies Act. Report on Other Legal and Regulatory Requirements As required by the Jamaican Companies Act, we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. In our opinion, proper accounting records have been kept, so far as appears from our examination of those records, and the accompanying financial statements are in agreement therewith and give the information required by the Jamaican Companies Act, in the manner so required. Chartered Accountants 1 July Kingston, Jamaicao the Members of Jamaica Broilers Group Limited Report on the Consolidated and Company Stand-Alone Financial Statements We have audited the accompanying consolidated financial statements of Jamaica Broilers Group Limited and its subsidiaries, set out on pages 1 to 83, which comprise the consolidated balance sheet as at, and the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 77

84 Jamaica Broilers Group Limited Group Statement of Comprehensive Income Year ended (expressed in Jamaican dollars unless otherwise indicated) Note Revenue 38,521,304 34,570,050 Cost of sales (28,500,748) (26,548,665) Gross Profit 10,020,556 8,021,385 Other income/gains 6 313, ,117 Distribution costs (1,209,088) (1,033,495) Administration and other expenses (6,151,676) (5,041,235) Operating Profit 2,973,290 2,120,772 Finance income 9 159, ,781 Finance costs 9 (733,792) (704,701) Profit before Taxation 2,398,576 1,561,852 Taxation 10 (671,960) (552,198) Net Profit 1,726,616 1,009,654 Other Comprehensive Income, net of taxes - Item that will not be reclassified to profit or loss - Re-measurements of post-employment/pension benefits - net of taxes ,425 (112,225) Item that will be reclassified to profit or loss - Exchange differences on translating foreign operations 75, ,624 Total other comprehensive income 290,992 43,399 Total Comprehensive Income 2,017,608 1,053,053 Net Profit Attributable to: Stockholders of the company 11 1,744,195 1,036,168 Non-controlling interests 18 (17,579) (26,514) 1,726,616 1,009,654 Total Comprehensive Income Attributable to: Stockholders of the company 2,039,482 1,078,675 Non-controlling interests (21,874) (25,622) 2,017,608 1,053,053 $ $ Earnings per Stock Unit JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

85 Jamaica Broilers Group Limited Group Balance Sheet (expressed in Jamaican dollars unless otherwise indicated) Non-Current Assets Note Property, plant and equipment 13 10,501,877 9,939,598 Intangible assets 14 1,165, ,602 Assets held for sale 15 16,042 - Investment property 16 6,645 23,315 Investments 17 45,982 68,749 Deferred income taxes 19 15,601 - Post-employment benefit assets ,100 - Affiliate 31-18,683 11,931,519 10,940,947 Current Assets Inventories 21 4,280,347 3,948,883 Biological assets 22 2,952,244 2,569,781 Receivables 23 3,278,254 2,789,062 Taxation recoverable 36,400 18,447 Financial assets at fair value through profit or loss , ,482 Cash and short term investments 25 1,199,194 1,828,446 12,447,742 11,627,101 Current Liabilities Payables 26 3,207,847 3,666,685 Taxation payable 482, ,486 Borrowings 28 1,983,290 2,763,024 5,673,354 6,893,195 Net Current Assets 6,774,388 4,733,906 18,705,907 15,674,853 Stockholders Equity Share capital , ,137 Capital reserve 30 2,062,158 1,850,181 Retained earnings 10,332,414 8,816,721 13,159,709 11,432,039 Non-controlling interests 18 (57,499) (35,625) 13,102,210 11,396,414 Non-Current Liabilities Borrowings 28 5,096,511 3,591,907 Deferred income taxes , ,032 Pension scheme benefit liabilities 20-94,700 Post-employment benefit obligations 20 21,900 24,800 18,705,907 15,674,853 Approved for issue by the Board of Directors on 30 June and signed on its behalf by: Robert E. Levy Chairman Christopher Levy Director JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 79

86 Jamaica Broilers Group Limited Group Statement of Changes in Stockholders Equity Year ended (expressed in Jamaican dollars unless otherwise indicated) Note Attributable to the Company s Stockholders Number of Shares Share Capital Capital Reserve Retained Earnings Noncontrolling Interests Total Equity 000 Balance at 3 May ,199, ,137 1,746,374 8,045,730 (36,023) 10,521,218 Remeasurements of pension asset/obligation, net of taxes (112,225) - (112,225) Exchange differences on translating foreign operations , ,624 Total other comprehensive income ,732 (112,225) ,399 Net profit ,036,168 (26,514) 1,009,654 Total comprehensive income , ,943 (25,622) 1,053,053 Dividends (203,877) - (203,877) Additional investment ,020 26,020 Transfer from capital reserves (50,925) 50, Total transactions with owners - - (50,925) (152,952) 26,020 (177,857) Movement during the year , , ,196 Balance at 1,199, ,137 1,850,181 8,816,721 (35,625) 11,396,414 Remeasurements of pension asset/obligation, net of taxes , ,425 Exchange differences on translating foreign operations ,862 - (4,295) 75,567 Total other comprehensive income , ,425 (4,295) 290,992 Net profit ,744,195 (17,579) 1,726,616 Total comprehensive income ,862 1,959,620 (21,874) 2,017,608 Dividends (311,812) - (311,812) Transfer to capital reserves ,115 (132,115) - - Total transactions with owners ,115 (443,927) - (311,812) Movement during the year ,977 1,515,693 (21,874) 1,705,796 Balance at 1,199, ,137 2,062,158 10,332,414 (57,499) 13,102, JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

87 Jamaica Broilers Group Limited Group Statement of Cash Flows Year ended (expressed in Jamaican dollars unless otherwise indicated) Note Cash Flows from Operating Activities Net profit 1,726,616 1,009,654 Adjustments for: Depreciation 817, ,134 Amortisation 14 86,650 90,517 Property, plant and equipment write-off 13-6,314 Property, plant and equipment adjustment 13 (3,308) (2,741) (Gain)/loss on disposal of property, plant and equipment 6 (9,990) 5,702 Loss on disposal of intangible assets - 55 Loss on disposal of subsidiaries 34-1,323 Investment write-off - 3,566 Impairment of investment 26,847 31,217 Fair value loss on financial assets at fair value through profit or loss 6 44,520 28,248 Changes in post-employment benefits 8,700 (150,800) Taxation expense , ,198 Interest income 6 (25,286) (23,715) Unrealised foreign exchange losses 52,745 60,567 Interest expense 9 636, ,405 4,033,580 3,008,644 Changes in operating assets and liabilities: Inventories (285,256) (264,354) Biological assets (382,463) (354,912) Receivables (512,053) (22,489) Payables (600,323) 761,387 Financial assets at fair value through profit or loss (273,341) (64,684) Translation gain on working capital of foreign subsidiaries (90,513) (66,382) 1,889,631 2,997,210 Taxation paid (661,760) (195,420) Cash provided by operating activities 1,227,871 2,801,790 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 81

88 Jamaica Broilers Group Limited Group Statement of Cash Flows (continued) Year ended (expressed in Jamaican dollars unless otherwise indicated) Cash Flows from Operating Activities (Page 4) 1,227,871 2,801,790 Cash Flows from Investing Activities Acquisition of business 33 (982,811) - Purchase of property, plant and equipment 13 (800,835) (1,060,948) Proceeds from disposal of property, plant and equipment 55,788 8,094 Purchase of intangible assets 14 (3,611) (3,615) Loan repayments received 46,027 6,335 Proceeds from disposal of subsidiaries 34-88,103 Interest received 25,286 23,715 Cash used in investing activities (1,660,156) (938,316) Cash Flows from Financing Activities Long term loans repaid (3,374,499) (1,342,756) Long term loans received 3,890,724 1,455,094 Additional investments from non-controlling interest 18-26,020 Interest paid (618,618) (665,643) Dividends paid (311,812) (203,877) Cash used in financing activities (414,205) (731,162) Effect of changes in exchange rates on cash and cash equivalents 50,821 21,617 (Decrease)/increase in cash and cash equivalents (795,669) 1,153,929 Cash and cash equivalents at beginning of year 1,668, ,628 CASH AND CASH EQUIVALENTS AT END OF YEAR ,888 1,668,557 Non-cash additions during the year amounted to $36,976,000 ( - $8,867,000). In the prior year the amounts were transferred from inventory. The current year amounts are recorded in accounts payable. Note 82 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

89 Jamaica Broilers Group Limited Company Statement of Comprehensive Income Year ended (expressed in Jamaican dollars unless otherwise indicated) Note Revenue 29,103,699 26,732,162 Cost of sales (22,217,921) (21,306,394) Gross Profit 6,885,778 5,425,768 Other income/gains 6 530,316 1,469,614 Distribution costs (901,298) (806,177) Administration and other expenses (4,184,378) (3,578,088) Operating Profit 2,330,418 2,511,117 Finance income 9 155, ,029 Finance costs 9 (533,520) (558,023) Profit before Taxation 1,952,423 2,223,123 Taxation 10 (404,632) (291,648) Net Profit 1,547,791 1,931,475 Other Comprehensive Income, net of taxes - Item that will not be reclassified to profit or loss - Re-measurements of post-employment benefits ,325 (100,275) TOTAL COMPREHENSIVE INCOME 1,754,116 1,831,200 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 83

90 Jamaica Broilers Group Limited Company Balance Sheet (expressed in Jamaican dollars unless otherwise indicated) Note Non-Current Assets Property, plant and equipment 13 3,801,278 3,829,523 Intangible asset 14 93,472 90,066 Investments 17 45,982 7,136 Interest in subsidiaries 888, ,116 Affiliate 31-18,683 Loans receivable 31 3,847,499 2,412,668 Post-employment benefit assets ,300-8,850,898 7,246,192 Current Assets Inventories 21 3,796,636 3,434,202 Biological assets , ,388 Receivables 23 1,885,243 1,782,235 Subsidiaries 31 3,305,597 3,148,840 Taxation recoverable 26,103 14,792 Cash and short term investments ,097 1,599,112 10,536,799 10,479,569 Current Liabilities Payables 26 2,129,272 2,977,456 Taxation payable 374, ,828 Subsidiaries , ,138 Borrowings 28 1,250,855 2,102,727 4,214,196 5,564,149 Net Current Assets 6,322,603 4,915,420 15,173,501 12,161,612 Stockholders Equity Share capital , ,137 Capital reserve , ,201 Retained earnings 9,214,373 7,772,069 10,112,711 8,670,407 Non-Current Liabilities Borrowings 28 4,650,058 3,085,651 Deferred income taxes , ,054 Pension scheme benefit liabilities 20-91,100 Post-employment benefit obligations 20 20,500 23,400 15,173,501 12,161,612 Approved for issue by the Board of Directors on 30 June and signed on its behalf by: Robert E. Levy Chairman Christopher Levy Director 84 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

91 Jamaica Broilers Group Limited Company Statement of Changes in Stockholders Equity Year ended (expressed in Jamaican dollars unless otherwise indicated) Number of Shares Share Capital Capital Reserve Retained Earnings Total Note 000 Balance at 3 May ,199, , ,201 6,144,746 7,043,084 Remeasurement of pension asset/obligation, net of taxes (100,275) (100,275) Total other comprehensive income (100,275) (100,275) Net profit ,931,475 1,931,475 Total comprehensive income ,831,200 1,831,200 Dividends (203,877) (203,877) Movement during the year ,627,323 1,627,323 Balance at 1,199, , ,201 7,772,069 8,670,407 Remeasurement of pension asset/obligation, net of taxes , ,325 Total other comprehensive income , ,325 Net profit ,547,791 1,547,791 Total comprehensive income ,754,116 1,754,116 Dividends (311,812) (311,812) Movement during the year ,442,304 1,442,304 Balance at 1,199, , ,201 9,214,373 10,112,711 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 85

92 Jamaica Broilers Group Limited Company Statement of Cash Flows Year ended (expressed in Jamaican dollars unless otherwise indicated) Note Cash Flows from Operating Activities Net profit 1,547,791 1,931,475 Adjustments for: Depreciation , ,861 Amortisation 14 14,898 22,154 Property, plant and equipment write off - 6,314 Property, plant and equipment adjustment - (2,741) Gain on disposal of property, plant and equipment 6 (4,429) (561) Investment write off - 3,566 Changes in post-employment benefits 6,800 (134,700) Taxation expense , ,648 Interest income (138,579) (146,209) Dividend income (132,915) (1,224,120) Unrealised foreign exchange gains (207,419) (132,251) Interest expense 9 530, ,051 2,366,277 1,447,487 Changes in operating assets and liabilities: Inventories (362,434) (124,543) Biological assets (129,735) 128,807 Receivables (125,869) 154,152 Subsidiaries 110,312 (625,495) Intercompany loans receivable (1,254,174) 123,951 Payables (952,461) 609,653 (348,084) 1,714,012 Taxation paid (206,184) (138,133) Cash (used in)/provided by operating activities (554,268) 1,575, JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

