blossoming for growth - Jamaica Stock Exchange

BLOSSOMING FOR GROWTH

Mission Statement Caribbean

Flavours and Fragrances Limited

is dedicated to providing its customers with

Table of

Contents

Flavours and Fragrances of the highest quality

Chairman’s Report

1

and functionality. We will maintain consistency

Notice of Annual General Meeting

3

5 Year Statistical Review

7

our customers, our employees and all our

Directors’ Report

9

stakeholders are satisfied by our daily efforts to

Board of Directors

11

Disclosure of Shareholdings

15

Management Discussion & Analysis

17

Our Customers

21

Management Team

23

Operations Team

24

Corporate Governance

25

Corporate Social Responsibility

27

Financials

29

in our batches through internal and external quality systems. We endeavour to ensure that

“Tease The Senses”

Form of Proxy

CHAIRMAN’S REPORT I am proud to represent my Colleague Directors and the Management of our Company in presenting the Annual Report for the financial year 2014-2015. During the above period our Company has continued to make many positive steps on our journey from Good to Great. We operate in a challenging global economic environment but, it is challenge that stimulates performance and these present challenges can be overcome by improving our efficiencies and being strong leaders in our sector. During this financial year, we welcomed Derrimon Trading Company Limited, now our largest shareholder, to the Company and to our Board of Directors. The acquisition by Derrimon of 49% of the ordinary shares of the Company further demonstrates the confidence of the wider community in our Company and our value proposition and highlights our commitment to increasing stakeholder value. We remain confident that the steps taken during the year to: a) b) c) d) e)

Expand into new markets. Improve the research and development capabilities of the Company. Strengthen the human resources of the Company. Train and provide international exposure to our development team. Obtain feedback from our local and international partners and act positively on that feedback, will result in long term benefits to the Company and its stakeholders.

Already, the many changes and enhancements made have improved the financial performance of our Company: • Revenue has experienced double digit growth, as evidenced by the 20.15% year over year growth recorded in 2015. • Gross profit has moved from $101.635 million dollars in 2014 to $113.452 million dollars in 2015, a 11.62% increase. • Net Profit has increased by 21.78% year over year moving from $47.394 million dollars to $57.716 million dollars. We are positive that our growth and development will continue to increase and that in the coming years the platform that we are now building will give our stakeholders not only financial wealth and security but increasing pride in our contribution to national development and in our impact on the export sector. We are dependent on your continued interest and critical support and look forward to our mutually rewarding future.

Howard Mitchell Chairman

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NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of Caribbean Flavours and Fragrances Limited (“the Company”) will be held at 10:00 a.m. on November 25, 2015 at the Knutsford Court Hotel, 11 Ruthven Road, Kingston 10, for the shareholders to consider, and if thought fit, to pass the following resolutions: Ordinary Resolutions 1. RECEIPT OF THE AUDITED ACCOUNTS FOR THE YEAR ENDED 30 JUNE, 2015 THAT the annual report and audited accounts of the Company for the financial year ended 30 June 2015 presented to the meeting and initialed by the Chairman for the purposes of identification, be and are hereby received. 2. RETIREMENT AND RE-APPOINTMENT OF DIRECTORS TO reappoint the following Directors of the Board, who, being the longest serving have retired by rotation prior to the reading of the resolution in accordance with the Articles of Incorporation of the Company, and, being eligible, have consented to be re-appointed and to act on reappointment: (a) Clive Nicholas, C.D. (b) Wilford “Billy” Heaven, J.P. 3. RESIGNATION OF DIRECTOR TO accept the resignation of: (a) Dr. Joan James 4. APPOINTMENT OF DIRECTOR TO appoint the following Director to the Board who, having been appointed to fill a casual vacancy is eligible and has consented to be appointed and to act on appointment: (a) Carlton Samuels 5. DIRECTORS’ REMUNERATION THAT the Board be and is hereby approved to fix and agree the remuneration of the Directors. 6. AUDITORS RE-APPOINTMENT AND REMUNERATION THAT the Board be and is hereby approved to re-appoint McKenley & Associates as the auditors of the Company, and to fix and agree their remuneration. 7. FINAL DIVIDEND THAT the dividend of $0.10 per ordinary stock unit paid to the stockholders on June 18, 2015 be and is hereby approved as the final dividend for the year. Dated this 10th day of October 2015 by order of the Board of Directors,

Ian Kelly, Company Secretary Note: A form of proxy accompanies this Notice. A shareholder who is entitled to attend and vote at the Annual General Meeting of the Company may appoint one or more proxies to attend in his/her place. A proxy need not be a shareholder of the Company. The proxy form should bear stamp duty of $100.00, before being signed. The stamp duty may be paid by adhesive stamps, which are to be cancelled by the person signing the proxy. All completed original proxy forms must be deposited together with the power of attorney or other document appointing the proxy, at the registered office of the Company, at least forty-eight (48) hours before the Annual General Meeting.

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4

5

6

5 YEAR STATISTICAL REVIEW

2011

2012

2013

2014

2015

(J$ ‘000)

(J$ ‘000)

(J$ ‘000)

(J$ ‘000)

(J$ ‘000)

179,411

193,874

229,892

255,362

306,807

Gross Profit

60,914

79,385

92,283

101,635

113,452

Total Operating Expenses

58,596

72,940

59,346

55,690

61,390

Profit Before Taxation

2,363

6,458

50,388

51,188

57,716

Net Profit

(939)

4,284

38,832

47,394

57,716

98,824

112,428

107,979

136,883

203,896

3,716

6,794

37,786

110,905

176,580

37,174

39,557

70,314

153,557

202,281

33.95%

40.95%

40.14%

39.80%

36.98%

EBITDA Margin

3.29%

5.78%

23.05%

22.69%

17.64%

Profit Before Taxation Margin

1.32%

3.33%

21.92%

20.04%

18.81%

Current Ratio

1.07

1.11

3.63

8.22

7.60

Quick Ratio

0.49

0.60

2.02

6.28

5.54

Debt-to-Equity

0.18

0.11

0.03

0.00

0.00

INCOME STATEMENT Revenues

BALANCE SHEET Average Total Assets Average Working Capital Total Assets less Current Liabilities IMPORTANT RATIOS Gross Profit Margin

Please note

The items highlighted were re-stated to reflect the current financial statements

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DIRECTORS’ REPORT The Directors of Caribbean Flavours and Fragrances are pleased to present their report for the financial year ended June 30, 2015. This is our second report since our historic listing on the Junior Market of the Jamaica Stock Exchange. The Statement of Comprehensive Income shows profit after tax of J$57.716 million net of adjusted taxation. This represents a 21.78% increase over the previous reporting period. During this financial year, our company continued to make major strides in the areas of new product development and product enhancements. This has resulted in the diversification of our revenue streams and also contributed to the deepening of our relationships with our existing customers.

Auditors The auditor of the Company, McKenley & Associates of 12 Kingslyn Avenue, Kingston 10 Jamaica has expressed their willingness to continue in office. The Directors recommend their reappointment. Our sincere thanks to all of our stakeholders, customers, staff, shareholders and service providers for choosing us as their partners for the supply of top quality flavours and fragrances.

FOR and on behalf of the Directors, Howard Mitchell

As we grow, we will continue with the strengthening of our human capital as well as providing our people with both technical and customer delivery training that is geared at solidifying our company’s competitive advantage in this market space. We continued to be excited about the renewed energy that these new professionals have brought to the Company as we continue on this journey of providing quality products to our loyal and new customers. Our customers continued to be the reason why we exist and remained the centerpiece of our business. We will endeavor at all times to improve our service delivery as we are always cognizant of the fact that we operate in a changing market space that requires us to be able to satisfy our customers’ needs without any form of inconvenience. In order to continuously improve on our service delivery, we continue to work closely with our customers to build a database that will facilitate continued research and development in anticipation of their future needs. Directors The Directors of the Company as at June 30, 2015 are Dr. Joan James, Messrs. Howard Mitchell, Anand James, Clive Nicholas, W. “Billy” Heaven, Derrick Cotterell and Ian Kelly. The mentor of the Company continues to be Mrs. Tania Waldron-Gooden.

”We should live and labor in our time that what came to us as a seed may go to the next generation as blossom, and what came to us as blossom, may go to them as fruit. This is what we mean by progress.” - H. W. Beecher

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BOARD OF DIRECTORS HOWARD MITCHELL, J.P.

DR. JOAN SAVEKA JAMES

Mr. Mitchell has spent more than 30 years as a practicing Attorney–at–Law. He is an alumnus of the Institute of Management Development (Switzerland) and currently serves as a company director on several boards, including Corrpak Jamaica Ltd (Chairman), Island Grill/Chicken Mistress (Chairman), TM Traders Ltd ( Chairman), Jamaica Manufacturers’ Association Ltd. (Deputy President), Jamaica Deposit Insurance Corporation, CariMed, Kirk Distributors Limited, Associated Manufacturers Limited, the G. Raymond Chang Foundation and, most recently, All Jamaica Air Services Limited (Chairman).

Dr. Joan Saveka James is a founding Shareholder and Non Executive Director of the Company. She is a graduate of the University of Guyana and the University of the West Indies Mona (B.Ed, Ph.D.) She is a consultant in Science Education specializing in Curriculum development and implementation. Dr. James is also a Trained and Certified Teacher and a Director of Anjoja Limited

Chairman, Non Executive Director (appointed July 2013)

Non Executive Director (appointed February 2001)

Mr. Mitchell is the immediate past Chairman of the National Housing Trust, the Coffee Industry Board, the Cocoa Industry Board, the Bauxite and Alumina Trading Company of Jamaica, Jamaica Bauxite Mining Ltd., and the Jamaica Bauxite Institute.

