Dear Shareholder, This report was approved by the Board of Directors on 12 May Antoine L. Harel Chairman. Charles Harel Chief Executive Officer

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2 Dear Shareholder, The Board of Directors of Harel Mallac & Co. Ltd is pleased to present the Annual Report for the year ended 31 December 2016, the contents of which are listed on page 3. This report was approved by the Board of Directors on 12 May Antoine L. Harel Chairman Charles Harel Chief Executive Officer 1

3 contents 2 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

4 Message to Shareholder Group Profile and Corporate Information Chairman s Statement Business Reviews Manufacturing and Trading Business Services Asset Management Purpose, Commitments and Guiding Principles Group Overview CEO s Report Corporate Social Responsibility and Human Resources Board of Directors Leadership Team Statutory Disclosures Value Added Statement Independent Auditor s Report Statements of Financial Position Statements of Changes in Equity Statements of Cash Flows Directors of Subsidiary Companies Corporate Governance Report Statement of Directors responsibilities Secretary s Certificate and Statement of Compliance Statements of Profit or Loss Statements of Profit or Loss and Other Comprehensive Income Notes to the Financial Statements 3

5 GROUP PROFILE Committed to Making a Difference for the Better With its origins dating back to 1830, the Harel Mallac Group is one of the oldest trading companies in Mauritius and has pioneered important sectors of the economy. Today, it remains deeply committed to continue supporting the development of its home country in three segments: Manufacturing and Trading, Business Services and Asset Management. With operations that have expanded to the African continent, in Burundi, Madagascar, Rwanda, Tanzania and Zambia, the Harel Mallac Group employs over 1,350 people. As an engaged corporate citizen, the Group strives to make a sustainable difference for its stakeholders by bringing to Mauritius and Africa the best that the planet has to offer in terms of products and services, while monitoring its impact on the natural environment and surrounding communities. CORPORATE INFORMATION REGISTERED OFFICE 18 Edith Cavell Street Port Louis BUSINESS REGISTRATION NUMBER C SECRETARY HM Secretaries Ltd 18 Edith Cavell Street Port Louis AUDITORS BDO & Co BANKERS ABC Banking Corporation Ltd Barclays Bank PLC The Mauritius Commercial Bank Limited State Bank of Mauritius Ltd REGISTRY Harel Mallac Corporate Services Ltd. 18 Edith Cavell Street Port Louis 4 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

6 PURPOSE, COMMITMENTS AND GUIDING PRINCIPLES Purpose Make a Difference for the Better Commitments For the better of our people, we make it our business to unlock their potential by stimulating individual initiatives and promoting the entrepreneurial spirit within the Group. For the better of our performance, we make it our business to do the right thing, with commitment and passion to achieve sustainable economic growth. For the better of our consumers, we make it our business to understand their needs and source the very best products, brands and solutions to make a difference in their operations and lives. For the better of our planet, we make it our business to improve quality of life and care for the world we live and evolve in. Together we can tackle today s issues to build a better tomorrow. Care and Engagement In What We Do We believe that one has to care for what they do to do it well, fuelled by the passion and enthusiasm we put in every action we undertake. We operate in a spirit of cooperation and respect, by embracing each individual s talents and we commit to creating a forward-thinking environment driven by how we are engaged in improving what we leave behind. Trust and Responsibility In Our Relationships We lead by example and take ownership of our individual responsibility. This means doing the right thing at all times and conducting our business with the highest standards of professional behaviour and ethics, by being transparent and honest in all our interactions with employees, consumers, partners and the public at large. Guiding principles And because better begins with each of us, our commitment is fuelled by fundamental guiding principles that define how we do business. They guide our actions and behaviour. They influence the way we work with each other and the way we serve our various stakeholders. Agility and Determination in Achieving Our agility enables us to seize and also create the opportunity. We believe in the power of ambition and it is only by taking determined initiatives and by moving quickly that we can serve our clients with excellence, generate sustainable value for our people and our shareholders, and contribute to our broader community. 5

7 GROUP OVERVIEW at 31 December 2016 MANUFACTURING AND TRADING EQUIPMENT AND SYSTEMS % Climapro Ltée EO Solutions Ltd * Harel Mallac Trading Ltd Linxia Ltd * Novengi Ltd Harel Mallac Distribution SARL** * Harel Mallac Healthcare Ltd** * RETAIL % CMPL (Bagatelle) Limitée * CMPL (Cascavelle) Limitée * Compagnie des Magasins Populaires Limitée CHEMICALS, FERTILISERS AND HYGIENE Archemics Ltd Bychemex Limited Chemco Limited * Coolkote Entreprises Ltd * Harel Mallac Export Ltd Harel Mallac (Tanzania) Limited * Logima Reunion SAS * M.C.F.I (Freeport) Ltd * MCFI International & Co. Ltd * MCFI International (Zambia) Ltd * Reunifert SAS * Suchem Ltd The Mauritius Chemical and Fertilizer Industry Limited % BUSINESS SERVICES TECHNOLOGY % Harel Mallac Technologies Ltd Orinux (Rwanda) SARL * Informatics Business Solutions Ltd Infosystems Business Technologies SARL Mauritius Computing Services Limited * * Orinux Burundi SA * DIGITAL AGENCY % Activeline Ltd TRAVEL % Harel Mallac Aviation Ltd * Itineris Ltd Orinux (Mauritius) Ltd FINANCIAL AND CORPORATE SERVICES Harel Mallac Corporate Services Ltd % Harel Mallac Global Services Ltd The Professional Learning Centre Ltd * includes indirect holdings ** Discontinued operations 6 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

8 ASSET MANAGEMENT PROPERTY % Harel Mallac International Ltd Société Sicarex Société Gare du Nord Standard Continuous Stationery Limited ASSOCIATES & JOINT VENTURES % Held by holding company Attitude Hospitality Management Ltd Emineo Holding Limited Imatech Ltd Maritim (Mauritius) Ltd Société Oneo Solar Field Ltd Total Mauritius Limited Touristic United Enterprise Ltd Water Sport Village Limited Zilwa Resort Ltd Held by group Biofert Co. Ltd Rehm Grinaker Construction Co Ltd Rehm Grinaker Properties Co Ltd

9 CHAIRMAN S STATEMENT Dear Shareholder, 2016 saw a new chapter being written in the history of the Harel Mallac Group with a refreshed Purpose, Guiding Principles and four key Commitments unveiled at the launch in December 2016 of our brand repositioning. This launch was actioned in the wake of a substantial rethinking and reorganisation of our activities, and it embodies the vision behind the change initiatives implemented in the recent years, both internally towards an agile organisation, and externally towards key stakeholders. We recognise that our People are key in achieving this new Purpose. Corporate culture has thus been placed on top of our Human Resources agenda for 2017 to allow our 1,367 team-members to understand and adopt the Group s Purpose, Guiding Principles and Commitments. 8 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

10 Financial Performance The macro-economic environment remained challenging for the Group, with Mauritius remaining within the lower bounds of single digit growth of 3.7% in 2016 after 3.5% in Harel Mallac s presence on the regional market has improved and represents 15% of the revenues, up from 10% in The challenge taken up by Harel Mallac remains to exploit opportunities in new markets, be it in terms of geography, Africa and the region, or new consumption patterns which include our new ventures in the renewable energy sector and moving online in retail and travel. For the year under review, the Group s continuing operations had flat revenues compared to prior year at Rs 4.6 billion but it achieved an important milestone in its recovery by returning to profitability at an operational level, with a profit before finance cost (PBFC) of Rs 42m after nearly breaking even in As an investor, the Group focused on consolidating its positions in 2016: -- Injecting a further Rs 43m to tide Rehm Grinaker over the current weakness in the construction industry and converting Rs 17m previously lent to Touristic United Enterprises into equity to fund its continued expansion in Reunion Island. -- Launching the commercial operations of its Solar Field Ltd joint venture in 2016 by setting up a 2MW power plant in the north of the island. This is our endeavour to help the island having a greener energy and acquiring expertise in a promising future development. The Board decided to maintain its dividend pay-out at Rs 1.80 for the year ending December The diversified portfolio of activities, including in associated companies, remain a key asset of the Harel Mallac value proposition, evening out your net exposure to sectors facing different economic conditions. The bottom line results were disappointing, delivering a loss after tax at Rs 78m but can be explained by the impact of: -- Rs 63m from discontinuing operations in subsidiaries where, after careful deliberations, it was determined that a return to profitability would require too much commitments that would detract from the core operations. -- Rs 13m from impairment of intangibles relating to historic goodwill. The underlying performance of the Group clearly shows signs of a recovery: even after including exceptionals (i.e. asset impairments and investment disposal), profit before tax was Rs 17m in current year, an improvement of Rs 52m from the prior year. This is a considerable turnaround considering that this performance includes losses before tax of Compagnie des Magasins Populaires of Rs 92m for the year, reflecting the unfortunate delays and inevitable disruptions to the ongoing business in rolling out the ambitious expansion plans of our retail subsidiary in Accelerating the recovery of this subsidiary remains a key strategic priority for the Group. Our share price was at Rs at the end of the financial year, a decrease of 27% over 2016, giving a dividend yield of 3% as of 31 December Social Responsibility Harel Mallac remains committed to being a model corporate citizen, pursuing its mission of exerting a positive impact on the community through the Fondation Harel Mallac the Group s dedicated vehicle for CSR activities since During the year, the foundation focused on improving the life of disadvantaged children via strong NGO partners as well as leveraging the resources of volunteering employees. Acknowledgements On behalf of the Board, I would like to thank all of our employees for their continued hard work and professionalism to deliver on their responsibilities so that Harel Mallac can progress in its recovery. I would also take the opportunity to express my appreciation to the CEO for his dedication and to my fellow directors on the Board for their continuing support. Antoine L Harel Chairman 9