93 Jamaica Broilers Group Limited Company Statement of Cash Flows (continued) Year ended (expressed in Jamaican dollars unless otherwise indicated) Note Cash Flows from Operating Activities (Page 9) (554,268) 1,575,879 Cash Flows from Investing Activities Disposal of subsidiaries - 32,344 Purchase of property, plant and equipment 13 (341,903) (624,373) Proceeds from disposal of property, plant and equipment 4,429 3,917 Purchase of intangible asset 14 (3,611) (3,615) Interest received 138, ,189 Dividend received 132,915 1,224,120 Cash (used in)/provided by investing activities (69,591) 763,582 Cash Flows from Financing Activities Long term loans repaid (3,141,509) (1,017,737) Long term loans received 3,803, ,000 Interest paid (507,404) (551,275) Dividends paid (311,812) (203,877) Cash used in financing activities (157,539) (1,097,889) Effect of changes in exchange rates on cash and cash equivalents 50,821 21,617 (Decrease)/increase in cash and cash equivalents (730,577) 1,263,189 Cash and cash equivalents at beginning of year 1,446, ,354 CASH AND CASH EQUIVALENTS AT END OF YEAR ,966 1,446,543 Non-cash additions during the year amounted to Nil ( - $8,867,000). These amounts were transferred from inventory. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 87

94 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 1. Identification Jamaica Broilers Group Limited (the Company) is a company limited by shares, incorporated and domiciled in Jamaica. Its registered office is located at Content, McCooks Pen, St. Catherine. The Company was incorporated in The principal activities of the Company and its subsidiaries include the production and distribution of poultry products, animal feeds and agricultural items (Note 2(b)). In addition, one of the Company s subsidiaries, JB Terminal (Port Esquivel) Limited (formerly JB Ethanol Limited) is equipped to contractually process fuel products on behalf of customers for a fee. The Company s subsidiaries together with the Company are referred to as the Group. The Company is listed on the Jamaica Stock Exchange. 2. Summary of Significant Accounting Policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) Basis of preparation The consolidated financial statements of Jamaica Broilers Group Limited have been prepared in accordance with International Financial Reporting Standards (IFRS) under the historical cost convention, as modified by the revaluation of biological assets and certain financial assets. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. Although these estimates are based on management s best knowledge of current events and action, actual results could differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4. Certain new standards, interpretations and amendments to existing standards have been published that became effective during the current financial year. The Group has assessed the relevance of all such new standards, interpretations and amendments and has put into effect the following IFRS, which are immediately relevant to its operations. IAS 19 (Amendment) Defined Benefit Plans: Employee Contributions, (effective for annual periods beginning 1 July 2014). The amendment allows entities to recognise employee contributions as a reduction in the service cost in the period in which the related employee service is rendered, instead of attributing the contributions to the periods of service, if the amount of the employee contributions is independent of the number of years of service. The amendment did not have a significant impact on the Group financial statements. 88 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

95 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (a) Basis of preparation (continued) Standards, interpretations and amendments to published standards that are effective during the year and are relevant to the Group (continued) The IASB annual improvements projects for the and cycles resulted in amendments to the following standards which were deemed relevant to the Group s operations. These amendments were effective for the accounting periods beginning on or after 1 July IFRS 8, Operating Segments. The standard is amended to require disclosure of the judgements made by management in aggregating operating segments. This includes a description of the segments which have been aggregated and the economic indicators which have been assessed in determining that the aggregated segments share similar economic characteristics. The standard is further amended to require a reconciliation of segment assets to the entity s assets when segment assets are reported. The amendment did not have a significant impact on the Group financial statements. IFRS 13, Fair value measurements. When IFRS 13 was published, certain paragraphs of IAS 39 were deleted as consequential amendments. This led to a concern that entities no longer had the ability to measure short-term receivables and payables at invoice amounts where the impact of not discounting is immaterial. The IASB has amended the basis for conclusions of IFRS 13 to clarify that it did not intend to remove the ability to measure short-term receivables and payables at invoice amounts in such cases. The amendment did not have a significant impact on the Group financial statements. IAS 24, Related Party Disclosures. This has been amended to include, as a related party, an entity that provides key management personnel services to the reporting entity or to the parent entity. The amendment did not have a significant impact on the Group financial statements. Standards, interpretations and amendments to published standards that are not yet effective and have not been early adopted by the Group The Group has concluded that the following standards which are published but not yet effective are relevant to its operations and will impact the Group s accounting policies and financial disclosures as discussed below. These standards and amendments to existing standards are mandatory for the Group s accounting periods beginning after or later periods, but the Group has not early adopted them: Amendment to IAS 1, Disclosure initiative (effective for accounting periods beginning on or after 1 January ). These amendments clarify the existing requirements of IAS 1 and provide additional assistance to apply judgement when meeting the presentation and disclosure requirements in IFRS. The amendment does not affect recognition and measurement and is effective for accounting periods beginning on or after 1 January. The amendment is not expected to have a significant impact on the financial statements. IAS 16, Property, plant and equipment and IAS 38, Intangible assets (effective for accounting periods beginning on or after 1 January ). 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 carrying amount of the asset is to be restated to the revalued amount. The split between gross carrying amount and accumulated depreciation is treated in one of two ways. The gross carrying amount may be restated in a manner consistent with the revaluation of the carrying amount, and the accumulated depreciation is adjusted to equal the difference between the gross carrying amount and the carrying amount after taking into account accumulated impairment losses. Alternatively, the accumulated depreciation may be eliminated against the gross carrying amount of the asset. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 89

96 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (a) Basis of preparation (continued) Standards, interpretations and amendments to published standards that are not yet effective and have not been early adopted by the Group (continued) Amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture (effective for annual periods beginning on or after 1 January ). The amendments define a bearer plant and include bearer plants within the scope of IAS 16. A bearer plant is defined as a living plant that is used in the production or supply of agricultural produce, is expected to bear produce for more than one period and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales. Previously, bearer plants were not defined and bearer plants related to agricultural activity were included within the scope of IAS 41. Bearer plants are used solely to grow produce. The only significant future economic benefits from bearer plants arise from selling the agricultural produce that they create. Bearer plants meet the definition of property, plant and equipment in IAS 16 and their operation is similar to that of manufacturing. Accordingly, the amendments require bearer plants to be accounted for as property, plant and equipment and included within the scope of IAS 16, instead of IAS 41. The produce growing on bearer plants will remain within the scope of IAS 41. The Group will apply the amendment effective 1 May, but does not expect any significant impact from its adoption. IFRS 9, Financial Instruments (effective for annual periods beginning on or after 1 January 2018). This addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the hedged ratio to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The Group is considering the implications of the standard, the impact on the Group and the timing of its adoption. IFRS 15, 'Revenue from Contracts with Customers' (effective for accounting periods beginning on or after 1 January 2018). The IASB has published its new revenue standard, IFRS 15 'Revenue from Contracts with Customers'. The U.S. Financial Accounting Standards Board (FASB) has concurrently published its equivalent revenue standard which is the result of a convergence project between the two Boards. IFRS 15 applies to nearly all contracts with customers: the main exceptions are leases, financial instruments and insurance contracts. It specifies how and when an entity will recognise revenue. It also requires entities to provide more informative, relevant disclosures. The standard supersedes IAS 18, 'Revenue', IAS 11, 'Construction Contracts' and a number of revenue-related interpretations. Application of the standard is mandatory for accounting periods beginning on or after 1 January The Group is assessing the impact of future adoption of the standard. 90 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

97 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (a) Basis of preparation (continued) Standards, interpretations and amendments to published standards that are not yet effective and have not been early adopted by the Group (continued) IFRS 16, Leases, (effective for annual periods beginning on or after 1 January 2019). In January, the IASB published IFRS 16 which replaces the current guidance in IAS 17. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a right-of-use asset for virtually all lease contracts. There is an optional exemption for lessees for certain short-term leases and leases of low-value assets. Amendments to IAS 12, Income Taxes, (effective for annual periods beginning on or after 1 January 2017). In January, the IASB published amendments to IAS 12 clarifying specifically how to account for deferred tax assets related to debt instruments measured at fair value as well as clarifying the guidance for deferred tax assets in general by adding examples and elaborating on some of the requirements in more detail. The amendments do not change the underlying principles for the recognition of deferred tax assets. Amendments to IAS 7, Statement of Cash Flows, (effective for annual periods beginning on or after 1 January 2017). In January, the IASB published amendments to IAS 7 to improve information about an entity's financing activities. These amendments are as part of the IASB initiative to improve presentation and disclosure in financial reports. The amendments require disclosure of information enabling users to evaluate changes in liabilities arising from financing activities including both cash and non-cash changes. IASB Annual Improvements - The IASB annual improvements project for the cycle resulted in amendments to the following standards which may be relevant to the Group s operations. These amendments are effective for the accounting periods beginning on or after 1 January. The Group is assessing the impact of future adoption of the amendments. IFRS 7, Financial instruments: Disclosures. The amendment clarifies, among other things, that the additional disclosure required by the amendments to IFRS 7, Disclosure Offsetting financial assets and financial liabilities is not specifically required for all interim periods, unless required by IAS 34. IAS 19 (Revised), Employee benefits. The amendment clarifies that, when determining the discount rate for post-employment benefit obligations, it is the currency that the liabilities are denominated in that is important, and not the country where they arise. The assessment of whether there is a deep market in high-quality corporate bonds or not is based on corporate bonds in that currency, and not corporate bonds in a particular country. Similarly, where there is no deep market in high-quality corporate bonds in that currency, government bonds in the relevant currency should be used. IAS 34, Interim financial reporting. The amendment clarifies what is meant by the reference in the standard to information disclosed elsewhere in the interim financial report. The amendment further amends IAS 34 to require a cross-reference from the interim financial statements to the location of that information. There are no other IFRS or IFRIC interpretations that are published but not yet effective that would be expected to have an impact on the accounting policies or financial disclosures of the Group. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 91

98 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (b) Consolidation (i) Subsidiaries Subsidiaries are all entities (including structured 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 Group controls another entity. The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the size of the Group s voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies, etc. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition- by-acquisition basis, either at fair value or at the non-controlling interest s proportionate share of the recognised amounts of acquiree s identifiable net assets. If a business combination is achieved in stages, the acquisition date carrying value of the acquirer s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss. Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity. 92 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

99 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (b) Consolidation (continued) (i) Subsidiaries (continued) Goodwill is recorded at cost and represents the excess of the value of consideration paid over the Group s interest in net fair value of the identifiable assets, liabilities and contingent liabilities of the acquire and the fair value of the non-controlling interest in the acquire. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segment. Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 93

100 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (b) Consolidation (continued) (i) Subsidiaries (continued) The consolidated financial statements include the financial statements of the company and its operating divisions and subsidiaries as follows: Principal Activities % Ownership by Company at % Ownership by Group at Resident in Jamaica: Operating divisions Best Dressed Chicken (including Best Dressed Feed Mill and Best Dressed Further Processing Facility) Best Dressed Foods Hi-Pro Ace Poultry and pullet production and feed milling, processing and sale of salted products/pickled products Distributors of chicken, beef, fish and imported of protein products Feed sales, suppliers of farming equipment and supplies Subsidiaries Best Dressed Chicken Limited Non-trading Content Agricultural Products Limited Property rental Energy Associates Limited and its subsidiary: Holding and investment company CE Jamaica Inc. Non- trading EAL/ERI Co-generation Partners, LP Generation of electricity ERI Jam, LLC (subsidiary of ERI Services (St. Lucia) Limited) Non-trading Hamilton Smoke House Limited Non-trading JB Terminal (Port Esquivel) Limited formerly (JB Ethanol Limited) (subsidiary of ERI Services (St. Lucia) Limited) Fuel processing Jabexco Limited Non-trading Jamaica Eggs Limited Non-trading International Poultry Breeders (Jamaica) Limited (formerly Jamaica Poultry Breeders Ltd) Fertile egg production and cattle rearing for sale Levy Industries Limited Property rental Master Blend Feeds Limited Property rental JB. Trading Limited Non-trading Trafalgar Agriculture Development Limited Non-trading S.G Developments Limited Non-trading Resident outside of Jamaica: Atlantic United Insurance Company Limited, St.Lucia Captive insurance ERI Services (St. Lucia) Limited, St. Lucia Holding company International Poultry Breeders, Inc, Arkansas USA and its subsidiaries Holding company England Packing Company Inc Arkansas. USA Packing company England Transport Company Inc, USA Transportation England Farms Inc. USA Fertile egg production International Poultry Breeders Hatcheries Inc. USA Hatching and distribution of baby chicks Haiti Broilers, S.A. and its subsidiary: Production and sale of broilers, layer pullets, table eggs and animal feeds T&S Rice S.A., Haiti Lessee of production facilities in Haiti - 68 WI Trading (St. Lucia) Limited, St.Lucia 100 (formerly Wincorp Air Services Limited) Aircraft ownership 100 International Poultry Breeders LLC Georgia, 90 U.S.A. Fertile egg production 90 Jabexco Cayman Limited, Cayman Non-trading Wincorp International, Inc., U.S.A. and its subsidiary: Procurers and distributors of agricultural and industrial supplies JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