ANAND JAMES

Executive Director, Managing Director (appointed February 2011) Anand James is a founding shareholder and the Managing Director of the Company. Mr. James has a Bachelor of Arts degree from the University of Guyana, and a Master of Arts degree from the University of the West Indies. He is a qualified teacher and worked in the management function of the Company’s predecessor, Bush Boake Allen (Jamaica) Limited prior to its voluntary winding up in 2000. Mr. James spearheaded the purchase of the assets of that entity and the founding of the current Company in 2001. He has over 20 years’ combined experience in the Company. He is also a Director of Spurtree Spices Jamaica Limited, AMJ Agro Processors Guyana Inc., and Anjoja Limited.

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DERRICK COTTERELL

Non Executive Director (appointed November 2014) Derrick has the responsibility of being Chairman and CEO of Derrimon Trading Company Limited. Derrick has over 20 years’ experience in the fields of Sales, Marketing and General Management. He also serves as a director of the Governor General of Jamaica’s “I Believe Initiative” which seeks to improve the lives of young Jamaicans. Derrick is a graduate of the University of the West Indies and Florida International University, from which he attained a Bachelor of Science degree in Management Studies and a Master of Business Administration respectively.

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W. “BILLY” HEAVEN, O.D., J.P. CLIVE NICHOLAS, C.D.

Non Executive Director (appointed July 2013) Mr. Clive Nicholas is a Tax Consultant and Chartered Accountant who retired as Director General for Tax Administration after over forty (40) years of combined service to the Income Tax Department, the Revenue Board, the General Consumption Tax Department and the Ministry of Finance and Planning. He is a graduate of Harvard Law School and was awarded the Order of Distinction (Commander Class) for his services to Jamaica. Mr. Nicholas is a member of the Integrity Commission, Chairman of the Kingston College Development Trust Fund Audit Committee, Chairman of the Land Taxation Relief Board, a Director of the Kingston College Development Trust Fund, Marjoblac Limited, and a Trustee of the Jamaica Church Pension Scheme. He has also served as a Director of Container Services Limited, and a Commissioner of the Betting Gaming and Lotteries Commission

TANIA WALDRON-GOODEN Mentor

Mrs. Tania Waldron-Gooden is the Senior Vice President of Corporate Finance, Research & Special Projects at Mayberry Investments Limited. As the Mentor of the Company, she is responsible for providing the Board with support in establishing proper procedures, systems and controls for its compliance with the Junior Market Rule requirements for financial reporting, good corporate governance, and the making of timely announcements. Mrs. Waldron-Gooden joined Mayberry Investments Limited as a Management Trainee approximately seven years ago. She rotated through the Research, Asset Management, Equity Trading, Corporate Financing, Risk & Compliance and Information Technology departments. Prior to joining Mayberry Investments, Mrs. Waldron-Gooden worked at Capital & Credit Financial Services limited in the area of Pension Fund and Client Portfolio Management. She holds a BSc. (Hons.) in Geology from the University of the West Indies (Mona). She also holds an M.B.A from the University of Sunderland (U.K.). She has completed the Jamaica Securities Course as well as the Canadian Securities Course administered by the Canadian Securities Institute.

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Non Executive Director (appointed July 2013) Mr. Heaven is the Chief Executive Officer of the CHASE Fund, a post he assumed in 2003. Prior to this he served as a Small Medium-sized Enterprise (SME) consultant and Executive Director of the National Development Foundation of Jamaica. Mr. Heaven has worked as an Accountant, Management Accountant and Financial Controller with local and multi-national corporations. Mr. Heaven is the Deputy Chairman of the Board of Directors for the Jamaica Civil Aviation Authority; Chairman of the Audit Committee and member of the Procurement Committee. He is Vice President of the Courtney Walsh Foundation, Director of the Heart Institute of the Caribbean and member of the Audit Committee of the Edna Manley College of the Visual and Performing Arts. Recently, he was elected President for the Jamaica Cricket Association. He is also a member of the Man and Biosphere Committee of the Jamaican National Commission of UNESCO and a member of the Development Committee, Bustamante Hospital for Children. He is a member of the Task Force that advises the Government on rural development. He is a founding member of the Association of Development Finance Institution (DEFINA) and served as Chairman of the Jamaica Conservation and Development Trust (JCDT). He was a member of the Board of the Mico University College and President, Mico Old Students’ Association. He served as board member University Hospital of the West Indies, Chairman of the Audit Committee and member of the Finance and General Purpose Committee. He Chaired the Finance & Administration Committee and the Investment & Legacy Committee of Jamaica 50 anniversary celebrations as well as member of the Jamaica 50 National Planning Committee and the Executive Committee.

IAN KELLY

Corporate Secretary, Non Executive Director (appointed November 2014) Ian is the Chief Financial Officer at Derrimon Trading Company Ltd, he is an experienced financial and risk manager with senior level experience in the areas of treasury, corresponding banking, corporate finance, securities trading and asset management. He is a certified public accountant and holds a Bachelor of Science Degree in Accounting and a Master of Science degree in Accounting from The University of the West Indies. Ian currently serves as the Chairman of Wigton Windfarm Ltd, Director of Jamaica Free Zone Limited, Director of Postal Corporation of Jamaica and serves as the Chairman of the Audit Committee for both Jamaica Free Zone and Postal Corporation of Jamaica.

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DISCLOSURE OF SHAREHOLDINGS DIRECTORS AND CONNECTED PARTIES REPORT AS AT JUNE 30, 2015 Name Account #

Position Primary Holder Joint Holder

Anand James Director Anand James Joan James Director Joan James Anthony James Director Anthony James Howard Mitchell Director Howard Mitchell Clive Nicholas Director Clive Courtney Nicholas W. Heaven Director

Total Key Members Total Connected Parties Total Combined Holdings

Relationship

SHAREHOLDINGS OF TOP TEN (10) STOCKHOLDERS, DIRECTORS AND SENIOR OFFICERS AS AT JUNE 30, 2015

Units

Percentage

TOP (10) STOCKHOLDERS SELF 11,689,604.00 Key Members Holdings 11,689,604.00 Connected Party Holdings 0.00 Combined Holdings 11,689,604.00

13.00 13.00 0.00 13.00

SELF 11,689,604.00 Key Members Holdings 11,689,604.00 Connected Party Holdings 0.00 Combined Holdings 11,689,604.00

13.00 13.00 0.00 13.00

SELF 4,445,000.00 Key Members Holdings 4,445,000.00 Connected Party Holdings 0.00 Combined Holdings 4,445,000.00

4.94 4.94 40.00 4.94

SELF Key Members Holdings Connected Party Holdings Combined Holdings

444,395.00 444,395.00 0.00 444,395.00

0.49 0.49 0.00 0.49

SELF Key Members Holdings Connected Party Holdings Combined Holdings

100,000.00 100,000.00 0.00 100,000.00

0.11 0.11 0.00 0.11

SELF Key Members Holdings Connected Party Holdings Combined Holdings 28,368,603.00 0.00 28,368,603.00

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31.54 0.00 31.54

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

NUMBER OF SHARES HELD

DERRIMON TRADING COMPANY LIMITED ANAND JAMES JOAN JAMES ANTHONY JAMES MAYBERRY WEST INDIES BANK LIMITED MAYBERRY MANAGED CLIENTS ACCOUNT KONRAD BERRY CATHERINE ADELIA PEART MANWEI INTERNATIONAL LIMITED MAYBERRY INVESTMENTS LTD. PENSION SCHEME

44,078,122 11,689,604 11,689,604 4,445,000 3,597,002 3,418,447 1,768,214 1,711,330 975,828 781,275

DIRECTORS ANAND JAMES JOAN JAMES HOWARD MITCHELL CLIVE NICHOLAS WILFORD HEAVEN DERRICK COTTERELL IAN KELLY

11,689,604 11,689,604 444,395 100,000 0 0 0

SENIOR MANAGERS ANAND JAMES JANICE LEE RHONDE MCPHERSON

11,689,604 0 0

CONNECTED PARTIES ANTHONY JAMES (SON OF MANAGING DIRECTOR) DERRICK COTTERELL (DIRECTOR OF DERRIMON TRADING LTD) IAN KELLY (DIRECTOR OF DERRIMON TRADING LTD)

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4,445,000 0 0

MANAGEMENT DISCUSSION & ANALYSIS

Looking Ahead - Strategic Planning

OUR PROGRESS

We recognize the value of working closely with our customers to ensure we are always meeting their needs, and therefore keep them at the pinnacle of our strategic planning. For the financial year 2015/16 some of the strategic initiatives include:

Since October 1st 2001 Caribbean Flavours and Fragrances Limited (CFF) has been the supplier of choice for quality fragrances and flavours in Jamaica and the other markets in which it operates. The business was acquired as a going concern from Bush Boake Allen Jamaica Ltd, which was part of a multinational company operating in over forty countries in the world.

• Ensuring that the established quality control standards are maintained and improved so that we will continue to provide quality products to our customers.