11 CEO S REPORT Dear Shareholder, 2016 marked a fresh start for the Harel Mallac Group with a strategic repositioning exercise which resulted in a leaner and more agile organisational structure (page 6), a new visual identity and new Purpose, Make a Difference for the Better, all geared towards the future. Harel Mallac reported revenue of Rs 4.6bn in 2016, broadly on par with Despite a generally lacklustre economic environment with marginally higher growth in 2016 of 3.7% (2015: 3.5%), the Harel Mallac Group achieved operational profitability with Rs 42m of profit before finance costs (PBFC) compared to a minor loss last year. The profit before tax on continuing operations also turned positive at Rs 17m in the current year even after exceptional impairments of Rs 17m. The Group was determined to pursue its strategic reorganisation in 2016, with difficult decisions taken to shoulder a short-term hit, whether to exit certain businesses or to write off goodwill on historic businesses, in the interest of longer-term sustainability. Taking these one-off factors into account, the Group almost broke even for the year on continuing operations, which comforts management that the actions taken to-date are on the right track. Key Strategic Moves The corporate strategy built on the projects kick-started in 2015 with the aim to set the positive momentum into higher gear. The former Technology Arm is the prime example of the focus of the Group in 2016 when it undertook the following change initiatives: -- A review of its organisational structure including the split early in the second half of 2016 of the segment into two main divisions keyed to the specific core competencies and needs of the different business sectors so as to generate the best results from the distinct opportunities available to each: Equipment & Systems which sources, installs and services information technology and consumer electronics equipment; and Technology which leverages our strong expertise and know-how in IT integration solutions to be the first-choice technical partner and adviser for businesses looking for Cloud, Advanced Infrastructure and Business Automation Services. -- The restructuring shows promising signs to December 2016 with significant operational efficiencies in working capital in the Equipment & Systems division and substantial improvements in operational PBFC of the Technology Division. 10 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

12 Other major projects initiated in 2016 across the Group included: -- The withdrawal from two underperforming businesses Harel Mallac Healthcare in Mauritius and Harel Mallac Distribution in Madagascar where despite some strong brands and partnerships, we determined that the resources required both in terms of time and commitments from the Group to turn around were too high compared to the returns we could expect from these businesses; -- The raising of capital amounting to Rs 141m for our listed subsidiary, Compagnie des Magasins Populaires (CMPL) that subsequently financed an ambitious refurbishment and expansion programme of its stores to accompany the Strategic Plan rolled out in After a promising 10% increase in customer numbers in the first half of 2016, unfortunate delays and inevitable disruptions linked to the renovation programme affected the revenue, in which the company only managed to generate a 5% increase. In view of the latter, we are focusing on other strategic actions in 2017 that would accelerate this turnaround; and -- The kick-off of a strategic review in the Chemical subsidiaries geared towards aligning the structures and leadership team to extract the maximum synergies from overlapping consumers, products and competencies. Review of Financial Performance The continuing businesses of the Group registered marginal movements in revenue year-on-year, with the Technology Division suffered a decline of Rs 130m in revenue, due to the rationalisation of its activities following the restructuring and the slow start of its overseas operations in This reflects a responsible approach to risk management, with the Group moving out of noncore activities such as tyres - and limiting exposure to actors experiencing difficulties in the local market (e.g. in construction and retail electronics) as well as to macroeconomic risks in overseas markets (e.g. political turmoil and foreign exchange issues in Burundi). Operational performance showed a significant Rs 41m improvement in PBFC from 2015, benefiting from operational efficiency gains in 2016 as well as a more accommodative foreign exchange environment for our chemicals subsidiaries in Africa compared to These more than offset the continuing drag from our general retail subsidiaries that recorded a loss before finance costs of Rs 77m compared to Rs 79m in The Group s bottom line was nonetheless impacted by the strategic decisions taken in 2016: discontinuing our involvement in the healthcare sector in Mauritius and the Fast Moving Consumer Goods distribution activity in Madagascar led to Rs 63m of losses after tax with a further Rs 13m from the write-off of historic goodwill. Exceptional asset impairments in 2016 of Rs 4m reflect the underutilisation of certain intangible website assets which are no longer core properties of the Group. Overall share of profits from associates and joint ventures dropped by Rs 16m. While most of our associates did better, the losses in the construction sector (Rs 36m in 2016, representing a deterioration of Rs 35m from 2015) outweighed improvements elsewhere. It should be noted that our Solar Field joint venture has started delivery of solar-generated electricity in late December 2016 and is expected to recover its start-up losses (Rs 5m in 2016 after Rs 2m in the previous year) going forward. Cluster Revenue Profit/(loss) Before Finance Costs (PBFC) 2016 (Rs m ) 2015 (Rs m ) 2016 (Rs m ) 2015 (Rs m ) Manufacturing & Trading 3,919 3, Business Services Corporate, Investment & Property Consolidation Adjustments (210) (215) (46) (61) Group 4,598 4, Discontinued Operations (60) (6) Total 4,649 4,743 (18) (6) 11

13 CEO S REPORT (cont d) Statement of Financial Position Group non-current assets increased by Rs 303m driven primarily by: -- New investments in Property, Plant and Equipment where the capex in excess of depreciation and disposals of Rs 94m can be mainly attributed to the expansion plans of our CMPL subsidiary which now boasts refreshed and modernised outlets; -- Gains of Rs 145m on revaluation of property, in line with our group policy; -- Rs 89m of increases in associates and joint ventures, fuelled principally by Rs60m of new capital injected into our construction and hospitality associates; and -- Offsetting losses such as Rs 13m of goodwill impairment and Rs 17m of non-current receivables converted into equity of our associates. Working capital management improvement remains one of the key priorities of the Group and yielded improved results in 2016, with a further Rs 230m reduction in net current assets employed by the Group. This, added to the underlying profitability of the Group, contributed to reversing the net debt trend by approximately Rs 42m. Acknowledgements I would like to end the report by thanking the Harel Mallac management team and staff for their commitment to the journey of change that has been embarked on in 2016 and I look forward to their continuing support in the ongoing reorganisation of the Group. I am grateful to the Board and the Chairman for their renewed confidence and guidance to date and in a year which has seen our continuing operations turn the corner and deliver positive results before tax. Finally, I would like to express my appreciation to all our valued consumers and other stakeholders for their continued trust in our Group. Charles Harel Chief Executive Officer Outlook The priority in the coming year is to solidify the recovery of the Group by further streamlining governance processes and embedding the common culture that reflects the Harel Mallac s new purpose. There is room for growth and operational improvements within our existing core activities, which will be driven by the Head Office. This culture of for the better, together with our guiding principles of agility, care and trust must be part of our people s life at work and the environment they evolve in, to improve our businesses a little more every day. A market-leading position in a range of economic sectors locally gives the Group a strong footing to benefit from the positive forecast for the Mauritian economy for Similarly, strategic initiatives are being considered and implemented to leverage its core competencies in the regional markets and enable Harel Mallac to exploit business opportunities in the emerging markets of Africa. 12 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