101 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (b) Consolidation (continued) (ii) Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions, that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. (iii) Disposal of subsidiaries When the Group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. (iv) Changes in year During the year the newly incorporated International Poultry Breeders Hatcheries Inc, acquired certain hatchery assets in the United States of America. (Note 33). (c) (d) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is the President and Chief Executive Officer. Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group s activities. Revenue is shown net of General Consumption Tax, returns, discounts and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and specific criteria have been met in relation to the Group s activities as described below: Sales of goods Sales are recognised upon delivery of products, customer acceptance of the products and collectibility of the related receivables is reasonably assured. Sales of services Fees and commission income fees arising from tolling and insurances contracts are generally recognised on an accrual basis when the service has been provided. Dividend income Dividend income is recognised when the right to receive payment is established. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 95

102 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (d) (e) Revenue recognition (continued) Interest income Interest income is recognised in profit or loss for all interest bearing instruments on an accrual basis using the effective yield method based on the actual purchase price. Interest income includes coupons earned on fixed income investments and accrued discount on other discounted instruments. Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in Jamaican dollars, which is the Group s presentation currency and the Company s functional currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement in other income. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss, except when deferred in equity as gains or losses from qualifying cash flow hedging instruments. All foreign exchange gains and losses recognised in the profit or loss are presented net in the profit or loss within the corresponding item. Foreign exchange gains and losses on other comprehensive income items are presented in other comprehensive income within the corresponding item. Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in stockholders equity. Translation differences on non-monetary financial instruments, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary financial instruments, such as equities classified as available-for-sale financial assets, are included in the capital reserve in stockholders equity. 96 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

103 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (e) Foreign currency translation (continued) (iii) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (a) (b) (c) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and all resulting exchange differences are recognised in other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income. (f) Income taxes Taxation expense in profit or loss comprises current and deferred tax charges. (i) (ii) Current taxation Current tax charges are based on taxable profit for the year, which differs from the profit before tax reported because it excludes items that are taxable or deductible in other years, and items that are never taxable or deductible. The Group s liability for current tax is calculated at tax rates that have been enacted at balance sheet date. Deferred taxation Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability settled. Deferred tax assets are recognised where it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising from investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the difference will not reverse in the foreseeable future. The tax effects of income tax losses available for carry-forward are recognised as an asset when it is probable that future taxable profits will be available against which these losses can be utilised. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 97

104 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (g) Property, plant and equipment Property, plant and equipment are stated at historical cost, less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Land is carried at cost and is not depreciated. 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. The carrying amount of the replaced part is derecognized. Depreciation is calculated on the straight line basis at such rates as will write off the carrying value of the assets over the period of their estimated useful lives. The expected useful lives are as follows: Freehold buildings Leasehold property Plant, machinery and equipment Furniture and fixtures Motor vehicles years Life of lease 4 33 years 10 years 3 5 years (h) The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. 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 of property, plant and equipment are determined by comparing the proceeds with the carrying amount and are recognised in other income in profit or loss. Repairs and maintenance expenditure are charged to profit or loss during the financial period in which they are incurred. Assets held for sale Property and equipment held for sale is stated at the lower of their carrying amount and fair value less cost to sell. The assets are not depreciated while they are classified as held for sale. 98 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

105 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (i) Intangible assets (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group s share of the net identifiable assets of the acquired subsidiary at the acquisition date. Goodwill on acquisition of subsidiaries is included in intangible assets. Separately recognised goodwill is tested for impairment annually and carried at cost less accumulated impairment. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. An excess of the identifiable net assets acquired over the acquisition cost is treated as negative goodwill. Negative goodwill related to expected post-acquisition losses is taken to profit or loss during the period the future losses are recognised. Negative goodwill which does not relate to expected future losses is recognised as income immediately. For the purposes of impairment testing, goodwill acquired in a business combination is assigned to cash generating units that is expected to benefit from the synergies of the combination. (ii) Computer software Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over the estimated useful life of ten years for software on a straight line basis. Amortisation is recognised in the profit or loss in administration and other expenses. Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. (iii) (iv) (v) (vi) Brands Brands are recorded at historical cost. They are acquired in a business combination and are recognised at the fair value at acquisition date. These costs have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method over their expected useful lives of 7 to 15 years. Customer relationships Customer relationships are recorded at cost and represent the value of the consideration paid to acquire customer contract and the related customer relationships. These costs are amortised over the estimated useful lives of the relationships between 8 to 10 years. Non-compete agreements Non-compete agreements are recorded at cost and represent the attributed consideration paid to acquire them. These costs are amortised over the estimated useful lives of the non-compete agreements which is between 2 to 10 years. Product formulation Product formulation are recorded at cost and represent the value of the consideration paid to have rights to the use of recipes and formulations. These costs are amortised over their estimated useful lives of 20 years. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 99

106 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (j) (k) (l) Investment properties Investment properties are held for long-term rental yields and are not occupied by the Group. Investment properties are treated as long-term investments and are carried at deemed cost less accumulated depreciation. Freehold buildings are depreciated on the straight line basis over their expected useful lives of 60 years. Impairment of non-financial assets Property, plant and equipment and other non-current assets 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 carrying amount of the asset exceeds its recoverable amount, which is the greater of an asset s net selling price and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Financial assets The Group classifies its financial assets into the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at every reporting date. (i) Financial assets at fair value through profit or loss This category has two sub-categories: financial assets held for trading, and those designated as fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the balance sheet date. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date, which are classified as non-current assets. Loans and receivables are classified as trade and other receivables in the balance sheet. (iii) Available-for sale financial assets Available-for-sale investments are non-derivative financial assets intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices. Available-for-sale investments are initially recognised at fair value, which is the cash consideration including any transaction costs. Purchases and sales of available-for-sale financial assets are recognised at the trade date the date on which the Group commits the purchase or sell the asset. Loans and receivables are recognised when cash is advanced to the borrowers. 100 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

107 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (l) Financial assets (continued) Subsequent to initial recognition at cost, financial assets at fair value through profit or loss and availablefor-sale financial assets are carried at fair value. Loans and receivables financial assets are carried at amortised cost using the effective interest method. Gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised directly in other comprehensive income, until the financial asset is derecognised or impaired. At this time, the cumulative gain or loss previously recognised in other comprehensive income is recognised in profit or loss. However, interest calculated using the effective interest method and foreign currency gains and losses on monetary assets classified as available for sale are recognised in the profit or loss. Dividends on available-for-sale equity instruments are recognised in profit or loss when the Group s right to receive payment is established. The fair values of quoted investments in active markets are based on current bid prices. Unquoted securities are recorded initially at cost. They are subsequently measured at fair value. Where fair value cannot be measured reliably they are measured at cost less impairment. Financial assets are derecognised when the right to received cash flows from the financial assets have expired or where the Group has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when they are extinguished, that is, when the obligation is discharged, cancelled or expires. The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that loss event has an impact on the estimated cash flows of the financial asset or financial group of assets that can be reliably estimated. For loans and receivables category, the amount of the loss is measured as the difference between the asset s carrying value amount and the present value of estimated cash flows discounted at the financial asset s original effective interest rate. The carrying amount is reduced and the amount of the loss is recognised in the consolidated profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the reversal of the previously recognised impairment loss is recognised in the consolidated profit or loss. For equity investments, a significant or prolonged decline in the fair value of the security below its costs is also evidence that the assets are impaired. If any such assets exists the cumulative loss is removed from the equity and recognised in the profit or loss. Impairment losses recognised in the consolidated profit or loss on equity instruments are not reversed through the profit or loss. Financial liabilities The Group s financial liabilities are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest method. These liabilities are classified as current and non-current liabilities. (m) Interest in subsidiaries Interests in subsidiaries are stated at cost. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 101

108 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (n) Employee benefits (i) Pension obligations The Group has a defined benefit plan; the assets of which are generally held in separate trusteeadministered funds. The pension obligations are determined by periodic actuarial calculations. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The asset or liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability. The current service cost of the defined benefit plan, recognised in the income statement in employee benefit expense, except where included in the cost of an asset, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes curtailment and settlements. Past-service costs are recognised immediately in income. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the profit or loss. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions of the defined benefit obligation are charged or credited to equity in other comprehensive income in the period in which they arise. An overseas subsidiary operates a defined contribution plan. The subsidiary s contributions are based primarily on employee participation. Once the contributions have been paid, the subsidiary has no further legal or constructive obligations. The contributions are recognized as employee benefit expense when they are due. (ii) Other post-employment benefits The Group also provides supplementary medical and life insurance benefits to qualifying employees upon retirement. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. Actuarial gains and losses arising from experience adjustments, and changes in actuarial assumptions are charged or credited to equity in other comprehensive income. These obligations are valued annually by independent qualified actuaries. (iii) Termination benefits Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. 102 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

109 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (n) Employee benefits (continued) (iii) Termination benefits (continued) The Group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to present value. (iv) Leave entitlements Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date. (v) Profit-sharing and performance incentives The Group recognises a liability and an expense for performance incentives and profit-sharing based on a formula that takes into consideration the profit before taxation after certain adjustments. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. (o) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Net realisable value is the estimated selling price in the ordinary course of business, less the cost of selling expenses. (p) Biological assets Biological assets include beef cattle, breeder flocks held for the production of hatching eggs, layer pullets being grown for sale to table egg farmers, layer pullets held for the production of table eggs, and broiler flocks at various stages of growth. There is an active market in Jamaica for beef cattle. No active markets exist for breeder flocks, layer pullets in grow out and broiler flocks at various stages of growth. Biological assets, except breeder flocks and pullets in production, are measured at fair value less cost to sell. Fair value is determined by reference to available market data. In the absence of market data, fair value is based on management s best estimate considering available data and benchmark statistics. Gains and losses arising from changes in fair values are recorded in profit or loss for the period in which they arise. Breeder flocks and pullets in production are capitalised. Breeder flocks and pullets in production are not sold and no active market exists for these birds. Other references to market prices such as market prices for similar assets are also not available. Valuation based on a discounted cash flow method is considered to be unreliable given the uncertainty with respect to mortality rates and production. Consequently, breeder flocks and pullets in production are measured at cost, less depreciation and impairment losses. Pullets in production are depreciated on a straight line basis over the production life cycle which is estimated to be one year on average Breeder flocks are depreciated over the production cycle which is estimated to be nine months on average based on the anticipated production output month to month. 3. Summ ary of Significant Accounting Policies ( Continued) JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 103

110 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (q) (r) (s) (t) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the profit or loss in administration and other expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in profit or loss. Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of the cash flow statement, cash and cash equivalents comprise cash at bank and in hand, short term deposits and investments with original maturity dates of ninety days or less, net of short term loans and bank overdrafts. Trade payables Trade payables are stated at cost. Borrowings and borrowing costs Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective yield method. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of these assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. (u) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, if it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. (v) 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 recognised at the inception of the lease at the lower of the fair value of the leased asset or the present value of minimum lease payments. Each lease payment is allocated between the liability and interest charges so as to produce a constant rate of charge on the lease obligation. The interest element of the lease payments is charged to profit or loss over the lease period. Property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful 104 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

111 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (continued) (w) (x) Leases (continued) Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments under operating leases are charged to profit or loss on a straightline basis over the period of the lease. Dividends paid Dividends on ordinary shares are recognised in stockholders equity in the period in which they are approved by the Company s stockholders. Dividends for the year that are declared after the balance sheet date are dealt with in the subsequent events 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 Group s overall risk management programme includes a focus on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group s financial performance. The Group s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The Group regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice. The Board of Directors is ultimately responsible for the establishment and oversight of the Group s risk management framework. The Board approves principles for overall risk management. The Board has established functions/committees for managing and monitoring risks, as follows: (i) Treasury Function The Treasury function is responsible for managing the Group s assets and liabilities and the overall financial structure. It is also primarily responsible for the funding and liquidity risks of the Group. The Treasury function identifies, evaluates and hedges financial risks in close co-operation with the Group s operating units. (ii) Audit Committee The Audit Committee oversees how management monitors compliance with the Group s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. The most important types of risk are credit risk, liquidity risk and market risk. Market risk includes currency risk, interest rate and other price risk. (a) Credit risk The Group takes on exposure to credit risk, which is the risk that its customers or counterparties will cause a financial loss for the Group by failing to discharge their contractual obligations. Credit exposures arise principally from the Group s receivables from customers and investment activities. The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to a single counterparty or groups of related counterparties. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 105