Caribbean Flavours and Fragrances continued to build on the rich traditions of manufacturing and providing the highest quality flavours and fragrances. This is done by sourcing these unique oils and flavour blends from our partners. Over the last fourteen (14) years the business has grown tremendously. This financial year was quite special as we have deepened our reach in the existing markets that we serve, as well as, to expand our reach in one new market namely the Dominican Republic. We remain excited by the prospects of increasing and expanding our reach in the areas of fragrances; to this end, efforts to increase this aspect of the business has been progressing at a very fast pace. We continue to increase our product offerings with additional flavours, giving our customers a wider selection to choose from and ultimately passing that variety down to their consumers. Our new product development and research team continues to work with various existing and new customers and we are confident that this will generate additional business for the Company in the near future. We continue to serve our customers in Jamaica, Barbados, St. Kitts, Trinidad and Tobago, Guyana, Grenada, Canada and the Dominican Republic. Both local and overseas manufacturers continue to account for the major share of our business as our business model is not retail. We will continue to support the major manufacturers with raw material to produce some of the most popular carbonated, non alcoholic, alcoholic beverages, baked goods, soaps and other household cleaners.

• Effective management of our operations to ensure that efficiency is achieved throughout the entire organization. This includes timely deliveries of products and availability of raw materials and finished products. • Continued nurturing of our relationships with all our customers so that CFF will be the first point of contact for new product development. This allows us to offer our existing customers a wider selection of products as well as to attract new customers. The long term focus and strategy of CFF includes the continuation of the customer “centricity” goals established in the financial year 2014/2015. We will continue with the deepening of the relationships within the current market that we served through new developments and further enhancement of our products. CFF is mindful that the development of its human capital is vital to achieve its primary goals of improved efficiencies and customer satisfaction. In this regard we will continue to place emphasis on the motivation of staff as well complemented by the vigorous exposure through training and development at all levels within the organization. Caribbean Flavours and Fragrances Limited recognizes that this as a critical and key component to the Company’s continued upward trajectory for growth. Financial Performance Highlights During the ensuing reporting period ended June 30, 2015, Caribbean Flavours and Fragrance Limited exceeded many of the financial objectives, which were established by the Board of Directors. Not withstanding this achievement, the Board and management continues to remain focused on innovation and new product development, implementation of new strategies geared at revenue enhancement and continuation of its thrust of cost containment and operating efficiency. Revenue

We treasure the fact that our products play a key role in supporting manufacturers with these critical raw materials. As such during this financial year, we have strengthened the production team and its capabilities to ensure that the highest quality products continue to leave our facility. Our mandate to produce the highest quality products and to be able to supply our customers on a timely basis, was one of our major focuses during this financial year. We have made major positive strides in our logistics management, service providers and our internal order management. This has ensured that we achieve greater efficiencies in our production cycles, cost reduction in our transportation costs and ultimately faster turnaround time to our customers. Notwithstanding the movement in the foreign exchange rates, the savings achieved from these cost savings initiatives allowed CFF to absorb some of these major input costs rather than passing them on to our customers. We will continue to improve the various aspects of our business to ensure that efficiencies are achieved at all levels of the business. 17

The revenue generated by the company for the reporting period ending June 30, 2015 was $306.807 million representing a 20.15% improvement over the $255.342 million reported for the similar reporting period in 2014. The growth in revenue was strategic and was directly influenced by: • Broadening of our customer base in both the local and exports markets. • A new marketing thrust thereby deepening the relationship with the existing customers. • The ability to readily avail our customers with finished products at a faster pace. • Major improvement in our supply chain and logistics and carrying higher levels of major fast moving inventory. Whilst there is always a carrying cost for inventory, our decision of carrying higher than normal levels of fast

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moving items ensure that we have a competitive advantage with the timeliness of delivery resulting in both satisfied and loyal customers. These and other initiatives will continue to improve the Company’s annual revenue growth above the 10% minimum benchmark, which has been established.

to gross profit margin was 50.80% in 2015 compared to 46.63% reported in 2014. We expect that this positive growth trajectory will continue as the Company strives to diversify and deepen its revenue stream, as well as, to increase its sales in the Caribbean.

Gross Profit The Company recorded gross profit of $113.452 million for this reporting period which translates to a $11.817 million or 11.62% growth over the $101.635 million reported in the comparative 2014 period. This positive year over year growth in gross profit is a step in the right direction and we will be implementing some new initiatives aimed at reducing our annual average cost of sales, specific input cost associated with logistic and the modality of the movement of raw materials from the point of order to our warehouses.

Risk Management

Operating Expenses We continue to manage our operating expenses in order to achieve a below budget annual performance and in many instance, just above the recorded levels of inflation. The management of each expense item on a line by line basis, ensures that costs which will not add immediate or future value to the Company’s growth or a general improvement in efficiencies are deferred unless justified. For this reporting period, the total administrative expenses record was $59.257 million or ($4.464 million or a 8.14%) average increase over the $54.793 million recorded for the similar period in 2014. With the exception of staff costs, office expenses and repairs and maintenance, all other operating expenses were either flat or had marginal reductions. Staff costs inclusive of statutory deduction increased from $14.709 million in 2014 to $23.288 million in 2015 as a result of the deliberate actions taken by the Board of Directors in 2014 to bolster and strengthen the management and production team capabilities of the Company. As such, the annual financial impact of the compensation packages of these individuals are now fully reflected in this years operating costs. Whilst these costs represent a 58.324% increase in the year over year movement, the benefits which were derived from product development, marketing and client services are contributing factors to the growth in revenue that the Company experienced during this reporting period.

Risk management continues to form a critical and pivotal role in the daily operations of our business. At every level of our operations, the full evaluation of our risk is done to ensure that standards are maintained, as well as, ensuring that product quality is achieved and maintained. From the receival of raw materials to our stores, cycle counts of the inventory, ratio analysis conducted on the monthly and quarterly financial statements, testing of each production batch and further test at the completion of the manufacturing process ensures that the various enterprise risk is measured and managed. The management team is required to mange the daily operation and enterprise risk of the Company within the policy framework established by the Board of Directors. In addition to the various reviews which continue to be done by the management team, the oversight given by the internal and external audit team complements the work being done by the Audit Committee to ensure that our corporate governance objective for effectively managing risks is met. In supporting our continued growth, we continue to strengthen the internal controls of the Company based on the findings of both the internal audit and external audit management letters. We continue to place high levels of focus on the areas of cash sales, credit sales, aging accounts receivables and management of the inventory process. We continue to institute robust internal measures to increase the security of our assets as well as the safeguarding of proprietary trade secrets, clients relationship and the data protection infrastructure; that will enable us to have business continuity in the event of any catastrophic occurrence. The Company will continue to manage its risks to protect its employees, assets and the interests of its stakeholders.

Both the office expenses and repairs and maintenance categories grew by $0.690 million and $0.748 million respectively during the reporting period. Whilst not significant, the growth in the business and the use of the machinery in the production process are the main factors for these increases. The major areas of cost reductions were: depreciation, legal and professional fees, travelling, printing and stationery and entertainment. Staff costs and rent continues to be the major operating expenses. The general movements in these costs were in line with budget and came out below inflation. Net Profit We continue to experience tremendous bottom line growth. The Company reported Net Profit of $57.716 million which translates to a 21.77% or $10.322 million growth over the restated net profit of $47.394 million recorded in 2014. The healthy net profit is driven by the improvement in sales, as well as the management of cost. The net profit

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OUR CUSTOMERS

OUR CUSTOMERS At the heart of our operations

Testimonials

Caribbean Flavours and Fragrances takes pride in having the best quality products in Jamaica and the Caribbean. We are leaders in innovation and creativity in both the flavours and fragrances markets, producing products of superior quality but, our customers are the heartbeat of our operations. Given that our business is largely a B2B (Business to Business) structure, where our customers are manufacturers and not end users, fostering good relationships and having exceptional customer service is paramount to our success. We go above and beyond to offer our customers an experience by providing individualized and technical support. Our relationship goes beyond a sale, as our Quality Manager is in constant collaboration with our customers’ to hear their needs and improve our products. Our customer service team gives each customer the personal attention needed to ensure they receive the right product for their particular need.

CAL’S MANUFACTURING “CFF makes us feel like family, they always go above and beyond to deliver excellent customer service“ Stacy-Ann Miller

COLDFIELD MANUFAC TURING “C

To further support relationship building with our customers, we offer small manufacturers interested in growing their businesses, the opportunity to test new products in our labs.

FF is one that BIG JOof the biggest reaso ns is a qua Their flav ours hav lity product. e products b ring smiles made our to Jamaic everywhe ans re, everyd ay.” Brett Wong

V.A.P.

d ociate n ass rs, the e e b yea have many ts always “We F for c F u C d ro h p alue wit of their , We v quality xpectations wiliness to e meet pertise and rt” x o their e hnical supp c e t r e off

Rhonde McPherson, CFF’s Quality Manager receiving the Ray Hadeed Award for Best Manufacturer of the Year from JMA President Metry Seaga.

y y Dale

Beverle

Quality assurance meeting with Customer.