14 Promote creativity 13

15 BUSINESS REVIEW Manufacturing & Trading The Harel Mallac (HM) manufacturing and trading cluster comprises a multi-disciplinary group of businesses with the flagship subsidiaries broken into: Equipment & Systems : Novengi, Linxia and EO EO and Linxia are mainly engaged in the distribution of Information Technology and Consumer Electronic products, the integration of digital production printing and cash processing equipment and related after-sales support, while Novengi operates in the supply, installation and maintenance of commercial and industrial equipment and systems mainly in the construction, manufacturing and distribution sectors. The macroeconomic context remained generally weak with the construction industry registering no growth in 2016 while the wholesale/retail trade reported marginal growth of around 3%. Revenue of these main entities was up Rs 6m at Rs 1,127m while PBFC declined Rs 13m to Rs 42m, impacted by margin pressure and the drop-off from big contracts won in 2015 in the Technology Equipment sector. Achievements for the year include: -- The relaunch in the last quarter of 2016 of Harel Mallac Bureautique as EO, and Harel Mallac Engineering as Novengi following the restructuring of the former Technology activities. -- EO s capabilities to perform to the highest standard being recognised in awards such as Xerox Africa Operations Distributor of the Year and Neopost s Best Sales in Production Mail. -- Linxia successfully marketed its own high-quality curved TV brand, Myros and a new brand of Xiaomi smartphones, despite price competition from the major established players fighting for market share. -- Our first photovoltaic plant going live onto the grid, which should lead the way to more projects in the commercial and industrial production of both electricity and hot water, a promising area for the expansion of Novengi s activities. Management is confident that the continued focus on operational efficiencies and key products/brands will allow for continued expansion locally and into the East African region for the Technology Equipment sector. In the Industrial Equipment sector, the Government s incentives to boost the construction, distribution and port sectors this year present further opportunities to grow and consolidate our business lines. Chemicals, Hygiene & Fertilisers: Archemics, Suchem, MCFI, Chemco, Bychemex This division covers the manufacture and distribution of a wide range of chemicals including agricultural (e.g. fertilisers at MCFI and agrochemicals in Suchem), industrial (e.g. detergents and textile at Chemco and Bychemex) and consumer products (e.g. FMCG household detergents and cosmetics with Archemics), as well as services such as waterproofing contracting (through Coolkote). The subsidiaries are exposed to volatile market conditions with the sugarcane agricultural sector returning to growth of 5% (after contracting by 6% in 2015), textile manufacturing down by 6% and construction showing no growth. For 2016, revenue was up by Rs 13m to Rs 2,137m while PBFC jumped to Rs 101m from Rs 55m (attributable to a better sales mix driving higher margins). To address the macroeconomic challenges, management continues to push forward on: -- Product renewal (new bio-fertilisers and seeds as well as a new range of textile products from CHT-Bezema) and new brands (Australian Silvan sprayer) -- Market development with double-digit revenue growth in some regional markets, collaboration with new industrial partners like Rochex on industrial detergents and Tradecorp on specialty fertilisers to reach new market segments as well as aggressive marketing and on-the-ground presence with customers on existing products. -- Operational efficiencies from cost control and a better working capital management, including where appropriate discontinuing non-core trading (e.g. tyres) and clearing out tax compliance issues from prior years. The challenges in 2017 will be to consolidate the market share gains established in 2016, including through better logistics to reach a greater distribution network locally and in the region as well as the launch of new products and updated product lines despite an uncertain economic environment where Brexit is exacerbating the long-term decline of the textile manufacturing sector in Mauritius. Retail : Compagnie des Magasins Populaires (Monoprix) Monoprix operates three retail outlets in Bagatelle, Cascavelle and Curepipe in a dynamic food retail sector where the increasing number of supermarkets, limited household consumption expenditure (less than 3% growth) and low inflation (around 1%) have led to fierce competition for market share with a lasting impact on profit margins. This is reflected in the negative PBFC position that nonetheless improved from a loss before finance cost of Rs 79m in 2015 to Rs 77m in 2016 despite revenue rising to Rs 870m vs. Rs 829m in HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

16 BUSINESS REVIEW Manufacturing & Trading 2016 saw the completion of several key strategic projects for Monoprix, with : -- A new price positioning, via more intense promotional offers aiming to be the cheapest, which has seen the number of customers up by 10% in the first half of 2016 (pre-renovation period) and an overall 5% increase in revenue over the year (including the disruptive renovation period). -- A user-friendly customer outreach programme with the launch of the Monoprix website and mobile app as well as the loyalty card, the only scheme to give cash benefits for each shopping trip based on the level of spending, which has seen 30% of turnover coming from cardholders within eight months. -- A refurbishment and expansion of its stores funded by Rs 141m of rights issue. All the actions already implemented and to be carried out in the near future, lead management to expect significant market share gains in 2017 to establish Monoprix as the preferred local store for consumers. Management is continuing to actively pursue a number of further strategic actions to accelerate the return to profitability. Revenue and Profit Before Finance Costs Revenue Profit Before Finance Costs (Rs m) 4,000 - (Rs m) ,000-2, , Equipment & Systems Chemicals, Fertilisers & Hygiene Retail Others & Consolidation 15

17 BUSINESS REVIEW Business services Technology: Harel Mallac Technologies and its overseas subsidiaries in Madagascar, Burundi and Rwanda. Harel Mallac Technologies is organised around three core activities: Advanced Infrastructure Services which provides cost-effective infrastructure solutions to business needs, Business Automation Services which has the expertise to streamline business processes and operations for efficiency and Cloud capabilities to deliver managed hosting and connectivity services. The information and communication sector locally experienced a slowdown to less than 6% growth vs. 7% in The division was not helped by its overseas subsidiaries in this respect, as they were impacted by political turmoil in Burundi and a slow start in Rwanda and Madagascar. Achievements for the year include: -- an increase in operational PBFC to Rs 30m despite the Rs 130m decrease in revenue to Rs 626m arising from all the headwinds described above and the restructuring of non-core activities; -- the successful relaunch of its African offices under a unified brand, Harel Mallac Technologies instead of the mismatched legacy identity of Infosystems Business Technologies and Orinux; and -- the high profile contract for the National Assembly video platform project further cemented our status as a leader in the field. The challenge for 2017 rests in developing market share with further expansion in the African continent and in particular, in new territories like Ethiopia and West Africa where opportunities have been identified to position Harel Mallac Technologies in niche segments. Financial & Corporate Services: Harel Mallac Global Services, Harel Mallac Corporate Services and The Professional Learning Centre (TPLC) Harel Mallac Global Services is a management company providing administrative services to global companies. As part of the reorganisation of the former Technology Arm, the share registry business was moved to the newly created Harel Mallac Corporate Services while TPLC, traditionally positioned within IT training, has moved into Financial Services, with the provision of FITCH Learning courses in Mauritius and Africa. The economic backdrop has been broadly supportive with sectoral growth of around 6% but changes in the double taxation treaty with India and a weaker economic performance in Africa added a specific overlay of concern for the industry. The division contributed Rs 29m in revenue (2015: Rs 20m) and showed an improvement of Rs 1m at operational level but ended the year with a loss before finance cost of Rs 2m. Highlights from 2016 include: -- revenue more than doubled in 2016 at Harel Mallac Global Services to Rs 9m and losses before finance costs nearly halved; -- Harel Mallac Corporate Services was successfully launched, ending its first year with a PBFC of Rs 1m; and -- TPLC secured training contracts with a major Mauritian financial services group for its new FITCH Learning product and is in advanced stage discussions with others. The priority in 2017 remains new client acquisition and management will be looking into such areas as acquisition of blocks of administrative business, dual listings on African exchanges and further marketing outreach into African countries. Travel Itineris and Harel Mallac Aviation Itineris is in the travel design agency business as well as the cargo General Sales Agent activity it represents Leisure Cargo, a German-based cargo management company while Harel Mallac Aviation acts as a passenger General Sales Agent for Condor, Germany s number one leisure carrier, and India s flag carrier, Air India. The year 2016 saw a favourable climate for the passenger business with the number of Mauritians travelling abroad up 7% compared to prior year whereas excess capacity remained a drag on the cargo environment, driving extreme competition. Revenue registered growth of 10% to Rs 26m in During 2016, management prioritised: -- the rebranding exercise of Harel Mallac Travel & Leisure into Itineris to align better with new travel trends, focused on designing aspirational travel experiences tailored to the customer s travel dreams; -- the roll-out of the digital marketing strategy which attracted new leisure customers and the Carlson Wagon Lit Travel (the worldwide leader in corporate travel) representation to reinforce our corporate segment strategy; and -- operational efficiencies to tackle the competitive headwinds, including the withdrawal of Meridiana fly (Italy) from the mandate airlines operating into Mauritius represented by the cargo business. These are reflected in the improving financials of the division where PBFC upped 56% to Rs 1m. Further investments in systems and training to develop the business lines are expected in 2017 to continue the improving trend. 16 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

18 BUSINESS REVIEW Business services Digital Agency Activeline Activeline operates in the BPO, design and media services sector and 2016 saw a significant investment in resources to launch the CZAM agency brand to market the advertising and digital services offering as a full-fledged communication agency. The wider administrative and support services sector showed growth of about 6% in 2016 and although Activeline grew its top-line by about 15% to Rs 43m, the investments made to grow the business weighed on its operational profit so that it ended with a loss before finance costs of Rs 5m. Revenue and Profit Before Finance Costs Revenue Profit Before Finance Costs (Rs m) (Rs m) Technology Financial Services Digital Agency Travel Others & Consolidation 17