112 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 3. Financial Risk Management (Continued) (a) Credit risk (continued) Credit review process The Group has an established credit process which involves regular analysis of the ability of borrowers and other counterparties to meet repayment obligations. (i) Trade and other receivables The Group s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Customers of the Group include wholesalers, farm store and feed customers, and chicken farmers. There is a credit policy in place under which each wholesaler and feed customer is analysed individually for creditworthiness prior to the Group offering them a credit facility. Customers are assigned credit limits, which represent the maximum credit allowable. The Group has procedures in place to restrict customer orders if the orders will exceed their credit limits. Customers that fail to meet the Group s benchmark creditworthiness may transact with the Group on a prepayment basis. The credit quality of the customer is assessed, taking into account its financial position, past experience and other factors. The utilisation of credit limits is regularly monitored. Sales to farm store customers are settled in cash or by the use of major credit cards. JB Terminal (Port Esquivel) (formerly JB Ethanol Limited) contractually processes fuel products on behalf of customers for a fee; credit risk is managed by entering into contracts with reputable customers. The Group establishes a provision for impairment that represents its estimate of incurred losses in respect of trade and other receivables. Impairment is assessed for each customer balance over 30 days. The Group s credit period on the sale of goods ranges from 7 to 30 days. The Group has provided fully for all receivables where collectibility is deemed doubtful. (ii) Investments The Group limits its exposure to credit risk by investing mainly in liquid securities, with counterparties that have high credit quality and Government of Jamaica securities. Accordingly, management does not expect any counterparty to fail to meet its obligations. 106 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

113 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 3. Financial Risk Management (continued) (a) Credit risk (continued) Ageing analysis of trade receivables that are past due but not impaired Trade receivables that are less than 30 days past due are not considered impaired. Trade receivables over 30 days overdue are considered for impairment assessment. As of, trade receivables of $774,823,000 (-$457,046,000) and $366,336,000 ( - $286,866,000) for the Group and Company, respectively, were past due for more than 30 days. The amount of the provision was $283,846,000 ( - $312,171,000) and $235,366,000 ( - $262,578,000) for the Group and Company, respectively. The impairment recognised represents an estimate of incurred losses in respect of trade receivables. The main components of the provision for impairment are a specific loss component that relates to individually significant exposures, and a collective loss component based on the time value of money. The impaired receivables mainly relate to wholesalers who are in unexpected difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. The Group The Company Past due 31 to 60 days 364, , ,774 91,462 Past due 61 to 90 days 60,613 97,600 18,190 71,604 Past due over 91 days 349, , , , , , , ,866 Movement on the provision for impairment of trade receivables The movement on the provision for impairment of trade receivables was as follows: The Group The Company At beginning of year 312, , , ,182 Provision for receivables impairment 102, ,721 98,501 90,890 Receivables written off during the year as uncollectible (102,138) (2,720) (102,138) (2,155) Recoveries (23,575) (3,339) (23,575) (3,339) Translation (4,967) 1, At end of year 283, , , ,578 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 107

114 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 3. Financial Risk Management (continued) (a) Credit risk (continued) Movement on the provision for impairment of trade receivables (continued) The creation and release of provision for impaired receivables have been included in expenses in profit or loss. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. There are no significant financial assets other than those listed above that were individually impaired. Exposure to credit risk for trade receivables The following table summarises the Group s and Company s credit exposure for trade receivables at their carrying amounts, as categorised by the customer sector: The Group The Company Supermarket chains 116, , , ,869 Wholesalers and retail distributors 528, , , ,925 Hotels 141, , , ,490 Farmers/farm stores 1,357,049 1,118, , ,716 Other 512, , , ,504 2,656,756 2,423,703 1,490,307 1,544,504 Less: Provision for impairment (283,846) (312,171) (235,366) (262,578) 2,372,910 2,111,532 1,254,941 1,281, JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

115 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 3. Financial Risk Management (continued) (a) Credit risk (continued) Exposure to credit risk for investments The following table summarises the Group s and company s credit exposure for investments at their carrying amounts, as categorised by issuer. The carrying amounts below represent the total for investments (adjusted for equity securities) included in financial assets at fair value through profit or loss in Note 24 and short term investments included in Note 25: The Group The Company Financial institutions 1,109,561 1,551, ,258 1,078,522 (b) Liquidity risk Liquidity risk is the risk that the Group may be unable to meet its payment obligations associated with its financial liabilities when they fall due. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Liquidity risk management process The Group s liquidity management process, as carried out within the Group and monitored by the Treasury function, includes: (i) (ii) (iii) (iv) Monitoring future cash flows and liquidity periodically. This incorporates an assessment of expected cash flows; Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen interruption to cash flow; Maintaining committed lines of credit; Managing the concentration and profile of debt maturities JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 109

116 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 3. Financial Risk Management (continued) (b) Liquidity risk (continued) The matching and controlled mismatching of the maturities and interest rates of assets and liabilities are fundamental to the management of the Group. It is unusual for companies ever to be completely matched since business transacted is often of uncertain term and of different types. An unmatched position potentially enhances profitability, but can also increase the risk of loss. The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature, are important factors in assessing the liquidity of the Group and its exposure to changes in interest rates and exchange rates. Financial liabilities cash flows The tables below summarise the maturity profile of the Group s and company s financial liabilities at and based on contractual undiscounted payments. As at Within 3 Months 4 to 12 Months The Group 2 to 5 Years Over 5 Years Total Payables 2,955,954-36,976-2,992,930 Borrowings 999,796 1,484,615 3,402,469 3,852,216 9,739,096 Total financial liabilities (contractual maturity dates) 3,955,790 1,484,615 3,439,445 3,852,216 12,732,026 As at Within 3 Months 4 to 12 Months The Group 2 to 5 Years Over 5 Years Total Payables 3,647, ,647,403 Borrowings 1,196,865 1,809,052 3,885, ,628 7,374,692 Total financial liabilities (contractual maturity dates) 4,844,268 1,809,052 3,885, ,628 11,022, JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

117 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 3. Financial Risk Management (continued) (b) Liquidity risk (continued) Financial liabilities cash flows (continued) The Company Within 3 Months 3 to 12 Months 1 to 5 Years Over 5 Years Total As at Payables 2,030, ,030,185 Borrowings 448,358 1,264,866 3,107,362 3,551,238 8,371,824 Total financial liabilities (contractual maturity dates) 2,478,543 1,264,866 3,107,362 3,551,238 10,402,009 As at The Company Within 3 Months 3 to 12 Months 1 to 5 Years Over 5 Years Total Payables 2,927, ,927,939 Borrowings 1,027,028 1,264,005 3,400, ,217 6,010,810 Total financial liabilities (contractual maturity dates) 3,954,967 1,264,005 3,400, ,217 8,938,749 Assets available to meet liabilities and to cover financial liabilities include cash and short term investments. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 111

118 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 3. Financial Risk Management (continued) (b) Liquidity risk (continued) Off-balance sheet items Contingent liabilities and commitments (a) The company has guaranteed Nil ( - $400,000,000) and US$6,360,000 ( - US$4,860,000) in favour of various financial institutions for loans undertaken by the company and certain subsidiaries. (b) (c) The Group has capital commitments authorised but not contracted for amounting to Nil ( - $92,592,000). The Group has obligations under long term operating leases for premises. Future minimum lease payments under such commitments are as follows: The Group The Company Not later than 1 year 101,258 78,355 30,180 16,978 Later than 1 year and not later than 5 years 270, , ,649 - Later than 5 years 21,487 40, , , ,829 16,978 (f) The Group is subject to various claims, disputes and legal proceedings, in the normal course of business. Provisions are made for such matters when in the opinion of management and its legal counsel, it is probable that a payment will be made by the Group and the amount can be reasonably estimated. 112 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

119 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 3. Financial Risk Management (continued) (c) Market risk The Group takes on exposure to market risk, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks mainly arise from changes in foreign currency exchange rates, interest rates and commodity prices. Market risk is monitored by the Group s Treasury function which carries out research and monitors the price movement of financial assets on the local and international markets. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. There has been no change to the Group s exposure to market risk or the manner in which it manages and measures the risk. (i) Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The Group manages its foreign exchange risk by ensuring that the net exposure in foreign assets and liabilities is kept to an acceptable level by monitoring currency positions. The Group further manages this risk by maximising foreign currency earnings and holding foreign currency balances. The Group has operations in two functional currencies, Jamaican dollar and United States dollar, which provide a natural hedge in currency risk. The Group s balance sheet at includes aggregate net foreign liabilities of approximately US$4,730,000 ( US$6,890,000) in respect of transactions arising in the ordinary course of business. The Company s balance sheet at includes aggregate net foreign assets of approximately US$38,135,000 ( US$26,956,000), in respect of transactions arising in the ordinary course of business. Foreign currency sensitivity The following tables indicate the currencies to which the Group and Company had significant exposure on its monetary assets and liabilities and its forecast cash flows. The change in currency rate below represents management s assessment of the possible change in foreign exchange rates with all variables held constant. The sensitivity analysis on pre-tax profit is based on outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for 1% ( 1%) depreciation and a 6% ( 10%) appreciation of the US dollar against the Jamaican dollar. There was no impact on other components of equity. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 113

120 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 3. Financial Risk Management (continued) (c) Market risk (continued) (i) Currency risk (continued) % Change in Currency Rate The Group Effect on Pre-Tax Profit % Change in Currency Rate Effect on Other Comprehensive Income Currency: USD +6 (34,843) ,818 USD -1 5,807-1 (34,983) % Change in Currency Rate The Group Effect on Pre-Tax Profit % Change in Currency Rate Effect on Other Comprehensive Income Currency: USD +10 (100,347) ,613 USD -1 10,035-1 (54,161) % Change in Currency Rate The Company Effect on Pre-Tax Profit % Change in Currency Rate Effect on Pre-Tax Profit Currency: USD , ,275 USD -1 (46,815) -1 (31,128) 114 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

121 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 3. Financial Risk Management (continued) (c) Market risk (continued) (ii) Interest rate risk Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Floating rate instruments expose the Group to cash flow interest risk, whereas fixed interest rate instruments expose the Group to fair value interest risk. The Group s interest rate risk mainly arises from its long term investments and borrowings. This risk is managed by analysing the economic environment and obtaining fixed rate loans when interest rates are expected to rise and floating rate loans when interest rates are expected to fall. The policy also requires it to manage the maturities of interest bearing financial assets and liabilities. Investments At and, the Group s investments were fixed rate instruments. Interest rate sensitivity The following tables indicate the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, on the Group s and company s profit or loss and stockholders equity. The sensitivity of the profit or loss is the effect of a 1% increase/1% decrease ( 2.5% increase and 1% decrease) for Jamaican dollar denominated loans and a 1% increase/0.5% decrease ( 2.5% increase and 1% decrease) for US dollar denominated loans on pre-tax profit based on the floating rate borrowings. The sensitivity of other components of stockholders equity is calculated by revaluing fixed rate available-for-sale financial assets for the effects of an assumed change in interest rates. There were no available-for-sale financial assets at the current or prior year end. The Group The Company Effect on Pre-tax Profit Effect on Pre-tax Profit Effect on Pre-tax Profit Effect on Pre-tax Profit Change in basis points: Jamaican dollars - 100(: -100) 5,000 5,493 5,000 5, (: 250) (5,000) (13,732) (5,000) (12,732) US dollars - 50(: -100) (: 250) (307) (1,733) (307) (1,733) JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 115

122 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 3. Financial Risk Management (continued) (c) Market risk (continued) (iii) Commodity price risk Price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. The Group and the Company are exposed to price risk relating to corn, soya bean meal and ethanol. The Group and the Company enter into commodity contracts or related financial instruments in respect of its future usage requirements. The price of these commodities is reviewed regularly in considering the need for active financial risk management. To manage price risk in the ethanol operation, purchases and related sales are effected on the same bases to the extent possible to create a hedge. In the few instances in which a mismatch occurs a short term financial hedging instrument may be used to minimise attendant risks. Price risk is also managed by entering into contracts to process hydrous alcohol into anhydrous ethanol on behalf of customers for a fee. To manage price risk on imported corn and soya bean meal, the prices are tracked and items purchased in advance if prices are increasing. (ci) Capital management 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 its stockholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital as well as meet externally imposed capital requirements. The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total stockholders equity. The Board of Directors also monitors the level of dividends to ordinary stockholders. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as borrowings divided by total capital. Borrowings include current and non-current borrowings as shown in the consolidated balance sheet. Total capital is calculated as stockholders equity as shown in the consolidated balance sheet plus borrowings. During, the Group s strategy, which was unchanged from, was to maintain the gearing ratio below 1:1. The gearing ratios at and were as follows: The Group Borrowings 7,079,801 6,354,931 Total capital 20,239,510 17,786,970 Gearing ratio 1:3 1:3 There were no changes to the Group s approach to capital management during the year. 116 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

