what s inside Dear Shareholder,

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2 Dear Shareholder, The Board of Directors of Chemco Limited is pleased to present the Annual Report for the year ended 31 December 2016, the contents of which are listed below. This report was approved by the Board of Directors at its meeting held on 8 May Antoine L. Harel Chairman Shemboosingh Cheekhooree Managing Director what s inside managing director s report board of directors senior management profile independent auditors report statement of financial position statement of profit or loss and other comprehensive income 08 corporate governance report 23 statement of changes in equity 02 vision mission guiding principles 15 statutory disclosures 24 statement of cash flows 03 company profile business segments corporate information 16 secretary s certificate 25 notes to the financial statements 04 chairman s statement 17 statement of directors responsibilities statement of compliance ANNUAL REPORT

3 vision To be the leader in the chemical business in the region and to diversify through new ventures. mission To develop a strong and competitive organisation which delivers on its targets and maximise shareholder s value. To provide a wider range of eco-friendly products to the textile sector. To foster a quality culture and sustainable development. To provide its employees with a work environment which promotes participation, innovation and customer service. guiding principles Agility and Determination in achieving Care and Engagement in what we do Trust and Responsibility in our relationships 02 Chemco Limited

4 company profile Chemco Limited was incorporated in It is a public company listed on the Development and Enterprise Market (DEM) since 2007 and is a subsidiary of Harel Mallac & Co. Ltd. The Company is involved in the distribution of industrial chemicals as well as a range of consumer goods in the local and regional markets. business segments Sugar Chemicals Industrial Chemicals Swimming Pool Chemicals and Equipment Water Treatment Chemicals Laboratory Services* Refrigeration PRODUCTS Coagulants Flocculants Biocides Lime Phosphoric Acid Sulphur END USE Complete range of process chemicals for the sugar industry PRODUCTS Caustic Soda Hydrochloric Acid Hydrogen Peroxide Calcium Carbonate Sodium Sulphate Sodium Chloride Sulphuric Acid Food Chemicals END USE Range of chemicals for textile, food and beverages and detergents industry PRODUCTS Cyanuric Acid Calcium Hypochlorite Chempool Acid & Alkali Pool Accessories Pumps & Filters Desalination Equipment Reverse Osmosis Systems Water Purifiers END USE Wide range of chemicals and equipments to keep swimming pool water crystal clear PRODUCTS Coagulants Flocculants Polymers Lime Calcium Hypochlorite Chlorine Dioxide END USE Boiler water treatment Cooling tower/chiller Process water treatment Water Treatment: Demineralised System Softeners Plant Reverse Osmosis Membrane System PRODUCTS Water & Wastewater Analysis Microbiological Testing Soil and Sand Analytical Services END USE Environmental monitoring services provided with high tech laboratory equipment Technical support to Customers PRODUCTS Air Conditioners Ammonia Gas and Freon Gases R22, R407C and R410 END USE Domestic and industrial purposes * The Laboratory is ISO certified corporate information REGISTERED OFFICE Chaussée Tromelin Fort George Port Louis BUSINESS REGISTRATION NUMBER C SECRETARY HM Secretaries Ltd 18 Edith Cavell Street Port Louis AUDITORS BDO & Co. BANKERS ABC Banking Corporation Ltd MauBank Ltd The Mauritius Commercial Bank Ltd LEGAL ADVISERS Ivan Collendavelloo Chambers Étude Georges Robert NOTARY Mr Didier Maigrot REGISTRY Harel Mallac Corporate Services Ltd 18 Edith Cavell Street Port Louis ANNUAL REPORT

5 chairman s statement Dear Shareholder, The Company continued to operate in a challenging environment as a result of the sluggish growth in the manufacturing sector. Management focussed on productivity improvement and operational effectiveness. These initiatives combined with reversal of provisions from previous year, helped to improve the Company s performance in Return On Shareholders Funds increased to 15% compared to 4% in previous year. Earnings Per Share rose to 2.49 compared to Re 0.66 for the previous period. The Company declared a dividend of Re 1.10 per share in December Acknowledgements The Board would like to extend its gratitude to the Management and staff of Chemco Limited for their commitment, professionalism and hard work. We are confident that the Company s strategic orientation, dedicated employees and customer-centric approach will help deliver on targets set for next year. The Company s profit after tax increased to 15.5M in 2016 Antoine L. Harel Chairman 04 Chemco Limited