19 BUSINESS REVIEW Asset Management The Harel Mallac Asset Management cluster comprises investments in: Associates Attitude Hospitality Management, Emineo Holding, Imatech, Maritim (Mauritius), Société Oneo, Solar Field, Total Mauritius, Touristic United Enterprise, Water Sport Village, Zilwa Resort, Biofert, Rehm Grinaker Construction, Rehm Grinaker Properties. Harel Mallac holds investments in hospitality, engineering, construction, commodities and printing. These investments have been made at various life-cycle stages and the Group sees itself as a co-venturer for the long-term. The performance in 2016 is notable for the following factors: -- Continued growth in the contribution of the hospitality investments, with the ramp up of the Attitude and Touristic United Enterprise activities more than offsetting the relative underperformance of Maritim which although profitable, was negatively affected by the Brexit. However, such growth requires funding and Harel Mallac converted its shareholder loans of Rs 17m to Touristic United Enterprise into additional shareholder capital as the latter continues its expansion into Reunion Island. -- The engineering and construction associates remain cyclical investments with Emineo benefiting from contracts in mainland Africa and Mauritius (swinging into the black at Rs 2m for 2016 from a Rs 11m loss in 2015) but Rehm Grinaker suffered from the weak pricing environment in the construction sector in Mauritius (and losing a further Rs 36m in 2016 after Rs 1m in 2015). To strengthen Rehm Grinaker, the Group contributed a further Rs 43m as its share of the capital raising in Total Mauritius remains a stable influence within our investment portfolio showing an 8% growth in the share of profits consolidated by Harel Mallac. -- Imatech found a surer footing in the printing market in 2016, allowing the Group to report a Rs 1m share of profit from a marginal loss in Property Harel Mallac holding companies manage a portfolio of investment properties. The Group holdings are mainly in and around the Port Louis area and limited economic growth as well as the development of smart cities is causing downward pressure on the wider rental market, leaving buildings unoccupied and depressing prices in the capital city. The portfolio recorded a fair value decline of Rs 1m from 2015 on a like-for-like basis, which was offset by other increases in the portfolio. Management continues to look at all opportunities to extract value from what remains a great asset, particularly in terms of prime land in Port Louis. Harel Mallac continues to review its investments on an ongoing basis to determine where it can maximise shareholder returns. Joint venture Solar Field Harel Mallac jointly controls Solar Field, a start-up photovoltaic farm providing green electricity to the national grid. This venture only started its sale to the CEB in late December 2016 after commencing construction in the second quarter, which is the main driver of its running costs exceeding its revenue by Rs 5m in HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

20 BUSINESS REVIEW Asset Management Profit contribution and Investments Profit contribution Investments (Rs m) (Rs m) Associates Joint Venture Investment properties 19

21 Improve quality of life 20 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

22 CORPORATE SOCIAL RESPONSIBILITY The Fondation Harel Mallac (FHM) has been focusing since its inception in 2009 on improving the education and living conditions of underprivileged children, in particular in the localities where the Group 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 Bois Marchand, 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. On the environmental side, the Group has continued its Go Green Initiative, in partnership with the NGOs Mission Verte and the Mouvement pour l Autosuffisance Alimentaire (MAA). In 2016, Mission Verte has collected 150kg of cardboard and 1,085kg of paper from our Port Louis offices. The MAA has helped us grow our roof vegetable garden which provides herbs and vegetables to the kitchen and employees. HUMAN RESOURCES Mission Statement At Harel Mallac, we strongly believe that people are our greatest asset, and in line with our Purpose, we strive to build together a trusting and energizing workplace where ideas are shared, talents are nurtured and creativity is stimulated. Accordingly, the Group pursued a number of key initiatives such as organisational restructuring, talent training, management competency review, performance reward incentive, talent recruitment, welfare and employee engagement. Organisational Restructuring The Group, in its pursuit to build a lean and agile organisation capable of efficiently meeting its growing challenges within a fierce and competitive environment, has restructured its former Technology, Engineering, Retail, Chemical and Services Arms to now operate under three distinct clusters consisting of divisions, sub-divisions and business units. At 31 December 2016, the Harel Mallac Group employed 1,367 people in Mauritius and abroad. Training For the year 2016, the Group invested some Rs 8.9m in on-site and off-site employee training. Twenty of our young talents with growth potential attended an intensive training on Successful Implementation of Operational Initiatives and have been assigned with four challenging and company-related projects: A centralised car service centre ; Digitalisation of Legal and Corporate Secretaries Department ; Group Innovation Award ; and Group Employee Privilege Card. The projects are underway and will help the Group bring appropriate recommendations to fruition. The Group continued its series of inspirational presentations with the seminar on Management Techniques for High-Performing Teams by Patrick Dutartre former Leader of the Patrouille de France to its management and high-potential staff. Eighteen members of the Finance Team and a selected number of managers went through a training conducted by Grant Thornton on Budgeting and Reporting. The Financial Controllers and Accountants went through a technical refresher programme on accounting issues and standard. Management Development Centre As part of the Harel Mallac Group Management Development Programme, a development assessment was conducted among seventy of its managerial staff. The findings will help equip the Group s identified candidates with the required level of competencies. These in turn help the organisation in developing and implementing the most resilient strategies for business performance and business sustainability. The exercise also served as a tool to plan appropriate development and training for managers. Performance Reward Incentive A Make it Happen incentive scheme was introduced to reward employees of those Business Units that managed to meet or exceed the incentive PAT targets. Some business units made it in 2016 and the employees concerned have been rewarded in line with the scheme s provisions. 21

23 HUMAN RESOURCES (cont d) Talents Recruitment A young professional challenge initiative was developed with the aim to (i) providing young professionals (internal and external) who already have a few years of work experience at mid-management level with development opportunities, where the enhancement of key technical and managerial competencies as well as reinforcing the Group s management team are of core importance; (ii) preparing them to assume higher positions and responsibilities in line with the Group s succession planning process; (iii) obviating existing and potential talent shortage as part of a risk mitigation plan; and (iv) providing a healthy competitive atmosphere with a drive and passion for self-development, excellence and making a difference for the better. Welfare activities Beside numerous employee welfare activities held at business unit or division level, a new edition of the Harel Mallac Funlympics was organised. It rolled out over five months in all workplaces involving the participation of hundreds of employees at all levels and ended with the Funlympics Day on 24 September. Other activities included inter alia the projection of the movie Demain, a Health and Safety Week at MCFI and weekly Zumba sessions at Pailles. Employee Engagement Survey Harel Mallac has been using engagement surveys to identify the key drivers for employees sense of belonging and will to progress and thrive in the company. In 2016, the Group worked with AON Hewitt to assess its employee engagement level and guide us in taking appropriate measures to improve the latter. The survey was conducted towards the end of September, with a laudable response rate of 82% among the employees, and showed the following results: was entirely reviewed. With three dedicated Health and Safety Officers, the Group fully commits itself to protect the safety, health and welfare of its employees and enhance their working environment. Regular employee induction training has been conducted for new recruits over the year. Communication In line with our ambition to create a better and more cohesive team, our internal communication has been revived via regular communications from the CEO s desk, sharing important news with all staff, the monthly In Touch e-newsletter, a video of the CEO explaining the financial results, a CEO s roadshow comprising 13 visits to business units to share the Brand Positioning with all employees. The traditional six-monthly communication meeting (L Apéro du CEO) also remains a key moment of sharing on the Group s achievements and plans with the management team. The management team convened for a full-day workshop in August on defining a Purpose and Guiding Principles for the Group. A joint HR and Communication task force has worked on the Group Intranet, Edith, which was launched early January 2017, and whose main objective is to make available to all staff the information, tools and documents needed to collaborate better. Although this overall engagement rate falls below our expectations, it was encouraging to note that the scores of our Retail, Chemicals and Business Services Divisions all rated over 50%, which, in a transition time for the Group, is rather satisfactory. Each business unit has nevertheless set up work improvement teams to tackle the factors of disengagement and presented work-plans in this sense in December Health and Safety The health and safety of employees has remained high on the Group s agenda in A new Group Health and Safety Officer was recruited. The Health and Safety Policy 22 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