123 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 4. Critical Accounting Judgements and Key Sources of Estimation Uncertainty 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 assets and liabilities within the next financial year are discussed below. (a) (b) Critical judgments in applying the Group s accounting policies In the process of applying the Group s accounting policies, management has made no significant judgements regarding the amounts recognised in the financial statements. Key sources of estimation uncertainty Income taxes Estimates are required in determining the provision for income taxes. There are some transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for possible tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were originally recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Post-employment benefits Accounting for some post-employment benefits requires the use of actuarial techniques to make a reliable estimate of the amount of benefit that employees have earned in return for their service in the current and prior periods. These actuarial assumptions are based on management s best estimates of the variables that will determine the ultimate cost of providing post-employment benefits and comprise both demographic and financial assumptions. Variations in the financial assumptions can cause material adjustments in the next financial year, if it is determined that the actual experience differed from the estimate (Note 20). Depreciable assets Estimates of the useful life and the residual value of property, plant and equipment are required in order to apply an adequate rate of transferring the economic benefits embodied in these assets in the relevant periods. The Group applies a variety of methods in an effort to arrive at these estimates from which actual results may vary. Actual variations in estimated useful lives and residual values are reflected in profit or loss through impairment or adjusted depreciation provisions. Assessment of goodwill The Group test annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2h. The assessment of goodwill impairment involves the determination of the value in use. Determination of value in use involves the estimation of future cash flows from the business taking into consideration the growth rates, inflation rates and the discount rate. Any changes in these variables would impact the value in use calculations. A 1% increase in the discount rates would result in a reduction in the value in use by $1,299,770,000 which would not result in an impairment of goodwill of $405,141,000 (Note 14). JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 117

124 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 4. Critical Accounting Judgements and Key Sources of Estimation Uncertainty (continued) (b) Key sources of estimation uncertainty (continued) Purchase price allocation of a business combination In a business combination, the acquirer must allocate the cost of the acquisition at the acquisition date by recognising the acquiree s identifiable assets, liabilities and contingent liabilities at fair value at that date. The allocation is based upon certain valuations and other studies performed with the assistance of external valuation specialists. Due to the underlying assumptions made in the valuation process, the determination of those fair values requires estimations of the effects of uncertain future events at the acquisition date and the carrying amounts of some assets, such as intangible assets, acquired through a business combination could therefore differ significantly in the future. As prescribed by IFRS 3 (revised), if the initial accounting for a business combination can be determined only provisionally by the end of the reporting period in which the combination is effected, the acquirer must account for the business combination using those provisional values and has a twelve month period from the acquisition date to complete the purchase price allocation. Any adjustment of the carrying amount of an identifiable asset or liability made as a result of completing the initial accounting is accounted for as if its fair value at the acquisition date had been recognised from that date. The purchase price allocation for the acquisition of the business during the year has been finalised as described in Note Segmental Financial Information Management has determined the operating segments based on the reports reviewed by the President and Chief Executive Officer that are used to make strategic decisions. Segment information is provided for reportable segments as follows: Jamaica Operations US Operations Other Caribbean Operations The business is considered primarily from a geographical perspective. Interest income and interest expense are not included in the measure of segment results and are not regularly reviewed by the President and Chief Executive Officer. 118 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

125 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 5. Segmental Financial Information (continued) Jamaica Operations US Operations Other Caribbean Operations Eliminations Group External revenues 28,402,435 8,802,209 1,316,660-38,521,304 Revenue from other segments 369,513 2,371, ,850 (3,198,365) - Total revenue 28,771,948 11,173,211 1,774,510 (3,198,365) 38,521,304 Segment result 3,066,252 1,023, ,748-4,315,127 Unallocated corporate expenses (1,341,837) Operating profit 2,973,290 Finance income 159,078 Finance costs (733,792) Profit before tax 2,398,576 Taxation (671,960) Net profit 1,726,616 Segment assets - Current assets 9,043,353 3,892,570 1,336,025 (1,824,206) 12,447,742 Non-current assets 11,886,781 2,317, ,367 (3,268,424) 11,931,519 Total assets 20,930,134 6,210,365 2,331,392 (5,092,630) 24,379,261 Segment liabilities - Current liabilities 4,157,254 2,276,806 1,073,371 (1,834,077) 5,673,354 Non-current liabilities 5,379,620 2,216, ,940 (2,667,870) 5,603,697 Total liabilities 9,536,874 4,492,813 1,749,311 (4,501,947) 11,277,051 Other segment items- Capital expenditure 383, , , ,811 Amortisation 24,396 62, ,650 Depreciation 649,283 74,034 94, ,319 Impairment charge ,847-26,847 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 119

126 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 5. Segmental Financial Information (continued) Jamaica Operations US Operations Other Caribbean Operations Eliminations Group External revenues 26,205,116 7,127,917 1,237,017-34,570,050 Revenue from other segments 401,213 2,160, ,987 (2,974,574) - Total revenue 26,606,329 9,288,291 1,650,004 (2,974,574) 34,570,050 Segment result 2,141,453 1,001, ,506-3,291,362 Unallocated corporate expenses (1,170,590) Operating profit 2,120,772 Finance income 145,781 Finance costs (704,701) Profit before tax 1,561,852 Taxation (552,198) Net profit 1,009,654 Segment assets - Current assets 11,259,012 4,085,236 3,402,175 (7,119,323) 11,627,101 Non-current assets 11,638,397 1,299,030 1,269,031 (3,265,501) 10,940,947 Total assets 22,897,409 5,384,266 4,671,206 (10,384,824) 22,568,048 Segment liabilities - Current liabilities 10,692,246 3,789,410 1,943,696 (9,532,157) 6,893,195 Non-current liabilities 3,848, ,091 2,552-4,278,439 Total liabilities 14,541,042 4,216,501 1,946,248 (9,532,157) 11,171,634 Other segment items- Capital expenditure 651, , ,976-1,073,430 Amortisation 33,641 56, ,517 Depreciation 581,597 53,762 96, ,151 Impairment ,217-31, JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

127 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 6. Other Income/Gains The Group The Company Dividend income from subsidiary ,915 1,224,120 Fair value loss on financial assets at fair value through profit or loss (Note 24) (44,520) (28,248) - - Foreign exchange gains 78,126 21,585 78,126 21,585 Gain/(loss) on sale of property, plant and equipment 9,990 (5,702) 4, Loss on disposal of subsidiaries (Note 34) - (1,323) - (36,271) Interest income 25,286 23,715 19,095 21,961 Management fees , ,168 Reinsurance commissions 43,505 38, Other 201, ,760 80,436 30, Expenses by Nature 313, , ,316 1,469,614 The Group The Company Auditors remuneration 53,205 46,393 15,287 14,226 Advertising and promotions 639, , , ,094 Amortisation of intangible assets 86,650 90,518 14,898 22,153 Impairment charge 26,847 31, Bad debts 87, ,477 78,951 91,645 Cost of inventories recognised as expense 20,943,387 19,549,244 16,880,815 16,360,346 Depreciation 817, , , ,861 Fuel 481, , , ,244 Legal and professional fees 192, , ,532 76,678 Insurance 315, , , ,638 Occupancy rent and utilities 691, , , ,290 Repairs and maintenance 1,137, , , ,645 Staff costs (Note 8) 7,011,905 5,635,852 4,431,966 3,722,229 Trucking 1,117, , , ,646 Other expenses 2,260,423 2,095,363 1,846,464 1,620,964 35,861,512 32,623,395 27,303,597 25,690,659 Expenses by nature include the total of cost of sales, distribution costs, administration and other expenses. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 121

128 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 8. Staff Costs The Group The Company Wages, salaries and contractors costs 5,984,454 4,887,044 3,670,796 3,210,864 Payroll taxes - Employer s portion 343, , , ,815 Pension costs - defined contribution plan 26,327 20, Pension costs - defined benefit plan (Note 20) 113,800 (103,100) 109,800 (89,200) Post-employment medical benefits (Note 20) 2,200 1,400 2,100 1,300 Termination costs 13,173 45,783 12,516 36,462 Other - benefits and welfare 528, , , , Finance Income and Costs 10. Taxation 7,011,905 5,635,852 4,431,966 3,722,229 The Group The Company Finance income - Foreign exchange gains 159, ,781 36, ,781 Interest income , , , , , ,029 Finance costs - Foreign exchange losses 96,926 40,298 3,364 6,608 Interest expense 585, , , ,125 Amortisation of debt financing fees and other expenses 51,271 25,714 33,940 18, , , , ,023 The Group s subsidiary, JB Terminal (Port Esquivel) Limited (formerly JB Ethanol Limited), is an approved enterprise under the Jamaica Export Free Zone Act 1982, and accordingly has been granted total relief from income tax in respect of profits earned from its manufacturing and retailing operations until December. Subsidiaries incorporated and domiciled in Jamaica, United States of America and St. Lucia are taxable at a rate of 25%, 34% and 1% on their income, respectively. The companies located in Haiti has been given a tax relief status of ten years. This expires in JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

129 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 10. Taxation (continued) (a) (b) Taxation is based on the profit for the year adjusted for tax purposes and comprises: The Group The Company Current taxation 643, , , ,643 Prior year under provision 18,998 28,713-27,176 Deferred taxation (Note 19) 9,422 63,528 30,403 68, , , , ,648 The tax on the Group s and Company s profit differs from the theoretical amount that would arise using the applicable tax rate as follows: The Group The Company Profit before taxation for taxable entities 2,832,571 1,886,326 1,952,423 2,223,123 Loss before taxation for non-taxable entities (433,954) (324,474) - - 2,398,617 1,561,852 1,952,423 2,223,123 Tax calculated at applicable tax rates 708, , , ,781 Adjusted for: Income not subject to tax (1,070) (64,376) (33,239) (332,359) Employment tax credit (101,149) (52,239) (101,149) (52,239) Adjustment to deferred tax 15,550 70,308 15,550 70,993 Prior year under provision - current tax 18,998 28,713-27,176 Different tax rate in other countries 32,263 42, Expenses not deductible for tax purposes ,036 22,383 30,500 Other allowances (1,581) (7,576) 12,981 (8,204) Income tax expense 671, , , ,648 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 123

130 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 10. Taxation (continued) (c) The tax charge/(credit) relating to components of other comprehensive income is as follows: The Group The Company Other comprehensive income - Remeasurements on retirement benefits (286,400) 148,900 (275,100) 133,700 Tax assets, charge before (Note 19) tax 70,975 (36,675) 68,775 (33,425) 11. Net Profit/Retained Earnings Attributable to the Stockholders Net profit attributable to: (215,425) 112,225 (206,325) 100,275 Holding company 1,547,791 1,931,475 Intercompany dividend and management fees (348,229) (1,431,288) Adjusted Holding company profits 1,199, ,187 Subsidiaries 544, ,981 Retained earnings attributable to: 1,744,195 1,036,168 Holding company 9,214,373 7,772,069 Subsidiaries 1,118,041 1,044, Earnings Per Stock Unit 10,332,414 8,816,721 The calculation of earnings per ordinary stock unit is based on the Group s net profit attributable to stockholders and 1,199,277,000 ordinary stocks units in issue. 124 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

131 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 13. Property, Plant and Equipment At Cost - Freehold Land Freehold Buildings Leasehold Property The Group Plant, Machinery & Equipment Furniture & Fixtures Motor Vehicles Capital Work in Progress Total At 397,088 2,820, ,259 9,360, , , ,892 15,157,058 Acquisition of business 4,865 89, ,928 1,036 97, ,262 Additions 57, ,078-70,247 49, , , ,811 Disposals - (1,449) - (29,230) - (76,101) - (106,780) Transfer from CWIP - 181,359 8, ,960 26, (693,620) (12,576) Reclassifications/ adjustment (4,701) 4, (24) Write off (122,851) (8,672) (5,887) - (137,410) Translation 5,712 30,637 (64,686) 245,781 22,005 (2,929) 5, ,993 At 464,947 3,347, ,283 10,239,796 1,049, , ,935 16,428,334 Depreciation - At - 956,163 63,672 3,123, , ,512-5,217,460 Charge for the year - 91,747 33, , , , ,632 Relieved on disposals - (451) - (1,897) - (58,634) - (60,982) Reclassifications/ adjustment - - (66) (1,150) (1,216) Write off (122,851) (8,672) (5,887) - (137,410) Translation - 11,735 (12,384) 77,930 16,326 (1,634) - 91,973 At - 1,059,194 85,011 3,554, , ,903-5,926,457 Net Book Value - At 464,947 2,287, ,272 6,685, , , ,935 10,501,877 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 125