6 managing director s report The Company s revenue for 2016 reached 282M compared to 344M in the previous period, representing an 18% drop. This highlights the difficult local business environment prevailing during the year. However, the Company s profit after tax increased to 15.5M in 2016 compared to 4.1M during the previous year. This improvement was achieved through lower staff costs, productivity and efficiency improvements, rigorous debt recovery and sound financial management. The drop in turnover mirrors the current difficulties within the local manufacturing sector, of which textiles and apparel is a major component. The relocation of some major textile companies and a sluggish local manufacturing sector performance has exacerbated the challenging business environment. Chemco s Industrial Chemicals Division faced several challenges during 2016, and took important decisions such as the closing down of its Tyre Division to focus on business segments with better growth potential. It has further strengthened its association with partners and suppliers during 2016 to create a springboard for the future. The Company will promote more environment friendly products to help customers improve their chemical footprint. The Company will promote more environment friendly products to help customers improve their chemical footprint. The first desalination plant installed at Maritim Hotel is ready and awaiting final clearance from the authorities to start operations. The unit incorporates the very best technologies available on the market. This is the first of a series of projects that the Company intends to carry out in the future. The Company has laid down its strategic imperatives for the next three years and will turn to the regional market for growth. The continued relocation of our manufacturing base, especially the textile sector, will require increased focus on the region where it has been present for a number of years. Shemboosingh Cheekhooree Managing Director ANNUAL REPORT

7 board of directors Antoine L. Harel (59) Chairman (Non-Executive) Antoine L. Harel is a Fellow Member of the Institute of Chartered Accountants in England and Wales and holds a BA (Hons) degree in Accounting and Computing. He joined Harel Mallac & Co. Ltd in In 1997, he was appointed Group CEO and has been Chairman of the Board since April He was President of the Mauritius Chamber of Commerce & Industry in 1992/1993. He was appointed to the Board of Directors of Chemco Limited on 30 November Other Directorships (listed Companies): Compagnie des Magasins Populaires Limitée (Chairman), Harel Mallac & Co. Ltd (Chairman), The Mauritius Chemical and Fertilizer Industry Limited (Chairman), Bychemex Limited (Chairman) and Les Gaz Industriels Ltd (Chairman). Suie Sen Hock Meen Ah Kine (55) Executive Director Suie Sen Hock Meen Ah Kine is an Associate Member of the Institute of Chartered Accountants in England and Wales and holder of a BSc (Hons) Management Science from the University of Ottawa. He joined Harel Mallac in 2005 as Financial Controller of Harel Mallac Bureautique Ltd and was appointed Group Financial Controller in February Since 15 November 2015, he holds the position of Finance Director of the Chemicals and Fertilizers Sub-Division of Harel Mallac Group. He was appointed to the Board of Directors of Chemco Limited on 6 November Other Directorships (listed Companies): Bychemex Limited and The Mauritius Chemical and Fertilizer Industry Limited. Shemboosingh Cheekhooree (55) Executive Director Shemboosingh Cheekhooree holds a bachelor s degree in Chemical Engineering from the North East London Polytechnic, United Kingdom. He has over 25 years experience in the textile and apparel sector and has served in various senior management positions during the last 15 years in the textile industry in Mauritius and in India, before joining the Harel Mallac Group in 2012 as Managing Director of Harel Mallac Export Ltd, a company forming part of the Chemicals and Fertilizers Sub-Division of Harel Mallac Group. In October 2013, he became General Manager of the MCFI Group of Companies. Since October 2014, he is the Managing Director of Harel Mallac Export Ltd, Harel Mallac (Tanzania) Limited and the MCFI Group of Companies. He was appointed to the Board of Directors of Chemco Limited on 31 October Other Directorships (listed Companies): Bychemex Limited and The Mauritius Chemical and Fertilizer Industry Limited. Charles Harel (49) Non-Executive Director Charles Harel holds an MBA from the University of Birmingham and a National Diploma in Management and Finance from Cape Technikon, South Africa. Charles Harel joined the Harel Mallac Group in He has held various positions within the Group and was appointed Chief Executive Officer of Harel Mallac in January He has also been sitting on the Board of Directors of The Mauritius Chemical and Fertilizer Industry Limited since 29 May He was appointed to the Board of Directors of Chemco Limited on 29 May Other Directorships (listed Companies): Harel Mallac & Co. Ltd, Compagnie des Magasins Populaires Limitée, Bychemex Limited and The Mauritius Chemical and Fertilizer Industry Limited. 06 Chemco Limited