24 BOARD OF DIRECTORS Antoine L. Harel (59) Chairman - Non-Executive Director Antoine L. Harel is a Fellow Member of the Institute of Chartered Accountants in England and Wales. He holds a BA (Hons) degree in Accounting and Computing. He joined Harel Mallac & Co. Ltd in 1987 and launched the Company s Information Technology Division. On joining the Board in 1990, he was appointed Executive Director with responsibility for the Information and Communication Technology and the Distribution and Retail Divisions. In 1997, he was appointed Group CEO and has been the Chairman of the Board since April He was President of the Mauritius Chamber of Commerce & Industry from 1992 to Other Directorships (listed Companies): Compagnie des Magasins Populaires Limitée (Chairman), The Mauritius Chemical and Fertilizer Industry Limited (Chairman), Bychemex Limited (Chairman), Chemco Limited (Chairman) and Les Gaz Industriels Ltd (Chairman). Charles Harel (49) Chief Executive Officer - Executive Director Charles Harel holds a National Diploma in Management and Finance from the Cape Technikon, South Africa, as well as an MBA from the University of Birmingham, UK. He joined the Harel Mallac Group in 1998 as the General Manager of the Tourism and Retail Cluster. He has, over the years, held various positions across the Group before being nominated as the CEO Designate of the Harel Mallac Group in 2013 and CEO from 1 January He was appointed to the Board of Directors in June Other Directorships (listed Companies): Compagnie des Magasins Populaires Limitée, The Mauritius Chemical and Fertilizer Industry Limited, Bychemex Limited and Chemco Limited. Dean Ah Chuen (52) Independent Director Dean Ah-Chuen holds a BA degree in Computer Science from the University of Sydney and an MBA in International Business from the University of Western Sydney. He is the Executive Director of ABC Motors Co. Ltd. Prior to joining ABC Motors Co. Ltd, he worked for the IT Division of Westpac Banking Corporation and as Sales Consultant for Clintons Toyota in Sydney, Australia. Dean Ah Chuen was appointed to the Board of Directors of Harel Mallac & Co. Ltd in June Other Directorship (listed Company): ABC Motors Co. Ltd. Jérôme de Chasteauneuf (50) Independent Director Jérôme de Chasteauneuf qualified as Chartered Accountant of England and Wales in 1992 and holds a BSc (Hons) degree in Economics from the London School of Economics and Political Science. He joined the CIEL Group in 1993, became Head of Finance in 2000 and serves as Executive Director since January He was appointed to the Board of Directors of Harel Mallac & Co. Ltd in May Other Directorships (listed Companies): CIEL Limited, Alteo Limited and Sun Resort Limited. 23

25 BOARD OF DIRECTORS (cont d) Paul Clarenc (72) Independent Director Paul Clarenc holds a Diploma in Production Management (Delft, Holland) and a Bachelor of Science (Hons) degree from Cape Town University. He was the Managing Director of Mauritius Oil Refineries Limited from 1986 to He is a Founder Member of the Association of Mauritian Manufacturers. He has also been, from 1995 to 2000, a member of the Council and in 1998, President of the Mauritius Chamber of Commerce and Industry. Paul Clarenc was appointed to the Board of Directors of Harel Mallac & Co. Ltd in May Other Directorships (listed Companies): Plastic Industry (Mauritius) Ltd. and Mauritius Oil Refineries Ltd. Anne Christine Lévigne-Fletcher C.S.K. (62) Chevalier de l Ordre National du Mérite Independent Director Anne Christine Lévigne-Fletcher C.S.K. holds a Diplôme de l Institut d Etudes Politiques de Paris/ Sciences Po, a Licence en Droit from Assas University and a Licence en Littérature Anglaise from Université de Nanterre. She was, from 1976 to 1981, the Managing Director/Designer of Mistra, an international company based in Paris operating in the design industry. She has been the Managing Director of Les Ateliers Créatifs de l Océan Indien Ltée/Caléage Ltd - Hémisphère Sud since Anne Christine Lévigne-Fletcher C.S.K was appointed to the Board of Directors of Harel Mallac & Co. Ltd in May Other Directorships (listed Companies): None Anwar Moollan S.C. (49) Independent Director After reading for a degree in Mechanical Engineering in France, Anwar Moollan, SC studied Law at Downing College, Cambridge and the Université de Paris Panthéon-Sorbonne. He joined the Chambers of Sir Hamid Moollan, QC in 1995, and practices as a barrister. Anwar Moollan, S.C. joined the Board of Directors of Harel Mallac & Co. Ltd as an Independent Director in June Other Directorships (listed Companies): Compagnie Immobilière Limitée. Michel Rivalland G.O.S.K. (63) Executive Director Michel Rivalland G.O.S.K. is a Fellow Member of the Chartered Association of Certified Accountants. He was appointed to the Board of Directors of The Mauritius Chemical and Fertilizer Industry Limited on 1 June 2006 and Managing Director in October He is presently Executive Director of Harel Mallac & Co. Ltd. Michel Rivalland G.O.S.K. was appointed to the Board of Directors of Harel Mallac & Co. Ltd in May Other Directorships (listed Companies): Compagnie des Magasins Populaires Limitée, The Mauritius Chemical and Fertilizer Industry Limited, Bychemex Limited and Chemco Limited. 24 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

26 LEADERSHIP TEAM at 31 December 2016 Charles Harel Chief Executive Officer Charles Harel holds an MBA from the University of Birmingham, UK, as well as a National Diploma in Management and Finance from Cape Technikon, South Africa. He joined the Harel Mallac Group in He has held various senior management positions within the Group and was appointed Chief Executive Officer of the Harel Mallac Group in January Michel Rivalland G.O.S.K. Executive Director Michel Rivalland, G.O.S.K. is a Fellow Member of the Chartered Association of Certified Accountants. He was appointed to the Board of Directors of The Mauritius Chemical and Fertilizer Industry Limited in June 2006, and subsequently as Managing Director of that same entity in October He has been an Executive Director of Harel Mallac & Co. Ltd since July Alain Ah Sue Managing Director Linxia & EO Holder of a BSc in Computer Science from the City University of New York, Alain Ah Sue joined Harel Mallac Computers in He was appointed Managing Director of the Group s Technology Arm in 2010, and since the restructuring of Harel Mallac in 2016, is the Managing Director of Linxia and EO. Jean-Alain Bigara Managing Director Novengi Jean-Alain Bigara holds a BSc in Economics and Business Administration (University of Natal, Pietermaritzburg) and a MBA from Heriott-Watt University. He first joined Harel Mallac in 1988 as Sales Representative and was appointed Department Manager (Agro-Industrial) in 2005, then General Manager. Jean-Alain Bigara is Managing Director of Novengi since April Shemboosingh Cheekhooree Managing Director MCFI, Chemco, Bychemex Holder of a Bachelor s degree in Chemical Engineering from the North East London Polytechnic, United Kingdom, Shemboosingh Cheekhooree worked at Tate and Lyle Process Technology in the UK, in Before joining Harel Mallac Export Ltd as Managing Director in 2012, he was the General Manager of FM Denim Co. Ltd. Since October 2014 he is the Managing Director of Harel Mallac Export Ltd, Harel Mallac (Tanzania) Limited and MCFI Group of Companies. 25

27 LEADERSHIP TEAM (cont d) at 31 December 2016 Sophie Desvaux de Marigny Group Head of Communications and CSR Sophie Desvaux de Marigny holds a Maîtrise in Geopolitics and a Magistère in International Relations and Diplomacy (both from Sorbonne University, Paris) as well as an Executive MBA from Dauphine University. After working for the United Nations in New York, she came back to Mauritius in 2003 and joined the European Commission Delegation as Assistant to the Economic Adviser for three years. She then spent ten years in Medine Group as Head of Corporate Communications and Sustainability. Sophie Desvaux de Marigny joined Harel Mallac in March Hélène Echevin Managing Director Archemics & Suchem Hélène Echevin holds a degree in Food Sciences and Technology from the ISIM Engineering School (Institut des Sciences de l Ingénieur de Montpellier). She has also been on a Management Executive Programme at INSEAD. Hélène was the President of MCCI (Mauritius Chamber of Commerce and Industry) from 2015 to She is a Board member of MARENA (Mauritius Renewable Energy Agency) and Maurilait Production Ltd. She was COO at the Corporate Office of Food and Allied where she spent 15 years. Hélène Echevin joined Harel Mallac in January 2016, as Managing Director of Archemics and Suchem, until February Vishen Gopalla Group Financial Controller Holder of a BA and MA in Economics from the University of Cambridge & a member of the Institute of Chartered Accountants of Scotland, Vishen G. Gopalla (an ex-laureate) worked in London as Audit Executive at Ernst & Young LLP and Finance Manager at Close Brothers Group plc. He returned to Mauritius in 2011 to be Partner at Nexia Baker & Arenson, Chartered Accountants and subsequently Group Finance Director at Apavou. He joined Harel Mallac in March Vanessa Leclézio-Hippert Group Head of Corporate Services Vanessa Leclézio-Hippert holds a Master s Degree in Banking and Finance and a Licence in Economics from the Université de Paris Panthéon-Sorbonne. Prior to joining Harel Mallac as Head of Business Risks and Operational Efficiency in October 2014, she has held various management position within Société Générale Investment Banking in New York and Paris between 2004 and André Nairac General Manager Itineris & Harel Mallac Aviation André Nairac started his career in the aviation industry in 1989 when he joined the Sales and Marketing Department of South African Airways (SAA) in Mauritius. He subsequently held the position of SAA s Country Manager in Côte d Ivoire. He took employment with the Harel Mallac Group as General Manager of the Travel and Leisure business in HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