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OPERATIONS TEAM

MANAGEMENT TEAM

DELVIA CLARKE

Administrative Assistant

ANAND JAMES

RONALD SMITH

Compounder / Production

SHERENE ORMSBY

Cashier / Receiving Clerk

JANICE LEE

Managing Director

General Manager

EASTON FISHER Warehouse Clerk

JOAN BENNETT-SIMMONDS Packaging Department

MONIQUE RICHARDS Packaging Department

RHONDE MCPHERSON Quality Manager

GUYLENE GAYLE

Customer Service Supervisor

ROMONE McGHIE Warehouse Clerk

CHRISTOPHER CARLESS Accountant

ANDREW FERGUSON Driver

RECHAL TURNER

Production Supervisor

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JERMAIN CHAMBERS

Compounder/ Production

CORPORATE GOVERNANCE Effective Corporate Governance is a major priority of the Board of Directors of Caribbean Flavours and Fragrances Limited and therefore we remain committed to promoting high standards of corporate governance within the Company by ensuring the soundness of the Company’s financial policies, business strategies, internal controls and risk management framework. The Board recognises its role in providing entrepreneurial leadership and strategic direction as critical components in the creation of shareholder long term value and maintaining the confidence of its shareholders, employees, stakeholders and the community. The Directors of the Company are experienced professionals with diverse skill sets and knowledge from various professions which guarantees that the decisions made are in the best interest of all stakeholders and the Company’s long term success. The Management and Staff of the Company are expected to exercise the highest standard of ethical conduct and the adherence of Company policies and procedures thereby ensuring compliance with the rules of the Jamaica Stock Exchange Junior Market and the laws and regulations of Jamaica. Board Composition At the beginning of the financial year 2014/2015 the Board consisted of six (6) members, three (3) of which were independent members. 1. 2. 3. 4. 5. 6.

Howard Mitchell Wilford (Billy) Heaven Clive Nicholas Anand James Joan James Anthony James

Chairman (Independent) (Independent) (Independent) Managing Director (Company Secretary)

The Company also has an external Mentor, Mrs. Tania Waldron-Gooden as required by the Jamaica Stock Exchange Junior Market Rules who assists with the monitoring of the various rules and regulations. In August 2014 Derrimon Trading Company Limited, a company listed on the Junior Market of The Jamaica Stock Exchange, acquired forty-nine percent (49 %) of the ordinary shares of the Company, and consequently two (2) members of the Derrimon Board, Mr. Derrick Cotterell and Mr. Ian Kelly were appointed to the Board of CFFL. At the same time Mr. Anthony James, resigned from his position as Director and we would like to place on record our appreciation for his services to the Company. Mrs. Joan James, resigned from her position as Corporate Secretary but remained as a Director. As a result of the above changes, the composition of the Board of Directors is now one (1) nonindependent Director and six (6) independent Directors. The Board also took the decision to appoint Director Ian Kelly, who has extensive experience in the area of Corporate Governance, to the position of Corporate Secretary; thereby strengthening and monitoring the administration of Corporate Governance initiatives within the company.

Name of Directors

No. of Meetings Attended

Howard Mitchell - Chairman 4 Clive Nicholas 5 Wilford “Billy” Heaven 2 Derrick Cotterell 5 Ian C. Kelly 5 Anand James 5 Joan James 0 In carrying out its work the Board was assisted by the following Board Committees: Audit Committee The Audit Committee comprises the following directors and attendance to meetings are outlined in table below: Audit Committee Members No. of Meetings Attended Clive Nicholas - Chairman Willford “Billy” Heaven Ian C. Kelly Anand James

5 1 5 5

The Committee had five (5) meetings in 2014/2015 in which it carried out the following functions: - reviewed the integrity of the monthly, quarterly and annual financial statements; - reviewed the formal announcements relating to the Company’s financial performance to the Jamaica Stock Exchange; - reviewed and recommended budgets for approval by the Board of Directors; - reviewed the effectiveness of internal controls and risk management systems and other matters that fall within its mandate; - reviewed the independence, objectivity and effectiveness of the relationship with the external auditor; - make recommendation to the Board of Directors in relationship to the appointment of the new external auditor as well as remuneration and other terms of engagement. During this financial year the Company changed its external Auditor from Lee Clarke Chang to McKenley and Associates and has been satisfied with the proactive approach, audit approach and the timeliness in the submitting of the 2015 Audited Financial Statements. We wish to thank the outgoing auditor Lee Clarke Chang for their many years of service to this Company and wish them all the best in their future endeavours. Compensation Committee The composition of this Committee is outlined as follows: • • • •

Wilford “Billy” Heaven Clive Nicholas Howard Mitchell Anand James

-

Chairman Member Member Member

The Committee is charged with the responsibility for providing advice to the Board on all matters relating to the remuneration of the Executive Director and Senior Managers. There was no need for the Committee to have met in the 2015 financial year; however discussions were had, in the various Board meetings, on matters relating to these issues.

The Board met on five (5) occasions during the year 2014/2015 and the focus was on enhancing shareholder value and ensuring the long term viability through its provision of guidance and strategic direction to management. The table below outlines the Directors attendance:

25

26

CORPORATE SOCIAL RESPONSIBILITY Serving our community Here at Caribbean Flavours and Fragrances, being good corporate citizens is at the core of our business. We believe that the transformation of a nation starts with the transformation of individuals. It is that belief that drives our outreach initiatives, which focused on education, sports and community development. During the financial year 2014-2015, the Company provided a much needed stand to house a water tank at the Trintarian Basic School located in the Kingston 11 area. In a move to support the development of sports in schools, Caribbean Flavours and Fragrances sponsored the Melbourne Cricket Club 5K Walk another school based initiative. We take our role as change drivers very seriously, and are committed to continue to support the development of our beautiful island by participating in initiatives that support our communities.

27

Independent Auditors’ Report

Financial Statements Independent Auditors’ Report to the Members

Statements of Comprehensive Income

1

Statement of Financial Position

2

Statement of Cash Flows

3

Statement of Changes in Equity

4

Notes to the Financial Statements

5 - 32

CARIBBEAN FLAVOURS & FRAGRANCES LTD

STATEMENT OF COMPREHENSIVE INCOME

Caribbean Flavours and Fragrances Limited30 JUNE 2015 YEAR ENDED Statement of Comprehensive Income Year ended 30 June 2015 Note

Revenue Cost of sales Gross profit Bad debt recovered Impairment of fixed asset Selling and distribution costs Administrative expenses Operating profit Net finance income Profit before tax Taxation

3

4 5 6 7

Net profit Other Comprehensive Income Items that may be subsequently reclassified to profit or lossUnrealised gain/(loss) on available-for-sale investments Total Comprehensive Income for year

Earnings per share

8

*restated for comparative purposes. See note 20

2015 $’000

C A R I B B E A N F L AV O U R S & F R A G R A N C E S LT D Page 1

STATEMENT OF FINANCIAL POSITION

Caribbean Flavours and Fragrances Limited 30 JUNE 2015 Statement of Financial Position 30 June 2015

2014 $’000 Restated

306,807 (193,355)

255,362 (153,727)

113,452 94 (2,133) (59,257) 52,156 5,560 57,716 -

101,635 23 (528) (897) (54,793) 45,440 5,748 51,188 * (3,794)

57,716

47,394

57,716

47,394

$0.64

*$0.56

Note Non-Current Assets Property, plant and equipment

2015 $’000

Page 2

2014 $’000 restated

9

1,358

1,320

10 11

62,873 60,914 4,085 50,000 53,488 231,360

41,750 47,893 *4,214 79,897 173,754

Current Assets Inventories Receivables Taxation recoverable Investment Cash and cash equivalents

12 13

Current liabilities Payables Current portion of long term loan

14 15

30,437 30,437 200,923 202,281

20,824 693 21,517 152,237 153,557

16

56,200 146,081 202,281

56,200 *97,357 153,557

Net Current Assets Stockholders’ Equity Share capital Retained earnings

* restated for comparative purposes. See note 20

Approved for issue by the Board of Directors on 18 August 2015 and signed on its behalf by: ………………………………. Howard Mitchell: Director

1

….………………………………… Anand James: Director

2


STATEMENT OF CASH FLOWS

Caribbean Flavours and Fragrances Limited 30 JUNE 2015 Statement of Cash Flows 30 June 2015

2015 $’000 Cash flows from operating activities: Profit for the year Items not affecting cash: Depreciation Impairment of fixed assets Interest income Taxation Changes in operating assets and liabilities Inventories Receivables Payables Taxation paid Taxation recoverable Net cash provided by operating activities Cash flows from investing activities Purchase of fixed assets Purchase of investment Interest received Net cash (used in)/provided by investing activities Cash flows from financing activities Directors’ current account Repayment of loan Shareholders’ loan Issue of shares Dividend paid Net cash (used in)/ provided by financing activities (Decrease) /increase in cash and cash equivalents Net cash and cash equivalents- beginning of year Cash and Cash Equivalents at End of Year Represented by: Cash on hand Bank balances Fixed deposits

* restated for comparative purposes. See note 20

3

Page 3

2014 $’000 Restated

57,716

*47,394

675 (4,264) 120 54,247

1,422 528 (3,929) 3,794 49,209

(21,123) (13,021) 9,613 (120) 129 (24,522) 29,725

(1,100) (6,502) 9,478 (14,477) *(4,214) (16,815) 32,394

(713) (50,000) 4,264 (46,449)

(16) 3,929 3,913

(693) (8,992) (9,685)

(1,472) (1,127) (5,000) 50,580 (8,993) 33,988

(26,409) 79,897 53,488

70,295 9,602 79,897

3,167 33,321 17,000 53,488

287 17,903 61,707 79,897

C A R I B B E A N F L AV O U R S & F R A G R A N C E S LT D Caribbean Flavours and Fragrances Limited STATEMENT OF CHANGES IN EQUITY Statement of Changes in Equity 30 JUNE 2015 30 June 2015 Share Capital Balance at 30 June 2012 Net profit Balance at June 30, 2013 Issue of shares Net profit as previously reported Prior year tax charge Net profit as restated