8 Guy Harel (68) Independent Director Guy Harel joined the Harel Mallac Group in 1981 as Managing Director of Fapcom Ltd. In 1983, he created Henkel Chemicals (Mauritius) Limited and took over as Managing Director in Following the acquisition of the company in 2007 by the Harel Mallac Group, he became the Managing Director of Archemics Ltd and held the position until 31 December He was appointed to the Board of Chemco Limited on 29 May Other Directorships (listed companies): Bychemex Limited and The Mauritius Chemical & Fertilizer Industry Limited. Michel Rivalland G.O.S.K. (63) Non-Executive Director Michel Rivalland G.O.S.K. is a Fellow Member of the Chartered Association of Certified Accountants. He joined the Board of Directors of The Mauritius Chemical and Fertilizer Industry Limited on 1 June 2006 and served as Managing Director from October 2006 to 30 June He is currently an Executive Director of Harel Mallac & Co. Ltd. He was appointed to the Board of Directors of Chemco Limited on 21 December Vincent Labat (54) Independent Director Vincent Labat graduated as a Chemical Engineer. From 1996 to 2009, he was the Managing Director of the listed company, Les Gaz Industriels Ltd. In 2010, he joined Medine Ltd as Project Development Executive. In July the following year, he was appointed Managing Director of the Agriculture Cluster. He has been a Director of Chemco Limited since 12 August Other Directorships (listed Companies): Bychemex Limited and The Mauritius Chemical & Fertilizer Industry Limited. Other Directorships (listed Companies): Compagnie des Magasins Populaires Limitée, Harel Mallac & Co. Ltd, Bychemex Limited and The Mauritius Chemical & Fertilizer Industry Limited. senior management Suie Sen Hock Meen Ah Kine Finance Director Suie Sen Hock Meen Ah Kine is an Associate Member of the Institute of Chartered Accountants in England and Wales and holder of a BSc (Hons) Management Science from the University of Ottawa. He joined Harel Mallac in 2005 as Financial Controller of Harel Mallac Bureautique Ltd and was appointed Group Financial Controller in February Since 15 November 2015, he has been the Finance Director of the Chemicals and Fertilizers Sub-Division of the Harel Mallac Group. Shemboosingh Cheekhooree Managing Director Shemboosingh Cheekhooree holds a degree in Chemical Engineering from the North East London Polytechnic, United Kingdom. He joined the Harel Mallac Group in 2012 as Managing Director of Harel Mallac Export Ltd, a company forming part of the Chemicals and Fertilizers Sub-Division of Harel Mallac Group after spending 25 years at senior position within the textile industry. He was appointed Managing Director of Chemco Limited in October Ajay Luximun Operations Manager profile Ajay Luximun holds a degree in Business Studies and a master s in International Business Management. He joined Chemco Limited in May 1993 and has held various positions within the Company. He was appointed Operations Manager of Chemco Limited in January ANNUAL REPORT