28 Jean-Raymond Semaesse Chief Executive Officer Compagnie des Magasins Populaires Limitée Jean Raymond Semaesse has a Maîtrise en Sciences Économiques from Lille University. He worked for more than 25 years in Europe for reputable enterprises such as Carrefour, Auchan, Casino and Promodes. From July 2005 to January 2010, he served as General Manager of Vindemia in Mauritius with responsibility for two Jumbo hypermarkets and seven SPAR supermarkets, thereafter becoming Directeur Réseau Hypermarchés Jumbo until He joined CMPL Group in July 2015 as CEO. Shateeaum Sewpaul General Manager Harel Mallac Technologies Shateeaum Sewpaul holds an MBA and a Post-Graduate Diploma in Business Administration from the Heriot-Watt University, Scotland. He also holds distinctive certificates in Computer Science and Administrative Management from the City and Guilds of London Institute (UK) and from the Institute of Administrative Management (UK) respectively. He started his career in ICT in 1996 with Harel Mallac, where he has held different senior sales and management positions until He was also General Manager of a leading South African IT Brand (Distributor) from 2001 to 2004, before joining Harel Mallac again in He was appointed General Manager of Harel Mallac Technologies in April Appalsamy Thomas G.O.S.K. Group Head of Human Resources Appalsamy Thomas, G.O.S.K. holds an MBA from the University of Surrey, a Diploma in Personnel Management from the University of Mauritius, a Diploma in Occupational Health and Safety and a Diploma in Industrial Psychology from the National College of Industrial Hygiene, Australia. He joined Harel Mallac in June 2005 as Group Head of Human Resources and assumed the role of Managing Director of Activeline from February Appalsamy Thomas left Harel Mallac in March Christian Yong Kiang Young General Manager Projects and Investment Christian Yong Kiang Young is a member of the Institute of Chartered Accountants in England and Wales (ICAEW) and holds a Bachelor of Science degree from the London School of Economics, UK. He was Director International Accounting & Reporting at MoneyGram from September 2009 to September 2015 and Audit Manager at KPMG from September 2002 to July In October 2015, he joined Harel Mallac as Group Financial Controller and accepted the challenge of managing the Group s projects and investments portfolio in August

29 DIRECTORS OF SUBSIDIARY COMPANIES Director during the year ended 31 December 2016 Gérant Statutaire Resigned during the year ended 31 December 2016 Alternate Director President Ceased to act as Director during the year ended 31 December HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

30 29

31 Take you forward 30 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

32 CORPORATE GOVERNANCE REPORT Harel Mallac & Co. Ltd is committed to the highest standards of business integrity, transparency and professionalism in all its endeavours in order to ensure that the activities within the Company and the Group are managed ethically and responsibly to enhance business value for all stakeholders. The Company is fully committed to the highest principles of corporate governance. THE BOARD OF DIRECTORS The Board exercises leadership, entrepreneurship, integrity and sound judgment 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 management and capital management. As such, it reviews and approves quarterly and annual financial reports, monitors financial results and approves major capital expenditure, major acquisitions, divestitures and material commitments. Finally, the Board oversees compliance and risk management. The roles of the Chief Executive Officer and the Chairman are separated. Non-Executive Directors have access to members of the leadership team, with whom they can meet freely without the Executive Directors. All Directors have access to the Company Secretary and newly appointed Directors follow an induction programme. Board Committees, as described below, have been set up to assist the Board and its Directors in discharging their duties and responsibilities through comprehensive evaluation of specific issues, followed by carefully considered recommendations to the Board. The Board Committees meet regularly under the terms of reference set by the Board. The Board entrusts the operating decisions of the Company to the CEO and Leadership Team, who meet regularly to ensure the smooth running of the organisation. 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 discussed at the Corporate Governance Committee. This Committee makes recommendations to the Board on any remedial action that may be required. The Directors of the Company hold office for one year but are eligible for re-appointment. Directors are elected or reelected yearly by separate resolutions. The composition of the Board of Directors, the Directors profiles and their other directorships in listed companies are provided on pages 23 and 24. BOARD MEETINGS The Board meets regularly during the year. For the period under review the Board met nine times. Board meetings are conducted in accordance with the Company s Constitution and the Companies Act. Board meetings are organised in such a way that Directors receive all relevant information pertaining to the agenda of the Board meeting so that they may participate meaningfully in the decision-making process and fully make their contribution as Directors. The Board may invite management or external consultants to attend Board meetings when required. BOARD COMMITTEES Corporate Governance Committee At 31 December 2016, the Corporate Governance Committee consisted of Messrs Antoine L. Harel (Chairman), Paul Clarenc, Anwar Moollan S.C. and Dean Ah Chuen. The Company Secretary acts as Secretary to the Committee. The Committee s terms of reference cover the key areas that are the remit of a nomination and remuneration committee as contained in its formal terms of reference approved by the Board. Its main responsibilities include establishing formal and transparent procedures for developing policy on executive and senior management remuneration, as well as determining specific remuneration packages for Executive Directors of the Company. This Committee fixes the fees of the Company s Non-Executive and Independent Non-Executive Directors. It oversees the process regarding recommendations of potential Directors, and ensures that proposed candidates are fit and proper to act as Directors. It monitors the balance and effectiveness of the Board. It also makes recommendations to the Board on the nomination and remuneration of the Company s representatives on the Board of Subsidiary Companies. The Corporate Governance Committee has assessed the Board and made recommendations for the election of Directors at the next Annual Meeting of Shareholders. 31

33 CORPORATE GOVERNANCE REPORT Audit Committee The Audit Committee consists of Messrs Jérome de Chasteauneuf (Chairman), Anwar Moollan S.C. and Michel Rivalland G.O.S.K. and Mrs Anne Christine Lévigne-Fletcher C.S.K. The Company Secretary acts as Secretary to the Committee. The Committee fulfilled its responsibilities for the year under review, in accordance with its formal terms of reference approved by the Board. The role and responsibility of the Audit Committee is to assist 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 caters for issues within the ambit of a risk management committee and as such provides a forum for discussing business risks and control issues and for formulating relevant recommendations for consideration by the Board. The Board is satisfied that the Audit Committee has the required skills, knowledge and financial experience to discharge its duties effectively. Strategic Committee The Strategic Committee is chaired by Mr Antoine L. Harel and its members are Messrs Michel Rivalland G.O.S.K. and Charles Harel. The Company Secretary acts as Secretary to the Committee. This Committee monitors the implementation of plans and policies decided by the Board, advises executives in the interim period between Board meetings, and evaluates strategic plans, budgets, acquisitions and proposals by executives for presentation to the Board. This Committee also validates small-sized projects that are in line with the Company s strategic plan as determined by the Board. COMPOSITION OF SUBSIDIARY COMPANIES BOARDS The composition of the Boards of subsidiary companies is given on pages 28 and 29. DIRECTORS FEES Non-Executive Directors are paid Directors fees commensurate with their responsibilities on the Board. Those serving on Board Committees receive additional fees. The Company s Executive and Non-Executive Directors sitting on the Boards of subsidiary companies may also receive Directors fees from such subsidiaries. The fees paid are in line with market practices. ATTENDANCE AT BOARD AND BOARD COMMITTEE MEETINGS IN 2016 Board of Directors Corporate Governance Committee Audit Committee Strategic Committee AH CHUEN Dean 5/9 5/5 - - CLARENC Paul 9/9 4/5 - DE CHASTEAUNEUF Jérôme 8/9 7/7 HAREL Antoine L. 9/9 5/5-2/2 HAREL Charles 9/9 5/5 2/2 LEVIGNE FLETCHER C.S.K. Anne Christine 8/9-6/7 - MOOLLAN Anwar S.C 3/9 3/5 3/7 - RIVALLAND G.O.S.K. Michel 8/9-7/7 2/2 32 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

34 CORPORATE GOVERNANCE REPORT DIRECTORS REMUNERATION Directors remuneration is given on page 39. It has been disclosed globally due to the commercial sensitivity of the information. REMUNERATION POLICY The Company s remuneration policy recommends that the Company provides competitive rewards for its senior executives and other senior management staff, taking into account the Company s performance and external market data from independent sources, in particular, salary levels for similar positions in comparable companies. The remuneration package consists of base salary, fringe benefits and individual and collective performance bonuses. The remuneration package is determined by the Board of Directors upon recommendations of the Corporate Governance Committee. SHAREHOLDERS AGREEMENT AFFECTING THE GOVERNANCE OF BY THE BOARD The Company is not aware of any such agreement during the year under review. THIRD PARTY MANAGEMENT AGREEMENT There was no agreement between third parties and the Company or its subsidiaries during the year under review. LEADERSHIP TEAM PROFILE The profile of the Leadership Team is given on pages 25 to 27. RELATED PARTY TRANSACTIONS Related party transactions are detailed on pages 119 and 120. RISK MANAGEMENT Risk management refers to the process used by the Company to monitor and mitigate its exposure to risk. The Board regularly addresses and evaluates physical, human resources, technology, financial, business, operational, reputational as well as regulatory and compliance risks. Although the Board is ultimately responsible for the process of risk management, the management is accountable to the Board for the design, implementation and detailed monitoring of the risk management process. The Board has delegated to the Audit Committee the responsibility to supervise the monitoring and mitigation of risk exposure. The Audit Committee has overseen a risk review in collaboration with management. Internal and external risks facing the organisation have thus been identified and the mitigation of such risks is being implemented by management. In 2010, a risk management framework 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. A risk register has been elaborated for better safeguard of the Company s interests and assets. Among the risk areas identified and control procedures put in place are the following: 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. The Company s control procedures ensure mitigation of risks relating to fraud and theft. 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 and a formal performance assessment and reward system has been 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-risk jobs in line with the Company s health and safety policy. Technology Risks In order to mitigate the risk of an IT crash or major breakdown, backup and restriction procedures have been set up within the Company. 33