$’000

5,620 5,620 50,580 56,200 56,200 56,200

Dividend paid Balance restated as at June 30, 2014 Net Profit Dividend paid Balance at 30 June 2015 * restated for comparative purposes. See note 20

4

Retained Earnings $’000 20,124 38,832 58,956 50,547 (3,153) 47,394 106,350 (8,993) 97,357 57,716 (8,992) 146,081

Page 4

Total $’000 25,744 38,832 64,576 50,580 50,547 *(3,153) *47,394 162,550 (8,993) 153,557 57,716 (8,992) 202,281


NOTES TO THE FINANCIAL STATEMENTS

Caribbean Flavours and Fragrances Limited 30 JUNE 2015 Notes to the Financial Statements 30 June 2015


NOTES TO THELimited FINANCIAL Caribbean Flavours and Fragrances 30 JUNE 2015 Notes to the Financial Statements 30 June 2015

STATEMENTS

Page 6

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

1. IDENTIFICATION AND PRINCIPAL ACTIVITIES Caribbean Flavours and Fragrances Limited (“the Company”) is incorporated under the Companies Act of Jamaica and domiciled in Jamaica. Effective 2 October 2013, the Company was listed on the Junior Market of the Jamaica Stock Exchange. Its principal activity is the manufacture and distribution of flavours, mainly for the beverage, baking and confectionary industries. Its registered office is located at 226 Spanish Town Road, Kingston 11. These financial statements are presented using Jamaican dollars, which is considered the functional currency of the primary economic environment in which the Company operates. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal financial accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied over the years presented, unless otherwise stated.

(a) Basis of preparation (continued) Critical Accounting estimates and assumptions (continued) (i) Allowances for losses In determining amounts recorded for allowance for losses in the financial statements, management makes judgments regarding indicators of impairment, that is, whether there are indicators that suggest there may be a measurable decrease in the estimated future cash flows from accounts receivable and other financial assets. For example, a decrease in cash flow may result from repayment default and adverse economic conditions. Management also makes estimates of the likely estimated future cash flows from impaired financial assets, including the net realizable value of underlying collateral, as well as the timing of such cash flows. The adequacy of the allowance depends on the accuracy of these judgments and estimates. (ii) Depreciable assets

(a) Basis of preparation The financial statements of Caribbean Flavours and Fragrances Limited have been prepared in accordance with and compliance with International Financial Reporting Standards (IFRS) under the historical cost convention. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. Although these estimates are based on management’s best knowledge of current events and action, actual results could differ from those estimates. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are noted below:

Estimates of the useful life and the residual value of property, plant and equipment are required in order to apply an adequate rate of transferring the economic benefits embodied in these assets in the relevant periods. The Company applies a variety of methods in an effort to arrive at these estimates from which actual results may vary. Actual variations in estimated useful lives and residual values are reflected in profit or loss through impairment or adjusted depreciation provisions. (iii) Income taxes

Critical Accounting estimates and assumptions

Estimates are required in determining the provision for income taxes. There are some transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual events. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

The Company recognizes liabilities for possible tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were originally recorded, such differences will impact the income tax in the period in which such determination is made. (iv) Post-employment benefits Accounting for some post-employment benefits requires the use of actuarial techniques to make a realizable estimate of the amount of benefit that employees have earned in return for their service in the current and prior periods. The Company does not operate a defined benefit contribution pension scheme and therefore no judgment or estimate was required in this regard. The Company has implemented an individual retirement account (IRA) plan operated at a reputable financial institution for some categories of staff. The Company is only responsible to match employees’ contributions to the plan.

5

6


NOTES TO THE FINANCIAL Caribbean Flavours and Fragrances Limited Notes to the Financial Statements 30 JUNE 2015 30 June 2015

STATEMENTS



Caribbean Flavours and Fragrances NOTES TO THELimited FINANCIAL Notes to the Financial Statements 30 JUNE 2015 30 June 2015

STATEMENTS

Page 8

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (a) Basis of preparation (continued)

(a) Basis of preparation (continued) Critical Accounting estimates and assumptions (continued) (v) Accruals Amounts accrued for certain expenses are based on estimates and are included in payables and accruals. (vi) Net realizable value of inventories. Estimates of net realizable value are based on the most reliable evidence available, at the time the estimates are made, of the amounts the inventories are expected to realize. These estimates take into consideration fluctuations of price or costs directly relating to events occurring after the end of the year to the extent that such events confirm conditions existing at the end of the year. (vii) Fair value estimation Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. A number of assets and liabilities included in the Company’s financial statements require measurement or disclosure at fair value. The fair value measurement of the Company’s financial and non-financial assets and liabilities utilizes market observable inputs and data as far as possible. Inputs used in determining fair value measurement are categorized into different levels based on how observable the inputs that are used in the valuation technique. The fair value hierarchy is: Level 1 Quoted unadjusted prices in active markets for identical assets or liabilities Level 2 Observable direct or indirect inputs other than level 1 input Level 3 Unobservable inputs that are not derived from market data The classification of an item into the above level is based on the lowest level of inputs used that has a significant effect on the fair value measurement of the item. Transfer of items between levels is recognized in the period that they occur. The fair value of financial instruments traded in active markets, such as available-for-sale investments, is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Company is the current bid price. These instruments are included in level 1 and comprise equity instruments traded on the Jamaica Stock Exchange (JSE).

Standards, interpretations and amendments to published standards effective in current year  Amendment to IAS 1, ‘Financial statements presentation’ regarding other comprehensive income. The main change resulting from these amendments is a requirement for entities to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The Company has implemented the amendment and has adjusted the statement of comprehensive income for the current and prior periods.  IAS 19, ‘Employee benefits’ the standard requires the Company to immediately recognise all past service costs. The Company has implemented the applicable requirements of the standard.  IFRS 12, ‘Disclosures of interest in other entities’ includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off balance sheet vehicles. Where applicable, the Company has implemented the necessary and relevant disclosures of interest in other related entities.  IFRS 13, ‘Fair value measurement’, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for the use across IFRSs. The standard explains how to measure fair value for financial reporting. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs. The adoption of this standard did not have a significant impact on the financial statements of the Company.  IAS 32 (Amendment), ‘Financial Instruments: Presentation’, (effective for annual periods beginning on or after 1 January 2014). This amendment clarifies the requirements for offsetting financial instruments and address inconsistencies in current practice when applying the offsetting criteria in IAS 32‘Financial Instruments: Presentation’. The Company will apply the standard but does not expect any significant impact from its adoption.  IAS 36 (Amendments), ‘Recoverable Amount Disclosures for Non-Financial Assets” (effective for annual periods beginning on or after 1 January 2014). The amendments were issued to reverse the unintended requirement in IFRS 13, Fair Value Measurement to disclose the recoverable amount of every cash-generating unit to which significant goodwill or indefinite-lived intangible assets have been allocated. Under the amendments, recoverable amount is required to be disclosed only when an impairment loss has been recognised or reversed The adoption of these standards will not have any significant impact on the financial statements of the Company.

7

8







STATEMENTS

Page 10

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (b)Property, plant and equipment

(a) Basis of preparation (continued) New and amended standards and interpretations to existing standards that are not yet effective and have not been early adopted by the Company At the date of authorisation of these financial statements, certain new standards and amendments to existing standards have been issued which were not yet effective at statement of financial position date, and which the Company has not early adopted. The Company has assessed the relevance of all such new standards, interpretations and amendments and they will be applied by the Company as of those dates, unless otherwise noted.  IFRS 9, ‘Financial instruments’, (effective for annual period beginning on or after 1 January 2018). The standard introduces new requirements for the classification, measurement and recognition of financial assets and financial liabilities, in order to ensure that relevant and useful information is presented to users of financial statements. It replaces those parts of IAS 39 relating to the multiple classification and measurement of financial instruments and now classification into two measurement categories: fair value and amortised cost. The determination of classification will be made at initial recognition, and depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instruments. Management is assessing the timing of its adoption by the Company, and the potential impact of adoption.  IFRIC 21, ‘Levies’, sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation addresses what the obligating event is that gives rise to payment of a levy and when should a liability be recognised. The interpretation defines a levy as an outflow from an entity imposed by a government in accordance with legislation. It requires an entity to recognise a liability for a levy when and only the triggering event specified in the legislation occurs. The Company is not subjected to any significant levies so any impact on the Company should not be material.  IFRS 15, ‘Revenue from contract customers’ (effective for annual periods beginning on or after 1 January 2017). The objective of this standard is to establish the principles that an entity shall apply to report useful information to users of the financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. Management is considering the impact of the adoption of this new standard. The Company has assessed the impact of future adoption of the other IFRSs or IFRIC interpretations that are not yet effective and has determined that these standards are not expected to have any significant impact on the accounting policies or financial disclosures of the Company.