9 corporate governance report Chemco Limited (the Company ) is committed to the highest standard of business integrity, transparency and professionalism in all its activities and ensures that the activities within the Company are managed ethically and responsibly to enhance business value for all stakeholders. board of directors The Board endeavours to exercise leadership, entrepreneurship, integrity and judgement in directing the Company, so as to achieve continuing prosperity for the organisation while embracing both performance and compliance. The Board also ensures that the activities of the Company comply with all legal and regulatory requirements as well as with its constitution from which the Board derives its authority to act. The Board inter alia oversees the development and implementation of the Company s corporate strategy and reviews performance objectives. It provides for succession plans for key individuals, ensures effective communication with the Company s stakeholders, promotes the Company s Code of Ethics, and oversees financial and capital management. As such, it reviews and approves quarterly and annual financial reports, monitors financial results and approves major capital expenditure, acquisitions, divestitures and material commitments. The Board finally oversees compliance and risk management. At 31 December 2016, the Board of Directors consisted of seven members, of whom two are Independent Directors and two are Executive Directors. Non-Executive Directors have free access to members of the senior management team. All Directors have access to the Company Secretary. The Directors are elected as per the provisions of the Company s constitution that do not provide for a definite term of office. With a view to enhancing the Board s effectiveness, a Board performance review is carried out yearly to assess the Directors appreciation of the Board s performance, its procedures and practices. The results of the assessment are examined by the Corporate Governance Committee. This Committee makes its recommendations to the Board on any required remedial action. Since the Company has a management contract with The Mauritius Chemical and Fertilizer Industry Limited (MCFI), the Board has delegated authority to MCFI s Audit Committee and Corporate Governance Committee to provide assistance in discharging its duties and responsibilities. This is done through a more comprehensive evaluation of specific issues that are the remit of such committees. The Board regularly receives the reports and recommendations of these committees and takes appropriate action. The Board entrusts the day-to-day management of the Company to MCFI through its Managing Director, who ensures the smooth running of the organisation. The composition of the Board of Directors and other directorships held by the Directors in other listed companies are given on pages 6 and 7. board meetings The Board meets regularly during the year. For the period under review, the Board met five times. Board meetings are conducted in accordance with the Company s constitution and the Companies Act. Board meetings are organised in such a way as to allow Directors to receive all relevant information critical to their understanding of the business to be conducted at the Board meeting, and therefore to participate fully in the decision-making process. The Board may invite management or external consultants to attend Board meetings whenever required. responsibilities entrusted to MCFI s corporate governance committee The Board has entrusted to MCFI s Corporate Governance Committee the key areas that are the remit of a nomination and remuneration committee. The Committee s main responsibilities include establishing a formal and transparent procedure for developing policy on senior management remuneration. The Committee also fixes the fees of the Company s Non-Executive and Independent Non-Executive Directors. It oversees the process regarding recommendation of potential candidates as Directors, ensures that proposed Directors are not disqualified from holding such office and monitors the balance and effectiveness of the Board. The Committee met three times in Chemco Limited

10 corporate governance report responsibilities entrusted to MCFI s audit committee The Board has entrusted to MCFI s Audit Committee the key areas that are the remit of an Audit Committee as detailed in the formal terms of reference approved by the Board. The Committee thus assists the Board in discharging its duties relating to the safeguarding of assets, the operation of adequate systems and control processes, and the preparation of accurate financial reports and statements, in compliance with all applicable legal requirements and accounting standards. The Committee also addresses issues relating to risk management and provides a forum for discussing business risks and control issues, and formulates relevant recommendations for consideration by the Board. During the period under review, the Committee met four times. attendance at board meetings held in 2016 Directors Attendance Suie Sen Hock Meen Ah Kine 5/5 Shemboosingh Cheekhooree 5/5 Antoine L. Harel 5/5 Charles Harel 5/5 Guy Harel 5/5 Vincent Labat 3/5 Michel Rivalland G.O.S.K. 5/5 risk management The Board regularly addresses and evaluates physical, HR, IT, business, financial, reputational as well as regulatory and compliance risks. In the course of 2016, the internal audit function examined and evaluated the adequacy and effectiveness of control systems in place within the Company. Reports were subsequently produced and submitted to the Audit Committee, which, when applicable, made relevant recommendations to the Board. In 2010, a Risk Management Framework for the Company was adopted, followed by the implementation of a continuous and dynamic system of risk assessment through compliance checks and discussions with management for enhanced risk mitigation strategies. Some of the major risk areas entail: physical risks Among the physical risks identified are unavoidable events such as riots, cyclones and other natural calamities. Mitigating actions such as the adoption of cyclone and fire procedures, subscription to a relevant insurance cover, and the identification of a business continuity plan and disaster recovery plan have been taken. To limit the occurrence of on-site accidents, health and safety as well as security procedures have been implemented. The Company also draws upon the expertise of both an Occupational Physician Consultant and a full-time Health and Safety Officer. business (market) risks As a result of subdued growth in the manufacturing sector in 2016, the business environment of Chemco Limited has become more competitive and difficult. human resources risks Loss of key personnel has been identified as a major risk factor. In view of mitigating this risk, retention policies have been adopted as well as a formal performance assessment and reward system implemented within the Company. Furthermore, a Code of Ethics has been adopted so as to limit reputational risks. Health surveillance is performed at regular intervals on employees in high risks jobs in line with the Company s Health and Safety policy. ANNUAL REPORT