132 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 13. Property, Plant and Equipment (continued) At Cost - Freehold Land Freehold Buildings Leasehold Property The Group Plant, Machinery & Equipment Furniture & Fixtures Motor Vehicles Capital Work in Progress Total At 3 May ,746 2,512, ,559 8,396, , , ,857 14,120,321 Additions 29,332 83,848 74,798 52,769 51,600 85, ,668 1,069,815 Disposals - - (2,063) (4,000) (1,502) (31,630) - (39,195) Transfer from CWIP - 221,459 13, ,330 17,164 28,148 (1,108,459) (13,622) Transfer from intangible assets , ,177 Transfer from investment property 10, , ,489 Disposal of subsidiaries - (155,860) - (115,108) (18,014) (16,958) - (305,940) Reclassifications/ adjustment ,900 (78,294) (1,865) - 2,741 Write off (134,805) (10,278) (4,624) - (149,707) Translation 2,900 21,249 6, ,443 18,748 5,584 2, ,979 At 397,088 2,820, ,259 9,360, , , ,892 15,157,058 Depreciation - At 3 May ,017 34,681 2,771, , ,821-4,725,017 Charge for the year - 82,052 30, ,696 79, , ,275 Relieved on disposals - - (2,028) (748) (1,476) (21,147) - (25,399) Transfer from intangible assets , ,218 Transfer from investment property - 113, ,565 Disposal of subsidiaries - (139,331) - (106,466) (18,014) (17,970) - (281,781) Reclassifications/ adjustment ,370 (76,451) - - 1,919 Write off (130,959) (3,539) (8,895) - (143,393) Translation - 7, ,678 11,352 3,161-88,039 At - 956,163 63,672 3,123, , ,513-5,217,460 Net Book Value - At 397,088 1,863, ,587 6,237, , , ,892 9,939, JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

133 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 13. Property, Plant and Equipment (continued) The Company Freehold Land Freehold Buildings Leasehold Property Machinery & Equipment Furniture & Fixtures Motor Vehicles Capital Work in Progress Total At Cost - At 3 May ,182 1,399,218 13,510 2,315, , , ,097 5,733,334 Additions - 33,443 25,000 12,930 31,370 40, , ,240 Disposals (3,239) - (11,265) - (14,504) Transfers from CWIP - 215, ,963 10,918 27,686 (1,079,285) (13,622) Transfer from intangible assets , ,177 Reclassifications/ adjustment ,900 (78,294) (1,865) - 2,741 Write off (134,805) (10,278) (4,624) - (149,707) At 78,182 1,647,757 38,510 3,096, , , ,831 6,202,659 Additions - 6,492-5,467 8,832 99, , ,903 Disposals (26,995) (26,995) Transfers from CWIP - 9, ,825 21,424 - (456,721) (24,806) Write off (122,851) (8,672) (5,887) - (137,410) At 78,182 1,663,915 38,510 3,379, , ,326 97,554 6,355,351 Depreciation - At 3 May ,855 4,381 1,201, , ,835-2,229,679 Charge for the year - 36,070 3, ,545 30,443 70, ,861 Disposal (11,148) - (11,148) Transfer from intangible assets , ,218 Reclassifications/ adjustment ,370 (76,451) - - 1,919 Write off - - (130,959) (3,539) (8,895) - (143,393) At - 403,925 7,545 1,304, , ,431-2,373,136 Charge for the year - 40,847 4, ,918 48,154 75, ,342 Disposals (26,995) - (26,995) Write off - - (122,851) (8,672) (5,887) - (137,410) At - 444,772 12,112 1,357, , ,405-2,554,073 Net Book Value - At 78,182 1,219,143 26,398 2,021, , ,921 97,554 3,801,278 At 78,182 1,243,832 30,965 1,791, , , ,831 3,829,523 Depreciation is charged to cost of sales and administration and other expenses in profit or loss. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 127

134 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 14. Intangible Assets The Group The Company Goodwill Brands and Customer Relationships Non- Compete Agreement Product Formulation Computer Software Total Computer Software Cost - At 3 May , ,064 89,550 20, ,006 1,114, ,654 Additions ,615 3,615 3,615 Disposal (3,239) (3,239) - Transfer to PPE (11,177) (11,177) (11,177) Transfer from CWIP ,622 13,622 13,622 Disposal of subsidiary (4,511) (4,511) - Translation 15,328 18,020 4, ,082 - At 372, ,084 93,738 20, ,862 1,151, ,714 Additions ,611 3,611 3,611 Acquisition of business 201, ,598 45, ,341 - Deferred tax adjustment (a) (191,324) (191,324) - Transfer from CWIP ,693 14,693 14,693 Translation 22,034 25,934 5, ,416 - At 405, , ,529 20, ,680 1,520, ,018 Amortisation - At 3 May ,491 15, , , ,631 Charge for the year - 43,252 20,384 1,039 25,842 90,517 22,154 Relieved on disposal (3,184) (3,184) - Transfer to PPE (8,218) (8,218) (8,218) Adjustment (1,919) (1,919) (1,919) Disposal of subsidiary (3,703) (3,703) - Translation - 2, ,313 - At - 78,881 37,108 1, , , ,648 Charge for the year - 47,163 20,641 1,039 17,807 86,650 14,898 Translation - 5,506 2, ,417 - At - 131,550 60,317 2, , , ,546 Net Book Value - 405, ,066 85,212 18,096 94,757 1,165,272 93, , ,203 56,630 19,135 94, ,602 90, JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

135 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 14. Intangible Assets (continued) (a) This represents the effect a deferred tax adjustment to goodwill calculations in relation to the 2013/2014 acquisition of England Packing Group Arkansas USA, based on subsequent deductions received for tax purposes (Note 19). Impairment tests for goodwill The Group determines whether goodwill is impaired at least on an annual basis or when events or changes in circumstances indicate the carrying value may be impaired. This requires an estimation of the recoverable amount of the cash generating unit (CGU) to which the goodwill is allocated. The recoverable amount is usually determined by reference to the value in use. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the CGU and also to choose an appropriate discount rate in order to calculate the present value of those future cash flows. The amortisation of intangible assets is included in administration and other expenses in profit or loss. The allocation of goodwill to the Group s cash generating units (CGUs) identified according to segment is as follows: US operations 352, ,512 Jamaica operations 53,033 53, , ,545 The recoverable amount of a CGU is determined based on value in use. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates. Key assumptions used for value in use calculations: Revenue Growth Rate EBITDA to Revenue Capital Expenditure to Revenue Discount Rate US operations 5.0% 9.5% 0.1% 19.7% Jamaica operations 6.0% 9.0% 1.3% 18.1% 15. Assets held for sale This represents certain land, buildings and equipment with a carrying value of $16,042,000 in a subsidiary company that has been placed on the market for sale. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 129

136 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 16. Investment Property Cost - The Group Land and Buildings At 3 May ,428 Transfer to property, plant & equipment (147,489) At 58,939 Transfer to assets held for sale (48,963) At 9,976 Depreciation - At 3 May ,330 Charge for the year 859 Transfer to property, plant & equipment (113,565) At 35,624 Charge for the year 628 Transfer to assets held for sale (32,921) At 3,331 Net Book Value - At 6,645 At 23,315 The investment property was valued by independent valuers, Allison Pitter & Company as at December, on the basis of open market value. The market value of the property is estimated to be $27,000,000. In the previous year a property was transferred from investment property to property, plant and equipment as it was being occupied by a company within the Group. Rental income earned on these properties amounted to $600,000 ( - $10,826,000). There was no repairs and maintenance on the property. 130 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

137 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 17. Investments The Group The Company Available-for-sale - Unquoted equities- at cost 45,982 68,749 45,982 7, Non-controlling Interests The Group Beginning of year (35,625) (36,023) Share of total comprehensive income, as restated: Share of net profit of subsidiaries (17,579) (26,514) Revaluation (loss)/gain (4,295) 892 Additional investments during the year - 26,020 End of year (57,499) (35,625) Summarised financial information on subsidiaries with material non-controlling interests Set out below is the summarised financial information for the subsidiary that has non-controlling interests that are material to the Group. Summarised balance sheet The Group Current Assets 541, ,621 Liabilities (1,084,592) (1,042,752) Total current net assets (543,017) (538,131) Non-current Assets 559, ,468 Total non-current net assets 559, ,468 Net assets 16,982 85,337 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 131

138 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 18. Non-controlling Interests (continued) Summarised financial information on subsidiaries with material non-controlling interests Set out below is the summarised financial information for the subsidiary that has non-controlling interests that are material to the Group. Summarised income statement The Group Revenue 1,316,660 1,237,018 Loss before income tax (54,933) (82,858) Taxation expense - - Loss after tax (54,933) (82,858) Other comprehensive income - - Total comprehensive income (54,933) (82,858) Total comprehensive income allocated to noncontrolling interest (21,874) (25,622) Dividends paid to non-controlling interest - - Summarised cash flows The Group Cash flows from operating activities Cash generated from operations 44,613 69,635 Interest paid (18,811) (12,652) Income tax recovered - - Net cash generated from operating activities 25,802 56,983 Net cash used in investing activities (131,895) (60,529) Net cash (used in)/provided by financing activities (34,508) (41,216) Net (decrease)/increase in and cash equivalents (140,601) (44,762) Cash and cash equivalents at the beginning of year 25,328 70,090 Cash and cash equivalents at end of year (115,273) 25,328 The information above represents amounts before intercompany eliminations. 132 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

139 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 19. Deferred Income Taxes Deferred income taxes are calculated on all temporary differences under the liability method using an effective tax rate of 25% ( 25%). The Group The Company Deferred tax assets (15,601) Deferred tax liabilities 485, , , ,054 The movement on the deferred income tax account is as follows: The Group 469, , , ,054 The Company Balance at start of year 567, , , ,650 Credited to profit or loss (Note 10) 9,422 63,528 30,403 68,829 Credited to other comprehensive income (Note 10) 70,975 (36,675) 68,775 (33,425) Adjustment to goodwill (a) (191,324) Disposal of subsidiaries - 11, Translation 13,580 12, Balance as at end of year 469, , , ,054 (a) This represents the effect a deferred tax adjustment to goodwill calculations in relation to the 2013/2014 acquisition of England Packing Group Arkansas USA, based on subsequent deductions received for tax purposes (Note 14). The deferred tax assets and liabilities at the end of the year are as follows: The Group The Company Deferred income tax assets - Other post-employment benefits 5,475 29,725 5,125 28,625 Accrued vacation and general provisions 11,028 10,562 10,813 8,860 Tax losses unused - 1, Interest payable 11,158 14,979 10,580 13,731 Intangible assets 30, Other - 3, ,773 60,704 26,518 51,216 Deferred income tax liabilities - Pension benefits 44,875-43,575 - Property, plant and equipment 432, , , ,274 Unrealised foreign exchange gains 27,949 41,293 27,922 41,283 Intangible assets 12, , Other 8,977 8,713 8,977 8, , , , ,270 Net deferred tax liability 469, , , ,054 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 133

140 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 19. Deferred Income Taxes (continued) The deferred tax credited in profit or loss and other comprehensive income comprises the following temporary differences: Profit or loss The Group The Company Property, plant and equipment 43,046 90,130 44,002 73,690 Accrued vacation and general provisions (423) 895 (1,953) 1,448 Post-employment benefits (1,850) 37,175 (1,700) 33,675 Tax losses 1,664 (1,664) - - Unrealised foreign exchange losses/gains (13,345) (49,796) (13,361) (49,806) Intangible assets (27,657) (20,402) - - Interest payable 3,820 (1) 3,150 1,246 Other temporary differences 4,167 7, ,576 9,422 63,528 30,403 68,829 Other comprehensive income Post-employment benefits 70,975 (36,675) 68,775 (33,425) Deferred income tax liabilities have not been provided for in respect of the withholding and other taxes that would be payable on the undistributed earnings of certain subsidiaries to the extent that such earnings are permanently reinvested. Such undistributed earnings, included in the consolidated results, totalled $1,505,264,000 ( - $915,013,000). These undistributed earnings are in foreign subsidiaries. 134 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