9

Property, plant and equipment are stated at historical cost less accumulated depreciation. Depreciation on assets under construction does not commence until they are complete and available for use. Depreciation on all other property, plant and equipment is calculated on the straight-line basis at annual rates estimated to write-off the carrying value of the assets over the period of their estimated useful lives. Land is not depreciated. The annual rates are as follows:Leasehold property & improvements Buildings Plant and machinery, furniture and fixtures, office equipment Computer equipment Motor vehicles

10% 2 1/2% 10% 33 1/3% 25%

The assets’ residual values and useful life are reviewed periodically for impairment. Where an asset’s carrying amount is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposal of property, plant and equipment are determined by comparing the proceeds with the carrying amount and are recognized in other income in the statement of comprehensive income. Repairs and maintenance expenditure are charged to statement of comprehensive income during the financial period in which they are incurred. (c)Inventories Inventories are valued at the lower of cost, determined principally on a weighted average cost basis and fair value less costs to sell. Cost is determined as follows: Finished goods : costs of product plus all indirect costs such as labour and appropriate allocations for overhead expenses to bring the product to a saleable condition. Work-in-progress: cost of product, labour plus appropriate allocations for overhead expenses. Goods-in-transit : cost of goods translated at the year- end exchange rate.. (d)Foreign currency translations Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions. Monetary items denominated in foreign currency are translated to Jamaican dollars using the closing rate at the reporting date. Non-monetary items measured at historical cost denominated in a foreign currency are translated using the exchange rate as at the date of initial recognition; nonmonetary items in a foreign currency that are measured at fair value are translated using the exchange rates at the date when the fair value is determined.

10



STATEMENTS


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (d)Foreign currency translations (continued) Exchange differences arising from the settlement of transactions at rates different from those at the dates of the transactions and unrealized foreign exchange differences on unsettled foreign currency monetary assets and liabilities are recognized in profit or loss. (e)Trade receivables Trade receivables are carried at anticipated realisable value. A provision is made for impairment of trade receivables when it is established that there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the statement of comprehensive account. (f) Revenue recognition Revenue is recognized in the statement of comprehensive income to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue from the sale of goods is recognized when the significant risk and rewards of ownership of goods have been passed to the buyers and the amounts of revenue can reliably be measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and other sales taxes or duty. Rental, other income and interest income are recognized as they accrue unless collectability is in doubt. Dividend income is recognized when the right to receive payment is established. (g)Current and deferred Income taxes Current Current tax charges are based on taxable profits for the year, which differ from the profit before tax reported because taxable profits exclude items that are taxable or deductible in other years, and items that are never taxable or deductible. The Company’s liability for current tax is calculated at tax rates that have been enacted at the reporting date. Deferred tax Deferred tax is the tax that is expected to be paid or recovered on the differences between the carrying amounts of assets and liabilities and the corresponding tax bases. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

11


STATEMENTS

Page 12

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (g)Current and deferred Income taxes (continued) Deferred tax (continued) Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred tax is charged or credited to statement of income, except where it relates to items charged or credited to other comprehensive income or equity, in which case deferred tax is also dealt with in other comprehensive income or equity. (h)Financial instruments A financial instrument is any contract that gives rise to both a financial asset for one entity and a financial liability or equity of another entity. Financial assets The Company classifies its financial assets in the following category: loans and receivables and investments available for sale and held to maturity categories. The classification depends on the purpose for which the financial assets are acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date. Loans and receivables These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market; they are principally through the provision of goods and services to customers (e.g. trade receivable) but also incorporate other types of contractual monetary assets. They are included in current assets and include short term investments, accounts receivable, other receivables and cash and cash equivalents. Investments (i) Available-for-sale These are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. (ii) Held-to-maturity Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company’s management has the intention and ability to hold to maturity. Where the Company is required to sell other than an insignificant amount of held-to-maturity assets, the entire category would be compromised and reclassified as available-for-sale. At the date of the statement of financial position, the Company held no investments in these categories.

12



STATEMENTS


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (h)Financial instruments (continued)



Page 14

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (l) Impairment of non-current assets

Financial liabilities The Company’s financial liabilities are initially measured at fair value, and are subsequently measured at amortized cost using the effective rate interest method. At the date of the statement of financial position, the following items were classified as financial liabilities: bank overdraft, current portion of long term loans and accounts payables and accruals. (i) Borrowing and borrowing costs

Property, plant and equipment and other non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the greater of an asset’s net selling price and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identical cash flows. Calculation of recoverable amount and reversal of impairment.

Bank and other borrowings are recognized initially at fair value, net of transactions costs incurred. Borrowings are subsequently stated at amortized cost. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized during the period of time that is required to complete and prepare the asset for its intended use. Capitalization of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. All other borrowing costs are recognized in the statement of comprehensive income in the period in which they are incurred. (j) Dividends Dividends on ordinary shares are recognized in stockholder’s equity in the period in which they become legally payable. Interim dividends are due when declared and approved by the directors while final dividends are approved by shareholders at the Annual General Meeting. Dividends for the year that are declared after the reporting date are disclosed in the subsequent events note. (k)Provisions Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as an interest expense.

13

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company makes an estimate of the recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation. Such reversal is recognized in the income statement unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. (m)Employee benefits (i) Employee benefits include current or short term benefits such as salaries, statutory contributions paid, annual vacation and sick leave and non-monetary benefits such as medical care. Entitlement to annual leave and other benefits are recognized when they accrue to employees. (ii) The Company does not operate a pension scheme (iii) The Company does not have a formal profit-sharing or bonus plan in place for permanent employees. (n)Related parties A related party is a person or entity that is related to the entity that is preparing the financial statements; referred to in IAS 24 Related Party Disclosures as the “reporting entity.” (a) A person or a close member of that person’s family is related to a reporting entity if that person: (i) Has control or joint control over the reporting entity; (ii) Has significant influence over the reporting entity; or (iii) Is a member of the key management personnel of the reporting entity or of a parent of the reporting entity

14



STATEMENTS


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (n)Related parties (continued)


STATEMENTS

Page 16

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (t)Comparative balances

(b) An entity is related to a reporting entity if any of the following conditions apply: (i) The entity and the reporting entity are members of the same group. (ii) One entity is an associate or joint venture of the other entity. (iii) Both entities are joint ventures of the same third party (iv) One entity is joint venture of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment benefit plan for the benefit of the employees of either the reporting entity or an entity related to the reporting entity. (vi) The entity is controlled or jointly controlled by a person identified in (a) above. (vii) A person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity. A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. (o)Earnings per share The earnings per share is computed by dividing the profit attributable to the ordinary shareholders by the number of ordinary shares issued.

When necessary, comparative figures are reclassified to conform with changes in presentation in the current year. 3. REVENUE Revenue represents the invoiced value of sales, net of General Consumption Tax, returns and discounts. 4. SELLING AND DISTRIBUTION COSTS 2015 $’000 1,346 787 2,133

Advertising and promotion Motor vehicle

* reclassified for comparative purposes. Sabina Park Box reclassified to advertising and promotion

(p)Segment reporting An operating segment is a component of a company that engages in business activities from which it may earn revenues and incur expenses; whose operating results are regularly reviewed by the entity’s Chief Operation Decision Maker ( CODM) to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Based on the information presented to and reviewed by the CODM, the entire operations of the Company are considered as one operating segment. (q)Share Capital Ordinary shares are classified as equity. Incremental costs directly attributed to the issue of ordinary shares are recognized as a deduction from equity. (r)Trade and other payables Trade and other payables are stated at amortized cost. (s)Cash and cash equivalent Cash and cash equivalent are carried at the statement of financial position date at cost. For the purpose of the cash flow statement, cash and cash equivalents comprise cash at bank and in hand and short term deposits with original maturities of three months or less, net of bank overdraft.

15

16

2014 $’000

*777 120 897


C A R I B B E A N F L AV O U R S & F R A G R A N C E S LT D



30 JUNE 2015 Caribbean Flavours and Fragrances Limited Notes to the Financial Statements 30 June 2015

Page 17


Page 18

7. TAXATION

5. ADMINISTRATIVE EXPENSES 2015 $’000

Audit fee Bank charges Depreciation Donations and subscriptions Entertainment Insurance Rent Legal and professional fees Motor vehicle Office and general Asset tax and other Printing and stationery Minimum Business Tax Repairs and maintenance Staff costs (Note 17) Security Telephone and postage Travelling Utilities Penalties fines and interest Bad debts Director’s fees Director’s remuneration

1,440 628 675 593 458 1,514 7,200 4,083 709 1,659 120 401 120 1,758 23,288 573 1,381 1,925 2,252 980 7,500 59,257

Taxation is based on profit for the year adjusted for taxation purposes and comprises:

2014 $’000

1,200 465 1,422 422 827 1,416 7,200 5,953 1,476 969 130 510 1,010 14,709 149 1,010 2,344 2,241 10 1,087 660 9,583 54,793

6. NET FINANCE INCOME 2015 $’000

Interest income Net foreign exchange gains Loan interest incurred Net finance income

4,264 1,317 5,581 (21) 5,560

2014 $’000

2015 $’000

Current taxation Deferred tax asset written back

The tax effect of difference between treatment of items for financial statements and taxation purposes is as follows:

Profit before tax Taxation at 25% Difference between depreciation and capital allowances Expenses not allowed for tax purposes Unrealized foreign currency conversion gain Remission of tax (note i) Current taxation

2015 $’000 57,716 14,429 68 60 (14,557) NIL

2014 $’000 * 51,188 12,797 283 35 (484) *(12,631) NIL

The 2014 figures were restated to match figures reported to Tax Administration Jamaica in the final 2014 income tax computation submitted after the financial statements were approved and issued by the Board. No account is taken of deferred taxation during the year ended 30 June 2015 because the Company was granted a remission from income tax as a result of listing on the Junior Market of the Jamaica Stock Exchange (JSE), effective 2 October 2013. Remission of income tax th

3,929 1,937 5,866 (118)

By notice dated 13 August 2009, the Minister of Finance and the Public Service, issued and gazetted the Income Tax (Jamaica Stock Exchange Junior Market) (Remission) Notice, 2009. The Notice effectively granted a remission of income tax to eligible companies that were admitted to the Junior Market of the Jamaica Stock Exchange (JSE) if certain conditions were achieved after the date of initial admission.