11 corporate governance report technology risks In order to mitigate the risk of an IT crash or major breakdown, back-up and restriction procedures have been set up within the Company. internal control Internal control is a process designed to provide reasonable assurance regarding the achievement of organisational objectives with respect to: effectiveness and efficiency of operations; safeguarding of assets and data of the organisation; reliability of financial and other reporting; prevention of fraud and irregularities; acceptance and management of risk; conformity with the codes of practice and ethics adopted by the organisation; compliance with applicable laws and regulations; and supporting business sustainability under normal as well as adverse operating conditions. Internal Control is applicable to and is built into various business processes so as to cover all significant enterprise areas. During the year, one internal control review was performed by Internal Audit. The Board has set appropriate policies to ensure that the above control measures are implemented. internal audit Internal audit is an objective assurance function reporting to the Board of Directors and Management. The Internal Audit function is performed by the Harel Mallac Group s Internal Auditor. Internal audit provides assurance as to the adequacy and effectiveness of the risk management and internal control framework of an organisation. Internal audit assists the Board and Management to maintain and improve the process by which risks are identified and managed, and helps the Board discharge its responsibilities to maintain and strengthen the internal control framework. The Internal Auditor has examined the current control systems to check their suitability and to ensure that they are being adhered to. The Internal Auditor conducts its assignments based on a yearly plan, which is validated by the Audit Committee and has unrestricted access to the Company s records, Management and employees. Systems reviewed in 2016 at Company level include the sales, debtors and cash cycles, fixed assets cycles, procurement and expenses as well as the stock cycle and cover all significant areas of the Company s internal control. In 2016, the Internal Auditor has regularly submitted to the Audit Committee reports for discussion and follow-up of the implementation of recommended actions. group structure The Directors recognise that the parent entity is Harel Mallac & Co. Ltd and that the ultimate parent entity is Société Pronema. The Directors common to the aforesaid entities are Mr Antoine L. Harel, who is gérant of Société Pronema and Director of Harel Mallac & Co. Ltd and Messrs Charles Harel and Michel Rivalland G.O.S.K., who sit on the Board of Directors of Harel Mallac & Co. Ltd. shareholders holding more than 5 percent of the company Shareholders directly or indirectly interested in 5 percent or more of the ordinary share capital of the Company are detailed on page Chemco Limited

12 corporate governance report dividend policy Year Dividend per share Dividend Cover Dividend Yields () (Times) (%) share price index from January 2015 to December 2016 Chemco Share Price v/s Demex from January 2015 to December Chemco Share Price () DEMEX Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Month Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Chemco Sep-16 Oct-16 Nov-16 Dec-16 Demex 170 directors interest in shares The direct and indirect interests of Directors in the ordinary shares of the Company are to be found on page 15. directors dealings in shares of the company The Directors are aware of Appendix 6 of the Listing Rules of the Stock Exchange of Mauritius Ltd, which provides for restrictions on dealings during a closed period as well as the provisions of the Companies Act 2001 on disclosure and restrictions on share dealings by Directors. All the disclosures made by the Directors are entered into an Interest Register. During the year under review, none of the Directors bought or sold any of the Company s shares. ANNUAL REPORT

13 corporate governance report related party transactions Related party transactions are detailed on page 53. senior management profile The profile of the senior management members is given on page 7. company s constitution The constitution of the Company does not provide any ownership restrictions or pre-emption rights. It is in agreement with the Companies Act 2001 and the DEM rules and does not contain any material clause that needs to be disclosed. shareholders agreement affecting the governance of the company by the board The Company is not aware of any such agreement during the period under review. third party management agreement The Company has a management agreement with The Mauritius Chemical and Fertilizer Industry Limited for management support services including but not limited to the financial, accounting, legal, internal audit and human resources fields. The agreement is renewable on a yearly basis. directors fees Directors are paid Directors fees with the exception of the Executive Directors and one of the Non-Executive Directors. directors remuneration Directors remuneration is given on page 15. It has been disclosed globally due to the sensitivity of the information. remuneration policy The Company s remuneration policy recommends that the Company provides competitive rewards for its senior management staff, taking into account the Company s performance and external market data from independent sources, in particular, where available, salary levels for similar positions in comparable companies. The remuneration package consists of base salary, fringe benefits and an annual individual performance bonus. The remuneration package is determined by the Board of Directors upon recommendations of the Corporate Governance Committee. employee share option plan No employee share option plan is available within the Company. code of ethics The Company abides to the Code of Ethics of Harel Mallac Group. 12 Chemco Limited