35 CORPORATE GOVERNANCE REPORT Financial Risks Information on financial risks management is given in note 3 to the Financial Statements on pages 66 to 68. Internal Control Internal control is a process designed to provide reasonable assurance regarding the achievement of the Group s objectives in respect of effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations. It is carried out by the Board of Directors, the management and other personnel. It is applicable to and is built into the various business processes so as to cover all significant enterprise areas. Systems and processes have been implemented within the Group and are regularly controlled by the internal audit function to ensure that they are being adhered to and that they are effective. Twelve audit reviews were performed during the year by the Internal Audit. Reports are reviewed by the Audit Committee which makes its recommendations for modifications and/or upgrading of audit systems and processes, as and when necessary, to enhance their effectiveness. Though internal control mechanisms cover subsidiaries, they do not include associate companies. INTERNAL AUDIT Internal audit is a function responsible for providing assurance to the Board regarding the implementation, operation and effectiveness of internal control and risk management systems within the Group. It reports to the Audit Committee and to the Board of Directors. It assists in the maintenance and improvement of the process by which risks are identified and managed, and in the strengthening of the internal control framework. The Group Internal Audit has examined the current control systems to check their suitability and to ensure that they are being adhered to. The Internal Audit Department conducts its assignments based on a yearly plan that is validated by the Audit Committee. The Group Internal audit has unrestricted access to the Company s records, management and employees. Systems reviewed in 2016 at the Company s and subsidiaries levels include fixed assets, procurement and accounts payable, work-inprogress management, expenses control cycles, sales and accounts receivables, cash receipts, banking procedures, stock cycles, payroll and cover all significant areas of the Company s and its subsidiaries internal control. 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 listing rules of the Stock Exchange of Mauritius and does not contain any material clause that needs to be disclosed. GROUP STRUCTURE The Directors recognise that the parent entity is Société de Lerca which holds percent of the voting rights of Harel Mallac & Co. Ltd and that the ultimate parent entity is Société Pronema. The Director common to the above entities is Mr Antoine L. Harel who is gérant of Société de Lerca and Société Pronema. SHAREHOLDINGS OF MORE THAN 5 PERCENT AS AT 31 MARCH 2017 Shareholdings of more than 5 percent as at 31 March 2017 are detailed on page 40. PROFILE OF S SHAREHOLDERS AS AT 31 MARCH 2017 The profile of the Company s shareholders as at 31 March 2017 is detailed on page 36. DIRECTORS AND OFFICERS INTERESTS IN SHARES The direct and indirect interests of Directors and Officers in the ordinary shares of the Company and its subsidiaries are to be found on page 39. DIRECTORS DEALING IN SHARES OF The Directors follow the Model Code for Securities Transactions as detailed in Appendix 6 of the Stock Exchange of Mauritius Listing Rules whenever they deal in the shares of the Company. EMPLOYEE SHARE OPTION PLAN No employee share option plan is available. The reports produced by the Group Internal Audit were regularly submitted to the Audit Committee for discussion and follow-up of the implementation of recommended actions. 34 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

36 CORPORATE GOVERNANCE REPORT DIVIDEND POLICY The Company s dividend policy provides that the dividend payable to the Company s shareholders would represent some 50 percent of the after-tax profit for the relevant period, before exceptional items. However, due consideration is given by the Board to the need to avoid major fluctuations from one year to the next. During the year under review the Board declared a dividend of Rs 1.80 per ordinary share. Year Dividend per share Dividend Cover Dividend yield (Rs) (Times) (%) SHARE PRICE INFORMATION Information relating to the share price on the Stock Exchange is given on page 37. CODE OF ETHICS As a leading operator in the Mauritian market, the Harel Mallac Group has a responsibility to conduct its business with the highest ethical standards. We are driven by our guiding principles detailed on page 5. The Company s Code of Ethics is covered in the Company s induction programme for all new employees and Directors. SOCIAL, HEALTH AND SAFETY The Health and Safety of employees has remained high on the Group s agenda in 2016, as we recruited a Group Health and Safety officer, and entirely reviewed our Health and Safety Policy. With three dedicated Health and Safety Officers, we fully commit to protect the welfare of employees and enhance their working environment. Regular employee induction training has been conducted for new recruits over the year. More than 784 hours of training have been delivered across the Group on Health and Safety such as First Aid, Induction Training, OSHA 2005 Duties of Employers and Employees and Hazard & Risk Assessment. The Health and Safety performance for the year 2016 has showed no serious accident, albeit a fire incident that occurred at one of the workshops at Pailles but which did not cause any serious material damage or bodily injury. All incidents have been investigated and near misses reported to identify the root causes. The lessons learnt and gaps identified have reinforced the need for all employees to be more vigilant. The Company has a strong commitment to sustain an organisational culture that embeds Health and Safety in its objective of remaining an employer of choice. 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 AND ENVIRONMENTAL RESPONSIBILITY The Fondation Harel Mallac (FHM) has been focusing since its inception in 2009 on improving the education and living conditions of underprivileged children, in particular in the localities where the Group 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 Bois Marchand, 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. 35

37 CORPORATE GOVERNANCE REPORT On the environmental side, the Group has continued its Go Green Initiative, in partnership with the NGOs Mission Verte and the Mouvement pour l Autosuffisance Alimentaire (MAA). In 2016, Mission Verte has collected 150kg of cardboard and 1,085kg of paper from our Port Louis offices. The MAA has helped us grow our roof-vegetable garden which provides herbs and vegetables to the kitchen and employees. PROFILE OF COMPANY S SHAREHOLDERS AS AT 31 MARCH 2017 Size of Shareholding Number of Shareholders Number of Shares Owned % Holding , , , ,001-2, , ,501-5, , ,001-10, , ,001-25, , ,001-50, , , , , , , , , , , , , ,129, ,001-1,000, ,000,001-2,000, ,888, Over 2,000, ,687, Total ,259, SUMMARY BY SHAREHOLDING CATEGORY AS AT 31 MARCH 2017 Category of Shareholders Number of Shareholders Number of Shares Owned % Holding Individual , Insurance and assurance companies 5 31, Pension and provident funds , Investment and trust companies 4 61, Other corporate bodies 71 10,296, Total ,259, FORTHCOMING ANNUAL MEETING A proxy form is enclosed for those shareholders unable to attend. Shareholders are requested to bring their National Identity Card or passport to the meeting, as these are required for registration. SCHEDULE OF EVENTS Publication of condensed audited results for previous year March 2017 Annual Meeting April/May 2017 Publication of condensed results for 1st quarter May 2017 Publication of condensed results for 2nd quarter August 2017 Publication of condensed results for 3rd quarter November 2017 Dividend declaration and payment December 2017/January HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

38 CORPORATE GOVERNANCE REPORT 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 DAILY SHARE PRICE FROM JANUARY 2016 TO DECEMBER 2016 HAREL MALLAC (Rs) SEMDEX PERIOD Harel Mallac Semdex 37

39 Foster sustainable growth 38 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

40 STATUTORY DISCLOSURES PRINCIPAL ACTIVITIES Following Harel Mallac s strategic repositioning exercise, the Group s activities have been organised into three distinct clusters of operations, namely Manufacturing and Trading, Business Services and Asset Management. DIRECTORS The directors of the Company are listed on pages 23 and 24. In addition, a list of the directors of subsidiary companies is found on pages 28 and 29. DIRECTORS SERVICE CONTRACTS One of the Executive directors of the Company has a fixed-term contract with the Company providing for renewal subject to the mutual agreement of the parties. None of the other directors of the Company and its subsidiaries have service contracts that need to be disclosed under Section 221 (2) of the Companies Act DIRECTORS REMUNERATION AND BENEFITS Remuneration and benefits received, or due and receivable from Harel Mallac & Co. Ltd. and its subsidiaries were as follows: THE SUBSIDIARIES The Company Executive Director Full-time 9,671 13, Part-time Non-Executive Directors 3,267 2,832 1,910 1,642 12,938 16,047 1,910 1,642 Directors of subsidiary companies Executive Directors Rs 000 Rs 000 Full-time 16,278 24,969 Part-time - - Non-Executive Directors 3,826 4,072 20,104 29,041 One director has waived emoluments received by him from the Company since his nomination in DIRECTORS AND SENIOR OFFICERS INTERESTS IN SHARES The interests of the directors and senior officers in the securities of the Company and of the Group as at 31 December 2016 are as follows: Directors THE SUBSIDIARIES Direct Interest Indirect Interest Direct Interest Indirect Interest HAREL Antoine L ,347-1,128,142 HAREL Charles P. L ,390-1,105,362 None of the Directors hold direct or indirect interest in the shares of the company or its subsidiaries. None of the other Senior Officers of the Company has direct or indirect holding in the shares of the Company or its subsidiaries. 39