5,748 * restated for comparative purposes. See note 20.

17

-

2014 $’000 * 3,153 641 3,794

18





7. TAXATION (continued)



Page 20

7. TAXATION (continued)

Remission of income tax (continued)

2014 income tax expense

Effective 2 October 2013, the Company’s shares were listed on the Junior Market of the JSE. Consequently, the Company is entitled to a remission of income taxes for ten years in the following proportion:

The Company was listed on the Junior Market of the Jamaica Stock Exchange on 2 October 2013, three (3) months after the beginning of its financial year end 30 June 2014 and as a consequence Caribbean Flavours and Fragrances Limited was liable to pay income tax on profits for the three (3) months amounting to $3,153,000. This amount was incorrectly reflected in the statement of financial position as income tax recoverable instead of being expensed in the Company’s profit and loss account. This resulted in the net profit and earnings per share being overstated. The comparative 2014 figures have been restated to reflect the necessary changes. See note 20 for further details.

Years 2014 - 2018 – 100% of standard rate Years 2019 - 2023 – 50% of standard rate Provided the following conditions are met: (i) the Company remains listed for at least 15 years and is not suspended from the JSE for any breaches of its rules. (ii) the Subscribed Participating Voting Share Capital of the Company does not exceed J$500 million

8. EARNINGS PER SHARE Earnings per share is calculated by dividing the profit for the year by the weighted average number of ordinary shares in issue for the year.

(iii) the Company has at least 50 Participating Voting Shareholders The financial statements have been prepared on the basis that the Company will have the full benefit of the tax remissions. Government of Jamaica (GOJ) new taxes Effective January 1, 2014, the Government of Jamaica enacted new tax measures to change the tax incentive regimes applicable to various industries. Given the current tax position of the Company, as disclosed in note (i) above these new tax measures have resulted in changes in the income tax and capital allowances computations but will not materially affect the Company’s tax position until the end of the tax remission period. Some of these changes are as follows:    

Profit attributable to shareholders as previously reported Prior year income tax adjustment Net profit as restated Weighted average number of shares in issue Earnings per share

2014 $’000 50,547 *(3,153) *47,394 84,300 *0.56

*Prior year figure adjusted. See note 20.

The 2014 profit and earnings per share were adjusted to account for the prior year income tax adjustment. See note 20.

Tax compliant entities are able to claim up to 30% of employer’s and employees’ statutory contributions (Employment Tax Credit (ETC)) against income tax for the year. Unused ETC , cannot be carried forward or refunded The maximum capital allowances on private motor vehicles, which were previously limited to J$3,200, increased to a maximum of US$35,000 and No initial allowances are given on the purchase of buildings; however, all other capital expenditure on buildings and other assets continue to attract initial allowances. A Minimum Business Tax of $60,000 was enacted, payable in two installments, June 15 and September 15 of each year by registered companies. This tax can be set-off against income tax liability for the financial year but cannot be carried forward if unused in the respective year.

19

2015 $’000 57,716 57,716 89,920 0.64

20

-

2,587 341 2,928 485 826

21

-

-

-

872 493

3,966 334 4,300

4,459 713 5,172

Plant, Machinery Furniture & Fixtures $’000

2015

$’000

Office Computer & Equipment

-

-

-

2,334 (2,334) 391 (391) -

2,025 341 2,366 221 2,587 826 1,047

$’000

$’000

3,413 3,413 3,413

Leasehold Improvements

Leasehold Property

22

-

5,347 (5,347) -

493 898

3,175 370 3,545 421 3,966

3,604 839 4,443 16 4,459

Plant, Machinery Furniture & Fixtures $’000

2014

28,550 (28,550) -

$’000

Land & Building

30 JUNE 2015

528

560 121 681 (681) -

1,209 1,209 (1,209) -

$’000

Office Computer & Equipment


9. PROPERTY, PLANT AND EQUIPMENT (continued)

At cost June 30, 2012 Additions Disposals June 30, 2013 Additions Impairment At June 30, 2014 Depreciation June 30, 2012 Charge for the year Disposal June 30, 2013 Charge for the year Impairment At June 30, 2014 Net Book Value June 30, 2014 June 30, 2013

$’000

Land & Building

30 JUNE 2015

C AR IBBEAN FLAVOURS & FRAGRANCES LTD

-

3,413 3,413

$’000

$’000

Caribbean Flavours and Fragrances Limited Notes to the Financial Statements 30 June 2015

At cost June 30, 2014 Additions June 30, 2015 Depreciation June 30, 2014 Charge for the year Relieved on disposal June 30, 2015 Net Book Value June 30, 2015 June 30, 2014

Leasehold Improvements

Leasehold Property

9. PROPERTY, PLANT AND EQUIPMENT



C AR IBBEAN FLAVOURS & FRAGRANCES LTD

1 781

8,942

9,066 2,011 (2,915) 8,162 780

8,943

11,858 (2,915) 8,943 -

$’000

1 1

8,942 8,942

8,943 8,943

Motor Vehicles

$’000

Motor Vehicles

1,320 3,254

20,564 2,843 (8,653) 14,754 1,422 (681) 15,495

50,968 839 (33,799) 18,008 16 (1,209) 16,815

$’000

Total

Page 22

1,358 1,320

15,495 675 16,170

16,815 713 17,528

$’000

Total

Page 21







Page 23

13. CASH AND CASH EQUIVALENT

10. INVENTORIES Inventories comprise: Raw materials Finished goods Resale goods

2015 $’000 40,391 8,783 13,699 62,873

2014 $’000 33,787 2,334 5,629 41,750

2015 $’000 53,746 (501) 53,245 6,606 321 742 60,914

2014 $’000 42,405 (501) 41,904 5,263 210 516 47,893

Trade Less: provision for bad debts Prepaid purchases Prepaid insurance Other

There was no movement during the year in the allowance for doubtful debts account Balance at June 30 2015 and July 1 2014

501

501

IMPAIRMENT

$’000

501 501

2014 $’000 27,395 10,472 4,538 42,405

IMPAIRMENT

Trade General Consumption Tax (GCT) Audit fee Statutory contributions Vacation leave Customer deposits Other

501 501

This represents amounts advanced to a related entity, Derrimon Trading Company Limited at an interest rate of 10.25% and matures in September 2015.

10.25% Derrimon Trading Company Limited

23

50,000

2014 $’000

2014 $’000 12,427 2,664 1,154 408 553 3,226 392 20,824

2015 $’000

2014 $’000

-

693 (693) -

This represents an initial amortised loan of $5,000,000 at an annual interest rate of 9% accruing on a daily basis, from National Commercial Bank. Repayment is $103,792, per month, inclusive of interest which commenced February 2010 for 60 months. The loan was repaid during 2014.

12. INVESTMENT

2015 $’000

2015 $’000 15,670 6,223 1,335 554 500 4,733 1,422 30,437

287 8,839 9,064 61,707 79,897

15. LONG TERM LOAN

9% National Commercial Bank Current portion Balance : non-current

$’000

2014 $’000

14. PAYABLES

The aging of trade receivables and related impairment was: 2015 $’000 51,419 1,156 1,171 53,746

2015 $’000

3,167 9,227 24,094 17,000 53,488

Cash on hand J$ bank balances US$ and other foreign currency bank balances Fixed deposits

11. RECEIVABLES

Current & past due 31 to 60 days Past due 61 to 90 days Past due over 90 days

Page 24

-

24





30 JUNE 2015


Page 25

16. SHARE CAPITAL

30 JUNE 2015


Page 26

18. FINANCIAL INSTRUMENTS 2015 $’000

Authorized: 91,452,000 ordinary shares of no par value Issued and fully paid: 89,920,033 ordinary shares of no par value

56,200

2014 $’000

56,200

Effective 13 September, 2013, the shareholders passed a resolution to re-register as a public company under section 34 of the Companies Act 2004 and adopted new articles for that purpose. In addition, the following resolutions were passed: - The authorized share capital be increased by 85,831,000 shares. - That each of the existing 5,620,002 ordinary shares in the capital of the Company be subdivided into 12 ordinary shares and 11 ordinary shares be issued as bonus shares for each ordinary share held by the existing shareholders prior to the public issue. By prospectus dated 18 September, 2013, 22,480,009 shares were offered to the general public at an invitation price of $2.25 per ordinary share. 17. STAFF COSTS

(a) Financial risk management The Company has exposure to credit risk, market risk and liquidity risk from its use of financial instruments in the ordinary course of business. Derivative financial instruments are not used to reduce exposure to fluctuations in interest and foreign exchange rates. (i) Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The maximum exposure to credit risk at the reporting date is represented by the carrying amount of each relevant financial asset. Cash and cash equivalents, The Company limits it exposure to credit risk by:  

2015 $’000

Casual labour Redundancy Salaries and wages Statutory contributions Travelling allowance Staff welfare Staff training Health and group life insurance Vacation leave

3,231 441 14,002 1,781 699 2,049 117 968 23,288

2014 $’000

1,439 8,315 1,838 1,646 214 704 553 14,709

The average number of persons employed full-time by the Company during the year was 14 and 1 part- time employee (2014-14 full-time).