141 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 19. Deferred Income Taxes (continued) These balances include the following: Deferred tax assets - The Group The Company Deferred tax assets to be recovered after more than 12 months 35,587 31,389 5,125 28,625 Deferred tax assets to be recovered within 12 months 22,186 29,315 21,393 22,591 Deferred tax liabilities - 57,773 60,704 26,518 51,216 Deferred tax liabilities to be recovered after more than 12 months 490, , , ,274 Deferred tax liabilities to be recovered within 12 months 36,926 50,006 36,899 49, , , , ,270 Net deferred tax liability 469, , , , Post-employment Benefits Amounts recognised in the balance sheet are as follows: The Group The Company Pension scheme benefit assets/(liabilities) 180,100 (94,700) 174,300 (91,100) Post-employment benefit obligations (21,900) (24,800) (20,500) (23,400) Amounts recognised in the profit or loss (Note 8) - Pension scheme benefit liabilities 113,800 (103,100) 109,800 (89,200) Post-employment benefit obligations 2,200 1,400 2,100 1, ,000 (101,700) 111,900 (87,900) Amounts recognised in other comprehensive income Pension scheme benefit assets (283,500) 138,800 (272,100) 123,900 Post-employment benefit obligations (2,900) 10,100 (3,000) 9,800 (286,400) 148,900 (275,100) 133,700 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 135

142 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 20. Post-employment Benefits (continued) (a) Pension scheme benefits The Group participates in a defined benefit scheme, which is open to all permanent employees and administered by an external agency. The plan provides benefits to members based on average earnings for the final two years of service or the two years in which the highest salaries of the employee have been earned. The defined benefit scheme is valued by independent actuaries annually using the Projected Unit Credit Method. The latest actuarial valuation was carried out as at. The Board of the pension fund is required by law and its articles and association to act in the interest of the fund and all relevant stakeholders. The Board of the fund is responsible for the investment policy with regard to the assets of the fund. The funds are managed by NCB Insurance Company Limited who has responsibilities for the general management of the portfolio of investments and the administration of the fund. The post-employment benefit asset recognised in the balance sheet was determined as follows: The Group The Company Fair value of plan assets 3,346,100 2,531,600 3,238,000 2,435,500 Present value of obligations (3,166,000) (2,626,300) (3,063,700) (2,526,600) 180,100 (94,700) 174,300 (91,100) Pension plan assets include investment in ordinary stock units of the Company with a fair value of $172,736,000 ( - $58,000,000). The pension fund earned and received rental income from the Company of Nil ( - $2,557,000). The movement in the defined benefit asset during the year was as follows: The Group The Company At start of year (94,700) (105,900) (91,100) (101,200) Amounts recognised in profit or loss (Note 8) (113,800) 103,100 (109,800) 89,200 Amounts recognised in other comprehensive income (Note 8) 283,500 (138,800) 272,100 (123,900) Contributions paid 105,100 46, ,100 44,800 At end of year 180,100 (94,700) 174,300 (91,100) 136 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

143 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 20. Post-employment Benefits (continued) (a) Pension scheme benefits (continued) The movement in the present value of obligations was as follows: The Group The Company At start of year 2,626,300 2,307,700 2,526,600 2,206,300 Transfer in fund new employee 2,900-2,900 - Current service cost 97,700 88,900 94,300 84,600 Interest cost 263, , , ,000 Past service cost - (210,500) - (191,400) 2,990,500 2,416,000 2,877,600 2,319,500 Remeasurement loss on obligations 136, , , ,300 Members contribution 98,800 77,800 96,900 74,100 Benefits paid (60,100) (77,800) (57,100) (68,300) At end of year 3,166,000 2,626,300 3,063,700 2,526,600 The movement in the fair value of plan assets was as follows: The Group The Company At start of year 2,531,600 2,201,800 2,435,500 2,105,100 Transfer in fund new employee 2,900-2,900 - Members contribution 98,800 77,800 96,900 74,100 Employer s contribution 105,100 46, ,100 44,800 Interest income on plan assets 247, , , ,400 Benefits paid (60,100) (77,800) (57,100) (68,300) Remeasurement loss on plan assets 420,300 71, ,400 77,400 At end of year 3,346,100 2,531,600 3,238,000 2,435,500 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 137

144 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 20. Post-employment Benefits (continued) (a) Pension scheme benefits (continued) The amount recognised in profit or loss is determined as follows: The Group The Company Current service cost 97,700 88,900 94,300 84,600 Interest cost 263, , , ,000 Interest income on plan assets (247,500) (211,400) (238,300) (202,400) Past service costs - (210,500) - (191,400) Total included in staff costs (Note 8) 113,800 (103,100) 109,800 (89,200) The amount recognised in other comprehensive income is determined as follows: The Group The Company Remeasurements of the defined benefit obligation 136, , , ,300 Remeasurements of the plan assets (420,300) (71,500) (418,400) (77,400) Total (283,500) 138,800 (272,100) 123,900 At the last valuation date, the present value of the defined benefit obligation was comprised, for the Group and the Company respectively, of approximately $2,657,900,000 and $2,593,900,000 relating to active members, $200,300,000 and $195,800,000 relating to deferred members, $302,200,000 and $266,300,000 relating to the members in retirement and $5,600,000 and $5,000,000 relating to other liabilities. Expected yields on fixed interest investments are based on gross redemption yields as at the balance sheet date. Expected returns on equity and property investments reflect long-term real rates of return experienced in the respective markets. Expected employer contributions to the plan for the year ended amount to $134,300,000 for the Group and $131,900,000 for the Company. The principal actuarial assumptions used were as follows: Discount rate 9.0% 9.5% Future salary increases 6.5% 7.0% Future pension increases 2.25% 2.5% 138 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

145 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 20. Post-employment Benefits (continued) (a) Pension scheme benefits (continued) The sensitivity of the defined benefit obligation to changes in the principal assumptions is: The Group Impact on post-employment obligations Change in assumption Increase in assumption Decrease in assumption Discount rate 1% (467,600) 612,000 Future salary increases 1% 253,500 (214,800) Pension increases 1% 284,000 (294,500) The Company Impact on post-employment obligations Change in assumption Increase in assumption Decrease in assumption Discount rate 1% (455,600) 596,900 Future salary increases 1% 248,700 (210,600) Pension increases 1% 275,600 (285,200) Increase Assumption by One Year The Group Decrease Assumption by One Year Increase Assumption by One Year The Company Decrease Assumption by One Year Life expectancy 36,700 (40,000) 35,400 (38,800) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the statement of financial position. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 139

146 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 20. Post-employment Benefits (continued) (b) Post-employment medical benefits In addition to pension benefits, the Group offers qualifying retirees medical and life insurance benefits. Funds are not built up to cover the obligations under these retirement benefit schemes. The method of accounting and frequency of valuations are similar to those used for the defined benefit pension scheme. In addition to the assumptions used for the pension scheme, the main actuarial assumption is a long term increase in health costs of 8% per year ( 8.5% per year). The liability recognised in the balance sheet was determined as follows: The Group The Company Restated Restated Present value of funded obligations 21,900 24,800 20,500 23,400 The movement in the liability during the year was as follows: The Group The Company At start of year 24,800 15,500 23,400 14,300 Amounts recognised in profit or loss (Note 8) 2,200 1,400 2,100 1,300 Amounts recognised in other comprehensive income (2,900) 10,100 (3,000) 9,800 Contributions paid (2,200) (2,200) (2,000) (2,000) At end of year 21,900 24,800 20,500 23, JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

147 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 20. Post-employment Benefits (continued) (b) Post-employment medical benefits (continued) The movement in the present value of obligations was as follows: The Group The Company At start of year 24,800 15,500 23,400 14,300 Interest cost 2,200 1,400 2,100 1,300 Benefits paid (2,200) (2,200) (2,000) (2,000) Remeasurement loss on obligation (2,900) 10,100 (3,000) 9,800 At end of year 21,900 24,800 20,500 23,400 The amount recognised in profit or loss is as follows: The Group The Company Interest cost 2,200 1,400 2,100 1,300 Total included in staff costs (Note 8) 2,200 1,400 2,100 1,300 The amount recognised in other comprehensive income is determined as follows: The Group The Company Remeasurements of the defined benefit obligation (2,900) 10,100 (3,000) 9,800 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 141

148 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 20. Post-employment Benefits (continued) (b) Post-employment medical benefits (continued) The sensitivity of the defined benefit obligation to changes in the principal assumptions is: The Group Impact on post-employment obligations Change in assumption Increase in assumption Decrease in assumption Discount rate 1% (1,600) 1,700 Medical cost 1% (3,600) (6,300) The Company Impact on post-employment obligations Change in assumption Increase in assumption Decrease in assumption Discount rate 1% (1,500) 1,600 Medical cost 1% (3,600) (6,100) Increase Assumption by One Year The Group Decrease Assumption by One Year Increase Assumption by One Year The Company Decrease Assumption by One Year Life expectancy 1,200 (1,200) 1,100 (1,000) 142 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

149 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 20. Post-employment Benefits (continued) (c) Distribution of pension plan assets - The Group % % Equities 1,172, , Property 252, , Government securities and reverse repurchase agreements 1,449, ,136, Corporate bonds 306, ,500 9 Leased assets 38, ,700 2 Other 126, , ,346, ,531, The Company % % Equities 1,134, , Property 244, , Government securities and reverse repurchase agreements 1,402, ,093, Corporate bonds 296, ,800 9 Leased assets 37, ,000 2 Other 122, , ,238, ,435, JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 143

150 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 20. Post-employment Benefits (continued) (d) Other pension plan disclosures - Risks associated with pension plans and post-employment plans Through its defined benefit pension plans and post-employment medical plans, the Company is exposed to a number of risks, the most significant of which are detailed below: Asset volatility The plan liabilities are calculated using a discount rate set with reference to Government of Jamaica bond yields; if plan assets underperform this yield, this will create a deficit. As the plan matures, the Company intends to reduce the level of investment risk by investing more in assets that better match the liabilities. The Government bonds represent investments in Government of Jamaica securities. The Company believes that due to the long-term nature of the plan liabilities, a level of continuing equity investment is an appropriate element of the Company s long term strategy to manage the plans efficiently. See below for more details on the Company s asset-liability matching strategy. Changes in bond yields A decrease in Government of Jamaica bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans bond holdings. Inflation risk Higher inflation will lead to higher liabilities. The majority of the plan s assets are either unaffected by fixed interest bonds, meaning that an increase in inflation will reduce the surplus or create a deficit. Life expectancy The majority of the plan s obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plan s liabilities. This is particularly significant, where inflationary increases result in higher sensitivity to changes in life expectancy. The Company ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the pension scheme. Within this framework, the Company s ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due. The Company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the pension obligations. The Company has not changed the processes used to manage its risks from previous periods. The Company does not use derivatives to manage its risk. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. A large portion of assets in consists of bonds and equities. Funding levels are monitored on an annual basis and the agreed employer contribution rate was 10% of pensionable salaries up to,. The next triennial valuation is due to be completed as at 30 April JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

151 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 21. Inventories The Group The Company Grain and feed ingredients 1,502, ,839 1,384, ,744 Inventories for resale and spares 2,477,276 2,215,859 2,271,623 2,002,780 Processed broilers 16,926 13, Goods in transit and others 357, , , ,087 4,354,084 3,996,881 3,847,266 3,471,611 Less: Provision for obsolescence (73,737) (47,998) (50,630) (37,409) There were no inventory write-downs for the current or the previous year. 22. Biological Assets 4,280,347 3,948,883 3,796,636 3,434,202 The Group The Company Cattle 38,729 54, Poultry 2,913,515 2,515, , ,388 The movement in biological assets at fair value was determined as follows: 2,952,244 2,569, , ,388 The Group The Company At start of year 418, , , ,150 Fair value losses (1,308) (3,775) - - Increase due to purchases and transfers 6,574,609 6,390,230 6,574,609 6,389,549 Decrease due to sales (6,509,591) (6,637,245) (6,495,354) (6,504,996) Disposal of subsidiary - (53,000) - - Translation - (2,227) - - At end of year 482, , , ,703 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 145

152 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 22. Biological Assets (continued) The movement in biological assets at cost was determined as follows: The Group The Company At start of year 2,150,805 1,542, , ,045 Increase due to purchases and acquisition 5,471,977 5,065,534 2,376,415 1,876,566 Decrease due to sales and depreciation (5,213,576) (4,523,126) (2,325,935) (1,889,926) Translation 60,352 65, At end of year 2,469,558 2,150, , ,685 Biological assets for the Group comprise of: The Group The Company Biological assets at fair value 482, , , ,703 Biological assets at cost 2,469,558 2,150, , ,685 2,952,244 2,569, , ,388 Fair value of livestock is determined as the best available estimate for livestock with similar attributes. Any gains or losses arising on initial recognition of livestock at fair value less estimated point of sale costs and from a change in fair value less estimated point of sale costs is included in other income in the period in which it arises. The physical quantities at the end of the year and output for each group of biological assets are as follows: (i) Cattle The number of cattle at the end of the year was 545 ( 723). The number of cattle harvested during the year was 380 ( 407). (ii) Poultry The number of birds in the field, including broilers, breeders, and layer pullets at year end was 5,807,821 ( 4,994,685) and the number of eggs at year end was 5,584,615 ( 4,459,268). The total number of birds produced during the year was 46,812,000 ( 43,428,000). The total number of eggs produced during the year was 20,946,653 ( 16,898,180) dozens. 146 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