14 corporate governance report profile of company s shareholders as at 31 March 2017 Size of Shareholding Number of Shareholders Number of Shares Owned % Holding , , , ,001-5, , ,001-10, , ,001-50, , , , , , , , , , ,154, Over 500, ,394, Total 1,196 6,208, summary of shareholding category as at 31 March 2017 Category of Shareholders Number of Shareholders Number of Shares Owned % Holding Individual 1, , Insurance and assurance companies 1 7, Pension and provident funds 4 92, Investment and trust companies 5 362, Other corporate bodies 65 4,978, Total 1,196 6,208, shareholder information Forthcoming Annual Meeting A proxy form is enclosed for those shareholders unable to attend. Shareholders are requested to bring their identity cards or passports to the meeting, as these are required for registration. Schedule of Events Publication of condensed audited results for previous year March 2017 Annual Meeting May/June 2017 Publication of condensed unaudited results for 1 st quarter May 2017 Publication of condensed unaudited results for 2 nd quarter August 2017 Publication of condensed unaudited results for 3 rd quarter November 2017 Dividend declaration and payment December 2017/January 2018 Shareholders Practical Guide Issues Change of address If shares are deposited with CDS Change of name Acquisition or disposal of shares Share transfers Lost share certificate Direct dividend credit Action Contact the Company s secretariat Contact the personal broker Contact the Company s secretariat Contact the personal broker Contact the Company s secretariat Contact the Company s secretariat Forward the relevant form to the Company s secretariat ANNUAL REPORT

15 corporate governance report social, health and safety The Company continued its journey towards a zero accident workplace. No Lost Time Incident (LTI) was reported during the year This resulted in zero lost working days and helped optimise our operational efficiency. The four pillars of Safety & Health, namely Policies & Procedures, Consultation & Communication, Risk Management and Training & Competence have contributed to improve the standards of safety across operations. Our medical surveillance further safeguards the wellbeing of each and every employee. During the year, the Company organised a week-long health awareness campaign for the benefit of all employees. The programme exceeded the boundaries of the workplace to include talks on healthy eating, oral hygiene, road safety awareness (special emphasis was placed on two-wheeler and pedestrian safety), vision test, breast cancer prevention and screening. A No Smoking painting competition also involved employees children. It is worth mentioning that the programme did not only target employees, but their family members as well. The attendees were encouraged to draw the attention of their families and friends on the negative health effects of smoking. Furthermore, the Company continued its awareness campaign at customer sites by providing suitable and updated information, instructions and training to ensure there is no deviation to Safety & Health norms. Management has started a dynamic risk assessment framework that includes monitoring and improvement of Health and Safety measures against occupational hazards and ensures proper residual risk management which by default ensures compliance with OSHA 2005, associated regulations and related laws. The Company also ensures that its recruitment and promotion policies are fair and that procedures adopted are both transparent as well as competency and merit-based. We also promote honest and transparent business practices. corporate social responsibility As a member of the Harel Mallac Group, Chemco Limited fully supports the causes embraced by the Fondation Harel Mallac (FHM) which, since its inception in 2009, has been focusing on improving the education and living conditions of underprivileged children, in particular in the localities where the Group s companies operate. In 2016, the FHM has partnered with four major non-governmental organisations working with children: SOS Children s Village in Bambous, Ecole Sainte Famille in Roche Bois, APEIM School in Port Louis, and Collège Technique Saint Gabriel in Sainte Croix. This financial support was complemented by regular employee volunteering activities ranging from Music and Arts Days to the Christmas Wish in a Box celebration. The FHM has also supported sports-related projects led by the Trust Fund for Excellence in Sports and the Northern Pirates Sports Club. 14 Chemco Limited

16 statutory disclosures principal activities The principal activities of the Company during the year have remained unchanged and consist of the trading of specialised chemical products for the textile industry and general goods. directors The Directors of the Company as at 31 December 2016 are listed on pages 6 and 7. directors service contracts There are no service contracts between the Company and its Directors. directors remuneration and benefits Remuneration and benefits received, or due from the Company were: Executive Directors - - Non-executive Directors Total directors interests in shares The interests of the Directors in the shares of the Company as at 31 December 2016 were: Directors Direct Interest Indirect Interest Antoine L. Harel - 196,085 Charles Harel - 194,920 The other Directors have no shares either directly or indirectly in the Company. contracts of significance There was no contract of significance to which the Company has been a party and in which a Director of the Company was materially interested, be it directly or indirectly. third party management agreement The Company has a management contract with The Mauritius Chemical and Fertilizer Industry Limited. shareholders At 31 March 2017, the following shareholders were directly or indirectly interested in more than 5 percent of the Company s share capital. Shareholders Interest % Harel Mallac & Co. Ltd Alteo Limited 7.39 The Mauritius Chemical and Fertilizer Industry Limited 6.53 ANNUAL REPORT