41 STATUTORY DISCLOSURES CONTRACTS OF SIGNIFICANCE There was no contract of significance to which the Company or any of its subsidiaries have been a party and in which a director of the Company was materially interested, be it directly or indirectly. SHAREHOLDERS Major Shareholders At 31 March 2017, the following shareholders were directly or indirectly interested in more than 5% of the ordinary share capital of the Company. NUMBER OF SHARES INTEREST % Société de Lerca 5,687, Terra Mauricia Ltd 1,888, Société Deshenri 570, Except for the above, no person has reported any material interest of 5 percent or more of the equity share capital of the company. CORPORATE SOCIAL RESPONSIBILITY Donations made during the year: Political Recipients for the Group and the Company 2016: nil (2015:1) Others Recipients for the Group 2016:33 (2015:24) Recipients for the Company 2016:4 (2015:5) Corporate Social Responsibility 1, AUDITOR S FEES The fees payable to the auditors, for audit and other services were: Audit Fees payable to: BDO & Co 6,652 6, Other firms Fees payable for the other services provided by - BDO & Co Other firms Other services provided by auditors in 2016 and 2015 relate to fees for advisory services on taxation. 40 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

42 VALUE ADDED STATEMENT Rs'000 Rs'000 Revenue 4,648,741 4,742,324 Paid to suppliers for materials and services 3,839,749 3,906,304 Value added 808, ,020 Income from investment in associates & Joint Ventures 63,299 76,124 Profit on disposal of investments - 10,691 Reclassification of fair value gain on available for sale financial assets, net of expense - - Net impairment of investment, receivables & goodwill (17,746) (38,938) Total wealth created 854, % 883, % Distributed as follows: Employees Remuneration and service benefits 692,868 81% 699,047 79% Providers of capital Dividends to shareholders 20,267 20,267 Interest paid on borrowings 84,518 94,602 Minority interests (43,851) (54,241) 60,934 7% 60,628 7% Government taxes on earnings Taxation 45,157 5% 25,200 3% Retained in the group to ensure future growth 109, ,851 Depreciation and amortisation (53,960) (24,829) Retained profit/(loss) 55,586 7% 99,022 11% Total wealth distributed and retained 854, % 883, % Total Wealth Created Employees Remuneration & Service Benefits Providers of Capital Government Taxes on earnings Retained in the Group to ensure future growth

43 STATEMENT OF DIRECTORS RESPONSIBILITIES The 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 and the results of its operations and cash flows 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 judgment. The external auditors are responsible for reporting on whether the 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 judgments and estimates have been used consistently; 3. applicable accounting 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 been non-compliance. Signed on behalf of the Board of Directors on 31 March Antoine L. Harel Chairman Charles Harel Chief Executive Officer 42 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

44 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 For HM Secretaries Ltd. Secretary 31 March 2017 STATEMENT OF COMPLIANCE (Section 75 (3) of the Financial Reporting Act Name of PIE: HAREL MALLAC & CO. LTD. Reporting Period: Year ended 31 December 2016 We, the Directors of Harel Mallac & Co. Ltd, confirm that to the best of our knowledge, the PIE has not complied with Section of the Code. It has been disclosed globally due to the sensitivity of the information. Antoine L. Harel Chairman Charles Harel Chief Executive Officer 31 March

45 44 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016 Anticipate your needs

46 INDEPENDENT AUDITOR S REPORT To the Shareholders of Harel Mallac & Co. Ltd This report is made solely to the members of Harel Mallac & Co. Ltd (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 consolidated financial statements of Harel Mallac & Co. Ltd and its subsidiaries (the Group), and the Company s separate financial statements on pages 49 to 122 which comprise the statements of financial position as at 31 December 2016, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements 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 49 to 122 give a true and fair view of the financial position of the Group and of the Company as at 31 December 2016, and of their financial performance and their 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 Group and 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 judgement, 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. The Company - Valuation/Impairment of investments in subsidiaries, associates, joint ventures and others Key Audit Matter The Company carries its investments in subsidiaries, associates, joint ventures and others at fair value. At 31 December 2016, total investments amounted to Rs 2bn. The amount is significant to the financial statements. Moreover, the fair value exercise involves the use of estimates and judgements. The identification of impairment events and the determination of an impairment charge also require the application of significant judgement by management, in particular with respect to the timing, quantity and estimation of future cash flows. Amount impaired during the year in respect of investments in subsidiaries and associates is Rs 141.9m. Related Disclosures Refer to notes 8, 9, 10 and 11 of the accompanying financial statements. Audit Response In our audit approach, we reviewed the valuation methods used and discussed with management regarding the reasonableness of the basis and assumptions used. We also verified the inputs used in the fair value computation. Our audit response also consisted of analyzing the possible indications of impairment and discussed them with management. We discussed the forecasted results of the subsidiaries with management, and also reviewed the substantiation of the forecasts based on historical information. 2. The Group and the Company - Valuation of property, plant and equipment and investment properties Key Audit Matter The Group and the Company revalue its land and buildings every three years and carries its investment properties at fair value. Valuations are performed by independent professional valuers. The valuation exercise involves significant accounting estimate and a range of judgmental assumptions. 45

47 INDEPENDENT AUDITOR S REPORT To the Shareholders of Harel Mallac & Co. Ltd Related Disclosures Refer to notes 5 and 6 of the accompanying financial statements. Audit Response We have reviewed the valuation report issued by Professional Valuers Co Ltd. We also held discussion with the independent valuer regarding the valuation methods and challenged the key assumptions used in the valuation techniques. We confirmed that the adjustments arising from the valuation were correctly accounted for and disclosed in the financial statements. The results of these procedures did not identify any issues with the valuation of land and buildings in the financial statements. 3. The Group - Assessment of net realizable value of inventories 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 Rs 680m. The exercise for the assessment of the net realisable value involves the use of judgement and assumptions. Audit Response Our audit procedures were designed to challenge the basis used for assessing the net realisable value of inventory and included: Examining the subsidiaries 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. 4. The Group - Trade debtors recoverability Key Audit Matter The recoverability of trade receivables and the level of provisions for impairment of receivables 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, trade receivables amounted to Rs 913m, net of provision of Rs 132m. Related Disclosures Refer to note 15 of 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 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 Group 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. 5. The Group - Assessment of impairment of goodwill Key Audit Matter Goodwill arising on acquisition of subsidiaries amounted to Rs 86.7m at 31 December Goodwill is tested annually for impairment. These calculations require the use of estimates. An impairment of goodwill of Rs 12.8m was recorded during the year. Related Disclosures Refer to note 7 of the accompanying financial statements. Audit Response The assessment of impairment of goodwill was based on the fair value of the related investment determined at 31 December 2016 as well as on the discounted cash flows of the cash generating unit to which the goodwill is related. 46 HAREL MALLAC & CO. LTD ANNUAL REPORT 2016

48 INDEPENDENT AUDITOR S REPORT To the Shareholders of Harel Mallac & Co. Ltd Other Information Directors are responsible for the other information. The other information comprises of the following reports (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: - Board of Directors - Leadership Team - Corporate Governance Report - Statement of Compliance - Statement of Directors Responsibilities Other information also comprise of the reports listed below,which is expected to be made available to us after that date. - Purpose, Commitments and Guiding Principles - Group Profile and Corporate Information - Group Overview - Chairman s Statement - CEO s Report - Business Review - Human Resources - Corporate Social Responsibility - Directors of subsidiary companies - Statutory Disclosures - Value Added Statement 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 other information 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 other information received after the date of our auditor s report, 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 Group and 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 Group and the Company or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group and 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 Group and the Company s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by directors. 47

49 INDEPENDENT AUDITOR S REPORT To the Shareholders of Harel Mallac & Co. Ltd 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 Group and 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 Group and 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. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 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 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 or any of its subsidiaries, other than in our capacity as auditors, business advisers 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, F.C.C.A. Licensed by FRC Port Louis, Mauritius 31 March HAREL MALLAC & CO. LTD ANNUAL REPORT 2016