Placing cash resources with substantial counterparties who they consider to be stable and have minimal risk of default and Investing in liquid securities with credit worthy institutions.

Trade receivables The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Management has a credit policy in place under which each customer is analysed for credit worthiness prior to being offered credit. The Company does not require collateral in respect of trade and other receivables. At the reporting date there were no significant concentration of credit risk in respect of the five (5) major customers that comprise over 47% (2014-57%) of the trade receivables balance. At 30 June 2015, amounts receivable from these customers aggregated approximately $25,364,052 (2014-$24,404,062) Due to related parties At the reporting date there were significant amounts receivable and paid in respect to amounts due from and to related parties. There were no changes in the Company’s approach to managing credit risk during the year.

25

26







Page 28

18. FINANCIAL INSTRUMENTS (continued)


(a) Financial risk management (continued)


(ii) Liquidity risk (continued)

(i) Credit risk (continued) Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Cash and bank balances Accounts receivable Fixed deposits The aging of trade receivables at reporting date was: Current: below 30 days Past due 31-60 days Past due 61-90 days More than 90 days Provision for doubtful debt

2015 $’000 36,488 53,245 17,000 106,733

2014 $’000 18,190 41,904 61,707 121,801

41,748 9,671 1,156 1,171 53,746 (501) 53,245

20,097 7,298 10,472 4,538 42,405 (501) 41,904

The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The allowances for doubtful debts are based on the ageing of the receivables, with write-offs made if attempts to collect fail and the amount is deemed uncollectible by management. (ii) Liquidity risk Liquidity risk, also referred to as funding risk, is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at or close to its fair value. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, and the availability of funding through an adequate amount of committed credit facilities.

Accounts payable Long-term liabilities Total financial liabilities

Accounts payable Long-term liabilities Total financial liabilities

Carrying Amount $

Contractual Cash Flows $

2015 6 months or less $

30,437 30,437

30,437 30,437

30,437 30,437

Carrying Amount $

Contractual Cash Flows $

2014 6 months or less $

20,824 693 21,517

20,824 726 21,550

20,824 622 21,446

1-2 Years $ -

6-12 months $ 104 104

2-5 Years $ -

1-2 Years $

-

2-5 Years $ -

(iii) Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate as a result of changes in market prices. These arise mainly from changes in interest rates and foreign exchange rates and will affect the Company’s income or the value of its holdings of financial instruments. (iv) Interest rate risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Subject to normal conditions, the Company materially contracts financial liabilities at fixed interest rates for the duration of the term. Interest- bearing financial assets are primarily represented by cash and cash equivalents. Interest –bearing financial liabilities are represented by bank overdrafts and long term loans At the reporting date, there were no bank overdrafts or long term loans.

Liquidity risk is managed by the Company by maintaining committed lines of credit and by efficiently managing the Company’s cash cycle. At the end of the reporting period, the Company was not exposed to any liquidity risk as current assets significantly exceeded current liabilities.

27

6-12 months $

28

-





Page 29



Page 30





(v) Foreign currency risk

(iv)Interest rate risk (continued)

Exposure to foreign currency risk on Euro (€) denominated balances were as follows:

Financial instruments are subject to interest as follows: 2015 $’000

Fixed rate instruments: Financial assets Financial liabilities

2015 $’000

2014 $’000

100,321 100,321

79,610 693 78,917

At the statement of financial position there were no variable rate instruments: Cash flow sensitivity analysis for variable rate instruments An increase or decrease in basis points in interest rates at the reporting date would not have increased/ (decreased) profit for the year because there were no variable instruments held by the Company at 30 June 2015.

Cash and cash equivalent Equivalent to

€ J$

2014 $’000 49 6,360

5 756

Exchange rates in terms of the Jamaican dollar ($) to the Unites States dollar (US$) and Euro (€) were as follows: US$ 116.98 112.15

At June 30, 2015 At June 30, 2014

€

130.45 152.97

Sensitivity Analysis Changes in the exchange rates of the Jamaican dollar ($) to the Unites States dollar (US$) and the Euro (€) would have the effects on profit as described below:

(v) Foreign currency risk Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates, primarily the United States Dollars (US$) and Euro (€). Exposure to currency risk

Increase/(decrease) in profit for the year 2015 2014 $’000 $’000

At June 30, 2015 the Company incurred foreign currency risk primarily on cash and cash equivalents, purchases and receivables that are denominated in a currency other than the Jamaican dollar. The principal foreign currency exposures of the Company are denominated in United States dollars (US$).

10% (2014:10%) strengthening of the US$ and Euro (€) against the J$ 1% (2014 : 1%) weakening of the US$ and Euro (€) against the J$

Exposure to foreign currency risk on US$ denominated balances were as follows:

The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2014

2015 $’000 Cash and cash equivalent Accounts receivable Accounts payable

US$ J$

Equivalent to

29

159 87 (159) 87 10,128

2014 $’000 74 112 (106) 80 9,020

30

1,649 (165)

978 (98)







Page 32

20. RESTATEMENT (continued)


Prior year adjustments (continued)

(b) Capital management The Company manages the adequacy of capital by managing the returns on equity and borrowed funds to protect against losses on its business activities so as to be able to generate an adequate level of return for its stockholders. As a condition of its long term loans, the Company is required to have positive stockholders’ equity. There are no other externally imposed capital requirements and there have not been any changes in the Company’s approach to managing capital during the year.

The amount was adjusted retrospectively in accordance with the requirements of IAS 8 and the impact of this prior year adjustment is as follows:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Effect on Effect on Effect on Statement of Comprehensive Taxation Financial Income Position ‘000 $’000 $’000 Balance at 30 June 2014 as previously reported 7,367 50,547 641 Effect of prior year adjustment: (decrease)/increase (3,153) (3,153) 3,153 Balance as restated at 30 June 2014 4,214 47,394 3,794

The following methods and assumptions have been used:

Earnings per share

(i) The fair values of cash and cash equivalents, accounts receivable, due from related parties and accounts payable are assumed to approximate their carrying values due to their relatively short-term nature. (ii) The carrying value of long-term loans approximate the fair values as these loans are carried at amortised cost reflecting their contractual obligations and the interest rates are reflective of market rates for similar loans.

The earnings per share were also restated as follows:

(c) Fair value of financial instruments

19. COMMITMENTS AND CONTINGENCIES

Before 2014 Balance at 30/6/2014

$0.60

Effect on Retained Earnings $’000 100,510 (3,153) 97,357

After 2014 $0.56

21. RELATED PARTIES TRANSACTIONS AND BALANCES

Apart from commitments to financial institutions, the management and directors of the Company were not aware of any significant claims, disputes and legal proceedings against the Company that could result in any material contingent liability. 20. RESTATEMENT Prior year adjustments The Company was listed on the Junior Market of the Jamaica Stock Exchange (JSE) on 2 October 2013, three (3) months after the beginning of its financial year ended at 30 June 2014 and as a consequence Caribbean Flavours and Fragrances Limited was liable to pay income tax on profits for the three (3) months amounting to $3,153,000 as the tax remission under the Income Tax Act (Junior Market Companies) only related to the 9 months period subsequent to the listing on the JSE. This amount was incorrectly reflected as recoverable in the statement of financial position instead of being reflected as an expense in the Company’s profit and loss account. The comparative 2014 figures for income tax, net profit, retained earnings and earnings per share have been restated to reflect the adjustment.

31

(a)

The statement of comprehensive income includes the following related party transactions 2015 2014 $ $ Key management compensation: 7,500,000 9,583,333 Salaries Rental expense: Paid to a related company 7,200,000 7,200,000 Interest income: 2,695,890 Paid to a related company

22. EVENTS AFTER STATEMENT OF FINANCIAL POSITION DATE As at 18 August 2015 the date these financial statements were approved and signed, management was not aware of any material subsequent event that should be disclosed to stakeholders.

32



NOTES

FORM OF PROXY A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a Proxy to vote on his/her behalf. A Proxy need not be a member. A suitable form of Proxy is below. The Proxy must be signed and deposited, duly stamped with duty at the Stamp Office, at the registered office of CARIBBEAN FLAVOURS AND FRAGRANCES LIMITED at 226 Spanish Town Road, Kingston 11, Jamaica, W.I. not less than 48 hours prior to the meeting.

I/We, _______________________________________________________________________

(Name(s) of Shareholder(s))

of, _________________________________________________________________________

(Address(es) of Shareholder(s))

in the parish of _____________________, being a member(s) of Caribbean Flavours and Fragrances Limited hereby appoint, ____________________________________________________________

(Name of Proxy)

of, _________________________________________________________________________

(Address of Proxy)

or failing him, _______________________________________________________________

(Name of Alternative Proxy)

of, _________________________________________________________________________

(Address of Alternative Proxy)

as my Proxy/our Proxy to vote on my/our behalf at the Annual General Meeting to be held on November 25, 2015 This form is to be used IN FAVOUR of resolutions numbered____________________. This form is to be used AGAINST resolutions numbered_________________________. Signed this ______ day of _______ 2015. _____________________________________________________________________________ Signatures(s) of Shareholder(s)


NOTES

BLOSSOMING FOR GROWTH

Caribbean Flavours & Fragrances Limited, 226 Spanish Town Road, Kingston 11, Jamaica (876) 923-5111 | 923-8777 | 937-0366 | 923-5256 [email protected]