17 statutory disclosures corporate social responsibility Donations Political - - Others - - Corporate Social Responsibility AUDITORS FEES The fees payable to the auditors for the audit and other services were: Auditors fees payable: -BDO & Co Fees paid for other services provided by: -BDO & Co Other services provided by the auditors of the Company relate to the issue of certificate for stock items in the bonded warehouse. secretary s certificate We certify that, to the best of our knowledge and belief, the Company has filed with the Registrar of Companies all such returns as are required of the Company under the Companies Act HM Secretaries Ltd Secretary 20 March Chemco Limited

18 statement of directors responsibilities Directors acknowledge their responsibilities for: 1. Adequate accounting records and maintenance of effective internal control systems; 2. The preparation of financial statements which fairly present the state of affairs of the Company as at the end of the financial year, the results of its operations, and cash flow for that year and which comply with International Financial Reporting Standards (IFRS); and 3. The selection of appropriate accounting policies supported by reasonable and prudent judgements. The External Auditors are responsible for reporting on whether the Company s financial statements are fairly presented. The Directors report that: 1. Adequate accounting records and an effective system of internal controls and risk management have been maintained; 2. Appropriate accounting policies supported by reasonable and prudent judgements and estimates have been used consistently; 3. International Financial Reporting Standards have been adhered to. Any departure in the interest of fair presentation has been disclosed, explained and quantified; and 4. The Code of Corporate Governance has been adhered to. Reasons have been provided where there has not been compliance. Signed on behalf of the Board of Directors on 20 March Antoine L. Harel Chairman Shemboosingh Cheekhooree Managing Director NAME OF PIE: CHEMCO LIMITED REPORTING PERIOD: Year ended 31 December 2016 statement of compliance We, the Directors of Chemco Limited, confirm that to the best of our knowledge, the PIE has not complied with Section of the Code of Corporate Governance. The reasons for non-compliance are detailed on page 12 of the Corporate Governance Report. Antoine L. Harel Chairman Shemboosingh Cheekhooree Managing Director 20 March 2017 ANNUAL REPORT

19 independent auditors report for the To the shareholders of Chemco Limited This report is made solely to the members of Chemco Limited (the Company ), as a body, in accordance with Section 205 of the Companies Act Our audit work has been undertaken so that we might state to the Company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company s members as a body, for our audit work, for this report, or for the opinions we have formed. Report on the audit of the Financial Statements Opinion We have audited the financial statements of Chemco Limited (the Company ), on pages 21 to 55 which comprise the statement of financial position as at 31 December 2016, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the financial statements on pages 21 to 55 give a true and fair view of the financial position of the Company as at 31 December 2016, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the Companies Act Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Mauritius, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 1 Valuation of Inventory Key Audit Matter Inventory is carried in the financial statements at the lower of cost and net realisable value. The net carrying value of inventory at 31 December 2016 was.63,683,542. Sales in the industry can be extremely volatile with consumer demand changing significantly based on current trends. As a result there is a risk that the carrying value of inventory exceeds its net realisable value. Related Disclosures Refer to note 2.3 (accounting policy note) and note 10 (financial statement disclosures). Audit Response Our audit procedures were designed to challenge the basis used for assessing the net realisable value of inventory and included: Examining the Company s historical trading patterns of inventory sold at full price and inventory sold below full price, together with the related margins achieved for each product lines in order to gain comfort that stock has not been sold below cost; and Assessing the appropriateness of the percentages applied to arrive at the net realisable value by challenging the assumptions made by the Directors on the extent to which older inventory can be sold. 2 Trade debtors recoverability Key Audit Matter The recoverability of trade receivables, receivables from group companies and the level of provisions for bad debts are considered to be a significant risk due to the pervasive nature of these balances to the financial statements, and the importance of cash collection with reference to the working capital management of the business. At 31 December 2016, the trade receivables and receivables from group companies balances net of provisions included in note 11 was.72,483,448. Related Disclosures Refer to note 11 to the accompanying financial statements. Audit Response We have: assessed the design and implementation of key controls around the monitoring of recoverability; challenged management regarding the level and ageing of trade and group receivables, along with the consistency and appropriateness of receivables provisioning by assessing recoverability with reference to cash received in respect of debtors. In addition we have considered the Company s previous experience of bad debt exposure and the individual counter-party credit risk; critically assessed the recoverability of overdue unprovided debt with reference to the historical levels of bad debt expense and credit profile of the counter-parties; tested these balances on a sample basis through agreement to post period end invoicing and cash receipt; and considered the consistency of judgments regarding the recoverability of trade receivables made year on year to consider whether there is evidence of management bias through discussion with management on their rationale and obtaining evidence to support judgement areas. 18 Chemco Limited