153 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 23. Receivables The Group The Company Trade receivables 2,656,756 2,423,703 1,490,307 1,544,504 Less: Provision for impairment (283,846) (312,171) (235,366) (262,578) 2,372,910 2,111,532 1,254,941 1,281,926 Contract farmers receivables 286, , , ,450 Deposits 21,160 8,935 3,088 2,247 G.C.T recoverable 32,541 10,292 22, Insurance claims receivable 3,454 71,110 2,788 11,649 Jamaica Broilers Trust (Note 31) 70,656 98,000 70,656 98,000 Prepayments 321, , , ,893 Staff receivables 26,254 25,782 19,887 17,545 Other 143, ,177 63, ,964 3,278,572 2,789,380 1,885,561 1,782,553 Less: Provision for impairment (318) (318) (318) (318) 24. Financial Assets at Fair Value through Profit or Loss 3,278,254 2,789,062 1,885,243 1,782,235 This represents amount invested in investment funds that have been designated at fair value on initial recognition. Changes in fair values of financial assets at fair value through profit or loss are included in other (losses)/gains (Note 6). 25. Cash and Short Term Investments The Group The Company Cash at bank and in hand 788, , , ,661 Short term investments 408,258 1,078, ,258 1,078,522 1,196,576 1,824, ,479 1,595,183 Interest receivable 2,618 3,929 2,618 3,929 1,199,194 1,828, ,097 1,599,112 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 147

154 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 25. Cash and Short Term Investments (continued) The weighted average effective interest rate on Jamaica dollar and US dollar short term deposits was 4% ( 4%) and 1% ( 1%) respectively. These represent call deposits which are repayable on demand. For the purposes of the cash flow statement, cash and cash equivalents comprise the following: 26. Payables The Group The Company Cash and short term investments 1,199,194 1,828, ,097 1,599,112 Short term borrowings and bank overdraft (326,306) (159,889) (177,131) (152,569) 872,888 1,668, ,966 1,446,543 The Group The Company Accrued charges 549, , , ,418 Contractors retention payable 8,630 7, GCT payable Payroll taxes payable 55,834 49,312 55,834 49,518 Staff related payables 100,137 88,712 47,945 14,585 Trade payables 2,024,296 2,777,158 1,316,500 2,206,024 Unclaimed cheques 59,533 70,408 59,533 70,408 Other 409, , , ,779 3,207,847 3,666,685 2,129,272 2,977, JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

155 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 27. Dividends The Group and The Company First interim 10 cents per stock unit ( 8 cents) 119,928 95,942 Second interim 16 cents per stock unit ( 9 cents) 191, , Borrowings Non-Current - The Group 311, ,877 The Company Borrowings 5,096,511 3,591,907 4,650,058 3,085,651 Current - Short term borrowings and bank overdraft 1,306,461 1,756, ,139 1,257,569 (Note 23) Current portion of non-current borrowings 632, , , ,231 Interest payable 44,633 59,914 42,328 54,927 1,983,290 2,763,024 1,250,855 2,102,727 7,079,801 6,354,931 5,900,913 5,188,378 Interest rates on these loans ranged between 7% to 10% on Jamaican currency loans and 3.75% to 12% on United States currency loans throughout the Group. Negative pledges have been issued in respect of loans, guarantees and other banking facilities extended by the various financial institutions. At year end the Group has access to undrawn financing facilities amounting to $500,000,000. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 149

156 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 29. Share Capital Number of Stock Units Ordinary Stock Units 000 1,199, ,137 1,199, ,137 The total authorised number of ordinary shares is 1,209,324,000 shares ( 1,209,324,000). The stock units in and are stated in these financial statements without a nominal or par value. 30. Capital Reserve The Group The Company At start of year - Realised capital gains 32,618 32,618 3,227 3,227 Unrealised surplus on revaluations 349, , , ,198 Fair value loss on available-for-sale securities - - (538) (538) Translation loss on subsidiary assumed - - (8,686) (8,686) Gains on translation of financial statements of foreign subsidiaries 1,468,513 1,313, ,850,181 1,746, , ,201 Movements during the year - Translation gain 79, , Transfer from/(to) retained earnings 132,115 (50,925) - - At end of year 2,062,158 1,850, , ,201 Consisting of - Realised capital gains 32,618 32,618 3,227 3,227 Unrealised surplus on revaluations 349, , , ,198 Fair value loss on available-for-sale securities - - (538) (538) Translation loss on subsidiary assumed - - (8,686) (8,686) Gains on translation of financial statements of foreign subsidiaries 1,680,490 1,468, ,062,158 1,850, , , JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

157 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 31. Related Party Transactions and Balances Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial or operational decisions. Related parties include fellow subsidiaries, directors and key management. Subsidiaries buy and sell inventory to other entities within the Group. Key management includes directors (executives and non-executives) and members of the senior management team. (i) The following transactions were carried out between the company and its related parties: Sale of goods 795, ,836 Purchases of goods 3,361,116 3,010,283 Interest income earned 119, ,248 Management fees earned 215, ,168 Rental expense incurred 17,060 4,680 Dividend received 132,915 1,224,120 Other expenses 16,485 55,590 (ii) Key management compensation The Group The Company With directors and key management - Salaries, profit sharing and other short-term employee benefits 546, , , ,995 Payroll taxes - Employer s portion 41,527 29,742 41,527 28,018 Pension benefits 12,568 5,899 12,568 4,690 Professional fees paid 6,100 11,048 6,100 11, , , , ,750 Directors emoluments - Fees 21,970 18,503 21,970 18,503 Management remuneration (included above) 390, , , ,656 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 151

158 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 31. Related Party Transactions and Balances (continued) (iii) Year end balances with related parties: Directors and key management - The Group The Company Receivables 4,753 1,109 4, Receivable from subsidiaries - - 3,305,597 3,148,840 Payable to subsidiaries , ,138 Loan to Jamaica Broilers Trust(a) 70, ,683 70, ,683 Loan to Haiti Broilers S.A.(b) ,263 Loans receivable : Loan to Haiti Broilers S.A.(b) ,387 - Loan to JB Terminal (Port Esquivel) Limited long term portion of loans receivable (c) - - 1,169,925 1,331,010 Loan to International Poultry Breeder Inc. long term portion of loans receivable (d) - - 1,059,090 1,081,658 Loan to International Poultry Breeder Hatcheries Inc. long term portion of loans receivable (e) , ,847,499 2,412,668 (a) Loan receivable from Jamaica Broilers Trust is payable by August and interest is payable at WATBY plus 2% per annum. The loan is secured with stock units in Jamaica Broilers Group Limited. The current portion of the balance is included in receivables (Note 23) and the long term portion is Nil ( - $18,683,000). (b) The balance represents the outstanding amounts on a loan of HTG344,000,000. The loan is interest free and matures in (c) The balance represents the outstanding amounts on a loan of US$18,000,000 at a rate of LIBOR + 2% and matures Principal is repaid quarterly in the amount of US$500,000. Included in receivable from subsidiaries is the current portion of the loan in the amount of $560,333,000 ( - $324,072,000). (d) The balance represents the outstanding amounts on a loan of US$10,750,000 at a rate of US Prime + 3% and matures Principal is repaid quarterly in the amount of US$700,000. Included in receivable from subsidiaries is the current portion of the loan in the amount of $86,205,000 ( - $80,549,000). (e) The balance represents the outstanding amounts on a loan of US$8,500,000 at a rate of US Prime % and matures Principal is repaid quarterly in the amount of US$850,000. Included in receivable from subsidiaries is the current portion of the loan in the amount of $104,678,000 ( - Nil). 152 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

159 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 32. Fair Value of Financial Instruments Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction. Market price is used to determine fair value where an active market (such as a recognised stock exchange) exists as it is the best evidence of the fair value of a financial instrument. However, market prices are not available for a significant number of the financial assets and liabilities held and issued by the Group. Therefore, for financial instruments where no market price is available, the fair values presented have been estimated using present value or other estimation and valuation techniques based on market conditions existing at balance sheet dates. The values derived from applying these techniques are significantly affected by the underlying assumptions used concerning both the amounts and timing of future cash flows and the discount rates. The following methods and assumptions have been used: (i) (ii) Financial assets at fair value through profit or loss are measured at fair value by reference to quoted prices when available. If quoted market prices are not available, then fair values are estimated on the basis of pricing models, or discounted cash flows. Fair value is equal to the carrying amount of these items; Investment securities classified as available-for-sale are measured at cost. Fair value cannot be reliably determined as no active market for these securities exist as they relate to investment in private entities. (iii) The fair value of long term borrowings approximates carrying value as the contractual cash flows are at current market interest rates that are available to the Group for similar financial instruments; and (iv) The amounts included in the financial statements for receivables, cash and short term investments, payables short term borrowings and bank overdraft reflect their fair values due to the short term maturity of these instruments. Financial instruments that are measured in the balance sheet at fair value are grouped into Levels 1 to 3 based on the degree to which the fair value is observable: (i) (ii) (iii) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Financial assets measured at fair value are all categorised as level 2 and comprise financial assets at fair value through profit or loss amounting to $701,303,000 ( - $472,482,000) for the Group. These investments represent units in investment funds which are stated at unit prices determined by the fund manager. There were no transfers between levels in the year. Biological assets which are measured at fair value totalling $482,686,000 ( $418,976,000) and $443,958,000 ($364,703,000) for the Group and the Company respectively are included in Level 2. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 153

160 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 33. Business Combinations In March, International Poultry Breeders Hatcheries, Inc (USA). a newly incorporated subsidiary of the Group acquired hatchery assets from a company in the USA. The principal activity of International Poultry Breeders Hatcheries, Inc. is the hatching and distribution of baby chicks for the poultry industry. As a result of this acquisition, the Group is expected to extend its reach in the poultry industry of North America. The acquired assets contributed revenues of $95,636,000 and losses of $12,006,000 for the year ended 30 April. Had the company been acquired at the beginning of the year, it could have contributed revenues of approximately $1,147,635,000 and profits of approximately $229,867,000 to the Group for the year ended 30 April. Details of the net assets acquired, goodwill and net cash outlay on acquisition, determined on a provisional basis, were as follows: Hamilton England Total Fair Values Fair Values Fair Values Net assets arising on the acquisition 58, ,605 Intangible assets 286,455 Property, plant and equipment 448,262 Inventories 46, ,925 Goodwill on acquisition: Purchase consideration 111,160 1,181, ,811 Less: Fair value of net assets acquired (58,126) (877,605) (780,925) 53, , ,886 Net cash outlay on acquisition: Purchase consideration paid in cash 111,160 1,181, ,811 Cash and cash equivalents acquired 345 (352) - 111,505 1,181, ,811 The goodwill acquired represents the synergies inherent in the consolidation of a market competitor. 154 JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS

161 Jamaica Broilers Group Limited Notes to the Financial Statements (expressed in Jamaican dollars unless otherwise indicated) 34. Disposal of Subsidiaries During the previous year the Group disposed of two of its subsidiaries, Aquaculture Jamaica Limited and Aqualapia Limited. The disposals were not significant to the Group s operations as there were no operating activities during the year. The operations were previously included in the Jamaica Operations segment. Proceeds received 111,160 1,181,788 88,103 Net assets disposed 345 (352) (89,426) Loss on disposal 111,505 1,181,436 (1,323) 35. Subsequent Event On 29 June Jamaica Broilers Group Limited signed an agreement with West Indies Petroleum Limited with respect to the sale of its shares in ERI Services (St. Lucia) Limited and its wholly owned subsidiary JB Terminal (Port Esquivel) Limited (formerly JB Ethanol Limited) for a cash consideration of US$4 million. As part of the deal West Indies Petroleum Limited will also assume liabilities of US$18.5 million due to Jamaica Broilers Group Limited. JB Terminal (Port Esquivel) Limited (formerly JB Ethanol Limited) owns and operates the ethanol and terminal facilities at Port Esquivel. The transaction is expected to be completed during the first quarter of the next fiscal year. JAMAICA BROILERS GROUP ANNUAL REPORT & ACCOUNTS 155

162 NOTES

163 GRAPHIC DESIGN: Sutherland Wade Associates Limited PHOTOGRAPHY: Peter Ferguson, Alan Smith, Fernandez Barrett PRINTERS: Lithographic Printers Limited

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