20 independent auditors report for the To the shareholders of Chemco Limited Other information Directors are responsible for the other information. The other information comprises the Corporate Governance Report, Board of Directors, Senior Management Profile, Statutory Disclosures, Statement of Directors Responsibilities and Statement of Compliance (but does not include the financial statements and our auditor s report thereon), which we obtained prior to the date of this auditor s report, and the Vision, Mission and Guiding Principles Statement, Company Profile, Corporate Information, Business Segments, Chairman s and Managing Director s Report (together referred as the other statements ), which is expected to be made available to us after that date. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the Corporate Governance Report, Board of Directors, Senior Management Profile, Statutory Disclosures, Statement of Directors Responsibilities and Statement of Compliance, that we obtained prior to the date of this auditor s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the other statements which will be made available to us after that date, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. Responsibilities of Directors and Those Charged with Governance for the Financial Statements The directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and in compliance with the requirements of the Companies Act 2001, and for such internal control as the directors determine is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the Company s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company s financial reporting process. Auditor s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by directors. Conclude on the appropriateness of directors use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical ANNUAL REPORT

21 independent auditors report for the To the shareholders of Chemco Limited Auditor s Responsibilities for the Audit of the Financial Statements (cont d) requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements Companies Act 2001 We have no relationship with, or interests in, the Company, other than in our capacity as auditors and dealings in the ordinary course of business. We have obtained all information and explanations we have required. In our opinion, proper accounting records have been kept by the Company as far as it appears from our examination of those records. Financial Reporting Act 2004 The Directors are responsible for preparing the corporate governance report. Our responsibility is to report the extent of compliance with the Code of Corporate Governance as disclosed in the annual report and on whether the disclosure is consistent with the requirements of the Code. In our opinion, the disclosure in the annual report is consistent with the requirements of the Code. BDO & Co Chartered Accountants Rookaya Ghanty, FCCA Licensed by FRC Port Louis, Mauritius. 20 March Chemco Limited

22 statement of financial position at 31 December 2016 Notes ASSETS Non-current assets Property, plant and equipment 5 16,004,222 8,300,567 Intangible assets 7 747,944 1,173,312 Investments in financial assets 8 35,966 39,217 Deferred tax assets 9 276, ,960 17,064,218 9,915,056 Current assets Inventories 10 63,683,542 56,263,523 Trade and other receivables 11 73,991, ,177,309 Cash and cash equivalents 28(b) 27,631,029 14,007, ,305, ,448,598 Total assets 182,370, ,363,654 EQUITY AND LIABILITIES Capital and reserves Share capital 12 6,208,722 6,208,722 Share premium 5,518,864 5,518,864 Other reserves (4,129,107) (4,664,082) Retained earnings 97,336,804 88,703,333 Owners interest 104,935,283 95,766,837 LIABILITIES Non-current liabilities Borrowings ,285 1,081,206 Retirement benefit obligations 15 6,214,161 5,862,326 7,074,446 6,943,532 Current liabilities Trade and other payables 16 62,618,258 56,455,603 Current tax liabilities 17(a) 258,400 1,576,862 Borrowings ,039 12,791,226 Dividends 18 6,829,594 6,829,594 70,360,291 77,653,285 Total liabilities 77,434,737 84,596,817 Total equity and liabilities 182,370, ,363,654 These financial statements have been approved for issue by the Board of Directors on 20 March Antoine L. Harel Chairman Shemboosingh Cheekhooree Managing Director The notes on pages 25 to 55 form an integral part of these financial statements. Auditor s report on pages 18 and 20. ANNUAL REPORT